Photo: Mint (Mint)
Photo: Mint
(Mint)

Old Monk loses ground to McDowell’s No.1

Old Monk has lost so much ground that it now sells less than one-fourth the volume of McDowell’s No.1 rum

Bangalore: Mohan Meakin Ltd’s Old Monk, easily recognizable by the squat bottle it comes in, was once synonymous with dark rum in India, besides being the largest selling spirits brand in the country, enjoying unrivalled brand loyalty.

A decade later, it has lost so much ground that the venerable label sells less than one-fourth the volume of McDowell’s No.1 Celebration rum, owned by United Spirits Ltd (USL).

Several industry executives and distributors said Mohan Meakin largely stopped promoting Old Monk and handed over its distribution rights to third parties in different regions, which led to inconsistency in availability and brand positioning.

“When you look at Old Monk, there’s no work done on brand imagery, positioning or any other marketing activity," said Santosh Kanekar, a former marketing head at Diageo Plc’s Indian unit, who now advises funds on investing in India, including the liquor industry.

A marketing executive at Mohan Meakin said the company does not allocate “much funds" to promote Old Monk. “We haven’t even changed the packaging for so many years," he said on condition of anonymity. To be sure, liquor advertising isn’t allowed in India—companies get around this through so-called surrogate advertising, where the brand name is used to promote another product.

With distribution handled by different groups across the country, marketing and brand positioning is “confused", said a senior executive at rival Allied Blenders and Distillers Pvt. Ltd, who declined to be named. “I don’t think Mohan Meakin has a serious interest in building the brand. And McDowell’s has gained big time because Old Monk is dormant," he said.

Mohan Meakin managing director Kapil Mohan did not respond to phone calls or emails seeking comment. Emails sent to the company were unanswered.

In 2002, Old Monk was the largest selling branded spirits product in India, selling 7.9 million cases (of 9 litres each), nearly two million cases more than its nearest competitor, Bagpiper Whisky, and more than double the volumes of McDowell’s No.1 Celebration rum, according to International Wine and Spirit Research data.

Old Monk likely sold only four million cases in 2012, a drop of 11% from a year ago, barely making the list of the top 10 spirits brands in India, according to a report by Impact Databank, a data provider. Data collated by Mint from industry executives shows Old Monk’s sales to be even lower than four million cases for the fiscal year 2013.

A change in the drinking habits of Indians with new products such as vodka and white rum gaining in popularity over the past decade also hit demand for Old Monk, which has still survived largely because of consistent word-of-mouth marketing by many of its hard-core loyalists.

The endurance of the brand despite the neglect by its owner makes Old Monk an excellent candidate for a comeback or a takeover, and perhaps both, according to some experts.

For now, it’s a distant second to USL’s McDowell’s No.1 Celebration rum, which is priced more than 20% higher. McDowell’s rum is likely to have sold as many as 17.8 million cases in 2012, a jump of 13.6% from a year ago, Impact Databank’s report said.

USL, which sells more than half of India’s branded spirits, grabbed the opportunity offered by the lack of Old Monk’s marketing aggression to quickly expand distribution of McDowell’s rum by using its wide network of distributors.

Not only did McDowell’s snatch share from Old Monk in large liquor-consuming markets such as Andhra Pradesh, Maharashtra and Karnataka, the brand also reached out to eastern states such as West Bengal and Orissa, where the supply of Old Monk is scarce. McDowell’s rum gets more than 40% of its business from eastern India, compared with just 5% for Old Monk.

McDowell’s rum also benefited from the increased marketing spending by USL on the McDowell’s portfolio, which includes whisky and brandy.

“With McDowell’s, because United Spirits has created an umbrella brand, whatever investment is happening in McDowell’s is rubbing off on all its brands. They don’t really need to specifically invest too much on McDowell’s rum," said Kanekar, the ex-Diageo executive.

McDowell’s rum has grown sales volumes at a compounded annual rate of 15% over the past five years, and now sells 4.5 times as much as Old Monk, USL said in a statement on Thursday.

Old Monk also blundered by reducing prices in some states over the past few years, the managing director of a Bangalore-based distiller said. “Instead of leveraging the brand’s pull and converting it into a premium brand, they made it into a cheaper brand. In the mid-2000s the economy was doing really well. And when the economy does really well, people tend to ‘premiumize’—they look at moving to the next level of price. And McDowell’s took advantage of this by pricing itself higher than Old Monk," the executive said.

Last fiscal year, the gap between the two brands widened at a faster pace. Old Monk’s sales were dented by regulatory actions in Tamil Nadu, which accounts for more than 20% of its business. The Tamil Nadu government promoted local brands and sharply cut supply of products made by companies based in other states, industry executives said. Distribution and retail of liquor in the state is controlled by the government.

McDowell’s rum, on the other hand, has been largely unaffected by the regulatory actions in Tamil Nadu since it earns less than 5% of its sales from that state.

Old Monk could still make a comeback. Despite declining sales over the past decade, it commands brand loyalty and has enough of a legacy to become one of the top spirits products again, experts said.

A recent survey on the drinking habits of young people in cities by consulting firms Qilo and Juxt showed that a surprising 80% preferred Old Monk and Bacardi over other rum brands. The survey was conducted online with over 650,000 people in 12 cities.

“Even if Mohan Meakin does some token marketing and branding work, the brand can come back like a rocket. It still has very strong credentials and loyalty," Kanekar said.

He also said that Old Monk was an “ideal" acquisition candidate.

“There have been many suitors for Old Monk over the years. Any international investor who wants to enter the alcohol beverages market in India and wants to look at a brand or a company where they can do the maximum value turnaround, Old Monk is the foremost," Kanekar said.

Mohan Meakin’s other products include Golden Eagle and Meakin 10000 beer, and whiskies such as Solan No.1, Diplomat Deluxe, Colonel’s Special, Black Knight and Summer Hall.

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