Political risks in The Liquor Industry
We first do a company analysis of all the existing liquor companies, and then look at the political risks faced by them
Published on: Mar 4, 2016
Transcripts - Political risks in The Liquor Industry
Indian Liquor Industry is high riskindustry
on account of high taxesand innumerable regulations
The Liquor industry has seen players with strong brands,
diversifiedportfolios, and largeoperationsachieve market
Indian Liquor Industry is divided into 2 broad categories
Has a marketvalueof INR 350 Billion, growing at
12-15% per annum over last 2 yrs.
headquartered at Paris,
France, founded in 1975
after arch rivals Pernod &
Ricard joined hands.
Major subsidiaries in
Australia, Greece, India,
Major brands : 100
Pipers, Absolut Vodka,
Blenders Pride, Chivas
Regal, Havana Club,
Imperial Blue, Royal Stag.
its tusslewith Vijaya
India set to become the third largest
market for the company after USA
and China, overtaking France.
Not allowedto operate in Andhra
Pradesh& Karnataka, the largest
consumer market for distilled beverages in
Indian Liquor Industry is molasses
basedwhich adds on to the regulatory and
Limited Price Flexibility.
products are sold in over 180
Formed in 1997from the merger
of Guinness and Grand
Headquartered in London
8th-largest company on the London
include Smirnoff, JohnnieWalker,
Recently in news over restructuring
of its SouthAfricanandNamibian
Situation in Kenya
Increase in illicitliquorsalesleading to ill health
effects on citizens.
Introductionof low costbeer, Senator Keg to cater
to the Kenyan market by Diageo to game the
Proposedthe government to reducetaxesto make
liquor affordable by the masses, thus eliminating
trade of illicit liquor
In 2012, Kenyan government waivedtaxes off
altogether after seeing the health benefits.
In 2014, Kenyan govt put an excisetax of 50% to increase its revenue from liquor industry.
7,500distributors out of the original 12,000 that supplied Senator Keg have closedbusiness as an
effect of a tax.
● Americanmanufacturer of spirits
headquartered in Deerfield, Illinois.
● Subsidiary of SuntoryHoldingsof
● Established as Beam Inc. on October3,
● Founder : Remainder company created
from Fortune Brands by Matthew
Stanton, top political lobbyist
● Marketpresencein Europe, China,
Japan, Southeast Asia, the
Oceania, and the Americas.
● Majorbrands:Jim Beam, Maker’s
● Investmentsin bottlingand
enhance company’s future
prospects in India.
• In US, Federal Uniform Drinking
Age Act of 1984 sets the minimum
legal drinking age to
• Alcohol duties applied in UK
• Canada has highesttaxrateon
alcohol in the world.
• Foundedby Scottish gentleman named
•The Group is professionally managed and
is headedby Dr VijayMallya
•Headquartered in UB City,Bangalore
• The UB Group, is the marketleaderin
both Spirits & Beer in the country with 79
distilleriesand bottlingunitsacross the
•Turnoverof Rs 3700Crores
•Marketshareof 48%by volume.
• The core Beverage Alcohol business
account for 80%of the group turnover
• Other interests include Fertilizer,
Engineering , Life Science,
Infrastructure development, Aviation &
•Flagship brand: KingfisherBeer
M & A
•McDowell & Company Limited
•Herbertsons Limited (Listed)
•Triumph Distillers & Vintners
•United Distillers India Limited
•Baramati Grape Industries Limited
•Phipson Distillery Limited
•United Spirits Limited
•McDowell International Brands
•Shaw Wallace Distilleries Limited
with its subsidiaries Whyte and
Kingfisher Strong Fresh
Kalyani Black Label
Kalyani Black Label Strong
• Indianalcoholic beverages company, and
the world's second-largest spirits company
•Originatedas a trading company called
founded in India in 1826by Angus
•Subsidiary of the UnitedBreweriesGroup,
and headquarteredat UB Tower in
•Largest Spirits Company in India, with
•USL exports its products to over 37
•Has more than 140 liquorbrands, of
which 20 brands each sell more than
onemillioncases annually while 5
brands each sell more than 10 million
•Major brands include Antiquity,
Black Dog, Signature, White Mischief
•Information and Broadcasting
ministry of India has banned direct
prices of intermediate goods
(molasses, ethanol) tightly controlled
- state governments exert
•Subject to licensingunder
Industrial Development and
•Cap on licensed capacity; special
license for expansion.
•Plethora of dutiesandtaxes from
bottling to salesstage;varying from
state to state.
• Rs 45/litre
• Rs 60/litre
•Limitedhoursof trading, prohibiting
sale of alcohol between 11 pmto 8 am.
• Consumption of alcohol prohibitedin the states
of Gujarat,Manipur, and the union
territory of Lakshadweep
•Keralagovernmenthas planned to implement
almost fullprohibitionof hard liquor
•Illegal to sell or supply any liquor to Andamanese,
Nicobareseor any other ScheduledTribes.
• Legaldrinkingage in india is in most of the states
and 18 in other states
• Low marginlevelsbecause of
State deciding the retail prices.
• Taxes and duties constituting
more than 50%of final consumer
• Decrease in salesof liquor, and in
turn revenue, which may lead to
decrease in supply
•Increasesaleof spurious country
Economic Social & Technological
• Increase in consumer
effects of liquor.
• Newproduct developments
needed– Diet Whisky.
needed to reduce costs and