Financial Daily from THE HINDU group of publications
Saturday, Dec 28, 2002
Industry & Economy - Breweries
People-factor dominates liquor industry saga
Mr Vijay Mallya, Chairman, UB Group.
BANGALORE, Dec. 27
THE year that is drawing to a close made the Indian alcobev (alcoholic beverage) industry a personality-driven one like never before. A key individual influence was seen behind most happenings that shaped the course of business, from acquisitions to strategic alliances to family squabbles, - - a feature that refuses to fade away from the Indian liquor scene.
The alcobev industry has always had a list of tycoons - Mr V R Mohan, Mr Vittal Mallya, Mr O.P. Jaiswal, Mr Vijay Mallya and Mr Manohar Rajaram Chhabria who towered over the business at different times. But what made this year remarkable was the rise of professional-turned entrepreneurs who authored a few crucial developments in the industry.
Mr Ravi Jain, Managing Director, Millennium AlcoBev
Take Mr Ravi Jain, a former managing director of Shaw Wallace & Co. Currently a strategic ally of Mr Vijay Mallya, he has played a significant role in structuring what is touted as the biggest deal in the Indian alcobev business. In January, the UB group signed an agreement with UK brewer, Scottish & Newcastle, which saw the latter bringing in about Rs 500 crore into the Indian major. The deal included formation of a new 40:40:20 joint venture between UB, S&N and Mr Ravi Jain. UB also agreed to divest 26 per cent stake in its share capital to S&N for a mutually acceptable valuation within five years.
Analysts said the capital infusion from S&N, which was formalised towards the end of the year, came as oxygen for UB, which had stretched its finances with recent brewery buyouts. By restructuring Millennium AlcoBev, a fledgling company, which started as a marketing venture for some of UB's beer brands, through an equity venture involving S&N, UB and a key stake for himself, Mr Jain emerged as a force to reckon with and made the industry and the financial community sit up and take notice of his moves.
"He shaped up a less than three-year-old company like Millennium AlcoBev to attract almost Rs 750 crore (including S&N's Rs 500 crore and an additional Rs 250 crore from financial institutions) into the UB group fold," says an industry observer. The deal gave him enough resources to stall the progress of global brewers like SABMiller and Foster's which did not effect any significant strategy moves in the country this year, pointed out a former colleague of Mr Jain, who currently works for a multinational operation.
The year's most talked about acquisition was effected by another manager turned investor, Mr Deepak Roy, who bought over the assets of Guinness UDV, part of Diageo Plc, in India. Earlier this year, Guinness UDV decided to shed its Indian-Made Foreign Liquor (IMFL) business and to focus on its international portfolio. Mr Roy, a former head of the company in South Asia, Baltic and Russia, made a personal bid to buy out brands like Gilbey's Green Label, Old Gold and Gold Club along with the manufacturing plant at Nira in Maharashtra.
His Triumph Distilleries & Vintners acquired the assets in November and soon thereafter brought in the UB group as majority partner to take the business forward.
Mr Roy, who holds a 15 per cent stake in the company and the post of Chief Executive, carried out the most talked about happenings in the domestic spirits market in the last one decade. However, Mr Roy's Triumph and Mr Jain's Millennium Alcobev are not yet proven entities and their performance in the marketplace will come under close scrutiny in the coming year. It is left to be seen how they will manage the assets in a market engulfed by the winds of consolidation and bigger boardroom ambitions. "The industry will judge them harshly in 2003," said an observer.
It was sheer irony, perhaps, that Mr Manohar Rajaram Chhabria passed away in a year that was remarkable for personal achievements. Mr Chhabria, a first generation entrepreneur who blazed into the alcobev business with the takeover of Shaw Wallace in 1986, succumbed to a heart attack in Mumbai's Jaslok Hospital on April 4. As industry observers suggested, he will be remembered for his travails with the establishment and the bitter rivalry with the UB group, which plunged Shaw Wallace into turmoil for most part of the '90s.
Ms Komal C. Wazir, Executive Director, Shaw Wallace.
He was succeeded by his wife, Ms Vidya Chhabria. But the talking point for the industry was the rising importance of the second daughter, the 29-year-old Ms Komal Wazir. Sadly enough, the family's troubles with Mr Vijay Mallya did not end with Mr Chhabria's demise. A fresh battle was raging as the Chhabria clan met fire with aggression. During the year, Shaw Wallace, under the new chairperson, rolled out a new initiative to revamp its corporate image. It hired Mercer, the world's largest human resources consultancy, to build bridges with employees. It came at a time when the company's HR framework was severely tested in recent years with many high-profile executives leaving in controversial circumstances.
The year saw no spectacular brand achievements. The spirits business continued to grow between eight and 10 per cent in the April-September period, while an extended summer made the beer market more buoyant with a 15 per cent sales growth. The new brand introductions included McDowell's pure Scotch whisky, Scottish Crown, Radico's Premium Whisky, Special Appointment and SABMiller's flagship, Castle Lager. The New York-based Drinks International ranked UB spirits Division, comprising McDowell & Co and Herbertsons, as the fifth largest marketer of spirits in the world.
It was ranked behind global giants such as Diageo, Pernod Ricard, Allied Domecq and Bacardi.
Mr Vijay Mallya was elected to the Upper House of Parliament this year, carrying with him the hopes of an industry which fought prohibitions and an unrelenting tax onslaught.
The signals from the government were, however mixed. The Delhi administration announced sweeping reforms for the alcobev industry, including private participation in retail, while large States such as Maharashtra and Tamil Nadu stifled the market following a stand-off with the trade and industry on licensing issues.
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