brew a career_case study

SABMiller is in the beer and soft drinks business

globally, bringing refreshment and sociability to

millions of people all over the world who enjoy our

drinks. Through our local businesses we work in a

way that improves livelihoods and builds

communities. SABMiller India is one of the leading

brewers in the country. In a span of just 13 years,

SABMiller India has been able to make its mark on

the Indian beer market with a mix of local and global

brands such as Haywards 5000, Knock Out, Fosters,

Miller High Life, Indus Pride and Peroni Nastro

Azzurro.- a portfolio that appeals to a cross-section

of consumer segments. Gotham is a key market for

the company. Haywards 5000 has traditionally been

the lead brand for the company in that market, but

the dynamics of the market are changing. Some

critical headwinds are posing tough challenges for

the organization. At the same time the market is

opening up to democratic pricing and the

organization has scripted ambitious plans.

Brew-a-Career Case Study

SABMiller India

1 2014, SABMiller India. No contents must be reproduced, redistributed without permission.

A smooth sea never made a skillful sailor English proverb

BEER IN INDIA

In India, traditional beer has been prepared from rice or millet for thousands of years. But it was not until the 18th

century, when the British introduced European beer to India. By 1716, pale ale and Burton ale were being

imported to India from England. To protect the beer from spoiling during the long journey, it had to have high

alcohol content and hops were added to it. This led to the invention of India pale ale in about 1787 by Bow

Brewery. In 1830, Edward Dyer travelled to India and set up India's first brewery in Kasauli.

MODERN TIMES

In recent years, foreign companies have been entering India and acquiring local businesses. In 2000, SABMiller

India entered Indian market by acquiring Narang Breweries. In June 2001, it acquired the Mysore Breweries. In

2003, SABMiller India acquired 50% stake in local Shaw Wallace's beer business. In November 2002, SABMiller

India acquired Rochees Breweries.

In May 2005, SABMiller India acquired the balance stake in Shaw Wallace's beer assets for INR 600 crore thus

completing the overall acquisition of the Shaw Wallace Beer business for about INR 1400cr. In 2005, Carlsberg

entered India with its local venture South Asian Breweries. Also in 2005, Singapore-based Asia Pacific

Breweries acquired a 76% share in the local Aurangabad Breweries. In 2006, SABMiller India acquired Foster's

Indian assets.

In February 2006, Anheuser-Busch Inbev, the maker of Budweiser, entered a partnership with Hyderabad-based

Crown Beers. In 2011, United Breweries announced that they would produce the Heineken brand beer in India.

BEER INDUSTRY | KEY SEGMENTS

In 2013, the size of the Indian beer industry was ~21.5

million HL (Hecto Liters), and growing at 7%, 3 yr. CAGR.

The industry is broadly classified into 3 sub-segments

based on price index as well as brand-positioning.

Premium Beer Segment constitutes ~0.9 Million HL

of volume but is growing at fast pace of 41%

Mainstream Beer Segment The current Industry is

largely a mainstream segment. Constitutes about 18.6

Million HL and us growing at 8%

Economy Beer Segment As the name suggests, a segment which appeals to price-sensitive consumers,

currently constitutes to about 1.8 million HL. With the rise of disposable income and proliferation of the middle

class, this segment has been under duress and experienced a decline of (5)% when compared with last year

The growth of premium segment and emergence of brewpubs is providing consumers the reasons to experiment

with a wider repertoire of brands. Albeit small and mostly an urban phenomenon, experimental beers such as ones

with flavours are expected to be the order of the day in times to come.


ABOUT SABMILLER

SABMiller India is one of the leading brewers in the country. In a span of just 13 years, SABMiller India has been

able to make its mark on the Indian beer market with a mix of local

and global brands such as Haywards, Knock Out, Foster`s, Miller

High Life, Indus Pride and Peroni Nastro Azzurro.- a portfolio that

spans across the various categories.

A well-diversified footprint of owned and contract manufacturing

operations based in most critical markets ensures that SABMiller

India is well placed to service the markets quickly and efficiently.

Sustainable Development is integral to SABMiller India and we have

thought hard about the world we want our business to be a part of, with prosperity at its heart. A prosperous

world means a thriving world, where incomes and quality of life are growing; a sociable world, where our beers are

developed, marketed, sold and consumed in a way that maximises individual and societal wellbeing; a resilient

world, where our businesses, local communities and ecosystems share uninterrupted access to safe, clean water; a

clean world where nothing goes to waste and emissions are dramatically lower; and a productive world where land

is used responsibly, food supply is secure, biodiversity is protected and brewing crops can be accessed at

reasonable prices.

One of our long-term competitive advantages is the calibre of our people. We succeed because we attract,

develop and reward people who have the passion to make a significant contribution to the continued growth of

our business. We provide a culture of accountability, challenge and opportunity that encourages our employees to

develop to their full potential.

OUR BUSINESS

The beer industry in India operates in a challenging environment.

Success in such an environment can only be achieved by constantly

reinventing and recreating practices that adapt to a changing

environment.

We believe that people, processes and practices drive our

operational performance. Achieving our goal requires a strong

organisation embedded with systems and practices with high

standards of performance.

People who understand that progressive initiatives are critical to the long-term success of our industry and

business and who work constantly towards creating a strong performance management ethos are vital to our

company.


OUR VISION, MISSION AND VALUES

Our success is built upon a clear strategic direction and a shared commitment to the company's vision, mission and

values. Our Vision is to be amongst the 3 most admired beverage companies in India. Our Mission is to own and

nurture local and international beer brands that are the first choice of the consumer.

Our Values and group behaviors:

Our People are Our Enduring advantage

The commitment and caliber of our people sets us apart, we encourage diversity & develop people for the

long term.

Accountability is clear & personal

We promote strong management & self-management practices through aligned and clearly articulated

goals, we prize intellectual rigor and engagement through the objective management of performance

We work and win in teams

We are indivisible individuals immersed in teams, where we collectively develop and share knowledge

while balancing local and group interests, consciously/enthusiastically building camaraderie.

We understand and respect our customers and consumers

With a keen focus on our customers & consumers needs and perceptions, we build lasting relationships

of trust built on quality & innovation, steering towards the preferred product of choice.

Our reputation is indivisible

We build our long term reputation through our fair & ethical dealings, a value that relies on the actions of

each employee and is embedded in the benefit provided to local communities.

*-*-*

GOTHAM STATE | OVERVIEW

Gotham is a lower than average GDP state in India. States economy is largely dominated by agriculture,

construction and hospitality industry. Whilst the pace of urbanization is not as rapid as its other counterparts, 42%

of states population is below the Legal Drinking Age (LDA).

Gotham also happens to be one of the Indian beer industrys critical markets in terms of both volume and value,

and has been a winning market for SABMiller India historically. This state has one of the highest beer volumes in

the country, and is the 5th

largest state in terms of beer volumes representing close to 5.6% of the total Beer

Industry in India. Despite being a high volume market, during the last few fiscal years beer industry growth in this

state has been lower than the India average.


One of the key regulatory changes introduced in this

market were to reduce the retailing hours of Alcoholic

beverages till 10 PM as well as reduce the number of

outlets retailing the alcoholic beverages. Changes in

the excise duty structure in the recent past have also

resulted in higher cost for the consumer.

In addition, retail license holders were permitted to

renew their license by paying 20% higher fees in the

year 2011 when compared against 2010. Despite

these challenges, Gotham Excise Department was the 2nd

largest collector in India, of Tax revenues from alcohol

from the state.

Mainstream Strong beer segment continues to be the dominating segment in this market. They have managed to

add to their segment share by nipping in from the Mainstream Mild beer segment, which has been on a decline.

Wave of premiumization is yet to awaken in the state of Gotham and though the per-capita disposable income of

the state has been growing steadily, the premium beer segment still represents only a fraction of the total Beer

Industry in Gotham.

MSS: Main Stream Strong segment beer; MSM: Main Stream Mild segment beer; WM: Worthmore segment beer; Eco: Economy segment beer

While the Gotham State enjoys significant volume, the state suffers from low-profitability.

It is also one of the most competitive markets with each share point well contested between United Breweries

(42%), SABMiller (28%), Carlsberg (11%), ABI and various local brewers (~9%).

SABMillers ultimate ambition is on profitability which impacts its discounts strategy and portfolio strategy. In

addition, it would also be imperative to re-look at our brand portfolio and evaluate the option of either

streamlining the portfolio in order to maximize impact of initiatives or evaluate possibility of including a new

proposition in the portfolio.


CURRENT OPERATING MODELS

Different players in the market have adopted different strategies. One of the top brewer contract packs all his

volume with a contract manufacturer. Operating on no capital base has its risk and rewards. The biggest advantage

for a brewer operating on a contract model is the ability to maintain prices even when the Government asks for a

price rise (prices in Gotham are Government recommended). On the other hand, the risk of operating under

contract model is obviously in-consistency of product profile.

So far SABMiller India has operated on self-manufacturing model where the brands operating in the market are

brewed in-house, packaged and distributed. SABMiller India has been winning in this market historically; however,

United Breweries has recently overtaken taken the market share in the state.

ROLE IN THE OVERALL STRATEGIC ARCHITECTURE

As an organization responsible and driven to create shareholders wealth, SABMillers operating strategy in India is

determined by a mix of volume and value which can be created in the geography. The organization has consciously

taken the decision not to blindly follow the rat race of trying to increase the market share across geographies, at

the cost of profitability.

Consequently, Gotham as a market has been given the task of improving its profitability. Thus any initiatives by the

organization in the Gotham market would be driven to enhance profitability of the market.

Trade is extremely fragmented in the state; however there are areas of consolidation where trade has started

behaving like a cartel in certain zones. Collectively they account for 25% of the states volumes especially in urban

centers. On the other hand, rural centers have low outlet density; and hence the power of one outlet to impact its

share is very high. SABMiller historically has been very well distributed, but currently distribution has fallen into

the late 70s. Brands like Haywards 5000 are universally available but brands like Fosters are struggling at 20%

availability. Miller High Life is a newly launched brand, currently available only in 10 % outlets, placed in the 2

largest markets of Gotham state. Others brands have not been launched in the state yet.

AMBITION: TEMPER OR FLARE

SABMiller India wants to enhance their growth in the market of Gotham. While there are usual business challenges

such as Haywards 5000, the lead brand in the market is being challenged by new incumbents like Tuborg and other

mainstream brands which have been offering the trade higher margins as compared to Haywards 5000. Although

consumers continue to repose their faith in the brand by way of higher brand equity as articulated by the

consumers in research, when compared with the competitive brands.

Fosters a brand which has been re-launched by SABMiller is in its initial stages of cementing its foothold in the

market and is yet to make any visible impact. Since the trade margins on the brand are low, it doesnt have a

strong trade interest (which becomes a critical driver of success in a dark market).

Miller High Life, a premium American styled lager, has been rolled out and plays selectively in certain markets. This

brand has almost doubled its volume since the time of launch. The portfolio also includes Haywards 2000 which

though priced at lower mainstream, suffers from low consumer interest in a category that is dominated by United

Brewerys Bullet beer.


Our recent trend reports also points at lower availability and high trade barriers. Recent changes in excise policy

suggest that the government is willing to introduce free pricing, thus improving SABMiller India profitability and

ability to take on the competition in the marketplace

SABMiller India has distributors for certain zones in the Gotham State. One of the large distributors is becoming

increasingly disinterested in doing business with us, due to the decreasing market share and volumes, and is being

wooed by one of our competitors to get affiliated with them. The distributor is critical to our business. However, as

a result of our market realities in the state, hes been reducing market investments, and been delaying our

payments. Business needs to take a strong stance with him.

There has also been an impact on our human resources in the state. The team didnt have right discounts, and

hence an incremental market share at low profitability, has resulted in increasing pressure on the business. This

has led our field sales force to be running after market share, while keeping business profitable.. Because of this

pressure, SABMiller India has seen a high turnover in the field force and the team has had 3 Area Sales Managers in

the last 2 years.

PRODUCTION

SABMiller India has a brewery in Gotham. The brewery is running at 70% capacity. Most of the other brewers also

have a brewery in the state and capacity maximization leads to a different approach by most brewers. However

like most players in this category, breweries are built not just to support the local market but also support the

peripheral markets.

While that strategy allows organizations to ensure that operating cost of running the brewery is fully leveraged (as

the utility percentage goes up), it also comes at a cost in form of Import and Export duties which are levied by the

Government.

THE BIG AMBITION

Given the backdrop of industry, segments, and expected policy changes, organization now wants to be very

ambitious about the Gotham market and wants to attain profitable leadership in the territory over next 5 years.

Keeping this ambition in mind, develop an 18 month business plan addressing the following aspects:

Strategy for SABMiller India in Gotham

What is the right portfolio for SABMiller India - Which segments to play in, how and why?

Positioning: What product / brand is best suited for the Gotham market

Pricing strategy (approach to pricing, trade-offs)- keeping Capacity in view

Trade drivers and focus areas (distribution strategy, activation in trade, partnerships with Off-premise and On-

premise)

Improvement in talent engagement and efficiencies

Corporate social responsibility (approach, partnerships)

With such diverse skills acquired through brands and cultures, what should be our plan towards building an

inclusive organisation


WHAT TO SUBMIT

a. Participating teams must submit an approach note not exceeding 1000 words in a word document

b. The same must reach the SABMiller on or before 7th August 2014

c. Approach note must consist of the The Big Ambition spelt out in the case study

d. Please attach the profiles/resumes for all the team members along with the approach note

RULES OF PARTICIPATION

a. The team must consist of 3-4 participants

b. All participants must be from the same campus (and location)

c. A diverse profile and specialization would make a good group

d. In case the approach note gets shortlisted, the team would require to make a detailed face to face

presentation to the SABMiller India team

e. Selected teams from across the country would be provided a Summer Internship Interview Offer

f. All information provided by SABMiller during the competition is proprietary, and must not be used in any

other form (classroom case study etc.) on the campus or outside

brew a career_case study

Documents