United Strategies
University of Wollongong Faculty of Engineering Strategic Management for Engineers and Technologists Subject Code: ENGG954 Assignment – 1, Option – 1 STRATEGIC STUDY UNITED BREWERIES Ltd. BY LIST OF GROUP MEMBERS 1. GAUTHAM SUKUMARAN () 2.
JOGI RAJU MANDAPAKA (35) 3. PRASAD KORARTAGERE SIDDAGANGAIAH () TABLE OF CONTENTS I. Introduction………………………………………………………………. … 03 II. List of SBUs Under United Breweries ……………………………………..
04 III. The Industry map IV. V. Strategic Capability ………………………………………..
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. …………… 07 VI. Performance of The Industry & United Breweries………………………….. 10
VII.
Analysis of Threats and Opportunities ……………………………………… 18 VIII. Principle Players & Competition …………………………………………… 22 IX. Importance of Logistics in the Industry …………………………………….
23 X. Environmental Constraints on the Industry ……………….
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…. XI. Changes in the Industry …………………………………………………….
. XII. Conclusion …………………………………………………………………. XIII. References …………………………………………………………………… Introduction : United Breweries Group or UB Group, based in Bangalore, is a conglomerate of different companies with a major focus on the brewery (beer) and alcoholic beverages industry.
The company markets most of its beer under the Kingfisher brand and has also launched Kingfisher Airlines, an airline service in India, with international flights operating recently.
United Breweries is India’s largest producer of beer with a market share of around 48% by volume. The UB Group was founded by a Scotsman, Thomas Leishman in 1857. The Group took its initial lessons in manufacturing beer from South Indian based British breweries. It made an impact by manufacturing beer for the British Troops, which was transported in huge barrels or “Hogheads”.
Kingfisher, which is the groups major brand and also its mascot made a very modest entry in the sixties. At the age of 22, Vittal Mallya was elected as the company’s first Indian director in 1947.
After a year, he replaced R G N Price as the chairman of the company. UB Group’s headquarters in Bangalore, India. After Vittal Mallya’s death in 1983, his son Vijay Mallya assumed the mantle of the group. Vijay Mallya inducted professional management and consolidating the Group into individual operating divisions. Whereby giving the individual divisions freedom and authority to grow and change according to the environment.
Vijaya Mallya is considered as India’s Richard Branson of the Virgin Group.
The company’s expansion mainly depends up on acquisitions and mergers. First was the addition of McDowell as one of the Group subsidiaries, a move which helped United Breweries to extend its portfolio to wines and spirits business. Strategically, the Group moved into agro-based industries and medicines when Mallya acquired Kissan Products and formed a long-term relationship with Hoechst AG of Germany to create the Indian pharmaceutical company now known as Aventis Pharma, the Indian subsidiary of the global harma major Sanofi-Aventis. (http://www. kingfisherworld. com/corporate/corporate-index.
htm) In this report we shall point out the main reasons why United Breweries is the 3rd largest Beverage Alcohol Organization in the world and India’s largest by far. The Impact of Vijay Mallya on the organization and the growth of the Beverage – Alcohol Industry in India. And we will be concentrating on UB’s Beverage – Alcohol division. The group is very similar to the Virgin Group as it has diversified into many different industries or SBUs. Each having an individual identity to itself.
Its most recent additions are the IPL Cricket Tournament and with a collaboration with Tata Motors in the F1 Circuit. The structure of the Organization resembles the multidivisional structure where each SBU is flexible and independent and still can be controlled by the head office. (This information was gathered from the Company Website). SBUs under United Breweries Ltd.
: Beverage – Alcohol: The UB Group is 3rd largest spirits marketer in the world, with overall sales of 60 million cases. The company offers 140 brands at varying price points.
Some of the famous brands of the UB Group are: Bagpiper Whisky, McDowell’s No. 1 Whisky, Kingfisher Beer, Taj Mahal Beer Director’s Special Whisky, McDowell’s No. 1 Brandy and McDowell’s Celebration Rum. Pharmaceuticals: The group’s company Aventis Pharma Limited is the second largest pharmaceutical multinational in India.
It develops and markets branded prescription drugs and vaccines. Media: The UB Group also has a shareholding in Asian Age Holdings Ltd, the company that owns and manages daily newspaper, The Asian Age. It is also known for marketing its own brand of Calendar.
Which goes by the name of The King Fisher Calendar. International Trading: The Group’s company UB Global Limited is a recognized export house engaged in the export of Beer, Spirits, Leather Footwear and Processed Foods. The Company also exports Pharmaceutical Products and customized perfumeries.
Fertilizer: Mangalore Chemicals & Fertilizers Limited is under UB Group’s management. It has a manufacturing capacity of 2,17, 800 MT of Ammonia and 3,80,000 MT of Urea. The Company is a part of the UB Group with Group shareholding of 30%. Research ; Development:
Vittal Mallya Scientific Research Foundation (VMSRF) was established in 1987 with the objective of developing newer and novel technologies that will have substantial application in industry and health care. The foundation is it is recognized by the Departments of Scientific ; Industrial Research (DSIR), Dept. of Biotechnology (DBT), Council for Scientific and Industrial Research (CSIR) and the Ministry of Finance, Govt.
of India. Aviation: UB Group entered aviation sector in 2005 with the launch of Kingfisher Airlines Limited. Kingfisher Airlines has captured an impressive market share and has established a niche identity for itself.
The airlines recently acquired 25% stake in the budget class airlines, Deccan Airlines. This had a strategic goal to change its outlook from being a high class airlines to budget class airlines.
Infrastructure: United Breweries Ltd. has also entered the prized real estate in the heart of Bangalore, Karnataka, India. It is constructing one of the largest mixed-use developments – UB CITY, in the heart of Bangalore. It is situated at the corner of Vittal Mallya Road and Kasturba Road, just 600 meters away from Bangalore’s commercial hub, M.
G. Road.
(This information has been gathered from the Company Website…. ) The Industry map The map which is obtained by plotting cost against differentiation clearly shows us that UB is highly differentiated with low cost when compared to others. UB is a highly diversified company with SBU’s like Breweries, Spirits, Aviation, International trading, Pharmaceuticals, Engineering, Fertilizers, Real estate, F1 racing, Cricket club, Football club. It has many medias to market its product, UB’s presence is everywhere in India.
In a cricket crazy country like India when you have a cricket club associated with the product it gives a leading edge, UB’s chief is the brand ambassador, he is considered as India’s Richard Branson.
On the international stage UB has the F1 car team called as Force India which participates in the F1 circuit, the Kingfisher logo (which is the flagship logo of UB beer) on the F1 car is the best medium to market the product & gets good recognition, The Airlines UB owns also carries the Kingfisher name giving the brand good leverage, hence UB is highly differentiated. Fig. 1: The Strategic Position of the Organization in the Industry w. . t Cost and Differentiation.
Strategic Capability : The Strategic Capability of an organization refers to the resources and competences of the organisation needed for it to survive and prosper in its desired Industry. ( This view is noted by Gerry Johnson, Kevan Scholes & Richard Whittington(8th edition, p93) … ) Hence the Key Competencies required in this Industry are :- A good quality product, a very good sales and distribution Team, a politically savvy management, very high inventory management skills, a solid raw materials purchase system, a very good packaging line and a very good marketing Strategy.
Business competencies to identify product design best suited to meet customer preferences so as to generate profit to the organization. Marketing competencies to ensure repeated customer purchases. Brand build up in awareness, loyalty & availability from distinctly different manufacturing at multi manufacturing facilities spread across the country. Sales and distribution systems competencies to ensure product is reached to the customer Process competencies to convert raw materials to a quality Finished product (Beer) as per above specifications and maintain such qualities across the scenario described above.
Engineering competencies to set up and maintain the manufacturing systems which deliver the product as designed. Human resource competencies to manage the whole operations by keeping the business competencies in focus. Financial competencies to manage money in an industry with investments. United Breweries is the largest Beer manufacturer in India. It has manufacturing plants in most of all the states.
Leaving exceptions to the state of Gujarat and the extreme north east where the sale of alcohol is prohibited. | COMPETENCES|
ThresholdCapabilities| * 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”. And investing into media and also producing the Kingfisher Calendar. |
The Key Resources required in the Market are:- 1. Capability to procure and store raw materials: Barley Malt, Maize Flakes ( or any other grains as per design), Hops, Sugar, Brewing Chemicals. And well equipped warehouses to store them without any wastage. 2.
Good Infrastructure: A manufacturing Plant (Brewery) which is consisting of the Brewing section, the Fermentation & Lagering section, the Packaging Section, which are distributed in all the states as in India, Beer is a state subject. Hence every state makes its own excise rules and export to other states is not encouraged.
Backed by infrastructural (Engineering Support) requirements of Steam (Boilers), Water (Treatment Plants), Waste Disposal systems (ETP), Process Temperatures (Refrigeration), Power and Fuel like Electricity, Furnace Oil for (boilers) and Water generally 1 litre of beer requires an input of 5. 5 litres of water. 3.
Well trained Employees: Well trained personnel which are required to use the above mentioned infrastructural resources. 4. Sufficient Funds: Financial capital to lubricate the wheels of the whole business. | RESOURCES| THRESHOLDCAPABILITIES| 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 the country 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. 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. | PERFORMANCE OF UB :
Indian Beer market value Year| $ Billion| % Growth| 2004| 1. 8| 9%| 2005| 2. 1| 13.
20%| 2006| 2. 3| 10. 50%| 2007| 2. 6| 14. 80%| 2008| 3| 14.
50%| Fig:2: United Breweries Annual results of United Breweries | | | | | Mar ‘ 05| Mar ‘ 06| Mar ‘ 07| Mar ‘ 08| Mar ‘ 09| Sales| 642. 63| 580. 49| 960. 73| 1,340. 80| 1,672.
80| Operating profit| 56. 61| 99. 69| 140. 41| 171. 69| 218. 21| Interest| 20.
82| 21. 87| 27. 98| 42. 83| 89. 57| Gross profit| 35.
79| 92. 91| 133. 53| 154. 44| 177. 15| Operating income | 452.
3| 515. 76| 679. 72| 1,046. 24| 1,370. 47| (Rs.
Core) Fig. 3:
As we can see from the graph there has been an exponential increase in the value of Sales, operating profit, operating income over the period of 5 years. In 2008 the total sales of UB was 1340 crores when compared to 1086 crores of SABMiller and 410 crores of Mohan Meakin. There’s a growth of 260% over a period of 5 years when compared to growth of 200% SABMiller, it’s a close competition but UB group are highly differentiated when compared to SABMiller. UB chief Vijay Mallya owns a F1 car in the circuit, its aviation business “kingfisher airlines” is also flying high carrying the brand image to greater heights.
The newest entrant is the RCB cricket team owned by UB, in a cricket crazy nation when a product has cricket associated with it the differentiation is high. Competitors SAB MILLER | | | | | | 2004| 2005| 2006| 2007| 2008| Sales| 221| 501| 611| 864| 1086| | | | 2006| 2007| Revenue| 634| 897| Profit| 5. 3| 40| Rs. In Crores. Fig.
4: SABMiller is the closest competitor to UB with 38% market share, it has very strong brands like Fosters, Haywards, Knockout etc but they are not highly differentiated when compared to UB brands.
With big brands like Carlsberg, Budweiser, Heineken, Tiger coming into the Indian market it will be a tough task to maintain the market share. Mohan Meakin | | | | | Mar ‘2005| Mar ‘ 2006| Mar ‘ 2007| Mar ‘ 2008| Total sales & other incomes| 370. 2| 371.
36| 427. 4| 410. 1| Profit for the year| 3. 3| 0. 6| 1. 1| 0.
45| Rs in crores Fig. 5: Fig. 6: United Breweries : Graph showing the Share value of UB from 2004 to 2009. Month| Price – High| Price – Low| Price – Close| Apr-09| 120. 05| 87. 75| 110.
45| Mar-09| 93. 5| 75| 89. 45| Feb-09| 95. 7| 71| 89. 85| Jan-09| 86.
8| 67. 75| 74. 05|
Dec-08| 93. 9| 75. 9| 77. 95| Nov-08| 105| 82.
55| 85. 35| Oct-08| 135. 45| 81| 91. 6| Sep-08| 176. 85| 124| 132| Aug-08| 202| 150.
7| 172. 7| Jul-08| 175| 123. 05| 156. 1| Jun-08| 194| 143. 3| 145. 1| May-08| 255.
75| 176| 179. 85| Apr-08| 240| 170. 9| 222. 9| Mar-08| 257. 32| 149. 32| 185.
7| Feb-08| 317. 55| 227. 96| 255. 73| Jan-08| 383. 24| 238. 91| 305.
85| Dec-07| 358. 36| 304. 6| 328. 94| Nov-07| 373. 24| 308.
59| 329. 84| Oct-07| 411. 51| 298. 63| 364. 13| Sep-07| 413. 11| 293.
65| 379. 96| Aug-07| 329. 89| 262. 85| 293. 11| Jul-07| 333.
47| 287. 68| 326. 11| Jun-07| 323. 52| 219| 301. 57|
May-07| 383.
24| 264. 29| 314. 36| Apr-07| 285. 69| 251. 05| 268. 82| Mar-07| 286.
69| 224. 02| 265. 28| Feb-07| 287. 43| 208. 05| 249. 46| Jan-07| 218.
9| 174. 2| 209. 14| Dec-06| 206. 45| 149. 32| 177.
84| Nov-06| 214. 02| 159. 27| 179. 23| Oct-06| 184. 16| 134. 38| 178.
58| Sep-06| 144. 44| 112. 39 span class=’tab’>| 136. 97| Aug-06| 135. 18| 98. 55| 115.
12| Jul-06| 133. 39| 91. 78| 104. 22| Jun-06| 151. 71| 79.
64| 123. 38| May-06| 201. 04| 126. 32| 147. 74| Apr-06| 185.
85| 128. 41| 173. 73| Mar-06| 151. 2| 104. 82| 148.
84| Feb-06| 124. 93| 84. 61| 109. 92| Jan-06| 92. 58| 70. 88| 87.
65|
Month| Price – High| Price – Low| Price – Close| Dec-05| 77. 64| 65. 7| 75. 26| Nov-05| 70. 58| 61. 38| 67.
69| Oct-05| 74. 56| 61. 97| 67. 19| Sep-05| 77. 13| 57. 24| 64.
76| Aug-05| 68. 69| 50. 77| 64. 4| Jul-05| 52. 26| 44.
7| 50. 8| Jun-05| 51. 76| 41. 81| 46. 98| May-05| 44. 5| 40.
32| 43. 8| Apr-05| 46. 59| 32. 85| 40. 73| Mar-05| 44.
1| 30. 68| 32. 2| Feb-05| 44. 7| 37. 33| 37.
72| Jan-05| 44. 6| 40. 12| 42. 32| Dec-04| 52. 46| 37.
44| 43. 3| Nov-04| 38. 68| 13. 44| 38. 68| Oct-04| 16.
13| 9. 95| 13. 22| Sep-04| 13. 44| 10. 57| 12.
5| Aug-04| 11. 39| 8. 27| 10. 94| Jul-04| 9. 15| 7.
97| 8. 6|
Jun-04| 9. 85| 7. 97| 8. 14| May-04| 10. 45| 8.
96| 8. 96| Apr-04| 10. 45| 9. 46| 9. 77| Mar-04| 9. 84| 9.
06| 9. 63| Feb-04| 9. 95| 8. 36| 9. 34| Jan-04| 14.
04| 8. 87| 9. 52| Fig. 7: UB ‘s profit from 2003 – 2008 | | | | | | | Mar-08| Mar-07| Mar-06| Mar-05| Mar-04| Mar-03| Profit Before Tax | 4. 7069| 6. 4104| 6.
8357| 3. 9897| 0. 7503| 0. 74| Rs. in crores Fig.
8: Growth of UB compared to industry | | | | | | FY02| FY03| FY04| FY05| FY06| Industry Growth| 78| 85| 87| 90| 100| UB Growth| 26| 30| 34| 36| 40| Million cases sold Fig. 9: PORTERS 5 FORCE ANALYSIS:- 1. Threat Of New Entrants: As per the UB’s report to SEBI and its Investors in 2004)The Indian Beverage – Alcohol industry is witnessing high level of competition as the domestic players gear up to compete for a larger share of the market. The entry of multinationals in the domestic brewing business has led to increased competition. Growing competition may force the Company to reduce the prices of its products and services, which may reduce its revenues and margins and/or decrease its market share, either of which could have a materially adverse effect on its business, financial condition and results of operations.
Competition may also increase if tariff barriers on imported beer are lowered.
But the threat of new entrants is only restricted to International and powerful organizations as they have the money and capability to sustain risks. As the beer Industry is heavily regulated by the Government. The business of the Company is subject to the regulations of State Government policy on excise. Changes in policies of Government could have an adverse effect up on the profitability of the Company. (from http://www. scribd.
com/doc/14036615/-Kingfisher-vs-Fosters-with-porters-five-forces)
Despite competition and entry of multinationals such as SAB-Miller and Anheuser Busch, United Breweries has a dominant position in the beer market with leading market share. The experience and cultural know how are in favour of the organization. UB also has a strong brand image which will act in its favour. Since there is very little brand loyalty in this segment customers will tend to move towards better quality of beer which may affect the sales of Kingfisher and the rest of the brands that UB has to offer. 2.
SUPPLIER POWER: Fig : 10: Production of Barley in India. http://www. indexmundi. com/agriculture/? ountry=in;commodity=barley;graph=production Barley is a key raw material in the beer making industry. (indexmundi. com) It constitutes to around 12% of the raw material expenses to the company.
From the graph above we can clearly see the decline in the production of barley in India. Glass bottles, Barley, Hops, and Malt constitute more that 40% of the companies operating costs. However UB being a large player and customer will have better bargaining power and enjoy flexible sourcing arrangements over distributers and raw material suppliers and will continue to maintain their margins. . SUBSTITUTES: Fig.
11: Consumption of Beverages in the world when compared to India. As we can see from the above graph the per capita consumption of beer is only 1lt per person per annum in India where the global trend is much higher. India is a hot country and there are many options for customers. And there is a stigma attached with beverage alcohol and people tend to avoid consuming alcohol in public. Due to heavy and irregular taxing by the various states has made beer very costlier than other beverages.
But this is changing with the income levels of customers increasing the Beverage – Alcohol industry is showing a strong rise in market size.
4. CUSTOMERS BUYING POWER: The growth of the Industry is driven by a progressive economy with favorable demographics, higher disposable incomes, increasing exposure to Western lifestyles and higher consumer spends. The social habits among people in India are undergoing a transformation with a relaxed attitude towards consumption of alcohol, especially beer. Canned Beer in social gatherings is becoming more popular.
Also, liberalization in some States, including deregulation and increased retailing opportunities through supermarkets, malls, etc.
has increased access to beer and resulted in higher sales volumes. Despite impressive growth over past few years, the per capita consumption of Beer in India remains much lower when compared to other countries and provides a huge opportunity in coming years. (From http://www. scribd. com/doc/14036615/-Kingfisher-vs-Fosters-with-porters-five-forces) 5. Competition and Intensity of Rivalry: Fig.
12: Market Share Pie Chart. (http://www. scribd. om/doc/14036615/-Kingfisher-vs-Fosters-with-porters-five-forces) From the above chart the major competitors of UBL in the beer industry are Shaw Wallace and Mohan Meakins. The beer manufacturing business of Shaw Wallace is being carried through an unlisted company namely SKOL Breweries Limited.
In May 2003, Shaw Wallace entered into a joint venture with SAB Miller Group for the beer business. A SWOT ANALYSIS below clearly shows the positives and the negatives of our case organization. STRENGTHS 1. Large Market share of 47. 5%. 2.
Well Known Brand Image. Kingfisher. 3.
Tie ups with various Distilleries under Contracts. 4. Old ; Established company which means they have the experience and knowledge on their side.
5. National Presence and also expanding into International Market. 6. The Marketing and Promotional strategies are already a hit among customers. 7. A Diversified Parent Organization.
UB group is into Aviation, Pharmaceuticals, Infrastructure, R;D and Media. WEAKNESSES 1. Large capacities may lead to a problem of over capacity in winter/rainy seasons. 2. Over leveraged position leading to short term cash flow problems.
3.
Only One major and popular brand of Kingfisher Premium. As in India Beer is divided into 2 segments Strong ; Premium. Kingfisher Premium is leading the premium segment but it is 2nd after Haywards 5000 in the Strong segment. OPPORTUNITIES 1.
Growing beer market in India. 2. Tie-up with S;N to open export opportunities. 3. Any deregulation in the excise policies with reference to taxation and duty on beer which could drastically push up the demand for beer. THREATS 1.
The level of taxes, is very high which could render beer unaffordable. 2. Advertising and marketing restrictions. . Entry of foreign liquor majors may affect existing market share. Principle Players and Competition: The principle players in the industry are United breweries with 48% market share second comes SABMiller with 33% market share then comes Mohan meakin ; mount shivalik with 3% ; 5% respectively.
There are also many small players in this industry with very less market share. The current industry scenario shows us that UB is the leader with close competition from SABMiller But how is UB positioned itself in the market when compared to SABMilller?
UB it is a diversified company, UB chief Vijay Mallya also owns a F1 car in the international F1 circuit and calls it as Force India, he owns the cricket club “Royal challengers Bangalore” which plays in the IPL the biggest sports sensation in the recent years, UB has so many medias to market its product, the airlines UB own is named as kingfisher airlines, the famous beer brand is also called as kingfisher beer, these brands are closely associated with UB chief, he is the brand ambassador, he is called India’s Richard Branson, the products are marketed very aggressively, Kingfisher octoberfest 2008, Delhi.
UB is targeting all the segments, its making its brand global, it has high differentiation when compared to its competitors. UB is also positioning itself strongly in the market by acquisition & mergers. Acquisition of White & Mackay which is the 4th largest whisky manufacturer in the world, merger with Shaw Wallace in India which had about 10% market share, the tie up with Scottish & Newcastle which has a major market share in Europe will help UB to sell its products internationally.
UB is not only targeting the Beer and Whisky segment it is also targeting the Wine & champagne segment, the country’s largest brewer– UB group enters the wine segment with the acquisition of French wine maker Bouvet-Ladubay.
In the wake of increasing vodka consumption in India, the group is planning to launch flavored vodka. United Breweries group is also planning to enter Chinese and Russian markets. There is a huge gap between local Chinese wines and imported liquor, UB is using this strategy to take advantage of this market potential.
UB Group also acquired a brewery from GMR Technologies and Industries Ltd in Andhra Pradesh at a consideration of over Rs 57 crore ; Karnataka Breweries ; Distilleries Ltd (KBDL) for Rs. 1. 8 billion ($41 million) these acquisitions points out that UB group is planning to expand its brewing capacity in India.
UB is not only contended in being a market leader in India but plans to become a global brand the above statements support this.
With new entrants like Heineken, Carlsberg, Tiger beer, Budweiser into the Indian market it will be very tough competition for UB to maintain its position but with acquisitions ; mergers (both India ; overseas) UB is positioning itself strongly in the market for the future. Importance of Logistics in the Industry : Raw materials and Packaging materials logistics. Main RM like Malt is restricted to N. India.
Hence, large inventories need to be stockpiled at manufacturing (S. India) centers in Silos sufficient to last at least 21 days to offset bad road infrastructure, season impact (rains etc).
HOPS are imported. Hence, inventory levels are kept at 6 months requirements in refrigerated spaces in manufacturing centers. Other Raw materials are locally available and do not constitute a logistics problem. Packaging materials are all locally sourced. Critical is glass bottles. In India, 80-85% recycling is the norm. Hence, dedicated, manufacturing centre specific, daily collection and delivery systems have to be in place to enable smooth operations and achievement of capacity utilization. Finished Goods. In India, Beer is a state subject.
Hence every state makes its own excise rules and export to other states is not encouraged. This keeps manufacturing volumes very low since per capita consumption is very low. Duties and Taxes are prohibitive which makes price a critical component to increasing per capita consumption. In India Infrastructure is very weak, Govt controls on goods movement (emphasis on Beer and Liquor) are very restrictive. Temperatures are hot, and economics do not justify refrigerated vans. In most states the distribution is through Govt controlled centers both whole sale and retail.
Here the key is inventory management of govt warehouse space (for your products) by fast supply of small lots on repeat basis. In India demand is very dynamic and the influence of seasonal climate changes has an immediate impact on demand. So, Hired trucks are used to transport small lots on a daily basis to govt depots located in various cities in the state. Environmental Constraints on the Industry : (As per the UB’s report to SEBI and its Investors in 2004) Taxation and policies regarding alcohol in India fall under the State list; hence every state has different rules, norms and policies.
Tamil Nadu, for instance, does not allow sale of alcoholic beverages manufactured in other states, while Gujarat does not allow sale of alcohol at all. There are also excise duty levels which vary from state to state and every state imposes additional taxes and levies. While the highest taxes are levied by Uttar Pradesh, Maharashtra and Delhi, the lowest taxes are levied in Kerala, Karnataka and Tamil Nadu. Then there are other obstacles in the way as well. Since the 1990s, the government has banned advertisements of any sort promoting alcoholic beverages.
However, an interesting way to overcome this and promote the brand has evolved – advertisements for mineral water or aerated water with the same brand name as the beer. Apart from this, there is also the matter of preferences. The older generation of Indians still prefer whisky or scotch, while the youth have been seen opting for wines and white alcohol, like vodka for example. Changes in the Industry: Three factors, which would drive the growth of beer consumption in India is – affordability, availability and better regulatory policies.
In India the concentration of wealth is in the urban areas. India has a greater youth population. The older generation of Indians still prefer whisky or scotch, while the youth have been seen opting for Beer, wines and white alcohol, like vodka. Tax reforms in some states, changing lifestyles fuelled by booming economy and industry de-regulation in favour of mild alcohol are driving the growth in India, which has traditionally been a hard spirits market. Rapid economic growth of India has charmed the rest of the globe.
Constantly increasing GDP, favourable growth in the demographics with a growing urban middle class, growth of modern retail formats, hopeful rationalisation of the taxation rules and ban on local country liquor are factors which will act in favour of the growth of beer in India. On-premise consumption, a major sociological reason which hinders growth of any alcoholic beverage, is expected to grow. Keeping these patterns in mind we can predict that beer consumption in India will reach 21 mhl by 2012 and the growth between 2006 and 2012 will reach 16 per cent per annum. This is a good sign for the future.
In India the concentration of wealth is in the urban areas. India has a greater youth population. In India the policies regarding alcohol are made by the states its not centralized. Nevertheless, industry-wise, the beer industry itself is more structured and organised in India ; strong beer is more favoured in India. Thus, growth of beer in India is definite. Andhra Pradesh and Maharashtra together account for almost 40 per cent of beer consumption in the nation, while Karnataka, Tamil Nadu, Rajasthan, Delhi, Kerala, and Uttar Pradesh account for a further 40 per cent of consumption.
The rest of the states combined, account for just 20 per cent. As for per capita consumption, the highest recorded figures are from Goa, Andhra Pradesh, Delhi, Tamil Nadu and Maharashtra. Most of the market lies in the urban area, a new market segment that can be created is the rural market. There is lot of potential in this market. (http://www. expresshospitality. com/20080131/management04. shtml) Conclusion: Most Likely Scenario: Refrences: Company website, accessed 20/05/2009…www. kingfisherworld. com/corporate/corporate-index. htm Company
