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FEATURES/Boardroom | Oct 17, 2011 | 30602 views

The New King of Good Times

Pernod Ricardís Param Uberoi has dethroned the King of Good Times with pricing strategy and a high-stakes marketing campaign
The New King of Good Times
Image: Mallikarjun Katkol for Forbes India
SUCCESSOR Mohit Lal has taken over as CEO of Pernod Ricard India after Param Uberoi hung up his boots

In 1998, soon after Seagram rebuffed Mallya’s overtures, Uberoi was asked to take over the spirits business as CEO. The business was losing Rs. 40 crore a year and had volumes of less than half a million cases a year. Uberoi was among the first non-sales chief executive of a liquor company in India. While this meant he was more focussed on earning profits than driving volumes, his FMCG (fast moving consumer goods) background ensured that he chose a very different route to rebuild the business. During those early days, Uberoi’s decisions were first ridiculed by the industry, but as they bore fruit later, elicited respect and cemented his legacy.

 First, he changed the top team. “The focus was to align the team to a common vision,” says Uberoi. If anyone didn’t share that vision, they were replaced. Uberoi roped in Mohit Lal, who was at confectionery giant Perfetti as the CFO; got a new manufacturing head and till 2001, took care of marketing himself. Later, Sumeet Lamba was roped in from Dabur and only the sales head, Rakesh Vasishta who was in the UB Group, came from the liquor background. “I suspect, a lot of other industry players may have laughed at us for this kind of a mix,” Uberoi recalls with a smile.

Structurally, Seagram’s operations in India were divided into four regions, each a profit centre in itself. Uberoi increased this to six. “Aside from the sales head, we added marketing and finance heads to sharpen ground level actions and decision making capabilities,” says Uberoi. And then the finance whiz did something that was unheard in the industry. He forbade his sales team to cut prices of the products. “Royal Stag was the first grain-based whisky in India, whereas till then local whiskies were made from molasses. It was a premium product and we decided to play that up. And price is a good indicator of the quality,” says Mohit Lal, the then CFO.

On the production side, Seagram had just one bottling unit in Uttar Pradesh, from where bottles were trucked across the country. That pushed up logistics costs. Uberoi went about increasing the access to more bottling units across the country, and also set up distilleries.

These steps saw Seagram double its turnover and sales within three years. By 2001, it had wiped off the losses. And Uberoi’s progress immediately appeared on the radar of its most formidable rival in Bangalore.

On a High
 French multinational Pernod Ricard had entered India in 1996, but waited another four years before it launched its first two products — Santiago rum and Tilsbury whisky. The two had a short life because within a year, in 2001, Pernod Ricard acquired Seagram globally. “It is to the credit of Pernod Ricard’s decentralised business model, that even after the acquisition, the company was called Seagram India till 2007. The focus remained to develop local brands as Pernod Ricard’s international brands had limited opportunity outside Duty Free and large hotels owing to absence of state policies and prohibitively high duty rates,” says Uberoi. In an unusual move, Uberoi was chosen to head the Indian business even though he belonged to the acquired company’s operations.

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Before Uberoi could begin the second innings, there was a ‘surprise visitor’ in Vijay Mallya. The fact that talks again broke down with Mallya may have been a blessing in disguise. Over the next few years, Uberoi shifted gears to build on the foundations set in place three years before the Pernod Ricard acquisition.  

The key was revving up the brands. “In the Indian alcohol industry, you either give an image per rupee or a kick per rupee. Before Pernod Ricard came in, it was mostly kick per rupee. They changed the rules of the game,” says Santosh Kanekar, an industry veteran turned consultant.

But it wasn’t without its challenges. Through the years, USL had built a strong relationship with distributors, first under Vittal Mallya and then under his son Vijay. Mallya leveraged this strength to build volumes, pushing distributors to drive stocks, giving discounts and sometimes asking distributors, who also had retail outlets, to push USL products in their shops.

Once it became clear that he wouldn’t be able to bring Pernod to the bargaining table, Mallya decided to go on the offensive. He asked his distributors to deal with only his products and drop all the Pernod Ricard brands. He also asked the retail outlet owners to stop selling the Pernod brands.

Simultaneously, Mallya flooded every bar and highway joint with Bagpiper and McDowell posters, glasses, ash trays and even table covers.

By then, Uberoi knew that they couldn’t match up to USL’s distribution strength. First, he carefully selected his distributors. He opted for the smaller players. “We didn’t have volumes initially and knew that the bigger distributors won’t push our products,” says a Pernod Ricard executive. So instead, Pernod salesmen, through the hand-picked distributors, focussed on not pushing volumes, but on ‘width’, or reaching maximum consumer points.

 Moreover, as Kanekar says, “In India, due to advertising restrictions, you can’t show consumers how to use your product.” So, Uberoi’s team hosted tasting sessions in restaurants and clubs to introduce their products and sponsored musical events, including DJ nights. As awareness of the brands improved, volumes also picked up. Retail outlets, despite Mallya’s orders, started stocking PRI brands.

This article appeared in the Forbes India magazine issue of 21 October, 2011
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Comments (2)
Ravi Oct 21, 2011
where there is will there is a way
Vivek Agarwal Oct 18, 2011
Excellent write up and good case study for young genreation for knowing how strong will power and commitmemnt make difference. I am really hats off for Mr.Param Uberoi for his success story.
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