Cheers in the time of recession

It's this time of the year when Ambrosia looks back in retrospect at the performance of the liquor industry in the year gone by and at the trends likely to influence growth in the coming year. Well the industry has continued its double digit growth but some slow down can be expected. Our interviews with a cross section of industry top executives reveals growth at a slightly diminishing rate and many are readying launches of new products by the end of the year.

This year our focus has shifted South and interviews with major players in Tamil Nadu indicate that the good times are over as more and more players get access to this huge market where demand and supply has been highly regulated by TASMAC which controls manufacturing, wholesale and retail. Established players are worried that increasing brands and supply could upset the guaranteed sales, guaranteed payment regime.

To counter this trend, many of the big players are looking beyond the realms of Tamil Nadu and are looking at states like Andhra, Karnataka, and Kerala for future growth. In Karnataka, the story is a bit different as the retail trade is privately owned. With emphasis on an effective push and pull strategy, major players have been able to clock good sales. But companies prone to dumping stocks could pay the penalty. The premium segment which is expected to see a possible slow down and the consequent loss of higher margins is expected to hit companies’ revenues marginally in 2009. Some top end brands will see a steady pace of sales, but they may not see the double-digit growths that were taking place through most part of 2004- 2008.

Buoyed by the tremendous growth rate in 2008, firms such as Radico Khaitan and Allied Blenders & Distillers (ABD) are ready for major launches in 2009. John Distillers is looking for brands but is biding its time for the right brands. Other major players within the Southern region like the J P Group and Sipping Spirits have ambitious plans.

However the increasing prices of molasses could act as a dampener and could affect margins. But all eyes will be on the budget. Will the sops on income tax boost consumer spending? Will there be additional taxes? Or will the budget produce the feel good factor among Indians give an impetus to computer spending?

Ambrosia hopes to give a boost to demand as it brings the trade, consumers and strategic buyers under one roof at INDSPIRIT 2009. Perhaps this is the opportune time for companies planning product launches to do some sampling and conduct consumers’ surveys of their products. It is up to the industry to rally together at this event packed with opportunities for tie-ups and creating the right corporate image. INDSPIRIT 2009 has already been promoted at Vinitaly, London International Wine Fair and now at Vinexpo. Ambrosia and INDSPIRIT hopes to give the industry a truly global image and we look forward to the industry support to make theirs and our dream come true.

USL: More thrust on exports

USL has 19 of its brands selling over a million cases. Its total portfolio consists of 80 active brands.

Currently, the total number of distilleries through which United Spirits sources its liquor requirements is 68 which will go up to 74 this fiscal. United Spirits Ltd. (USL) has 19 of its brands selling over a million cases. Its total portfolio consists of 80 active brands. Speaking to Ambrosia Vijay.K. Rekhi, company’s President and Managing Director, says, "Our ambition is to take the company to over 100 million cases in sales."

"Though having to put up with the unexpected price rise in alcohol, due to reduced molasses output and steep rise in fuel prices, USL has been able to maintain its profits through a combination of price increases, a focused plan aimed at improving sales at the premium end of the brand spectrum, strategic buying of inputs, entering into partnerships with key suppliers and a constant review to contain all elements of cost.

Excerpts of the interview:

What is the time frame for your 100 million cases target and how achievable is it given the recessionary trends?
Looking at the trend for 1st two months of the current year, we feel, we should achieve this target in 2009-10.

Is there likely to be some positive effects on the United Spirits brand after the IPL tourney?
IPL has been very successful and especially our Team, Royal Challengers Bangalore reaching the finals has exhibited the true spirit of the game and our brands. An event of this magnitude and reach will definitely stamp its positive effect on brands and Company that it associates with.

How are some of the recent acquisitions like Whyte & Mackay shaping up?
We are satisfied with the progress made so far in terms of placement and sales of all relevant Whyte & Mackay brands. We have also recently introduced W&M Special, BII which is doing very well.

What has been the effect of spiraling costs of ethanol on general sales?
Industry in the 1st 2 months of this FY has grown by 15per cent Y-o-Y. This, of course does not take away the fact that there will be pressure on the industry on account of cost push of ethanol.

Recession-hit Scotch industry
   SWA offer guidelines

The import duty issue between EU and India has now moved to EU-India Free Trade Agreement (FTA). An early substantial reduction and, eventually, elimination of the external tariff on spirits is expected. Gavin Hewitt, Chief Executive, The Scotch Whisky Association discusses growth, opportunities and issues pertaining to the Scotch whisky industry in recessionary times with Rojita Tiwari..

Excerpts: Discuss implications of the global economic slowdown on the world Scotch whisky market?

Tough international economic conditions have clearly weakened consumer confidence. Availability of credit is also relevant. The main effect seems to be on the distribution pipeline, with some de-stocking. This might stall export growth in certain markets in the short term, but we remain optimistic about the future prospects for Scotch whisky. Scotch whisky is a long term business. What we distil today is not whisky by law for at least three years. The next twelve months may be challenging but distillers are looking more than a decade ahead as they plan and invest, with new opportunities internationally both in ‘mature’ and emerging markets.

What are the reasons that you attribute to the growth this year in spite of a slowdown?

In 2008, Scotch whisky proved itself again to be recession-resilient if not recession-immune. To have achieved a record export value performance in the face of such challenging conditions is an impressive achievement. The good news is that the discerning consumer is continuing to buy Scotch and continues to recognise it as the global premium drink that underlines and enhances his or her aspirations. Scotch whisky’s international spread of markets, to virtually every country on the planet, has also been strength in recession, meaning that when some markets have been difficult others have still been growing. We don’t depend on any one market for our success.

The molasses mess
   Liquor Price Rise Imminent

According to the All India Distillers Association (AIDA), molasses prices have increased to Rs 6,500-7,000 per tonne-a quantum jump from last year’s prices. Molasses-based liquor accounts for more than 90per cent of the total IMFL market in India and the skyrocketing prices are spelling bad news particularly for players in the regular and middle segments.

Excerpts: The sugarcane shortage is having a domino effect on the alcohol industry as prices of molasses have shot up 75per cent this year and are still heading north. With Rectified Spirit ruling between Rs 28-30 per litre and ENA hitting upwards of Rs 33 per litre and climbing, a 10per cent-15per cent increase in spirits prices is around the corner as manufacturers are negotiating with state governments for a price push.

While the premium brand customer will take the relatively nominal increase in his stride, it is the regular and middle segment brands where the consumers will feel the pinch harder since the price bands are low and pockets are tighter. Only last year, molasses was available at about Rs 4,000 a tonne. But with the shortage of sugarcane in the current season, the prices have gone up to the range of Rs 7,000.

The sugar production this year stood at 18.5 million tonnes, down from 22 million tonnes last year and almost 25 million tonnes the year before that. 45per cent of this production comprises molasses which is directly related to sugar production. However, AIDA President, Mr. Devin Narang, assures that the situation is not as bad as it looks. "Regarding the sugarcane shortage, this is a typical, natural cycle which has taken place. It has obviously resulted in lower molasses production and the price of molasses has shot up", he says..

Khoday rediscovers the magic

Khoday is rediscovering its magic in the Indian market. Khoday India Chief Operating Officer, Satpal Chaudhry is bullish about the company prospects in the Indian market.

Excerpts: After swaying the market with brands like Peter Scot and Red Knight, the company is set to get back its winning ways. Said Mr. L. Sri Hari Khoday, Vice Chairman and Managing Director of Khoday Group, "We agree that our growth has not been consistent with the market situation, but we believe that we should not concentrate on growth at the cost of quality. Now we are determined to continue maintaining our quality and grow as well. "Khoday Products have fared quite well and we have increased our share almost 5% on all India basis", adds Chaudhry. Besides it’s focus on the local market, the company is also concentrating on export operations and is scouting for a bottling unit in Scotland and are looking to acquire a distillery with a bottling capacity of around 10,000-15,000 cases per month. We are looking forward to many options to boost our growth like events at various locations, and publications of our products in various magazines, says Chaudhry who is doing his utmost to help Khoday boost growth. We are in the process of changing the packaging of the existing brands, he adds.

The company is also planning a foray into wines. We are in the process of signing an agreement with one of the largest Wine manufacturers in Italy. We will be the sole distributor for these wines for all India basis, Chaudhry informs. The company is also looking to strengthen its domestic liquor portfolio Based on the brand equity of Khoday and the quality perception by the consumers, we are going to launch couple of brands in Whisky, Brandy and Vodka Segments, he points out.

Kingfisher - Good times ahead

The Indian beer market never had it better. Despite the recessionary trends the industry has managed double digit growth. For United Breweries with its flagship Kingfisher brand, things could not get better. Shekhar Ramamurthy, Deputy President, United Breweries Ltd., looks back in retrospect.

Excerpts:  With so many brands launched recently in the Indian market how are your brands faring in India?.

UB continues to be the dominant market leader in the beer space in India. We control close to 50% of the overall beer industry with our various brands. Kingfisher Strong is the single largest brand in India. Kingfisher Premium is the overwhelming market leader in the premium mild category.

Whilst there have been several new entrants in the beer industry in India, they have not made any dent on our firm control of the market.

What’s your current market share in terms of percentage and volume? And expected growth for the coming year?

As mentioned to you earlier, we control close to 50% of the total beer industry and we expect the industry to grown at 10% this year.

Is the Indian market ready for niche beers?

There has been a lot of discussion about the potential for niche beers in India. In the Indian context where beer penetration is still relatively low, the definition of ‘niche beers’ needs to be clearly understood. At present, the beer market is largely differentiated by the beer strength, i.e. strong beers with alcoholic content above 5%, typically in the 7% range and beers that are below 5% that are referred to as mild beers. Any new type of beer that defies this strong beer / mild beer definition would be considered as a ‘niche beer’ since it would cater to a relatively small segment of consumers. Our view is that, there is definitely a market for the right kind of niche beers and we are working on several new brands that would address these new and emerging consumer segments

Budding big deal

Budweiser comes under one roof. A report

Excerpts: It's a big move within the context of India’s growing beer market. Anheuser-Busch’s marketing; distribution and sales functions along with its trademark Budweiser are now being tied up under the RJ Corporation’s joint venture with Anheuser-InBev. With this, the country's largest Pepsi bottler, Ravi Jaipuria, will take over the control of the operations of Budweiser beer in India, with RJ Corporation owning a 51% stake. Raja Mukherjee, CEO and director of InBev India told Ambrosia that "We have brought together the two sales operations in India and the InBev India (the JV arm of ABI) is undertaking the sales, marketing and distribution of Budweiser and Armstrong and other brands like Tennents and the imported products like Stella, Leffe and Hoegaarden"

Under the new structure, the company said that the share holdings status will remain despite the realignments. "As of today, we have no plans to further integrate the two businesses. As in any joint venture the Brand Owner holds the trade marks. As per different excise rules prevalent in various states, brands registration’s will take place", said Mukherjee.

The company is already making good headway in Maharashtra with Budweiser, and with Tennents in Madhya Pradesh, Karnataka, UP and Delhi Buoyed by the new realignment, Mukherjee said that within a couple of years, "we should have at least 5-7% shares in markets where we operate".

Regarding plans for a pan-India launch of Budweiser, the company currently from July onwards is opening key north Indian markets and hopes to produce Bud in one more location by early next year.

Cobra signs JV with Molson Coors 
Forms Cobra Beer Partnership

Lord Karan Bilimoria is a happy man these days. After a long wait, he has found a great partner in Molson Coors, the US Beer giant which has recently acquired 50.1per cent stake in Cobra Beer Partnership- the newly formed JV Company between Cobra Beer and Molson Coors. In an exclusive interview, Bilimoria pours his heart out to Ambrosia.

Cobra Beer Ltd. was rumoured to be on the sale block for quite some time. However, the company officials and above all Lord Karan Bilimoria, the owner of the beer major, had a moment to rejoice when on 29th of May 2009 the company finally declared to have signed a JV with Molson Coors - the US beer giant which has some top beer brands like Carling, Coors Light and Grolsch beer in its portfolio.

Expressing his pleasure over this deal Bilimoria says, "I am glad to have got into a partnership with one of the best beer companies in the world." Ambrosia had met Lord Bilimoria exactly a year before during which he had discussed few possibilities (acquisition, JV or dilution of stake) which the company was looking at. "Going back to May last year, when we had met, Cobra Beer was raising finance (£30 million for India and UK operation and the time to implement these were till 2012 in India), he adds.

At that time, we had restructured the management and had a new marketing strategy in place when we were approached by one of the largest beer companies in the world for a 100per cent acquisition. The beer major wanted to acquire Cobra Beer but in phases. For the following 3 months (June-July-August 2008) we focused on this deal.

SABMiller unveils challenges of marketing in India

Jean Marc Delpon de Vaux, Managing Director, SAB Miller India, unveils the woes facing the beer industry. A report.

SABMiller's India sojourn began in 2000 and in just a few years, it has cornered nearly one third of the Indian beer market with brands such as Haywards 5000, Haywards 2000, Haywards Black, Knock Out, Royal Challenge, Castle Lager and Foster’s. But marketing in India has never been easy. Says Jean Marc Delpon de Vaux, "It’s like marketing in 35 different regions. The tax is governed by local thinking." He is also appalled by the fact that the tax on hard liquor is less than that of soft liquor. This is bizarre, he says. It is like drawing people to hard liquor for more intoxication.

Yet another bone of contention is the import export duties. Beer taxes are levied by individual states in India and taxes are also paid between states so beer taxes are some of the highest in the world. Inter-state taxes discourage trade between states, while India’s second biggest beer drinking state Tamil Nadu in the southeast restricts beer entering the state offering licenses selectively.

Although United Breweries and the world’s No 2 brewer SABMiller control nearly 80 per cent of the market, other big brewers such as Anheuser-Busch InBev, Heineken and Carlsberg have entered the market. India’s 65 breweries scattered across most of its 30 states only produce 13.5 million hectoliters of beer.

Carlsberg turning the competition green

The Indian market has been dominated by United Brewers and SABMiller but now foreign brands like Carlsberg are now planning to change the equation. Pradeep Gidwani, Managing Director, Carlsberg India explains how.

Excerpts: With so many brands launched recently in the Indian market how are your brands faring in India?.

Carlsberg is a truly iconic brand which enjoys a super premium positioning in the Indian beer market, to provide the Indian consumer a truly exceptional experience. As the only All Malt Beer in India, the beer is brewed from 100% imported malted barley, which gives it a consistently distinctive taste and smoothness. It is spiced with a unique Carlsberg Aroma Hop, which lends a spicy flavour and fruity aroma. Carlsberg is packaged in a proprietary Carlsberg bottle. The Carlsberg bottle is also a symbol of success having won prestigious awards for its spectacular design which makes it both stylish and easy to hold.

Carlsberg is available in more than 150 countries and is one of the fastest growing beer brands in the world. We compete with global brands all across the world. In India Carlsberg is creating a new super premium segment.

Is the Indian market ready for niche beers?

The Indian beer market is currently sitting at approx 10 mio hectoliters, comprising of 70% strong and 30%.We foresee double digit growths for our brand in the years to come as we see a very positive trend developing towards the mild beer category. Across the world the trend is to move from traditional brown spirits to lighter alcoholic beverages products including beer and wine. The same trend is being witnessed in India.

With prices of beer moving steadily northwards do you see a slump in sales?

Luxury Liquor brands have very levels of consumer involvement. High end consumers are very clear of their brand choice and specifically ask for their brand by choice. They never walk up to a bar and ask the staff for a recommendation – they will do so for food, but never for High End Drinks.

Watch out, the little devils are here!

India's beer market has been splashing with various brands with the multinationals that have been flowing in. But according to David Home, CEO & Managing Director, TVB International, Indians have yet to get a taste of beer’s finer avatars. David is at the helm of bringing in a bouquet of Craft beers under the label Little Devils. The first batch is already hitting the Indian market and there’s much more to come. Amitabh Joshi finds out more.

Excerpts: The beer market throughout the world is separated into two distinct business operations. Mass market lager beer brewing dominated by a handful of large global brewers (UB, SABMiller, Inbev, Carlsberg, etc) and Craft brewers that produce smaller volumes of all the other varieties of beers and ales. "India is the last major beer market in the world that has not been introduced to Craft beers, but this is about to change", says David Home, Chairman of Little Devils under TVB Craft Breweries. Already in 2009, two brew pubs have opened in Haryana and more are expected shortly in Mumbai, Goa, Bangalore and Hyderabad.

TVB Craft breweries is the first large regional Craft brewer to launch a range of 5 new Craft beer and ale flavours in India in 1000 retail outlets, hotels and restaurants throughout Himachal Pradesh, Punjab, Chandigarh, Haryana, Rajasthan, UP, Maharashtra and Goa.

UB Wines on expansion mode

The Company plans to increase the share of its wine portfolio to about 30 per cent over the next two years. Currently, it sells 35 types of wine and plans to add 10 more in next six months. Besides, sparkling wines are on the cards too early next year.

Excerpts: The UB Group, headquartered in Bangalore, has varied business interests, the core being beverage alcohol (spirits and beers) and aviation. At a time when wine consumption in India is growing at a rapid pace and is fast approaching international levels. Quality and affordability being this wineman’s key concerns are quite in tune with the colossal market opening up for Indian wine, feels Abhay Kewadkar, Chief Wine maker and Business head, UB Wines. A wine culture has certainly arrived he says and adds it needs nurturing though, through education, awareness and accessibility. The UB Group’s wine business operates through two companies - Four Seasons Wines Ltd and United Vintners Ltd.

Four Seasons is the fastest growing brand in our portfolio, says Kewadkar. After a successful launch in Mumbai, Delhi, Kolkata, Bangalore, Chennai and Pune, we are now looking forward to have a truly national presence in the next 3 months. Bouvet Ladubay at the moment is more metro centric considering the profile and pricing. The quality has been accepted very well and we would like to see Bouvet Ladubay as a celebration drink of the country.

October last year saw the launch of Four Seasons and we are well in the process of expanding the market. However, we can say with certainty that at this stage the product quality has been very well appreciated. The year 2009-10 will see us completing one full year of operation and we will be in a position to share figures in terms of sales and volume.

John Distilleries
Constant Endeavour for new venues

With the company's roots at the prime distillery plant in Bangalore that has vested in it a production capacity of 300,000 cases per month, John Distilleries Ltd, A Paul John enterprise, also has its own distilleries at Goa and Chhattisgarh. These apart, there are several associate plants including four plants in Andhra Pradesh, two in Kerala, one in Pondicherry and more at Haryana, Punjab, Bihar and Himachal Pradesh, thus heralding the Group’s recent entry into India’s northern states as well.

Excerpts: Constantly driven to endeavour new venues and achieve newer heights, Paul P John, the Chairman of the acclaimed Kumarakom Lake Resort, Kerala, India known for its finesse, is the brain behind this company. Undeterred focus has led him to venture into India’s lucrative wine market with Chateau de Banyan, a company that has forged international associations with renowned Italian winemakers to bring out premium wines into specific cities and highend locations across the country. On his company’s fastest growing brand portfolio, John informs that Chateau de Banyan currently has a single brand, Big Banyan Wines, which is doing well across South and Goa. "Under Big Banyan we offer 5 single varietals; 2Whites (Chenin Blanc and Sauvignon Blanc) and 3 Reds (Zinfandel, Shiraz and Cabernet Sauvignon," says Paul. Over the last year Big Banyan has grown at an impressive rate of 52per cent and the turnover of the company has been approximately INR25 million at retail market value for the financial year. John stresses that Chateau de Banyan is committed towards providing international quality wines for our patrons.

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