Radico Khaitan Ltd. Corporate Presentation August, 2010 1
Indian Spirit Industry According to Euromonitor International, Industry has been growing @ 9.4 % p.a. for the last 9 years. Industry size for 2009-10 (April to March):- Total market volume: 182.2 million cases in 2009 Liquor industry segmentation: Cases in millions % Whisky 103.5 57.0% Brandy 35.5 19.0% Rum 34.1 19.0% White Spirits 9.1 5.0% Total 182.2 100.0% Source: Internal Industry data 2
Key Drivers for Growth of Liquor Consumption in India Economic expansion and increasing urbanization is driving the emergence of a larger middle class that increasingly appreciates premium goods and services, including high end spirits, and is willing to pay for it Income distribution (million households) 107 2009-10 80 35 53 2001-02 70 65 20 1989-90 38 84 (% ) % of total population in the age group of 15 64 68 64 60.9 64.1 65.7 66.4 66.2 65.4 Per capita consumption litres per annum (lpa) (lpa) 10 8 6 4 2 9.5 8.5 5.0 4.7 4.5 4.6 0.9 0 20 40 60 80 100 120 Low (<$1,000) Lower Middle ($1,000 60 2001 2011 2021 2031 2041 2051 0 Russia Brazil Thailand USA UK World India Middle High (>$2,000) Income growth India is one of the fastest growing economies in the world with GDP growth of 7.4% in FY,10. Per capita income has increased from US$450 in FY01 to an estimated US$1030 in FY10 Growth in per capita income to drive discretionary income growth at much higher pace than the GDP growth, boosting demand for lifestyle products including alcoholic beverages Rural economy is likely to see big upsurge in income levels due to various Govt initiatives Young demographics More than 60% of India s s population is in the age-group group of 15-45 Nearly 485mm people in the drinking age Another 150mm are likely to be added to this target population in the next five years Following these favorable demographics, demand for alcoholic beverages is set to rise Underpenetrated market spelling huge growth potential India's per capita consumption of alcoholic beverages is among the lowest in the world A small increase in per capita consumption to significantly alter industry growth, given the large population base Source : Mckinsey Report 3
Radico The Journey So Far Radico s total sale volume for the year ended March 31, 2010 was 14.6 million cases 1943-1997 - Spirit Company Started distillery in 1943 A major spirits supplier Supplier of Rum to Armed Forces Bottler for others 1998-Current One of the Largest IMFL Spirits Companies in India Started branded division for production of IMFL and launched its first brand 8 PM Whisky in 1998 Created four Millionaire brands - 8PM Whisky, Contessa Rum, Old Admiral Brandy and Magic Moments Vodka in last one decade in terms of cases sold, millionaire brands are the brands of which, total sale in a single financial year is more than one million case. Strong sales and distribution network, covering bars, clubs and other retail points in india. Acquisition of Whytehall whisky from American Beverages (Mauritius) Limited, an affiliate of Bacardi Martini India Limited in 2004 and Brihans range of brands from Brihans, Maharashtra sugar syndicate limited in 2005 32 bottling units : 5 own bottling units and 27 contract bottling units in India In 2005, after creating brands in high volume regular categories, the Company made foray into the semi premium segment by launching Magic Moments Vodka, in the white spirits segment, (and attained the sales of 1 million cases mark in FY 09) In 2009, launched Morpheus Brandy, a Super premium range brandy. In June, 2010, launched two new whiskies i.e. After Dark & Eagles dare in the Premium segment. 4
High Success Rate Of Brands Launches & Acquisitions 1998 2002 2004 2005 2006 2009 2010 8PM WHISKY (Regular Range) OLD ADMIRAL BRANDY (Regular Range) WHYTEHALL WHISKY Acquisition (Deluxe Range) BRIHANS BRANDS Acquisition (Regular Range) MAGIC MOMENTS VODKA (Semi premium Range) Morpheus Brandy (premium Range) ~Launched After Dark Whisky (premium Range) ~Launched 5
Innovations Radico creates new brands through innovative design of production outlook and blend. The Company always tries to deliver quality and brand image that is beyond the price point for the Brand. Radico s brands are relatively young. Our brands symbolise youthfulness and are contemporary and aspirational while delivering smoother blends, contemporary packaging and value for money. 6
Radico Marketing Success Stories 1 2 3 8PM WHISKY 8 PM Whisky, launched in 1998, achieved sales of 1 million cases in its very first year of launch in what is typically considered the largest segment of the Indian whisky market in terms of sale volume. By virtue of this achievement, the brand is listed in the Limca Book of Records 2001. Superlative growth rates Adjudged the fastest growing whisky by Drinks International magazine (U.K.) in 2005 Became the youngest brand to achieve 100% distribution in the country and attain a level of 4 million cases in FY,07 Grew @ 5.3 % in FY,10 Awards won FY07 - Won a bronze medal at International Spirits Challenge FY02 Nominated for an award at Cannes after having won the gold medal at Delhi Advertising Club and silver in the Ashby Advertising awards of Mumbai Ad Club FY01 8 PM Whisky TV commercial awarded as being the 'Best 5 ads of the century' by Advertisers Association of India in 2000 7
Radico Marketing Success Stories New packaging launched in FY09 is a grain blended whisky Also the first scotch-blended whisky in the segment and was launched with a specially designed heavy bottle. 8
Radico Marketing Success Stories Magic Moments Vodka - Successful Brand launch in 2006 - Innovation in packaging - Created new price point in vodka semi premium segment - Fastest growing brand of the company. - Rewarded with Gold Medal at Monde selection in 2008 - Achieved 1 million case mark in FY,09 - Grew 39.1% in FY,10 9
Radico Marketing Success Stories Magic Moments Remix Vodka- launched in six different flavors in 2008. Chocolate Green Apple Raspberry LemonGrass & Ginger Lemon Orange Remix has potential to be a separate business vertical. 10
Awards Won by Magic Moments Vodka Awards received by Magic Moments Vodka in 2008: Monde Selection 2008 Magic Moments Vodka Gold Medal International Spirits Challenge 2008 Magic Moments Remix Orange Vodka - Silver Medal International Wine & Spirits Competition 2008 Magic Moments Vodka- Silver Magic Moments Flavoured Orange Vodka- Silver Magic Moments Flavoured Green Apple Vodka Silver (Best in Class) Magic Moments Vodka- Best Packaging Innovation-Alcobev Alcobev-2008 Awards received by Magic Moments Vodka in 2009: Monde Selection 2009 Magic Moments Premium Grain Vodka - Gold Medal Magic Moments Flavored Green Apple Vodka Bronze Magic Moments Flavored Lemongrass & ginger Vodka - Gold 11
M2 and MAGIC MOMENTS REMIX Spreading the Magic.. At Present Global Vodka Industry ~ 22.5% of Indian Vodka Industry ~ 3.5 % (6.3 million) (2009-10) Indian Vodka Industry grew 30 % CAGR for 5 yrs(2006 10) Magic Moments became a millionaire brand in 2008-09 Sold 1.42 mn c/s in FY 2009-10 CAGR~95% (April, 2005 onwards) Industry Market Share ~23.0% Semi premium segment market share~ 84.9% M2 Driving the semi-premium Vodka segment In 5 years By 2015 Indian Vodka Industry ~ 18 million cases (estimated) Indian Vodka Growth seen at ~ 25% CAGR Magic Moments has become market leader in the vodka category 12
Radico Marketing Success Stories 1 2 CONTESSA RUM Contessa Rum is Radico s flagship Rum brand Contessa is a millionaire brand and has registered sales of 2.25 million cases in FY10 Dominant in CSD Leading Brand (with a 18.5 % market share) in the Indian CSD rum market. Steadily upstaged Old Monk s leadership position in the CSD market over the past 6 years Contessa is the one of the top selling brand across all categories in CSD Contessa is the highest priced rum in CSD 3 Awards won The brand has won quality awards at Monde Selection 2008, International Spirits Challenge 2008 13
Radico Marketing Success Stories 1 2 3 OLD ADMIRAL BRANDY Old Admiral Brandy was launched in July 2002 and has increased its share in the Indian brandy market Has been mainly targeted at the South Indian markets, Old Admiral became a millionaire brand in FY05 in the third year of its launch Adjudged the fastest growing brandy brand in the world for two consecutive years 2004 and 2005 by Drinks International (U.K) Sold 2.73 million cases in FY,10 Grew 36.4 % in FY,10 Focus on quality The Company has devoted special attention to its blend and its packaging (frosted bottle) Old Admiral Brandy received an overwhelming response from trade channel and consumers Awards won Won bronze medals at International Spirits Challenge in 2006 and 2008 Won silver medals at Monde Selection, Brussels (Belgium) in 2005, 2006 and 2007 14
Radico Marketing Success Stories Launched upgraded version of Whytehall, Royal Whytehall in key markets and is being supported by new marketing programmes. Sales grew 54% in FY,10 15
Morpheus Brandy Morpheus launched in May 2009. Premium and highest priced brandy launched by any Indian company. With the French, XO blended and the innovative packaging, the brand name and its communication stands out as Super Premium Brandy. The initial rollout response in the Andhra Pradesh & Tamil Nadu Market is highly encouraging. Product has been launched in other Indian states i.e. Kerala, Pondicherry & Karnataka. 16
The Spirit Of France Captured in a Goblet Morpheus 17
AFTER DARK The Thought : The Night has different Connotations for different people, the night unfolds differently and brings a unique world of desire, adventure and excitement. In fact, it s where the fun and action begins. After Dark, the brand here plays the role of getting people together, adding energy and spontaneity to the evening, giving people a world where the party never stops. 18
Eagles Dare The Thought : A unique blend set to take soar high with the eagles. Challenge every existing norm, threaten every boundary. Rise above the ordinary 19
Radico has a Strong Distribution Footprint across India 1 2 3 4 Pan India presence Radico has a strong sales and distribution network with a presence in retail and off-trade outlets in the relevant segments in different parts of India. The Company has 32 bottling units spanning almost the entire country, of which 5 belong to the Company and 27 are contract bottling units Developed network of distribution Currently sells to 468 wholesalers, who in turn sell to 32,254 retail outlets and over 5,000 on premise outlets. Wholesalers are supplied through 147 sales depots Apart from wholesalers, a total of around 200 employees divided into 4 zones, each headed by regional profit centre head, ensure an adequate on-the-ground sales and distribution presence across the country Strategically located bottling units Radico s strategic bottling units are spread across the country This is to avoid the high taxes levied on inter-state movement of finished and in-process liquor Collaboration with International players Ernest & Julio Gallo of California (one of the largest wineries in the world) for distribution of their wines in India Own Bottling Units Contract Bottling Units 20
High Entry Barriers Requires scale to set up all India manufacturing and distribution network. Existing players can leverage their distribution network k to launch new brands without any substantial increase in costs. Restriction on inter-state movement of Liquor. Each state in India has its own regulations and requirements and typically imposes levies on inter-state movements of spirits. Direct media advertising of alcoholic beverages is not permited in India. Registration of brands in Canteen Stores Department ( CSD( CSD ) ) is a very difficult process and has a eligibility requirement of selling significant volumes in the civil market to qualify for CSD brand registration. Liquor industry is highly regulated and companies are required to t give major share of their revenue to the State Governments, comprising almost 60% of the end consumer price as taxes. 21
Radico Brand Portfolio Cases in 10,000 (Qty. in Lac Cases) Actual 2008-09 Actual 2009-10 Growth Rate% Apr.09- June.09 (Q1) Apr.10- June.10 (Q1) Growth Rate % age 1 st Qtr. 2010-11 Magic Moments 102 142 39.1% 388 514 32.6% 8 PM Whisky 339 357 5.3% 1101 1162 5.6% Whytehall Whisky 38 59 53.5% 164 178 9.0% Contessa Rum 250 225 (9.9%) 557 586 5.2% Morpheus Brandy - 8 - - 050 - OAB 200 272 36.4% 633 726 14.7% Other Brands 358 399 11.5% 994 1025 3.1% Total- Radico 1287 1462 13.6% 3837 4241 10.6% Mainline Brands 929 1063 14.4% 2843 3216 13.1% Radico is focusing on growth of its main line brands 22
Radico s Sustained Competitive Edge The company has three distilleries in the largest Sugar producing states of Uttar Pradesh. Rampur-U.P. The distillery has a capacity of manufacturing 102 million litres annually Molasses Based : 75 million litres Grain Based : 27 million litres Malt Based : 460 thousand litres The grain based facility was added in FY07 Maharashtra Distillery Radico, under a JV, has commissioned a Molasses distillery in Maharashtra with an annual capacity of 36 million litres, in Dec,2008 and also Grain ENA distillery in Feb,2010 with capacity of 12 million litres. Backward Integration PET bottle manufacturing plant in Uttaranchal, a tax exempt zone. 23
Sustained Competitive Edge - Contd Canteen Stores Department (CSD) Radico market share is 22.34% of the CSD volume. High entry barriers for getting brands approved. Brands Radico has successfully created four millionaire brands in last decade. Radico s s Grain based ENA Plant at Rampur is a hedge against increasing prices of Molasses. 24
Future Growth Drivers Moving towards premium brands, already launched Morpheus (XO Blended Premium Brandy ) in May 2009. Launched two new Whiskies in growing Semi Premium Segment in June,2010. Improve market share of existing brands such as 8PM, Whytehall, Contessa Rum, Magic Moments and Old Admiral Brandy. Magic Moments Vodka, Morpheus Brandy and Remix to drive growth. Entry of Existing Brands in Tamil Nadu, one of the largest liquor consuming state. New International Tie-ups for distribution of Premium brands in India 25
Competitive Strengths Brand Creation and Innovation. Our ability is to identify spirits in a particular category y at certain price points with growth opportunities and to launch brands in the premium segment with our attractive packaging attributes. Strong Brands and Advertising: Four new millionaire brands have been created in last one decade, which is unparalled in the Industry. National Footprint and Distribution: We are present in all the states and cover 95% of the retail universe. Significant Market Share in the Defence Segment. There are strict entry barriers in CSD for brand registrations, ions, however once the brands are registered, they are for lifetime. We have about 22% market share in CSD. 26
Competitive Strengths - contd.. Cost Optimization: We enjoy cost advantages due to the economies of scale of our operations and our cost savings on raw material transportation due to the location of our manufacturing facilities, which are located in the state of Uttar Pradesh, the e largest molasses- producing states in India and in proximity to other molasses-producing regions in India. Product Quality: We have won several awards from prestigious institutions for f our product packaging & quality. Experienced Management Team: Our management team is headed by Dr. Lalit Khaitan, who has more than 32 years of experience in the spirits industry in India and is a visionary. His son, Mr. Abhishek Khaitan, joined us in 1996 and has more than 14 years of experience in the Indian spirits industry. Respective functions are headed by respective professionals. 27
Financial Summary Key Financials Particulars (Rs. millions) 2008-09 (Audited) 2009-10 Audited Growth % 2010-11 (Q1) Unaudited 2009-10 (Q1) Unaudited Growth % Gross Sales 15752 21163 34.3% 6333.65 5633.73 12.42% Net Sales 9327 11470 23.0% 3260.70 2743.82 18.84% EBITDA 776 1301 67.5% 340.60 303.91 12.07% Profit before Tax & Exceptional Items 104.46 464.29 344.4% 215.53 88.15 144.52% PAT 65 415 536.0% 160.53 107.05 50% EPS(Rs./Share) 0.64 4.02 1.22 1.04 Sales Include sale from Contract Bottling units 28
Shareholding Pattern INDIAN PUBLIC, 11.14 PROMOTERS RELATIVE, 0.06 BODIES CORPORATE, 7.92 BANKS, 0.05 INSURANCE CO, 0.26 STATE GOVT., 0.02 PROMOTERS, 37.82 MUTUAL FUNDS & UTI, 15.17 FIIs, 27.56 As on 30.06.2010 29
Radico Core Team Lalit Khaitan (CMD) Abhishek Khaitan (MD) K.P Singh Director, Mfg Operations Dilip Banthiya CFO Raju Vaziraney COO, Domestic Business Sanjeev Banga Head International Business Vice Presidents /Asst Vice Presidents Management Committees, Regional Profit Center Committees. 30
Disclaimer This presentation does not constitute an offer or invitation to purchase or subscribe for any securities in any jurisdiction, including the United States. No part of it should form the basis of or be relied upon in connection with any investment decision or any contract or commitment to purchase or subscribe for any securities. None of our securities may be offered or sold in the United States, without registration under the U.S. Securities Act of 1933, as amended, or pursuant to an exemption from registration therefrom. This presentation is confidential and may not be copied or disseminated, in whole or in part, in any manner. 31
THANK YOU 32