Presented to :Prof.

Rashmi Menon & Class

Prepared by: Valay Chaya (07) Nikul Maheshwari (28) Anis Vohra (56) Ravi Vyas (57) Nilesh Jain (60)

The Industry
Top 5 Emerging countries (Brazil, China, India, Mexico and South Africa) contributed $39876.3 million to the global Spirits industry in 2009, with a CAGR of 8.6% between 2005 and 2009
Per capita Consumption in Litres
India
China Litres Europe USA 0 10 20 30 40 50 60 70 80 90

http://www.researchandmarkets.com/research/a73aa3/spirits_top_5_em

Key Drivers and Challenges

Drivers - Young population - Low per capita consumption - Rising income levels - Dynamism in beer market Challenges - Bottling shortage - Advertisement barriers - Taxation - Social Factors

Product life cycle theory for brewery Industry

India is one of the Worlds most exciting beer markets

Available in two strengths: mild(around 5% alcohol) and a generous strong (6-8% alcohol) Excellent demographics, an expanding middle class, and increasing income levels have huge potential to propel domestic demand 70% of population below 30 years of age Middle class growing from 5% in 05 to 43% in 2025 Disposable income set to increase significantly on back of sustained GDP growth Positioning of Beer is developing very positively Rise in income makes beer affordable to more consumers Super premium segment is quickly emerging in large metros

India is one of the Worlds most exciting beer markets

IMFL grows every year at a rate of 15% per year. Kerala and Punjab top the list of heaviest consumption in a state wise break up Summer is the peak season for beer. South is the biggest beer market in India with a share of about 60%, North contributes 30% and the rest of the country contributes the remaining. More than three-fourths of Indias beer sales are of the strong variety with over 5% alcohol content, with only up market towns and cities preferring light beers.

http://www.retailing360.com/index.aspx

10%

16.2
Kingfisher

South 30% 60% North Rest

31.8

52

SAB Miller
Others

Market share in terms of cases sold

Regionwise market share in India

http://eng.pivnoe-delo.info/2011/03/31/india-ubl-undisputed-leader-in-beer-market/

KINGFISHER BEER (UNITED BREWIES LTD.)

Beer
52% 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

MISSION & VISION: To be the recognized leader in our target markets. To be the preferred employer wherever we operate. To recognize the value of our human assets. To be the partner of choice for customers, suppliers, and other creators of innovative concepts

STRATEGIES OF THE COMPANY:

Tie 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.

COMPETITIVE ADVANTAGE
MANAGEMENT TEAM Professional Managed Seasoned Professionals with Significant Industry Experience SEGMENT MARKET PRESENCE Least Vulnerable to Policy Volatility due to Large Spread LOCAL SOURCING OPTIMAL, AS ALMOST COMPLETELY LOCALLY SOURCED

MANUFACTURING TECHNOLOGY Largest Manufacturing Space Maximum Capital Utilization BRANDING Strongest Brand Significant Up gradation Value Chain Ownership Initiatives Planned for Integrating into Retailing
CORE COMPETENCY Strong brand image with continuous innovation and technology along with good marketing and distribution channel are the core strength of the company

INTERNATIONALIZATION PATH OF SABMiler:

Kingfishers SWOT Analysis

Strength
Worldwide known Brand Oldest & Largest Player In India Huge Finances backing from UB Group Strongest Worldwide Distribution System

Weakness
Different Brands under Same Company High Concentration on Strong Beer Market

SWOT Opportunities
Beer consumption is increasing Reduction in Taxes Brand Extension Benefits

Threats
High Taxes & Regulations Prohibition on Advertising Indian Culture is a Major Hindrance Many International Player Entering In India

Strategic Capability
COMPETENCES

Threshold

Capabilities

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. Dr.Vijaya Mallya is not only a chairman but also a Member of Parliament and a style Icon. Marketing : It has created a unique brand image of style by the marketing quote THE KING OF GOOD TIMES. And investing into media and also producing the Kingfisher Calendar.

Core Competences

RESOURCES

Tangible

Manufacturing Plants Distributed all over the nation. Human Capital to efficiently function to achieve a sustainable business. Financial capital to lubricate the wheels of the whole business and to fund the future investments. Since UB is the oldest beer manufacturer in the country it has a good knowledge on all aspects of manufacturing and selling of Beverage Alcohol in India. UB has a strong Brand Image and a reputation of its Brands which is basically unmatched in the present Indian Alcohol industry. It is diversified into many different fields giving it a key strategic and financial advantage over other competing firms.

THRESHOLD CAPABILITIES

Intangible

Tangible

RESOURCES 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.

Capabilities for Competitive Advantage

Intangible

Since UB is the oldest Beverage Alcohol manufacturer in the Indian market. It has a vast pool of experience and knowledge to tap into for efficient functioning and to create new and innovative ways to stay ahead in the market.

Porter Value Chain

PRIMARY ACTIVITIES

INBOUND LOGISTICS

Beer is brewed in either the companys owned or non-owned Breweries, with certain Breweries set up for certain functions. This also reduces the cost and there is less treat of the suppliers. The company also has its franchise for the production of the beer. In states like Uttar Pradesh, Rajasthan and Madhya Pradesh which, account for 80.34% of barley production in India, the area under cultivation is shifting to other crops like sugarcane It has extended its own contract farming initiatives in the state of Punjab. The 51% Equity stake in Maltex Malsters Limited, a manufacturer of malt, is also an initiative for vertical integration and excellence in inbound logistic. Quality and hygiene are the key elements of the United Breweries' manufacturing philosophy Marketing . The Central Scientific Laboratory (CSL), headquartered at Bangalore sets standards for all its breweries. These beers are tested as per the standards laid down by the European Brewery Convention on 40 different parameters. Quality Management Systems laid out along the lines of ISO 9000.

OPERATIONS

PRIMARY ACTIVITIES

OUTBOUND LOGISTICS

No internal distribution/Use third party to distribute product. Since beer is not delinked from other spirits it is heavily taxed at over 42. Rajasthan, Bihar and Himachal Pradesh auction based distribution is used. The distribution system in these states would increase the competitiveness in the market and lead to increased sales as was demonstrated by the 400% increase in beer sales in the states of Punjab and Haryana after the distribution reforms in July 2008. The complete plant to any of the distributer reaching the plant has improved the brand loyalty and increase the switching cost for the users. It has a network of 23 distilleries across the country.

MARKETING/SALES

Vijay Mallya believes in leading his brand from the front by leveraging his personality. The image of his beer brand from a commodity to a lifestyle brand. The strong brand marketing that it is said that at every second 4 bottles of Kingfisher bottles are sold. Sales force is trained and highly experienced.

SUPPORT ACTIVITIES

PROCUREMENT

Choose high quality ingredients to ensure higher quality end result. Heavy reliance on this process. In technology advancement they have automated the complete plant in 2000 by the Allen Bradley system. This has considerably reduced the cost and increase the rate of production. The cycle time is reduced to half of the previous statistics.

TECHNOLOGICAL

INFRASTRUCTURE

Very strong management with a good understanding for competition and zeal for staying on top of industry. Its infrastructure is good as it is backed by the parent brand of UB Groups.

CORPORATE GOVERNANCE
United Breweries Limited has always strived for excellence in Corporate Governance. UB are committed towards taking all strategic initiatives to enhance Shareholders wealth in the long term The Company accords high importance to transparency, accountability and integrity in its dealings. Our philosophy on Corporate Governance is driven towards welfare of all the Stakeholders and the Board of Directors remains committed towards this end. Its role to align and direct the actions of the Company in achieving its objectives.

CORPORATE SOCIAL RESPONSIBILITY

Belief: No business can exist without impacting or being impacted by the environment it operates in. Focus and concentrate on four areas of Corporate Social Responsibility: Water Management, Contract Farming, Primary health and welfare, and Primary education.

Generic Strategy of Kingfisher

Differentiation:
Product variations in all the categories like premium beer, mild beer and strong beer cater to all the segments in the market.
Associations Windies Team, IPL, East Bengal FC, F1 etc. Region Specific brands- Kalyani Black (Eastern India), UB Exports (Ktaka)

Competitive Strategies in Hypercompetitive Conditions:Repositioning.

Interbrew v/s Heineken. World's Local Brewer v/s Most international brewery group in the world.

Corporate-Level and International Strategy

Product - Market diversity:

Market Development: Premium priced, Upper-end product (Tajmahal- USA, Australia, France; some premium hotels in India); Lower-end product (London Pilsner).

Product Development
o KINGFISHER DRAUGHT:- this beer contain less amount of water and comes in 500ml can. Hence creating a new product in existing market, o KINGFISHER ULTRA:- This will be launched within some months. It is a new drink having sweetness in it.

o KINGFISHER BLUE:- this is launched around 8-9 months before to tap those customer who wants less alcoholic beer in comparison to strong beer but more milder. It has around 6% alcohol content.

o KINGFISHER BOHEMIA:- Kingfisher- has launched their own brand of wines in India -"Kingfisher Bohemia". It is launched in 2008 to get the wider reach in the alcoholic drink market.

Related and Unrelated Diversification

Unrelated Diversification of UB groupo KINGFISHER LEISURE WEAR:- kingfisher is diversified in the leisurewear segment extending itself in the path of providing good time to customers. o KINGFISHER AIRLINES:- kingfisher airlines had becomes a very well known company in itself. This is a full-fledged carrier providing comfort to its fliers. o KINGFISHER SWIMSUIT CALENDAR:- kingfisher also launch its annual swimsuit calendar which is the second costliest calendar in the world.

Unrelated Diversification of UB group- cont

o UB ENGINEERING LIMITED:- UBEL is an engineering and construction company catering to cross section of industries in power, steel, cement and petrochemical sectors.

o MANGALORE CHEMICALS & FERTILIZERS LIMITED:- Only Fertilizer plant in Karnataka, with a dealer network of 2530 in South India and a well established brand MANGALA. SPORTS:- kingfisher also diversified in various sports Current such as in Formula 1, Rugby and Football.

Un-related diversification
Un related diversification, and acquisitions: Sab Miller decided to divest all non-beer companies in home market. => Lynch, P. R. (Writer) (2008). World beer industry focusing on sabmiller and heineken [Web]. Retrieved from

http://www.globalsrategy.net/categories/20101201_1

International Diversity & International Strategy

Case Exampleo Global Forces and European Brewing Industry -by Mike Blee (Chapter- 2: The Environment): Heinekein (from The Netherlands), Carlsberg (from Denmark), and Guinness (from Ireland) are involved in Internationalization.

Market Selection and Entry- China

Macro Economic Conditions: overwhelmingly positive, Political Environment: veiled Communism, China: Local Players posing tough challenge to global players- 45o mn Hectolitres (Twice that of the US), 5 % growth (double the global market growth).

International Strategies
Multi-domestic Strategy: Interbrew And Global Strategy: Heinekein

Managing the Corporate Portfolio

BCG Matrix for Kingfisher o Star: Tajmahal and KF Strong, o Cash Cow: KF Lager, o Question marks: London Pilsner, KF Draught, KF Blue o Dogs: UB Ice Beer, Kalyani Black Label.

Consolidation
Food Business was sold to Hindustan Lever, the Indian subsidiary of AngloDutch Unilever; Loss-making polymers business to LG Chemicals of South Korea; Best and Crompton, an engineering company, to Polysindo of Indonesia; its stake in Vijay TV to Star. Reduced its stakes to 10% each in Asian Age, an English-language paper, and in Aventis, a life-sciences company. The loss-making Mangalore Fertilisers and Chemicals was turned around. The groups core business now is clearly spirits and brewery, and accounts for 80% of its turnover.

Product Development

Market Development
Tie-up with S&N which has a good track record of distribution of third party brands for international distribution of Kingfisher. Entered into a Licensing and Distribution agreement in May 2004 with Independent Liquor Limited to produce, market, distribute and sell their products in Australia and New Zealand. Worked closely with Scottish and New Castle to extend the reach of products, particularly kingfisher, to reach to more global markets.

Diversification
Fertilizers, Engineering, Packaged drinking water, Pharmaceuticals, Real Estate, Sportsspecially in cricket and formula one.

The TOWS Matrix

WO strategic options: SO Strategic Options: Consumption pattern is increasing with development of youth and western culture, so the worldwide presence and brand image can play a better role in future By reducing few brands/products, or by reducing its focus from premium segment, the co. is having a higher opportunity to meet the potential demand and get a new segment to deal with

WT Strategic options:

ST Strategic Options:
As the co. has already build up a strong brand recognition through sponsorships in youth oriented sports and events, the co. can increase the market share and meet the high potential customer base.

The co. can search for products specially for women as the women are increasing their fancy towards alcohol.Also they need to increase market share and become a dominant player to meet the future competition from international players

Mergers and Acquisitions

Year 2001-02 M&A Acquired GMR vasavi, MP Breweries, 65% share in Associated Breweries and Distilleries Ltd. 97% in Mangalore Distilleries and Breweries Ltd.

2002

Empee Breweries

2006 2007

Strategic alliance with Scottish &New castle Shaw Wallace and Company after long hurdles, Whyte and Mackay, 4th largest scotch company

Nigeria.
It is doubtful if many local industry players knew for a long time that the beer market in Nigeria is a robust one. All that was apparent was the presence of two major players, Nigerian Breweries Plc and Guinness Nigeria Plc, and a number of fringe players doing business in the sector. But if local players didnt know or knew, but showed no interest, SABMiller, a South African brewing giant knew and made a grand entry into the market. Its coming has since rattled the market, giving the hitherto two giants in the industry a run for their money.

 Nigerias beer market has shown a compound annual growth rate of 9 percent over the 10 years to 2009, when national consumption of the beverage was estimated at 16.5 million hectolitres

 SABMiller, South African world brewing giant, in 2009, bought Pabod Breweries, Port Harcourt where it owns 57 per cent and Voltic Nigeria Limited (Voltic produces tablewater), Lagos owning 80 per cent of the company, and Standard Breweries in Ibadan, using these companies for soft landing in Nigeria. This was done to tap huge beer market of $3 billion. They are encouraging farmers to raise cassava and barley for its new discount beer..

 In an apparent response to SABMillers entry into the Nigerian market, Heineken N.V., Nigerian Breweries Plc parent company stepped up the struggle for domination of the Nigerian beer market in Nigeria with its acquisition of two holding companies from the Sona Group which has controlling interests in five breweries in Nigeria. Of the five breweries being acquired, Champion Breweries is listed.

 Analysts believe that the acquisition provides Heineken with an additional technical capacity of 3.7 million hectolitres, helping to alleviate the companys current capacity constraints in the market and improving the geographic location of its breweries. The acquisition has been funded from existing resources.

Heinekens geographic footprint now stretches across 15 countries on the continent with 37 breweries.

Why so many breweries????

Because consumption differences.. Throughout Africa beer is consumed with alcohol content as low as 2% to as high as 18%.

 Commenting on the Heineken acquisition, Tom de Man, President Africa & Middle East of Heineken, said: This important move reflects Heinekens strategy of increasing our exposure to and growth from developing markets. Nigeria is one of the worlds most exciting beer markets and one of the most important countries for Heineken. This acquisition underlines our ongoing commitment to the country and will significantly strengthen our platform for future growth.

Reaction from local player

Guinness has just commissioned a new brewery that has taken its production capacity to about 5.5mn hectolitres, and capacity utilization is expected to be more than 80 per cent. Guinness Nigeria Plc, the local unit of Diageo Plc (DGE), heightened the ongoing beer war tempo by announcing plans to spend 52 billion naira ($335.8 million) on expanding brewing capacity in the country

What analysts say about the unfolding scenario

According to the IMF, the Nigerian economy is estimated to grow at an average of 7 per cent over the next four years while the population is expected to grow at about 3 per cent.

 This along with a youthful population enmeshed in a culture in which entertainment has gained a foot-hold, present key drivers for the Nigerian beer market. A growing, largely youthful population, with increased disposable incomes is expected to drive beer consumption, leading us to estimate that the Nigerian beer market will grow at an average of 8 per cent over the next 5 years, the Lagos based research company says.

 The low level of penetration in the Nigerian beer market (as evidenced by the beer consumption per capita of about 10 litres, compared with an African average of 14.6 litres) clearly leaves room for brewers to take advantage of the underlying growth potentials in Nigeria.

 The variety of products in the market that will arise from the consolidation and expansion of the brewery industry will create value for the consumers, while the looming heightened competition will be an incentive for innovation and creativity. Heineken will explore the possibility of consolidating the newly acquired breweries into its existing business structure in Nigeria during 2011.