Term Paper Report

Term Paper Report

On

STUDY OF 4 COMPANIES FROM ALCOHOL

SECTOR

Mentors Submitted ByMr. Navneet Saxena Digvijay Singh (A1802011022)Ms. Luvnica Rastogi Shikhar Puri (A1802011003) Manobi Baruah (A1802011047) Gitika Singh (A1802011096)

MBA-IB (2011-2013)

AMITY INTERNATIONAL BUSINESS SCHOOL AMITY UNIVERSITY UTTAR PRADESH

SECTOR 125, NOIDA - 201303, UTTAR PRADESH, INDIA 2011

Term Paper Report 2011

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Contents ACKNOWLEDGEMENT ............................................................................................................................ 3

OBJECTIVE ................................................................................................................................................. 4

INTRODUCTION ........................................................................................................................................ 5

COMPANIES ANALYSIED ........................................................................................................................ 6

DIAGEO ................................................................................................................................................... 6

UNITED BREWERIES ............................................................................................................................ 6

CARLSBERG ........................................................................................................................................... 7

PERNOD RICARD .................................................................................................................................. 7

FINANCIAL HEALTH OF THE COMPANIES ......................................................................................... 8

GROSS MARGIN PERCENTAGE .......................................................................................................... 8

OPERATING MARGIN PERCENTAGE ................................................................................................ 9

ASSET TURNOVER .............................................................................................................................. 10

RETURN ON EQUITY .......................................................................................................................... 11

CURRENT RATIO ................................................................................................................................. 12

PAYABLES PERIOD ............................................................................................................................ 13

EARNING PER SHARE ........................................................................................................................ 14

SWOT ANALYSIS .................................................................................................................................... 15

MARKETING STRATEGIES .................................................................................................................... 20

INTERNATIONAL MARKET EXPANSION STRATEGIES .................................................................. 24

MERGERS, ACQUISITIONS AND EFFECT ON ECONOMY ............................................................... 31

HUMAN RESOURCE MANAGEMENT .................................................................................................. 40

BIBLIOGRAPHY ....................................................................................................................................... 49


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ACKNOWLEDGEMENT

The success of any research study depends upon a number of factors among which the proper guidance from the experts in the industry and a faculty plays an important role.

We take this opportunity to convey our sincere thanks and gratitude to all those who have directly or indirectly helped and contributed towards the completion of this project.

We take here a great opportunity to express our sincere and deep sense of gratitude our professors for giving us an opportunity to work on this project. The support & guidance from Sir, was of great help & it was extremely valuable.

STUDENTS


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OBJECTIVE

1. Market Description and Current Marketing Situation with analysis using SWOT. 2. Analysis of Financial Statements of selected 4 companies of the sector. 3. Analysis of ICT trends in the sector. 4. Nature of Competition (Number of companies, market share, market dominance, entry

and exit barriers etc.) 5. Analysis of International Business Expansion Strategy of 5 companies within the chosen

sector while maintaining a scrap book of the latest news & views 6. Impact of change in the National Income on the growth of the sector. 7. Impact on the performance (revenue) of chosen sector due to change in technology and

foreign investment. 8. Analysis of key ratios.


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INTRODUCTION

Indian Liquor Industry with estimated market value of INR 340 bn is growing at 12-15% over the last two years. The industry is estimated to have sold 115 mn cases of IMFL last year. The sector is expected to maintain its CAGR of ~15% while the premium segment Wine and Vodka is expected to grow at a higher rate. With consolidation and foreign acquisitions gaining steam the sector is about to witness next phase with realization rising in line with that of their foreign counterparts. There are 325 distilleries in India, with an installed capacity of about 3.58 billion liters of liquor. However, production rate is about 40% of total licensed capacity as total requirement of liquor stands at 1.3 billion liters.

India is predominantly a hard spirits market and beer is a minority preference for those who consume Beverage Alcohol. Beer makes only 4% by revenue of the total alcoholic market. It would be pertinent to mention that while per capita consumption of spirits in India is 65% of global average, in the case of beer it is a mere 3% of global average.

With the global market experiencing low/stagnating 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. Total consumption of beer in China grew by 33.56% between 2000 and 2006 to reach a total market volume of 30.47 billion liters. With the per capital consumption of 22 litres, 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 neighbors.

In this study, we analyzed the financial health of the companies with help of some key ratios, and then we have tried to explain the findings on the basis of different marketing, international business expansion strategies. Also we have studied nature of competition in terms of number of competitors, market share and their major collaborations. Apart from these we have slightly touched upon the HR policies of the companies.

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COMPANIES ANALYSIED

DIAGEO

Diageo is the world's leading premium drinks business with an outstanding collection of international brands across spirits, wine and beer. Many of their brands have been around for generations, while some have been developed more recently to meet new consumer tastes and experiences. Their great range of brands and geographic spread means that people can celebrate with their products at every occasion no matter where they are in the world. This is why 'celebrating life every day, everywhere' is at the core of what they do.

Trading in approximately 180 markets, they employ over 20,000 talented people around the world. With offices in 80 countries, they also have manufacturing facilities across the globe including Great Britain, Ireland, United States, Canada, Spain, Italy, Africa, Latin America, Australia, India and the Caribbean. And the people who work for them across these markets really care for the legacy of each of their brands. They want them to be enjoyed by consumers for generations to come, which means they also take their role as a producer of alcohol very seriously. Diageo is at the forefront of industry efforts to promote responsible drinking.

The company is listed on both the London Stock Exchange (DGE) and the New York Stock Exchange (DEO).

UNITED BREWERIES The UB Group was established in 1947 when the late Mr. Vittal Mallya (Dr. Vijay Mallya’s father) acquired United Breweries Limited.

In the period 1950 to 1960, United Breweries expanded rapidly and made numerous acquisitions. It entered the spirits business by acquiring McDowell in 1951, and launched its flagship brand, Kingfisher Lager Beer, in 1955. Mr. Vittal Mallya started creating a global conglomerate by moving into agricultural-based products and medicines by acquiring Kissan Products and forming a long-term relationship with Hoechst AG of Germany to promote a company today known as Aventis Pharma. In the mid-1970s, when liquor


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prohibition seemed a possibility in India, the late Mr. Vittal Mallya acquired breweries and distilleries across the country. The significant amount of financial risk taken by Mr. Vittal Mallya in acquiring these breweries and distilleries enabled United Breweries to attain a market leadership position at the end of the prohibition threat.

CARLSBERG The Carlsberg Group is a Danish brewing company founded in 1847 by J. C. Jacobsen after the name of his son Carl. The headquarters are in Copenhagen, Denmark. The company's main brand is Carlsberg Beer, but it also brews Tuborg as well as local beers. In 2009 Carlsberg became the 4th largest brewery group in the world employing around 45,000 people.

PERNOD RICARD Pernod Ricard SA (PRS) is one of the leading producers and distributors of wines and spirits in the world. The company’s product portfolio includes a range of whiskies, anise drinks, liqueurs,

cognacs and brandies, white spirits and rums, bitters and wines. Some of the leading brands of the company include ABSOLUT Vodka, Jacob’s Creek, Ballantine’s, Ricard, Chivas Regal, Malibu, Stolichnaya, Havana Club, Jameson, Beefeater, Kahlua, Martell, Montana, Mumm, The Glenlivet and Perrier-Jouet. PRS operates in

the regions of North America, Europe and Asia Pacific. The company operates in over 70 countries and has 113 production facilities. The company is headquartered in Paris, France.


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FINANCIAL HEALTH OF THE COMPANIES

GROSS MARGIN PERCENTAGE In accounting, the gross margin refers to sales minus cost of goods sold. It is not necessarily profit as other expenses such as sales, administrative, and financial must be deducted.

Cost of goods sold (COGS) includes variable costs and fixed costs directly linked to the sale, such as material costs, labor, supplier profit, shipping costs, etc. It does not include indirect fixed costs like office expenses, rent, administrative costs, etc.

2002 2003 2004 2005 2006 2007 2008 2009 2010 Pernod Ricard 50.9 65.2 65.7 59 59.4 57.2 58.4 59.6 60.3 Carlsberg 50.3 50.9 50.8 50.4 51 49.9 47.9 49.1 51.7 Diageo 60.1 29.1 28.6 28.9 59.8 59.9 59.9 58.3 58.1 United Breweries 50.7 50.7 51.8 52.1 52.4 53 52.7 53 54.2

The reason for a sharp dip in the Diageo’s gross margin was due to

huge inventories the company was managing.

The relationship between inventory and gross margin will be more clear the graphs below.


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For Diageo during the 2007-2010, as the inventories grew the gross margin came down hence higher gross margins for a manufacturer reflect greater efficiency in turning raw materials into income.

OPERATING MARGIN PERCENTAGE

It is a measurement of what proportion of a company's revenue is left over, before taxes and other indirect costs (such as rent, bonus, interest, etc.), after paying for variable costs of production as wages, raw materials, etc.

A good operating margin is needed for a company to be able to pay for its fixed costs, such as interest on debt. A higher operating margin means that the company has less financial risk. The purpose of these financial metrics is to measure levels and rates of profitability.

2002 2003 2004 2005 2006 2007 2008 2009 2010 Pernod Ricard 15.5 20.9 19.6 18.6 22.8 21.9 24.4 24.1 24.2 Carlsberg 10.6 9.1 8.7 8.2 7.9 8.7 8.6 13.7 17.1 Diageo 18.8 29.1 28.6 28.9 28.2 28.9 27.5 26.2 26.3 United Breweries 10.9 11.9 14 13.5 14.6 16.1 15.5 17.7 18.5


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Hence on the basis of operating margin we can say that among the four companies Diageo is most profitable, then Pernod Ricard, United Breweries and the least profitable among the four is Carlsberg.

ASSET TURNOVER Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company.

"Sales" is the value of "Net Sales" or "Sales" from the company's income statement

"Average Total Assets" is the average of the values of "Total assets" from the company's balance sheet in the beginning and the end of the fiscal period.

2002 2003 2004 2005 2006 2007 2008 2009 2010 Pernod Ricard 0.64 0.48 0.73 0.45 0.33 0.35 0.33 0.27 0.29 Carlsberg 0.76 0.74 0.7 0.64 0.68 0.75 0.59 0.43 0.43 Diageo 0.62 0.39 0.44 0.49 0.53 0.54 0.54 0.55 0.52 United Breweries 0.54 0.62 0.72 0.8 0.81 0.82 0.82 0.71 0.74

In the graph we can see that United Breweries started from the bottom but reached at the top by 2010. And Carlsberg which was at the top came down drastically.


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RETURN ON EQUITY Return on equity (ROE) measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners. It measures a firm's efficiency at generating profits from every unit of shareholders' equity (also known as net assets or assets minus liabilities). ROE shows how well a company uses investment funds to generate earnings growth. ROEs between 15% and 20% are considered desirable.

ROE is equal to a fiscal year's net income (after preferred stock dividends but before common stock dividends) divided by total equity (excluding preferred shares), expressed as a percentage. 2002 2003 2004 2005 2006 2007 2008 2009 2010 Pernod Ricard 16.07 17.5 20.77 14.52 13.86 13.22 13.65 11.3 11.11 Carlsberg 9.33 8.65 3.71 6.86 10.59 12.68 7.1 6.26 8.29 Diageo 28.9 -12.96 12.92 13.86 46.89 35.16 42.78 48.2 45.07 United Breweries 5.22 15.16 15.63 15.5 16.75 21.09 18.4 26.7 22.87

Amont the four United Breweries ROE is within or near the desirable range.


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CURRENT RATIO The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. It is expressed as follows:

Acceptable current ratios vary from industry to industry. If a company's current ratio is in this range, then it is generally considered to have good short-term financial strength. If current liabilities exceed current assets (the current ratio is below 1), then the company may have problems meeting its short-term obligations. If the current ratio is too high, then the company may not be efficiently using its current assets or its short-term financing facilities. This may also indicate problems in working capital management.

2005 2006 2007 2008 2009 2010 Pernod Ricard 3.48 1.54 1.91 1.76 1.96 1.49 Carlsberg 0.73 0.76 0.87 0.75 0.59 0.57 Diageo 1.21 1.45 1.24 1.2 1.56 1.76 United Breweries 2.21 1.8 2.22 1.37 1.66 1.88

The current ratio of all the companies lies between 0.5-2, and as these are the market leaders we can safely assume that for companies in alcohol sector try to maintain the ratio within this range.


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PAYABLES PERIOD It is an indicator of how long a company is taking to pay its trade creditors. It is typically looked at either quarterly or yearly.

2002 2003 2004 2005 2006 2007 2008 2009 2010 Pernod Ricard 163.88 311.67 183.44 251.62 299.91 221.29 207.73 231 225.94Carlsberg 75.42 84.06 84.96 83.01 87.49 89.37 80.75 96.2 109.03Diageo 59.89 47.38 37.12 34.56 59.88 63.88 68.69 133 213.18United Breweries 82.6 78.13 68.66 59.28 60.05 63.57 73.67 111 129.54

Ideally payable period should be zero, but the minimum the better.


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EARNING PER SHARE Earnings per share is the amount of earnings per each outstanding share of the company’s stock.

If we take 2006 as base year then we see that Diageo’s, Pernod Ricard’s EPS has fallen considerably while EPS of Carlsberg’s and United Breweries’s has increased.


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SWOT ANALYSIS

The purpose of doing a SWOT analysis is to look at the strengths and weaknesses present internally in the organisation, coupled with the opportunities and threats that the organisation faces externally.

DIAGEO

Strengths: Diageo’s broad geographical coverage acts as a cushion against economic uncertainty in any one particular region. The company is becoming increasingly recognised for providing a positive working environment, and being a good place to work. High levels of employee loyalty will help the company through difficult periods. Diageo recognises the importance of building international brands, which enhances its sales potential.

A broad wine portfolio means that the company is reasonably insulated from undesirable fluctuations in consumer confidence, through its affordable labels, but can also offer the aspiration consumer, higher-priced reserve wines. The acquisition of the Chalone Wine Group, which was completed in February 2005, adds several premium Californian wines to Diageo’s portfolio, which significantly increases the company’s profile in the wine industry.

Focused marketing of Blossom Hill in the UK has paid off, with significant volume increases during fiscal 2004. Taking control of its North American distribution through dissoliving its joint venture with Moët Hennessy gives Diageo greater control over its marketing in this region as well.

Weaknesses: Insufficient marketing resources are being put towards the company’s wine brands in comparison to its spirits business. The lack of any major wine strategy reflects a lack of commitment to Diageo’s wine portfolio. The company has not established itself fully in the UK premium wine market, with both Blossom Hill and Piat D’Or more mid-priced wines.

The lack of a major global brand is a distinct disadvantage in an industry which is becoming increasingly focused on branding. Diageo’s portfolio remains incomplete without ownership of an Australian brand, and also suffers from lack of participation in the Chilean or Argentinean wine industries, which are increasingly popular in key markets such as the UK.

Opportunities: The UK wine market is proving to be more resilient against private label wines than may be suggested by the growth of private labels elsewhere in the retail sector. Strong growth in both still red and white wines is forecast in the US market over the 2004-2009 periods. This will help to boost sales in the company’s most significant overseas market. The


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WEAKNESSES

1. Large capacities may lead to a problem of over capacity in winter/rainy seasons.

2. Over leveraged position leading to short term cash flow problems.

3. Only One major and popular brand of Kingfisher Premium. As in India Beer is divided into 2 segments Strong & Premium. Kingfisher Premium is leading the premium segment but it is 2nd after Haywards 5000 in the Strong segment.

STRENGTHS

1. Large Market share of 47.5%. 2. Well Known Brand Image. Kingfisher. 3. Tie ups with various Distilleries under

Contracts. 4. Old & Established company which

means they have the experience and knowledge on their side.

5. National Presence and also expanding into International Market.

6. The Marketing and Promotional strategies are already a hit among customers.

7. A Diversified Parent Organization. UB group is into Aviation, Pharmaceuticals, Infrastructure, R&D and Media.

Company’s domestic market, the UK, is a “showcase market”, where consumers are happy to experiment with wines, providing a wide market for Diageo’s products.

Red wine sales are likely to continue to benefit from medical and scientific research findings indicating that it offers health benefits to regular, moderate drinkers. Recent studies have suggested red wine may help improve coughs, lower blood pressure and, reduce the risk of lung cancer. There is considerable growth potential in Norway and Ireland. Although sales in these countries are growing, they are not yet at the same level as other Western European countries. As Diageo is currently well represented in Europe, it is in a strong position to further exploit these markets. The trend towards premium wines offers growth potential to several of Diageo’s brands including Sterling Vineyards, Beaulieu Vineyard and Barton & Guestier.

Threats: Continued fears about the social impact of alcohol abuse may lead to the reduction of Diageo’s market as consumers are encouraged to turn away from alcohol. Any changes in excise levels in any of its markets could have a negative impact on the company’s margins.

As a British company, with significant overseas sales, the company is at the mercy of fluctuating exchange rates, when a strengthening pound, particularly against the US dollar may impact negatively on revenues. Falling sales of spirits brands could lead to an international price war, which could drive down both the company’s revenues and margins. There is increasing competition from small, artisan wineries throughout California, which could impact Diageo’s Californian wines. Greater emphasis is being placed on anti-drink/driving campaigns in some traditional wine-drinking countries, such as Spain, which is a key market for Diageo.

UNITED BREWERIES


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OPPORTUNITIES

1. Growing beer market in India. 2. Tie-up with S&N to open export

opportunities. 3. Any deregulation in the excise

policies with reference to taxation and duty on beer which could drastically push up the demand for beer.

THREATS

1. The level of taxes, is very high which could render beer unaffordable.

2. Advertising and marketing restrictions.

3. Entry of foreign liquor majors may affect existing market share.

CARLSBERG

Strengths:

• Strong, durable and well known brand which they utilise to create international and recognised sponsorships.

• Great Advertising for Consumer Awareness. Their commercials try to show that their high quality beer should be associated with good and fun times.

• Managed to position themselves as a strong player in their core markets, Western & Northern Europe, Eastern Europe and Asia.

• Good and efficient distribution channel. Carlsberg is available in restaurants, supermarkets or pubs with both premium and mainstream products.

• The company has a wide portfolio of beer which is suitable for both the younger and elder generation.

• Carlsberg is trying to improve efficiency and lowering costs through the Operational excellence program.

Weaknesses:

• Seeing as Carlsberg has recently acquired parts of Southern&Northern America it is not an option to make such a big purchase in the near future. The Foundation is an obstacle in the strategy for Carlsberg to grow through mergers as they do not have the sufficient capital required for them to buy 51 % of the shares of the new division created by the merger.

• The debt of Carlsberg is another weakness, which is an obstacle in terms of investments in growth. In the near future Carlsberg intends to pay off some of the debt and will then again be able to make large investments..


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Opportunities:

• Possibilities for organic growth in Asia together with strategic acquisitions and joint ventures. Organic products have become more and more popular and the consumers are concerned with the environment as well as additives.

• Baltika has a great potential in Russia and possibilities for further growth in other Eastern European countries.

• Increasing growth in premium segment, this will familiarise the consumers with more products and increase the knowledge of Carlsberg’s product portfolio.

• Carlsberg is now in the market for alcoholic beverages with products such as Somersby cider and EVE beer in addition to regular beer. EVE is a beer that is mainly targeted towards women only sold in Switzerland and Germany.

• Innovation can also be used to design new packaging and new bottles, which can

increase the interests in the products.

• The Eastern European Market has great prospects and potential due to the large populations and large upper group communities.

• As people are becoming more health conscious, people might choose alcoholic products to substitute beer. Hence this becomes an opportunity for Carlsberg to launch beer with fewer calories. By broadening the portfolio the company will be able to target a larger group of segments.

Threats:

• Stagnation in the Western and Northern Europe where Carlsberg earns their maximum revenue, but it is also the market where they have the highest costs. This means that Carlsberg needs to set high prices on their products to cover all their expenses in this market.

• The unstable world economy in terms of fluctuating exchange rates. This is mostly seen in relation to the British and the Russian markets(RUB), where Carlsberg has suffered losses on sales.

• Increases in the unemployment rate and insecurity have affected the sales of premium beer. Consumers are more likely to replace their premium beer with more mainstream beer, which is cheaper.

• In the Western and Northern European market there is intense competition. Carlsberg’s largest competitor in this market is Heineken, but there are also several local players that have a good position in the local communities.


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PERNOD RICARD

STRENGTH

Since its founding, the Group’s success has been in large part due to : its highly-talented teams

• A decentralised organizational structure • A product based culture. • Outstanding sales and marketing strategies. • Ethical commitment

WEAKNESSES

• Over leveraged position leading to short term cash flow problem. • Expensive brand maintenance. • Static market growth • Long development cycles.

OPPORTUNITIES

• Growing beer market. • Demand for better quality. • Increase in disposable income. • As people are becoming more health conscious , people might choose alcoholic products

to substitute beer. Hence this becomes an opportunity for Pernod Ricard to launch beer with fewer calories. By broadening the portfolio the company will be able to target a larger group of segments.

THREATS

• Advertising and market restrictions. • Entry of foreign liquor brands. • Economic downturn. • High taxes. • Negative perception of alcohol in India. • As parts of the world are becoming more health conscious, people might choose to

substitute beer for alcoholic products they find healthier.


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MARKETING STRATEGIES

DIAGEO

Diageo is the drinks group behind the likes of Johnnie Walker, the scotch; Guinness, the beer; and Blossom Hill, the wine – a well-rounded product portfolio. The group recently announced revenue had increased 5% to £9.78 billion and operating profit had risen 2% to £2.45 billion for their financial year. This was despite the weak consumer spending in the US and Europe – their largest markets, suffering from recent recessions – where the net sales in the former fell 3% and 2% in the later. So how did Diageo remain resilient? And, as marketing and planning is a cyclical process, Diageo has not forgotten its core market, the UK: Guinness is about to repositioned.

Although, according to Ansoff’s Matrix, Market Development poses high levels of risk when initially expanding – moreover given localized brand names used in alcoholic drinks – the spread of revenue channels in the long-term reduces Diageo’s reliance on one economy. Therefore, a PEST analysis is always a fundamental influence on the marketing strategy. Diageo has furthermore proven the benefits of risk-taking: scotch drinks returned a 15% net sales growth in Latin America and 10% in Africa; most importantly, however, their market share increased as well as volumes. When their sales are boosted by GDP growth, and higher overall consumer spending, of emerging markets and one-off factors, like the World Cup in South Africa, it is important for the sake of raw-competitiveness that market share grows by a greater proportion to be hailed a success.

However, Diageo have clearly identified the UK market as their ‘Cash Cow’, which needs to be milked for all its worth, where as Latin America and Africa can be considered ‘Rising Stars’ – if one uses the Boston Matrix to analyze markets rather than products of a firm. Diageo’s repositioning of Guinness as sports brand, therefore, is a form of market penetration; this is a low-risk strategy, albeit with low scope for growth. The ‘Bring it to life’ campaign involves above-the-line T.V promotions, sponsorship of Sky’s 3D sports coverage – which is currently only available in pubs – and nostalgic football advertisements in newspapers. While none of this is particularly innovative, Guinness’ brand image is consequently associated among sport viewers – and not sport hooligans.


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UNITED BREWERIES

• Focus on Brand Imagery

– Since Beer is a category with little product differentiation, consumer’s brand choice is largely on imagery

– With multiple brands in each segment of beer, UB has successfully positioned different brands on different platforms relevant to different consumers, different need states

– Kingfisher has appropriated some of the category values including ‘refreshment’

• Brand Association

– With Fashion, through Kingfisher Fashion Awards and the Kingfisher Swimsuit Calendar

– With high visibility events like the Mumbai Marathon, the Delhi Half Marathon, the International Film Festival of India

– With events important to the ethos and culture of people in key regions like the Goa Carnival, the Bangalore Habba

• Focus on Value to Consumer

• Bottle Return model

– Small packs to drive consumption

– Dominance at point of purchase / consumption through

– Visibility

– Cold Stock Management

– To develop new consumption occasions for beer

– “Food tastes better with Kingfisher”

– Promote Home Consumption of Beer

– Sporting Occasions

– Movies

• Innovation

– In product

– In packaging


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CARLSBERG

ASIA

The goal of the Asian region is to continue to develop this business so that the region can supplement Eastern Europe as an additional growth engine for the Group.

STRATEGIES

Focus on portfolio and mix

• Balance value and volume

Assessing multi-beverage portfolio

• Leverage strengths with non-beer categories

Roll-out of Excellence programmes

• Realise synergies

Continued build-up of smaller markets and new markets

EASTERN EUROPE

The priority in Eastern Europe is profitable growth now and in the coming years. The most important challenge is to exploit the growth potential of the Russian market as well as of a number of the other markets in the region.

A key task is to strike the best possible balance between value growth and volume growth. On the one hand, this means strengthening brand loyalty and sales of more expensive premium beers, whilst on the other hand, it means supplying competitive and attractively priced beers which can capture consumers and sales from other beverages, in particular spirits.

STRATEGIES

Focus on portfolio and mix

• Balance value and volume

Assessing multi-beverage portfolio

• Leverage strengths with non-beer categories

Roll-out of Excellence programmes

• Realise synergies


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Continued build-up of smaller markets and new markets.

NORTHERN AND WESTERN EUROPE

Northern & Western Europe is a particularly important region in the business portfolio with the overriding short-term goal of generating free cash flow for the Group while developing long-term equity through strong consumer loyalty. This is done by focusing on value rather than volume and a constant focus on efficiency improvements. The efficiency agenda has been delivered through the Excellence programme in all functions.

STRATEGIES

Increase efficiency

• Excellence programmes • Network optimisation • Business standardisation

Value creation

• Strengthen local power brands and develop international brands • Premiumise the portfolio • Innovate • Expand portfolio • Improve category and value management

PERNOD RICARD

Pernod Ricard SA has a bottom-up, decentralized business model under which the holding company determines the overall strategy and “brand owning” companies produce and develop specific marketing strategies for the brands. The company then empowers its regional subsidiaries, like Pernod Ricard USA, to make field decisions based on its in-depth knowledge of each market. In line with this structure, Pernod Ricard USA is guided by the insight of its employees and customers in the markets. This enables the company to more quickly identify and respond to consumer trends and distributor needs, and to successfully execute against its strategic priorities.


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INTERNATIONAL MARKET EXPANSION STRATEGIES

DIAGEO

Main markets of Diageo:

Since 2005 up to the year ended 30 June 2011 Diageo managed its business through four regions: North America, Europe, International, and Asia Pacific. The North American region, comprising the United States and Canada, accounts for the largest proportion of Diageo’s net sales and operating profit. Europe is comprised of Great Britain, Ireland, Iberia, Northern Europe, Southern Europe, and Russia and Eastern Europe. The International region is made up of three business units: Latin America and the Caribbean (including Mexico), Africa and Global Travel and Middle East (GTME). The Asia Pacific region comprises South Korea, Japan, the People’s Republic of China, India and other Asian markets, Australia and New Zealand. In the past financial year roughly two-thirds of net sales were derived from developed markets (mainly North America and Western Europe) and one-third from emerging markets (mainly Latin America and the Caribbean, Africa and Asia Pacific). In 2005 approximately four-fifths of net sales arose in emerging markets and one-fifth in emerging markets. During the year ended 30 June 2011 the group reviewed its operating model across its businesses and commenced a restructuring programme that is expected to be fully implemented by 30 June 2013. The main objective of the programme is to improve the effectiveness and productivity of the group’s operations and to deploy resources closer to the market and in those geographical regions where the potential for growth is greatest. This review will result in changes to the group’s regional structure and the way it organises its central functions. The principal countries impacted are the United Kingdom, Ireland and the United States. On 25 May 2011 Diageo announced that the International region from 1 July 2011 will have two autonomous regions: Diageo Latin America and Diageo Africa. The Global Travel business will be divided and each specific duty free operation will be allocated to the market of the geographic region where it is located. The Middle East business will become part of Asia Pacific.

Diageo’s International business strategy:

Diageo is the leading premium spirits business in the world by volume, by net sales and by operating profit and is one of a small number of premium drinks companies that operate globally across spirits, beer and wine. Diageo creates long term value for shareholders through its outstanding brands, its geographical breadth and the expertise of its people. Diageo manages a broad range of brands across several categories. It manages eight of the world’s top twenty premium spirits brands, including Smirnoff, the number one brand by volume and Johnnie Walker, the number one brand by value. In beer, Diageo owns the only global stout brand, Guinness, and a range of lager brands sold primarily in Africa. Diageo’s wine brands are sold predominantly in North America and Great Britain across a full range of price points. Diageo is a global company with its products sold in more than 180 markets around the world. In the developed markets of North America and Europe, Diageo has built scale and strong routes to market. Diageo is also the number one international spirits company in the emerging markets of Africa, Latin America and Asia. These rapid growth markets now comprise approximately one


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third of Diageo’s net sales, up from 22% in 2005. Through continued organic growth driven by infrastructure investments and targeted acquisitions, these markets is expected to contribute 50% of Diageo’s net sales by 2015.

In the majority of markets, Diageo’s brands reach customers and consumers through local teams with strong local expertise and networks. In countries where Diageo has not established its own subsidiary, it looks to expand organically through business partners and third party distributors. Diageo is also committed to explore opportunities to expand geographically through acquisitions, within its financial criteria. The acquisition of companies with strong local routes to market and brands that appeal to the growing number of middle class consumers are particularly appealing. The acquisition of Mey İçki in Turkey and the investment in ShuiJingFang in China are two examples of this strategy in action. Diageo combines the benefits of global scale with local insights into consumer trends and behaviours to deliver world class marketing campaigns. For example, the Keep Walking campaign on Johnnie Walker has been running globally for over 10 years, based on the universal appeal of personal progress. The marketing campaign is true to this insight although the local creative executions look different around the world. Likewise, consumer insights inform Diageo’s innovation launches and pipeline. The premiumisation of scotch to appeal to consumers of luxury brands and the development of ready to serve cocktails as at-home consumption increases have been particularly successful. Diageo is also focused on driving category growth with its customers through shopper insights. The sales ambition is to win at the point of purchase. The ‘Diageo Way of Selling’ programme equips four thousand salesmen with best practice tools and processes. It builds capabilities in sales execution, customer service and the efficient use of trade investment so that Diageo becomes an indispensable business partner to its customers. Diageo is committed to building a sustainable business across its value chain through its Sustainability & Responsibility’ strategy. The way in which Diageo promotes a positive role for alcohol in society; respects the natural resources, communities and people it relies on; and champions a culture of good governance and ethics are all important drivers of growth. The company and its employees are proud of the responsible manner in which its brands are


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marketed and the positive role that moderate consumption of its brands plays in the lives of many people. Diageo seeks to be at the forefront of industry efforts to promote responsible drinking and works with other stakeholders to combat alcohol misuse. Diageo recognises that it operates in a world where many of the natural resources that the business relies on, such as fossil fuels and water, are limited. In 2007 Diageo set highly challenging environmental targets covering water efficiency, the reduction of carbon dioxide, polluting power of water and waste-to-landfill, and in 2009 Diageo expanded these to include the sustainability of its packaging. Measuring and managing its environmental impact is not only important for the planet, it is essential for the financial sustainability of Diageo’s supply chain and its business.

UNITED BREWERIES

Markets of United Breweries:

Mendocino Brewing Company Inc., located in California, is a pioneer in the American Craft Brewing, or “micro-brewing,” trend. It has two breweries, one north of San Francisco, California and the other at Saratoga Springs, New York. Red Tail Ale and Blue Heron Pale Ale are two of Mendocino’s popular brands.UBSN Limited, based in Faversham, Kent (United Kingdom), is a wholly-owned subsidiary of Mendocino Brewing Co. Inc. UBSN Limited has an exclusive licensing arrangement with UBL for brewing and of distributing Kingfisher in Europe and Canada. UBSN Limited predominantly sells Kingfisher in the United Kingdom, where it has a large share of the market for ethnic Indian restaurants and food and beverage outlets.

UB office furniture business territory to the whole Asia area covering Hong Kong , Japan , Thailand , Singapore , Philippines , Middle East and for these years most important the Mainland China. Apart from international dealers, the China Sales Division ,the Headquartered in Shang


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Hai to support all local dealers and direct corporate clients. For the China market, we divided into three main sectors including North China, Mid China and South China. Our dealership network is set up in other cities in the outer provinces which is fully supported and trained by a member of the UB staff who will coordinate all operations with them. United Breweries’ International business strategy

United Spirits will evaluate opportunities globally and such overseas forays will-

• Strengthen its presence in its core Indian business;

• Create credible alternatives in the premium and high end segment;

• Facilitate entry into new segments, such as wines, etc

• Provide access to nontraditional global markets, particularly Russia and China

CARLSBERG

After World War II, and especially since the late 1990’s, Carlsberg began to establish beer production in foreign countries. This establishment was done by mergers and acquisitions with other breweries, where operations in the local markets were left local with limited cooperation across markets.

Markets of Carlsberg

Northern and Western Europe

Carlsberg is the undisputed market leader in Northern Europe with No. 1 positions in Denmark, Sweden, Norway and Finland. Western Europe with markets such as UK, Germany, France, Switzerland, Poland, etc, accounts for a large part of our annual revenue.

Characterstics Of Market:

• Beer markets are generally mature and characterised by a well-established retail structure

• Innovation Strategies and Dynamic marketing

• Maintain Growth and Market Share.

• Implemeted Excellence Program From 2003

.


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France :

Carlsberg arrived in France shortly after 1945 and is now distributed by Brasseries Kronenbourg. Both Carlsberg Beer and Carlsberg Elephant Beer are available in France In 2008 Brasseries Kronenbourg became 100% part of the Carlsberg Group.

Danmark:

In 1970, Carlsberg merged with the other leading Danish brewery, Tuborg. Carlsberg Danmark became a fully owned subsidiary of the Carlsberg Group in 2000.

Germany:

Carlsberg brands have been exported to Germany for decades. In 1988 Carlsberg took over Hannen-Brauerei, which was an “Alt-Bier” brewery in Mönchengladbach, and in 2004 we acquired one of Germany’s leading breweries-Holsten-Brauerei in Hamburg

Eastern Europe

The Eastern Europe region covers the growth markets of Russia and the Ukraine and the emerging beer markets of Kazakhstan, Uzbekistan, Belarus and Azerbaijan.

During the last decade of the century, market conditions for beer changed however rapidly. Beer sales dropped in the western part of the world, leaving many smaller brewers with surplus capacity. Competition was fierce, and consolidation within the European beer industry accelerated. Carlsberg then entered the markets of Eastern Europe and Asia.

Kazakhstan:

In 2002 Carlsberg entered the beer market of Kazakhstan via purchase of the major ownership in a local Irbis brewery. Later in 2003 Carlsberg acquired one more local brewery Ak-Nar, which produced the very popular local beer DERBES. This process was completed in December 2010 when the DERBES Brewery was officially renamed as the Carlsberg Kazakhstan.

Russia:

Baltika Brewery was established in 1990, and in 1992 became part of a joint venture (named BBH) owned 50% by Carlsberg. Since 2008 it has been owned 88.86% by Carlsberg.

Uzbekistan:

Since June 2006 Carlsberg has been investing in the brewing industry in Uzbekistan, the first local brand - “Sarbast” was shipped to trade outlets in 2007.The word “Sarbast” was derived from ancient Uzbek and means “free and independent”.


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Asia

The Carlsberg Group is a significant player in the Asian markets The region comprises both old, mature Carlsberg markets (Hong Kong, Malaysia, Singapore) and new emerging beer markets such as China, Vietnam and India.

TheIinvestment will be used to build new breweries, add machinery and for upgrades, among others. Asia will continue to take a huge part of investment in the medium and long term.

India:

Carlsberg entered India in May 2006 by forming a company named South Asia Breweries Pvt. Ltd. by a joint venture between the Carlsberg Group and associated companies. The name changed to Carlsberg India Private Limited on 23rd February 2009 .In March 2008, Carlsberg expanded its operations with the opening of breweries at Alwar in Rajasthan and at Aurangabad in Maharashtra in August 2008.

Hongkong:

Carlsberg has been enjoyed in Hong Kong since 1923 when it was first imported on an official basis. This made Carlsberg Hong Kong’s first imported quality beer and secured the brand’s long standing position as one of the most popular brand in the market. The Carlsberg Hong Kong Brewery was established as a joint venture with the East Asiatic Company.

China :

Carlsberg officially began its business in Greater China in 1978. The company inaugurated the Carlsberg Brewery in Hong Kong in 1981, which became the base for Carlsberg’s expansion into mainland China. In 1995, Carlsberg acquired a major shareholding in a brewery in Huizhou, Guangdong.

PERNOD RICARD

MARKETS OF THE COMPANY

The world’s second largest drinks group is also considering entering the beer industry in sub-Saharan Africa. Pernod Ricard Europe covers Europe (excluding France and Ireland), the Middle East and Africa. The region was accountable for 30% of group turnover in fiscal year 2009/10.

Crisis-hit markets such as Greece and Spain, where consumers have been cutting spending amid government austerity measures and high unemployment, were tough markets where Pernod Ricard will be both “cautious” and “reactive”.In Greece, where the company’s profits have significantly decreased, the group wants to focus even more on marketing investment on key


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brands such as Chivas Regal whisky and Absolut vodka. Pernod Ricard Europe’s growth will be driven mostly by the fast-growing emerging markets of eastern and central Europe, the Middle East and Africa, which already more than offset difficult times in western Europe.In sub-Saharan Africa, Pernod’s Jameson whisky is now a leading brand in South Africa, but the group is weak in the rest of the region.Last month, the Pernod Ricard group posted stronger than expected third-quarter sales, led by strong emerging market growth, and kept its full-year financial targets.

The United States remain the main market for Pernod Ricard, France being its second. French sales represent 10% of Pernod Ricard’s turnover and registered a 5% increase over the last six months. However, the group can count on emerging markets such as China which already accounts for 9% of Pernod Ricard’s turnover

Pernod Ricard’s International business strategy

Pernod Ricard success is built on a solid strategy focused on generating value and outperforming the competition. Specifically, the company aims to perform better than its peer group and the market by ensuring that its brands excel in their respective categories. This requires Pernod Ricard to retain and expand relationships with consumers already loyal to its brands, as well as to attract new consumers. Key strategic levers include:

• Brand-building activities that capture consumer imagination; • Innovative programs which activate Pernod Ricard brands in on-premise bars, clubs and

restaurants; • Effective wholesaler management ensuring a successful route-to-market; • Ongoing efforts that build the image, equity and price of brands, particularly higher

marques; • Development and retention of dynamic people.


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MERGERS, ACQUISITIONS AND EFFECT ON ECONOMY

DIAGEO

Market Share, Market Position:

Diageo PLC is a British multinational alcohol company, selling alcohol in 180 countries, with a substantial presence in 30 countries.5 The company was created in 1997 by the merger of Guinness PLC with Grand Metropolitan PLC (GrandMet). At that stage it was a large multinational with interests in food as well as drink.

In September 2004, Diageo was the 11th largest publicly quoted company in the UK in terms of market capitalisation.6 The company's turnover was £8.89 bn in 2004, with a total profit of £1.87 bn after exceptional items and tax.7 It is the largest spirits company in the world, with many of the leading spirits brands (see section on Products and Projects in this profile). As well as spirits, it is the manufacturer of Guinness, and has a 79% share of the stout sector in Europe.

No of Employees working:

Diageo values diversity in its workforce and works to ensure that the group is inclusive of all people, regardless of their background or style. To enhance diversity, Diageo aims to create opportunities that are attractive to a wide range of candidates, including those with disabilities, and seeks to make working for Diageo compatible with a variety of lifestyles. Diageo sponsors a number of employee networks around the world that seek to support diverse interest groups. The company also seeks to design and adjust roles to accommodate people’s lifestyles, and increasingly encourages flexible working.

Average number of employees 2010 2009 2008

North America 1,615 2,258 2,234

Europe 3,007 3,253 3,144

International 5,097 4,952 5,000

Asia Pacific 2,636 2,668 2,923

Global Supply 8,171 8,116 8,238

Corporate and other 2,761 2,792 2,605

Total 23,287 24,039 24,144


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Major mergers/ Collaborations:

Diageo has made a number of acquisitions and disposals of brands, distribution rights and equity interests in premium drinks businesses including the following:

In February 2005, Diageo acquired The Chalone Wine Group for $285 million (£153 million). The Chalone Wine Group is a North America based wine business with a range of premium brand wines and has been merged into Diageo’s North American wine business, Diageo Chateau & Estate Wines Company.

In February 2005, Diageo acquired Ursus Vodka Holding BV, the owner of the Ursus vodka and Ursus Roter brands. The principal market, by volume, for the Ursus vodka and Ursus Roter brands is Greece. Diageo’s total cash investment was €146 million (£99 million).

On 25 August 2005, Diageo completed the purchase of The “Old Bushmills” Distillery Company Limited, owner of Bushmills Irish whiskey, one of the world’s leading Irish whiskey brands, from Pernod Ricard for approximately €296 million (£209 million).

On 3 July 2006, Diageo completed the purchase of the Smirnov brand in Russia through the formation of a 75% Diageo-owned joint venture Company. This company unites the Smirnoff/Smirnov brands in Russia under common ownership and is the exclusive distributor of Smirnov and Diageo’s spirits brands in Russia.

On 27 January 2007, Diageo completed the acquisition of a 43% equity stake in Sichuan Chengdu Quanxing Group Co Ltd (‘Quanxing’). Quanxing holds 39.48% of the equity in Sichuan ShuiJingFang Joint Stock Co Ltd (‘ShuiJingFang’) a leading maker of premium traditional Chinese liquor, or baijiu. ShuiJingFang is listed on the Shanghai Stock Exchange.

Number of Competitors:

Diageo competes on the basis of consumer loyalty, quality and price.

In spirits, Diageo’s major global competitors are Pernod Ricard, Bacardi and Brown-Forman, each of which has several brands that compete directly with Diageo brands. In addition, Diageo faces competition from local and regional companies in the countries in which it operates.

In beer, the Guinness brand competes in the overall beer market with its key competitors varying by market. These include Heineken in Ireland and both Heineken and SABMiller in several markets in Africa, Coors Brewing (Carling) in the United Kingdom and Carlsberg in Malaysia.

In wine, the market is fragmented with many producers and distributors

GDP growth:

International spirit categories continue to grow strongly driven by consistently high GDP growth, expansion of middle-class income population and increase in consumers’ quality consciousness and demand. In Vietnam, Scotch brands approximately shares 65% of the international spirits


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market and this category is forecasted to grow at the rate of 12% to 15% over the next 5 years. Diageo Indochina continues to establish leadership in international brown spirits with Johnnie Walker. Diageo Indochina continues to focus on the fast growing premium international vodka segment and is investing consistently behind Smirnoff - the number vodka one in terms of volume and value in the world. Diageo Indochina also continues to invest in Baileys, The Original Irish Cream. Diageo Indochina is also built a strong Super Deluxe Reserve Portfolio with some of the most celebrated luxury beverage alcohol brands. Diageo Indochina is building a separate Super Deluxe Reserve Sales team to service national trend-leading accounts. Strong Investment in process, systems and people as well and fantastic execution in trade has boosted Diageo Indochina’s sales growth significantly.

Impact of Diageo on National Income:

Diageo is ideally positioned to capitalize on Asia Pacific growth

o Number one in international spirits o Diageo’s emerging Asia growth is double our Asia Pacific growth o Gaining share across the region o Investing in local spirits o Deep local partnerships.

UNITED BREWERIES

Market share UB Group:

On entering the new millennium, the UB Group is considerably more focused and has dramatically increased value for its shareholders through its various operating businesses. Sales of the UB Spirits Division have crossed 90 million cases (9 litres each) during the fiscal year 2008-09. In addition, this Division is one of only three in the world to own nineteen millionaire brands and at least five brands rated by Drinks International, UK to be amongst the ten fastest growing brands in the world in their respective categories. The market share of the Spirits Division in India is currently 60% and exports to the Middle East, Africa and Asian countries are growing rapidly. In 2007, United Spirits Limited, the flagship of The UB Group, acquired a hundred percent of premium scotch distillers Whyte & Mackay and Liquidity Inc, a United States-based maker of specialty vodkas. The Delaware-based Liquidity Inc produces speciality brands like Pinky Vodka and Marakesh.

The UB Group’s Brewing Division has also assumed undisputed market leadership with a national market share in excess of 48%. Through a process of aggressive acquisition and market penetration, The UB Group today controls 60% of the total manufacturing capacity for beer in India. The flagship brand, Kingfisher, is now sold in over 50 countries worldwide having received many accolades for its quality.


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Major mergers/ Collaborations:

The UB group is now trying to strongly position McDowell in the wine market. It has a presence in the wine market through its alliance with the Italian wine maker, Bosca. The $100 million Sogrape group, owner of Mateus Rose - the largest branded wine in the world with sales of over one mn cases a year, is holding talks with the United Breweries group for a possible tie-up. United Breweries group acquired a 65% stake in the Mumbai-based Associated Breweries & Distilleries (ABD), producers of London Pilsner beer. With this acquisition, UB has protected the western Indian market from South African Breweries (SAB), which has already made its presence felt in north India by taking over Narang Industry's brewery in UP. Its brands, besides London Pilsner, are London Diet, Maharaja Premium and San Miguel. ABD manufactures these beer brands at its brewery in Thane. United Breweries is expanding the capacity of its Nacharam brewery in Andhra Pradesh to 220,000 hl. It has also acquired majority control over beer manufacturing Inertia by raising its stake to more then 51% from 31%. The move was to help UB raise its market share significantly. Besides, UB has further concluded an agreement to acquire 75% of Mangalore Breweries, through its wholly owned subsidiary, United Breweries (Holdings). United Breweries has already decided to divest 26% stake to a strategic investor who could include Belgian Interbrew, Carlsberg or Heineken. The company owns or contracts 22 out of 57 operating breweries in the country, representing about half the total capacity. Carlsberg Breweries based in Denmark had decided to bring two of its brands, Carlsberg and Tuborg to India. It launched Bengal Premium, a lager beer. Cans, which account for negligible volumes might, however, come sooner than later. Shaw Wallace is launching its Royal Challenge beer in cans. Kingfisher beer from UB is already available in cans.

GDP growth:

International spirit categories continue to grow strongly driven by consistently high GDP growth, expansion of middle-class income population and increase in consumers’ quality consciousness and demand. In Vietnam, Scotch brands approximately shares 65% of the international spirits market and this category is forecasted to grow at the rate of 12% to 15% over the next 5 years. UB group continues to establish leadership in international brown spirits with Johnnie Walker. It continues to focus on the fast growing premium international vodka segment and is investing consistently behind Smirnoff - the number vodka one in terms of volume and value in the world. It also continues to invest in Baileys, The Original Irish Cream. Diageo Indochina is also built a strong Super Deluxe Reserve Portfolio with some of the most celebrated luxury beverage alcohol brands. It is building a separate Super Deluxe Reserve Sales team to service national trend-leading accounts. Strong Investment in process, systems and people as well and fantastic execution in trade has boosted it’s sales growth significantly.


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CARLSBERG

Carlsberg Main Competitors:

Heineken

Heineken is the largest brewery and distributor on the European market and it is one of the world’s leading breweries in terms of sales volume and profitability. Their portfolio includes approximately 170 brands of beer and cider including Heineken beer, Tiger, Foster’s, Strongbow. Their main markets are Western Europe, Central and Eastern Europe, Americas, Africa, Middle East and Asian Pacific .This shows that they are one of the most globally exposed breweries in the world. Their yearly volume of sales for 2008 was 125.8 million hectolitres and their net profits amounted to €209 million in 2008.

Anheuser-Busch InBev

American brewery, Anheuser Busch and Belgian brewery InBev officially joined forces in July 2008, becoming the largest brewer in the world, and took the name Anheuser-Busch InBev. The company manages a portfolio of more than 300 brands that includes Budweiser, Stella Artois and Becks. Their main markets of operation are North America, Latin America, Western Europe, Central & Eastern Europe, and Asia Pacific. The combined sales volume for 2008 is 285 million hectoliters and their operating profit before non-recurring items was €4.022 billion.

SABMiller

South African company SABMiller is one of the world’s largest brewers with a portfolio that includes more than 200 brands, including Grolsch, Miller Genuine Draft and Peroni Nastro ,Azzurro. SABMiller is also one of the world’s largest bottlers of Coca Cola products. The company operates in Europe, North America, Latin America, Asia and Africa. Total volume of beer sold was 239 million hectoliters and an operating profit before exceptional items of $3.560 billion.


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Market Overview

NORTHERN & WESTERN EUROPE

THEIR MARKETS DENMARK NORWAY THE BALTIC STATES

GERMANY FINLAND

Population(millions) 5.5 4.9 6.9 81.6 5.4

GDP/Capita USD 36,764 52,239 16,349 35,930 34,402

Real GDP Growth %

2.0 0.6 -1 to 1.8 3.3 2.4

Breweries 1 2 4 3 1

Employees 1825 1322 1018 833 919

Market Position No. 1 1 1 1 3

Market Share % 56.7 52.2 37-40 17.3 13.8

Per Capita Beer Consumption (l)

84 54 67-86 107 87

EASTERN EUROPE

THEIR MARKETS RUSSIA UKRAINE KAZAKHSTAN UZBEKISTAN BELARUS


GDP/Capita USD 15807 6656 12402 3022 13865

Real GDP Growth %

4.0 3.7 5.4 8.0 7.2

Breweries 10 3 1 1 1

Employees 9485 1727 431 473 462

Market Position No. 1 2 1 1 2

Market Share % 39.7 28.6 40.8 56.3 30.7

Per Capita Beer Consumption (l) 66 56 37 13 47


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ASIA

THEIR MARKETS MALAYSIA SINGAPORE HONGKONG CHNA INDIA


GDP/Capita USD 14603 57238 42277 7518 3291

Real GDP Growth %

6.7 15 6 10.5 9.7

Breweries 1 0 0 19 5

Employees 681 71 194 6182 2217

Market Position No. 2 2 2 1 N/A

Market Share % 41 19.8 20.4 57.8 N/A

Per Capita Beer Consumption (l)

5 18 22 35 1

Major Mergers/Collaborations

Carlsberg and Tuborg Merge

In 1970, Carlsberg merged with the other leading Danish brewery, Tuborg. Carlsberg Danmark became a fully owned subsidiary of the Carlsberg Group in 2000. Carlsberg Danmark is the country’s leading producer and supplier of beer . Carlsberg and Tuborg are among the strongest brands in Denmark, giving Carlsberg a 63% share of the beer market.

Brasseries Kronenbourg

Brasseries Kronenbourg was founded on 9th June 1664 by Jérôme IV Hattin Alsace (East of France). .Since the fifties Brasseries Kronenbourg is France’s leading beer company, with a unique 350-year know-how and a famous portfolio of beer brands. Carlsberg arrived in France shortly after 1945 and is now distributed by Brasseries Kronenbourg. In 2008 Brasseries Kronenbourg became 100% part of the Carlsberg Group.

Hannen-Brauerei

Carlsberg brands have been exported to Germany for decades, so it was natural for the Group to gain a foothold in the country. In 1988 Carlsberg took over Hannen-Brauerei, which was an “Alt-Bier” brewery in Mönchengladbach, and in 2004 they acquired one of Germany’s leading breweries – Holsten-Brauerei in Hamburg.


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Baltika Breweries

The Russian beer market is considered one of the largest in the world. Baltika Brewery was established in 1990, and in 1992 became part of a joint venture (named BBH) owned 50% by Carlsberg. Since 2008 it has been owned 88.86% by Carlsberg. Since its foundation, Baltika has expanded rapidly and today is the largest brewery in the Russian Federation and Eastern Europe.

PERNOD RICARD

PERNOD’S MAIN COMPETITORS:

Constellation Brands, Inc.:

Constellation Brands is a leading beer, wine, and spirits maker. It offers more than 100 brands, which it sells in some 150 countries. Its wine division, anchored by its domestic wine making subsidiary Constellation Wines U.S., is a global leader in wine production, offering brands such as Robert Mondavi and Vendange, as well as such premium labels as Ravenswood and Simi. Constellation Brands also markets premium spirits, including Black Velvet whiskey and SVEDKA vodka. North America accounts for about 70% of Constellation Brands' sales.

Diageo plc:

Diageo's company parties must be the talk of the town. It is the leading premium spirits business in the world by volume, net sales, and operating profit. The company produces and distributes eight of the world's top 20 spirits brands. It is also one of the few international drinks companies that spans the entire beverage alcohol market, offering beer, wine, and spirits. Diageo's well-known brands include Smirnoff vodka, Baileys Irish Cream liqueur, Johnnie Walker Scotch whisky, José Cuervo tequila, Tanqueray gin, Captain Morgan rum, Guinness beer, and wines from Sterling Vineyards and Beaulieu Vineyard. Although spirits are sold worldwide, subsidiary Diageo North America generates about one-third of the sales.

E. & J. Gallo Winery:

E. & J. Gallo Winery brings merlot to the masses. The company is one of the world's largest winemakers, thanks in part to its low-end jug and box brands, including Carlo Rossi and Boone's Farm brands. The vintner owns seven wineries and some 15,000 acres of California vineyards; it also contracts with other growers to meet its supply demands. It is the leading US exporter of California wine, selling its some 60 brands in more than 90 countries across the globe. Among its premium wines and imports are those of Gallo Family Vineyards Sonoma Reserve and the Italian wine Ecco Domani. For those who prefer a little more kick to their imbibing, Gallo offers a number of distilled beverages, including brandy and gin.


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MARKET SHARE:

PARIS -(Dow Jones)- French spirits maker Pernod Ricard SA (RI.FR) plans to increase its market share in Western Europe as the region recovers from the economic downturn, according to slides posted on the company's website.

The group, which is the world's second-largest spirits maker in terms of revenue after U.K.-based Diageo PLC (DGE.LN), also plans to increase its advertising and marketing investment in Eastern Europe to boost performance in this strong growth area where customers are increasingly favoring international brands, according to the slides.

Europe, excluding France and Ireland, represents 30% of Pernod Ricard's total annual sales.

Pernod Ricard estimates that in the Europe, Middle East and Africa region, sales volumes for Western-style spirits should grow on average 7.5% a year between 2010 and 2015.

MARKET POSITION:

India becomes 5th largest market for Pernod Ricard.

Today was another important turn for Indian liquor industry with Pernod ricards CEO Pierre Pringuet announcing that india had now become 5th largest market for them . What is interesting is that it is the 5th largest by value and profit, two important benchmarks for any product. It is soon expected to overtake spain in value and profits. The first three places are held by US, China and France.


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HUMAN RESOURCE MANAGEMENT

DIAGEO

Recruitment Policy of the Company:

As part of Diageo’s global policies, Diageo has emphasized the importance of treating individuals justly and in a non-discriminatory manner in all aspects of employment, including recruitment, compensation and benefits, Training, promotion, transfer and termination. Accordingly, factors not relevant to the Requirements of a role, including without limitation race, religion, color, ethnic or national Origin, disability, sexual orientation, gender or marital status, are not considered, and Reasonable adjustments are considered (and if necessary appropriate training provided) so that no individual is disadvantaged. Diageo has a number of graduate programmes that they recruit for annually across Europe (North America and other regions offer local programmes). Referred to by Diageo as "Early Career" programmes they enable the company to harness the potential of talented individuals who have either just graduated or who are at the beginning of their career. The programmes are aimed at individuals, who want to embark on a structured, yet flexible, programme that will stretch, challenge and grow them to become the future leaders of the business. Diageo recruit a relatively small number of graduates in each of their locations.

Candidate Criteria

The company recruits a diverse population that reflects the communities in which it operates and so encourages applications from all sections of the community.

Application Requirements

For their early career programmes Diageo looks for candidates who have attained, or are expected to achieve, a minimum 2.1 bachelors degree from a recognized University and has a solid academic record. Diageo recruiters are keen to employ candidates with solid commercial awareness, which are passionate about something they do in their lives and can demonstrate the ability to build great relationships across a wide range of people.

In order to be eligible for the programme candidates must be able to work in the EU without the need for a work permit, can speak English fluently as well as the language of the country which they apply to and has a full, clean driving license. Candidates must also demonstrate a genuine interest for both Diageo and the function of their choice.

Best HR practice of the Company:

Scope

The Diageo human rights policy applies to all Diageo employees and employees of subsidiaries and joint ventures where Diageo has a controlling interest. It also applies, as far as is reasonably achievable, to our upstream and downstream supply chain through partners, suppliers and third


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party contractors. In joint ventures where Diageo does not have overall control, the leaders and managers of those businesses are strongly encouraged to adopt the same or similar standards. If any human rights issues arise in joint ventures we will work actively with the business leaders to address them.

Dignity at work

At Diageo they encourage the uniqueness of individual contribution within a team environment. This is underpinned by one of the core values, ‘Freedom to succeed’, which promotes openness and teamwork, invites employees to challenge convention and encourages trust in people. All employees have the right to expect that their basic human identity and dignity are fully respected in the workplace and they reject any form of unfair discrimination. They celebrate cultural and individual diversity – rely on it even – to create an energizing team culture and leadership reputation. This is encompassed in another of their values, ‘Proud of what we do’. In all aspects of employment, such as recruitment, compensation and benefits, training, promotion, transfer and termination, we will treat individuals justly and in a non-discriminatory manner, solely according to their abilities to meet the requirements and standards of their role. We do not take into account any factors that are not relevant to the requirements of the role as they might be considered discriminatory. Such factors would include, without limitation, race, religion, color, ethnic or national origin, disability, sexual orientation, gender or marital status.

Valuing people

Diageo does not make use of nor will have partners who make use of any form of forced or compulsory labor. This includes any requirement to lodge ‘deposits’ or identity papers. They also respect the right of employees to leave the company giving reasonable notice. They will not employ children under the age of 16. Where young people under the age of 18 work for Diageo companies or their partners, a special responsibility devolves to the company to protect and promote their interests to ensure that they are only employed under circumstances that protect them from physical risks. For any Diageo employee under the age of 18 they will pay particular attention to their vocational training and development needs. The company will ensure that all young people under the age of 18, be they full- or part-time employed, are treated in accordance, with all our own values and standards. In addition, all relevant local employment laws in respect of working conditions, training and a duty of general care will be respected.

Corporate Social Responsibility:

Diageo has always believed that their success as a company is measured by more than just financial targets. Many of their historic brands, such as Guinness and Johnnie Walker were built on the same principles of corporate citizenship that we hold today. The Guinness family for example started a company in 1725 with a vision and commitment to improve the lives of employees and the communities in which they lived. This year we marked the Guinness 250th Celebrations by launching the Arthur Guinness Fund with the goal of empowering individuals around the world with the skills and opportunities to enrich their communities.

The evolution of Guinness’ approach to corporate social responsibility is a tribute to the remarkable legacy of the brand’s founder Arthur Guinness and reflects Diageo’s desire to


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continually evolve our approach to social progress to match the evolving interests of our stakeholders.

We realize that expectations placed on corporations continue to shift. We know consumers, regulators and our customers want a dynamic and evolving approach as the challenges facing society in terms of local economic development, health and safety issues and environmental sustainability continue to grow. Finally, we understand that trust in all institutions has eroded as a result of the economic turmoil of the last few years.

In light of these expectations, and the current economic environment, they asked themselves whether their current approach to CSR was still appropriately addressing our most important global impacts and what additional steps we could take to maximize value for both society and Diageo’s business.

Diageo’s approach to corporate citizenship has always been first and foremost a reflection of our values, culture and people. We learned many things from this stage of the process:

We reaffirmed that corporate social responsibility is integral to our purpose We decided to better integrate our corporate social responsibility agenda into our core business to create value for society and our shareholders We identified alcohol in society, our role in the community, our environmental impact, our people and compliance and ethics to be our key priorities We decided to place additional emphasis on initiatives that cut across our priorities, better integrate our strategy throughout our value chain and leverage our collective impact. The following diagram is designed to illustrate how our CSR goal – enriching lives, communities and the environment through good business – links to Diageo’s purpose, the important issues on which we will focus and activities we will continue to undertake within our priorities.

While we have begun to engage external stakeholders, over the course of the next year we hope to continue to validate our findings to determine whether our strategy meets the needs and concerns of the external groups and individuals who are most impacted by our business.

Doing so not only helps us enrich lives, communities and the environment, it is fundamental to the sustainability of our business. It is critically important to Diageo that alcohol plays a valuable role in society, that the natural resources we need to make our products are readily available, that local communities prosper and consumers are able to afford our brands, that we are able to attract, retain and engage talented employees to drive performance and that through exemplary governance we address the needs of our stakeholders.

This is a very exciting time for us, but we recognise a few difficult steps ahead such as addressing diverse expectations, identifying the points at which the interests of our shareholders and stakeholders intersect and embedding sustainability management throughout our operations. However, we welcome the challenge because we believe the results will drive even better value for society and our shareholders.


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UNITED BREWERIES

Recruitment policy of UB group:

As part of Diageo’s global policies, Diageo has emphasized the importance of treating individuals justly and in a non-discriminatory manner in all aspects of employment, including recruitment, compensation and benefits, Training, promotion, transfer and termination. Accordingly, factors not relevant to the Requirements of a role, including without limitation race, religion, color, ethnic or national Origin, disability, sexual orientation, gender or marital status, are not considered, and Reasonable adjustments are considered (and if necessary appropriate training provided) so that no individual is disadvantaged. Diageo has a number of graduate programmes that they recruit for annually across Europe (North America and other regions offer local programmes). Referred to by Diageo as "Early Career" programmes they enable the company to harness the potential of talented individuals who have either just graduated or who are at the beginning of their career. The programmes are aimed at individuals, who want to embark on a structured, yet flexible, programme that will stretch, challenge and grow them to become the future leaders of the business. Diageo recruit a relatively small number of graduates in each of their locations.

Corporate social responsibility:

The 24 hour Casualty and Trauma Care services are geared to handle all kinds of emergencies, ably supported by state-of-the-art, imported high-tech ambulances. These ambulances are fully equipped with Paramedical staff and are literally CCU's on wheel.

The Vittal Mallya Scientific Research Foundation was set up in December 1987, in memory of the Group’s Founder, late Mr. Vittal Mallya. It has been actively involved with a mission called “Science for Humanity” and is a non-profit organization participating with the Government in a Public Private Partnership on various projects.

In the field of education, the Group has assisted in the setting up of the Mallya Aditi International School where the best possible education is imparted. Mallya Aditi International School is located on a sprawling five-acre campus in the northern outskirts of Bangalore. It boasts of buildings of award-winning architectural standard, which allows students to interact with the sky, the earth and plant life as they move from room to room.

The beautification and entire maintenance of Vittal Mallya road has been the responsibility of the Group for over 15 years. Plans are afoot to further beautify the road. The Group’s commitment to the society is not restricted only to the city of Bangalore, but outside of Karnataka as well. It has also provided an extensive drinking water scheme in Srinivasapura village and has been actively involved in installation of Rain Water Harvesting structures at their Palakkad brewery thereby providing drinking water to Ganeshpuram village, Palakkad. A similar project was carried out at the Brewery in Ponda, Goa, which not only benefited the Brewery but also the village, whose well-water levels rose to help tide over their water problems during the dry months.

Besides, there is an ongoing commitment to society by way of sponsorships of various events which are organized by charitable bodies. The Group has also been responsible for providing bus shelters in the city and water tankers to villages around Bangalore facing severe water shortages


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during summer.The UB Group has rebuilt and renovated the Cubbon Park Police Station, exactly a century after it was originally built as a guard room for the statue of Queen Victoria. Great care has been taken to maintain the colonial style of this quaint architectural heritage building. This is another unique Public Private Partnership which the Group is proud to be associated with. The Group will continue its commitment to society for the betterment of the community.

RESEARCHING WELLNESS OF LIFE

Established (1987), in memory of the Group's illustrious founder Mr. Vittal Mallya, its prime objective has been laid to gain both newer and novel technologies that will have substantial application in industry and health care. Ably supported by The UB Group, it has established collaborative links with some reputed research and academic institutions within the country and abroad. The Foundation is led by a modest group of dedicated scientists trained in reputed institutions in India and abroad. Today, it is recognized by the Departments of Scientific & Industrial Research (DSIR), Dept. of Biotechnology (DBT), Council for Scientific and Industrial Research (CSIR) and the Ministry of Finance, Govt. of India, and has an incredible list of credits to its name.

CARLSBERG

Human Resources With more than 30,000 employees around the world. They need strong teams to support and develop them - and to help them find new talent. You could work in generalist HR, or in a specialist area such as rewards and benefits, performance management or employee engagement.

Typical jobs: HR administrator, HR manager, employee development manager, organisational development manager, internal communications manager.

RECRUITMENT POLICY

At Carlsberg, they recruit people in an efficient, fair, transparent and consistent manner, promoting diversity and opportunities for all.

GUIDELINES

Recruitment is always carried out jointly by the line manager and the local Human Resources department. Corporate HR in Denmark will also be involved in senior management appointments.

EVALUATION

Their two main methods are interviews and a standard test package, which consists of a personality questionnaire and a numerical and verbal ability test. Other methods can include case interviews, assessment centres and reference checks.


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EQUAL OPPURTUNITIES

They operate in many countries and have customers from all sectors of society. They promote diversity and do not discriminate on the grounds of sex, race, age, religion, disability or sexual orientation. Their recruitment procedures always comply with the local legislation of the countries within which they operate.

REWARDS AND BENEFITS

Carlsberg’s people strategy is to recruit, retain and develop talented and committed people who are passionate about their work, their business, their brands and their customers.

Most development takes place outside a formal training environment. On-the-job coaching, mentoring, exposure to different projects and giving people responsibilities have all proved invaluable in developing individual skills and enhancing performance.

Your Carlsberg benefits

At Carlsberg ,they are always looking to innovate in the area of delivering great employee benefits. Private Medical Insurance Participation in the Company Bonus Scheme Product Allowance – free beer Company Pension Scheme Generous Holidays Company Car Allowance Carlsberg Voluntary Benefits -- allows employees of Carlsberg to access generous discounts from well known suppliers. Buying and Selling of holidays

CSR – CORPORATE AND SOCIAL RESPONSIBILTY

The goal of CSR is to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere.

Carlsberg Approach towards CSR

ENVIORNMENT

Within our environmental strategy, we are focusing our efforts on three priority areas that are the most relevant to our business: Water, Energy and Emissions, and Packaging.

• Ambition is to be the industry leader for efficiency in water and energy consumption and CO2 emissions on our production sites.


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• To reduce the amount of packaging use and promote the reuse and recycling of packaging material.

RESPONSIBLE DRINKING

• Develop local activities that inform our customers how to avoid misuse and how to drink in a responsible and healthy way.

• Together with their partners, they are engaged in a number of initiatives across the globe designed to combat the misuse of alcohol. These initiatives are presented as case studies showing the work they are doing to support their policies on responsible drinking. Eg. In Russia Carlsberg Baltika has introduced Beer Patrol at events we sponsor to combat underage drinking.

COMMUNITY ENGAGEMENT

• To achieve long-term sustainable relationships the communities in which they operate. As a global brewer, they recognises that different communities have different needs and challenges, so we are constantly developing initiatives to improve the effectiveness of our engagement activities.

LABOUR & HUMAN RIGHTS

At Carlsberg, we believe that our employees are fundamental to our success. Our aim is to provide an open and inspirational workplace where all our employees can develop their full potential

• Opportunities for development

Programmes such as the Leader Development Programme and International talent programme provide employees with opportunities to enhance their professional development.

• Same standards for all

They are committed to creating a working environment which encourages transparency, respect and fairness; a commitment reflected in many and various group and local activities.

• Involving employees


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They conduct a bi-annual employee attitude survey to find out what our employees think about Carlsberg and to identify areas for improvement.

BUSINESS ETHICS POLICY

Their Business Ethics Policy, and the supporting Handbook and Guidelines, are designed to help employees resolve day-to-day ethical dilemmas, such as situations involving anti-corruption, confidentiality, the misuse of company assets for personal advantage and the rules regarding donations and gifts.

PERNOD RICARD

With 17,600 employees in over 70 countries. They need strong teams to support and develop them - and to help them find new talent.

TYPES OF WORK:

Vineyard Workers

We need seasonal workers in the winter to help with the pruning, thinning and canopy management of our vines. This work is critical, as it prepared our vines in the best possible way to ensure good healthy yields at harvest time.

Cellarhands If you are as excited as we are about producing quality wine, that’s a good start. Then all you be working with automated machinery, and will have the chance to work a variety of shifts, as a temporary Cellarhand.

Laboratory Technicians

This role helps with all aspects of the day to day operations of the laboratory, including: routine laboratory analysis; processing of vineyard grape samples to assess maturity; monitoring of wine fermentation in tanks and barrels; and assisting in trial research work.

Assistant Winemakers Assistant Winemakers are sought at Vintage and will be involved in all aspects of winemaking, including: ensuring all wines meet quality, analytical and legal specifications; daily work planning; blending and grading tastings; and liaising with laboratory and cellar staff.


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RECRUITMENT POLICY

Pernod Ricard encourages professional development for all employees. Throughout their careers, Group employees can take advantage of training sessions organised locally by subsidiaries or at the Pernod Ricard Training Centre. Pernod Ricard offers its employees a complete range of training courses through :

• the Pernod Ricard Professional Training Centre (CFPR), • management training programmes • courses in luxury brand management, • orientation programmes for new employees, • local initiatives.

STAFF BENEFITS:

Product allowance Eligible employees receive a generous product allowance on a regular basis to enjoy and sample the products enjoyed by our customers. Share with family and friends and be proud of what the company has to offer our customers. Discounts and offers Employees may also be entitled to purchase products at discounted rates and there are regular product specials. Enjoy in moderation. Employee awards Employees may be nominated to receive a regular award for excellence. Our high performing employees benefit through this process by gaining further recognition and reward for their efforts. Health Insurance Employees may be eligible to receive a corporate health plan through one of New Zealand’s leading health insurance providers, which has some great health insurance benefits. The company offers a health package for the employee, their partner and dependents up to the age of 21 years.


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BIBLIOGRAPHY • http://financials.morningstar.com/ • http://www.wikipedia.org/ • http://www.diageo.com • www.theubgroup.com/ • www.carlsberg.com/ • www.pernod-ricard.com/

Documents

Term Paper Report