• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Boby Kurian

Bangalore , Dec. 30

THE world's second largest brewer SABMiller gaining control of Shaw Wallace Breweries and the strides made by Seagram set the future direction for the Indian alcoholic beverage industry in 2003. The two multinationals pushed open the doors of the domestic alcobev market in contrasting styles to leave an impact in their respective business segments - beer and Indian Made Foreign Liquor (IMFL).

SABMiller acquired a 50 per cent stake and management control in Shaw Wallace Breweries for roughly $133 million in what was the biggest merger and acquisition deal in the Indian alcobev sector. It catapulted the global brewer to a strong second position in the local beer market. It now manages over 35 per cent of the domestic beer consumption, sharply up from less than 10 per cent share last year. The aggressive transnational guzzling down a big local brewer looked almost inevitable, as it went through with a string of smaller acquisitions in the last two years. Its deal with Shaw Wallace has undoubtedly turned the heat on market leader United Breweries (UB), which has been the undisputed leader in the domestic beer industry. SABMiller's decision to push ahead with the transaction, despite the legal impediments raised by the rival camp, was reflective of its experience and outlook in the developing markets, and helped in living up to its reputation of being "the global brewer with a difference."

Seagram has been here for a decade and growing organically through a well scripted brand-building strategy. The company has consolidated the exceptional growth of its Indian whiskies - Royal Stag and Imperial Blue - in recent years and has emerged to stake claim on the table of the top five IMFL companies with sales moving closer to five million cases annually. "It built brands in a tough market and in the face of legislative restraints, something which the domestic spirits majors found difficult doing in the last 10 years," an industry observer said. Both Royal Stag and Imperial Blue are million cases a year brands with the former probably looking at the two million cases mark.

The company's carefully researched and detailed move was on display when it forayed into the premium vodka market late this year with a new brand, Fling, which has developed a distinct brand proposition of Flingles (read singles) nights to tackle a growing market dominated by the youth.

Incidentally, the two companies also have been charting their course banking mostly on human resources drawn from outside the alcobev sector. In fact, SABMiller, which has a pronounced HR policy in this regard, demonstrated the same after taking over Shaw Wallace Breweries when it put most of the market operational responsibilities in the hands of officials brought from other sectors. Notwithstanding the initial troubles, the company has indicated that it would stay on course with the strategy and there is nothing in its recent top management recruitments that suggest a change. Though the old block of the alcobev industry has predicted disaster for this HR initiative, some analysts tracking the sector said it would help the transnationals "in weeding out the in-bred management style" that has stifled new approach to growth.

It was a hardly remarkable year for the Indian majors, UB group and Shaw Wallace & Co Ltd. UB chugged along in the volume game with its spirits division, comprising McDowell & Co and Herbertsons, closing the financial year March 2003 with sales crossing 30 million cases. It fought a more intense battle in the beer market and kept the leadership with 45 per cent share of the total domestic consumption. The UB Chairman, Mr Vijay Mallya's strategic allies - Mr Ravi Jain and Mr Deepak Roy who made news last year - delivered growth on expected lines. The spirits division of Shaw Wallace & Co returned to growth this year after a bizarre 2002. The company claimed that its spirits sales were up 15 per cent with its topline brands firing once again. It expects its iconic premium whisky Royal Challenge to touch one million cases in the current financial year.

The overall consumer offtake remained sluggish with liquor sales growing in single digit for yet another year and beer sales, which suffered due to bountiful monsoon, staying flat. The ready-to-drink (RTD) segment, which was touted as a new growth trigger for the spirits sector, failed to live up to its hype with only 1.55 lakh cases sales in April to September period. With the trade gulping down most of the profits in the industry value chain, Mr Vijay Mallya, indicated that UB might be forced to look at retailing especially in the auction driven market of north India. During the year, the State Governments in Tamil Nadu and Karnataka stepped in to clean up the liquor trade. The TN government took over retailing in Tamil Nadu to break cartels, while a newly constituted beverages corporation started managing wholesale trade in Karnataka, hitherto a heaven for tax-evaded liquor.

In the end, the domestic heavyweights largely made news for their internecine legal battles. Another year passed with Mr Vijay Mallya and the estate of the late Manu Chhabria not being able to resolve their long pending dispute. Mr Mallya's tussle with Mr Kishore Chhabria for control over Herbertsons too remained inconclusive though both appeared to be on the verge of an amicable settlement as the year draws close. The industry buzzed with Mr Kishore Chhabria's plans in the wake of a settlement keeping room for significant developments in the coming year. Mr Ramesh Vangal, the man who steered Seagram into the country, was charting a comeback into the spirits business and he too could make some splash in the new year.

Article E-Mail :: Comment :: Syndication

Stories in this Section
MNCs push open doors in alcobev sector

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line