White Horse Distillers White Horse Distillers LimitedLimited

Whisky’s symbol of victoryWhisky’s symbol of victory

Presents: Giampaolo Marinello, Anthony Irungu, Mudathir Abdulla

Our history Our history

• James Logan Mackie founded the James Logan Mackie founded the company in Glasgow in 1883company in Glasgow in 1883

• Peter Mackie, in 1981 registrered Peter Mackie, in 1981 registrered the trademark ‘White Horse’ and the trademark ‘White Horse’ and he’s stil developing the brand.he’s stil developing the brand.

• The company is known as one of The company is known as one of the 'Big Five' in the Scotch whisky the 'Big Five' in the Scotch whisky

worldworld • Today White Horse products are Today White Horse products are

exported to almost 200 countries.exported to almost 200 countries.

• Its export markets are Europe, Its export markets are Europe, USA, Australia, Africa and South USA, Australia, Africa and South America.America.

Mission Statement and Company’s Mission Statement and Company’s VisionVision

The mission statement outlines the broad direction that the organisation The mission statement outlines the broad direction that the organisation will follow, furthermore present reasoning and values that lie behind it.will follow, furthermore present reasoning and values that lie behind it.

• In light of consolidate reputation company aims to maintain an high In light of consolidate reputation company aims to maintain an high standard for Scotch wisky and broaden its diffusion among customers.standard for Scotch wisky and broaden its diffusion among customers.

Vision refers to a future state, ‘a condition that is better then now’. Vision refers to a future state, ‘a condition that is better then now’. Vision’s concepts is associated with a goal . Conversely to mission Vision’s concepts is associated with a goal . Conversely to mission

statement which is more linked with a way of behaving.statement which is more linked with a way of behaving.

• Make stronger our brand worldwide, seeking continuously for new Make stronger our brand worldwide, seeking continuously for new markets to exploitmarkets to exploit

• achieving a "distinctive" status for English Whisky, further protect and achieving a "distinctive" status for English Whisky, further protect and increase the prestige of the product internationallyincrease the prestige of the product internationally

HOW UK'S WHISKY MARKET ISHOW UK'S WHISKY MARKET IS

((WELL DEVELOPED, WELL SERVED, GROWINGWELL DEVELOPED, WELL SERVED, GROWING))

• Prolific and healthy industryProlific and healthy industry

• 3rd largest commercial sector in UK after fisheries 3rd largest commercial sector in UK after fisheries and oil industryand oil industry

• fifth biggest export earner for Britainfifth biggest export earner for Britain

• UK market worth around UK market worth around £ 3 billion a year£ 3 billion a year

• overall growth valued around 10% a yearoverall growth valued around 10% a year

Global point of viewGlobal point of view

• the industry is dominated by large the industry is dominated by large multinationals multinationals

• globally competitive scenario in globally competitive scenario in which big players operate through which big players operate through own dedicate structure or as joint own dedicate structure or as joint ventures with companies that are ventures with companies that are already established in that particular already established in that particular area. area.

Market’s trendMarket’s trend

Who are the biggest consumers of scotch Who are the biggest consumers of scotch whiskywhisky

• France 154 millionFrance 154 million• Spain 137 millionSpain 137 million• USA 110 millionUSA 110 million• Japan 70 millionJapan 70 million• South Korea 45 millionSouth Korea 45 million• Venezuela 43 millionVenezuela 43 million• Greece 38 millionGreece 38 million• Thailand 34 millionThailand 34 million• Germany 34 millionGermany 34 million• Australia 26 millionAustralia 26 million

Total exports 1013 millionTotal exports 1013 millionTotal exports to EU markets 449 million Total exports to EU markets 449 million

(data are related with number of bottles consumed within the country)(data are related with number of bottles consumed within the country)

TOP EMERGING MARKETSTOP EMERGING MARKETS

• Brazil £25m. 1.7m Brazil £25m. 1.7m

• China £25m. 0.7m China £25m. 0.7m

• India £14m 1.0mIndia £14m 1.0m

• Poland £6m. 0.2m Poland £6m. 0.2m

• Russia £28m. 0.6mRussia £28m. 0.6m

• Turkey £17m. 0.6m Turkey £17m. 0.6m

(data are related with number of bottles consumed within the (data are related with number of bottles consumed within the country)country)

COMPETITOR COMPETITOR ANALYSISANALYSIS

• Canadian Whisky has an excellent quality Canadian Whisky has an excellent quality reputation and it is exported to 150 reputation and it is exported to 150 different countries.different countries.

• Nearly 90% of total volume is destined for Nearly 90% of total volume is destined for the US market. the US market.

• Japan is the second major importer, Japan is the second major importer, accounting for 4.2% of Canadian export accounting for 4.2% of Canadian export sales. sales.

• The United Kingdom is third, importing The United Kingdom is third, importing 1.6%. 1.6%.

Data from Association of Canadian Distillers Data from Association of Canadian Distillers

Why an expansion into the Oriental MarketWhy an expansion into the Oriental Market

As seen from previous data:As seen from previous data:

• Japan, South Korea, Thailand, India are very attractive Japan, South Korea, Thailand, India are very attractive market in light of their high whisky's consumptionmarket in light of their high whisky's consumption

• Market’s in which whisky is achieving a ‘status’ Market’s in which whisky is achieving a ‘status’ symbol’ image (high profit margin!!)symbol’ image (high profit margin!!)

• At the same time are market that are growing At the same time are market that are growing economicallyeconomically

• Our main competitor under-serve that area of the Our main competitor under-serve that area of the worldworld

• Convenience in exploiting local factors of production Convenience in exploiting local factors of production aiming to achieve highly cost effectiveness production aiming to achieve highly cost effectiveness production

Why an expansion into Why an expansion into JapanJapan

Japan’s growthJapan’s growth

GNP/capita

Year US Japan1987 21.938 15.423

1988 22.531 16.317

1989 23.021 17.053

1990 23.068 17.871

1991 22.603 18.492

1992 22.914 18.652

1993 23.314 18.667

1994 23.861 18.728

1995 24.026 18.922

1996 24.483 19.674

1997 25.178 19.855

Key Factors of SuccessKey Factors of Success

BRANDBRAND especially during expansion’s manoeuvres is imperativeespecially during expansion’s manoeuvres is imperative

•Grab attention of new customersGrab attention of new customers•Increase loyaltyIncrease loyalty•Develop from the beginning high Develop from the beginning high

quality reputationquality reputation

Aiming to future growth and tackle competitorsAiming to future growth and tackle competitors

Key Factors of SuccessKey Factors of Success

PRODUCT DIFFERENTIATIONPRODUCT DIFFERENTIATION

In a mature market with big players, with considerable In a mature market with big players, with considerable competition’s level differentiate products became competition’s level differentiate products became necessarynecessary

• Different flavoursDifferent flavours• Different packagingDifferent packaging• Different approach to customers Different approach to customers

Key Factors of SuccessKey Factors of Success

TQMTQMa total quality management approach is needed in light of a total quality management approach is needed in light of the fact that:the fact that:

• Oriental market is highly pretentiousOriental market is highly pretentious

• Completely different culture, monitoring carefully and Completely different culture, monitoring carefully and constantly customer needs is compulsoryconstantly customer needs is compulsory

• Reduction in unexpected costs which could undermine our Reduction in unexpected costs which could undermine our new businessnew business– Errors in productionErrors in production– Non conforming productionNon conforming production

Key Factors of SuccessKey Factors of Success

MARKET and CUSTOMER ANALYSISMARKET and CUSTOMER ANALYSIS

This business area is going to be one This business area is going to be one of the most relevantof the most relevant

• Its performance is intimately linked with TQMIts performance is intimately linked with TQM• Extremely important to collect more information Extremely important to collect more information

is possible about new marketis possible about new market• It needs to be followed during all business’ timeIt needs to be followed during all business’ time

Key Factors of SuccessKey Factors of Success

DISTRIBUTIVE CHANNEL and LOGISTICDISTRIBUTIVE CHANNEL and LOGISTIC

• Distributive Channel– Reliable– Fast– Flexible– Cheaper

• Logistic System– Costs’ reduction– Efficient distribution

Key Factors of SuccessKey Factors of Success

SUPPLY CHAIN MANAGEMENTSUPPLY CHAIN MANAGEMENT

Supply chain is that network of organizations that are involved, through upstream and downstream linkages, in the different

processes and activities that produce value in the form of products and services in the hands of ultimate customer or

consumer.Lysons K. and Farrington B. 2006

• Our aim is to develop a supply chain or value chain (they’re synonymous) highly efficient, for all the activity, trough everyone of them as a whole. Differentiation, TQM, Branding are at the same time RELATED and DIPENTENT from its performance!!!!

Key Factors of SuccessKey Factors of Success

SUPPLY CHAIN MANAGEMENTSUPPLY CHAIN MANAGEMENTMeet requirements of international retailers Meet requirements of international retailers

(in order to increase the sales) (in order to increase the sales)

• Forecast activity at the SKU level, must be Forecast activity at the SKU level, must be highly accuratehighly accurate

• Increase visibility into inventory at various Increase visibility into inventory at various nodes within production and distribution nodes within production and distribution chainchain

• Develop linkages among forecasting, Develop linkages among forecasting, planning and execution system planning and execution system

COSTS’ ANALYSISCOSTS’ ANALYSIS

Sources for ProductionSources for Production

• Water Water

• Cereals – CORN – (high incidence)Cereals – CORN – (high incidence)– Barely and Wheat for malt productionBarely and Wheat for malt production

• YeastYeast

• Energy (high incidence)Energy (high incidence)

• Oak wood (cask for ageing) high Oak wood (cask for ageing) high incidenceincidence

• Packaging materials (high incidence)Packaging materials (high incidence)

How much is it?How much is it?(PRODUCTION COSTS)(PRODUCTION COSTS)

A litre of fresh spiritA litre of fresh spirit (malt whisky) (malt whisky) costscosts: : – from from £ 1 to£ 1 to ££ 1.5 per litre ( 1.5 per litre (€ € 1,25 – 2,25) in 1,25 – 2,25) in

production production

• The common size for a The common size for a Hogshead CaskHogshead Cask is 250 is 250 litres, therefore:litres, therefore:– from from £ 250£ 250 to to ££ 375 each one. ( 375 each one. (€ 375 – 562)€ 375 – 562)

• Estimated Estimated cost for uncertaintycost for uncertainty around 10% of around 10% of production’s bundleproduction’s bundle

• Storage and insuranceStorage and insurance costs about 10 cents per costs about 10 cents per litrelitre

Human ResourcesHuman Resources

The production of whiskey needs of different The production of whiskey needs of different typologies of workers, skilled and unskilled typologies of workers, skilled and unskilled as wellas well

• Chemical engineers (distilling process)Chemical engineers (distilling process)• Mechanical and electrical engineers Mechanical and electrical engineers

(maintaining and development of productive (maintaining and development of productive structure)structure)

• Masterblander Masterblander • Trained workers (administrative, logistic, Trained workers (administrative, logistic,

marketing, sales function)marketing, sales function)• Unskilled labour (mere activity of production) Unskilled labour (mere activity of production)

Human ResourcesHuman Resources

• Line managementLine management

• Some things we need to think about:Some things we need to think about:

- Determine where efficiencies can be - Determine where efficiencies can be achievedachieved

- determine the staffing requirements- determine the staffing requirements

- Health and safety- Health and safety

Human Resources’ costHuman Resources’ cost

Graduate work forceGraduate work force

• GraduateGraduate ££ 22.000 22.000 (¥ 4.522.900 c.a.)(¥ 4.522.900 c.a.)

• MiddleMiddle £ 35.000 £ 35.000 (¥ 7.195.500 c.a.)(¥ 7.195.500 c.a.)

• SeniorSenior £ 60.000 £ 60.000 (¥ 12.335.190 c.a.)(¥ 12.335.190 c.a.)

SHIPPING COSTSSHIPPING COSTS(LOGISTIC’S COSTS)(LOGISTIC’S COSTS)

• In order to reduce transport’s costs, and in light of the fact that In order to reduce transport’s costs, and in light of the fact that whisky quality is not effected from long carrying time, the best whisky quality is not effected from long carrying time, the best way is through ocean freight (way is through ocean freight (from 35 to 40 days timefrom 35 to 40 days time))

the shipping rate is quoted based on the weight (or volume) in the the shipping rate is quoted based on the weight (or volume) in the case of ocean freightcase of ocean freight

We assume to use We assume to use CONTAINERSCONTAINERS during our transport during our transport

20 feet container20 feet container 5.9m(length)x2.2m(width)x2.4m(height)=31.15 m3 5.9m(length)x2.2m(width)x2.4m(height)=31.15 m3

it can hold the cargo with the volume of roughly 28 m3. it can hold the cargo with the volume of roughly 28 m3.

SHIPPING COSTSSHIPPING COSTS(LOGISTIC’S COSTS)(LOGISTIC’S COSTS)

• Assuming that Assuming that – one Hoghshead occupies 1mone Hoghshead occupies 1m33

– A container can carry at least 28 caskA container can carry at least 28 cask– A litre is almost equal to a kilogramA litre is almost equal to a kilogram

– 250 kg x 28 = 7000 kg250 kg x 28 = 7000 kg

Shipped Shipped byby

Sea rateSea rate Total Total freight freight

costcost

Everage Everage cost for cost for

KgKg

Unit Unit freight freight

costcost

20 ft 20 ft containercontainer

USD 1400 - USD 1400 - 16001600

USD 1400USD 1400 0,2USD x 0,2USD x KgKg

USD 50USD 50

Another consistent costAnother consistent cost

The distillery industry has been The distillery industry has been identified to be one of the most identified to be one of the most polluting industries due to the very polluting industries due to the very high organic pollutant load associated high organic pollutant load associated with its waste discharges.with its waste discharges.

• Many distilleries are operating their Many distilleries are operating their own treatment plants own treatment plants

• This function can be outsource This function can be outsource

Packaging CostPackaging Cost

High quality packaging is one of the keys to the international High quality packaging is one of the keys to the international sales success of the industry. It is critical to the recognition, sales success of the industry. It is critical to the recognition, integrity and image of brands. integrity and image of brands.

• We aim to develop our packaging activity in JapanWe aim to develop our packaging activity in Japan

– Reduce costs of activity (cheaper not specialized work force)Reduce costs of activity (cheaper not specialized work force)

– Reduce cost for materials (glass, general packaging)Reduce cost for materials (glass, general packaging)

– Reduce costs for damaged products during shipping transportReduce costs for damaged products during shipping transport

Logistic and Distributive Logistic and Distributive ChannelChannel• Store of final products in Japanese warehouse Store of final products in Japanese warehouse

(due to our strategy we’re going to partially (due to our strategy we’re going to partially contradict the ABC model or Pareto analysis)contradict the ABC model or Pareto analysis)

• Outsource distribution (at least in the Outsource distribution (at least in the beginning) to supplier of this servicebeginning) to supplier of this service

Aiming to exploit their cost convenience and consolidated quality Aiming to exploit their cost convenience and consolidated quality in these activitiesin these activities

Cost of ProductionCost of Production

• We estimate to produce 250.000 litres a year, and therefore We estimate to produce 250.000 litres a year, and therefore 1000 casks c.a. (250.000 tot./250litres in a cask = 1000)1000 casks c.a. (250.000 tot./250litres in a cask = 1000)

• £375 x 1000 = 375.000 Cost of production (inclusive of £375 x 1000 = 375.000 Cost of production (inclusive of administrative costs and treatment’s cost)administrative costs and treatment’s cost)

• 0.10 x 375.000 = 37.500 Cost for uncertainty0.10 x 375.000 = 37.500 Cost for uncertainty

• 0.10 x 250.000 = 25.000 Stocking cost (0.10 per litre)0.10 x 250.000 = 25.000 Stocking cost (0.10 per litre)

• if we assume that a container can carry 28 casks every go, if we assume that a container can carry 28 casks every go, 1000casks/28 = 35 shipments a year c.a.1000casks/28 = 35 shipments a year c.a.

Cost of ProductionCost of Production

• the shipment price is 1.400 $ a container, therefore the shipment price is 1.400 $ a container, therefore Tot. Tot. annual delivery priceannual delivery price is £ 32.600 (exchange rate £/$ = 1.5) is £ 32.600 (exchange rate £/$ = 1.5)

• Cost before packaging and distributionCost before packaging and distribution £ 470.100 £ 470.100

• from every cask is possible to obtain 500 bottles c.a., from every cask is possible to obtain 500 bottles c.a., therefore, our annual production will be at least 500.000 therefore, our annual production will be at least 500.000 bottles.bottles.

• We think to split our overall bundle of bottles in this way:We think to split our overall bundle of bottles in this way:– 60% upper segment’s product (300.000 bottles) class A60% upper segment’s product (300.000 bottles) class A– 40% medium segment’s product (200.000 bottles) class B40% medium segment’s product (200.000 bottles) class B

Cost of ProductionCost of Production

• Packaging, distribution and storing costs are Packaging, distribution and storing costs are weighting on the two class of products in this weighting on the two class of products in this way:way:

– Class A product = £ 3 a bottle (£ 900.000)Class A product = £ 3 a bottle (£ 900.000)– Class B product = £ 2 a bottle (£ 400.000)Class B product = £ 2 a bottle (£ 400.000)

• Overall cost of packaging and distributionOverall cost of packaging and distribution £ 1.200.000 £ 1.200.000

• Tot. cost of productionTot. cost of production £ 1.770.100 £ 1.770.100

Prevision of salePrevision of sale

• Exploiting the favourable price Exploiting the favourable price differentiation within the Japanese countrydifferentiation within the Japanese country

• We suppose to adopt these sale’s prices:We suppose to adopt these sale’s prices:– class A product £ 18 a bottleclass A product £ 18 a bottle– class B product £ 13 a bottleclass B product £ 13 a bottle

• Tot. income from sales 8.000.000 -Tot. income from sales 8.000.000 - Tot. costs of production Tot. costs of production 1.770.1001.770.100 = = Net profit 6.229.900Net profit 6.229.900

Oak casks & Corn Suppliers(Canada) & (North America)

WAREHOUSE 1 WAREHOUSE 2

PRODUCTION PLANT(GLASGOW)

WATER ENERGY

LABOUR (SKILLED & UNSKILLED)

DELIVERY(INTERMODAL TRANSPORTATION)

WAREHOUSING(JAPAN)

PACKAGING ACTIVITY

DISTRIBUTORS

CUSTOMERS

INVENTORY STOCK

MANAGEMENT

CUSTOMERS CUSTOMERS

CONCLUSIONCONCLUSION

• Through a tailored market strategy towards a high Through a tailored market strategy towards a high social class target market (exploit price social class target market (exploit price differentiation)differentiation)– Distribution in club, restaurants, private circle Distribution in club, restaurants, private circle

• Trough an overall cost effectiveness activity Trough an overall cost effectiveness activity • Trough a smooth and reliable Supply Chain of ValueTrough a smooth and reliable Supply Chain of Value• In light of actual trend of Japanese economyIn light of actual trend of Japanese economy

WE RECKON OUR NEW BUSINESS CHALLENGE IS WE RECKON OUR NEW BUSINESS CHALLENGE IS GOING TO PERFORM VERY WELL IN A GOING TO PERFORM VERY WELL IN A

MEDIUM/LONG TERMMEDIUM/LONG TERM

THANKS FOR YOUR THANKS FOR YOUR ATTENTIONATTENTION

Now, we are extremely glad Now, we are extremely glad to answer your questions to answer your questions