UB.ppt - final

UB Group : 

UB Group Analysis of Corporate level Strategy

Overview : 

Overview Introduction Portfolio Strategy Formulation Mission Business Portfolio Analysis : Internal & External Competitive Analysis Industry Attractiveness v/s Business Position matrix Recommendations/Conclusion

UB - Group : 

UB - Group The UB Group was founded by Scottish gentleman named Thomas Leishman in 1857. The UB Group, is the market leader in both Spirits & Beer business in the country The Group has a turnover of Rs 3700 crores The core Beverage Alcohol business account for 80% of the group turnover Other interests include Fertilizer, Engineering , Life Science, Infrastructure development, Aviation & Media

UB Group : 

UB Group Five Core listed companies have a market cap of USD 1.7 billion. Market cap has grown 10 times in last 5 years. The Group is professionally managed and is headed by Dr Vijay Mallya, the Group Chairman

Slide 6: 

Group Holding Structure (UB City Project) Investments Real Estate Spirits Business United Spirits Shaw Wallace Ltd Beer Business United Breweries Millenium Alcobev Aviation Others Kingfisher Airlines Ltd. Aventis Pharma Mangalore Chemicals & Fertilizers UB Engineering UB (Holdings) Ltd. (36.54%) (37.50%) (50%) (100%) (10.28%) (30.44%) (34.74%) (55%) ( Erstwhile McDowell & Co Ltd) (75%) Air Deccan (26%) Whyte & Mackey

UB Group : 

UB Group Year : 2006

Mission – UB Group : 

Mission – UB Group 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. We are focused on assuming leadership in all our target markets. We seek to be the most preferred employer wherever we operate. We recognize that our organization is built around people who are our most valuable asset. We will always be the partner of choice for customers, suppliers and other creators of innovative concepts. We will continually increase the long-term value of our Group for the benefit of our shareholders. We will operate as a decentralized organization and allow each business to develop within our stated values. We will be a major contributor to our National Economy and take full advantage of our strong resource base.

Strategic Management Process : 

Strategic Management Process EXTERNAL ANALYSIS INTERNAL ANALYSIS Corporate Strategy Business Strategy Functional Strategies F M M IT HR IMPLEMENTATION IMPLEMENTATION FORMULATION Structure Culture Control EXPECTATIONS AND POWER OF STAKEHOLDERS Opportunities Threats Key Success Factors Strengths Weaknesses Competences FORMULATION

Levels of Strategy : 

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 : 

Corporate Strategy The ultimate goal is GROWTH of the company Focus on primary line of business Effort to sell the same products to a new market GROWTH BY CONCENTRATION, MARKET DEVELOPMENT,MERGER AND ACQUISITION

MERGERS - UB : 

MERGERS - UB Following entities being merged: McDowell & Company Limited (Listed) Herbertsons Limited (Listed) Triumph Distillers & Vintners Private Limited United Distillers India Limited Baramati Grape Industries Limited Phipson Distillery Limited United Spirits Limited Asian Opportunities & Investments Limited McDowell International Brands Limited Zelinka Limited Shaw Wallace Distilleries Limited together with its subsidiaries WHYTE & MACKAY 26% stake in Air Deccan

External Analysis : 

External Analysis PEST Analysis Opportunities &Threats Competitive advantage

PEST : 

PEST Political Regulatory hurdles constitute an entry barrier to the industry. The alcohol distribution structure is 65% State government controlled. Deregulation is now starting to happen which will benefit the industry in general & USL in particular- Policy Change Benefits - De-cartelization in 2001 - Industry has doubled - State Govt has taken over - Net Realization has doubled the wholesale trade - Changes in the Annual - Price increase tender policy

PEST : 

PEST Economical: With 8% + GDP growth expected over the next few years the Industry have a bright future. High Disposable Income. Domestic Air Traffic – grew by 23% to 21.82 million passengers in 2005, over 17.70 million passengers in 2004. The buoyancy in the corporate sector with the economic boom, business and leisure travel is expected to far exceed first time travel.

PEST : 

PEST Social: Demographics, Higher disposable income & change in spending patterns favour growth of more profitable products Changing Lifestyles Attitudes of work & Leisure Rapid urbanization - middle class already exceed 300 million

PEST : 

PEST Technological: New packaging initiatives to reduce costs and curtail counterfeiting. New product developments – Diet Whisky Innovative CRM Techniques

Opportunities & Threat : 

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

THREAT : 

THREAT Government regulations Stiff competition to products Alternative drinks and health conscious customer.

The UB Group’s competitive advantage : 

Strongest brands Significant upgradation Least vulnerable to policy volatility due to large spread Branding Local Sourcing Value Chain ownership Segment-Market Presence Manufacturing Technology UB Group Optimal, as almost completely locally sourced Largest manufacturing base Maximum capacity utilisation Initiatives planned for integration into retailing The UB Group’s competitive advantage Management Team Professionally managed Seasoned professionals with significant industry experience

Internal Analysis : 

Internal Analysis

Internal Analysis : 

Internal Analysis Strengths Weaknesses Financials Critical Success Factors

Strengths : 

Strengths Cost Management Ability to manage scale up Extensive Product Portfolio Brand value Ability to manage synergies among SBUs

Weakness : 

Weakness High Reliance on United Breweries. Less focus on other SBU’s. Use of E-commerce in some SBUs

Financials – United Spirits : 

Financials – United Spirits 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 Year Ended March, 31 Rs. Crores

Slide 26: 

Financials- KFA – FY 06 KFA 12

Core Competencies : 

Core Competencies 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’ 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 : 

Core Competencies Focus on Value to Consumer. Develop Synergies Through Mergers and Acquisitions. Dominance at point of purchase / consumption through Visibility Innovation In product In packaging

Slide 29: 

New Product Initiatives USL 15 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)

Slide 30: 

New Marketing Initiatives USL 17 - To pursue the launch of existing products in innovative packaging variants (tetra packs, pre-formed sachets, etc) and there by reduce the packaging cost as well as the price point to consumers in addition to the convenience of the pack itself . Pre-formed Sachets 180ml Tetra Pack Saving of Rs.30/- per Cs. Saving of Rs.12/- per Cs.

Slide 31: 

UB Group in transition From Primarily volume focus Growth driven by market share across segments “Spirits” player Focus on India To Primarily top-line and profitability focus Growth driven by increased “premium-ness” of the portfolio Spirits, wine, Aviation , Pharma, Infrastructure & Fertilizers player Global ambitions – pragmatically calibrated through M&A’s

GE – Matrix Parameters : 

GE – Matrix Parameters

GE Matrix Analysis : 

GE Matrix Analysis

Industry Attractiveness v/s Business Position : 

Industry Attractiveness v/s Business Position Infra

CONCLUSION : 

CONCLUSION 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.

Slide 36: 

RECOMMENDATIONS Strategic Themes Increase profitability to bring USL in line with other FMCG companies in India Focus on increasing market share in premium segments Managing market share for profitability in other segments Enhance focus on brand building by increasing outlay on ATL, formalising innovation processes and controlling BTL Metrics & Objectives Value growth to lead volume growth Enhance MS in scotch and premium whisky segments – 25% in scotch by 2008-09 Increase Market share Spends increasingly towards ATL Develop and implement product innovation agenda Leverage scale with trade

Slide 37: 

Strategic Themes To Increase exports Enter wines segment Align performance metrics with the strategic plan Metrics & Objectives Indian whisky to be exported in bulk to Africa and America. Development of Existing Brands Acquisition of International brands. Introduce balanced scorecard to assess performance RECOMMENDATIONS