Radico expects premium brands to continue driving growth in FY12

Radico expects premium brands to continue driving growth in FY12

Mumbai: Radico Khaitan Ltd, India’s No 2 liquor maker, expects its premium brands to continue driving earnings growth in the current financial year as it looks for more partnerships with global liquor makers.

The company, which the market values at $401.5 million, has liquor brands such as 8 PM Whiskey, After Dark whiskey, Magic Moments vodka, Morpheus brandy among others in its portfolio.

“Our premium brands will contribute significantly to our sales this year and our strategy will be to continue focusing and driving growth via these in FY12," Abhishek Khaitan, managing director told Reuters on Tuesday.

Premium brands, which fall under the Indian made foreign liquor segment, contribute about 80% to the company’s overall revenues.

The company expects to clock a 20% sales growth and expects its profits to jump 25 percent in FY12. It posted a net profit of 72.8 crore on net sales of 970 crore in FY11.

Radico posted a jump of 29% in its June quarter results to 20.7 crore. Its sales grew 15% to 376 crore from the same period a year ago.

The company also said it expects growth in the state of Maharashtra to continue at the rate of 30% due to robust demand despite the age-limit imposition by the state-government and the recent excise duty-hike.

The Maharashtra government has raised the legal drinking age in the state to 25 years from 21 previously.

The Indian liquor maker which already has increased prices in FY12, due to rising prices of glass, does not have any further price hikes planned immediately, Khaitan said.

“Molasses prices are expected to remain at current levels and we expect the sugar crop to rise 15% this year."

Radico also said it plans to increase its advertising and promotional expenditure to 8% of total sales this year from 6.5% last year.

“We plan to launch a nationwide campaign for After Dark and that should help us push up volumes," Khaitan said.

International tie-ups

The Indian liquor maker said it is continuing to look for marketing and distribution tie-ups with international companies and it will make an announcement this fiscal year.

In April, the company told Reuters it plans to announce another international tie-up by October 2012, after it announced a marketing and distribution partnership with Japan’s Suntory Liquors Ltd.

It also has a joint venture with the world’s largest liquor maker, UK’s Diageo Plc, to make and sell liquor products in India. Radico has been planning to sell stake in the JV but has not made any progress on it so far.

“Its still status-quo on the Diageo tie-up. Currently, we are just focussing on bringing premium brands into the country," Khaitan said.

The company, also said it plans to focus on markets in Africa and South East Asia to grow its exports, which currently contribute to 12% of overall sales.

Shares of the company ended 1.12% lower at 132.35 in a weak Mumbai market.