For Mallya, the journey to restructure and realign his spirits and beer business started with an internal brainstorming with his senior managers more than a year ago. He is still on the road, reinventing his business, albeit having crossed a few crucial milestones. Savour a few: an overhaul of the brand portfolio with jettisoning of more than six brands, realignment of the sourcing pattern saving more than a crore every month, merging and revamping of the sales force and the setting up of UB's first market-research unit. The total business-process re-engineering itself should have saved UB a nearly Rs 30 crore annually.

The Change Agents:

Theroot of UB's restructuring, however, lies not in cost reduction alone, but in establishing a system which will constantly refresh brands, upgrade processes and improve profits. Says Mallya: " I am investing in the future of the company. I'd rather invest in brands and build a healthier company than just pay out more dividend."

Clearly aware of the intensifying competition, Mallya and his key team--comprising vice-chiarman Subhash Gupte and president, spirits division, Vijay Rekhi--have, therefore, realised that UB cannot afford to live with historical inefficiencies. However, a revamp of the business at various levels would require substantial cash flow. So, when Andersen Consulting was brought in to the job in January 1996, their first aim was to give UB breathing space in terms of cash flow. Three key areas were identified for the purpose; sourcing, brand portfolio, and the sales and distribution-cum manufacturing process.

Addressing the immediate need, Andersen worked on creating the first cash flowplus in reworking the sourcing logistics. Spirits and beer sourcing being spread across more than 35 units in the country, the final pattern was based on total delivered cost. The entire exercise was given shape of a linear-programming model, which could be handled at a single point in Bangalore. As a result, UB could save enough cash to come back into the business.

It was the turn of the brands next. With more than 83 brands in spirits and another half dozen in beer, the complexity of the liquor business had forced the company into bearing the cost of nearly 800 SKUs. Soon, an internal workshop on inventory efficiency was organised and UB cut down its brand portfolio by 50 per cent to 400 SKUs, which were giving 90 per cent of the money. No doubt, there was a contribution loss of more than Rs 2,00,000, but the simplification of the brands far outweighed the loss. Says Rekhi: "We scanned our brands and took a swipe on the totality of the portfolio, phased out some brands to release working capital and putthese resources to work." Consequently, 12 brands in spirits and one in beer have been identified as core brands. These include Bagpiper whisky, McDowell No 1 whisky, Diplomat and Celebration Rum in spirits. The beer brand is to be Kingfisher. Rekhi says that though more than 70 per cent of the volumes will come from the core brands, UB will continue to offer the full range of liquors.

With a net annual saving of around Rs 6 crore through brand management, UB's last bastion was process enhancement. Andersen looked into the sales-force pattern of UB and found four teams working in the field. These included the McDowell, the Carew, the Consolidated Distelleries and the Herbertsons team. Andersen merged them all to structure two new fields. While cost overheads dipped by more than Rs 3 crore annually, a clearer focus was given to the teams in terms of handling competing brands and attaining better bargaining power at retail.

For Rekhi, however, the most significant fallout from the process- managementexcercise has been the revamp of UB's organisational structure. " UB's traditional structure had to change to make the organisation more responsive and resonsible in high salience (in terms of volume and value) areas," he says. Part of this change was also the split of the marketing and sales functions into seperate departments. UB now has a distinct marketing set-up, and has roped in Asian Paint's Ashwin Mallick to head it. The new unit has also been made to set up UB's first market-research (MR) wing, which is to have an annual budget of nearly Rs 1 crore. The MR unit will not only deliver on issues of brand measurement, but also help establish a brand by implementing a five-year rolling plan in the next few months.

In a business which is inextricably linked to politics, no restructuring plan could be complete without assessing and planning UB's competency in managing the political environment. Says Mallya: "Liquor is singularly the most sensitive business in the country with many state-wise issues." ForUB, therefore, Andersen has broken each state on the basis of its finances, policies and demographics in the liqour market. Mallya has invested in a new marketing tool--the media business. "To me, the media is much more than a business. It gives me the ability to communicate with relevant people, he says."

So, where does UB go from here? Mallya answers this with the sureness born of a market leader: "My father taught me that if you want to lead, lead from the front." The next few years, therefore, should find UB delving even deeper into the complexities of the liquor industry and adding further value to each and every segment of its business.