This refers to the report Expensive rebate fuelled SWC cash crunch,e (Sept 11). The report has attempted to establish that the cash crunch at Shaw Wallace is majorly a consequence of the expensive rebate" extended to distributors.
Citing the margins granted in the beer segment by various alcoholic beverage manufacturers in the growing market of Orissa, the reporter has put the margins being granted to wholesalers by SWC as at times 50-60 per cent higher" than its competitors, according to certain industry figures available with Business Standard."
Notwithstanding the fact that there are gross inaccuracies in the report, the entire discussion attempting to make naive comments on SWCs commercial judgement is professionally misplaced and motivated.
A companys product and price decisions are a consequence of its management vision and marketing strategies. The only way to evaluate these decisions is to benchmark the market performance of the brand against the companys internal projections as well as against the competition.
To suggest that after being Indias foremost liquor brand builder for over a century, SWCs marketing management committed such a major faux pas on the elementary issue of trade discounts that the error drove the company into a cash crunch situation is preposterous.
SWCs national marketshare in the beer business has doubled in the last two years. Obviously, its increased marketshare has cost some other beer brands heavily. It is these elements who resort to a calculated misinformation campaign about Shaw Wallace and its business practices at a particularly difficult time for the company.
While we will not like to reveal our pricing pattern for obvious competitive reasons, we would like to mention that our Haywards 5000 beer which is now the single-largest brand in Orissa, is priced higher than the second-largest brand Maharani Blue Label of M P Distilleries.
An objective analysis will reveal that even at the entry stage nearly three years ago, SWCs trade discounts were always lower than those of Maharani Blue Label "" the single-largest brand at that juncture.
Your report further goes on to say that the company provides more attractive schemes and a higher turnover bonus to the trade than the competition. Normally, we would love to take this comment as a compliment for we firmly believe that outcompeting the rivals by offering best products at the best prices is the very spirit of free enterprise. It is however sad that the report is wrong even on this score. While SWC is indeed in a position to offer better trade margins due to a lesser incidence of freight and state levies, as it is the only manufacturer capable of sourcing its brands from a unit located within the state, there has been no need to do the same, at any stage, till date.
Thus, despite the lesser trade margins and the less popular trade schemes, Shaw Wallaces market share has been growing since the companys entry into Orissa
At present, SWC has a market share of 34 per cent compared to a 11 per cent in 1993-94. The company has registered a growth of 51 per cent in the period April-August 1996 (sales of 1.96 lakh cases) over the corresponding period last year. If the operations continue the way they are today, the companys market share in the beer segment in Orissa is expected to climb up to 45-48 per cent in 1996-97.
Harsimron S Sandhu
Director-India InfoMedia
For Shaw Wallace & Co Ltd