In a significant strategic pivot, French spirits giant Pernod Ricard has completed the sale of its mass-market whisky brand Imperial Blue, marking a decisive move to focus on higher-margin premium alcohol segments in India. The company sold the brand to Tilaknagar Industries for a lump-sum consideration of ₹3,442 crore.
A Deliberate Shift Towards Premiumization
This exit is not an isolated event but part of a decade-long strategy termed 'premiumization.' Jean Touboul, CEO of Pernod Ricard India, explained that the disposal of Imperial Blue frees up resources to accelerate growth in more profitable categories. The strategy is clear: to encourage consumers to move up the pricing ladder.
Simultaneously, the company announced the launch of its new India-made spirits brand, 'Exclamation!'. Priced around ₹700 to ₹940 for a 750 ml bottle, this brand will offer whisky, brandy, rum, vodka, and gin variants. It is strategically positioned between the company's mass-market giant Royal Stag and the more premium Blenders Pride. Pernod Ricard aims to scale Exclamation! to one million cases within its first 12 months, with a phased rollout across 14 states by June 2025.
Why Exit a Best-Seller?
The decision might seem counterintuitive, given Imperial Blue's market performance. The brand sold nearly 20 million cases annually, contributing roughly 20% to Pernod Ricard India's net sales. However, its profitability was lower due to its price point of around ₹400. By removing this lower rung from its portfolio, the company clears the path for aggressive growth in the mid-premium tier (₹700-₹1,100), where consumer trade-up is occurring faster.
Karan Taurani, EVP at Elara Capital, endorsed the strategy, noting that the mid-to-upper prestige segment offers higher growth rates, strong volume expansion, and better margins, making it an ideal target for innovation and competition.
Navigating Growth and Regulatory Hurdles
This strategic shift aligns with India's position as one of the world's fastest-growing alcohol markets. The industry grew by 9% in value in 2024, reaching nearly $40 billion, according to IWSR. However, the landscape is complex, marked by volatile state-level regulations and taxation.
A significant development is the India-UK Free Trade Agreement (FTA), which will progressively cut import duties on Scotch whisky from 150% to 40% over a decade. Touboul estimates this will reduce retail prices of brands like Chivas Regal, Ballantine’s, and The Glenlivet by 10-15%, potentially broadening their consumer base.
Yet, tax hikes remain a major challenge. For instance, Maharashtra's more than 50% excise duty increase on Indian Made Foreign Liquor in June forced Pernod Ricard to implement a 35-40% price increase in the state. This led to significant consumer trade-down, impacting a market that contributes over 10% of the company's net sales.
Market Outlook and Financials
Despite these headwinds, the outlook remains optimistic. Pernod Ricard India, the country's largest liquor company by sales, posted consolidated revenue of ₹26,773.23 crore in FY24, a 7% year-on-year increase. The company operates 24 manufacturing units across 18 states.
Touboul projects low double-digit growth for the Indian business over the next five to ten years. "If you grow at low double digits for 10 years, you triple the business," he stated. Early festive season indicators and credit card usage data point to resilient consumer demand, supporting this positive medium-term view.
