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Report on the Study of

THE UNITED BREWERIES Ltd.

KANJIKODE, PALAKKAD

Submitted to the

MAHATMA GANDHI UNIVERSITY

In partial fulfillment of the requirements for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Under the guidance of

Dr. POORNIMA NARAYAN

Professor

By

Mr. PRAVITH P MENONReg. No: 42990

SCMS SCHOOL OF TECHNOLOGY AND MANAGEMENT


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A

Report on the Study of

THE UNITED BREWERIES Ltd.

KANJIKODE, PALAKKAD

Submitted to the

MAHATMA GANDHI UNIVERSITY

In partial fulfillment of the requirements for the award of the degree of

MASTEROFBUSINESSADMINISTRATION

Under the guidance of

Dr. POORNIMA NARAYAN

Professor

By

Mr. PRAVITH P MENONReg. No: 42990

SCMS SCHOOL OF TECHNOLOGY AND MANAGEMENTi


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UNITEDBREWERIESLIMITED(Unit :Premier Breweries)

May lL2013

TO WHOMSOEVER IT MAY CONCERN

This is to certify that Mr. Pravith P Menon, Reg. No.

42990, MBA stu ent from SCMS School of Technology &

Management has undergone organizational study in

our organization for a period of one month from 8th

April, 2013.

We wish him all the very best in his future endeavors!

ForUnited Breweries Limited

Unit: Premier Breweries

l(l

MANAGER-HR

Kanjikode West P.O. 678 623, Palakkad, Kerala, India.Phone :(0491) 2566160 / 161/ 162,Fax :(0491) 2566260, Gram :BREWERY.

(Regd. Office: UB Tower, Level 3/4/5, UB City, No.24, Vittal Mallya Road, Bangalore-560 001)

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ALUVA, COCHIN, KERALA - 683106

CERTIFICATE

This is to certify that the project report entitled, A study of The Unite

Brewer ies Ltd. Palakkad, is a bonafide record submitted by Mr. Pravith P

menon, Reg No.42990, in partial fulfillment of the requirements for the award

of the Degree o Master o Business dministration during the academic years

2010- 2012.

Date : Dr. RADHA P. THEVANNOOR

DIRECTOR

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ALUVA, COCHIN, KERALA - 683106

CERTIFICATE

This is to certify that the project report entitled, A study of Uni ted Br eweries Ltd,

Palakkad, has been successfully completed by Mr. Pravith P M enon, Reg

No.42990, in partial fulfillment of the requirements for the award of degree of

Master of Business Administration, under my guidance during the academic years

2010-2012.

Date: Dr. POORNIMA NARAYAN

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DECLARATION

I, hereby declare that the Organizational study report on The Hindustan

Insecticide is my original work. I further declare that this report is based on the

information collected by me and has not previously been submitted to any other

university or academic body.

Date: PR A VI T H P M E N O N

Reg.No.42990

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Acknowledgement

I would like to express my sincere gratitude to god for giving me the blessing and necessary

courage to successfully complete the project. I wish to extend my heartfelt thanks to Mr.Vinu

Philipose, HR manager of United Breweries Ltd for giving me this opportunity to conduct my

studies. I would also like to express my sincere thanks to Mrs.Radhika, Mr.Sashi and all other

staffs of the company for their valuable guidance, support, cooperation and encouragement

which has helped me for the successful completion of my project. I would like to thank Dr.

Poornima Narayan, our faculty member, advisor and guide during this project. Without his

valuable inputs, this project would not have been a success. I am beholden to my parents and

friends for their blessings and encouragement.

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Executive summary

The organizational study was done at Unite breweries Ltd. Kanjikode, Palakkad. The

organization, United Breweries Ltd, Palakkad reveals that it has well-functioning

organizational structure. The management of various departments namely production,

purchase, commercial, finance, human resource, quality assurance etc. are the major concerns

of this study. It is easy to understand the organizations activities in managerial area and to

acquire practical knowledge in the field of company office management. The duration of the

study was for one month. The main objective is to understand the structure and functioning of

various department in the organization.

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TABLE OF CONTENTS


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ix

CHAPTER

NO.

TITLE PAGENO.

BIBLIOGRAPHY 62


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LIST OF FIGURES

x

SL

NO..

FIG.NO TITLE PAGE

NO.

1 2.3.2.1 Porters five force analysis 13

2 3.1.2 UB Ltd Logo 17

3 3.2.2.1 The UB Ltd. Palakkad Departmental Structure 20

4 3.3.1 Departmental chart of purchase Dept. UB Ltd.

Kanjikode

22

5 3.3.2.1 Departmental Chart of Production Dept. 24

6 3.3.2.2 Steps in Beer manufacturing and dispatching 26

7 3.3.2.3 Cost breakdown in percentage 32

8 3.3.2.4 Illustrated Beer Manufacturing process 33

9 3.3.2.5 Bottling process 34

10 3.3.3.1 Commercial Department Structure 36

11 3.3.3.2 Sales of manufactured Beer 37

12 3.3.4.1 Departmental chart of finance dept. 38

13 3.3.5.1 Departmental chart of HR Dept. UB Ltd Palakkad 46

14 3.3.5.1 Recruitment in UB Ltd. Palakkad 50

15 3.3.5.2 Training process UB Ltd. 51

16 3.3.5.3 Training methods UB Ltd. Palakkad 52

17 3.3.6.1 Departmental chart of Quality Assurance Dept. UB 53


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LIST OF TABLES

xi

SL NO.. TABLE.NO TITLE PAGE

NO.

1 2.3.1 Financial Comparison of Competitors 15

2 3.1.1 Board of Directors 16

3 3.2.1.1 Shareholdings pattern - United Breweries Ltd. 17

4 3.2.1.2 Shareholdings percentage 18

5 3.3.1.1 Major raw materials of the company 23

6 3.3.4.1 Balance Sheet United Breweries Ltd. 40

7 3.3.4.2 Profit & Loss Account United Breweries Ltd. 41

8 3.3.4.3 Ratios United Breweries Ltd. 43


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Chapter 1

Introduction

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1.1. Introduction to the study

Organization is a social unit which is deliberately constructed and reconstructed to seek

specific goals. An organization comes into existence when there are a number of

persons in communication and relationship to each other and are willing to contribute

towards a common endeavour. The evolution of organization dates back to the early

stages of human civilization when two or more persons began to cooperate and combine

together for fulfilling their basic needs of food, clothing, shelter and protection of life.

Thus an organization is born when people combine their efforts for some common

purpose. It is a universal truth that an individual is unable to fulfil his needs and desire

alone because he lacks strength, ability and resources. So man seeks the cooperation

of other people who share goals with him.

The organizational study is objectified to fulfil two basic ends. Firstly this study has

academic purpose and it provides exposure to practical aspects organizational

management. More than theoretical knowledge, this training helps to acquire with the

art of managing. The organizational study at UB Ltd. Kanjikode in Palakkad is an

attempt to understand the functioning of the organization. This study also tries to know

the various functional departments.

The organization, United Breweries Ltd, Palakkad reveals that it has well-functioning

organizational structure. The management of various departments namely production,

purchase, commercial, finance, human resource, quality assurance etc. are the major

concerns of this study. It is easy to understand the organizations activities in

managerial area and to acquire practical knowledge in the field of company office

management.

The production department is responsible for converting inputs into outputs through the

stages of production processes. The purchase department buys all the raw materials and

goods required for production. The human resource department deals with all the

recruitment, training, health and safety and pay negotiations with unions/workers. The

commercial department deals with all aspects of selling to customers, marketing

research, organises advertising and product promotion. The finance department helps

provide the financing and accounting information necessary to make various decisions.

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1.2. Scope of the study

The internship training was intended to provide Industrial exposure and bridge the gap

between theory and practice. The study covered few departments of UB Ltd.,

Kanjikode, Palakkad and was intended for a period of one month. The study was mainly

conducted to understand the functions, processes and

departments of the company. The organizational study at

procedures of different

United Breweries Ltd.,

comprehend about thePalakkad is a humble effort to understand and

organization. The organizational study is intended to access and to acquire the

knowledge regarding the functional as well as the management aspects of the

firm.

1.3. Objective of the study

The main objectives of the organizational study are classified to two

To Understand the type of organization, its history, vision, structure, hierarchy,

people, processes, products inter departmental interactions , the industry in

which this organization belongs and their competitors.

To analyze the performance, Key resources, Strength and weaknesses.

1.4. Methodology

This study was conducted mainly to familiarize with the activities, processes, policies,

programs and procedures followed in the firm. Required data for the study was

collected through monitoring and interrogation. The study was made personally visiting

the company and the data were collected through various methods. In the broader sense,

there are two types of data. They are

1.4.1 Primary data:

Primary data collected through discussion with manager, various department heads

officers and employees.

1.4.2 Secondary data:

Secondary data for the study was collected from both internal and external sources.

Internal records like annual reports, website, office records, management reports, house

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magazines were used for collecting relevant information for this study. The external

sources include internet, magazines, business dailies, journals and business magazines.

1.5. Limitations of the study

The study was limited to my experience and knowledge. Some documents were

confidential and were not available to me. Most of the Employees were busy in their

work so they could not give more information. There may be errors due to the bias of

the respondents. The time allotted for the study was not sufficient for the study.

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Chapter 2

Analysis of Business Environment

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2.1 Analysis of Remote External Environment

The United breweries operation and functioning is influenced by various factors

which include mainly political social economic and technological factors.

2.1.1 Political Factors:

Various government policies have a great influence on the functioning of UB Ltd. In

the 1983 Indian elections, the government has regulated a ban on consumption of

alcohol in the state of Andhra Pradesh. After implementing the regulations the state

was referred to as Alcohol free state. This had an adverse effect on the percentage

of alcohol consumed in the country and income of United Breweries. Several

strategies are adopted on prevention of drinking and driving in India. The legal

drinking age in India and the laws which regulate the sale and consumption of alcohol

vary significantly from state to state. In India, consumption of alcohol is prohibited in

the states of Gujarat, Manipur, Mizoram and Nagaland, as well as the union territory

of Lakshadweep. All other Indian states permit alcohol consumption but fix a legal

drinking age of between 1825 years. In some states, the legal drinking age can be

different for different types of alcoholic beverages. Advertising alcoholic beverages is

banned in India as per the Cable Television Network (Regulation) Amendment Bill,which came into effect on September 8, 2000. The government is very particular

against broadcasting such advertisements on its channel, Doordarshan, whereas most

of the private channels still broadcast surrogate alcohol advertisements. Dry Days are

specific days when the sale of alcohol is banned. National holidays such as Republic

Day (January 26), Independence Day (August 15) and Gandhi Jayanti (October 2) are

usually dry days throughout India.

2.1.2 Economic Factors:

Indias per capita income is expecting to grow more than double over the next seven

years. This leads to higher buying power in the Hands of the Indian consumers.

United Breweries registered a high increase in its sales over the past few years. The

growing economy will improve income levels substantially and NCAER estimates

that todays middle class population of 160 million will grow to 547 million by 2026.

This is especially significant as due to high consumer prices, beer consumption is

skewed toward higher income consumers. Urban consumption of alcoholic beverages

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is estimated to contribute 70% to the total consumption. The current urbanization of

around 30% is expected to grow to 44% by 2030, providing a significant further

impetus to growth.

2.1.3 Social Factors:

The older generation of Indians still prefer whisky or scotch, while the youth have been

seen opting for wines and white alcohol, like vodka for example. The social change towards

alcohol consumption is changing in India. Adaptation of Western Culture will have a

positive impact on this industry. However, as urban consumers become more exposed

to western lifestyles, through overseas travel and the media, their attitude towards

alcohol is relaxing. Social habits are undergoing a transformation as mixed drinks are

becoming more popular. The greatest evidence of this trend is the increase in beer,

wine and even tequila consumption among women. More and more women are

consuming wine and beer the penetration in metropolitan areas is almost twice as

high as the penetration in other large cities implying that the greater tolerance

towards alcohol consumption in metropolitan areas facilitates the consumption of

wine and beer. With increasing urbanization, this acceptance is only going to rise.

2.1.4 Technological Factors:

Many new strategies are employed by United Breweries to attract sales. Bottling

strategies are employed to attract youngsters by implementing new designs of bottle

and labels. New inventions and development are always being encouraged by the

company. Adapting of European technology has helped to increase production while

cost of production is lowered.

2.1.5 Environmental

Environmental factors include the weather and climate change. As the climate here is

generally warm, beer always has a great demand. The demand fluctuates according to

the season, during winter season demand is low and during summer season demand is

very high.

2.1.6 Legal

The UB Group is very careful about the steps it takes because of the political

environment which could land it in trouble. As the laws are different for different

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states, UB India has played smart in making a social networking website so that its

purpose of marketing is also solved and it didnt cross the line of law as well.

Considering all these factors the most important factor for the company is political

factors. The largest challenge to the beer industry is the pervasive nature of

government controls. Changes in taxation and regulation are particular high risks to

this industry and might significantly impact profitability from time to time. Any

deregulation in the government policies and taxation can have a huge impact on the

working of the company.

2.2.1 Global Scenario of the Company

The global beer industry is consolidating. Consolidation started 10 years ago and

probably has 10 more to go before it winds down. China is the biggest market for beer

followed by the US, Germany, Brazil, Russia, Japan, UK, Mexico, South Africa and

Spain. The paradox in China is that although the retail price of beer is very low in

terms of the market, it has very high profit margins as far as international players are

concerned.

With the global market experiencing low growth in recent years, the focus is now on

the Asia-Pacific region specially. For instance, the Chinese beer market has grown at

an astounding pace in recent years, spurred on by the massive levels of foreign

investment in the market, along with the rise in the average levels of consumer

spending and thanks to the economic reform policies of the government. China has

now overtaken the US to become the largest national beer market in the world. The

brewing industry in China has been one of those quickest to modernize and Indian

beer Industry should look to model themselves on their neighbours.

Beer, an alcoholic beverage, is made through the process of fermentation and brewing

of starch from malted barley. This industry involves production, distribution and sale

of beer in the market. The beer market consists of retail sales of bitters, ales and

stouts. It is categorized into four categories - low/no alcohol beers, premium lager,

specialty beers and standard lager.

This market is valued according to the retail selling price of the products and also

includes certain taxes. Three prominent brewers in this sector are South African

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breweries Miller, Anheuser-Busch and Molson Coors brewing company. These three

companies generate 90% of profit from the beer market. Beer attracts the largest share

among alcoholic beverages.

The global beer market was valued at USD 114,978.3 million in 2012 and is expected

to reach USD 137,458.9 million in 2015 with a CAGR of 6.3% during the 2012-2015

periods. This market has registered a mature and moderate growth rate in Europe and

the US market. But the growth is average in other countries like China, Thailand,

Nigeria and India. Some of the major challenges faced by this market is the increasing

consumption of wine, spirits and other alcoholic drinks. Europe holds the largest

market share in the beer industry and is continually growing.

The global beer market is primarily driven by various factors such as increasing

disposable income levels, promotion and marketing activities of beer market,

increasing beer consuming population and improvements in the quality of beer. This

market is highly affected by various factors such as seasonality, tax rates and duties,

climatic conditions, demographics, rules, regulations and other government policies,

health effects, consumption of various substitute products and high investment in beer

market and supply chain infrastructure.

Beer industry is facing major challenges from increasing rate of unemployment,

increase in fuel prices, and constrained consumer spending. However, with recovery

from global financial crisis in past, and reduction in unemployment, beer industry is

expected to witness considerable growth in upcoming years.

2.2.2 The Indian Scenario

The first modern brewery in India was set up in Kasauli, in the Himalaya Mountains,

near Shimla in the late 1820s by the Englishman Edward Dyer. Dyer's brewery

produced Asia's first beer, called Lion. Today no brewer in India makes India Pale

Ale. All Indian beers are either lagers (5 % alcohol such as Australian lager) or

strong lagers (8 % alcohol - such as the popular MAX super strong beer).

International Breweries Pvt. Ltd. have recently announced an intention to work with

Mohan Meakin to produce and launch an India Pale Ale called Indian IPA from

India's first brewery at Solan. Kingfisher, Haywards, Kalyani Black Label, Golden

Eagle, Australian, Max, Royal Challenge, Kings and Belo are popular Indian beer

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brands. With the average age of the population on the decrease and income levels on

the increase, the popularity of beer in the country continues to rise. Indian growth

rates compare favourably with the global beer industry part from providing strong

growth; India also provides attractive profit margins due to the consolidated nature of

the industry. The effect of this consolidation can be seen in the fact that beer prices in

India rarely go down with the competitive pressures of new product or brand

launches. In the past, whenever beer prices have gone down, it has been due to either

the lowering of duties by the government or the deregulation of distribution (leading

to lower margins for the distribution channel partners). In neither scenario have the

margins or revenues of beer manufacturers been affected.

The Indian beer market has been growing rapidly over the last 10 years, due to the

positive impact of demographic trends and expected changes, like:

Rising income levels

Changing age profile

Changing lifestyles

Reduction in beer prices

In India the future of beer industry is very much optimistic because:

India has predominantly a warm/hot climate

The beer-drinkers in the country are much younger than the average beer-

drinker elsewhere in the world. This makes them more likely to carry the

brand with them for a lifetime.

Increasing exposure to beer and wine drinking, mainly due to media and

consumer mobility.

All these factors combined together make the scenario very promising for beer

industry and are 'in sync' with their strategy for India.

The Indian beer industry has witnessed a big change during the last five years. The

industry was previously dominated by competition between the Vijay Mallya

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controlled United Breweries Group and the Manu Chabbria-controlled Shaw Wallace.

The scenario changed, however, with the entry of SABMiller in India.

international beer giant started by acquiring small breweries in the south but

completely changed the landscape with the acquisition of Shaw Wallaces

portfolio for a reported US$264m in 2003.

The

then

beer

2.2.3 Regional Scenario

United Breweries Ltd. Palakkad is the one of the breweries owned by the UB group in

India. The brewery with a technical collaboration of M/s Henninger International

Germany was originally established by the Premier Cotton Mills group, Coimbatore

in the year 1973. The unit then known as Premier Breweries Ltd came to being in the

year 1973. The unit then known as Premier Breweries Limited came to being United

Breweries Limited after it was amalgamated with the UB group in 1995.

United Breweries Limited, Palakkad started off with a modest capacity of 100000

cases a month has been expanded twice since last two years from 250000 cases to

450000 cases a month. The brewery with an installed capacity of 450000 cases per

month is the largest in Kerala and caters to about 70% of Kerala requirements.

With its state of art plant and machinery, seven popular brands of beer are produced in

the brewery. The company being one of the largest employers in Kanjikode Industrial

belt makes persistent efforts towards Environmental protection, Pollution Control,

Water Conservation through rain water harvesting and implementation of Corporate

Social Responsibility projects in and around the brewery in Palakkad.

Kerala's beer market seems to be growing faster compared with the national scene

thanks to robust consumption in smaller towns. Though brandy is the dominant

category in the State, the consumption of beer is also witnessing a growth in recent

times, especially in smaller towns. United Breweries has got dominant market share in

the State which is expected to grow. The company had sold 98 lakh cases in 2011-12

against 86 lakh cases in the previous year. The introduction of the new brand

Kingfisher Ultra Super Premium will play a leading role in achieving a comfortable

market share. The bulk of the beer sales are coming from retail outlets in the State,

contrary to the company's estimate that it comes from hotels. UB has launched

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http://en.wikipedia.org/w/index.php?title=Manu_Chabbria&amp%3Bamp%3Baction=edit&amp%3Bamp%3Bredlink=1http://en.wikipedia.org/w/index.php?title=Manu_Chabbria&amp%3Bamp%3Baction=edit&amp%3Bamp%3Bredlink=1


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various promotional programmes in the State as part of brand promotion. Kingfisher

Kochi International Fashion Week is one such event

2.3.1 Industry key players

The Indian alcohol market is regulated by the government. The restrictions on alcohol

advertisement, brand entry, pricing and Greenfield distilleries act as a barrier to entry

for new players. Also since alcohol is a state policy, there are restrictions in its

movement from one state to other. This has resulted into small inefficient distilleries

all across the country

2.3.1.1 SAB Miller

SABMiller is the closest competitor to UB, it has very strong brands like Fosters,

Haywards, Knockout etc. but they are not highly differentiated when compared to UB

brands. With big brands like Carlsberg, Budweiser, Heineken, Tiger coming into the

Indian market it will be a tough task to maintain the market share.

2.3.1.2 Mount Shivalik

Based in Alwar, Rajasthan, Mount Shivalik is in the business of manufacturing and

marketing beer. The group also has presence in the hospitality business with pubs,

motels, beer gardens and highway restaurants. It has a state of the art brewery in the

Alwar district with an annual installed capacity of 300000 hector litres.

2.3.1.3 Mohan Meakin

Registered in Solan, Himachal Pradesh, it manufactures and markets all types of beer

and prestigious brands of Indian made foreign spirits (IMFS) besides blende malt

whiskies, rum, gin and vodka. In addition to these, the company manufactures juicesand canned products, corn flakes, wheat porridge, malt extract, glass bottles, mineral

water, casting and other products. It has breweries and distilleries established under

collaboration arrangements in various other places in India and Bhutan.

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2.3.2 Competitor Analysis

Porters Five Force Analysis

This model analyses the nature and intensity of competition in an industry throughfive forces (rivalry, customers, supplier,

forces are explained as below

new entrants, and substitutes). These five

Threat of NewEntrants

Threat of MNCs

Entering theMarket

Customer's Buying Power

Growing Economy andDeepening of the customer's

pockets.

Substitutes

Tea, Softdrinks,Coffee with issue of

Alcohol being

considered aTaboo.

Competion AndIntensity of Rivalrybetween UB and its

Competitors.

Supplier'sPower

Variying cost ofRaw Materials

Fig. 2.3.2.1 Porters five force analysis

1. Threat of New Entrants

A major force shaping competition within an industry is the threat of new entrants.

The threat of new entrants is a function of both barriers to entry and the reaction fromexisting competitors. There are several types of entry barriers. Economies of scale act

as barrier to entry by requiring the entrant to come on large scale, risking strong

reaction from existing competitors, or alternatively to come in on a small scale

accepting a cost disadvantage. Economies of scale will enhance UBLs relative

position and drive financial performance. Product differentiation creates a barrier to

entry by forcing entrants to incur expenditure to overcome existing customer loyalties.

New entrants must spend a great deal of money and time to overcome this barrier. The

capital costs of getting established in an industry can be so large as to discourage all

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but the largest companies. Switching costs refer to the one-time costs that buyers of

the industry's outputs incur if they switch from one company's products to another's.

To overcome the switching cost barrier, new entrants may have to offer buyers a

bigger price cut or extra quality or service. All this can mean lower profit margins for

new entrants. Access to distribution channels can be a barrier to entry because of the

new entrants need to obtain distribution for its product. A new entrant may have to

persuade the distribution channels to accept its product by providing extra incentives

which reduce profits. Government agencies limit entry by requiring licenses and

permits. In the beer industry there are strict rules which limit the entry of new firms.

National governments commonly use tariffs and trade restrictions to raise entry

barriers for foreign firms.

2. Bargaining Power of Suppliers

With increasing cost of raw material and decreasing cost of barley suppliers

bargaining power was high. Shifting their production of beer on Malt Company has

achieved a hold on its raw material and considerable reduced the supplier strength and

dependency. Barley is a key raw material in the beer making industry. It constitutes

to around 12% of the raw material expenses to the company. Over the years there has

been a decline in the production of barley in India. Glass bottles, Barley, Hops, and

Malt constitute more that 40% of the companies operating costs. However UB being a

large player and customer will have better bargaining power and enjoy flexible

sourcing arrangements over distributers and raw material suppliers and will continue

to maintain their margins.

3. Threat of Substitute

India is predominantly a spirits market and beer is a minority preference for those

who consume beverage alcohol. So substitute is biggest threat as preference for beer

among beverage drinker is less. But the low penetration in beer consumption in

comparison to international levels offers the expectation of substantial and sustainable

growth in demand for beer in years to come, particularly given the youthful age of

Indias population. The per capita consumption of beer is only 1lt per person per

annum in India where the global trend is much higher. India is a hot country and there

are many options for customers. And there is a stigma attached with beverage alcoholand people tend to avoid consuming alcohol in public. Due to heavy and irregular

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taxing by the various states has made beer very costlier than other beverages. But this

is changing with the income levels of customers increasing the Beverage Alcohol

industry is showing a strong rise in market size.

4. Bargaining Power of Customers

It is the extent to which customers are successful in forcing prices down, or securing

high quality or more service at the same price. Customers tend to be powerful when

the quantities they purchase form a large portion of the seller's total sales. Buyers do

not understand the quality of the beverages and as there are not many players in the

market the customers has less command over price. The growth of the Industry is

driven by a progressive economy with favorable demographics, higher disposable

incomes, increasing exposure to Western lifestyles and higher consumer spends.

5. Competition and Intensity of Rivalry

The Company notch up market share of 55%, more than twice that of its closest

competitor. It is significant to note that the companys mild beers dominate the market

with a 70% share, while Kingfisher Strong has achieved a 50%+ share in the much

largerstrong beer segment of the market. The Company do a lot more marketing

and promotional activity around Kingfisher, whereas the regional brands are limited

to one-two posters,

Table 2.3.1 Financial Comparison of Competitors

Source: Annual Reports

15

Name Market

capitalization

i

Sales Turnover in

Rs. Cr

Net profit in Rs.

Cr

UnitedBreweries 19,930.86 3,627.69 126.44

SABMiller 5493 2,987 119.41

Mount Shivalik 13.82 117.79 -9.45

Mohan Meakin 122 384.89 -1.11
http://www.moneycontrol.com/india/stockpricequote/breweriesdistilleries/unitedbreweries/UB02http://www.moneycontrol.com/india/stockpricequote/breweriesdistilleries/unitedbreweries/UB02


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Chapter 3

Organizationalanalysis

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3.1.1 Background and History

Company Profile

17

Company Name United Breweries (Holding) LimitedHeadquarter Bangalore, India

Founded 1857

Founder Thomas Leishman

Incorporated 1915

Chairman Dr. Vijay Mallya

Logo Pegasus

Industry BreweryAlcoholic Beverage

Airline

Chemical & Fertilizers

Information Technology

Pharmaceuticals

Divisions United Breweries Limited

United Spirits Limited

Kingfisher Airlines

Mangalore Chemicals Fertilizers &

Limited

UB Global ( Trading Company)

UBICS

Regional Offices of the company East(Kolkata)

West(Mumbai)

North(Delhi)

South( Bangalore

Address of Organization United Breweries Limited, Kanjikode West

P.O. 678623 Palakkad

Official website http://www.theubgroup.com/
http://www.theubgroup.com/http://www.theubgroup.com/


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United Breweries Limited, the flagship company of the UB Group, has an association

with the brewing dating back over five decades, starting with 5 breweries in South India

in 1915. From bullock cart-loaded barrels or 'Hogheads' of frothing ale, the Beer

business has gone on to become the undisputed 'king' in the Indian beer market.

Here, innovative, creative and aggressive marketing is complemented by a strong

distribution network. A management focused on building brand equity on one hand and

exploiting it to the hilt on the other. A concerted emphasis on quality.

UBL today boasts an impressive spread of own and contract manufacturing facilities

throughout the Country. United Breweries Group or UB Group, based in Bangalore, isa conglomerate of different companies with a major focus on the brewery (beer) and

alcoholic beverages industry. The company markets most of its beer under the

Kingfisher brand and has also launched Kingfisher Airlines, an airline service in India,

with international flights operating. United Breweries is India's largest producer of beer

with a market share of around 55% by volume.

In addition, UBL has also entered into mutli-faceted strategic alliance with Scottish &

NewCastle Plc (S&N), an international brewery major, with $6 billion in revenue and

a market capitalization of $5.4 billion. This alliance, apart from having a joint venture

in India, will allow S&N to market it International brands like Kronenbourg in India,

while UBL will utilize S&N's global network to further globalize its Kingfisher.

The UB Group - History

Success

It was the late 19th century. Beer was delivered in bullock carts in casks called

hogsheads. Consumers were mostly defence personnel. Over hundred years have

passed. Beer from United Breweries is now delivered all over the world, catering to the

needs of consumers across generations and continents. From modest, local beginnings,

the UB Group has transformed into a global conglomerate.

The early days

The Castle Brewery which dates back to 1857 (the year of the Indian mutiny) was setup for the European planters scattered over the Nilgiris. So was the Nilgiris Brewery

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Company. The British Brewing Corporation set up in Madras (1902) catered to the elite

of the port town of Madras while the Bangalore Brewery Company had been supplying

beer for the troops stationed at Pune and Bangalore since 1885.

United Breweries Limited (UBL) was founded on March 15, 1915, in Madras by

Thomas Leishman, a Scotsman, also its first Managing Director. UBL manufactured

and sold only bulk beer for troops of both the world wars. It was a classic case of role

reversalIndia being introduced to this exotic brew and in turn becoming its major

exporter.

Consolidating growth

The Companys brewing tradition has a legacy of nearly 130 eventful years. Along itsjourney through the global Alcoholic Beverages landscape, UBL has consistently

influenced business paradigms, beer-drinking habits and conventional mind-sets. One

man played a pivotal role in the Groups growthVittal Mallya who was elected to the

Board of Directors of UBL in 1947 at the age of 22 and a year later became its

Chairman. Bangalore has been at the core of UBLs existence. The Registered Office

of UBL was shifted to Bangalore in June 1952, into the spacious 22-acre factory of the

Bangalore Brewery Company. The Bangalore Brewery buildings, dating as far back as

1885, have since given way to newer construction. The only relic that still stands is the

present go down adjacent to the UB Towers building, which earlier housed the bottling

cellars, pasteurizing and packing departments. The five acres of land across the road

donated to the Jesuit Society now forms the campus of St Josephs Indian High School.

Exploring Opportunities

In 1951, United Breweries Limited added liquor to its product cabinet when

McDowells became its first subsidiary. Under the dynamic guidance of Vittal Mallya,

the Company became the first to manufacture Indian substitutes of foreign liquor. This

gave rise to a new termIMFL (Indian Made Foreign Liquor). McDowell has since

then been the undisputed market leader and one of the largest and fastest moving

consumer goods companies in the country. Vittal Mallya was not a man to rest on his

laurels. He continued to pursue opportunities in the Alcoholic Beverages business and

at the same time diversified into Polymers and Batteries in addition to Pharmaceuticals

and Foods that the Company had been making till then.

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United Breweries (Holding) Ltd.

United Breweries Limited (UBL)

The new UBL was carved out as the principal brewing company of the Group on

demerger of the beer business from the erstwhile United Breweries Limited, now

renamed United Breweries (Holdings) Limited. UBL has an association to brewing

dating back over five decades and commands a 40% domestic market share. Its leading

brands are King-fisher, UB Export, London Pilsner, Premium Ice and, Kalyani Black

Label. UBL has recently entered into a multi-faceted strategic alliance with Scottish &

Newcastle Plc. (S&N).

McDowell and Herbert sons

McDowell & Company limited together with Herbert sons Limited constitute the spirits

division of the UB Group with a combined ranking of being the 7th largest distiller in

the world. The division has another unique distinction- its 7 millionaire brands make it

one of only 4 companies in the world, and the largest growing regional brands- No.1

McDowell's Brandy, No.1 McDowell's Celebration Rum and No.1 McDowell's

Whisky.

UB Global Corporation Limited (UBGCL)

The world is UBGCLs market. Forming the International Business Division of the

group, the company is a golden status recognized Export House. Its exports comprise

beer, spirits, leather footwear, processed foods, pharmaceutical products and

customized perfumeries. UBGCL has been instrumental in making Kingfisher Lager

Beer available in 52countries.

UB Engineering Limited (UBE)

UBE is one of the leading Indian Engineering companies specialising in installation

and erection of industrial plants. The company focuses on power, fertilizers, oil & gas,

effluent treatment and agrotech sectors and is involved from concept to commissioning.

UBEs specialised multi-disciplinary teams adapt their skills to engineering and

constructing large and medium size plants with speed and efficiency. UBE has bagged

a $21 Million contract for the installation of electro-mechanical and instrumentation

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works at a power station in Abu Dhabi. It has an order booking for the current year in

excess of Rs.1000 Million

Mangalore Chemicals & Fertilizers Limited (MCF)

The only fertilizer company in Karnataka has under UBs management, become one of

the more efficient and profitable naphtha based urea producers in the country. The Govt.

of Karnataka selected the UB Group in 1990 to take over the ailing MCF with

accumulated losses in excess of Rs. 600 Million. This company has become a

turnaround star in UBs stable with profits being recorded in each of the last six years

and cash flows utilised for repayment of accumulated debts. Its brands, Mangala Urea

and DAP have a strong brand equity with the farming community in the Southern

States.

Aventis Pharma Limited (Aventis)

UBHLs stake in Aventis is over 10%. A global pharmaceutical company that discovers

develops and markets branded prescription drugs and vaccines to protect and improve

the quality of life of people around the world. Aventis has been a focused value-driven

corporate. The company seeks to consolidate and penetrate fresh markets in its key

therapeutic segments. The market value of UBHLs investments in Aventis as on

31.3.04 was close to Rs. 1700 Million.

Mergers & Acquisitions

In 1995 Premier Breweries Kanjikode, Palakkad was taken over by UB. The brewery

is situated in an ideal position. The brewery is blessed with abundant water supply from

Malampuzha dam which is near to the unit.

1972 investment on fixed asset Rs.136.47 lakhs commercial production started

in June.

1972, Major Brand PREMIERHENNINGER BEER

1977 with reintroduction of prohibition in Tamilnadu, the company had to cut

down operations.

1978 secured marketing and tech. assistance from UB Ltd. On payment of

royalty, the asst. fee investment in fixed assets stood at Rs.466.49 lakhs

1983 KSBC came into existence taking over Beer/Liquor distribution in Kerala

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1985 during the year investment Rs 86 lakhs(conveyors and cold room

machinery)

1987 1:1 bonus share declare to equity share holders.

1990 took up second phase of modernization. Cold Room pipeline -0.57 lakhs,CO2 recovery plant-4.82 lakhs, auto code printer-42 lakhs, plate heat

exchanger-2.53 lakhs. Obtaining pollution control awards for best ETP.

1994-1995 Amalgamation with United Breweries Ltd. total gross block

Rs.619.28 lakhs production 18.84 lakh cases.

2002-2003 original cost of assets stood as Rs.315.27 lakhs due to revaluation of

assets.

2003-2004 installed Unitank 500HL, Boiler chimney height increase, addsoftener Rs.117.89 lakhs production 22.93 lakhs cases.

2004-2005 increases in licensed capacity- 4 lakhs HL: during sep-05 Bottle go

down converted to FG go down to increase storing of finished goods. Production

20.78 lakh cases.

2005-2006 Gross block stood Rs.554.17 lakhs during the year.

Capitalized-Glue pallets for labeller, ETP expansion-Rs 34.99 lakhs, pitching

tank cover Rs 1.76 lakhs, filter from Mohan tolls(8.88 lakhs) etc. The new brewhouse, new cold room extension at Rs 247.06 lakhs under CWIP produced 23.27

lakhs cases during the year.

Board of Directors

Company is managed and controlled through a professional board of directors. The

composition of the board of directors meets the requirement of corporate governance

code prescribed in the listing agreement. The board is comprised of requisite

independent directors in terms of corporate governance norms. Companys board

consists of eminent persons with considerable professional experts and experience.

Matters of policy and other relevant and significant information are regularly made

available to the board

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Table 3.1.1 Board of Directors

Source: Annual Report

5

Names of the Directors Category

Dr. Vijay Mallya Chairman (NE)

Mr. Kalyan Ganguly Managing

Mr. A K Ravi Nedungadi Director (NE)

Mr. Duco Reinout Hooft Graafland Director (NE)

Mr. Theodorus Antonius Fredericus de Rond Director (NE)

Mr. Guido de Boer Director (CFO)

Mr. Chugh Yoginder Pal Director (NE, Ind)

Mr. Sunil Alagh Director (NE, Ind)

Mr. Chhaganlal Jain Director (NE, Ind)

Ms. Kiran Mazumdar Shaw Director (NE, Ind)Mr. Madhav Bhatkuly Director (NE, Ind)

Mr. Stephan Gerlich Director (NE, Ind)

Mr. Sijbe Hiemstra @ Director (NE)


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3.1.2 Company Vision Mission Values

Vision of the Company

To provide quality beer to its consumers

Mission of the Company

Working with sincerity, loyalty towards The Government, Abiding and

Following the Rules Laid Down in Companies Act, 1956

Mission Statement

To 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.

To focus on assuming leadership in all our target markets.

To seek to be the most preferred employer wherever we operate.

To recognize that our organization is built around people who are our most

valuable asset.

To always be the partner of choice for customers, suppliers and other creators

of innovative concepts.

To continually increase the long-term value of our Group for the benefit of our

shareholders.

To operate as a decentralized organization and allow each business to develop

within our stated values.

To be a major contributor to our National Economy and take full advantage of

our strong resource base.

To commit ourselves to the on-going mission of achieving Scientific

Excellence.

Objectives of the Company

To be the partner choice for consumers, suppliers and other created of

innovative concepts.

To be the recognized leader in our target markets.

To be the preferred employees wherever we operate.

To recognize assets.

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To recognize people as the most valuable asset.

To be the partner of choice of consumers, suppliers and other creators of

innovation concepts.

To be a major contributor to our national economy and take full advantageof the strong resources we have.

To continually increase the long term values of our group for the benefit of

our shareholders.

To operate in decentralized manner, allowing each business to develop

within our values.

To commit ourselves to the ongoing mission of achieving scientific

excellence.

Unique Feature of the Palakkad Unit

The uniqueness of the unit is that even after being a food industry it gives high

importance to cleanliness and hygiene. It has implemented a unique Japanese

technology of cleanliness. It is called suchithwam. The unit adopts 5 Japanese words

for perfect housekeeping.

SEIRE - SORTING

SEITIONSYSTEMATIC

SEISCOCLEANLINING

SKIKETUSTANDARDISING

SITSHIKE - SELF-DISCIPLINE

The UB Logo and its Evolution

The emblem of the UB Group- the winged horse of Greek mythology-has evolved as a

very strong brand identity and has become synonymous with United Breweries. The

origin of the logo is unknown but as far back as 1944, the flying horse with a case of

beer on its back and between its wings became part of the UB lore with the UBL's

diversification and changed image, the cask is gone.

Then, the highflying Pegasus symbolizing the Group's forays into hitherto unexplored

avenues, its wings flapping tirelessly and assuredly, in its journey towards a beckoning

future. The colours of gold and the UB blue denoted exclusivity and dynamism.

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Source: Official Company Website

Fig. 3.1.2 UB Ltd Logo

Quality

Quality and hygiene are the key elements of the United Breweries' manufacturing

philosophy. To this end, the Central Scientific Laboratory (CSL), headquartered at

Bangalore sets standards for all its breweries. Quality Management Systems laid out

along the lines of ISO 9000 are strictly adhered to, controlling quality at every stage of

production, from raw materials to the end product. Also, besides controlling the

production process, the CSL analyses the Company's beer taken off market shelves all

over the country, the competition's beers and beers from across the world. These beers

are tested as per the standards laid down by the European Brewery Convention on 40

different parameters. By these standards, United Breweries' beers don't just equal, but

even surpass, several Dutch and American beers.

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3.1.3 Products and Market

Products

Kingfisher PremiumKingfisher Strong

Kingfisher Strong Fresh

Kingfisher Draught

Kingfisher Ultra

London Pilsner Premium Strong

Kalyani Black Label Strong

Bullet

Kingfisher Blue

Kingfisher Red

Kingfisher Bohemia

Zingaro

UB Export

UB Export Strong

United brewery Ltd. Palakkad produces 7 Brands.

Kingfisher Blue

Ice Blue

Kingfisher Lager

Kingfisher Strong

Sandpiper

Zingaro

London No:1 pilsner

Markets of UB

Government Market:

In a government market, the respective state government was the wholesale

distributor of beer and acquired beer directly from manufacturers based on an annual

tender system, via its own agencies. The government controlled the price at which

beer was procured from the manufacturer. This beer was then retailed through private

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vends (e.g., Tamil Nadu, Andhra Pradesh) or a combination of government and

private vends (e.g., Kerala, Delhi).

Open Market:

In this market, there was little or no government intervention in the pricing and

distribution of beer. The manufacturers sold beer to the wholesaler/distributor who in

turn sold it to the retail outlets. Pricing was free and determined by market forces. The

government issued wholesale/retail licenses for a fee. However, in certain markets,

new licenses were not freely available.

Exports:

The Companys products were exported indirectly through UB Global Corporation

Limited a subsidiary of UBHL. The Company had a tie-up with S&N, which had a

long established track record of distribution of third party brands, for the international

distribution of KINGFISHER'. The company also entered into an exclusive

Licensing and Distribution Agreement on May 24, 2004 with Independent Liquor

Limited (ILL) to manufacture, package, market, distribute, and sell the products of the

company in Australia and New Zealand for five-years.

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3.1.4 Awards Recognitions and Certifications

The company maintains ISO standards in all its operations and is approved.

Kingfishers Facebook has a fan following of over 3.5 million, which makes it the

second largest in the world for a beer brand. The Company has been reducing its carbon

footprint through reduction of energy consumed by 5% 10% annually. A ground

breaking project to generate electricity from spent grain will be inaugurated during the

current year. United Breweries Ltd. has won many awards for conservation of water

and our aim is to reduce use of water to a level of 3.5 kl/kl, which is the global

benchmark, from the already excellent level of 4 kl/kl. The Company also invests in

Primary Education and Primary Health Welfare in 27 villages where we operate. The

educational initiatives presently cover over 2500 students with emphasis on female

literacy. Potable water initiatives are taken, which bring clean drinking water to 20

villages. In addition empowerment through contract farming helps nearly 5000 farmers

.In the year 2012 the company has continued the infusion of its own patented bottles in

order to ensure sufficient availability of recycled bottles and to contain the cost of such

bottles. The initiative has proven to be successful and has been the key driver behind

the reduction in manufacturing variable cost, notwithstanding significant increases in

the prices of new bottles. The Company has won the World Beer Awards 2010 and

India Star 2010.

The United Breweries Limited Palakkad unit has been maintaining excellent standards

in Environment Protection and Effluent control as well as plant safety. An ETP of 400

cum per day is operational and the BOD, COD and TDS loads in the treated effluent

water has been fairly consistent and within the limits prescribed by the KPCB. The unit

has all approvals in place in terms of pollution control and compliance t0 pollution

norms. UBL-Palakkad has the unique distinction of bagging sate awards from Kerala

State Pollution Control Board for three consecutive years 2006, 2007 and 2008.

The unit was awarded the second prize among medium scale Industries for Pollution

Control and Environment Protection, by the Kerala State Pollution Control Board for

the year 2006 and won a cash reward of Rs 25000/- and a merit certificate. The unit

improved its performance consistently and was awarded first prize for the same subject

for the year 2007 that carried a cash of Rs 50000/- and a merit certificate. The unit is

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recognized as one of the most active contributors to pollution control and

Environmental protection activities in Kerala.

The units water usage of about 5.5 liters/KL of beer is close to international standards

and is the best in the country. Further with a view to enhance the utility potential of

treated water the unit has embarked upon a sponsored collaborative research with

Tamilnadu Agricultural University, Coimbatore on Utilization of treated effluent water

from breweries for sustainable soil health and development of select crops. This project

of 3 year duration at a total outlay of Rs 700000/- was commenced during July 2008.

Further the unit has made rapid strides in yeast business and has successfully recovered

yeast through fluidized bed drying process and started marketing the same. The highest

contributors of BOD/cod in effluent streams has been effectively standardized as a toxin

binder in cattle and poultry feed formulations by M/s Suguna Poultry Products Limited

, Coimbatore and Milma, Thiruvananthapuram. The product is being sold on

commercial scale since August 2008. Thus the effort as above, that started off as a

measure to control BOD/Cod load in the effluent, has got converted in to a credible

business proposition in big way.

The unit also has been able to recover and sell weak wort and spent grain. All theproducts have been independently tested for quality and toxicity by Veterinary College

and Research Institute, Kerala Agricultural University, Trissur, SGS Labs, Kochi,

Suguna Poultry Limited, Coimbatore, Milma, Thiruvananthapuram and National

Institute of Animal Nutrition and Physiology, Bangalore.

The unit has established safe work practices to ensure process and operational safety.

Safety training is imparted quite regularly and work procedures are continuously

upgraded. Slowly but steadily operations are mechanized and automated to reduce risks.

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3.1.5 Business Performance

The signal milestone of 100 million cases sale of Kingfisher Beer is the crowning

highlight of the Companys growth story during fiscal 2012. The entire market for

beer in India, just 10 years ago, was as small as 26 million cases, throwing into sharp

relief the pace of growth in the industry and more particularly of United Breweries

Ltd. Overall sales for the year amounted to 133 million cases representing a growth of

6% over the previous year. This has enabled the Company to notch up market share of

55%, more than twice that of our closest competitor. It is significant to note that our

mild beers dominate the market with a 70% share, while Kingfisher Strong has

achieved a 50%+ share in the much larger strong beer segment of the market. The

breweries have not only been approved for local brewing of Heineken but also that the

product brewed in India has been acknowledged to be one of the finest when

compared with global beers. United Breweries Limited has continued to expand its

clear market leadership in the Indian beer market, overcoming the challenges of the

highly regulated industry and competition from global brewers. For the 5th year in

succession, the Company has increased its market share and widened the gap with its

competitors.

Company has achieved a volume growth of 6% on a like-for-like basis in the year

under review, outgrowing the industry in a difficult year. The total sales volume has

reached 133 million cases, driven primarily by growth in Andhra Pradesh, Karnataka,

Rajasthan, Uttar Pradesh and Goa. The net sales for the year 2011-2012 stood at

Rs.36,277 million as against net sales of Rs.30,598 million in the previous year,

registering a growth of 18.6%. The Company has increased its market share in the

states of Andhra Pradesh, Uttar Pradesh, Haryana, Maharashtra, Punjab, Rajasthan,

West Bengal, Karnataka and Goa. The shares in Tamil Nadu, Bihar and Kerala were

affected by supply and environmental issues.

Indias largest selling beer, further consolidating its leadership position by registering

record volumes, while Kingfisher Premium continued its lead in the mild beer

segment. During the year 2012, our brewery in Taloja near Mumbai was approved by

Heineken for the brewing and bottling of Heineken Lager Beer. India-brewed

Heineken rolled out into the markets of Mumbai and Pune on International Beer Day

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3.1.6 Strategic plans, programs and long term objectives

Major initiatives such as introduction of patented bottles, control of energy and

reduction of water consumed in the manufacturing process are taken to keep costs down

in an environment of severe cost pressure, and also as a good practice that benefit the

environment and the communities in which business operate. To cater the term trend of

growth, even though it is periodically interrupted by government regulations and

taxation, the Company is continuously investing in capacity enhancement. During the

year 2012, capacity was expanded in West Bengal, Orissa, Andhra Pradesh and

Maharashtra. The coming year Company sees commencement of production at the new

Greenfield brewery in Karnataka and commencement of construction of a new brewery

in Bihar. While seeking to take advantage of rapid and sustainable growth, the companyis also conscious of the need to de-risk the business. To this end, several strategic

initiatives to cover Inputs, Packaging material and, indeed, Information Technology,

have been put in place.

A high growth economy and a young population bring significant opportunities for the

beer industry. Indias growing young population has led to the emergence of a

substantial active workforce that has increasing disposable income. Growth in the

alcoholic beverages sector has also been fueled by the increasing social acceptability of

alcohol consumption, especially for beer and wine, and evolving consumer taste.

There are four facets of sustainability that United Breweries Limited has built initiatives

around:

Reduction in carbon footprint, to ensure a better planet for the generations to

come

Water conservation, critical in a country that is listed as drinking-water deficient

Positively impacting stake-holders that reside around our breweries

Helping farmers who are part of the value chain get better net remuneration for

their produce

Company believes it is their responsibility to contribute to the improvement of thesociety around their breweries, which in a country like India is translated into a focus

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on basic necessities of life. Company focuses CSR efforts on four areas:

Potable Water Management,

Contract Farming,

Primary Health and Welfare, and

Primary Education.

United beverages compete on the basis of their available tangible and intangible

resources and skills. The various sources are the essence in the groups of the core

competences. It is difficult to manage the core competences and the strategies are to

evaluate its resources and to meet the challenge of whole environment in difficult

dimensions. It is in the pattern in the sequence of strategic action taken by the company.

The main strategy is to build that strength and competences never diversifies far away

from the company. The management has clear understanding of business as well as

micro and macro environment. The knowledge and experience provides the basics of

management intuition and creditability. The UB Ltd. is the only company in the

business with a comprehensive brand portfolio, with mix of strong national and regional

brands that carter to different need states of the customer. They manage cash and fund

in an effective and efficient manner and Keeps all records of expenditure. They ensures

effective Management of working capital.

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3.2.1 Corporate Structure

SBUs under United Breweries Ltd.

Beverage-Alcohol:

Spirits

United Spirits Limited (USL), the largest spirits company in the world by volume,

sold 122.75 million cases for cases for the fiscal ending March 31, 2012 with

revenues at Rs.9200 crores (consolidated) for the same financial year.

Besides Whyte & Mackay and Bouvet Ladubay being 100% subsidiaries of USL, the

company has 22 millionaire brands (selling more than a million cases a year) in itsportfolio and enjoys a strong 59% market share for its first line brands in India.

Aviation

Kingfisher Airlines Limited is one of India's leading airlines, operating more than

100 flights a day with a wide network of destinations. In May 2009, Kingfisher

Airlines carried more than a million passengers, giving it the highest market share

among airlines in India.

Fertilizers

Mangalore Chemicals & Fertilizers Limited

Mangalore Chemicals and Fertilizers Limited (MCF), with a turnover of over

Rs.3,700 Crore (FY 2011-2012), is the only manufacturer of chemical fertilizers in

the state of Karnataka. The factory is strategically located at Panambur, 9 km north of

Mangalore City, on the banks of the Gurpur River, in front of the New MangalorePort. The plant is well connected, both by rail and road. The West Coast National

Highway (NH-l7) from Kochi to Mumbai separates MCF from the New Mangalore

Port.

Engineering

UB Engineering- the UB Group's Engineering Division - is one of the foremost Indian

engineering companies in the field of installation of industrial plants. UB

Engineering's activities are strongly focused on the Turnkey Division for projects in

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Power, Fertilizers, Oil & Gas, Fire Fighting, Effluent Treatment, Agrotech and other

sectors like - concept to commissioning, on-site fabrication, installation, overhauling

and maintenance.

Shareholding pattern

The Shareholding Pattern page of United Breweries Ltd. presents the Promoter's

holding, FII's holding, DII's Holding, and Shareholding by general public etc.

Table 3.2.1.1 shareholdings pattern - United Breweries Ltd.

source: UB Ltd Annual report 2012

17

Shareholding pattern - United Breweries Ltd.

Holder's Name No of Shares % Share Holding

Promoters 106984230 40.46%

Foreign Promoter 90850440 34.36%

Foreign Institutions 49525306 18.73%

General Public 9629983 3.64%

Other Companies 6422874 2.43%

Foreign NRI 517888 0.20%

Others 343667 0.13%

N Banks Mutual Funds 96282 0.04%

Financial Institutions 31939 0.01%

Foreign OCB. 1880 0.00%

Central Govt. 660 0.00%


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Table 3.2.1.2 shareholdings percentage

Source: UB Ltd Annual report 2012

Corporate Offices

United Breweries Holdings Limited Level 12 - 16, UB Tower, UB City

24, Vittal Mallya Road, Bangalore, 560001 India.

United Breweries Limited Level 3 5, UB Tower, UB City 24, Vittal Mallya

Road, Bangalore, 560001 India.United Spirits Limited Level 6 10, UB Tower, UB City 24, Vittal Mallya

Road, Bangalore, 560001 India.

Kingfisher Airlines Kingfisher House, Western Express Highway. Vile Parle

(E) Mumbai 400057.

Mangalore Chemicals & Fertilizers Ltd Level 11, UB Tower, UB City

24, Vittal Mallya Road, Bangalore, 560001 India.

UB Global Level 15, Canberra, UB City, 24, Vittal Mallya Road, Bangalore-560001.

Vittal Mallya Scientific Research Foundation P.B. 406, K. R. Road Bangalore-

560004.

18

Promoters 74.82

Individuals 4.65

Institutions 0.73

FII 17.60

Govt. 0.00

Others 2.20


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3.2.2 Business and Departmental Structure

Organization Structure

A business organization has to perform a number of activities in order to run itself. Infunctional form of departmentation an organization group function or activities into

primary departments. The application of functional form of departmentation means

grouping activities into departments of Production, marketing, Human Resource

development and finance. Plant layout at mfg. unit is well designed and very

systematic, it is continuous flow starting from the introduction of Raw Materials to

final product which is Beer. The typically hierarchical arrangement of lines

ofauthority, communications, rights and duties of an organization.

19
http://www.businessdictionary.com/definition/hierarchical.htmlhttp://www.businessdictionary.com/definition/authority.htmlhttp://www.businessdictionary.com/definition/communications.htmlhttp://www.investorguide.com/definition/right.htmlhttp://www.investorguide.com/definition/duty.htmlhttp://www.investorguide.com/definition/duty.htmlhttp://www.investorguide.com/definition/right.htmlhttp://www.businessdictionary.com/definition/communications.htmlhttp://www.businessdictionary.com/definition/authority.htmlhttp://www.businessdictionary.com/definition/hierarchical.htmlhttp://www.businessdictionary.com/definition/hierarchical.html


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20Source: Organisation

Fig. 3.2.2.1The UB Ltd. Palakkad Departmental Structure


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Different Departments in the UB Ltd.

The departments in the organization which are classified on the basis of the functions

what they are performing, are listed below,

Purchase department

Production department

Commercial department

Finance department

Human resource department

Quality assurance department

Store department

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3.3.1 Purchasedepartment

Purchasing provides materials to the factory. Efficient buying can save in materials cost

which forms the major portion of the total cost of the organization purchasing can

contribute to import substitution such as cyclical swings of surplus and shortage rising

materials cost, heavy completion and contribution to the importance of purchasing.

Departmental Structure

Source: Purchase Dept. UB Ltd. Palakkad

Fig. 3.3.1.Departmental chart of purchase Dept. UB Ltd. Kanjikode

Steps in Purchase

Need identification

Purchase requisition

Evaluation of sources of supply

Negotiation with suppliers

Source selection

Order placement

Follow up

Receipt and inspection of goods

Making payment

22

Purchasemanager

Officepurchase

WarehousefunctionCharge

Superintendpurchase


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Maintaining records

Major functions

Procuring special raw materials from Bangalore as per the specification

given by or laid down by UB Bangalore(head office)

Collecting packing materials-cartons, empty bottles

Collecting labels from Bangalore

Importing raw materials from Germany- hops, malt

Responsible for establishing and administering purchasing policies

Dealing fairly with all potential sources of supply

Obtaining goods and services in an efficient mannerConsolidate requisitions and purchase of common items to obtain the

maximum economical bench and cost saving, advantages of quality

discounts

Handle complaint regarding purchase

Major raw materials

Major raw material is barley malt. Barley being an agricultural product, procured by

the supplier of malt in season and they ensure supplies all through the year. The major

suppliers are bar malt India Pvt. Ltd. and malt company India ltd.

Table 3.3.1.1 major raw materials of the company

source: Annual reports

23

ITEMS SOURCED FROM

Malt India

Hops Germany and Czech Republic

Maize/Flakes/Rice flakes India

Sugar India

Enzymes and chemicals India (Biocon Ltd.)

Filter aids and filter sheets India

Packing materials like labels, bottles, cartons. India

Packing materials like labels, cans and foils Germany, Thailand and Dubai


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3.3.2ProductionDepartment

In the UB Ltd. the production manager is called the Head Brewer. The Head Brewer

decides the type of beer to be produced in a shift. The annual production capacity of

the unit is 400000 Hector Liters (HL) as per recent certification obtained from Kerala.

The worker are employed in shift basis, 2 shifts are followed in bottling plants and 3

shifts in brewing process. The workers are permitted to do overtime where double

wages are provided to them.

Departmental Chart

Source: Production dept. UB Ltd Palakkad

Fig. 3.3.2.1 Departmental Chart of Production Dept.

24

Head Brewer(Mahesh R)

Assistant

Brewer

(Ravi S)

Chemist (K

R Prabath)

Trainee

Chemist

(Vivek MJ)

Process

Chemist

(Sandeep

Process

Associates

Brew

Manager

production(Velmurugan

Shift

Engineer

(Basil

Trainee

Bottlery

(Kiran

Supervisor

Production

(P.S.

Jagadeesh)

ShiftEngineer

Bottlery (S

BOTTLING


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Objectives

Shorted Lead Time

Higher Turnover

Better Quality

Greater Flexibility

Better Customer Service

Reduced Wastage

Production Process

Raw materials

Mixing machine

Lauter tank

Whirlpool tank

Cool room

KSH washer

Labelling

Packing

Dispatching

Presently the unit is producing 8 kinds of products in the Palakkad unit

Kingfisher strong beer

Kingfisher premium beer

UB Ice beer

Sandpiper

London Pilsner

Zingaro

Kalyani Black Label

The products are supplied mainly to Kerala State Beverages Corporation (KSBC) and

Karnataka state breweries cooperation and Tamil Nadu State Marketing Corporation

(TASMAC)

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DESPATCH

Source: Production Dept.

Fig. 3.3.2.2 Steps in Beer manufacturing and despatching

26

DESPATCH

STORAGE

PACKAGING

BOTTLING

FILTERING &

CARBONATION

LEAST CULTURE

BREWING

RAWMATERIAL


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Raw materials

The raw materials used in production of beer market, hops, maize, sugar, yeast and

water. Here the main raw materials in water constituting almost 90%. The production

cost is calculated and entered in the computer which can be viewed by the accounts

department to see the level of cost and for comparison with previous years cost.

Ingredients

Malted barley before roasting

Water

Starch source

Hops

Yeast

Clarifying agent

Ale

Wheat

Color

Alcohol strength

Manufacturing Process of Beer

In any beer industry there are basically 3-4 sections depending on the process. These

are as follows:

The Brew House.

The Fermentation section.

The Lagaring and Filtration section.

The Bottling section.

Each of these sections and the processes involved in each are discussed as follows:

The Brew House

The main raw material for making beer is malt which is processed from barley. Barley

is processed in mills into malt which contains the required enzymes to convert the

insoluble starch in the barley to soluble and simple sugar molecules. This process of

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converting barley into malt is known as Malting. The process of malting is described

as follows:

Malting

Malting serves the purpose of converting insoluble starch to soluble starch, reducing

complex proteins, generating nutrients for yeast development, and the development of

enzymes. The three main steps of the malting process are steeping, germination, and

kilning.

Malt Constituents

Malt is largely made up of carbohydrates, which are composed of starch, sugars,

insoluble cellulose, and soluble hemicellulose. Starch, the most important constituent,

accounts for about 60 to 65% of the malt's weight, is composed of amylose, which is

reduced to maltose and malt triose and amylopectin that decompose into glucose.

1. Malt Grinding

The objective of milling is to reduce the malt to particles sizes, which will yield the

most economic extract (wort) and will operate satisfactorily under brew house

conditions and throughout the brewing process. The more extensive the malt is

milled, the greater the extract production. However, the fine grind can lead to

subsequent wort separation problems and a loss of extract in the spent grains during

wort separation. As a result, the brewer needs to consider the equipment used in the

brew house when determining the particle size when milling the malt. For example,

mash tuns require comparatively coarse grist while Lauter tuns can use finer grist

and mash filters still finer grist.

2. Processing of broken rice/ maize grits in the Rice Cooker

Rice is boiled in a rice cooker which is a massive container designed especially

for boiling rice which is finally mixed with the mash. The gross capacity of the

rice cooker is 120 HL and the working volume of the rice cooker is 80 HL. For

preparing a wort of 220 HL, 41HL of sterile water is added in the cooker

together with it 640 kg of rice is added. Temperature of the cooker is maintained

at 45C. This activates beta-glucoses, which breaks down gummy beta-glucan

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in the mash, making the sugars flow out more freely later in the process. To this

6kg of gypsum and 1.5 lts of biotempase is added and lid of the cooker is closed.

Mashing in the Mash Tun3.

By the time the rice is getting boiled in the rice cooker simultaneously the malt is

also getting boiled in the mash tuns The resulting grist which is formed after the

malt is crushed in the malt mill to break apart the grain kernels, increase their

surface area, and separate the smaller pieces from the husks is mixed with heated

water in a vat called a "mash tuns" for a process known as "mashing". For preparing

220 HL of wort grounded mash of near about 2750 kg is added in the mash tuns

which takes 20 minutes to fall in the mashtun from the mill. To this 195 HL of water

is added which is at 45 C. This activates beta-glucanase, which breaks down

gummy beta-glucan in the mash, making the sugars flow out more freely later in

the process.

4. Wort clarification in the Lauter Tun

After the mash is ready it is transferred to the Lauter Tun which is the traditional

vessel used for separation of the extracted wort. A Lauter tun has two bottoms, one

the false bottom for filtration and the other the collecting bottom which collects thefiltered wort. The false bottom in a Lauter tun has thin slits or perforations to hold

back the solids and allow liquids to pass through. Before the wort enters the Lauter

tun 5HL of water is collected on the false bottom of the LT.

5. Boiling of the wort in the Wort Kettle

After the entire wort is collected in the wort kettle the next step of wort boiling is

carried on. The entire process of wort boiling is completed in 70 mints. As soon asthe wort enters the wort kettle all the ingredients required in the process of boiling

and imparts taste to the beer is added in the wort kettle. Hops, a vital ingredient is

added to the wort. This imparts the characteristic bitter taste to the beer. This hops

is in pellet form and is nearly 2.4 kg in weight. Together with 5 cans of hops extract

is also added to the wort. This is company specific and is calculated according to

the quantity of the wort prepared. The hops pellet and the wort extract imparts the

bitterness to the beer. The major flavor contribution of hops in beer is bitterness

from iso-alpha acids.

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6. Wort Clarification in Whirlpool

Usually there are various method cleaning the wort of its debris, like hop strainers,

hop back, etc. but the equipment used in the plant is known as the Whirlpool. It is

a circular vessel into which wort is introduced tangentially. The tangential inlet isresponsible for the centrifugal force that accelerates the trub outside of the wall and

downwards.

7. Wort Cooling

Wort needs to be cooled to 12-16C for fermentation as this is the optimum

temperature for yeast to function and the required flavor development. The process

of cooling is carried out in plate heat exchangers. The plate heat exchangers operate

in counter flow for optimum heat transfer with principal cooling agent being chilled

brewing water. The wort after clarification is being passed through the PEC.

8. Wort Aeration

During wort cooling one more important aspect is wort aeration. The

microorganism yeast is a facultative anaerobe and the fermentation process is

anaerobic i.e. without oxygen, but for the yeast to replicate and live it needs

dissolved oxygen which is not present in the wort.

The Fermentation section

Fermentation is the process by which fermentable carbohydrates are converted by yeast

into alcohol, carbon dioxide, and numerous other by-products. It is these by-products

that have a considerable effect on the taste, aroma, and other properties that characterize

the style of beer.

The most important thing in beer production is the microorganism which ferments the

malt to desirable level of alcohol. The microorganism which is used for the purpose is

Yeast (Saccharomyces sp.). The yeast strain itself is a major contributor to the flavor

and character of the beer. The company imports its characteristic yeast slant from

abroad and grows it in the plant. There is a separate room for the production of yeast to

be used in the fermentation process. The particular yeast strain is a company secret and

is kept in strict supervision so that it is not stolen or leaked.

Lagaring:

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After the yeast taken out of the fermenters and left for maturation in either the lagar

tank or the Unitank the process of Lagaring starts. The process of maturation of beer is

known as Lagaring. This is also known as secondary fermentation. In this process the

beer is kept very low temperature of nearly -1C. At this temperature the beer matures

and the characteristic flavor of the beer comes in. This process goes on for 5 days and

then the yeast is decanted of from the vessel. This beer is known as green beer. This

beer is sent for filtration.

Filtration:

After the fermentation is over the beer has to be filtered so that there is no haze in the

beer and it is free of any foreign particles and is crystal clear. This process is done in

the filtration unit. Although conditioning-maturation, clarification, and stabilization-

plays an important role in reducing yeast and haze loading materials, a final beer

filtration is needed in order to achieve colloidal and microbiological stability. The beer

must be rendered stable so that visible changes do not occur during its shelf life. After

the beer is properly carbonated the beer is ready for bottling and hence is sent for

bottling.

The Bottling Process

The bottling usually deals with the cleaning of the used bottles, filling it with beer,

pasteurizing it and then labelling and packing it. Dirty bottles are collected from the

vendors who supply it to the company. These bottles are processed and these are only

filled. The entire system of bottling is automatic and computerized. Volunteers only

check the process if its going correct or not. The bottles are placed on the conveyer

which conveys the bottle to the KHS Washing Machine. This machine has a capacity

of washing 21000 bottles per hour if everything goes well. The bottles enter the machineand are washed inside automatically by 2.5% caustic solution and with 80C hot water.

At this acidic concentration and at this hot temperature the microbes in the bottles are

destroyed and becomes more or less sterile and free of any foreign bodies. Further the

labels and other things attached on the body of the bottle is removed in the KHS

machine in the washing process.

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8

28

Source: Production dept.

Fig. 3.3.2.3 Cost breakdown in percentage

32

Packaging Tax

Cost Breakdown in Percentage

4 2 1

15

17 25

Sales&marketing Production Malt Minor ingredients Adjunts Hops


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WORT KETTLE

Fermentation takes place after7-9 days. After chilling at 0-1degree cent, yeast is separatedand green beer is sent in largevessel

During maturation, variouschemicals/additives areadded to make a quality andtasteful.

Beer is filtered, polished andcarbonated sent to Bright BEER Tank(BBT) where beer is ready forbottling/canning.

33

Source: Production dept.Fig. 3.3.2.4 Illustrated Beer Manufacturing

process

Malt is milled to a suitable Malt & maize flakes with treated The whole wort issize water after maintaining various transferred to lauter tun

temp. for enzymatic reaction which where it is separated as

is called WORT possible from spent grain

PLATE HEAT EXCHANGER WHIRLPOOL

The color wort is brought up to 7- The whole thing from Wort Wort from Lauter Turn is9 degree cent and sent for Kettle is transferred to whirlpool collected and boiled withfermentation for settling purpose to get clear sugar and hops.

wort.

FERMENTATION LERGER VESSEL FILTERATION & CONDITIONING

MALT MILLMALT MILLMALT MILL


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Source: Production dept.

Fig. 3.3.2.5 Bottling process

34

Dispatch

Packaging & Storage

Inspection

Bottle Labelling Coding

Tunnel Pasteuriser

Inspection

Crowner

Bottle Counter

BBT Tank Filter

Inspection

Bottle Washer

Empty Recyclable Bottles


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3.3.3CommercialDepartment

This department mainly consists of two sub departments. They are

a) Sales and distribution departmentb) Marketing and Advertisement Department

Sales and Distribution Departmen

Documents

Revikumar Os