Question

Ruphani Beverage Limited

Ruphani Beverage Limited entered the Indian wine industry in 1975 by acquiring the Mastana Wine Company of Shimla and two other smaller wine companies at Kalka for Rs. 50 Lakh.
Despite hostility expressed by other wine makers and predictions that Rupbani would very soon fail as other outsiders such as Parminder Wine Company had, the entry succeeded. Rupbani Limited performed the unheard of feat of establishing a volume of 30 lakh cases within two years and taking the market share away from premium brands such the National Wine Company of Bombay, Pearl Drink Limited of Pune and Syndicate Cola Limited of Madras.
Rupbani advertised heavily and incurred Rs. 10 lakh in one year and standardized the taste of its wines with considerable success. It also invested Rs. 48 lakh in a large, new winery at Ahmedabad. A Rupbani Executive said, “By 1995, consumption of wine in India will be a liter per capita, compared with half a liter today.”
The industry reacted to Rupbani’s presence by doubling and tripling advertising expenditure. ABC and Company began a costly campaign to market premium and varied wines while reducing marketing emphasis on its cheap wines such as Nahan Drinks and the Gola Beverage. ABC maintained its 25 percent market share but had to resort to some heavy price discounting to do so.

In 1982 Pearl Drinks formed a special wine unit to combine efforts for all its brands. Mr. Sailesh Kumar former Vice President of the National Wine Company had directed a project to coordinate Pearl’s world-wide wine business and develop a worldwide strategy. The new unit was, in face, a result of his work.
In 1983, wine consumption changed from growth at a rate of 5 per cent to no growth. The government also lifted the ban on imports of wine. This presented an even greater challenge because imported wines were cheaper as well as superior in quality.
In 1984 Mr. Ranganathan took over as Managing Director of Rupbani. He reviewed the recent performance of the company and its competitive position. He noted that the company was losing its hold over the market and it was not getting the return as expected. He also found that the company’s performance in the syrup business was excellent. He, therefore, thought of selling out the wine business to Pearl Drinks, He convened an executive meeting and apprised the executives of his proposal. He also informed them that Pearl Drinks had offered the company to recapture its investment in the wine business which was about Rs. One crore. Mr. Arun Mehta, General Manager, observed that Rupbani was in and out in the past six years and had joined different organizations in trying the wine business. The finance Manager, M. Subhash Ghai said, “The return on assets in the wine business is not the 30 to 35 per cent, which Rupbani is used to getting in the syrup business. Gaining share and trying to compete with ABC and Company left Rupbani with, eventually, the number two position in the wine industry with profits of Rs. 60 lakh on Rs. 220 lakh in sales. The stockholders wanted immediate return and hence, the company could not afford to make long-term investments necessary to popularize the brands. Had they stayed for five more years, they would have been a key leader in a large and profitable industry”. Pearl Drinks immediately went from the sixth position in the industry to a strong second place with an 11 per cent market share. The Chairman of Pearl Drinks stated: “We believe you can make money in this business in two ways. Remain a small boutique winery or become large and achieve economies of scale”.

Mr. Harish, Marketing Manager of Rupbani said, “It is no use selling out our business to Pearl Drink and get back what we have invested. We can compete with our competitors successfully and improve our market share if we manufacture wines of varying qualities to suit the varied preferences and pockets of diverse sections of society. We should also offer price discounts to attract the consumers. There should be wide publicity of our brands throughout the country”.

a) Perform SWOT analysis of Rupbani. (10 Marks)

b) In the light of opportunities and threats of Ruphani Beverage and its strengths and weaknesses, what strategy should it formulate to improve its performance and strengthen its competitive position? (5 Marks)

c) Should Rupbani spend on advertising in line with its competitors? Discuss. (5 Marks)
d) What Other strategies would you suggest for Rupbani for increasing their share of the market? (10 Marks)

Answer 1

1. SWOT Analysis: SWOT Analysis can be defined as the comparison with the internal strengths and weaknesses so as to match them with the external threats and opportunities for gaining competitive advantage over other competitors.
   
   Strengths - The huge expenditure on advertising makes us understand that advertising is one of the core strengths of the company. And also the by the case we understand that standardization of the flavor of the wine across the country India is also a strength to the company.
   Weaknesses - The main weakness for the company is the set of competitors it had, the competitors have been sustaining in the market from a long time.
   Opportunities - The sharp growth of the consumers of wine in the country India was the main opportunity for the company Rupbani.
   Threats - The change in strategies of the Competitor ABC and company to gain the market share is one of a threat. And also one of its competitor Pine drinks has invested in forming a special unit for the manufacturing of wine under all of its brands.
2. By the process of selling wine to Pearl Drinks or competing on the wine industry to become a leader. Rupbani will take the latter approach to enhance its efficiency and enhance its competitive position. It should pursue the following approach to enhance its efficiency: the market segment–identify distinct customer groups and their wine preferences. Identify under served segments. Develop new brands and target these segments aggressively. Improving supply chain–In Shimla, Kalka and Ahmedabad, Rupbani has wineries. In Northern and West India it may be powerful, but transporting wines to East and South India may be costly. It may well be costly. It is intended to seek partners at domestic level to distribute wines at reduced price.
3. My answer would be a Big No!. Because The ROI of Rupbani's shareholders in the wine company is not as big as anticipated. An rise in publicity expenditure would only make it worse in the brief term. Their rivals are wealthy in money and can readily surpass Rupbani. An rise in advertising expenditure therefore will not result in an rise in market share. Rupbani should instead concentrate on creative types of advertising, such as guerrilla marketing.
4. The other strategies that can be used by Rupbani for increasing the share of the market are:
   Following a low cost provider strategy will make their market share increase but doing so will decrease their profit ratio and also profit amount. The company can also concentrate on spending more on advertising since it has to gain the marketing share, whereas the profit ratio will again decrease. It can also opt for diversifying into ancillary business or into any vertically or horizontally related businesses for competitive advantages. It can also try out for expanding its business to other countries or states and through globalization. It can also try for any merger or acquisition of some MNCs in the related business industry. And hence these strategies are some of the alternatives that the company can follow for increasing their market share.