Strategy Group 6

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UB Group


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UB - Group

The UB Group was founded by Scottish gentlemannamed Thomas Leishman in 1857.

The Group is professionally managed and is headed byDr Vijay Mallya, the Group Chairman

The UB Group, is the market leader in both Spirits & Beerbusiness in the country

The Group has a turnover of Rs 3700 crores

The core Beverage Alcohol business account for 80% ofthe group turnover


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UB Group - DIVERSIFICATION

Spirits

59%

Beer

17%

Fertilizer

14%

Engineering

3%

Airlines

6%

Pharma

1%

Year : 2010


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UB Group : BEER

50% market share nationally.

Sold in over 52 countries and also on

international flights. Every third beer sold in India is

Kingfisher.

Indias 1st global consumer brand

Kingfisher.


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MarketShare &Growth


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0

0.5

1

1.5

2

2.5

3

1985 1990 1995 1997 1999 2000 2001 2003 2005 2006

HECTO

LITRES(INM

ILLIONS)

KINGFISHERBRANDGROWTH(BEER)


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Making A Mark

strategies.


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MarkofabrandnameKingfisher

Tying 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.


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MarketCharacteristics

Market Share

United Breweries

Limited 42.4%SABMiller 22.8%

Mohan Meakin

Limited 5.3%Others 29.4%

Data source: Datamonitor

United Breweries Limited is the leading having a 42.4%share of the market's volume.

SABMiller comes second and accounts for 22.8% of the

market.


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Industryanalysis


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Industry Structure

AlcoholicBeverages

IMFL

BrownSpirits

WhiteSpirits

CountryLiquor

Licensed Illicit


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IndianBeerIndustry

Hugegrowthsincetheliberalizationandopeningupofeconomyin1991.

IntolerancetowardsalcoholinIndiahasdecreasedthrough

globalizationandculturalinfluenceofwesterncountries.

MajorityofIndianpopulationfallsintheagegroupof18-35years,whichisthetargetedsegmentforbeersellers.

So,Indiahasbecometheidealmarketfortheindustry.


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Marketoverview

Indianbeermarketgrewby17.1%in2010toreachavalueof$5,022.8million.

UnitedBreweriesLimitedistheleadingplayer

having42.4%shareofthemarket'svolume.

Indianbeermarketishighlyconcentrated,withthetopthreeplayersholding70.6%ofthetotalmarketvolume.

In2015,forecastedtohaveavalueof$9,639million,anincreaseof91.9%since2010.


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Driversandchallenges

Drivers

Indiahasanemergingmiddleclass-Indiahasahealthyurbanworkforce.

63%ofthecountrypopulationisbetweentheagesof15-24.

Favorableregulatory

environment.

Challenges

Brewersmustmakeinnovativeandreadilyavailableproductstoremaincompetitive

Brewersmustcreateasenseofbrandloyalty

Utilizationofbrewing

capacitytokeepmanufacturingcostslow. Cleveradvertisingtoinducebeerdrinkerstobuyaparticularbrand


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FightingCompetitions

PresentlydistributingbrandsofBeerinIndia.1. SABMiller:Haywards,RoyalChallenge,KnockOut,Foster

2. Anheuser-Busch:Budweiser

3. Carlsberg(SouthAsianBreweries)4. Heineken(AsiaPacificBreweries)5. CastleLager6. Cobra


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Prohibition in India

Soon after independence, prohibition was imposed in

the erstwhile state of Bombay.

The first large-scale movement against alcohol began

in the 1970s, when rural women in various parts of the

country protested against the sale of liquor in theirvillages.

Information and Broadcasting ministry of India banned

the ads.

Even after the ban, liquor companies continued toadvertise their drinks in the form of surrogate

advertisements.


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Legitimate business & their surrogate advertisements

Brands Surrogate advertisementsMcDowellsmaltwhisky McDowellsSoda/water

RadicoKhaitans8pmwhisky RadicoKhaitanswater

Haywards5000Beer Haywardswater/soda

DerbySpecial Derbyspecialsoda

BacardiLiquor BacardiBlastCDs&Cassettes

Bagpiperliquor Bagpiperssodaandcassettes

KingfisherBeer Kingfisherbottleddrinkingwater

RoyalChallengerwhisky RoyalChallengergolfaccessories&

mineralwater&cricketteamWhiteMischiefLiquor WhiteMischiefholidays

SmirnoffVodka Smirnoffcassettes&CDs.SponsorsofManchesterUnited


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Competitoranalysis


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SAB Miller

Strong Branding Strategy

Broader Geographical Presence

Affordable Beer

Larger Coverage

Local value Creation


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Public Image

Vast Product Line

Commercial Tie up

Strong Brand Presence

Availability

BACARDI


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BEER Market Share in INDIA


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EnvironmentAnalysis

Political

InadequateMarketInfrastructure

StringentLegalPolicies GovernmentRegulations

Economical

PriceFluctuations PriceRestrictions(GovtdecidestheECP)

Social

Changeinconsumptionpattern(adaptionofwesternculture) Riseintheincomelevels,whichhasadirectpositiveeffectonbeerconsumption

Riseinmiddleclassandincreaseofurbanization

Technological

InnovationandDevelopmentofnewproducts Stateoftheartofbrewerytechnique


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Opportunities & Threats

OPPORTUNITIES

Market conditions very attractive for growth

Create credible alternatives in the premium and high endsegment.

Facilitate entry into new segments, such as wines, Aviation

etc.

Provide access to non traditional global markets, particularly

Russia and China.

Incorporate B2C e-commerce portal.


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THREATS

Government regulations

Stiff competition from other brands & local

products

Consumer preferences

Alternative drinks and health conscious customer.


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Porters 5forcemodel

Overall industry rating: high Moderate low

Entry BarrierX

Bargaining power of buyers.X

Threat of substitutes.X

Bargaining power of suppliers. X

Intensity of rivalry amongcompetitors.

X


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ThreatofNewEntrants

Entry and exit of the new competitor is not easy in this sector. Economies of scale are needed in manufacturing, distributing,and marketing to create barriers to the national and globalmarkets.

The market entrant needs to build manufacturing facilities,

distilleries etc and the cost associated with this highlycontroversial industry seek high level of sales, thus making theindustry more and more prohibitive for new comers .

There are strict rules and regulation from the government tocontrol this sector which makes this industry quiteunattractive.

Tax rate is high in this industry.


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Bargaining powerofbuyers

Buyers switching cost of the brand is very low.

A decline in disposable income shifts the consumer

preferences away from premium priced brand name products

in favor of lower priced brands i.e. switching cost is low.

The quantity of alcoholic beverages that a nation consumes

tends to be unaffected through recession and prosperity while

the quality of the products purchased is directly related to the

disposable income.

Buyers are in an advantage position when they are buying inbulk especially in peak season and time of celebration and

occasions.


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Bargaining powerofsuppliers

Weak bargaining power of suppliers

Products used to brew beer are inexpensive and suppliers

are numerous. Because of this suppliers are in a disadvantage

position in terms of bargaining power.

If there is no scope of backward integration or forward

integration from the manufacturer, the bargaining power of

the supplier increases. But in the beer industry manufacturesmay opt for the backward integration as manufacturing their

own facility for packaging.


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Government market(65%)State government is the sole

distributor

Auction market(16%) State government auctions geographicalterritories which has led to monopolies / cartels

Free market(19%) Through trade licenses

Bargaining power in the distribution network is commanded by

players with premium brands, large volume base and product range


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AstrongforcefromtheintensityofrivalryamongstcompetitorsThereisslightlyhigherthanmoderatekindofcompetition

becauseindustryisrefrainedfromadvertisingtheirproductpublicly.Becauseofthehighlegalandregulatoryburdens,

manufacturerstendtomergeinordertolowerthecompetition.Asthereismuchcompetitionamongthecompetitorsand

highintensityofthesubstituteproduct,thelevelofcompetitionandsurvivalofthecompanyistough.

TherearefewbigbrandslikeKingfisher,Budweiser,Hayward,Tuborgetcthatcontrolthemarketandenjoylargermarketshare.Thoughthecompetitionistough,theKingfisherbrandistheoneofthelargestsupplierofbeer,

Intensity ofrivalry among competitors


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Strongest brands Significant

upgradation

Least vulnerableto policy volatility

due to largespreadBranding

LocalSourcing

Value Chainownership

Segment-Market

Presence

ManufacturingTechnology

UB Group

Optimal, asalmost completelylocally sourced

Largest manufacturing base

Maximum capacity utilisation

Initiatives planned forintegration intoretailing

TheUBGroupscompetitiveadvantage

ManagementTeam

Professionally managed Seasoned professionals with

significant industry experience


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InternalAnalysis

United Breweries Limited Flagship


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Businessdescription

Geographicsegments

Qualityandhygienearethekeyelements

UnitedBreweriesLimitedFlagshipbusinessofUBgroup

R


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1. Alarge-scaledistributionnetworkforefficientsupplychainmanagementwithinIndiaandoverseas

- Globalfootprintwithexportstoover37countries,80

manufacturingandbottlingplants.

- Indian law prohibits the movement of alcoholic

beveragesacrossdifferentstates,sodistilleriesandbreweriesestablishedineachstate.

- LaunchedmultibrandretailstoreSpiritz&more

Resources

2 Excellent manufacturing processes


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- The proof thatUBLs breweries have notonly been approved for local brewing of

HeinekenbutalsothattheproductbrewedinIndiahasbeenacknowledgedtobeoneof the finest when compared with globalbeers.

2.Excellentmanufacturingprocesses


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Capabilit


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- ExpandingMarkets

Heinekenisrolledoutandwellreceivedin

Delhi, Bangalore, Kolkata, Goa andMaharashtra. It can expand into othermarketsaroundthecountry

Capability

C bili


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Capability

- Boost in demand and changing attitudes

Continuously invest in capacity

enhancement because of underlyingdemand boosted by the demographics ofthe country as well as changing attitudestowards the consumption of alcoholic

beverages, particularly beer, among ouryoungpopulation.


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Weakness:

Volumegrowthisnotreflectedintheprofitfigures.

Threats:

Intensecompetition. The alcohol bill in Scotland could erodemargins or indirectly diminish the customerbase.

Theboomingtradeincounterfeitalcohol

S i


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Strategies


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Primaryactivities

Bigscalesectorandenjoycostadvantageinformofloweroverhead.

Supplyfrommanufacturersiscomparativelyatcompetitiveprices.

Inboundlogistics

Savecostthroughhigherproductivitywhichisgeneratedthroughenthusiasticandloyalworkers.

Operations

Just-in-timefinishedproduct Productsaretransportedwithintheweekoftheirmanufacturing

Outboundlogistics


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Reducedthenumberofintermediariesinitsdistributionchannel

Manufacturertostockisttocustomer

Marketingandsales

NonerequiredService

B i t t i


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Businessstrategies Focus on Value to Consumer.

Dominance at point of purchase /

consumption through tie ups with retailers

and restaurants.

Innovation in product packing and new

product development.

Acquisition of BOUVET-LADUBAY in July 2006,

the UB Group has made a strategic entry into

the wines category.


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Excellent distribution system helps in pushing

of a few brands.

Investment in capacity expansion proving

fruitful as demand increases.

Low manufacturing overheads and large

volume manufacturing guarantees economies

of scale.

Consumer loyalty to the company preserved

through variety of offerings.


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Diversification into pharmaceuticals, airlines,engineering etc.

Diversification of risk and attractive prospect forinvestors.

Change in perception about the company.

Brand building which in turn helps for surrogateadvertising of the primary products

Sports teams like Force India and Royal challengersBangalore have helped appeal to masses.


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Thesalesinvolumesarenotwellreflectedintermsofprofits.

Newproductsrequiredinthebeersegment.

AdvertiseandpromotebrandslikeWhyte&Mackay

Tapuntappedforeignmarketsthroughstrategicalliances.


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Strategy Group 6

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