Pernod Ricard India to invest up to ₹1,800 crore to set up malt spirit distillery in Nagpur

New Delhi: The Indian arm of French spirits company Pernod Ricard has signed a memorandum of understanding with the Maharashtra government to set up a malt spirit distillery in Nagpur. It will invest up to €200 million ( ₹1,794 crore) for this over the next decade.

Once complete, the distillery in the industrial suburb of Butibori in Nagpur will be one of the largest in India, capable of producing up to 60,000 litres of malt spirit a day.

“For us, it's really the moment to reinforce that India is one of the key strategic markets for Pernod Ricard. We are the second-largest market for Pernod Ricard by net sales and it's obviously very important for the group to succeed in India and to fully benefit from the long term potential of this market,” Jean Touboul, CEO, Pernod Ricard India, said in an interview with Mint. Pernod Ricard operates 24 facilities in India. Some of these are fully owned by the company, some are through joint ventures, and some are leased.

The investment will be deployed in phases over the long-term, Touboul said. “We're talking about a decade for this investment to roll out in phases,” he added. The distillery will take at least two-and-a-half years to build.

The company has identified India as a priority market. In an interview with Mint in December, Touboul said Pernod Ricard was on track to triple its net sales in India over the coming decade. In fiscal year 2023, India surpassed China as the second-largest market by net sales for the company, after the United States. Pernod Ricard India sells mass-market brands such as Royal Stag, Blenders Pride and 100 Pipers, and premium ones such as Chivas Regal, Ballantine’s, Glenlivet and Jameson Irish Whiskey.

Once complete, the new distillery will employ between 700 to 800 people, the company said, and produce spirits such as Longitude 77, Royal Stag, Blenders Pride and 100 Pipers, among others. Pernod Ricard India aims to procure up to 50,000 tons of barley a year from farmers for this.

India’s organised liquor industry is set to record revenues of ₹4.45 lakh crore in FY24, according to a 2023 report by ratings firm Crisil. Pernod Ricard India posted a consolidated revenue from operations of ₹25,039 crore in FY23, up from ₹22,741 crore in FY22, according to data sourced from Tofler.

Earlier this month, the group reported earnings for the first half of its fiscal year 2024, which runs from July to June. “In the first half of the fiscal year (July to December 2023), our net sales in India grew 4%. This was slower than in the previous fiscal because we had some unfavourable comparatives in the base of last year, particularly in the Delhi business, and because of some route-to-market disturbance. Most of these issues have been resolved. We are happy that despite this unfavourable context, we've been able to grow. We forecast an acceleration in the second half of the year (January to June),” he said.

The pace of premiumisation in India’s liquor industry slowed down last year, he said, but is now gaining momentum. High inflation and interest rate hikes have squeezed disposable incomes, he added, affecting the sector at large.

Touboul, however, maintained a low-double-digit growth target for the company over the medium term. “In India, we should be able to grow year-on-year in the low double digits. It will not be the case for this fiscal year (2024). We will have high single-digit growth this year, but from next year we believe we can return to low-double-digit growth,” he added.