Paul John on how he got into the alcobev business & what to buy for your home bar ahead of Diwali 2024

Paul John, chairman, John Distilleries; and a Paul John warehouse. (Images courtesy John Distilleries)

Paul John, chairperson of John Distilleries Pvt Ltd (JDPL), learnt how the business world works after losing money on a biscuit factory straight out of college. John says he knew from a young age that he was going to go into business, and he turned to blending and bottling liquor after the biscuits business crumbled.

In 1992, in a newly liberalized India, he started National Distilleries, but he still wasn't distilling the alcohol himself. The thing he had going for him: his father, former Karnataka minister T. John, had a network of shops selling alcohol in south India. Paul John said this gave him confidence that he would at least have shelf space to retail whatever he bottled, till the business got off the ground.

Indeed, Paul John had got a glimpse into the liquor business from his schooldays, when he would accompany his father to the annual auction of rights to sell country liquor. "There used to be an auction every year (for the right to sell country liquor) in every state and every district... So I would go with him, even when I was in school and college," he said in an exclusive interview to Moneycontrol.

Paul John spoke at length about the early years of National / John Distilleries, why he set up a distillery in Goa, the private-equity investment from Gaja Capital, the investment by American alcobev Sazerac, the split of domestic vs international sales for John Distilleries and which spirits to buy for your home bar ahead of Diwali 2024, among other things. Edited excerpts from the interview:

Could we perhaps begin by dispelling a common confusion around when John Distilleries was started - was it 1992 or 1996?

Actually, I started in 1992 but it was under another name called National Distilleries and it was a partnership firm. And then in 1996, I changed it into a private limited company, and I renamed it as John Distilleries Private Limited.

You grew up in Bangalore, but you set up your distillery in Goa. Why was that?

Well, I grew up in Bangalore and I started my alcohol business in Bangalore. It was over a period of time that when I started expanding, I expanded to Goa also. And then when I decided to put up my single malt plant, Goa was the place that I picked because of the weather and the water and everything. My largest operation is still in the state of Karnataka and we are headquartered at Bangalore.

When you say weather and water in Goa, could you expand on that a little bit?

Before I put up the malt plant, I went to Scotland. I made many trips because we were all given to understand that you could only make good quality whiskeys in Scotland. There was a big confusion; nobody had done it in India before. I did a lot of research and found out that we could do good quality single malts even in India. And then when I started searching for a location, of course, you know the home base was Karnataka, Bangalore, but end of the day, I found that the water table in Goa was very good. I (also) loved the place because that's a tourist destination - I had been going there for many years. Then, of course, the weather conditions also I thought were ideal because of the humidity and the monsoon. Of course, it's completely a different thought process from what happens in Scotland. But I'm glad I picked Goa because now we mature (whisky) faster and we're able to get good quality alcohol at lower ageing than compared to what happens in the rest of the world.

You started with blended whisky, and you started selling your single malt in the UK first in 2012. What were the early years of Paul John like? What was happening at John Distilleries then?

When I decided to start the alcohol business, my father was in trading of alcohol, and he had about 32 retail shops in an area called Coorg, and he was a wholesaler. So that gave me the background to be able to be confident that OK, I have some captive volumes that my dad will help me to sell. That was the initial start, of making the cheaper brands for the domestic market in Karnataka, and I did that for many years starting from 1992.

It was in 1995-96 when I decided to upgrade the quality. And then I started the brand called Original Choice Whisky at that time. That's when I put in some malt and did some packaging and that was the initial years.

I continued to make the blended whiskeys for the domestic market, and started expanding to the neighbouring states: Kerala, Tamil Nadu and then Andhra, and then slowly started moving up to the neighbouring states...

Around 2005-6 is when I thought of putting up the (single malt) plant. And then in 2012, I decided to launch in Europe and I picked the UK (to start) because that was the home base for whiskeys and specifically single malts to get recognition and get the awards. After many other European countries, then I decided to come back to India and launch it in India.

Are any of the blended whiskies that you started out with still available?

Yeah, definitely. Our major business is still in the domestic market. Original Choice Whisky sells upwards of 20 million cases in a year. It is one of the top five largest selling brands in the world in terms of volume.

We have a whole range that we mainly sell in India, from Mont Castle whisky to Roulette whisky, Roulette brandy. And then we have Big Banyan wines. And then subsequently the single malts, the Paul John series. We have about 12 variants (in Paul John Single Malts) starting with Nirvana, then the flagship which is Brilliance, Paul John Edited and Paul John Bold, followed by the Star Sign series, and then we have the Christmas edition that we launch every year. For the last five years or so we've been doing that. And then we have some special editions also that we launch. I also have an XO brandy that is distilled from grapes in a pot still and matured in French limousine casks which is called the Paul John XO.

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Before we get into your Zodiac collection, which includes the Mithuna and Kanya whiskeys, tell us a little bit about why you decided to take private equity funding?

As the business started growing and the demand for single malts slowly started getting some clarity - that there was a potential to sell good quality single malts internationally and in the domestic market - it needed a lot of money because, as you know, it (the whiskey) sits in the warehouse for six to eight years before we are able to bottle it. All these things drove me. I had a choice to either be 100 percent owner of a small operation or dilute my stake to some extent and go for a bigger operation. So I picked the latter and that's how I landed first going in for a private equity investment (in 2011) and then we had a very good relationship with Gaja Capital that had put in money and it was a six-year fund. After six years or closer towards the six year period, they had to exit and that's when they sold their stake to Sazerac. And that is how now we've partnered with Sazerac.

Sazerac, which is based in the US, somebody who's already in the alcohol space internationally. Could you tell us a bit about what they've been able to bring to the table since 2017?

It starts from definitely the financial support that came with them taking stake. They are a very big player in the US. Their portfolio also includes high-end bourbons; they own brands like Buffalo Trays, Pappy Van Winkle, just to name a few, EH Taylor. The knowledge that has come with their ability to manufacture bourbon and the storage - the ability to understand how you know storing of costs happens - so, there is a lot of technology transfer that's happening between the two of us.

We have support from them as far as the distribution of our brands worldwide is concerned because they are present in, I think, 100-odd countries across the world. A lot of places where we've had issues with distributors, we've been able to take their support for that.

We've also launched some of their products in India. For example, Fireball is a brand that is owned by them, which is a very successful brand worldwide. We do manufacture that in India and we're distributing it in India now.

Going forward, we are also working on bringing in a lot of their other international brands that are being sold abroad, which we would, whatever we can manufacture in India, we will do that, and of course a lot of them bourbons that have to be bottled in origin, we already have some kind of an arrangement with them to market some of their products that they have launched in India, the bourbon whiskeys.

You've recently expanded your capacity at the Goa distillery... what was the size of the investment, and what is the capacity increase?

Yeah, we went from 2,000 liters (at launch) to 4,000 and then now we've gone to 12,000 liters a day. We've spent about Rs 100 crore to do the expansion. And we need a lot more in terms of investment to store the whiskey that's going to come out from that in terms of storage for barrels and the warehousing we need to build.

Paul John Single Malt in Goa (Image courtesy John Distilleries)

Your Mithuna whiskey, which is part of the Zodiac range, is priced at just over ₹20,000 at the Delhi duty-free; in Mumbai, it goes for about ₹22,000. Tell us about your pricing strategy.

We have categories that range from about Rs2,500, depending on the state and the taxes. Then we've got brands that start from Rs4,000, then 7,000 which is our Oloroso, PX and things like that. And then the Stars series are, I would say, one of the more premium segment products. We launched Kanya, which was also an award-winning whisky; it was (judged) the best Asian single malt and the third best whisky in the world. It's basically a single malt matured in virgin oak (barrels). Typically, we mature most of our single malts with one used bourbon cask that we get from the US, but in this case, we've matured it in virgin oak for about six years.

Because of Indian humidity and the temperatures, we lose a lot in terms of evaporation, which in other words is called the Angel's share. We lose anywhere between 10 percent to 12 percent in a year. But that's the flip side of it. The better side of it is that we're able to get excellent quality products where we are end up competing with 28-year and 30-year-old whiskies and winning awards with about six to eight years of maturation in India. And Mithuna is one of them.

What's your sense of the reception of Indian whisky abroad?

In the beginning, when I launched, of course it was a Herculean task. People did not know India made single malts. They were still under the impression that we make all our whiskeys from molasses. So most of the questions would circle around that: How do you make your single malt? Is it made out of molasses? But then over a period of time, I think the manufacturers, not only me, but the rest of the single malt manufacturers in India, have proved the ability to produce high-quality single malt whiskies.

And now that (poor awareness around Indian whisky and questions around the ingredients and process) is not the case anymore. Most people have heard of India as a significant produce of good quality single malts. A lot of them have tasted the single malts that have come from India, including our brand. And then they're looking forward to what's the new stuff that you have.

Barring Paul John, what Indian whisky do you recommend to people who ask you for a taste of Indian whiskey?

Amrut is making some excellent quality single malts. GianChand from Jammu is making some very good stuff. And I think there's a lot of good stuff that's coming out in the near future also.

If you open this up to international whiskeys as well... with Diwali coming up, what spirits would you recommend people buy?

If they are single malt fans? See the problem in India, I personally believe, is that we still have to educate the consumer to be able to drink single malt the way it should be had: preferably with no water added, but at best if they find it extremely pungent, probably a teaspoon for every peg.

Having said that, I am a non-peat (whisky) fan. If they are just starting out (experimenting with single malts), then probably a Brilliance would be good. But if they're little more into single malts, then I would highly recommend one of our cask finishes: the PX or the Oloroso. And then of course, if budget is not an issue, Mithuna is something that I would highly recommend. Again, if they are peat fans, we have something called Bold, which I think they will like. Then of course the other brands are there, multiple options are there.

Paul John Brilliance

Internationally, are there any whiskeys that you think are interesting to look at right now?

Definitely. There are some fantastic whiskeys that are coming out from really unknown parts of the world. For example, there's a brand called Kavalan.

Then of course the Japanese single malts are very good. Unfortunately, there are a lot of blended whiskys coming from Japan and they are not very clear on their labelling... if you can get your hands on a single malt like Yamazaki, they make fantastic single malts. But they are expensive and they are not easy to come by - availability is low.

What can you tell us about the R&D that happens at Paul John?

We take our business very seriously; especially since I have leant my name on the bottle.

There's a lot of research that we do. It starts from the barley, to the (distillation) process and maturation - where the casks are kept - and ultimately how the casks are picked and how the whisky is bottled.

At every stage, there is a lot of discussion. To give you just one example, the fermentation (of barley) can happen within 42 hours but we leave it for 72-90 hours so the yeast can impart all its flavours before it (the whisky) is distilled.

You mentioned that your father's retail shops gave you a little bit of confidence to get into the alcobev business. When did you know that you would get into business, and more specifically, the liquor business?

I had an inclination to do business from a very young age. Even when I was studying, I would look at distribution for various brands of liquor. I would make sure some brands were supplied, and I would take a commission, even at a young age. I used to accompany my dad on his trips... we were in the country liquor business before, and there used to be an auction every year (for the right to sell country liquor) - in every state and every district, there used to be auctions to have the right to sell country liquor in a particular area. So I would go with him, even when I was in school and college. From the get-go I knew business was something I was going to start.

After I graduated from college, I first went into the business of making biscuits. I bought a company that was making biscuits and which had been closed. But that was a disaster. I lost all the money and had to go into hiding (laughs). But it taught me a lot of stuff about what the real business world is. Subsequently, I managed to get a licence to manufacture alcohol and then I put up the distillery, and started my brands. My dad was in retailing of alcohol.

How many cases are you doing in a year - across brands?

We will close this year with more than 22 million cases.

This is after the expansion of the Goa distillery from 1.3 million liters to 3 million liters a year?

That will take another six years to start coming out. For the next six years, we have to stick with whatever is in the casks. But with the increase in expansion, it's going to go up four times. Maybe even 300,000-400,000 cases a year after the deduction for evaporation losses (angel's share) in the single malt category.

What percentage of your business is domestic vs international?

For the single malt category, somewhere between 35 percent and 40 percent of the single malts that we sell is international sales and the balance is domestic sales. But the cheaper brands, almost 95 percent domestic sales and only about 5 percent we sell abroad. Because in the cheaper brands, there are a lot of restrictions: in most countries, the classification to be called a whisky is that it has to be matured for at least two years in casks. And most of the domestic brands that we sell are not matured (for that long), so are not qualified to be called whiskies in most countries. But in Africa, and the Gulf countries, we are. And to some extent, we have some matured blended whiskys also which we send to Japan and Australia.

Any new launches planned?

We are on the verge of launching a lot of new products. An aged sipping rum is in the works. Hopefully within the next few months, we should be able to launch it. Then we have a Madeira finish - sherry cask finish - that is going to be launched soon.