1
Executive Summary
UB is the market leader in the Indian beer market. The company has however (as mentioned above) 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. 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 m arket being strong beer market. The UB group has chalked out a major restructuring plan under which it has merged all its spirits companies under the McDowell umbrella. The company has also decided to split its operations into beer business and investments business. The company would also be productively utilizing its real estate in the city of Bangalore to set up a Software Technology Technology park. The UB Group has also announced its intention to extend its well-known spirit brands McDowell and Bagpiper to beer to leverage on the strong brand equity. equity. The UB management has gone on record saying they will actively look at trifurcation of the company into the real estate portion, the investments and the breweries, with proportionate share holdings, in order to ensure that there's no shareholder value damage. On the core beer business, UB claims to make a return on capital employed exceeding 20 percent and may be closer to 25 percent. But figures are not available to really back this up given that all the numbers are consolidated. Background
The UB Group commenced its brewing operations as early as the 19th Century (1857) with five small breweries in South India. In 1951, a Scotsman named Thomas Leishman combined the five breweries to form United Breweries. The company was taken over by Vijay Mallya in 1947. In 1952 the Company shifted its registered office office from Madras to Bangalore. In 1988 the name of the Company was changed from United Breweries Ltd. to UB Ltd. In 1989 as a measure of diversification, the Company started manufacture of bulk drug, and pharmaceuticals on a priority basis. In 1992, 11 different breweries were amalgamated with the parent company. company. In 1994 the company launched its `Kalyani Premium Strong' and started exporting `Kalyani Export Special' to UK. The company presently has 21 breweries under its direct or indirect control. Recently the company has started implementing restructuring exercise exercise under which it has decided to split its businesses into two – the core beer business and the group investment business. The company has decided to focus on core businesses and to hive off non-core businesses.
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Detailed business plan:
The detailed business plan for the intended product being planned are outlined as follows: The product:
It is by definition a flavored beer preferably in two variants as amber and aqua blue, low on alcohol ( between 1 and 3 %) % ) , light and good to taste. Shifting the focus from our detailed synopsis our product in the fray is a flavored beverage valued on the lines of a flavored beer but to be launched as a lifestyle product mainly keeping in mind the premium-ness of king fisher brand. Augmenting the huge gap between the ordinary beer and the hard drinks we would like to plug the hole in that th at segment keeping in mind the target consumers price sensitivity. sensitivity. Since none of the other major international and domestic players are not launching any of their products in India in their near future this is probably (situational variables at stake) to launch the product and are keen to capitalize on first mover advantage.
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Field survey report Questionnaire :
1)
Where do you mostly drink beer? 1]at home
2)
2]at bar/club3] b3]at restaurant
How much are you willing to pay for a bottle of beer at a bar/club/restaurant?
3) Please rank the following beer companies/brands in terms of your preference. (1= first choice, 5= last choice) 1]Fosters 2]Heinikenen 3]Knock out 4]Haywards 5]Thunderbolt 4)
How important were the following attributes when choosing a beer?
5)
Taste
6)
Price
7)
Alcohol Content
8) Quality 9) 10) 11)
Ambiance/Place Promotions Colour
12) Package/Bottle 13)
Image of beer
4 Please rate your level of agreement on the following statements:
Not Import ant
Less Import ant
Neutra l
Some what Import ant
Very Import ant Strongl y disagre e
Somew hat disagre ed
Neutral
Somew hat agree
14) I love love Kingfisher Kingfisher 15) The beer I drink must have have a good reputation 16) The appearance of the bottle must appeal to me 17) A Kingfisher flavoured flavoured beer beer is a beer targeted targeted to women 18) I am loyal to a brand of beer 19) A kingfisher has a light taste 20) A Kingfisher is a cheap beer
Please complete the following sentence: 21) What I don't like about domestic domestic beer i 22) What I don't like about imported beer is 23) Flavour and Aftertaste is important because 24) Please associate the beer brand with with each of the following following words: Beach
Hot girls
BBQ
Hangover
Bar
Park
Cheap
25) Age: 1) under18
2) 18 to 2
3) 24 to 29
4) 30 to 39
5) 40 and over
Classy
Strongl y agree
5
26) Gender:
1)
Female
2) Male
27) Monthly Personal Personal Disposable Disposable Income: 28) Did you have to quit drinking drinking due to: obese, diabetic diabetics s no
yes
29) Are you ready ready to experiment experiment with your brand of drinking? drinking? no
yes
30) Did your health health problems problems restrict restrict you from socialisin socialising? g? no
yes
Questionnaire Questionnaire Analysis
We prepared prepared a questionnaire consisting of 30 questions and took sample size of 200 people by method of convenience sampling. We divided ourselves into two groups and visited Noida and Delhi. The group which went to Noida consisted of 4 people they went to great India place; central stage mall. They collected a total sample of 120 people from there. The other group which consisted of 3 people went to Delhi’s Connaught Place and Saket. They collected a sample size of 80 people from there. Our questionnaire directed directed in such a way so that we could could find the answers to the following relevant question
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• •
• •
• •
•
Our closest competitors How important are the attributes like taste ,quality, price ,color etc are important in beer consumption The Brand image kingfisher holds among beer drinker The age of people signifies interest of the people i.e. whether they are first timers, established drinkers or brand loyal. We also wanted to determine the ratio of male: female drinkers. The disposal income of people would help us in brand positioning of the product. We also tried to find the health issues of people i.e. obesity and diabetes and they had reason if any due to which they left drinking. Next we put forth our relative weighing method in which the choice of the people closest to our version of target segment has been allocated. Henceforth we allocated highest point (5) respectively and graduality of allocating points decreased as we moved away of our target segment. We calculated mean of the points points for each question to find out the the variation in their marking .it was found that most of the people that were in the sample space wanted something trendy and the lighter version of the beer that tasted good and had low alcohol content. Though t he sample space contained only a small representation of youth in the age group between 18 -22 most of them would like to be beer loyalist and rated high on the th e experience factor than on drinking factor. factor.
MARKET SEGMENTATION Market segment : Delhi & Noida
These figures include both genders and all age groups. The figures are taken from UB Group report 2007. 2001 populat ion
2007 population
Per capita consumption of beer
Total beer consumptio n (l)
No. of bottle No. of s cases
7
137829 76
Where are they?
18470506.05
Delhi
Who are th t hey? College going students (1824)
Delhi
Young corporate (21-28)
Delhi
Middle level corporate (28 35)
Delhi
Top level corporate (3559)
5.7
What they want? light alcohol content with with plea leasant sant tast taste e style statement price sensitive Socializing
105281884.5
14037 5846
11697 987.1 7
Our Brand Flavo lavorred beer eer
Showoff bizz pleasant taste Socializing alternative drink in parties for those who don’t prefer hard drinks especially ladies
Flavored beer
Health conscious but prefer to drink Socializing
Low diet whisky
Diabetic people at top mgt level Socializing
Low diet whisky
Target market segment: Fortunately India has the youngest beer drinking population in the whole world.
The target market segment is the youth urbanized liberalized Indian Yulics are mainly the Indian junta that are fresh out of consumers (21-34)(yulics). Yulics graduation or into their first few days of their corporate lives, by providing them
8 with a drink that will find favor with their taste and lifestyle including the metro sexual man and woman. We would like to concentrate on the thin line of demarcation between those who go in to start their first beer , the one’s who have just got into it and the young women crowd. by 2010 the young people population set to be around 35 % of the total population and the target segment set to gain about 115 million more more and the demand for premium beverage beverage drinks will will always always rise. with the beer culture gaining fast ,more young population exhibiting unprecedented spending patterns and an enormous boost given by the women beer population, it makes sense to go in for a premium flavored beer. beer. The market size has been calculated for the city of Delhi De lhi keeping in mind the highest growth rate of our target segment in the national capital region on which we are focusing on. Apart from this our focus will also be on: 1) Affluen Affluentt married married women of the the city city 2) Health Health conscious conscious people people who have stopped stopped drinking drinking due to the high level level of alcohol content in Indian In dian beer. beer. One of the factors that has limited our scope to this premium segment is because of the macro environmental policy still prevalent in India and the taxes levied on it .beer in India is still associated as sociated with the tagline of liquor and hence taxed similarly .once the de-regulation is in place for the beer industry it can always scale down to the lower segments too. TARGET POPULATION SIZE
According According to the Indian population statistics it is estimated that by 2008 , 1 out of every 20 Indians will drink beer based on a nation wide data analysis. If we juxtapose such a data and co relate it to fairly young and more volatile segment with a major share of the population in the Delhi metro we could estimate it to 1 out of every 8 yulics (young urbanized liberalized Indianconsumers). In addition to this data the pool will will also constitute the socialite affluent lady drinkers drinkers who would like like to take into this this segment and the young corporate in a very minute measure measure who would also like to have a seat at the table. Also we may mention mention that any of the first time drinkers drinkers at any point of time would like to switch onto stronger versions of the same product it would have created a niche brand space within them and they would stick onto that and we may favourably favourably assume assume that we maybegett maybegetting ing totally new set set of fresh brewe brewed d target target audience audience to carry carry on our sales. sales. It thus moves away from the traditional psychographics of the sector and toward the more up-market, college/office going youth, male or female, with aspirations, who sees himself as both physically and mentally fit, has an attitude of self-confidence self-confidence and nurtures the belief that ‘he/she can change the world’ . COMPETITOR OVERVIEW:
9 Who do we regard as our immediate competition?
In a period of consolidation of beer industry through mergers and acquisitions in a global global scenario, scenario, UB Group Group has to be bold bold and financial financially ly strong strong in additi addition on to expa expand ndin ing g prod produc uctt port portfo foli lio o throu through gh conti continuo nuous us inno innova vati tion on.. As a small small step step,, Company is introducing new variants to tap the huge potential Indian market and in a way further consolidate its leadership to ward off any global competitors. India’s beer industry posted 20 percent annual growth for the past two years, up from 10 percent per year over the past decade. The growth has been fueled by huge huge popula populatio tion n of young young peopl people. e. Roughl Roughly y 60 perce percent nt of the nation nation’s ’s 1.2 billion are people under the age of 30 India’s alcoholic beverage is still very small, hence the market has a huge potential for growth growth in the next few years. years. India’s India’s beer beer marke markett of 8 millio million n hectol hectolite iterr is dwarfed in comparison to other Asian markets like China, whose markets are 150 times bigger. Today, the per capita intake of beer in India is still less than a liter in comparison to the US or Europe, where it is 80-90 litres and 100 litres, respectively Owing to this huge market potential, a number of international players firmed up their plans to enter the domestic beer market. The noticeable new entrants included Carlsb Carlsberg erg,, throug through h South South Asia Asia Brewe Brewerie ries, s, and Anheus Anheuser er-B -Busc usch, h, which which launch launched ed locally made Budweiser . Other top global beer manufacturers are keen on entering the domestic beer market and players such InBev and Asia-Pacific Breweries, Cobra of UK along with diageo diageo have found Indian Indian partners partners and are setting setting up domestic production facilities The major brands which belong to large groups in the industry apart from UB are :SABMILLER SABMILLER India India Ltd. –Knock-Out, –Knock-Out, Royal Royal Challenge Challenge Premium Premium Lager, Lager, Haywards Haywards 2000 Premium Premium Lager, Lager, Haywards Haywards 5000 Super Strong Continental Continental ,Castle ,Castle & Lager, Lager, Fosters and Peroni. Anheuser-Busch – Budweiser - Budweiser, Becks Cobra beer & Diageo Asia pacific breweries (Heineken & Tiger)- Heineken ,tiger, Barons strong brew Carlsberg(South Asian breweries)- Carlsberg, Okacim palone
* (south American American based inbev has acquired acquired ANHEUSER-BUSCH ANHEUSER-BUSCH and became the world’s world’s largest beer brewer).
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Production Facilities and New Plants : Company Name
Existing plant
New Greenfield Plant
Number
State
Number
State
Asia Asia paci pacifi fic c one breweries
Aurangabad
One
Andhra Pradesh
Sout South h Asia Asian n Two breweries
Rajasthan, Himachal Pradesh
Two
Maharashtra,
Cobra
on e
Bihar
One
Sabmiller
Ten
Spread across
Two
Budweiser
One
Andhra Pradesh
West Bengal Andhra Pradesh
The domestic production of beer is on the rise, with official statistics reporting a 12% increase increase in domest domestic ic beer beer produ producti ction on in 2006, 2006, which which was was in tandem tandem with relatively strong sales growth during the year. Domestic beer manufacturers have actively pursued the establishment of breweries in as many states as possible in order to achieve market leadership. All the companies are expanding their production facilities in leaps and bounds amid overriding concerns about rising costs of raw materials such as barley and hops. Imports and exports both registered declines in 2006, with domestic production increasing significantly in 2006. Major imported brands include Heineken. In 2007, imports are expected to show strong growth as a number of international labels have introduced their products in India. With the dissolution of additional customs duty, imported brands are expected to increase their volume sales. Domestically produced beer is mainly produced with the intention of local consumption and a negligible amount is exported
11 Domestically produced beer is the dominant force in the Indian beer market, with a volume share of more than 99% in 2007. Restricted advertising, advertising, high prices and the limited distribution reach of beer make it difficult for foreign players with an imported brand to create brand awareness and loyalty. loyalty. Moreover, archaic legislation and high import duties lend a helping hand to domestic manufacturers. Domestic brands also tend to have a higher alcohol content compared to imports, and consumers prefer strong beer due to its faster intoxication effect
beer-drinkers in the country c ountry are much Value proposition: USP of the product. The beer-drinkers 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 like this is expected to attract first-time drinkers,
12 since it is much milder than any of the other beers in the country. country. Even if one accounts for the fact that the strong beer market is growing fast in India, we expect that at times when consumers of our product shift to stronger beers, they will restrict themselves to the kingfisher’s brand because of the association they have with it and the positive connotations from the kingfisher’s name. A lot of new variants promise to gain prominence, but mainly in niche urban segments. Substantiating the target market the value we would like to add to our product basically entails the following: Health Benefits : with changing lifestyles and rising incomes the urban junta have become aware aware of the the “FEEL GOOD LOOK GOOD GOOD CONCEPT” CONCEPT” that is exactly what what we bring out in our product with calorie content as low as 26 calories per 100 ml similar to the light beer market and the diet beverage market booming in the west . Compare that with red wine - 75 calories per 100ml , champagne - 70 calories per 100ml, full cream milk - 67 calories per 100ml , Coca Cola - 41 calories per 100ml or even skim milk - 46 calories per 100ml. the trend trend is catching up fast mainly to the socialite women urban population and the yulics segment we focused on. In terms of nutrition, beer is a source of vitamins as well as proteins. It is rich in vitamins B6 and B12 and essential amino acids. It's produced by natural fermentation and contains all natural ingredients. ingredients. Dining table: on a dining table for 4, three people (socialites) drink whisky and the fourth wouldn’t be so very eager to drink cheap beer. Elevating him to the same level keeping in mind his place at the dining table as well as the society s ociety the beverage should have the premium -ness within it. it also complements our ub group motive of providing generic adult beverages to lifestyle products within the same class. As in west south American countries beer is also associated with spicy Mexican food likewise it may also follow at blistering pace. Lifestyle: INDIA is changing and so is the way the people live their lives with more people taking to socializing ,urban youth partying and celebrations during festivities no longer in black and white, all the people have taken to a more vibrant ambience be it their car ,their attire, their eating habits and they way they socialize. Production line
13 – First First 25,000 BPH line in India at UB Rajasthan – 36,000 BPH line being installed at UB Bombay – New Products being developed in-house at CTC – Innovative Brewing Technology Development in process The UB group already has a very expansive production facility with new ones a s mentioned tailored to meet product capacity expansion portfolios. at the initial stages of production (keeping in mind the targeted population of Delhicity the in house facility are more than enough to cope up with the demand .as a matter of fact it can be run on the same production line with low variable costs except for the brewing area where the beer is given an entirely new dimension by flavoring it with the amber and cool blue ingredients ingredients .phase -1 objective of the production will be to roll out 75% of the whole demand within the Delhi city so as to create an initial urge and test marketing objectives .
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FINANCIAL ASPECTS:
FUNDING: The initial funding for the proposed launch of premium products would be elaborated as follows : I. Premium Premium products products a. Distillery Distillery and and bottling bottling facili facility(fo ty(four ur locations) locations)= = 4x70 = INR 280 crore b.
Advertisement and brand endorsement
= INR 50 crore
c. new prod product uct line line develo development pment in similar similar catego category ry = I NR 30 30 crore
The entire funding process can be funded through a mixture of debt and equity .an ideal debt to equity ratio of 3:1 is recommended .so the required INR 270 CRORE can can be fund funded ed by low low cost cost borr borrow owin ing g from from ECB’ ECB’s s (EXT (EXTER ERNA NAL L COMM COMMER ERCI CIAL AL BORRO BORROWIN WINGS) GS),so ,sover vereig eign n funds, funds, finan financia ciall instit institute utes s and banks banks .The .The rest rest equity equity portio portion n of INR 90 CRORE CRORE COULD COULD BE FUNDED FUNDED THROUG THROUGH H A MIX OF PROMOT PROMOTERS ERS CONTRIBUITION ( 60% OR 54 CRORES ) and dilution of promoters equity to various venture venture capitalists capitalists and hedge funds .After .After stabilizing stabilizing of operations operations company company can speen of the division to make an IPO to unlock original share holder value .
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Brand positioning and differentiation
Our only suggestion with regard to the brand name is that it should capitalise on the brand heritage which king fisher enjoys, and in its association with kingfisher s Lager which is already established in the market as one of the leading beers. . In India, pint-sized bottles have been an exception rather than the rule. In fact, 99% of beer consumed is from 650 ml bottles. This was in tune with the trend in other developing countries. Initially, we plan to launch our product only in Delhi. Then we will move onto Goa and subsequently into Andhra Pradesh and Pondicherry. Plans to venture into Himachal Pradesh, Punjab, Haryana and Uttar Pradesh can then commence. For United Breweries, its online facility is making a huge difference. All consumers need to do is log on to www.kingfishernetshop.com www.kingfishernetshop.com and get their beer - a minimum of six bottles - home-delivered, the move has been a big draw with info-tech professionals and "discreet" women drinkers. The online outlet apart, much of the beer boom has been through sales from some 1,600 shops, and not pubs and bars. We think a similar online facility for promoting and facilitating the sale of our product will help not only in the advancement of the product itself but will also go very well with the image of the product, while cutting into UB’s ‘virtual monopoly’ as the target audience of such a feature is more in tune with the kingfisher’s brand image. Promotion and branding:
Our company has decided to stay off the surrogate-advertising route (which is necessitated by restrictive advertising laws) and concentrate on sponsorships and other promotional activities. In a cricket-crazy nation, the alternatives are not too hard to find; cricket and Formula One racing are the two chosen vehicles for brand endorsement. The main objective of UB group in this regard will be to focus more on the brand identity “kingfisher “ as a premium brand than be more product specific. The new trend will also be to promote “responsible drinking” campaigns for the young brand loyalists of our product since we cater to the YULICS segment. Product launch:
A low profile launch in all the three st ar hotels, pubs, liquor retailing outlets and being made available through its online shop is being planned. Following Following a soft launch and once the festive season kicks in subsequent high decibel launches can be done from other parts of the country as outlined below. The UB group is renowned for its signature s ignature night life and with other new ven tures such as UB city coming up in Bangalore it would provide the much needed hy pe if
16 we can launch a high decibel party week in connection with the Christmas and the New Year Year just like other brands that associate itself with young metro sexual do.
How should it be in terms of colors and graphics?
The product should retain the kingfisher bird and the king of good time’s tagline it is associated with and it should signify something that has arrived with a bang. Each beer will carry the color of its respective flavor and the feel of young ur banized liberalized Indian beer lovers. The product is a variant of the international brand king fisher, and we are not averse to retaining the name here. Naming it something like simply ‘kingfisher amber’ and ‘kingfisher blue’ allows us to experiment with the brand while retaining the heritage and association of the kingfisher’s label Causes for optimism -
However, we are very optimistic about our future in India because: 1. India has predominantly a warm/hot climate 2. The beer-drinkers beer-drinkers in the country c ountry 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 KINGFISHER and are 'in sync' with our strategy for India
“he was a wise man who invented beer”- PLATO
