Wednesday, July 20, 2011
Diageo in India
A growing economy, expanding middle class and rising disposable incomes have given the Indian spirits market significant growth potential. India is home to 17% of the global population (close to 1.1 billion). India is now the largest international whisky market by volume, reporting 8-10% growth annually. This makes India one among the fastest growing whisky markets anywhere in the world. Diageo is the world‘s largest wine, beer and spirits company. It owns the brands like Smirnoff, Johnnie Walker, Guinness, Baileys, J&B, Captain Morgan, José Cuervo and Tanqueray. Diageo launched its operations in India in early 1990‘s. But, the UK headquartered giant, yielded ground to French ri4valPernodRicard in the early round of the Indian conquest. In the past 4-5 years, Diageo has taken a number of steps to revive its marketing strategies in the country. The biggest growth drivers for Diageo in India have been Johnnie Walker (Premium Scotch Segment) and Smirnoff (Premium Vodka Segment). In 2006, Diageo claimed to control 80% and 90% of the two respective segments with these brands. Diageo spotted two major trends in India markets – urbanization and premium-isation (based upon the aspiration levels of the people). Thus, they created price segmentation. There was a big gap between the prices of IMFL and premium alcohol. Haig was launched to target aspirants. So, there are different segments the takers for Haig, for existing brands like Black and White and VAT 69 and finally for Johnny Walker at the top-end. The aspirants eventually graduate to Johnny Walker. Similarly, in vodka, Shark Tooth which is mid-price, on a par with Fuel and Magic Moments and Smirnoff which is slightly more premium and Smirnoff Black which is at the top-end. So, here also three segments were created. Under its Smirnoff brand, the company introduced an array of festive drinks with Indian ingredients like Smirnoff Masala Marke, Smirnoff Jaljeera, and Smirnoff Katha Pudina esp. to cater to Indian taste buds. In 2001, Diageo had hurriedly exited Indian-Made Foreign Liquor (IMFL) to focus on its imported international portfolio but revised the strategy with the domestic market witnessing sustained robust growth. In 2006, Diageo announced a joint venture with homegrown liquor company RadicoKhaitan targeting the IMFL segment. Brands of RadicoKhaitan include 8 PM Whisky, Contessa Rum, Old Admiral Brandy and Whytehall Whisky. Bollywood king Shahrukh Khan was roped in as the brand ambassador for its first offering Masterstroke deluxe whisky. In Sep, 2006 Diageo decided to launch the indigenously develope5d vodka brand called Shark Tooth aiming to position it at prestigious vodka segment. In June, 2009 the Tamil Nadu government had cleared the decks for Diageo to start bottling in the state, making it the first MNC drinks company to list brands in the local retail trade. The company had sold its most successful brand Gilbey‘s Green Label to the country‘s largest spirits maker, UB Group, for Rs 60 crore in 2001. Diageo is also bringing back the Gilbey's trademark to India through the Tamil Nadu foray. Sources said that Gilbey's is now being readied as a brandy flavour as the drinks giant works on leveraging its brand equity in South East Asian markets. The company entered into the Indian beer market with its globally top-selling premium stout beer brand Guinness. Diageo bought a strategic stake in Nasik-based Sula Vineyards. They entered the Indian Rum market with their brand Captain Morgan. Despite the continuous efforts, the market share of Diageo in these other segments continues to be low. Roland Abella, managing director of Diageo India is clear that value, and not volumes, will drive Diageo India's growth, hence its focus on premium products. It has reorganised its product basket and has exited the wine business in India. It has taken off its only wine brand Nilaya (priced between Rs 395 and Rs 500) from the market so as to focus on its iconic brands like Johnnie Walker Scotch whisky, Vat 69, Ciroc and Smirnoff vodka. Now, says Abella, ''For us, the centre of gravity is spirits.‖ Diageo like other luxury retailers is betting on India's young demographic, rising consumer standards and exposure to sophisticated products. Another reason for Abella's optimism is that premium brands are less vulnerable to the fluctuations of the global economy. Diageo has made significant noise in India during the past two years in a bid to boost presence across trade channels for lifestyle drinks. In November, 2007 Diageo tied-up with 6retail giants Reliance Fresh and Shoprite Hyper to distribute its wines portfolio in cities like Mumbai and Pune. UB and Diageo initiated trade marketing activities with the alcobev channel in early 2008. Diageo helped revamp local wine shops and re-branded them as JW Select outlets. From a push effect earlier, Diageo initiatives like JW Select create the pull effect. Once the experience is created, offtake happens,‖ said Santosh Kanekar, then marketing director, Diageo India. Clubs like Johnie Walker Club & Lounge, Smirnoff Cafes were launched as a part of the surrogate advertising. These clubs aimed at giving the experience of drinks along with brand associated music, art events and Formula 1 races. Johnnie Walker Bartending Academy‘ was launched aiming at introducing world-class standards of bartending.
Art of War: A Book Review
The Art of War, is a Chinese military treatise, written by Sun Tzu, the sage Strategist, Military General and Philosopher. This book is speculated to be written somewhere in the 6th century B.C though the exact date is still considered to be a matter of dispute as different historians have different takes on the same. That was the time when Mainland China was fragmented into a number of smaller nations (some Chinese historians put the number at 7) and the nations were at constant war with each other in order to conquer control over a vast expanse of fertile territory in the Eastern China. Sun Tzu was the Military General of one of the warring nations named Wu, which was very successful in not only wading off the attacks from other aggressive nations but also many wars that it fought. The book is divided into 13 chapters where Sun Tzu writes about the nuances and knittygritties of warfare at great length. In the initial chapters, he talks about the traits that a General has to possess Wisdom, Sincerity, Benevolence,Compassion and Strictness. Sun Tzu focuses on the Deception as one of the primary weapons of military warfare. Some of the quotes on deception are:
“All warfare is based on deception.”
“Pretend inferiority and encourage his arrogance”
“Be extremely subtle, even to the point of formlessness. Be extremely mysterious, even to the point of soundlessness. Thereby you can be the director of the opponent's fate.”
“If you are far from the enemy, make him believe you are near.”
If one tries to draw an analogy to the real life business scenario it is pretty evident that, the advantages that one stands to gain out of keeping one’s opponent in the dark and mislead them are immeasurable. Here one has to remember that one can deceive or mislead someone only up to some point of time. One day the cloak of deception will fall down and may lay you bare. But it is here one needs to understand that the calculated and careful you are, the more one can extend the duration of keeping one’s opponents into believing something that’s not true and in the process draining their resources. Sun Tzu also focuses immensely on understanding one’s enemy as much as you understand yourselves.
“If you know the enemy and know yourself you need not fear the results of a hundred battles.”
“If ignorant both of your enemy and yourself, you are certain to be in peril.”
Sun Tzu writes about knowing one‘s enemy at great length as in order to outsmart our enemy one needs to know about him inside out. He also goes on say that-
“Keep your friends close and your enemies closer.”
Sun Tzu discourses about strategy by saying that the one who makes more number of calculations before the war has more number of chances of winning the war. Strategy is not all about sticking to one‘s plans but it‘s more about thinking on one‘s feet and to change it accordingly to suit to the ever changing scenario. If we try to draw a parallel with the real life business world where the situation changes faster than one could imagine, it makes all the more sense to immaculately strategize and implement it meticulously taking into consideration all the possible factors and variables involved. It goes without saying that the more holistically you look at the problem and plan accordingly the more are one‘s chances of avoiding the pitfalls of it. In this seminal work Sun Tzu also talks about the lead leadership qualities that are supposed to be possessed by a general (read as business leader) and the management of one‘s resources.
“A leader leads by example not by force.”
“Management of many is the same as management of few. It is a matter of organization.”
“Treat your men as you would your own beloved sons. And they will follow you into the deepest valley.”
“If words of command are not clear and distinct, if orders are not thoroughly understood, the general is to blame. But if his orders are clear, and the soldiers nevertheless disobey, then it is the fault of their officers.”
These are some of the quotes that one can find in this masterpiece regarding the characteristic traits that are to be possessed by a leader. He delves in depth as to how to manage one‘s resources and it is not a function of the amount of resources but it has more to do with the organization skills of the leader. These are some of the many things that the author has talked in the book. The book is as relevant today as it was when it was return speaks volumes about how farsighted the author is. This book is 7 highly recommended for Business leaders around the world because of the timeless pieces of wisdom the book provides. Such is the popularity of the book that it has seen a spin off in the form of Art of war for business, Art of war Executives, Art of war for Managers, Art of war for women, Art of war for teachers etc just to name a few. This book rightly places Strategy on the altar of business.
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