Living on his own terms

Living on his own terms

Dave Broom meets Indian drinks king Dr. Vijay Mallya

People | 04 Mar 2011 | Issue 94 | By Dave Broom

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You can more or less anticipate what you are going to get when granted an audience with Dr. Vijay Mallya. Not an interview note – billionaires don’t do those. You may be allowed to ask some questions, but it is clear from the manner in which the responses are phrased, by the long sentences, the lengthy expositions and flashes of testiness that this is a man to whom people listen. Silently.

The first time I came across him was at one of the World Whiskies Conferences in Glasgow where he shared a stage with Diageo’s CEO, Paul Walsh, and gave a bravura turn which touched on Ghandi, and the legacy of colonialism and left everyone in the room in no doubt of the coded message contained within the peroration: if you want to do business in India you come through me. As Mallya talked, Walsh fidgeted in his chair. A few months later, Diageo was in talks with Mallya.

He is tired, that much is clear. Who wouldn’t be after coming straight off a flight from New Zealand into a day of boardroom meetings? Jetlag even affects billionaires with their own private jet. The Dalmore King Alexander he cradles is however having a mellowing effect.

He is here to bring home the three bottles of Shackleton’s whisky, which have been permitted to leave the care of the Antarctic Heritage Trust in order to be analysed in Scotland. Flying them here may seem an unnecessary extra bit of PR on what is already a remarkable tale, but it transpires this was the only way in which the AHT would allow the bottles to leave New Zealand. You imagine they thought their ban on transportation on a commercial flight would stymie any attempt to prise them from their grasp, but they obviously hadn’t accounted for the fact they were dealing with a man who not only has his own private jet but his own airline. People don’t say no to Dr Mallya.

While Richard Paterson talks enthusiastically of the task he now faces to decode and reconstruct the whisky, Mallya’s mind is clearly already two steps further on. “This might be a huge marketing opportunity for us,” he says. “Yes, I’m looking forward to the scientific opportunity, but I am also excited about the marketing possibilities to create an Edwardian style whisky.”

So you think there’s an appetite for something like this?

“A lot of the world is going retro. India is one of the youngest countries in the world and the tastes of the newly successful young are evolving.

“Part of that is going retro, so if this whisky is correctly positioned it might be a hit.”

Sussing out hits has been Mallya’s forte since 1983 when he took over United Breweries [UB], aged 28, from his late father. Dismissed as being too young and frivolous to be a serious tycoon, Mallya surprised everyone by establishing Kingfisher as a global beer brand, launching Kingfisher airlines and establishing United Spirits [US] as the dominant player in India and the second largest spirits company in the world after Diageo.

His move into Scotch with the £595m purchase of Whyte & Mackay in 2007 was however widely seen as paying over the odds for a business which was UK-centric with a heavy focus on low-cost commodity brands. “My reasons were very different to the public perception. I have a large portfolio of Indian spirits and in producing these we need Scotch. I bought W&M because my competitors had started to restrict the supply of my requirements. It was becoming difficult to buy the liquid I needed for a growing market, so I bought a company which gave me production of grain and malt as well as stocks of both.”

In retrospect did you pay over the odds?He leans back in his chair, his eyes closed, his light blue pinstripe suit falling open to reveal his brightly coloured tie. “Price is in the eye of the beholder,” he says with a note of mild amusement. “Some say I overpaid, but I don’t think so.” He leans forward. The eyes are open. The cadence faster. “The people who write the cheque are the ones who make the decision. Buying W&M made me self-sufficient. So was that too much?”

The firm he bought is hardly the firm it is now. The bulk business has been scaled back and there has been greater concentration on repositioning malts such as Dalmore in the luxury category. “The direction has changed, yes,” he says. “The previous management had stopped investing and moved the business into bulk, so despite having brands the firm was dealing in commodities. Now, we are building brands. The value in the bottle is worth 10 times what it is in the barrel.”

During the past two years however there were suggestions that Mallya was losing his golden touch. News emerged that he was in talks with Diageo to offload a stake in US, even Whyte & Mackay was open to offers.

The diamonds in his heavy gold bracelet flash as he waves his hand dismissively. “You have to know that Diageo talked to me, not the other way round. I didn’t need them, they needed me to get distribution in India. I offered them 14.99 per cent at the time when the shares were trading at INR480. Now they are INR1400. Diageo was interested when the share price was low, now they are less so, and,” he adds with a quick smile, “this year our sales in India will be greater than Diageo’s globally. I am not overstretched.”

So you wouldn’t now sell a stake?

“I still have a personal stake of eight per cent which I’ve retained so I can keep my options open. I could have cashed it in at INR1400 if I’d been as desperate for cash as some people believed.” He pauses, looks around the room. “But I kept it.”

So, will you sell it? “I dunno!” He makes a face. Everyone laughs.

Yet can US, for all its dominance of its domestic market, go mano a mano globally with the likes of Diageo and Pernod Ricard which have already established international structures?

“I believe so. Asia Pacific is the fastest-growing region in the world; Eastern Europe shows promise while Africa must be the world’s forgotten business opportunity.

“Then there is India. Its economy is no bubble. In 2008, the world almost collapsed financially but India’s GDP grew by +5 per cent. We saw no recession. When I raised the funds to repay the W&M acquisition I did it in the middle of the recession. This is the world’s fastest-growing economy and spirits are growing strongly. I predict that India will be the biggest market for Scotch.”

Can it really when the tangled issue over import tariffs remains unresolved, as does the argument over Indian distillers’ demands to be allowed to call their molasses-based spirit ‘whisky.’

Will the duty come down? He shrugs. “Only if there is a level playing field. The EU’s position is that whisky is made from grain. We take a different view. If they want India to lower the tariff rates then they have to allow Indian producers the right to enter the EU with their products as they are, but that decision is up to the Indian government, not me.” He sits back.

But can India really become Scotch’s biggest market if there is this impasse?

“It will be the biggest. I will achieve it and W&M will be the biggest brand. We have 60 per cent of the market. Access is one thing; distribution is another. Even if tariffs are reduced, market penetration depends on distribution. We have control of that.”

Couldn’t he, as a player in both sides of the war, act as a peace broker? “Peace?” He feigns surprise. “I’m not at war! I’m not a member of the SWA, so I’m free to do and say what I want, but I have no intention to fight with anyone. I will co-operate to the best intent I can.” A glimmer of hope, then comes the caveat: “But if they want the Indian spirits industry open to European spirits then they have to reciprocate.”

But that’s not going to happen. He shrugs again, a smile playing at the corners of his mouth. “I have better things to do with my time than argue with people.”

Then he sits forward. The voice has changed. It’s louder, firmer, tinged with impatience. “They keep saying that India is breaking WTO rules, but the WTO has no jurisdiction to try and enforce change in a country’s constitution. The Indian constitution gives the right to raise taxes on tobacco and alcohol to each of the 28 states. The central government has no control over that. The WTO can try and force the Indian government to reduce import taxes, but no-one can influence each of the state governments on what taxes they levy. What then is the use of the WTO and the SWA yelling at the central government? What have we achieved in all of this? Nothing!” His voice drops again, sounding either resigned, or bored. “The SWA has to compromise, but if it doesn’t we can peacefully co-exist.”

He nods, stands up and leaves. The story is far from over. Earlier, asked about his flamboyant image he responded that he’d lived life on his own terms since he was 28. Nothing has changed.
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