A REPORT ON PRODUCT & BRAND MANAGEMENT OF ALCOHOL INDUSTRY (INDIA)

Submitted to Dr. Anil Ramesh, Head of Department, Marketing, Siva Sivani Institute Of Management, Komally, Secunderabad.

Submitted byAhmad Shakeeb, M2- 04 PGDM Marketing

Submission date- 21.07.08

CONTENTS
Alcohol Industry Sample of famous promotion Ads Surrogate advertisements Challenge in advertisement Positioning strategy of market leader Indian wine market poised for growth Product innovation by companies Potential of wine market in India Indian MNCs in market Reference: 3 7 10 11 12 17 18 19 24 26

ALCOHOL INDUSTRY

Alcohol is one of the commonly consumed intoxicating substances in India. It has traditionally been drunk in tribal societies, although it has won increasing social acceptance among other groups, urban males being the prime example. It is easily available and widely used, especially at festivals such as Deepawali and Holi. At the moment the use of alcohol is infrequent among women who also tend to resist the habit among male family members. Between 15 and 20 per cent of Indian people consume alcohol and, over the past twenty years, the number of drinkers has increased from one in 300 to one in 20. According to The Hindustan Times, it is estimated that of these 5 per cent can be classed as alcoholics or alcohol dependent. This translates into about five million people addicted to alcohol. Of what is actually consumed, the Intake of Indian Made Foreign Liquor (IMFL) is growing at the considerable rate of 15 per cent a year. Again, The Hindustan Times says that 65 per cent of the Indian liquor market is controlled by whiskey manufacturers. The state of Kerala stands first in per capita consumption of liquor at 8.3 liters followed by Punjab 7.9 liters.

INDIAN LIQUOR BRANDS The varieties of alcohol manufactured for consumption in India are: 1. Beer 2. Country Liquor 3. Indian Made Foreign Liquor (IMFL) 4. Wines Indian liquor brands have registered significant growth in recent years - some of the top Indian alcohol brands showing an increase of as much as 50 per cent in sales (1993-97). United Breweries registered an increase of nearly 20 per cent in sale in the year 1998-99.

INDIAN LIQUOR: Branded spirits market in India is 119 million cases out of which Whisky accounts for 55%, Rum 27%, Brandi 14%, Gin 3%, and Vodka 1%. North and west India consumes more of whisky and South, more of Brandy and Rum. The UB Group (35%) has a market share of 35% + 13% = 48% after merger of Spirits Division of Shaw Wallace (13%), Jagajit (7%), Mohan Meakins (7%) and IDL (3.5%). The key MNCs operating in the India include Diageo, Seagram, and Bacardi. About 80% of whisky is sold at below Rs.200 per bottle and 1% above Rs.600. AP (24), TN (19.3), Karnataka (11.2), Kerala (10.9) & Rajasthan (5.7) consume 60 % of the total IL, which is growing at about 11%.

AP TN Kerala Rajasthan Rest of India

COUNTRY LIQUOR: About 115 million cases of CL are sold in the country and the growth rate is 0.5%. The CL market is highly regulated, sold generally as commodity, often dominated by cartels, traders get disproportionate share of MRP. CL companies predominantly are state centric 4

e.g. Saraya & Radico in UP, GM Brewery & Vasant Dada in Maharashtra, IFB Agro in West Bengal, Som Distillers and Kedia in MP, Glenn in Haryana etc. A.P., Karnataka and Tamil Nadu have abolished RS based CL in favor of cheap ENA based IMFL. UP (19.5), Maharashtra (19.3), Karnataka (13.6), Punjab (10.2) & Haryana (9.4) consume 63% of the total CL. BEER: The Indian beer market is 93 million cases and has grown at 5.54% p.a. over 2003-05. Several parts of India are showing much higher growth rates. Five States, Andhra Pradesh (18.3), Maharashtra (16.2), Tamil Nadu (9.0), Karnataka (9.0), & Rajasthan (5.6) account for 63% of total beer consumption and top 10 States for 85%. Indian beer industry due to merger and acquisition is dominated by two top players (i.e. UB and SAB Miller together have a market share of 75%) and provide attractive profit margins due to the consolidated nature of the industry. The Chinese beer market in contrast is marked by intense competition with 400 brewers. The top 10 brewers account for only 45% of the market. Lower taxes on beer, falling distribution margin and prices have contributed to the surge in the consumption of beer in India. The use of alcohol as drink is an age-old story in India and it appears that the technique for fermentation and distillation was available even in the Vedic times. It was then called Somarasa and was used not only for its invigorating effect but also in worship. To date, not only has the consumption of alcohol been continued but it is an integral part of the Ayurvedic system of medicine. The First distillery in the country was set up at Crwnpore (Kanpur) in 1805 by Carew & Co. Ltd., for manufacture of Rum for the army. The technique of fermentation, distillation and blending of alcoholic beverages was developed in our country on the lines of practices adopted overseas particularly in Europe.

The distillery industry today consists broadly of two parts, one potable liquor and the industrial alcohol. The potable distillery producing Indian Made Foreign Liquor and Country Liquor has a steady but limited demand with a growth rate of about 7-10 per cent per annum. The industrial alcohol industry on the other hand, is showing a declining trend because of high price of Molasses which is invariantly used as substrate for production of alcohol. The alcohol produced is now being utilized in the ratio of approximately 52 per cent for potable and the balance 48 percent for industrial use. Over the years the potable liquor industry has shown remarkable results in the production of quality spirits. Indian Liquor industry is today exporting a sizable quantity of India Liquor products to other countries. The major players or competitors UNITED BEVERAGES VINTAGE WINES GROVER VINEYARDS RENAISSANCE WINES INDIE WINES VINTAGE WINES SANKALO WINES VINIVOLA WINES

GREAT INDIAN BEER RUSH Indians love their booze, but beer, it seems, leaves them cold. The country ranks tops globally in consumption of whisky, but it's somewhere near the bottom in beer drinking. So why is just about everyone in the brewing industry scrambling to get a piece of the market? Pretty small is putting it mildly. Although India boasts the world's second most populous nation, when it comes to beer it barely figures on the mapleaving plenty of upside for brewers who can get in early. Annual per capita consumption is very low estimated at 0.8

liters per annum. If you look at the statistics of other countries it tells a very different story. Getting Indians to switch from liquor to beer won't be easy. Brewers must contend with a dizzying list of bureaucratic restrictions that make it tough and expensive to win customers and to build a national footprint. Steep tariffs render imports uncompetitive. And state excise taxes of as much as 150% can push the price of a pint of domestic brew up to more than $3, or about triple what a shot of local whisky might cost.

SAMPLES OF FAMOUS PROMOTIONS ADS, PRESS, TV, RADIO, OUTDOOR ETC

It is not like any other product that it can be promoted widely, it is wine and there is lot of hurdles to promote the wines. As governments spend lot on creating awareness that it is harmful, so it is quit challenging to promote this product. But marketers have found different ways to solve their purpose as in Gulf country where ad of Wine is banned, they show ad of Mineral Water of the same company, which can be easily mixed with Beer, so if one way is closed, there are hundreds doors always opened.

FAMOUS ADS GIVEN BY WINE COMPANIES-

Ads for beer are banned. As a result, brewers have to be creative in building their brands on a national scale. SABMiller, for instance, sells a mineral water called Royal Challenge, not coincidentally the name of one of its lagers. Vijay Malya, launched Kingfisher Airlines, named after United's flagship brew, India's top seller and emblazoned the planes with its logo. In short, international brewers will be charged with crafting a beer culture in India largely from scratch. In that, at least, they have demographics in their favor. Roughly 60% of the population is under 30. What's more, incomes are rising, powered by an economy that's growing at 9%-plus. These trends are expected to fuel growth in beer consumption of up to 15% a year through the end of the decade. THE RISE OF SURROGATE ADVERTISEMENTS Advertisements have a strong influence in our life. We like them because they provide information and create awareness about the market. But many times, some advertisements are accused of misleading people. When such accusations are proved, some advertisements are scrapped off from media. Such instances have been reported in the advertisements endorsing alcoholic drinks and cigarettes. Hence the Government had imposed a ban on advertisements of these products in the media in the year 2002. ORIGIN OF SURROGATE ADVERTISEMENT As a reaction to the directive of Government, the liquor & tobacco majors sought other ways of endorsing their products. They have found an alternative path of advertising through which they can keep on reminding their liquor brands to their customers. They have introduced various other products with the same brand name. Launching new products with common brand name is known as brand extension, which can be carried out for related products (eg: Kingfisher Airlines and Kingfisher Beer). In this case, the companies launch other products with the same brand name for the purpose of reminding their old customers. Heavy advertising is done so that the customers do not forget their liquor & tobacco brands, for which advertisements are banned. The advertisements for

10

such new products are placed under the category of "Surrogate Advertisements". Their only objective is to compensate the losses arising out of the ban on advertisements of one particular product (i.e. liquor). This is a loophole challenging the Government's action. SURROGATE ADVERTISEMENTS PROMOTED BY LIQUOR The liquor industry is a prominent player in this game. Few surrogate advertisements shown in print, electronic and outdoor media are - Bagpiper soda and cassettes & CDs, Haywards soda, Derby special soda, Gilbey green aqua, Royal Challenge golf accessories and mineral water, Kingfisher mineral water, White Mischief holidays, Smirnoff cassettes & CDs, Imperial Blue cassettes & CDs, Teacher's achievement awards etc. These products bear exactly the same brand name and logo, which we had seen earlier in liquor advertisements. It was little surprising to know that liquor giants like McDowell's and Seagram's have entered into new segments like cassettes & CDs, mineral water, sports accessories etc. Later it was found that the basic aim of these surrogate advertisements was to promote their liquor brands like beer, wine, vodka etc. This brand extension is an act of bypassing the advertisement ban. Between April and June this year, three liquor ads which were termed as 'surrogate' by the consumer complaints council (CCC) of ASCI, have been withdrawn. In case of a few other advertisements which ASCI felt were surrogate, assurance of compliance is awaited from the advertiser. ADVERTISEMENT OF LIQOUOR; REALLY A CHALLENGE Among the ads which were withdrawn, is United Breweries' Kingfisher Premium ad which showed a visual depiction of a dancing couple with "packaged drinking water" written in fine print. ASCI felt that the visual and the headline ("the night rocks") did not bear any relevance to the product advertised - packaged drinking water. In the absence of specific information, ASCI felt the advertisement appeared to be a surrogate advertisement for a

11

liquor brand. Another ad which was withdrawn after being declared surrogate, was from Diageo India. The complaint against this ad was that while it mentioned the brand name 'Johnnie Walker', it talked about CDs and cassettes, which bears no relation to the product or service being promoted. ASCI upheld the complaint against the advertisement, which was subsequently withdrawn. Similar was the outcome of United Spirits' Antiquity ad. Though the ad stated "indulge in Blue Antiquity", it mentioned CDs and cassettes without showing any visual depiction of the same. After ASCI's decision that it was indeed a surrogate advertisement, the advertiser informed the watchdog about the temporary suspension of the campaign as regards new ads. The existing advertisements of Blue Antiquity have been withdrawn. Complaints against Seagram India's Royal Stag ("Make it large") and Chivas Regal (which mentioned CDs and cassettes in fine print) were also upheld by ASCI. The complaint against Seagram's Royal Stag ad was that it showed photographs of sports personalities, though the line "make it large" has a connection with alcoholic drinks. In absence of any visual depiction of cricket gear, and the mention of the brand name 'Royal Stag', the complainant felt that the advertisement was a surrogate ad for a liquor brand. One of the Chivas Life ads mentioned "ice fishing in Alaska". The complaint against the ad was that while it mentioned CDs and cassettes in the fine print, there was no visual depiction of the same.

12

THE CORPORATE STANDPOINT The industry segment has its own standpoint in defense. The liquor lobby claims that everything is in accordance to the Government regulations. They clarify that they have stopped showing liquor advertisements and they are free to use the brand name for any other products. Even the Confederation of Indian Alcoholic Beverages Companies (CIABC) advertising code maintains that advertisement of products (real brand extensions) by the liquor industry must be allowed POSITIONING STRATEGY OF THE MARKET LEADER The Indian beer market is 93 million cases and has grown at 5.54% p.a. over 2003-05. Several parts of India are showing much higher growth rates. Five States, Andhra Pradesh (18.3), Maharashtra (16.2), Tamil Nadu (9.0), Karnataka (9.0), & Rajasthan (5.6) account for 63% of total beer consumption and top 10 States for 85%. Indian beer industry due to merger and acquisition is dominated by two top players (i.e. UB and SAB Miller together have a market share of 75%) and provide attractive profit margins due to the consolidated nature of the industry. The Chinese beer market in contrast is marked by intense competition with 400 brewers. The top 10 brewers account for only 45% of the market. Lower taxes on beer, falling distribution margin and prices have contributed to the surge in the consumption of beer in India. UNITED BEVERAGES Group owned by Mr. Vijay Malya uses different strategies to position its product in market. It has 60 % market share in Indian wine market. Its brand Kingfisher has itself 25% share in market.

13

1. Wine a Part of foodWe can see in this ad it is written that, food tastes better with KINGFISHER. So, if you want add taste to your food you have to take Kingfisher. They have positioned the product as a part of dinner or lunch as we take water after food, take wine.

2. Taste of an International Brand Kingfisher has been positioned as international brand in the mind of customers, so if they drink it they should feel that it is not any local liquor, it is an international wine, taken by all across the world.

14

3. Positioning by PackagingKingfisher it is available in the packs, in which cold drinks are available, so it can be positioned as substitute for cold drinks, when a person is tired, or want drink some for energy, he can take the beer.

4. KINGFISHER a Synonym of StyleAs we can see in this ad also, it is written that, drink your KINGFISHER in style. So if a person is stylish, he will definitely go for this brand.

15

5. Brand Positioning by Vijay MalyaVijay Malya, it owner also does different kind of advertisement and publicity shows to promote and position its brand as a different one in comparison with other brands. In one Ad, he is shown with some young girls, so it gives a message, if a person wants same fun he should take that brand. He also represents his generation which over 45, so, dont let at that stage also Take Kingfisher and Keep on Batting on front foot in life with enjoy and style. ALL INDIA DISTILLERS ASSOCIATION In 1953, an all India body of distillers was constituted which was baptized All India Distillers Association. During the Intervening four decades this association has not only grown in size but has also widened its sphere of activity. At the time of its birth, the association had a membership of only fifteen whereas the fraternity has now swelled to close to two hundred. The constituents of the association control more than 80% of the total distillation capacity of the country. Besides, ten state associations have also been constituted in Maharashtra, Gujarat, Karnataka, Tamilnadu, Andhra Pradesh, Madhya Pradesh, Bihar, Uttar Pradesh, Punjab and Haryana, which are all affiliated to the parent body. It is indeed a matter for gratification that ours is the sole representative body of the alcohol industry and distilleries., in the country. The Association has been carrying out a pioneering work with regard to catering to interest of the alcohol industry and has gone from strength to strength through out all these 54 years, to the extent that it is now a force to reckon with as far as the alcohol and distillery industry is concerned. The advent of Ethanol as an ideal blend for admixture

16

with Motor fuel/ petrol has provided further boost to importance of this industry and the association, in the countrys industrial scenario. We visualize a bright future for the industry and a much stronger association in very near future. AIDA is the leading business support organizations for the alcohol & liquor industry in India and maintains the lead as the proactive business solution provider through continuous interaction at the constituent members level and various government agencies level. It is therefore now the largest and the oldest apex organization of Indian Alcohol Industry which stands for quality, industry Government- Society partnership and to enhance the quality and productivity of the distillery/ alcohol industry on the whole. AIDA today espouses the shared vision of the Alcohol / Distillery industry in the country and speaks directly or indirectly for the entire industry.

AIDA
The AIDA secretariat is located at Nehru Place, New Delhi having its own premises with all modern communication facilities like telephone, Email, E-links facilities. It is located in at one of the busiest Commercial complexes of New Delhi with all infrastructural setup available at the site itself. The office premises are under renovation, at present , and when complete it will provide a modern and more spacious and pleasant atmosphere for carrying out its secretarial activities in more efficient and prompt fashion. and other combined

17

INDIAN WINE MARKET- POISED FOR GROWTH

While generations of tipplers have been advised against mixing drinks, alcoholic beverage makers are doing it without trepidation. With the wine market in India poised for heady growth, liquor companies are ready to uncork their best wines. Currently, the Indian wine market is estimated at 1.2 million cases (one case has 12 bottles of 750 ml each), with imported wines accounting for a mere 200,000 cases. According to a report by consultancy firm KPMG and Federation of Indian Chambers of Commerce & Industry, the Rs 265 crore (Rs 2.65 billion) markets has grown at over 25 per cent per annum over the last three years. The industry is estimated to report a 60 per cent compounded annual growth rate in the five years to 2010. After that, the growth is expected to slow down, but not to below 24 per cent. The per capita consumption of wine in India is only 9 ml, compared with 400 ml in China. Since the two countries are often placed in the same economic bracket, this is being interpreted as a huge latent demand in India. Diageo, known for its premium scotch brands in India such as Johnnie Walker and premium vodka brand Smirnoff plans to soon serve an array of domestic and international wines. "We plan to launch our premium wines starting with Justerini & Brooks in April followed by Sterling Vineyards for the Indian market," Asif Adil, MD, Diageo India told Business Standard. Diageo has already introduced three of its international wine brands, B&G, Blossom Hill and Piat d'Or, in the domestic market last year. The company also plans to market its first domestic wine Nilaya, launched in November 2007, this year. Last year, the company had signed third-party manufacturing agreements with Renaissance Winery and Mountain View Wineries in Nashik, Maharashtra, for developing its Indian brands. On the other hand UB Group, which lords it over 45 per cent of the country's beer market, has announced plans to retail high-end bottled wines. The company has already started introducing some wines from Bouvet Ladubay, a premium French winery, which the company acquired last year. The company has positioned its Indian made wine Zinzi in the value-for-money category within a price band between Rs 275 and Rs 300. While its other Indian-made wine Four

18

Seasons will be available in the premium Indian wine category with prices starting from Rs 375. Wine firm Sula is not only aiming at increasing its market share but also looking at new marketing initiatives. Dia-Sula's first wine for women is one such example. Sula is expecting 30 per cent of its total sales to come from Dia. The other part of the strategy is to be present across the price spectrum with the most expensive (Dindori, at Rs 700 a bottle) and the cheapest wine (to be made from table grapes) available in the country. Says Rajiv Samant, "We hope to add 800 acres to our vineyards this year through contract farming, mainly in Nasik."

PRODUCT INNOVATIONS BY COMPANIESPERSONALIZED WINES

A leader in personalized wine for nearly ten years, Signature Wines & Beverages provides best bet for convenience, quality and savings. Its affordable wines are expertly chosen to match the special occasion, and make unique gifts for the holidays or upcoming corporate events. The wines are crafted in a fruit-forward, delicious style suitable for the occasional sipper and the wine connoisseur.

PERSONALIZED CHAMPAGNE
Bubble, bubbles, bubbles.Personalized champagne labels on large or mini champagne bottles have never been so easy or affordable. Perfect for holiday gifts, birthdays, executive gifts, wedding favors, anniversaries, corporate events or any time one wants to make a lasting impression. Keep several on hand with your personalized label for every one of lifes celebrations. Non-Alcoholic personalized champagne is available too.

PERSONALIZED WATERWine companies offers a selection of pure bottled spring water and allow to create own custom label for parties and events. Custom bottled water adds a personal touch to special

19

occasions and offers unique ideas for Valentines Day, wedding receptions, promotional items and more!

POTENTIAL OF LIQUOR MARKET IN INDIA

It is India's potential for whisky -- it accounts for about 60 per cent of the Indian Made Foreign Liquor (IMFL) market -- and other spirits such as rum and vodka that is attracting the MNCs to India. They reckon that India is a big and growing mark et with a weakness for spirits, especially whisky. This is not surprising considering that in the wake of the reforms, as the social transformation gathered momentum and global consumption patterns get increasingly assimilated, the country's moral fabric is loosening. Drinking liquor has rapidly gained acceptance and is no more taboo -- even among the conservative middle-class but whose attitudes have changed with improved standard of living has improved. Liquor companies have been quick to latch on to this trend. Groupe Pernod Ricard, the e world's fifth largest producer of alcoholic beverages, will be introducing new brands for the growing middleclass market. In fact, the youth, women and middle-class -- overlapping segments -- are being targeted by the liquor companies looking for growth. A good example of this potential is the per capita beer consumption placed at half-a-liter for India, in contrast to the Czech Republic's consumption of half-a-liter a day. It is also hardly comparable to the very high levels of per capita beer consumption on in the developed and some of the developing countries. But the emerging trends are interesting. Strong beer (alcohol content in excess of 5 per cent), a category non-existent in developed countries, has been growing at about 15 per cent in India for t he last two years, and already accounts for 55 per cent of beer consumption. This trend is slated to continue. Thus, there is significant latent demand and vast scope for growth in liquor consumption, both in the urban and prosperous rural areas, once the e regulatory environment is relaxed. A little noticed factor pertains to the gradual, but pronounced, shift of liquor consumers to the organized sector. The Indian market has traditionally been inclined towards the unorganized sector, which accounts for two-thirds of the liquor consumption in India.

20

However, maturing tastes and preferences are making the Indian liquor market more brand-led. This should promote growth in the organized sector.

BEER MARKET IN INDIA

The Indian beer market was estimated to be 6.7 million hectoliters (hl) in 2002-03. As seen in figure 1, beer consumption has been growing rapidly at a CAGR (Compound Annual Growth Rate) of 7 per cent over the last 9 years, while growth in 2002-03 was 11 per cent. Indian growth rates compare favorably with the global beer industry, which grew by about 2.6 per cent in 2001-02 Apart from providing strong growth, India also provides attractive profit margins due to the consolidated nature of the industry a comparison between China and India, for example, reveals that the Chinese beer market is marked by intense competition, with several players being marginalized. In China there are about 400 brewers, of which the top 10 account for only 45 per cent of the market. This has resulted in low profit margins for the Chinese beer players. In contrast, the top two beer players in India account for about 75 per cent of beer sales in India and the industry stands a chance to see more consolidation in the near future. The effect of this consolidation can be seen in the fact that beer prices in India rarely go down with the competitive pressures of new product or brand launches. In the past, whenever beer prices have gone down, it has been due to either the lowering of duties by the government or the deregulation of distribution (leading to lower margins for the distribution channel partners). In neither scenario have the margins or revenues of beer manufacturers been affected. Per capita consumption in India is hovering around a measly 0.5 liters per annum. These figures pale into insignificance if one compares them with those of Czech Republic that has the highest per capita consumption of 156.9 liters per annum (see box) Per capita consumption is directly related to the taxation, according to an industry observer. For instance, in Maharashtra there is a direct 100% excise duty on Beer. An

21

equivalent 650 ml bottle is available for approximately Rs 8 in China. Which is why the per capita consumption in China is a high 16 liters per annum? The Indian beer market has been growing rapidly over the last 10 years, due to the positive impact of demographic trends and expected changes, like: RISING INCOME LEVELS India is home to nearly one-sixth of the global population and is one of the most attractive consumer markets in the world today. Various research studies have shown that a rise in the income levels has a direct positive effect on beer consumption. The National Council for Applied Economic Research (NCAER) projects India's 'very rich', 'consuming' and 'climbers' classes to grow at a CAGR of 15 per cent, 10 per cent and 2 per cent respectively. With this growth in income levels, Indian beer consumption is expected to continue growing, at the very minimum, at the growth rates witnessed in the last decade. CHANGING AGE PROFILE As a consequence of the high birth rates prevalent until the 1990s, a large proportion of the Indian population is in the age group of 20-34 years. This age group is the most appropriate target for beer marketers. This population trend will give a further boost to the growth of beer consumption in India. Many global players are planning to enter the Indian beer sector and they realize that a partnership with a local player is important to establish a successful presence in India in a short time frame. CHANGING LIFESTYLES A deep-seated traditional social aversion to alcohol consumption has been a traditional feature of the Indian society. However, as urban consumers become more exposed to western lifestyles, through overseas travel and the media, their attitude towards alcohol is relaxing. Social habits are undergoing a transformation as mixed drinks are becoming more popular. The greatest evidence of this trend is the increase in beer consumption among women. More and more women are consuming beer the penetration in metropolitan areas is almost twice as high as the penetration in other large cities implying that the greater tolerance towards alcohol consumption in metropolitan areas

22

facilitates the consumption of beer. With increasing urbanization, this acceptance is only going to rise. REDUCTION IN BEER PRICES The Indian consumer typically values an alcoholic beverage on the basis of its 'kick' factor versus its price. The following two factors therefore, affect the market for beer. Firstly, as most states do not have a differential tax structure based on the alcohol content, strong beer... As far as the Light beer segment goes, there is no existing competition in the market. However, a number of well-established brands, especially lagers, have a significant market presence. Chiefly Kingfisher - India's celebrated malty draught lager since 1857; voted 'The World's Best Lager' in Stockholm and Chicago. In India the future of beer industry is very much optimistic because: 1. India has predominantly a warm/hot climate 2. The beer-drinkers in the country are much younger than the average beer-drinker elsewhere in the world. This makes them more likely to carry the brand with them for a lifetime. 3. Increasing exposure to beer and wine drinking, mainly due to media and consumer mobility. All these factors combined make the scenario very promising for beer industry and are 'in sync' with their strategy for India. UB (United Breweries Ltd.) is the market leader in the Indian beer market with a 40% market share. Its flagship Kingfisher brand alone commands 25% market share. The company has however been focusing on strong beer, which has driven growth. The company introduced its strong beer, Kingfisher Strong during the year 2000 in the selected market of Maharashtra and Karnataka. The move came as a reactive move following increasing shift of consumers towards strong beer, a trend started by Shaw Wallace. While the overall market grew marginally by 2%, the strong beer market grew at 8-10% during the year at the expense of lager beer. The market is now skewed towards strong beer with more than 60% of the market being strong beer market. Beer mix today is approximately 60 percent lager beer and 40 percent strong beer. This ratio was very different 4 years ago. Over the last four years strong beer has been the

23

fastest growing segment. This was completely usurped by Shaw Wallace. As of today while Shaw Wallace has approximately 28 to 30 percent of the strong beer market, UB already has achieved 14 to 15 percent of that strong beer market and is growing very fast. It launched Kingfisher Strong only in May of 2001. And once it is able to take Kingfisher Strong national, it will try to match Shaw Wallace's market share over the next few years. Apart from Kingfisher , and Foster's Beer, the other brands in the Indian market are Carling Black Label, Carlsberg, Dansberg, Golden Eagle, Guru, Maharaja Premium Lager, Haake Beck, Haywards 2000 Beer, Haywards 5000, Haywards skol, Flying Horse Royal Lager, Taj Mahal, Heinekin, Hi-Five, Ice, Kingfisher Diet, Kingfisher Strong, Kirin, KnockOut, Legend, London Diet, London Draft, London Pilsner, Royal Challenge, San Miguel Lager, Sand Piper, Strohs and Zingaro. The major brands which belong to large groups in the industry (apart from UB) are Shaw Wallace - Royal Challenge Premium Lager, Haywards 2000 Premium Lager, Haywards 5000 Super Strong, Hi-Five and Lal Toofan. South African Breweries India Ltd. - Knock-Out, Continental and Three Lions, a new brand that was launched in the autumn of 2001 by SAB in Uttar Pradesh, Chandigarh and Himachal Pradesh. Other possible competition Radico Khaitan and beer international Interbrew have formed a joint venture to distribute Interbrew's Beck's brand of beer in India. The premium lager beer segment in India will be targeted. Radico has also announced the launch of its international division. The beer-drinkers in the country are much younger than the average beer-drinker elsewhere in the world. This makes them more likely to carry the brand with them for a lifetime. Also, as the target audience becomes younger, a light beer is expected to attract first-time drinkers, since it is much milder than any of the other beers in the country. A lot of new variants promise to gain prominence, but mainly in niche urban segments. The sophisticated consumer who drinks beer for the experience and not to get drunk will lap up ice beer or light beer. In urban centers, apart from first time users companies are also targeting women, who as 'the times they are a changing,' are entering the market for

24

beer. Essentially, women shy away from beer consumption because it is associated with calories, and has traditionally been a buddy drink, associated with pot-bellied men sitting at bars and shooting darts.

INDIAN MNCs IN MARKET McDowell & Co., a 100-year-old company in the liquor business and a part of the UB group, together with sister company, Herbertsons, commands 34 per cent of the liquor market. The local brands have a wide reach too and are focusing on strengthening the network and logistics to minimize costs. McDowell brands are available in 90 per cent of the retail outlets in the country, and the company is setting up dedicated and model retail outlets to take advantage of the unrestricted point-of-purchase advertising. It plans to spend Rs. 18 crores on brand relaunches. This is expected to further boost brand growth. In 1998-99, the company's brands, six of which are millionaire brands, grew 24 per cent to 14.5 million cases. Most Indian companies effectively meet competition from the MNCs by restructuring and upgrading products, processes and practices to international standards. In recent years, there has been a spate of product launches and relaunches to improve perceived value through the up gradation of physical appearance, perception of blend and investment in brand-building. UB has considered all the elements of the product -- the carton, the bottle, the cap, and the label -- for a revamp. In their efforts to imp art an international look to their products, local companies are sharpening their focus on the personality and imagery of their brands with the help of international agencies. Yet, the MNCs have slowly gained a 10 per cent share in the whisky market. What is not revealed is the MNCs success in carving out higher shares of about 55-60 per cent and 30 per cent in the super-premium and premium segments respectively. Thus, Seagram 's Royal Stag and Oaken Glow, and Brown and Forman's Southern Comfort have overtaken Royal Challenge (SWC), Peter Scot (Khoday) and McDowell Premium.

25

MNCs are able to leverage the price-quality relationship and the intensive investment in brand-building through advertising and sampling better than local companies. The local firms appear to exploit the distribution dynamics more. However, it cannot be overlooked that the local Scotch industry is small, and both bottled-in-India Scotch and duty-free Scotch account for about one lakh cases each. Thus, to grow in value and volume, the MNCs will have to enter the regular segment which accounts for over 40 per cent of the total market and also contain the forays of local majors into the premium segment. IDI, a 60:40 joint venture between the International Distillers and Vintners (IDV) and Polychem Distilleries, has introduced Gilbey's Green Label whisky in the regular segment. On the other hand, SWC, which did not have a significant presence in the delu xe whisky segment, launched a DSP Black Whisky to fill this gap. It is reported to be growing in market share. MNCs will come under increasing competitive pressures and have to be alert. Fetters MNCs face numerous hurdles. Being licensed to produce only grain-based liquor -- the exception being International Distillers India -- which is about four times costlier than molasses-based liquor produced by Indian companies, the MNCs are confined to the premium segment and denied a level playing field. The Foreign Investment Promotion Board (FIPB) subjects the MNCs to a capacity ceiling of 10,000 kl (kilolitres) which some companies, like the IDI, have cleverly sidestepped by con tract manufacture from across the country since there is no ban on outsourcing. IDI's smooth entry into India and its success as a profit-making venture, unlike many other MNCs, can be partially attributed to these advantages. MNCs also face the problem of unfulfilled export obligations arising from the imposition of the foreign exchange neutrality norm at the time of the FIPB approval and are lobbying for the relaxation of this condition. Under the norms, the MNCs are required to counter the imports of alcoholic concentrates and export liquor products in equal amounts. They maintain that the ``Made in India'' tag of their export consignments acts as a barrier. Has it discouraged MNCs that entered India later? Not really. It has been a valuable experience for them. Fosters from Australia, which launched its beer in 1998, had sales

26

exceeding expectations in a low growth market right from the start. It is consider ring an expansion. The beer market, estimated at around 67 million cases, is growing at 8-9 per cent. In the last four years, the strong beer (alcohol content over 5 per cent) market has been growing at 15 per cent, while that of lager beer has been sluggish at 5-6 per cent. Local and foreign companies have lost no time in adjusting to this change in the consumption pattern. Strong beer is becoming popular due to its value for money.

REFERENCES:
http://www.aidaindia.org http://www.theubgroup.com/beveragealcohol.html http://www.vogaitalia.com/ http://economictimes.indiatimes.com

27