Royal challenge

Mumbai: Shaw Wallace chairman Manu Chhabria recently announced that his firm is fast on its way to become India's largest alcoholic beverages company. Indeed, in the past one year, Shaw Wallace has been making the right kind of moves to achieve the laid-out objective.

Recently Shaw Wallace, with much pomp and show, unveiled its entire range of power brands in a fresh new look. These include: Antiquity, Royal Challenge, Old Tavern whiskies, and Haywards lager done up in a new packaging designed by Classaenes, one of the world's leading design houses.

In addition to this, Shaw Wallace has announced the launch of a brigade of international brands: Veba, a ready to drink mix; Vladivar Vodka; Findlaters Scotch, Golden Mist red and port Wines; Papillon, a range of French red and white wines; and sparkling champagnes. These were launched in association with the UK-based Kyndal, one of UK's bigger scotch manufacturing companies, holding about a 35-per cent share in the UK Scotch market and a 9-per cent share in the world market.

Shaw Wallace has started exporting brands like Director's Special and Director's Special Black to countries like Singapore, Korea and Mongolia. Recently some of the companies' whiskies have found a market in the US, too.

In order to offer its products at competitive prices to customers, the company is looking at setting up manufacturing facilities in all parts of India. Thus, the company has set aside an investment of Rs 100 crore for the setting up distilleries in the coming years.

On the beer front, Shaw Wallace Breweries is resurrecting two beer brands, as part of its portfolio re-jigging. The brands are: Rosy Pelican and Haywards Lager in the mild beer category.

The brand Rosy pelican came into the Shaw Wallace portfolio when the company acquired Haryana Breweries in 1994-95. Rosy Pelican has already been launched in Kerala and will soon be launched in other parts of the country as well. Haywards Lager was part of the company's beer portfolio about a decade ago, after which it retreated to pave the way for the company's resounding success in the strong beer segment with brands like Haywards 5000 and Haywards 2000.

Both Rosy Pelican and Haywards Lager will return only to selected markets. Shaw Wallace is relaunching its beer brand, Lal Toofan, with higher alcohol content. Lal Toofan will have 8-per cent alcohol content, instead of the present 6.5 per cent. Lal Toofan has been Shaw Wallace's brand in European markets. The company launched it in the domestic market about two years ago as a flanking strategy for Haywards 5000 and to fight arch rival United Breweries' Kingfisher Strong.

In the beer market Shaw Wallace plays second fiddle to UB and in order to have a stronger hold on the beer market the former is increasing its manufacturing capacities in different parts of the country. Malabar Breweries at Kochi, with a capacity of 1.5 million cases, will be commissioned in May this year.

The Buckingham Brewery, at Jabalpur is undergoing civil work to be ready for manufacturing by February next year. Construction at three other breweries will start between the years 2003-2004. These include: Shaw Wallace Brewery, Goa; Sangam Brewery, West Bengal; New India Brewery, Jammu.

Shaw Wallace is also looking for breweries in Karnataka, Tamil Nadu, Bihar, Jharkhand, and Punjab. The vision is to increase the volume three-fold in the next three years. There are plans on the wines front as well. The company is in talks with leading wine manufactures in Australia, California and France for bringing in foreign labels and creating a whole new range of SWC wines.

Currently Shaw Wallace's Golconda wines enjoy over a 50-per cent market share in the existing low-price wine market. But will all this be enough? Its not as if United Breweries chairman Vijay Mallya, Chhabria's archrival, is sitting back and watching the whole scene with relish.

The spirits division of the UB group is planning to invest around Rs 50 crore in the company's whisky brands to boost sales to around 30 million cases in two years. Says UB group divisional vice-president Alok Gupta: “The division has chalked out major promotion campaigns for its core whisky brands, including Blackdog, McDowell Signature, McDowell No 1, Bagpiper, Gold Ribbon and Diplomat.“

McDowell's whisky was launched as an extension of the successful No 1 McDowell's brandy. The brand sells over 3.5 million cases and is growing at the rate of 20 per cent. It expects sales to cross 4 million cases by the end of the current fiscal.

Signature rare whisky is a blend of Indian malts and rare aged Scotch. It is currently the fastest-growing brand in the McDowell's portfolio, selling 1.5 lakh cases. The brand has grown five times over in the last two years and expects to carve out a market share of 17 per cent by the end of the current fiscal. Blackdog, a 12-year-old Scotch, has two-thirds of the market share. In the regular segment, recently Bagpiper whisky has been launched in a new packaging and is also available in halves and quarters of its classic quart bottles.

And what Shaw Wallace has to contend with is the fact that the UB group spirits division is the largest spirits manufacturing and marketing company in India with a 35-per cent market share. Shaw Wallace is UB's nearest competitor with a 12-per cent market share. In the beer market South African Breweries' rapid strides in the recent past should be causing concern to not only Shaw Wallace but also United Breweries.

Finally the bad news for domestic liquor makers. This year's budget provisions for liquor is that the basic duty on liquor is down to 182 per cent and the process of lowering it to the WTO-bound rate of 150 per cent by 2004 has started.

The government has also halved the additional duty on imports with CIF price below $25 per case to 75 per cent. The additional duty on products priced above $25 per case has been lowered to 50 per cent. This means, the cumulative tax incidence on the cheapest imports will be down to 413 per cent from the earlier 710 per cent. In comparison, the relief on more expensive products is marginal - down to 340 per cent from 406 per cent.

The reduction of additional duty (also called countervailing duties) by half on cheaper imports of liquor (150 per cent to 75 per cent) will open the floodgates for cheap imports of alcoholic beverages, which could be detrimental to local industry.

In his quest for leadership of the alcoholic beverages market Chhabria may find the going tougher than he anticipates.