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Tilaknagar Industries
BSE: 507205|NSE: TI|ISIN: INE133E01013|SECTOR: Breweries & Distilleries
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Chairman's Speech (Tilaknagar Industries) Year : Mar '13
Dear Shareholder''s
 
 I am proud to present the credentials of the Company at a time when we
 were faced not just with several macroeconomic challenges but issues on
 the regulatory front as well.
 
 Overall, we marketed 13.80 million cases in 2012-13 compared with 13.24
 million cases in the previous year, representing a growth of 4.2%, a
 credible achievement in a tight market.
 
 Strengthening our business amidst regulatory challenges Tamil Nadu is
 an important liquor- consuming state in India accounting for 19% of the
 overall consumption. On account of the changes undertaken by the
 government regarding the liquor ordering process which favoured local
 players, our sales volume in the state has declined during the year
 2012-13.  Also during the current year, CSD sales remained stagnant.
 
 I must mention that though the overall Indian liquor industry grew 5%
 during the year under review, our non-Tamil Nadu growth during the year
 was substantially higher than the industry.  This should provide our
 shareholders with an insight and an assurance that our brand has
 continued to remain robust without dependence on one particular state,
 enabling us to capitalise on the industry fundamentals as soon as they
 rebound.
 
 The other point I wish to communicate to the shareholders is that even
 though we encountered weak scenarios in Tamil Nadu and across CSDs, we
 continued to strengthen our overall business through various
 initiatives namely:
 
 - We extended our presence to 18 states and were able to increase our
 prices in four states including Kerala (August, 2012), Odisha
 (September, 2012), Andhra Pradesh (December, 2012) and Karnataka
 (March, 2013).
 
 - We signed strategic bottling agreements with Pernod Ricard India
 Pvt. Ltd. (PRIPL) to manufacture its products at our bottling
 facilities in Maharashtra and Andhra Pradesh.
 
 - We launched Courrier Napoleon Blue, a super-premium brandy in Tamil
 Nadu and Courrier Napoleon Green premium brandy in Karnataka, Kerala,
 Tamil Nadu, Puducherry, Goa and Sikkim. We also forayed into 13 states
 with our premium Mansion House Gold Whisky.
 
 - We entered into a trademark assignment agreement with Mohan
 Breweries and Distilleries Ltd. for assignment of their trademarks -
 Brigadier''s No. 1 Brandy and Vorion No. 1 Indian Brandy.
 
 - We strengthened our exports presence from 0.11 million cases to
 0.22 million cases, leveraging the combination of taste and price-value
 to widen our international footprint from nine countries to 11, all of
 which have a large expatriate presence.
 
 2012-13 - a year where performance defined our personality
 
 We have a sizeable presence in South India accounting for approximately
 75% of our volumes because of the fact that the region is the largest
 consumer of liquor in India. However, we recognise that to ensure
 robust and sustainable growth, we need a pan-Indian presence.  Towards
 this end, we acquired 26% stake in Mason & Summers Marketing Services
 to leverage its distribution network in North and East India, a move
 which will progressively enable us to spread wings to other parts of
 India, open up several new revenue streams and mitigate excessive
 dependence on one particular geography.
 
 Some of our other key developments include:
 
 - We selected to associate with prominent airlines (Indigo, SpiceJet,
 Jet Airways and GoAir) following which our brands were showcased via
 hand baggage tags, tickets, boarding passes, magazine covers and seat
 back panels.
 
 - We invested sizeable resources towards enhancing the visibility of
 up market brands like CNB Green and CNB Blue with the objective to
 climb higher up the value chain.
 
 - Our brand Mansion House Whisky is a strong driver of our whisky
 portfolio in unison with BLACPOWER Grain Whisky, which is also doing
 very well.
 
 Shareholder optimism
 
 In a business where the realisations of our end products are largely
 controlled by the government, the focus is to extend into states with
 more lenient liquor laws.  This is where the power of our brands can be
 fully unleashed and translate into corresponding realisations. A few
 years ago, we embarked on the strategic direction to increase our
 presence in Eastern India. We began to market aggressively following
 our understanding that increased prosperity would translate into a
 superior life quality and would inevitably lead to the consumption of
 better quality of liquor. Even as recent as three years ago, our sales
 volume in Eastern India accounted for only 2% of our overall volumes.
 But our investment in a new team of professionals, stronger
 distribution and production source and as a result of a stronger
 regional focus (covering West Bengal, Odisha and Assam) this share has
 increased to 4% in 2012-13.
 
 I must also mention the fact that the fundamentals related to the
 liquor industry are strengthening by the day.  India has probably the
 largest proportion of youth among the larger countries of the world.
 The quantum of new earners is also possibly the largest anywhere in the
 world. Besides, social taboo related to liquor consumption is
 declining, there is a growing incidence of liquor consumption among
 women and the low Indian per capita consumption leaves attractive
 headroom to be explored.
 
 The regulatory environment is also becoming favourable as the license
 required to enter the business is not easy for new companies. Even
 though MNCs have deeper pockets, they have not been doing too well in
 the country. As the country''s consumption increasingly attracts the
 interest of the global liquor companies, there could be acquisitions
 that enhance corporate valuations and their entry could benefit the
 entire industry.
 
 Preparing for tomorrow
 
 At Tl, we recognise that there are two ways to grow our business -
 organic (distribution, new brands, promotions and premiumisation) and
 inorganic (strategic partnerships). We are optimistic of achieving this
 rapid growth due to our strong execution capability, largest marketing
 team, margin-accretive brands and the presence of four millionaire
 brands in our portfolio.
 
 Going into 2013-14, we will focus on pushing at least a 15-20% growth
 in volumes of our brands through stronger local activities,
 sponsorships and doling out sales incentives. Furthermore, with the
 recent trademark assignment agreement with Mohan Breweries and
 Distilleries and penetration into other states, we could end up with
 volumes touching 20 million cases in 2013-14.
 
 As a Company focused on value-addition, we expect to sustain the
 proportion of value-added brands, and generating a substantial portion
 of our overall revenues. This focus is likely to translate into a
 volume-value play that generates higher revenues and profits towards
 building progressive long-term value of our enterprise.
 
 With my very best regards,
 
 Amit Dahanukar
 
 Chairman & Managing Director
Source : Dion Global Solutions Limited
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