Beruflich Dokumente
Kultur Dokumente
Faculty of Engineering
Assignment – 1, Option – 1
BY
LIST OF GROUP MEMBERS
1. GAUTHAM SUKUMARAN ()
TABLE OF CONTENTS
I. Introduction………………………………………………………………. … 03
2
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
XIII.References ……………………………………………………………………
Introduction :
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
3
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
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 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).
4
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
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.
5
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
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%.
6
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
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….)
7
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
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.
8
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
Fig.1: The Strategic Position of the Organization in the Industry w.r.t Cost and Differentiation.
Strategic Capability :
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.
Human resource competencies to manage the whole operations by keeping the business
competencies in focus.
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
9
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
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
10
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
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.
4. Sufficient Funds:
Financial capital to lubricate the wheels of the whole business.
RESOURCES
11
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
12
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
PERFORMANCE OF UB :
Fig:2:
United Breweries
13
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
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
2006 2007
Revenue 634 897
Profit 5.3 40
Rs. In Crores.
14
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
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 370.2 371.36 427.4 410.1
incomes
Profit for the
3.3 0.6 1.1 0.45
year
Rs in crores
Fig.5:
Fig.6:
15
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
United Breweries :
16
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
Fig.7:
17
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
Fig.8:
Fig.9:
(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
18
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
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:
19
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
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.
3. SUBSTITUTES:
20
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
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.
21
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
22
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
A SWOT ANALYSIS below clearly shows the positives and the negatives of our case
organization.
STRENGTHS WEAKNESSES
23
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
The current industry scenario shows us that UB is the leader with close competition from
SABMiller
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
24
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
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
position but with acquisitions & mergers (both India & overseas) UB is positioning itself
strongly in the market for the future.
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.
25
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
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.
26
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
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)
Conclusion:
Most Likely Scenario:
Refrences:
Company website, accessed 20/05/2009…www.kingfisherworld.com/corporate/corporate-
index.htm
27
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
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
http://www.scribd.com/doc/2421670/Kingfisher-Beer
http://www.siliconindia.com/shownews/UB_to_acquire_Karnataka_Breweries_for_41_M-
nid-26706.html
http://www.financialexpress.com/news/united-breweries-acquires-gmr-brewery-for-rs-
57cr/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-case-
study.htm
http://www.business-standard.com/india/news/scottishnewcastle-gets-into-grove-at-
ub/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=ed07dcb5-
334a-4143-b48f-55b665a2f4e9@sessionmgr3&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d
%3d#db=buh&AN=35952182
28
Jogi Raju Mandapaka Gautham Sukumaran Prasad Koratagere
Siddagangaiah
http://www.sebi.gov.in/dp/ublfinal.pdf
29