Ladli Pershad Jaiswals attempt to sell his company fails for the second time. But why is JIL on the block?
Last month, liquor multinational Bacardis negotiations with Ladli Pershad Jaiswal to buy out his Rs 355- crore Jagatjit Industries Limited (JIL) fell through. This makes it the second time in one year that Jaiswal has come close to selling his company. In 1997 it was Allied Domecq that was interested in acquiring Jagatjit. However, the two sides broke off over the question of price. And now, rumours are rife that a third party has been found that will soon take over the company. Whats going on at Jagatjit?
Its an unusual company, to say the least. Try and get in touch with managing director, Jagatjit Jaiswal, and you are fobbed off with: He doesnt meet the press. Last year, three chief executives resigned in a span of barely five months. Owner and chairman Ladli Pershad Jaiswal, in his eighties, lives in London and comes visiting only occasionally.
In Jagatjits Delhi office, it is hard to believe that this outfit had a turnover of Rs 355 crore in fiscal 1996-97, and a net profit of around Rs 20 crore. The office is spartan, to say the least. Bare walls, bare tables, very few chairs and no carpets. Theres a secretary outside with a telephone on her desk and not much else.
On the other hand, this is also a company that has one of the highest profit margins in the liquor industry, with net profit margin at around 5.5 per cent in the year ended March 1997. The other two big players, Shaw Wallace and United Breweries, declared negative margins in their latest results. Jagatjit also owns some of the most prestigious brands, including Aristocrat, Premium, Binnies and Bonny Scot. In the regular whisky segment (prices of around Rs 130), Aristocrat alone commands roughly 9 per cent market share. In the medium segment (Rs 90-110), Binnies and Bonny Scot are two of the three most recognised brands (the other is Shaw Wallaces Hayward) with a combined marketshare of almost 25 per cent. The company has one of the most envied distribution networks in the country, with an estimated 250 distributors, and perhaps the largest distillery in India at Hamira, Punjab, with a 48.5 million litres per annum capacity.
Of the 55 million cases per annum of Indian-made foreign liquor sold in 1996-97, Jagatjit took a market share of around 9 per cent. The other two majors, United Breweries and Shaw Wallace, had a share of 29 per cent and 17 per cent respectively. We have excellent brands, a fantastic distribution network, and great potential, says a highly placed official in the company.
Now listen to an ex-employee of Jagatjit: You just cannot work in Jagatjit. Im glad I resigned. Says another, I was much too ambitious to have worked there. The management just doesnt care about employees. And yet another: They dont want to change, sometimes I feel these people are 10 years behind the times.
For Jagatjit Industries, the unusual has been the norm for a while. Against an industry growth of 6-7 per cent, combined sales of Jagatjits top three brands have fallen by 3 per cent since 1994. Overall, industry estimates are that volumes have stagnated at 4.5 million cases since 1994, though the company argues otherwise.
From November 1996 to March 1997, Jagatjit saw three executives resigning. The position of vice president, sales and marketing, a crucial position in the liquor industry, has been vacant for close to a year. Last year also saw two vice presidents resigning, and the marketing department leaving en masse.
Employee dissatisfaction seems to have percolated downwards. Says a former manager at Jagatjit, who was with the company till a few months ago: There seems to be no clear cut strategic focus in the company; theres no understanding of systematic manpower recruitment, HRD or career development. Take a small example. Till some time ago Jagatjits frontline salesman received Rs 110 per day when on tour, against an industry average of around Rs 250. So he has little motivation to perform. Look at the brands: the Aristocrat packaging is yet to change in 15 years. Today the man in charge is deputy managing director, Vijay Kapoor, and he has a production background. Add to that the feeling that it may be sold at any moment, and you have a company that gives the appearance of running on auto pilot.
Its a piquant situation, more so because this could be the time that the company needs to get its act together. For, Jagatjit has only recently launched a brand, Aristocrat Supreme, the first in almost two years. It has set up a new distillery near Bulandshahar in UP, after a gap of around five years. Officials say there is to be a renewed focus on marketing, and plans are that in the next one year the company may come out with another liquor brand in the upper-end, super premium segment.
Former employees say that the reasons for the present state of affairs may be traced back to 1994. In that year two things happened that were to have a significant impact on the company. M L Goel, senior vice president of the liquor division, put in his papers after 35 years of service. That was the beginning of a mass exodus, says a ex-secretarial staff in the companys foods division.
Goelss exit, however, did not have an immediate impact. He was replaced by Shobhan Roy, currently head of Kishore Chhabrias BDA Distilleries. Roys agenda, as remembered by the people who worked with him in Jagatjit, was clear. Till that time Jagatjit was a traditional company in the fullest sense. It had the advantages of very successful brands and a solid distribution network.
On the other hand, it was yet to get into the aggressive mindset required of a liquor major in a market choc-a-bloc with competitors. And so, from one perspective, Goels resignation was seen as enabling Roy and co overhaul the company. We had certain objectives, says a marketing executive who worked in Jagatjit right through 1996. Inject professionalism, reorient and repackage existing brands, and launch a few new ones. The launch of Fortune Gold, a liquor brand in the super premium product range was intended, insiders say, to be Roys showcase achievement.
There were problems, though, right from the start. And, as insiders see it, many of the problems had to do with Jaiswal himself. Jaiswal has lived in London for as long as anyone can remember. He is, ex-employees say, a quixotic man. Mr Jaiswal, says a former marketing executive, is possessive about his company, to the point that it is difficult for a professional management to function. When we were trying to design the launch of Aristocrat Supreme a year ago, he would insist on control over details such as packaging and the shape of the bottle. Everything would go to London.
Stories about Jaiswal are legion; that he lives in a palatial apartment in London, that he has four Rolls Royces (number plates JIL 1, 2, 3 and 4), and that he believes he will live to a 120. The old gentleman calls up his senior managers every day at 9 in the morning to find out whats going on in the company, says the ex-employee, when it must be 3:30 am in London! At one time I remember the daily attendance register being faxed to him. In one instance his typist of 30 years retired as a director of the company. What do you call that, equal opportunity or parochialism? I think Roy had a difficult time.
On the other hand there may be no gainsaying the fact that Jaiswal was genuinely interested in giving the company a new focus. That Jaiswal took Roy, a professional manager, says a former head of Jagatjit, was an indication that he wanted a change.
However, the failure of Fortune Gold soon put paid to that. Rs 15-20 crore was invested in the launch of this brand. When the losses started to mount, Jaiswal would revert to his old ways of trusting a few old timers within the company, and his distributors.
In the meantime, company sales declined anyway. Binnies fell from 995,000 cases in 1994 to 600,000 cases in 1996 (latest available figures) a fall of almost 39 per cent. In the same period, Aristocrat saw a volumes fall of 34 per cent, from 1.975 million cases to 1.3 million cases. Only Bonny Scot was able to make up for the decline, its sales increasing from 1.025 million cases to around 1.8 million cases. Aristocrat Premium went from 810,000 cases in 1995 to 785,000 cases in 1996.
Shobhan Roy resigned near the end of 1996. To be replaced by Satish Kaul, an ex-Shaw Wallace and United Breweries man. Kauls stint in Jagatjit could be a record as one of the shortest tenures in corporate history under one month. He is now in Singapore. He was succeeded by S C Suman, an old timer who resigned soon after. Soon another vice president R S Ahluwalia also left.
From 1997 on, the companys operations have been handled by deputy managing director, Vijay Kapoor. If ex-employees are to be believed, managing director Jagatjit (Binnie) Jaiswal, Ladli Jaiswals eldest son, does not have any say in the company. He comes to the office, says a former employee, but hardly moves out of his room, and, in my time was not consulted on any decisions made within the company.
There may be confusion in plenty, but its not as if the company doesnt have ambitious targets. While officials say that Jagatjit has increased its marketing focus compared to last year, by getting into promotions and local level campaigns, they do not specify the numbers involved. The company is targeting a volume sale of 8 million cases, up from the 6.5 million cases it says it sold in 1996-97. This would imply a whopping increase of 23 per cent. The milk foods division with its popular products, Maltova and Viva, accounts for around 15 per cent of the turnover. Handled by Ladli Pershads second son, it is now expected to increase its production from 7,400 tonnes last year to 8,500 tonnes in 1997-98.
The industry and former employees do not think that Jagatjit will be able to retain its position, leave alone improve it. Its a company behind the times, says an executive at Allied Domecq, I dont think their growth plans for this year are achievable. Their brands are stagnating, and the emphasis on distributors and the treatment of liquor as a commodity is outmoded. At the right price, Jagatjit Industries is a fantastic prospect for a buyer by itself it will not survive.
