the acquisition of Shaw Wallace’s beer portfolio for a reported US$264m in 2003. This gave SABMiller SABMiller owners ownership hip of strong strong brands brands like Haywar Haywards ds 5000, 5000, along along with with its existing existing brands. After the acquisition acquisition,, SABMiller SABMiller focused on spreading spreading its footprint across India, including opening new breweries in states where Shaw Wallace did not have a presence. In 20 2008 08,, beer beer pric prices es saw saw steep steep hikes hikes in key beer beer cons consum umin ing g stat states es.. Consumers’ reactions to the price hikes saw many cut back on consumption, consumption, which adversely affected sales growth. Excessive regula regulatio tion n and and furthe furtherr extens extension ions s of gover governm nment ent inter interven venti tion on,, in the the areas areas of distribution and pricing, is affe affect ctin ing g the the grow growth th and and prof profit itab abili ility ty of the the indu indust stry ry as well ell as rest restri ricti cting ng government revenues. In addition, restrictions on advertising and licensing of retail outlets continue to present challenges to the Industry. The Indian beer industry is plagued with a myriad of taxes & levies that vary from state to state. These along with price regulation, inadequate market infrastructure and restrictions in interstate movement of beer, pose a great challenge for the industry. Unlike most developed countries where beer is less regulated and available freely, high level of regulation and higher end consumer price hampers hampers beer sales sales in India. India. Uniform tax regime for beer in all states will be a boon for the industry. If implemented, it will help the beer industry by rationalizing end consumer prices in all states, as is in the case of other consumer goods. In addition to economic contribution, a uniform tax structure will also crea create te incr increa ease sed d agro agro link linkag ages es that that are are bene benefi fici cial al to a coun countr try y like like Indi India. a. It is important to realize that the beer sector can contribute immensely to the agricultural sector, as beer is an agro-based product. Also marginal barley farmers, particularly stand to benefit from the growth of the beer sector.
BOSTON CONSULTANCY GROUP MATRIX (BCG MATRIX) It is a widely used portfolio management method for evaluating the performance of business units. There are four quadrants in a BCG matrix: question marks, stars, cash cows and dogs. On the X axis, market growth is measured, which indicates the level of market attractiveness On the Y axis, market share is measured, that serves as a measure of the company's strength in the market
STAR Stars are high-growth, high-share businesses. Very often, they need heavy investment for financing their rapid growth. Eventually, their growth slows down and they turn into cash cows. TAJMAHAL BEER:- Taj Mahal Premium Lager beer is prepared with finest malt made at United Brewery own malt house using premium quality barley. It has a distinct aroma and unique taste. The demand of this beer is mainly in abroad (australia, france, usa) as it is premium priced and have bitter taste which is not liked much in india though it is served in some premier hotels in india. The demand outside is very good and it accounts for good market share in the exported beer in india.
KINGFISHER STRONG:- spectacular growth of 36% is seen in strong beer (against a market growth of 16%) was witnessed. Kingfisher Strong has now achieved the number one position in the strong beer segment.
CASH COW Cash cows are low-growth and high-share businesses. Such established and successful business lines require less investment to maintain their market share. They generate a lot of surplus that a company can use to pay its bills, or invest in other businesses. KINGFISHER LAGER BEER:- it has witnessed a market growth of 13% in comparison to the lager beer industry growth of 9.4%.in the lager beer segment, UBL is the market leader in all the 10 largest states of the Country. UBL commands a market share of around 40% with 67% of the market share in the lager beer segment.
QUESTION MARK Question marks are low-share business units, in a high-growth market. They require a lot of cash, for maintaining the market share. Any business has to think between building a question mark into stars or whether they have to be phased out
LONDON PILSNER:- it has witnessed a market growth of more than 20% and targeting a market share of 15% . (Indiantelevision.com)
KINGFISHER DRAUGHT:- this beer has less water in comparison to other beer type. it has good market growth as it is proving success in its 2 nd year still the market share is less. (thaiindian.com) 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 than mild. It has around 6% alcohol content. Since it has launched sometime before hence the market share occupied is less as strong beer and lager beer segment is increasing very fast however market growth rate main up.
DOG Dogs are low-growth and low-share businesses. They may generate enough surplus to maintain themselves, but do not hold out the promise to be a large source of cash. UB ICE BEER:- this beer is launched for trendy people in 330ml can.It was different from the traditional lager beer as it was made using a unique refrigeration process which involves the formation of ice crystals which were filtered out giving the brew a crisp, clear and strong taste. It did’nt got good response as it has very low market growth instead people are drinking more the lager and strong beer. KALYANI BLACK LABLE:- one of the oldest brand launched in 1969. It has low market share as it is only popular in east india and it assumed to be economical . the market growth for this brand is not good as people are shifting towards other beers such as London pilsner which is also economical brand.
ANSOFF MATRIX To portray alternative corporate growth strategies, Igor Ansoff presented a matrix that focused on the firm's present and potential products and markets (customers). By considering ways to grow via existing products and new products, and in existing markets and new markets, there are four possible productmarket combinations.
MARKET PENETRATION The firm seeks to achieve growth with existing products in their current market segments, aiming to increase its market share. KINGFISHER LAGER PREMIUM:- it has witnessed a market growth of 13% in comparison to the lager beer industry growth of 9.4%.in the lager beer segment, UBL is doing market penetration in all the places by promoting the beer in every state. UBL commands a market share of around 40% with 67% of the market share in the lager beer segment.
KINGFISHER STRONG:- The company is investing much in this product and also the customers are increasing due to the more alcoholic content and it has registered spectacular growth of 36% in strong beer (against a market growth of 16%) was witnessed.
MARKET DEVELOPMENT The firm seeks growth by targeting its existing products to new market segments. TAJMAHAL :- This beer is made mostly for export purpose and contain less alcoholic content though the taste is unique due to its bitterness. The demand of this beer is mainly in abroad (australia, france, usa) as it is premium priced and have bitter taste which is not liked much in india though it is served in some premier hotels in india.
LONDON PILSNER:- this beer mainly aims lower income group as it is economical beer and this beer contain less alcoholic content hence catering to all together different segment.
PRODUCT DEVELOPMENT The firms develops new products targeted to its existing market segments. KINGFISHER DRAUGHT:- this beer contain less amount of water and comes in 500ml can. Hence creating a new product in existing market 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 than mild. It has around 6% alcohol content. It is also done to create a new product. KINGFISHER BOHEMIA:- Kingfisher- the brand that has been synonymous with providing a "good time" to consumers have 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. KINGFISHER ULTRA:- This will be launched within some months. It is a new drink having sweetness in it.
DIVERSIFICATION This resulted in the company entering new markets where it had no presence before KINGFISHER LEISURE WEAR:- kingfisher is diversified in the leisurewear segment extending itself in the path of providing good time to customers.
KINGFISHER AIRLINES:- kingfisher airlines had becomes a very well known company in itself.this is a full-fledged carrier providing comfort to its fliers. KINGFISHER SWIMSUIT CALENDAR:- kingfisher also launch its annual swimsuit calendar which is the second costliest calendar in the world.
SPORTS:- kingfisher also diversified in various sports Current Formula 1, Rugby and Football.
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PORTER’S FIVE FORCE MODEL This model is developed by Michael Porter, this model analyzes the nature and intensity of competition in an industry through five forces (rivalry, customers, supplier, new entrants, and substitutes). These five forces are explained as below:-
BARGAINING POWER OF SUPPLIERS:- With increasing cost of raw material and decreasing cost of barley suppliers bargaining power was high but with backward integration by acquiring Maltex Malsters Ltd. And shifting their production of beer on considerable reduced malt company has achieved a hold on its raw material and the supplier strenth and dependency. Company has aslo collaborated with Government of pujab and haryana for supply of iits raw material.
RIVALRY:- Rivalry is the means through which competitors fight for position by using tactics such as price, competition, advertisement battles, and new product introduction, to lower the profits of competitors in the industry. A CAGR of 11% is expected for beer in the next 5 years many MNcs are eyeing the Indian market. Currently the major rivalry for kingfisher premium is Budweiser, Carlsberg, Foster and Tiger and for kingfisher strong it’s Hayward 2000, Hayward 5000, Palone. SABMiller’s who came to India by acquiring small breweries and made its hold as Best-selling strong beer brand but still kingfisher being Largest-selling strong beer brand (29%market share) is currently being supplied in 55 country. There are also some small local players that are in the market but does not provide much threat to kingfisher. THREAT OF NEW ENTRANCE:- Beer industry is in Growth phase with 11% CAGR, so it is attractive for the new players. But strong brands like kingfisher and haywards which already have their brand recall and
extensive advertisement new entrants are expected to struggle to expand their consumer base as they try to penetrate the beer market in India. Foreign brewers have been eyeing the Indian market for some years now as India is widely acknowledged to be the last untapped big growth market Several
international brewers have currently built brand associations and are marketing their brands aggressively through various point-of-sale promotions throughout their distribution networks. But with strong players in the market the new entrant will face problems of a) Economies of scale For example benefit associated with bulk purchases and sales b) Cost of entry For example investment in technology c) Distribution channel For example ease of access for competitors d) Government Legislations introduction of new laws might weaken companies position e) Differentiation For example certain brands that cannot be copied f) Supplier power Possibility of forward integration by supplier BARGAINING POWER OF CUSTOMERS:- It is the extent to which customers are successful in forcing prices down, or securing high quality or more service at the same price. Customers tend to be powerful when the quantities they purchase understand the form a large portion of the seller's total sales. Buyer do not quality of the beverages and as there are not many players in the market the customer has less command over price. THREAT OF SUBSTITUTE:- India is predominantly a spirits market and beer is a minority preference for those who consume beverage alcohol. So substitute is biggest threat as preference for beer among beverage drinker is less but the low penetration in beer consumption in comparison to international levels offers the expectation of substantial and sustainable growth in demand for beer in years to come, particularly given the youthful age of India’s population.
MICHAEL PORTER’S VALUE CHAIN
PRIMARY ACTIVITIES INBOUND LOGISTICS:- Beer is brewed in either the company’s 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. The best example is of the Taloja plant situated in Mumbai. The experience of Kingfisher brand since 1915 adds to the experience and efficiency of the firm. The is thing is also very clear from its balance sheet as the EBITDA of United Breweries is 2675.2 Millions which is 35.61% more than previous year (2007-2008). The owned plant also has reduced the switching cost of the suppliers of Kingfisher. Higher prices and short supply of key raw materials like malt, hops and barley can reduce the profit margin and affect operations. Barley and glass bottles constitute 12% and 40% of the total operating expense of UBL. Any price increase in this two commodity has a direct bearing in reducing the overall operating margin. Due to price increase of barley by over 33% and increase in bottling cost, during FY2008 the net profit margin fell by 26%.[10] 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. The barley production has declined by over 60% from 3135 KMT to 1220 KMT from 1975 to 2005. To hedge the risk on rising raw material prices, UBL has entered into long term arrangements for sourcing of the vital inputs. In addition 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 logistics.
OPERATIONS:- Quality and hygiene are the key elements of the United Breweries' manufacturing philosophy. To this end, the Central Scientific Laboratory (CSL), headquartered at Bangalore sets standards for all its breweries. Quality Management Systems laid out along the lines of ISO 9000 are strictly adhered to, controlling quality at every stage of production, from raw materials to the end product. Also, besides controlling the production process, the CSL analyses the Company's beer taken off market shelves all over the Country, the competition's beers and beers across the world. These beers are tested as per the standards
laid down by the European Brewery Convention on 40 different parameters. By these standards, United Breweries' beers don't just equal, but even surpass, several Dutch and American beers.
OUTBOUND LOGISTICS:- No internal distribution/Use third party to distribute product. The channel is very strong. As we know alcohol is a state subject in India and hence each state has it own taxation, pricing and distribution policies. No inter state movement of alcohol is allowed. Also since beer is not delinked from other spirits it is heavily taxed at over 42%. Since tax on alcohol contributes to over 17% of state revenues, the government is hesitant to change the tax treatment. Any further increase in taxation on beer would shift consumer preference towards other alcohol products thereby reducing the demand for beer. In states of Delhi, Andhra Pradesh, Karnataka, Tamil Nadu and Kerala government controls the distribution of alcohol. Whereas in states of Rajasthan, Bihar and Himachal Pradesh auction based distribution is used. Reforms in 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. It has also
lowered the barriers to entry present in the industry and thus brings a more competitive environment in the industry. But the quality and its channel is so strong that it doesn’t find any threat from the new entrance. The corporate strategy of kingfisher to demonstrate 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 to meet the requirements at the regional level giving it an unparalleled distribution reach within India. MARKETING/SALES:- Lot of focus on quality marketing as well trained sales force to sell the product in India is carried by the Brand. Vijay Mallya, the flamboyant CEO of United Breweries the company that owns the Kingfisher brand - is one of the most flamboyant CEOs in Asia. Vijay Mallya believes in leading his brand from the front by leveraging his personality. Vijay Mallya is referred to as India's Richard Branson. A great part of the personality of the Kingfisher brand is based on Mallya's personality. He is credited with having single handedly changed the image of his beer brand from a commodity to a lifestyle brand. Hence he carry so 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. TECHNOLOGICAL:- 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. 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.
PORTERS GENERIC STRATEGY
Companies can achieve competitive advantages essentially by differentiating their products and services from those of competitors and through low costs. Firms can target their products by a broad target, thereby covering most of the marketplace, or they can focus on a narrow target in the market. According to Porter, there are three generic strategies that a company can undertake to attain competitive advantage: cost leadership, differentiation, and focus.
Kingfisher is following a differentiated strategy by introducing a product range in all the categories like premium beer, mild beer and strong beer cater to all the segments in the market. They also differentiated their product through marketing their product by associating their brand with major events, like sponsored West Indies team in world cup 1996 by showing a spirit of team, IPL, east Bengal football club, Mumbai marathon, Bangalore open. With the company target to youth segment it also
used the focus strategy by associating with events that youth likes such as Formula one race where it showed and given the brand a sense of excitement and a sense of thrill. Various sports club of kingfishers are sponsor by youth brands like Reebok, Nike etc. They have also introduced products specific to region like, kalyani black in eastern india, UB exports is famous in Karnataka in order to focus on their customers.
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