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Business News/ Mint-lounge / Mint-on-sunday/  How Old Monk went from India’s star to another has-been

How Old Monk went from India’s star to another has-been

Once India's favourite rum, Old Monk is struggling to adjust in face of modernity, changing tastes and competitors

Photo: Pradeep Gaur/MintPremium
Photo: Pradeep Gaur/Mint

The subject of Old Monk usually gets soaked with sentimentality. The rakish dark rum, the alcoholic equivalent of Govinda (you love it, but can’t admit it because it’s too cheap), has a rich, dark history.

What’s usually well known is that in 1855, an entrepreneurial Scotsman named Edward Dyer, quick to spot demand for cheap beer among the British, set up a brewery in Kasauli, Himachal Pradesh. A brewery that would in a few years change hands, become a distillery by the name of Mohan Meakin Pvt. Ltd and go on to produce one of India’s best-known liquor brands.

What’s less known is a slightly unsavoury piece of trivia: Dyer, the man who sowed the seeds of socialist India’s most loved brand of alcohol, was the father of Colonel Reginald Edward Dyer, the British Indian Army officer who oversaw the massacre of almost 500 people at Jallianwala Bagh in Amritsar on 13 April 1919.

But then, the story in 2016 is not about Old Monk’s legacy; it’s about the brand’s decay. A perfect Make-in-India prototype, with infinite potential, it has been pushed to the brink because of management inertia and dense government policies. A depressing saga that may drive loyal fans to the bottle, save for the fact that they would not be able to get one in many cities and towns.

Fall of the legend

Old Monk was the undisputed single brand leader till 2002, not just among rum labels, but the entire branded spirits market in India, well ahead of its closest competitor, the United Spirits Ltd-produced whisky Bagpiper. According to International Wine and Spirit Research data, Old Monk’s soon-to-be bête noire, McDowell’s Celebration Rum, was selling less than half the volume.

By 2005, Celebration had taken over Old Monk. But the difference was marginal: of less than 1.5 million cases. It could well have been an aberration, one bad year.

Except that it wasn’t.

By 2011, it was abundantly clear that Celebration Rum was here to stay—and dislodge Old Monk. In 2010-11, the former sold over 11 million cases; Old Monk, barely 3 million cases, according to data from global market research firm Euromonitor International.

Typically, it should have rung alarms bells, got the company to reinvent the wheel, and indulge in some serious self-introspection. But corrective measures were half-baked at best, say people acquainted with the affairs of the company, both within Mohan Meakin and outside. The numbers definitely suggest so.

Whatever measures the company took didn’t help arrest the decline.In 2013-14, Celebration sold more than seven times the volume of Old Monk, around 15 million cases versus just over 2 million cases. For Old Monk, that was a decline of almost 50% in less than 10 years.

Perhaps, at the time, Mohan Meakin’s management led by Brigadier (retd) Kapil Mohan had good reasons to be confident about Old Monk’s invincibility. For it wasn’t just India that Old Monk’s trademark squat bottle was ruling, the brand was practically the only Indian one you could see on the shelves of bars in foreign countries.

“It was sometime in the early 1990s. I was in Germany and the euro was yet to come. To my surprise, I found Old Monk. But what was the bigger surprise? Old Monk was being sold at 2 marks and Bacardi at 1 mark and the bartender told me people were actually drinking more Old Monk," recollects Pramod Krishna, chairman of the Confederation of Indian Alcoholic Beverages, and a long-time industry observer.

For Mohan Meankin, profit after taxes dropped from Rs2.5 crore in fiscal year 2005 to just Rs30 lakh in fiscal 2006. There was a brief recovery—but things tanked soon. In fiscal 2010, the company’s balance sheet showed a post-tax loss of Rs3.35 crore—which amounted to almost double the past four years’ combined profit.

The next year, though, the company bounced back with a profit of Rs7.67 crore. Or so it seemed. A closer inspection of the balance sheet, however, tells the truth about the profit on the books: sale of fixed assets, land.

Mohan Meakin plummeted further the following year with a loss of Rs7.44 crore, but the worst was yet to come. In fiscal 2014, it registered losses worth almost Rs20 crore.

What happened at the turn of the decade? Why did things go so horribly wrong that people stopped drinking their favourite brand of rum?

Crash and burn

After liberalization in the early 1990s, foreign liquor brands such as Bacardi started coming in. The hitherto-closed market, with only a few players such as Mohan Meakin, Shaw Wallace and United Spirits, suddenly became competitive.

“Domestic brands like USL and Radico Khaitan realized they had to up their game and they did so by aggressively promoting and marketing the product. Mohan Meakin didn’t think it was necessary to reinvent," says Krishna, while nursing a single malt at a genteel bar in a New Delhi five-star hotel, which does not stock Old Monk at all.

In 2009, Ponty Chadha, owing to what many consider an act of extreme political generosity of the then Uttar Pradesh chief minister Mayawati, gained near complete monopoly over the liquor business with his Wave Distilleries and Breweries in the state. The two events—Old Monk’s free fall and Chadha’s meteoric rise—had a direct cause-and-effect relationship.

One of the first casualties of Chadha’s monopoly was Mohan Meakin’s Lucknow distillery, which shut down almost immediately. Also to suffer heavily was the beer Meakin 10,000—a direct competitor of Chadha’s Wave beer—which was completely wiped out of the market.

“Meakin 10,000 was the highest selling beer across Dehradun to Meerut, but after 2009, we almost stopped getting any orders at all. What were we supposed to do?" laments S.C. Sahay, Mohan Meakin’s sales manager.

Wave Distilleries and Breweries didn’t respond to an email query by Mint on Sunday seeking comments on whether the company getting exclusive wholesale distribution rights was in violation of the spirit of a free and fair market, as alleged by Sahay.

According to a former Mohan Meakin shareholder, who didn’t want to be named, ad hoc state excise policies are not to blame for Old Monk’s lacklustre performance. “For a company as old as them, they have always been on the wrong side of the government—and if you are in this business, you can’t let ego dictate your business decisions," says the person, who recently sold his shares.

In Tamil Nadu, after the state took over liquor procurement and sales, Old Monk completely disappeared from the shelves till recently—a setback that hurt the brand worse than Chadha’s monopoly in Uttar Pradesh.

Tamil Nadu, as Sanjeev Raikar, research analyst at Euromonitor International, pointed out, is one of the largest rum markets in the country (along with Karnataka, Andhra Pradesh and West Bengal).

By 2008, Old Monk also lost the distinction of being the Indian Army’s most-loved drink. A Right to Information query filed in the year revealed that Radico Khaitan’s Contessa had overtaken Old Monk as the top-selling brand at army canteens According to an Economic Times report, Contessa, by 2013, had a market share of 25% in the army’s Canteen Stores Department.

This year, Mohan Meakin lost yet another battle with the government, and was forced to part with some of its land at the Mohan Nagar industrial estate for a Delhi Metro rail project.

To make matters worse, industry analysts say that Indians are drinking less rum. Apart from distribution woes, Old Monk, according to Raikar, has been the victim of “changing consumer preferences".

“A large consumer base is now embracing premium whiskies," Raikar said in an email.

Another analyst, Ranjana Sundaresan of market research firm Mintel India, agreed. “The Indian middle class is now shifting to more premium brands. They are drinking less, but drinking good stuff," Sundaresan said in a telephone interview.

Since 2011, the overall volume of rum sold in India has gone down. The decrease, though, at less than 1.5% annually, is not even a patch on Old Monk’s fall in sales.

As the market saw a shift towards premium (read: more expensive) brands in the mid-2000s, McDowell’s raised the price of Celebration Rum. It was rather tactically priced at around 20% in excess of Old Monk. It was a great move that helped the company tap the new shift towards premium brands, according to industry analysts.

Old Monk did nothing to give the brand a new lease of life. (Only in the past year or two has Mohan Meakin come up with some premium varieties that are priced as high as Rs1,200 for a 750ml bottle.) Instead, it outsourced distribution to a third party in many markets. It was a disastrous move. In the alcohol business, a strong distribution machinery is considered as important as the product.

“Just look at the board once," says an employee, on condition of anonymity, explaining why innovation has never been the company’s strength. “It is full of old people who are past their prime. I’m sure they were great managers in their time, but you need professionals up to speed with market realities to be able to deal with the onslaught of foreign companies."

Really old monks

At Mohan Meakin, the standing joke is that there is no retirement age. Group chairman Kapil Mohan is almost bedridden—and has limited mobility. One member in the board of directors, Swaraj Suri, is past 80. P.D. Goswami, the former financial director of the company, retired at the age of 86 in 2012.

The group’s reluctance to let go of the status quo has also led to the complete lack of any strategic partnerships. Many international companies such as Budweiser and Carlsberg have approached the company. In fact, SABMiller, India’s second largest beer company by sales, almost took over Mohan Meakin.

However, the deal, according to a person with knowledge of the matter, was called off at the last moment as Mohan insisted that he would lease out the company only for 10 years—a condition that didn’t cut ice with SABMiller. The company confirmed to Mint on Sunday that it was indeed in talks with SABMiller and was quite close to coming to an agreement.

Another event in the mid-2000s, according to insiders, that adversely affected the company was the exit of the flamboyant Rocky Mohan, one of Mohan’s nephews. While his final exit was without acrimony, several employees, current and former, say events leading up to the exit weren’t quite smooth.

“He just couldn’t get along with the Brigadier," says an employee who’s been on Mohan Meakin’s rolls since 1971.

“I retired from the company. I don’t want get into the why of it, but I continue to play an ambassadorial role," Rocky Mohan told Mint on Sunday.

Does he think the brand could be doing much better? “Yes, it could be doing much better. Most certainly we have had problems, but the numbers are not as bad as they are being projected to be."

Rocky, when asked if he thought the company could have been run in a much better fashion, refused to comment. “One thing I can say on record is that the company will be back to its old glory soon. A lot of positive steps are being taken."

In 2014-15, Mohan Meakin did show a semblance of a fightback, with a profit of Rs3 crore.

The opposite effect

Vinay Mohan, Rocky’s cousin and Kapil’s nephew, director at Mohan Meakin, who agreed to meet me at the company’s Mohan Nagar office—an administrative building that has the air of a government office in dire need of a makeover (and a stricter no-smoking rule inside the building)—after much persuasion, doesn’t think there is a problem.

“The numbers are highly exaggerated; I don’t know where you have got them from," says Vinay.

“We are growing everywhere. Yes, there was a problem due to political reasons in Tamil Nadu, which has now been sorted. In Bengal, we are growing by 30% annually, in Maharashtra, 20%," he claims.

What about the almost continuous losses the company has suffered in the past few years? “That has nothing to do with Old Monk. There were some loss-making entities in the group like the glass factory that we have shut down. We let go of around 400 people during the rejig. Anyway, we suffered losses only for a year or two," he says.

“We don’t believe in doing anything that is not permitted by the law of the land, that’s why we don’t do any surrogate advertising. But we have launched new premium varieties in the market. We are selective with our products because we want them to justify the Old Monk label," he says.

Old Monk, Vinay insists, continues to be most-sold drink even in duty-free shops across airports in India. “It sells so much that other companies have had to request duty-free shop owners not to display Old Monk prominently because their products were suffering."

Vinay appeared to be right about people asking for Old Monk at duty-free shops. Just one problem though: Mohan Meakin doesn’t have the wherewithal to match the demand. “The company has huge distribution issues. Supply is completely distorted," says a person who operates several duty-free retail stores in various cities, on the condition of anonymity.

The situation is not vastly different in duty-paid shops in airports either. “There is no supply," was the rather direct response from Amit Arora, chairman of Buddy Retail Pvt. Ltd, which runs Liquor World, a chain of duty-paid liquor stores in the Delhi, Goa and Mumbai airports.

So, has sale volume not been affected at all? “I told you; marginally for a few years because of a few markets," insists Vinay, instructing Sahay to share the company’s own historical sales data.

The numbers never came, despite multiple reminders over the course of a month. But then, things are hardly known to move fast at Mohan Meakin.

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Updated: 23 Apr 2016, 11:27 PM IST
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