Strategic Report of United Breweries

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

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3. PRASAD KORARTAGERE SIDDAGANGAIAH SIDDAGANGAI AH ()

TABLE OF CONTENTS

I.

Introduction…………………………………………………… Introduction………………………… ……………………………………. …………. … 03

Breweries …………………………………… …………………………………….. .. 04 II. List of SBUs Under United Breweries III. The Industr Industry y map IV.

……………………………………….........…………… ………….........…………… 07 V. Strategic Capability ……………………………

VI. Performance of The Industry & United Breweries………………………….. 10

Op portunities ……………………………………... ……………………………………... 18 VII. Analysis of Threats and Opportunities

…………………………………………… 22 VIII.Principle Players & Competition ……………………………………………

…………………………………….. 23 IX. Importance of Logistics in the Industry ……………………………………

X. Environmental Constraints on the Industry ……………................................

…………………………………………………….. XI. Changes in the Industry ……………………………………………………..

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……………………………………………………… ………………………………………. …………. XII. Conclusion …………………………

………………………………………………………… ……………………………………… ………… XIII.References ……………………………

Introduction : United United Brewerie Breweriess Group Group or UB Group, Group, based based in Bangalo Bangalore, re, is a conglo conglomer merate ate 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 impact by manufacturing manufacturing beer for the British British Troops, which was transporte transported d in huge barrels 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 194 7. Afte Afterr a year year,, he replace replaced d R G N Price Price as the chair chairma man n of the compan company. y. UB Group' Group'ss headquarter headquarterss in Bangalore, India. After Vittal Vittal Mallya's Mallya's death in 1983, his son Vijay Mallya Mallya assu assume med d the the mant mantle le of the the group group.. Vija Vijay y Mall Mallya ya induc inducte ted d prof profes essi sion onal al mana managem gement ent and and consolidating the Group into individual operating divisions . Whereby Whereby giving the individual 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 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 portfolio to wines and spirits spirits business. business. Strategical Strategically, ly, the Group moved into agro based industries and medicines when Mallya acquired Kissan Products and formed a long-term

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relationship with Hoechst AG of Germany to create the Indian pharmaceutical company now known as Aventis Pharma, the Indian subsidiary of the global pharma 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 Beverage Alcohol Organization Organization in the world and India’s India’s largest 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 Tournament and with a collaborat collaboration ion with TATA Motors Motors in the F1 Circuit. Circuit. The structure of the Organization resembles the multidivisional structure where each SBU is flexible and independent and still can be controlled controlled by the head office. (This information information was gathered from the Company Website). SBUs under United Unit ed Brewer Br eweries ies Ltd.:

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Beverage Bever age - Alcohol Alco hol:

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.

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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 ex ports 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:

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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 o f India.

Aviation: UB Group Group entere entered d aviati aviation on sector sector in 2005 with the launch launch of Kingfi Kingfishe sherr Airli Airlines nes Limited. Kingfisher Airlines has captured an impressive market share and has established a niche identity identity for itself. The airlines airlines recently acquired acquired 25% stake in the budget class airlines, airlines, Deccan Airlines. This had a strategic goal to change its 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 Compan y Website….)

The Industry map

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 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 ambassa ambassador, dor, he is consider considered ed as India’s India’s Richard Richard Branson. Branson. On the internatio international nal 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.

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Fig.1: The Strategic Position of the O rganization in the Industry w.r.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. Busi Busine ness ss comp compet eten enci cies es to iden identi tify fy prod product uct desig design n best best suit suited ed to meet meet custo custome mer  r   preferences so as to generate profit to the organization. Market Marketing ing compet competenci encies es to ensure ensure repeat repeated ed custom customer er purcha purchases ses.. Brand Brand build build up in awareness, loyalty & availability from distinctly different manufacturing at multi manufacturing facilities facilities spread across across the country. Sales and distribut distribution ion systems systems competencies competencies to ensure 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

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Threshold •

Capabilities

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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 u nique 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 manufa manufactu cturin ring g Plant Plant (Brewe (Brewery) ry) which which is consis consistin ting g of the Brewin Brewing g sect sectio ion, n, the the Ferme Ferment ntat atio ion n & Lage Lageri ring ng sect sectio ion, n, the the Packa Packagi ging ng Sect Sectio ion, n, whic which h are are distributed in all the states as in India, Beer is a state subject. Hence every state makes its

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own excise rules and export to other states states is not encouraged. encouraged. Backed by infrastruct infrastructural ural (Engineering Support) requirements of Steam (Boilers), Water (Treatment Plants), Waste Disposal Disposal systems systems (ETP), Process Process Temperature Temperaturess (Refrigera (Refrigeration) tion),, 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. Su Suff ffic icie ient nt Fund Funds: s: Financial capital to lubricate the wheels of the whole business.

RESOURCES

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Tangible

•

•

•

THRESHOLD CAPABILITIES

Intangible

•

•

•

Tangible

Capabilities for Competitive Advantage

•

•

Intangible

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Manufacturing Plants Distributed all over the nation. Human Human Capita Capitall to effici efficient ently ly functi function on to achieve achieve a sustainable business. Financial capital to lubricate the wheels of the whole  business and to fund the future investments. Since Since UB is the the olde oldest st beer beer manu manufa fact ctur urer er in the 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 key stra strate tegi gicc and finan financi cial al advan advanta tage ge over over othe other  r  competing firms. 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. 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.

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PERFORMANCE OF UB : Indian Beer market value Year 20 04 20 05 20 06 20 07 20 08

$ Billion 1 .8 2 .1 2 .3 2 .6 3

% Growth 9% 13.20% 10.50% 14.80% 14.50%

Fig:2:

United Breweries

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Annual results of United Breweries

Sales Operating profit Interest Gross profit Operating income (Rs. Core)

Mar ‘ 05 642.63 5 6 .61 2 0 .82 3 5 .79

Mar ‘ 06 580.49 99.69 21.87 92.91

Mar ‘ 07 960.73 140.41 27.98 133.53

Mar ‘ 08 1,340.80 1 7 1 .6 9 42.83 1 5 4 .4 4

Mar ‘ 09 1,672.80 218.21 89.57 177.15

452.3

515.76

679.72

1,046.24

1,370.47

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 

Sales

2004 22 1

2005 50 1

2006

2007

Revenue

63 4

8 97

Profit

5.3

40

2006 6 11

2007 86 4

2008 10 86

Rs. In Crores.

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Fig.4:

SABMiller is the closest competitor to UB with 38% market share, it has very strong   brands brands like like Foster Fosters, s, Haywar Haywards, ds, Knocko Knockout ut etc but they they are not highly highly differ different entiat iated ed when 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

Total sales & other incomes Profit for the year Rs in crores

Mar '2005

Mar ' 2006

Mar ' 2007

Mar ' 2008

370.2

371.36

4 2 7 .4

410.1

3.3

0.6

1.1

0.45

Fig.5:

Fig.6:

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United Breweries : Graph showing the Share value of UB from 2004 to 2009. Month Apr-09 Mar-09 Feb-09 Jan-09 Dec-08 Nov-08 Oct-08 Sep-08 Aug-08 Jul-08 Jun-08 May-08 Apr-08 Mar-08 Feb-08 Jan-08 Dec-07 Nov-07 Oct-07 Sep-07 Aug-07 Jul-07 Jun-07 May-07 Apr-07 Mar-07 Feb-07 Jan-07 Dec-06 Nov-06

Price - High 120.05 93.5 95.7 86.8 93.9 1 05 135.45 176.85 2 02 1 75 1 94 255.75 2 40 257.32 317.55 383.24 358.36 373.24 411.51 413.11 329.89 333.47 323.52 383.24 285.69 286.69 287.43 218.9 206.45 214.02

Price - Low 87.75 75 71 67.75 75.9 82.55 81 12 4 150.7 123.05 143.3 17 6 170.9 149.32 227.96 238.91 304.6 308.59 298.63 293.65 262.85 287.68 21 9 264.29 251.05 224.02 208.05 174.2 149.32 159.27

Price - Close 110.45 89.45 89.85 74.05 77.95 85.35 91.6 1 32 172.7 156.1 145.1 179.85 222.9 185.7 255.73 305.85 328.94 329.84 364.13 379.96 293.11 326.11 301.57 314.36 268.82 265.28 249.46 209.14 177.84 179.23

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Oct-06 Sep-06 Aug-06 Jul-06 Jun-06 May-06 Apr-06 Mar-06 Feb-06 Jan-06 Month Dec-05 Nov-05 Oct-05 Sep-05 Aug-05 Jul-05 Jun-05 May-05 Apr-05 Mar-05 Feb-05 Jan-05 Dec-04 Nov-04 Oct-04 Sep-04 Aug-04 Jul-04 Jun-04 May-04 Apr-04 Mar-04 Feb-04 Jan-04

184.16 144.44 135.18 133.39 151.71 201.04 185.85 151.2 124.93 92.58 Price - High 77.64 70.58 74.56 77.13 68.69 52.26 51.76 44.5 46.59 44.1 44.7 44.6 52.46 38.68 16.13 13.44 11.39 9 .1 5 9 .8 5 10.45 10.45 9 .84 9 .9 5 14.04

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134.38 112.39 98.55 91.78 79.64 126.32 128.41 104.82 84.61 70.88 Price - Low 65.7 61.38 61.97 57.24 50.77 44.7 41.81 40.32 32.85 30.68 37.33 40.12 37.44 13.44 9.95 10.57 8.27 7.97 7.97 8.96 9.46 9.06 8.36 8.87

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178.58 136.97 115.12 104.22 123.38 147.74 173.73 148.84 109.92 87.65 Price - Close 75.26 67.69 67.19 64.76 64.4 50.8 46.98 43.8 40.73 32.2 37.72 42.32 43.3 38.68 13.22 12.5 10.94 8.6 8.14 8.96 9.77 9.63 9.34 9.52

Fig.7:

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UB ‘s profit from 2003 - 2008

Profi rofitt Be Befo fore re Tax Rs. in crores

Mar-08

Mar-07

Mar-06

Mar-05

Mar-04

Mar-03

4.7069

6 .41 04

6 .835 7

3.9897

0.7503

0.74

Fig.8:

Growth of UB compared to industry

Industry Growth UB Growth Million cases sold

FY02

FY03

FY04

FY05

FY06

78

85

87

90

100

26

30

34

36

40

Fig.9: PORTERS ORT ERS 5 FORCE FOR CE ANALYSIS ANAL YSIS :-

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

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lowere lowered. d. But the threat threat of new entran entrants ts is only only restri restricte cted d to Intern Internati ational onal and powerf powerful ul 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/14 http://www.scribd.com/doc/14036615/-Kingfisher 036615/-Kingfisher-vs-Fosters-with-po -vs-Fosters-with-porters-fiverters-fiveforces ) 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/?country=in&commodity=barley&graph=production

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Barley is a key raw material in the beer making industry. industry. (indexmundi.com) It constitutes to 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.

3. SUBS UBSTITU TITUTE TES S:

Fig.11: Consumption of Beverages in the world when compared to India.

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As we can see from the above graph the per capita consumption of beer is only 1lt per   person  person per annum in India where the global trend is much higher. India is a hot country 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. CUST CUSTOM OMER ERS S BUYI BUYING NG POW POWER ER::

The grow The growth th of the the Indu Indust stry ry is driv driven en by a prog progre ress ssiv ivee econ econom omy y with with favo favora rabl blee demographics demographics,, higher disposable disposable incomes, incomes, increasing increasing exposure to Western Western lifestyle lifestyless and high higher er cons consum umer er spen spends ds.. Th Thee soci social al habit habitss amon among g peopl peoplee in Indi Indiaa are are under undergoi going ng a transf transform ormati ation on with with a relaxe relaxed d attitu attitude de toward towardss consum consumpti ption on of alcoho alcohol, l, especi especiall ally y beer. beer. Canned Beer in social gatherings gatherings is becoming becoming more popular. Also, liberalization liberalization in some States, including deregulation and increased retailing opportunities through supermarkets, malls, malls, etc. etc. has increa increased sed access access to beer beer and result resulted ed in higher higher sales sales volume volumes. s. Despit Despitee 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/1403 http://www.scribd.com/doc/14036615/-Kingfisher-vs 6615/-Kingfisher-vs-Fosters-with-Fosters-withporters-five-forces) porters-five-forces)

5. Competit Competition ion and Intensi Intensity ty of Rivalry: Rivalry:

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Fig.12: Market Share Pie Chart. (http://www.scribd.com/ http://www.scribd.com/doc/14036615/-Kingfisher doc/14036615/-Kingfisher-vs-Fosters-with-port -vs-Fosters-with-porters-fiveers-fiveforces) 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 w ith SAB Miller Group for the beer business.

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A SWOT ANALYSIS below clea clearl rly y show showss the the posi positi tives ves and and the the negat negativ ives es of our our case case ANALYSIS below organization. STRENGTHS

WEAKNESSES

1. Large Large Market Market share share of  47.5%. 2. Well Well Known Known Brand Brand Ima Image. ge. Kingfisher. 3. Tie Tie ups ups with with var vario ious us Distilleries under Contracts. 4. Old & Establ Establish ished ed comp company any which means they have the experience and knowledge on their side. 5. Nation National al Prese Presence nce and and also also expanding into International International Market. 6. The The Mar Marke keti ting ng and and Promotional Promotional strategies are already a hit among customers. 7. A Divers Diversifi ified ed Parent Parent OPPORTUNITIES

1. Large capacities may lead to a

1. Growing beer market in India.

1. The level level of of taxes taxes,, is very very high high which could render beer  unaffordable. 2. Adver Adverti tisi sing ng and and marke marketi ting ng restrictions. 3. Entry Entry of foreig foreign n liqu liquor or majors majors may affect existing market share.

2. Tie-u Tie-up p with with S&N S&N to to open open expor exportt opportunities. 3. Any Any dereg deregul ulat atio ion n in the exci excise se poli olicies with reference to taxation and duty on beer which could could dras drasti tica call lly y push push up the the demand for beer.

 p pro robl blem em of over over capa capaci city ty in winter/rainy seasons. 2. Over leveraged position leading to short term cash flow  problems. 3. Only Only One One majo majorr and and popu popula lar  r    brand brand of Kingfi Kingfishe sherr Premiu Premium. m. As in India Beer is divided into 2 segm segmen ents ts Stro Strong ng & Prem Premiu ium. m. Kingfi Kingfishe sherr Premiu Premium m is leadin leading g the premium segment but it is 2nd aft after Hay Hayward wardss 5000 5000 in the Strong segment.

THREATS

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Jog Jogii Raju Raju Mand Mandap apak aka a

Gaut Gautha ham m Suku Sukuma mara ran n

Pras Prasad ad Kora Korata tage gere re Siddagangaiah

Principle rinc iple Players Play ers and Compe C ompetiti tition on: 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 acquis acquisiti ition on & merger mergers. s. Acquis Acquisiti ition on of White White & Mackay Mackay which which is the 4th largest largest whisky manufactur manufacturer er in the world, merger with Shaw Wallace Wallace in India which had about 10% market 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 this mark market et poten potenti tial al.. UB Grou Group p also also acqu acquir ired ed a brew brewer ery y from from GMR GMR Techn Technol ologi ogies es and and Industries Ltd in Andhra Pradesh at a consideration of over Rs 57 crore & Karnataka Breweries 24

 

Jog Jogii Raju Raju Mand Mandap apak aka a

Gaut Gautha ham m Suku Sukuma mara ran n

Pras Prasad ad Kora Korata tage gere re Siddagangaiah

& 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   posit position ion but with with acquis acquisiti itions ons & merger mergerss (both (both India India & overse overseas) as) UB is positi positioni oning ng itself  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. sourced. Critical is glass bottles. bottles. In India, India, 80-85% recycling recycling is the norm. Hence, dedicated, 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  stat states es is not not encou encoura raged ged.. Th This is keeps keeps manu manufa fact ctur urin ing g volu volume mess very very low low sinc sincee per per capi capita ta consum consumpti ption on is very very low. low. Duties Duties and Taxes Taxes are prohibit prohibitive ive which which makes makes price price a criti critical cal 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 Indi Indiaa dema demand nd is very very dynam dynamic ic and and the the infl influe uenc ncee of seas season onal al clim climat atee chang changes es 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.

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Jog Jogii Raju Raju Mand Mandap apak aka a

Gaut Gautha ham m Suku Sukuma mara ran n

Pras Prasad ad Kora Korata tage gere re Siddagangaiah

Environmental Constraints Constraints on the Industry : (As per the UB’s report to SEBI and its Investors in 2004) Taxation and policies regarding regarding alcohol in India fall under the State list; list; hence every state has different 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 the 199 1990s 0s,, the the gov gover ernm nmen entt has has banne banned d adver adverti tise seme ment ntss of any any sort sort prom promot otin ing g alcoh alcohol olic ic  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: Threee fact Thre factor ors, s, whic which h would would driv drivee the the grow growth th of beer beer cons consum umpt ptio ion n in Indi Indiaa is affordability, availability and better regulatory policies. In India the concentration of wealth is in the urban areas. India has a greater youth  population  population.. The older generation generation of Indians Indians still prefer whisky whisky or scotch, scotch, while while the youth have  been seen opting for Beer, wines and white alcohol, like vodka. Tax reform reformss in some some states states,, changi changing ng lifes lifesty tyles les fuelle fuelled d by boo boomin ming g econom economy y 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 Constantly increasing increasing GDP, favourable favourable growth in the demographics demographics with a growing 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. India. On-pre On-premis misee consump consumpti tion, on, a major major sociol sociologi ogical cal reason reason which which hinder hinderss growth 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.

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Jog Jogii Raju Raju Mand Mandap apak aka a

Gaut Gautha ham m Suku Sukuma mara ran n

Pras Prasad ad Kora Korata tage gere re Siddagangaiah

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 http://www.expresshospitality.com/20080131/management04.shtml))

Conclusion: Most Likely Scenario:

Refrences: Company website, accessed 20/05/2009…www.kingfisherworld.com/corporate/corporate20/05/2009…www.kingfisherworld.com/corporate/corporateindex.htm Company website, accessed 20/05/2009http://www.theubgroup.com/ 20/05/2009http://www.theubgroup.com/ Company website, accessed 20/05/2009 http://www.theubgroup.com/beveragealcohol.html UB’s report to SEBI and Investors, accessed on 22/05/2009 http://www.sebi.gov.in/dp/ublfinal.pdf  Money Control.com accessed 20/05/2009 http://www.moneycontrol.com/india/stockpricequote/breweriesdistilleries/unitedbreweries/U B02

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Jog Jogii Raju Raju Mand Mandap apak aka a

Gaut Gautha ham m Suku Sukuma mara ran n

Pras Prasad ad Kora Korata tage gere re Siddagangaiah

Wikinvest.com accessed 19/05/2009 http://www.wikinvest.com/stock/United_Breweries_(UBL.EQ-IN) http://ey9ff7jb6l.search.serialssolutions.com.ezproxy.uow.edu.au/? genre=article&issn=00999660&title=Wall+Street+Journal++Eastern+Edition&volume=249&issue=112&date=20070514&atitle=Indian+Magnate+Near  s+Accord+To+Acquire+Whyte+ %26+Mackay.&spage=B3&pages=&sid=EBSCO:Business+Source+Premier&aulast=Ball %2c+Deborah Batlivala – Karani Repot on UB from Sribd.com accessed 20/05/2009 http://www.scribd.com/doc/10866016/United-breweries-limited-Batlivala-Karani http://www.scribd.com/doc/2421670/Kingfisher-Beer  Repo Report rt on Srib Sribd. d.co com m acce access ssed ed on 24-0 24-055-09 09.. http://www.scribd.com/doc/14036615/Kingfisher-vs-Fosters-with-porters-five-forces http://www.siliconindia.com/shownews/UB_to_acquire_Karnataka_Breweries_for_41_Mnid-26706.html http://www.financialexpress.com/news/united-breweries-acquires-gmr-brewery-for-rs57cr/37682/ http://www.business-standard.com/india/search_news.php?search=ub %20group&select=keyword&pgno=8 http://raktimb.sulekha.com/blog/post/2009/01/shaw-wallace-ub-group-merger-a-casestudy.htm http://www.business-standard.com/india/news/scottishnewcastle-gets-into-grove-atub/213782/ http://www.merinews.com/catFull.jsp?articleID=126059 http://www.expresshospitality.com/20080131/management04.shtml http://web.ebscohost.com.ezproxy.uow.edu.au/ehost/detail?vid=3&hid=104&sid=ed07dcb5334a-4143-b48f-55b665a2f4e9@sessionmgr3&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d %3d#db=buh&AN=35952182

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Jog Jogii Raju Raju Mand Mandap apak aka a

Gaut Gautha ham m Suku Sukuma mara ran n

Pras Prasad ad Kora Korata tage gere re Siddagangaiah

http://www.sebi.gov.in/dp/ublfinal.pdf 

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