alcohol industry final

8/2/2019 Alcohol Industry Final

http://slidepdf.com/reader/full/alcohol-industry-final 1/57

Presented to :Prof. Rashmi Menon & Class Prepared by:

Valay Chaya (07)

Nikul Maheshwari (28)

Anis Vohra (56)

Ravi Vyas (57)

Nilesh Jain (60)



The Industry

• Top 5 Emerging countries (Brazil, China, India, Mexico and South Africa)contributed $39876.3 million to the global Spirits industry in 2009, with aCAGR of 8.6% between 2005 and 2009

• http://www.researchandmarkets.com/research/a73aa3/spirits_top_5_em

0 10 20 30 40 50 60 70 80 90

USA

Europe

China

India

Per capita Consumption in Litres

Litres

http://cts.businesswire.com/ct/CT?id=smartlink&url=http://www.researchandmarkets.com/research/a73aa3/spirits_top_5_em&esheet=6527885&lan=en-US&anchor=http://www.researchandmarkets.com/research/a73aa3/spirits_top_5_em&index=1&md5=ceb3b0ddb547f8e1d7e63e388663dda5












Key Drivers and Challenges

Drivers

- Young population

- Low per capita consumption

- Rising income levels

- Dynamism in beer market

Challenges

- Bottling shortage

- Advertisement barriers

- Taxation

- Social Factors



Product life cycle theory for brewery Industry



India is one of the World’s most

exciting beer markets • Available in two strengths: mild(around 5% alcohol) and a generous

strong (6-8% alcohol)

• Excellent demographics, an expanding middle class, and increasingincome levels have huge potential to propel domestic demand

• 70% of population below 30 years of age

• Middle class growing from 5% in ‘05 to 43% in 2025 • Disposable income set to increase significantly on back of sustained

GDP growth

• Positioning of Beer is developing very positively

• Rise in income makes beer affordable to more consumers

• Super premium segment is quickly emerging in large metros



India is one of the World’s most

exciting beer markets • IMFL grows every year at a rate of 15% per year.

• Kerala and Punjab top the list of heaviest consumption in a statewise break up

• Summer is the peak season for beer.

• South is the biggest beer market in India with a share of about 60%,North contributes 30% and the rest of the country contributes theremaining.

• More than three-fourths of India’s beer sales are of the strongvariety with over 5% alcohol content, with only up market towns

and cities preferring light beers.

http://www.retailing360.com/index.aspx







5231.8

16.2

Kingfisher

SAB Miller

Others

Market share in terms of cases sold

http://eng.pivnoe-delo.info/2011/03/31/india-ubl-undisputed-leader-in-beer-market/

60%

30%

10%

South

North

Rest

Regionwise market share in India



















KINGFISHER BEER (UNITED BREWIES LTD.)



Beer

• 52% market share nationally.

• Sold in over 52 countries and also on international flights.

• Every third beer sold in India is Kingfisher.

• India’s 1st global consumer brand – Kingfisher

MISSION & VISION:

• To be the recognized leader in our target markets.

• To be the preferred employer wherever we operate.

• To recognize the value of our human assets.

•To be the partner of choice for customers, suppliers, and othercreators of innovative concepts



STRATEGIES OF THE COMPANY:

• Tie up with large department stores like Food world for retailing

its Beers.

• In association with number of Very Classy, Up market & Stylish

bars & lounges.

• Aggressive Advertising at Outlets & Pubs.

• Better Retailing outlets to be opened under Kingfisher Brand.

• Venturing into other Business with same Brand name, hence

increasing Brand Name & Publicity.



COMPETITIVE ADVANTAGE

MANAGEMENT TEAM

• Professional Managed

• Seasoned Professionals with Significant Industry Experience

SEGMENT MARKET PRESENCE• Least Vulnerable to Policy Volatility due to Large Spread

LOCAL SOURCING

OPTIMAL, AS ALMOST COMPLETELY LOCALLY SOURCED



MANUFACTURING TECHNOLOGY

• Largest Manufacturing Space

•

Maximum Capital Utilization

BRANDING

• Strongest Brand

• Significant Up gradation

•Value Chain Ownership

• Initiatives Planned for Integrating into Retailing

CORE COMPETENCY

• Strong brand image with continuous innovation and technology

along with good marketing and distribution channel are the corestrength of the company



INTERNATIONALIZATION PATH OF SABMiler:



Kingfishers SWOT Analysis

Strength

• Worldwide known Brand

• Oldest & Largest Player In India

• Huge Finances backing from UB Group

• Strongest Worldwide Distribution System

Weakness

• Different Brands under Same Company

• High Concentration on Strong Beer Market

Opportunities

• Beer consumption is increasing

• Reduction in Taxes

• Brand Extension Benefits

Threats

• High Taxes & Regulations

• Prohibition on Advertising

• Indian Culture is a Major Hindrance

• Many International Player Entering In India

SWOT



Strategic Capability

COMPETENCES

Threshold

Capabilities

A diversified parent organization with many SBUs which

means that each SBU is free to develop function.

It is in a Strategic alliance with Scottish & New Castle, giving it

a clear leverage above other competitors to export beer.

Core Competences

Dr.Vijaya Mallya is not only a chairman but also a Member of

Parliament and a style Icon.

Marketing : It has created a unique brand image of style by

the marketing quote “ THE KING OF GOOD TIMES”. Andinvesting into media and also producing the Kingfisher

Calendar.



RESOURCES

THRESHOLD

CAPABILITIES

Tangible

Manufacturing Plants Distributed all over the nation.

Human Capital to efficiently function to achieve a

sustainable business.

Financial capital to lubricate the wheels of the whole

business and to fund the future investments.

Intangible

Since UB is the oldest beer manufacturer in thecountry it has a good knowledge on all aspects of

manufacturing and selling of Beverage Alcohol in India.

UB has a strong Brand Image and a reputation of its

Brands which is basically unmatched in the present

Indian Alcohol industry.

It is diversified into many different fields giving it a key

strategic and financial advantage over other competing

firms.



RESOURCES

Capabilities for

Competitive

Advantage

Tangible

It has an aviation wing which has the same brand

image of the Kingfisher and hence is a unique

marketing strategy.

It has the most number of manufacturing plants

producing beer and alcohol giving it a clear and

unique advantage of maintaining inventory.

Intangible

Since UB is the oldest Beverage – Alcohol

manufacturer in the Indian market. It has a vast

pool of experience and knowledge to tap into for

efficient functioning and to create new and

innovative ways to stay ahead in the market.



Porter Value Chain



PRIMARY ACTIVITIES

INBOUND LOGISTICS

Beer is brewed in either the company’s owned or non-owned Breweries,

with certain Breweries set up for certain functions.

This also reduces the cost and there is less treat of the suppliers.

The company also has its franchise for the production of the beer.

In states like Uttar Pradesh, Rajasthan and Madhya Pradesh which,

account for 80.34% of barley production in India, the area under

cultivation is shifting to other crops like sugarcane

It has extended its own contract farming initiatives in the state of

Punjab.

The 51% Equity stake in Maltex Malsters Limited, a manufacturer of

malt, is also an initiative for vertical integration and excellence in

inbound logistic.

OPERATIONS

Quality and hygiene are the key elements of the United Breweries'manufacturing philosophy Marketing .

The Central Scientific Laboratory (CSL), headquartered at Bangalore sets

standards for all its breweries.

These beers are tested as per the standards laid down by the European

Brewery Convention on 40 different parameters.

Quality Management Systems laid out along the lines of ISO 9000.



PRIMARY ACTIVITIES

OUTBOUND LOGISTICS

No internal distribution/Use third party to distribute product.

Since beer is not delinked from other spirits it is heavily taxed at over 42.

Rajasthan, Bihar and Himachal Pradesh auction based distribution is used.

The distribution system in these states would increase the competitiveness

in the market and lead to increased sales as was demonstrated by the 400%

increase in beer sales in the states of Punjab and Haryana after the

distribution reforms in July 2008.

The complete plant to any of the distributer reaching the plant has

improved the brand loyalty and increase the switching cost for the users.

It has a network of 23 distilleries across the country.

MARKETING/SALES

Vijay Mallya believes in leading his brand from the front byleveraging his personality.

The image of his beer brand from a commodity to a lifestyle brand.

The strong brand marketing that it is said that at every second 4

bottles of Kingfisher bottles are sold.

Sales force is trained and highly experienced.



SUPPORT ACTIVITIES

PROCUREMENT

Choose high quality ingredients to ensure higher quality endresult.

Heavy reliance on this process.

TECHNOLOGICAL

In technology advancement they have automated the complete

plant in 2000 by the Allen Bradley system. This has considerably reduced the cost and increase the rate of

production.

The cycle time is reduced to half of the previous statistics.

INFRASTRUCTURE

Very strong management with a good understanding forcompetition and zeal for staying on top of industry.

Its infrastructure is good as it is backed by the parent brand of UB

Groups.



CORPORATE GOVERNANCE

• United Breweries Limited has always strived for excellence in

Corporate Governance.

• UB are committed towards taking all strategic initiatives to enhance

Shareholders’ wealth in the long term

• The Company accords high importance to transparency,accountability and integrity in its dealings.

• Our philosophy on Corporate Governance is driven towards

welfare of all the Stakeholders and the Board of Directors remains

committed towards this end.

• Its role to align and direct the actions of the Company in achieving

its objectives.



CORPORATE SOCIAL RESPONSIBILITY

• Belief: No business can exist without impacting or being impacted

by the environment it operates in.

• Focus and concentrate on four areas of Corporate Social

Responsibility: Water Management, Contract Farming, Primary

health and welfare, and Primary education.



Differentiation:• Product variations in all the categories like premium beer, mild beer

and strong beer cater to all the segments in the market.

• Associations – Windies Team, IPL, East Bengal FC, F1 etc.

• Region Specific brands- Kalyani Black (Eastern India), UB Exports

(K’taka)

Generic Strategy of Kingfisher



• Interbrew v/s Heineken.

• “World's Local Brewer”

v/s

“Most international brewery group in the

world.”

Competitive Strategies in Hypercompetitive Conditions:-

Repositioning.



Product - Market diversity:

• Market Development: Premium priced, Upper-end product

(Tajmahal- USA, Australia, France; some premium hotels inIndia); Lower-end product (London Pilsner).

Corporate-Level and International Strategy



o KINGFISHER DRAUGHT:- this beer contain less amount of water andcomes in 500ml can. Hence creating a new product in existing market,

o KINGFISHER ULTRA:- This will be launched within some months. It is a new

drink having sweetness in it.

o KINGFISHER BLUE:- this is launched around 8-9 months before to tap

those customer who wants less alcoholic beer in comparison to strong

beer but more milder. It has around 6% alcohol content.

o KINGFISHER BOHEMIA:- Kingfisher- has launched their own brand of

wines in India -"Kingfisher Bohemia". It is launched in 2008 to get the

wider reach in the alcoholic drink market.

Product Development



• Unrelated Diversification of UB group-

o KINGFISHER LEISURE WEAR:- kingfisher is diversified in the leisurewear

segment extending itself in the path of providing good time to customers.

o KINGFISHER AIRLINES:- kingfisher airlines had becomes a very well known

company in itself. This is a full-fledged carrier providing comfort to its fliers.

o KINGFISHER SWIMSUIT CALENDAR:- kingfisher also launch its annual

swimsuit calendar which is the second costliest calendar in the world.

Related and Unrelated Diversification



o UB ENGINEERING LIMITED:- UBEL is an engineering and constructioncompany catering to cross section of industries in power, steel, cement

and petrochemical sectors.

o MANGALORE CHEMICALS & FERTILIZERS LIMITED:- Only Fertilizer plant in

Karnataka, with a dealer network of 2530 in South India and a well

established brand “MANGALA”.

•

SPORTS:- kingfisher also diversified in various sports Current such as inFormula 1, Rugby and Football.

Unrelated Diversification of UB group- cont…



• Case Example-

o Global Forces and European Brewing Industry

-by Mike Blee (Chapter- 2: The Environment): Heinekein (from The Netherlands),

Carlsberg (from Denmark), and

Guinness (from Ireland) are involved in Internationalization.

International Diversity &

International Strategy



• Macro Economic Conditions: overwhelmingly positive,

• Political Environment: veiled Communism,

• China: Local Players posing tough challenge to global players- 45omn Hectolitres (Twice that of the US), 5 % growth (double the

global market growth).

Market Selection and Entry- China



• Multi-domestic Strategy: Interbrew

And

• Global Strategy: Heinekein

International Strategies



• BCG Matrix for Kingfisher

o Star: Tajmahal and KF Strong,

o Cash Cow: KF Lager,

o Question marks: London Pilsner, KF Draught,

KF Blue

o Dogs: UB Ice Beer, Kalyani Black Label.

Managing the Corporate Portfolio



Consolidation

• Food Business was sold to Hindustan Lever, the Indian subsidiary of Anglo-

Dutch Unilever;

• Loss-making polymers business to LG Chemicals of South Korea;

• Best and Crompton, an engineering company, to Polysindo of Indonesia;

its stake in Vijay TV to Star.

• Reduced its stakes to 10% each in Asian Age, an English-language paper,

and in Aventis, a life-sciences company.

• The loss-making Mangalore Fertilisers and Chemicals was turned around.

• The group’s core business now is clearly spirits and brewery, and accounts

for 80% of its turnover.



Product Development



Market Development

• Tie-up with S&N which has a good track record of distribution of third

party brands for international distribution of Kingfisher.

• Entered into a Licensing and Distribution agreement in May 2004 with

Independent Liquor Limited to produce, market, distribute and sell their

products in Australia and New Zealand.

• Worked closely with Scottish and New Castle to extend the reach of

products, particularly kingfisher, to reach to more global markets.



Diversification

• Fertilizers, Engineering, Packaged drinking

water, Pharmaceuticals, Real Estate, Sports-

specially in cricket and formula one.



The TOWS Matrix

SO Strategic Options:

Consumption pattern is increasing withdevelopment of youth and western culture,

so the worldwide presence and brandimage can play a better role in future

WO strategic options:

By reducing few brands/products, or byreducing its focus from premium segment,

the co. is having a higher opportunity tomeet the potential demand and get a newsegment to deal with

ST Strategic Options:As the co. has already build up a strong

brand recognition through sponsorships inyouth oriented sports and events, the co.

can increase the market share and meet thehigh potential customer base.

WT Strategic options:

The co. can search for products specially forwomen as the women are increasing their fancy

towards alcohol.Also they need to increasemarket share and become a dominant player tomeet the future competition from international

players



Mergers and Acquisitions

Year M&A

2001-02 Acquired GMR vasavi, MP Breweries,

65% share in Associated Breweries and Distilleries Ltd.

97% in Mangalore Distilleries and Breweries Ltd.

2002 Empee Breweries

2006 Strategic alliance with Scottish &New castle

2007 Shaw Wallace and Company after long hurdles,

Whyte and Mackay, 4th largest scotch company



Nigeria…….

• It is doubtful if many local industry players knew for along time that the beer market in Nigeria is a robustone. All that was apparent was the presence of twomajor players, Nigerian Breweries Plc and Guinness

Nigeria Plc, and a number of fringe players doingbusiness in the sector.

• But if local players didn’t know or knew, but showed nointerest, SABMiller, a South African brewing giant knew

and made a grand entry into the market. Its coming hassince rattled the market, giving the hitherto two giantsin the industry a run for their money.



• Nigeria’s beer market has shown a compound

annual growth rate of 9 percent over the 10

years to 2009, when national consumption of

the beverage was estimated at 16.5 millionhectolitres



• In an apparent response to SABMiller’s entry

into the Nigerian market, Heineken N.V.,

Nigerian Breweries Plc parent company

stepped up the struggle for domination of theNigerian beer market in Nigeria with its

acquisition of two holding companies from the

Sona Group which has controlling interests infive breweries in Nigeria. Of the five breweries

being acquired, Champion Breweries is listed.



• Analysts believe that the acquisition provides Heinekenwith an additional technical capacity of 3.7 millionhectolitres, helping to alleviate the company’s currentcapacity constraints in the market and improving the

geographic location of its breweries.• The acquisition has been funded from existing

resources.

• Heineken’s geographic footprint now stretches across15 countries on the continent with 37 breweries.



Why so many breweries????

• Because consumption differences..

• Throughout Africa beer is consumed with

alcohol content as low as 2% to as high as

18%.



• Commenting on the Heineken acquisition, Tomde Man, President Africa & Middle East of Heineken, said: “This important move reflectsHeineken’s strategy of increasing our exposure toand growth from developing markets. Nigeria isone of the world’s most exciting beer marketsand one of the most important countries forHeineken. This acquisition underlines our ongoingcommitment to the country and will significantlystrengthen our platform for future growth.”



Reaction from local player

• Guinness has just commissioned a new brewery

that has taken its production capacity to about

5.5mn hectolitres, and capacity utilization is

expected to be more than 80 per cent.• Guinness Nigeria Plc, the local unit of Diageo Plc

(DGE), heightened the ongoing beer war tempo

by announcing plans to spend 52 billion naira

($335.8 million) on expanding brewing capacity in

the country

Wh t l t b t th



What analysts say about the

unfolding scenario

• According to the IMF, the Nigerian economy is

estimated to grow at an average of 7 per cent

over the next four years while the population

is expected to grow at about 3 per cent.



• “This along with a youthful populationenmeshed in a culture in which entertainmenthas gained a foot-hold, present key drivers for

the Nigerian beer market. A growing, largelyyouthful population, with increaseddisposable incomes is expected to drive beerconsumption, leading us to estimate that the

Nigerian beer market will grow at an averageof 8 per cent over the next 5 years,” the Lagosbased research company says.



• The variety of products in the market that willarise from the consolidation and expansion of thebrewery industry will create value for theconsumers, while the looming heightenedcompetition will be an incentive for innovationand creativity.

• Heineken will explore the possibility of

consolidating the newly acquired breweries intoits existing business structure in Nigeria during2011.

alcohol industry final

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