UB Group

Analysis of Corporate level

Strategy
Overview
o Introduction
o Portfolio
o Strategy Formulation
n Mission
n Business Portfolio Analysis : Internal & External
n Competitive Analysis
o Industry Attractiveness v/s Business Position
matrix
o Recommendations/Conclusion
UB - Group
o The UB Group was founded by Scottish gentleman named
Thomas Leishman in 1857.

o The UB Group, is the market leader in both Spirits & Beer

business in the country

o The Group has a turnover of Rs 3700 crores

o The core Beverage Alcohol business account for 80% of the

group turnover

o Other interests include Fertilizer, Engineering , Life Science,

Infrastructure development, Aviation & Media
UB Group

o Five Core listed companies have a market cap of

USD 1.7 billion.

o Market cap has grown 10 times in last 5 years.

o The Group is professionally managed and is headed by Dr Vijay

Mallya, the Group Chairman
 Group Holding Structure
UB (Holdings) Ltd.

Investments Real Estate

(UB City Project)
(55%)

Spirits Beer Aviation Others

Business Business (100%)
(37.50%) Aventis
(36.54%) Kingfisher (10.28%)
Pharma
United Spirits United Airlines Ltd. Mangalore
( Erstwhile McDowell & Breweries
(50%) Chemicals & (30.44%)
Co Ltd)
Whyte & Millenium Alcobev Fertilizers
Air Deccan
Mackey (26%)
(75%) UB Engineering (34.74%)
Shaw Wallace Ltd
UB Group
U B G r o u p c o m p o s i t io n C o m p o s itio n (1 9 9 0

6% 1%
7% 7%
3%
25%
14% 6%

59%
17% 29% 18%
8%
Year : 2006

S p i r i ts B eer F e rt iliz e r
P h a rEm n ag i n Be ee reSi nr pg i r Pi t sh a rOm t ah eP r sa i
Mission – UB Group
o We constitute a large, global group based in India. We associate with world leaders in
order to adopt technologies and processes that will enable a leadership position in a large
spectrum of activities.

o We are focused on assuming leadership in all our target markets.

o We seek to be the most preferred employer wherever we operate.

o We recognize that our organization is built around people who are our most valuable
asset.
o We will always be the partner of choice for customers, suppliers and other creators of
innovative concepts.
o We will continually increase the long-term value of our Group for the benefit of our
shareholders.
o We will operate as a decentralized organization and allow each business to develop within
our stated values.
o We will be a major contributor to our National Economy and take full advantage of our
strong resource base.
 Strategic Management Process

EXTERNAL ANALYSIS INTERNAL ANALYSIS

EXPECTATIONS
Opportunities AND POWER OF Strengths
Threats STAKEHOLDERS Weaknesses
Key Success Factors Competences

FO Corporate Strategy
RM
UL L ATION
AT Business Strategy
O RMU
IO F
N Functional Strategies
ION F M M IT HR IM
AT PL
M ENT EM
LE EN
IMP Structure T AT
Culture IO
N
Control
Levels of Strategy

Corporate
What business + general direction

Business / Competitive
How to compete in the given business

Functional
How to translate competitive strategy in action plans
 Corporate Strategy
o The ultimate goal is GROWTH of the
company
o Focus on primary line of business
o Effort to sell the same products to a new
market
GROWTH BY CONCENTRATION,
MARKET DEVELOPMENT,MERGER
AND ACQUISITION
 MERGERS - UB
o Following entities being merged:
n McDowell & Company Limited (Listed)
n Herbertsons Limited (Listed)
n Triumph Distillers & Vintners Private Limited
n United Distillers India Limited
n Baramati Grape Industries Limited
n Phipson Distillery Limited
n United Spirits Limited
n Asian Opportunities & Investments Limited
n McDowell International Brands Limited
n Zelinka Limited
n Shaw Wallace Distilleries Limited together with its subsidiaries
n WHYTE & MACKAY
n 26% stake in Air Deccan
 External Analysis

o PEST Analysis

o Opportunities &Threats

o Competitive advantage
 PEST
o Political
n Regulatory hurdles constitute an entry barrier to the industry.

n The alcohol distribution structure is 65% State government controlled.

n Deregulation is now starting to happen which will benefit the industry in

general & USL in particular-

Policy Change Benefits

- De-cartelization in 2001
- State Govt has taken over
the wholesale trade
- Changes in the Annual
tender policy
- Industry has doubled
- Net Realization has doubled
- Price increase
 PEST
Economical:
o With 8% + GDP growth expected over the next few years the Industry have a bright future.

o High Disposable Income.

o Domestic Air Traffic – grew by 23% to 21.82 million passengers in 2005, over 17.70 million passengers in 2004.

o The buoyancy in the corporate sector with the economic boom, business and leisure travel is expected to far exceed first time travel.
 PEST
Social:

o Demographics, Higher disposable income & change in spending

patterns favour growth of more profitable products

o Changing Lifestyles

o Attitudes of work & Leisure

o Rapid urbanization - middle class already exceed 300 million

 PEST
Technological:

o New packaging initiatives to reduce costs and curtail counterfeiting.

o New product developments – Diet Whisky

o Innovative CRM Techniques

Opportunities & Threat
Opportunity

o Market conditions very attractive for growth especially booming real estate
and aviation.
o Create credible alternatives in the premium and high end segment.
o Facilitate entry into new segments, such as wines, Aviation etc.
o Provide access to non traditional global markets, particularly Russia and
China.
o Incorporate B2C e-commerce portal.
THREAT

o Government regulations

o Stiff competition to products

o Alternative drinks and health conscious customer.

 The UB Group’s competitive advantage
• Professionally managed
• Seasoned professionals with
significant industry experience

• Strongest brands • Least vulnerable

Management
• Significant Team to policy volatility
upgradation Segment- due to large
Market spread
Presence
UB
UBGroup
Group
Value Chain
ownership Local
Sourcing
Manufacturing
• Initiatives planned for Technology • Optimal, as
integration into almost completely
retailing locally sourced

• Largest manufacturing base

• Maximum capacity utilisation
Internal Analysis
 Internal Analysis

o Strengths
o Weaknesses
o Financials
o Critical Success Factors
Strengths
o Cost Management

o Ability to manage scale up

o Extensive Product Portfolio

o Brand value

o Ability to manage synergies among SBUs

Weakness

o High Reliance on United Breweries.

o Less focus on other SBU’s.

o Use of E-commerce in some SBUs

 Financials – United Spirits
Rs. Crores
Year Ended March, 31
Growth 2006 2005
Net Sales/Income from Operations 18% 2,087.48 1,769.08
Other income 43.42 50.27

Total Expenditure
a) (Inc)/Dec in stock in trade (15.25) (1.76)
b) Consumption of Raw Materials 461.33 419.10
c) Purchase of Finished Goods 226.24 70.63
d) Consumption of Other Materials 455.82 440.22
e) Staff Cost 155.03 158.91
f) Other expenditure
i) Advertisement & Sales Promotion 241.02 239.88
ii) Others 340.47 357.25

1864.65 1684.22
Earnings Before Interest, Depreciation and Tax 97% 266.25 135.14

Interest / Finance Charges (Net of receipts) 163.87 58.25

Depreciation 25.24 25.57

Profit Before Non-recurring Items & Tax 50% 77.14 51.31

Non-recurring items (Net) - (30.25)

Profit Before Tax 266% 77.14 21.06

 Financials- KFA – FY 06

Revenue Statement –
Major Items
Rs. Mio Rs. Mio
Income 5,845.00
Fuel Cost 2,356.00
Total Operating Cost 6,806.00
Other Cost 760.00
EBIDTA (1,721.00)

PBT (1,908.00)

KFA 12
Core Competencies
o Focus on Brand Imagery
• Since Beer is a category with little product differentiation, consumer’s brand choice
is largely on imagery
• With multiple brands in each segment of beer, UB has successfully positioned
different brands on different platforms relevant to different consumers, different
need states
• Kingfisher has appropriated some of the category values including `refreshment’
o Brand Association
• With Fashion, through Kingfisher Fashion Awards and the Kingfisher Swimsuit
Calendar
• With high visibility events like the Mumbai Marathon, the Delhi Half Marathon,
the International Film Festival of India
• With events important to the ethos and culture of people in key regions like the Goa
Carnival, the Bangalore Habba
Core Competencies
o Focus on Value to Consumer.

o Develop Synergies Through Mergers and Acquisitions.

o Dominance at point of purchase / consumption through

• Visibility
o Innovation
• In product
• In packaging
 New Product Initiatives

To achieve the national roll out of McDowells’ Diet Mate whisky (using a
proprietary and US patented technology from the Group Research
Foundation – VMSRF)

Launching of unique
Diet Vodka (using
another US patented
technology from VMSRF)

USL 15
 New Marketing Initiatives
- To pursue the launch of existing products in
innovative packaging variants (tetra packs,
pre-formed sachets, etc) and there by reduce 180ml Tetra Pack
the packaging cost as well as the price point
to consumers in addition to the convenience
of the pack itself .

Pre-formed
Sachets

Saving
of Rs.30/-
per Cs.
Saving of Rs.12/-
per Cs. USL 17
 UB Group in transition

From To

o Primarily volume focus o Primarily top-line and profitability

focus

o Growth driven by market share o Growth driven by increased

across segments “premium-ness” of the portfolio

o “Spirits” player o Spirits, wine, Aviation , Pharma,

Infrastructure & Fertilizers player

o Global ambitions – pragmatically

o Focus on India
calibrated through M&A’s
 GE – Matrix Parameters

• Market Attractiveness • Competitive strength

- Market size - Relative brand strength (marketing)

- Market growth rate - Market share

- Market profitability - Market share growth

- Pricing trends - Customer loyalty

- Competitive intensity / rivalry - Distribution strength and production capacity

- Overall risk of returns in the industry - Record of technological or other innovation

- Entry barriers - Quality

 GE Matrix Analysis Breweries Aviation Fertilizers Infra Pharma

Market Attractiveness

- Market size + + + + +
- Market growth rate + + + + +
- Market profitability + - moderate + Moderate
- Pricing trends + - moderate moderate
- Competitive intensity / rivalry moderate - - - -
- Overall risk of returns in the industry moderate moderate moderate + moderate

- Entry barriers moderate + + - -

Industry Strengths
- Relative brand strength (marketing) + + moderate moderate moderate

- Market share + - moderate - -

- Market share growth + + + moderate moderate
- Customer loyalty + moderate moderate moderate +
- Production capacity + moderate - moderate -
- Technological or other innovation + + + - -

- Quality + + + + +
Industry Attractiveness v/s Business Position
Industry Attractiveness
High Medium Low
Invest Selective Up or Out
Growth
High
Business Position

Breweries
KFA

Selective Up or Out Harvest

Medium

Growth

Infra Fertilizer

Up or Out Harvest Divest

Low

Aventis
CONCLUSION
o Based on the GE matrix and the
PEST,SWOT analysis we feel:
• The group should keep on investing in the
Breweries division as the portfolio offers
promising future.
• Aviation is in growth phase so needs focused
growth strategies.
• It can divest from the Pharma business and
concentrate on the Infra division specially.
 RECOMMENDATIONS

Strategic Themes
Metrics & Objectives
o Increase profitability to bring
USL in line with other FMCG o Value growth to lead volume growth
companies in India

o Focus on increasing market

share in premium segments o Enhance MS in scotch and premium whisky
o Managing market share for segments – 25% in scotch by 2008-09
profitability in other segments o Increase Market share

o Enhance focus on brand o Spends increasingly towards ATL

building by increasing outlay on o Develop and implement product innovation
ATL, formalising innovation agenda
processes and controlling BTL o Leverage scale with trade
 RECOMMENDATIONS
Strategic Themes Metrics & Objectives

o To Increase exports o Indian whisky to be exported in bulk

to Africa and America.

o Development of Existing Brands

o Enter wines segment
o Acquisition of International brands.

o Align performance
metrics with the strategic
o Introduce balanced scorecard to
plan assess performance