DH Interview | Third Eye Distillery plans launch of 2 brown spirits this year

Indian spirits maker, Third Eye Distillery, widely known for its Stranger & Sons gin, is looking to enter the brown spirits segment this year to tap the rising demand and spending capacity of Indian consumers. Third Eye Distillery’s co-founder and chief executive officer, Rahul Mehra, in an exclusive interview with DH’s Sonal Choudhary, said the company is looking to raise around $5-6 million capital, amidst expansion plans. Edited excerpts:

1. You entered the spirits business with Strangers & Sons, when there were not many Indian gin brands. But today, what do you make of competition from the likes of Anand Virmani’s Hapusa and Lalit Khaitan’s Jaisalmer?

I think the competition landscape has become interesting. There was barely anyone when we started off, especially in the premium space, and today, Indian brands are finally taking center-stage. Gin is a tiny subset of the spirit landscape and I think the competition will get more interesting as we keep growing into newer categories. Premiumisation itself is something that's been a trend for about a couple of years and a lot of new Indian drinkers are now attracted to consuming an Indian brand.

2. How is your business apportioned between gin, cocktails, mixers and duty-free retail? What is the growth plan for each of these segments?

Around 80 per cent of our revenue is generated from our spirit brands across our channels and markets, and the remaining 20% is from our non-alcohol division that includes Svami. Ready-to-drink cocktails and limited editions take up 10% of our spirits business. Stranger and Sons gin is our most mature brand, and being a premium product, it tops our business share. Most of our cocktails and limited edition products are seasonal in nature, and they attract a lot of attention, thereby helping the overall brand significantly.

Having said that, this year, we will be foraying into whiskey and dark rum categories. We are currently in about 17 countries and are aiming to be in about 25-26 in the coming six to eight months. We are also in talks with the markets in Miami and New York.

Moreover, we are expanding into the canteen stores department (CSD) by this quarter and that will be a big jump on our revenue as well as volumes. We are working on entering our travel retail in Heathrow and other markets.

3. You have been importing rum, but what are your plans on spreading to other spirits? 

More spirits will come under the imports portfolio this year as well. We intend to acquire more brands to expand our offering. 

4. Given the demand that you have highlighted, are you looking at increasing your production capacity?

We have increased our production capacity incrementally, which now stands at 35,000 cases per month. We are also engaged in establishing a new facility in Goa, which will double our current output. We have got most of our licenses for our distillery, and at least a part of the production to the new facility should be in before March.

5. You have been partnering with international entities - can you explain the business model there?

The objective is to build a massive distribution platform from scratch in India and partner with other brands to help them get onto our distribution channel. That's how the model works. Sometimes if the brand outperforms, we may hold talks to acquire certain rights of their brand, or we may continue to run it with good margins. It's a win-win for both sides, because it adds to our portfolio as well as helps the brands. This adds a lot of context to the Indian market because you can't build every brand out there.

6. How has the country's excise levels impacted your business? And, are there any other impairing factors? 

The excise infrastructure in India is quite robust. It works to protect all its players and consumers. I think the only complexity here is having to deal between state lines which will eventually at some point in time ease itself out. I don't believe all of it can be done in one go. However, we are seeing improvements. 

7. What are your capital raising needs and plans?

We are an equity-funded company and we continue to raise capital as and when required.We are in the middle of raising $5-6 million and I think we should close it in this quarter itself.