Narayanamurthy2015 Suppply Chain

Journal of Indian Business Research
A case study on downstream supply chain of an Indian alcoholic beverage

manufacturer: Some insights for the global business
Gopalakrishnan Narayanamurthy Anand Gurumurthy
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Gopalakrishnan Narayanamurthy Anand Gurumurthy , (2015),"A case study on downstream supply
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A case study on downstream Indian

alcoholic
supply chain of an Indian beverage
manufacturer
alcoholic beverage manufacturer
Some insights for the global business 161
Gopalakrishnan Narayanamurthy and Anand Gurumurthy Received 2 November 2014
Revised 19 January 2015
Quantitative Methods and Operations Management (QM & OM) Area, 9 March 2015
Indian Institute of Management Kozhikode (IIMK), Kozhikode, India Accepted 13 March 2015
Abstract
Purpose – This study aims to understand the structure of downstream network from a supply chain
(SC) perspective using a case of an Indian alcoholic beverage manufacturing company. In the SC
literature, many researchers and practitioners have studied the design of upstream supplier network.
Very few studies have documented the design of downstream network comprising distributors,
warehouses, retailers, etc. and current study attempts to contribute to this limited literature. In addition,
this study also tries to understand the influence of downstream SC, if any, on top management
strategies. Finally, it assesses the SC quality using the standard set of factors and provides insights for
its improvement.
Design/methodology/approach – Single case study approach has been utilized to understand
the configuration of downstream SC. A distillery in southern part of India which distributes a
variety of liquor products across the market has been chosen for this study. Different data
collection approaches have been adopted to understand the distribution channels prevailing in the
market. In addition to the internal documents, semi-structured interviews were conducted with
salesmen employed by the distillery for different group of outlets, top management of the distillery,
outlet owners and counter sales person.
Findings – Different distribution channels constituting the downstream SC network of the
industry in the market studied have been identified to be retails and bars, institutions, clubs,
modern trade, maximum retail price and Mysore Sales International Limited. Each of the
distribution channels has clearly defined their boundaries for reaching different segment of
consumers. Significant influence of the existing distribution channels on strategic decisions such
as new product development and pricing were noticed. Interesting inferences were obtained on the
relationships existing between the distilleries and different distribution channels. Insights were
also gathered on the regulatory role played by the government between the manufacturers and
distributors. Few marketing and promotional strategies adopted by companies to strengthen their
downstream relationships with distribution channels and, in turn, with consumers have also been
discussed. The quality of alcoholic beverage SC has been assessed and was found to perform on par
with the set standards of quality in robustness factors and enabling factors. Training factor needs
to be further improved by providing salesmen with exposure to best practices. Effort also needs to
be taken to improve in the complicating factors, i.e. the testability and time.
Research limitations/implications – This study is limited to the experience of a single alcoholic Journal of Indian Business
beverage manufacturer in the Karnataka state in India. SC of alcoholic beverage industry in India Research
Vol. 7 No. 2, 2015
varies across states and depends on State Government regulations. Hence, the obtained results and pp. 161-195
inferences cannot be generalized across the industries and geographies. Future studies can be © Emerald Group Publishing Limited
1755-4195
carried out in different locations across the country to understand the structure and dynamics of DOI 10.1108/JIBR-11-2014-0074
JIBR downstream SC in this industry. Scope also exists to study how the deficiencies identified in the SC
can be improved and how alcoholic beverage firms entering India adapt to the prevailing SC
7,2 structure. Comparative study of downstream SC of different industries can also be conducted.
Practical implications – Academicians and practitioners can consider this paper as a source to
understand the configuration of downstream SC of alcoholic beverage industry. More than that, this
study provides a counter-intuitive inference for researchers and practitioners that choice of distribution
channels have influence on the strategic decisions such as pricing and product development. Therefore,
162 it becomes necessary to factor in the target distribution channel at the product design phase itself. This
study may also help in performing a comparative study of downstream SC – especially the distribution
network of different industries and identify best practices that can be adopted across the industries.
Application of the standard set of factors from the food SC quality assessment literature have been
demonstrated in this study to assess the downstream SC of the alcoholic beverage industry studied. In
addition, this study provides several insights by detailing the structure of the SC for other alcoholic
beverage manufacturers who are planning to enter Indian market.
Originality/value – According to author’s knowledge, it is believed that this is the first study to
report the configuration of downstream SC of the alcoholic beverage industry specifically from India
apart from describing their influence on strategic decisions of the company.
Keywords Case study, Supply chain management, India, Alcoholic beverage industry,
Distribution channels, Downstream supply chain
Paper type Case study
1. Introduction
Raw materials pass through multiple value-adding transformation processes in the
supply chain (SC) before getting consumed by the end customer. SC is defined as the
network of organizations that are involved, through upstream and downstream
linkages, in the different processes and activities to produce value in the form of
products and/or services which is delivered to the end customer (Christopher, 2010).
Supply chain management (SCM) takes a systemic approach toward the SC as a whole
to optimize its performance measures by managing its various characteristics such as
flow of goods, inventory level, number and location of warehouses, push-pull boundary
decision, etc.
Two features, namely, the SC network and nature of the relationship between
each stage in the network have been of real interest for a long time from an
operational perspective (Erenguç et al., 1999). Erenguç et al. (1999) identify three
distinctive stages that exist in every SC: supplier stage (procurement stage), plant
stage (production stage) and, finally, distribution stage. Efficient operation at each
stage depends on several factors such as nature of the manufactured product,
policies and culture followed in the industry, nature of dependency between
industries operating at different stages, etc. (Thomas and Griffin, 1996). However,
the final distribution stage to end customers is least touched upon in both academic
and practitioner literature. One of the probable reasons could be that the design and
coordination of downstream networks, i.e. the distribution channels, is considered to
be the responsibility of more than one business function. Sales and marketing
department, operations department and SC and logistics department end up in
conflict while deciding on designing and owning the distribution process. Most of
the documentations in the past have discussed distribution process as a sales and
marketing department activity rather than an SC design or operations activity
(Wathne and Heide, 2004). Erenguç et al. (1999) mention that network design studies Indian
have lacked the operational considerations and have been mostly organized around alcoholic
market segments as a function of the marketing strategy adopted by the company. beverage
They also felt the need to consider network design issues by integrating marketing
and operations issues. Hence, in this study, authors have attempted to understand manufacturer
and provide clarity on the role and function of distribution network of Indian
alcoholic beverage industry from the perspective of SC. The reason behind the 163
choice of alcoholic beverage industry is discussed in the next sub-section. Chen and
Paulraj (2004) have noticed that understanding the true dynamics of SCM is far more
complex. Through their review, they convinced readers that the complex network of
interrelated activities in SC makes it challenging for managers to describe and
comprehend how those activities are related and how they influence each other.
Therefore, this study tries to understand the interrelated activities in SC and
documents its influence over other processes in the organization, such as pricing and
new product launch. Finally, this study assesses the quality of alcoholic beverage SC
using the internationally accepted standard set of factors. Improvement
opportunities are revealed through this assessment. Implementation of these
opportunities would help in imbibing the best characteristics of food SC, which, in
turn, conveys the implications that the global models and multinational practices
would have in the SC of alcoholic beverages, especially from an Indian perspective.
1.1 Motivation for the study

Soni and Kodali (2012) conducted a review of empirical research methodology in SCM.
Among the sample of 619 papers, a maximum number of articles were found to be from
manufacturing sector (nearly 40 per cent). But less than ten papers from the complete
sample had conducted empirical research by collecting data from other industrial
sectors such as third-party logistics (3PL) providers, defense, jewelry and small- and
medium-sized enterprises. By analyzing within the manufacturing sector, automotive
and electrical and electronics segment dominated the list, followed by textile and
process segment. Other types of manufacturing industries such as printing, toy and
fast-moving consumer goods (FMCG) were also present but in very few numbers. No
empirical study has documented the SC of a liquor manufacturing industry and in
particular detailed the downstream SC of this industry. This claim is also reconfirmed
by the literature review conducted by Gurumurthy et al. (2013) on SCM from Indian
perspective. Of the 70 papers reviewed, no study has discussed the SC of liquor
manufacturing industry in India. Hence, this study can be safely claimed to be a unique
attempt by contributing to the literature on liquor manufacturing industry and
especially from the emerging Indian context.
Another important reason for studying the SC of alcoholic beverage
manufacturer is because of its complex downstream configuration in comparison to
the upstream (Figure 1). It can be seen that the number of entities on the upstream
side is very less in comparison to the SC of other products. In this case, the supply
side would deal with the supply of agricultural products such as barley, grapes,
bagasse and fermenting agents apart from other components for packaging such as
glass bottle, bottle cover, label and cartons. Naturally, the upstream side of the SC
for alcoholic beverage manufacturer is relatively simple, as it involves only few
JIBR
7,2
164
Figure 1.
SC configuration of
the alcoholic
beverage
manufacturer
players. On the other hand, the downstream SC of the alcoholic beverage

manufacturer is complex, as it would involve different types of distribution
channels. Moreover, as presented later, it is also dependent on the significant role the
government plays in policymaking apart from monitoring and controlling the
output produced by the alcoholic beverage manufacturer. This situation might be
very specific to the states in Indian sub-continent.
As this study is believed to be first of its kind to document the SC of alcoholic
beverage industry, both upstream and downstream aspects of this SC is discussed in
this study. This is also expected to implicitly address the research gap observed by
Frohlich and Westbrook (2001) that “the connections between upstream (supplier) and
downstream (customer integration) is given least importance in literature”. But higher
focus is placed on downstream SC due to its higher complexity nature discussed above.
In addition, assessment of the quality of the Indian alcoholic beverage SC literature
using “six Ts” food SC quality framework proposed by Roth et al. (2008) could reveal the
existing deficiencies and improvement opportunities. For foreign firms entering
emerging markets like India, it is necessary for them to understand the industry
practices and procedures prevailing in the new market. This study is expected to
provide several insights for those alcoholic beverage manufacturers who are planning to
enter Indian market by documenting the structure and functioning of their industry’s
SC.
Rest of the paper is structured into five sections. Section 2 discusses the literature
review. Section 3 reasons the case company choice and describes the case company
chosen for the study. Section 4 enumerates the methodology adopted to conduct the
study. Section 5 discusses the results gathered from the study, and finally, Section 6
concludes the study by stating the limitations and possible future work.
2. Literature review
The literature in the domain of SC and its design addresses a diverse spectrum of
problems such as selection of suppliers (Wang et al., 2004), impact of product (i.e.
commonality) on the design of SC (Huang et al., 2005) and choosing the 3PL providers
(Jharkharia and Shankar, 2007). In addition, most of the existing studies on SC – Indian
especially those that explained the concepts of SC – are predominantly from the common alcoholic
industrial sectors such as automobile/automotive (Sanchez and Perez, 2005; Scannell
et al., 2000), FMCG (Battezzati and Magnani, 2000; Kärkkäinen, 2003) and electronic
beverage
industries (Chien and Shih, 2007; Berry et al., 1994). Only in recent times, the focus of manufacturer
research on SC has turned toward other industrial sectors such as agri SC (Jacxsens et al.,
2010; Hingley et al., 2006), perishable food SC (Blackburn and Scudder, 2009; Clements 165
et al., 2008; Shukla and Jharkharia, 2011) and humanitarian SC (John and Ramesh, 2012;
McLachlin and Larson, 2011; Blecken et al., 2009).
A cursory review of the SC literature revealed that the issue of upstream has got
relatively adequate attention among the researchers and practitioners (Groznik and
Trkman, 2009; Azevedo et al., 2012; Johnson, 2011; Browne and Gomez, 2011; Zhou
et al., 2012; Scannell et al., 2000; Giunipero and Eltantawy, 2004; Tatikonda and
Stock, 2003; Anderson et al., 2000; Boute et al., 2007). On the other hand, very few
papers are available discussing the downstream aspects of SC including its design.
These studies are reviewed in detail as the present study is contributing toward this
literature. The literature review documented in Table I lists the following for each
paper: industry, methodology used, contribution made and respective SC attributes
of each paper. These details will help in understanding the nature of studies existing
in downstream SC and how the current study is incrementally contributing toward
this literature. A closer look at Table I reveals that works related to downstream
design of SC exists for different industrial sectors such as FMCG, meat processing
and petroleum refining apart from also addressing the issue of service SC which is
recently developing.
From this review, it was clear that no existing study details the SC, especially the
downstream nodes, of liquor industry from an emerging Indian market. Documentation
of practices followed in alcoholic SC, differences of alcoholic SC from other SC and
importance of downstream SC in liquor industry would be of interest to both researchers
and practitioners. Comparing the documented practices followed in alcoholic SC in India
with respect to the global business perspective is also expected to reveal best practices
that the industry can engage in for efficiency improvements. Therefore, this study
would address these gaps by answering the following research questions (RQ):
RQ1. How is the configuration of upstream and downstream SC network for
alcoholic products in India structured? What are the practices followed in
alcoholic SC? Is this configuration different from other conventional SCs?
RQ2. Is there any influence of downstream SC on various strategic decisions that are
made for the product, especially for the new product to be launched?
RQ3. What insights do the responses to RQ1 and RQ2 based on the experience of
Indian organization offer to the global business perspective? What are the
international best practices that the alcoholic beverage industry in India can
engage in future to improve its efficiency?
3. An overview of the case company

As this study tries to answer “how”, “what” and “why” form of research questions on
downstream SC of alcoholic beverage industry by focusing on contemporary events
without controlling for the behavioral events around it, case study research
7,2
166
JIBR
Table I.
related to
downstream SC
Review of papers
Reference Industry Methodology Contribution SC attributes
Gilbert and Cvsa (2003) Generic Game theory Examined the trade-off faced when a firm’s Hold-up problem leading to
channel partner has opportunities to invest underinvestment by SC
in either cost reduction or quality partners in innovation
improvement, i.e. demand enhancement Commitment to price by
and on decision to commit to a price in downstream players leads
order to encourage innovation, or should it to irresponsive SC for
remain flexible in order to respond to demand uncertainty
demand uncertainty
McLaughlin et al. (2003) US manufacturing Case study Used case study methodology to discuss Role of IT in improving
how a manufacturing company external downstream SC
implemented a transportation planning operations
and optimization system to enhance their By manipulating pickup
downstream SC operations and delivery date ranges,
flexible transportation plan
can be made to account for
fluctuations in
manufacturing completions
Link manufacturing and
transportation planning
engines
Rusnac et al. (2012) Pharmaceutical Case study Studied the SC configuration from social, Sustainability aspects of
environmental and financial criteria and downstream logistics
attempted to identify the most important Centralized decision
criteria and method to measure their making with a
impact for a pharmaceutical downstream decentralized physical
logistics structure leads to best
global performance
(continued)
Bidyarthi and Deshmukh Petroleum Survey Investigated the aspect of downstream Swap strategy –
(2013) petroleum inventory management on the collaborate with
basis of a survey of intermediaries of competitors to design
PSUs, namely, Hindustan Petroleum solutions for SC challenges
Corporation Limited (HPCL) and Bharat
Petroleum Corporation Limited (BPCL) in
the state of Maharashtra
Li et al. (2010) Manufacturing Mathematical Developed a SC model consisting of a Increase of the demand
modeling supplier and a manufacturer where the variance benefits the
manufacturer faces a stochastic and price- supplier but return
sensitive demand, orders a component uncertainty harms the
from the supplier to manufacture new supplier
products, and also remanufactures the
product returns with a stochastic quantity
Norouzi (2013) Petroleum Analytical hierarchy Proposed a performance measurement Documents following three
process and balance method applicable for petroleum streams within petroleum
score card downstream SCM and developed a model SC:
for Iran petroleum downstream using the Upstream: Exploration and
literature production – seismic,
drilling and manufacturing
Midstream: Pipelines and
storage
Downstream: Refining and
processing, selling and
distribution
Low switching costs for
customer
(continued)
Table I.
167
Indian
manufacturer
beverage
alcoholic
7,2
168
JIBR
Table I.
Faure et al. (2010) Farming Analyzed the data Attempted to show the impact of decisions Analyzed the interactions
on production of and behaviors of downstream actors on the between producers and
leafy vegetable in management of farms, leeway of producers downstream actors and its
Madagascar, sugar emerging from these interactions and impact on producers’
cane in South Africa finally analytical approaches of farms and decisions regarding the
and pineapples in methodological support for farms choice of crops, timing of
Costa Rica crop cycles, crop
management and
management of cash-
income couples
Specifications, rights to
deliver, fee schedule,
information system are
some of the tools used to
facilitate coordination
Vandaele and Gemmel Business service Survey Investigated the impact of external Position of the customer in
(2007) provider purchased services by a service provider the SC influences how the
on the satisfaction of downstream SC service delivery is
members, i.e. end-users evaluated
Relationship between
supplier and provider and
between provider and end-
user are interconnected and
its strength is influenced
by importance attached to
the purchased service
Hu et al. (2012) Pig SC Case study Studied the two nodes in pig SC, slaughter Revenue sharing contract
enterprise and pig breeding enterprise, to can coordinate the
understand the product pricing and profit downstream of pig SC with
distribution between them in the revenue slaughter and pig breeding
sharing contract enterprise
(continued)
Cirtita and Glaser-Segura Generic Survey Noted that downstream SC performance Downstream SC
(2012) metrics can help balance performance performance attributes
trade-offs among firms but did not find considered were delivery
convincing support for the notion that reliability, responsiveness,
external performance metrics are used to flexibility, costs and asset
coordinate external, downstream SC inter- management efficiency
firm activities
Aman et al. (2010) FMCG Archival analysis Studied the impact of the entry of Studies the impact of
and semi-structured international wholesalers upon existing consolidation and
interviews FMCG channel structures and the internationalisation on
relationships between channel members in traditional channel
Pakistan. Inferred that entry and growth of structures
international wholesale has opened
alternative channel structures by imposing
threat over some channel members and
creates relationships that alter the
distribution of power in the channel
Aggarwal (2012) Indian life Archival analysis Discussed the effectiveness of the Public insurers in India are
insurance innovative distribution channels along getting their 97% of new
with traditional distribution channels in individual business in last
present era of Indian life insurance five years through their
Industry individual agents which is
a traditional form of
insurance
(continued)
Table I.
169
Indian
manufacturer
beverage
alcoholic
7,2
170
JIBR
Table I.
Yin (2013) Tourism in China Review and archival Investigated the evolution and Distribution channels are
analysis transformation of information technologies expected to increase with
application in tourism distribution increase in adoption of
channels (TDCs) in China and identified information technology in
four eras namely the era of travel agencies, tourism
the era of preliminary appliance, the era of
integrated appliance and the era of social
network
Arya and Mittendorf Generic Mathematical Stated that boundaries between wholesale Manufacturer tends to
(2013) modeling suppliers and retail competitors are invest in brand promotion
blurring and same has been attributed to (benefiting both itself and
the introduction of online channels for its retail competitor), rather
suppliers to provide products directly to than heavy promotion of
consumers its own sales channel
New face of distribution
channels characterized by
partial forward integration
leads to greater
investments in boosting
product demand, spurring
consumer attraction both to
overall product offerings
and particular brands
(continued)
Hamzaoui-Essoussi et al. Organic food Interview Attempted to identify supply side factors Trust has extreme
(2013) that determine trust/mistrust in organic importance in the organic
food products and also determined the food networks and varies
distribution channel strategies to increase from one country to
trust in organic food products by another
conducting 80 in-depth interviews with Types of distributors for
store managers in Canada and France. organic food are mainly
Future research is needed to take into farmers, specialty stores
account different market structures, and superstores,
labeling and branding issues, as well as supermarkets and food
differing food culture store chains
Table I.
171
Indian
manufacturer
beverage
alcoholic
JIBR methodology is used (Yin, 2014). In case study research, the case company is not
7,2 randomly sampled, but rather chosen based on how they contribute to the research
questions being asked (Eisenhardt, 1989; Glaser and Strauss, 1967; Siggelkow, 2007).
Best-fit candidate for this study would possess the following characteristics:
• Organization belonging to alcoholic beverage industry.
172 • Operating in a location in Indian market where the probability of getting
influenced by international practices is higher.
• Organization launching new product in near future.
• Organization operating in all downstream channels prevailing in the chosen
market mentioned in point (2).
• The process of data collection is convenient for authors (convenience sampling).
Case company chosen operates in the Indian market for more than two decades and has
wide portfolio of brands and market presence across different states in India. It has more
than ten manufacturing units and distribution networks spread across the country with
dedicated team of nearly 2,000 employees. The company has established itself as the
leading brand in the economy segment of the Indian alcohol market. It produces
altogether eight brands, of which two brands are brandy, three brands are whisky and
three brands are wine (see Figure 2 for past two years’ monthly sales and packet-wise
sales of a wine product produced and sold by the case company in Karnataka market).
As shown in Figure 2, demand is increasing, and the smallest pack size, i.e. 180 ml, is the
fastest moving pack size in the market for the chosen wine brand. Few of the liquor
brands of the case organization sell more than 10 million cases annually. Company
exports products to more than five different countries including UK, UAE, Angola,
Congo, Ghana and Namibia and also acts as distributor in Indian market for couple of
international brands. To cater to the different segments of the market, the case company
frequently introduces new brands. Recently, two new brands, one in brandy and other
in whisky, were launched for different segments of the market. Therefore, this
organization with high frequency of launching new brands is considered suitable for
addressing the research questions posited above.
We conducted the study as events unfolded and viewed both the process and
outcome in phases. It helped us in avoiding retrospection bias and the influence
exerted by the data collector in the research context (Miles and Huberman, 1994).
The research project timeline is detailed in Table II. The first author was present for
all the events, and the second author was regularly consulted for any suggestions
during the course of the research. Structured case study methodology discussed by
Eisenhardt (1989) and Yin (2003) for data collection and data analysis (Table III) was
followed in this study.
4. Data collection
Open-ended interviews, direct observations and company documents were considered
to be the sources of data and evidence for their targeted focus, contextual reality and
stability advantages (Yin, 2014). These multiple sources of evidence helped in
triangulating to develop converging lines of inquiry, which remains one of the primary
evaluation criteria of conducting case study research. Semi-structured interviews with
human resource manager, chief marketing officer, chief operating officer, brand
Indian
alcoholic
beverage
manufacturer
173
Figure 2.
(a) Two years’
monthly sales of a
wine product
produced and sold by
the case company in
Karnataka market;
(b) Two years’
packet-wise sales of a
wine product
the case company in
Karnataka market
manager, distribution channel manager, company salesmen, depot/warehouse officials,

shop floor employees and counter salesperson were performed to gather individual
insights. Details regarding the interview questions for each category of employees can
be obtained on request from the authors. One of the authors in the process of collecting
data travelled with sales representatives to different outlets to understand the structure
of downstream SC. Process of field visits and semi-structured interviews were
performed for nearly two months with different sales representatives responsible for
different outlets to thoroughly understand the market and operation of downstream SC
of the industry. More than 100 outlets were visited. Nearly 38 counter salesmen agreed
to participate in the interview process. Everyday report was maintained to organize the
collected data. Iteration between fieldwork and data analysis was followed regularly as
prescribed in the case study research process (Eisenhardt, 1989; Eisenhardt and
Graebner, 2007). The recursive cycling between these two tasks allowed us to
empirically ground the observations.
JIBR Month and year Event
7,2
March 2013 Permission was sought from the case company to work with and understand
the dynamics of the industry
Permission was given to visit the manufacturing plant, sales and
distribution office and marketing office, all three located in the Bangalore
174 city in Karnataka state:
Choice of this location was also a conscious decision as this state was
among one of the few states which had maximum amount of sales
through regulated market
In addition, Bangalore was the third largest city in India and had huge
influence of international best practices due to the operation of
multinational companies in this market
April 2013 Visits to the manufacturing plant, sales and distribution office and
marketing office for this whole month

Semi-structured interviews were conducted with human resource manager,
operations manager, marketing manager, brand managers (especially of new
product to be launched), employees of sales team handling different
channels, etc
May 2013 Visits to selected outlets distributed over the entire state were carried out.
Researcher was accompanied by the salesmen of the company and was
introduced to the counter sales person
More than 100 outlets distributed over different channels were visited in this
entire month
A new product was launched by the case company in this month
Table II. June-September 2013 Telephonic interactions and follow up interactions were conducted with top
Timeline of research management, sales team and counter salesperson wherever the need for data
study was felt
5. Results and discussion

After content analyzing the data collected, it was noticed that distribution channels of
the case company and, in general, of the alcoholic beverage industry were highly
segmented. Content in this section is sequentially organized as answers to the research
questions raised earlier.
5.1 Configuration of upstream and downstream SC network

This section answers the first research question that deals with structure of SC followed
in the alcoholic beverage industry, especially in the state of Karnataka, India. It also
describes the downstream configuration of the SC apart from other aspects such as role
of the government in the SC.
5.1.1 Structure of alcoholic beverage industry SC. Figure 1, as shown earlier,
represents the structure of the SC of the case company. The procurement of raw
materials is brand-specific, and they have dedicated suppliers to cater to specific
product’s raw material requirements. For example, agricultural raw materials, cartons
and labels for premium products were procured from suppliers belonging to different
states like Maharashtra and Uttar Pradesh, whereas those for non-premium products
were procured from local suppliers within the state of Karnataka. Agricultural raw
materials including barley and grapes are procured directly from farmers through
contract farming. Design of cartons and labels for premium products were handled by
Serial no. Step Summary
Indian
alcoholic
1 Getting started Framed the following RQs to be addressed: beverage
How is the configuration of SC network for alcoholic
products in India structured? manufacturer
Is this configuration different from other conventional SCs?
Is there any influence of downstream SC on various
strategic decisions that are made for the product, especially
175
for new product to be launched?
2 Selecting cases Best-fit candidate for this study was selected
Organization belonging to alcoholic beverage industry
located in an Indian market where the probability of getting
influenced by international practices is higher. New product
launches in organization should be underway
3 Crafting instruments Developed semi-structured interview protocols that was

and protocols conducted on downstream SC
4 Entering the field After getting the consent, multiple visits were made to sales
and distribution office, marketing office, manufacturing
plant, outlets and depots
5 Analyzing data Data gathered through semi-structured interviews,
participant observation and company documents were
content analyzed to construct the entire SC of alcoholic
beverage industry in Karnataka market with finer details of
downstream SC. Also, data were analyzed to answer the
various research questions posited above
6 Shaping hypothesis Data analysis was performed to examine the role of different
players in alcoholic industry SC and how downstream SC can
influence new product development. Evidences can be used to
build or strengthen theory for downstream SC
7 Enfolding literature Findings were compared and triangulated with downstream
SC literature and new product development literature
8 Reaching closure Stopped iterative analysis when we reached theoretical
saturation – the point at which new evidence did not appear Table III.
(Strauss and Corbin, 1990) Detail on case study
methodology
Source: Structure from Eisenhardt (1989) adopted
agencies recognized in the market, whereas for non-premium products, they were done
by in-house designers. Post-finalizing the designs of cartons and labels, they are
outsourced to agencies in Karnataka market. All these choices are made primarily,
depending on the final market price targeted for the product.
The production is carried out in the shop floor comprising semi-automated
production setup for the products of 375 and 180 ml. Human intervention existed in
several stages of production process such as quality check, bottle positioning and
packing. However, completely automated machinery dedicated only for production of
tetra packs were also available in the shop floor, which was imported from one of the
European country. The case company had employed precisely the requisite number of
shop floor employees based on its past experience. The shop floor operated only one
shift (8 hours), as they were able to meet the demand through the production within this
JIBR shift. Dedicated chemical laboratory was also available to perform specification check
7,2 related to chemical composition of the liquor to be packed through random sampling at
different time slots. Case company manufactured each brand at different volume pack
sizes which were predominantly 180, 375 and 750 ml. Among the different products
supplied, the empty bottles of 375 ml products alone were brought back through reverse
logistics, as they were widely consumed. Details regarding the same are presented later
176 (Section 5.2.4). A huge warehouse was used to store both end products and products in
process such as fermentation tanks. End products from the storage place are
transported to distribution warehouses through the company-owned or contractors’
vehicles. These distribution warehouses are owned by the government – in particular,
the State Government –, and this node in SC acts as a regulatory body in controlling and
authorizing the inflow and outflow of alcoholic products from producer to seller.
Production manager manufactured the products based on the requirements provided
by individual brand managers. These brand managers arrive at the requirements by

evaluating the past sales data across different outlets in the market. Sales representative
has to ensure the placement of stocks in those set of outlets under his control and
regularly follow the status of the company’s product stocks in those outlets. Sales
representative had combination of fixed and variable component in the pay to
incentivize them to grab more orders and achieve higher placements. Case company
studied operated through supply to stock strategy, as alcoholic beverage industry had
consistent demand.
5.1.2 Structure of downstream SC of alcoholic beverage industry. Alcohol
policymaking rights in India were provided to individual states to formulate their own
regulations and to levy their own taxes (Benegal, 2005). Karnataka market in India
where the case company was located had total universe of 8,800 outlets, of which 2,800
outlets were located in Bangalore, the capital city of Karnataka (details of complete lists
of outlets and the outlets visited for this study are available with the authors). Six
different distribution channels were used by the case organization to reach the product
to consumers – namely, clubs, institutions, modern trade (MOT), maximum retail price
(MRP), Mysore Sales International Limited (MSIL) and retails and bars (as shown in
Figure 3). MSIL, MOT and MRP outlets only sell the bottles of alcoholic products in
sealed forms and do not provide provision to drink in the outlet. On the other hand,
institutions, retails and bars and clubs provide facilities to consume within their
Figure 3.
Distribution channels
available in the
market
premises. Table IV lists the difference between MOT and MRP outlets. Figure 4 plots the Indian
past two-year sales of the chosen wine brand across the six different distribution alcoholic
channels. The chosen product is a non-premium brand in wine category, and hence, its
sales volume is more concentrated in retails and bars, followed by MRP channel.
beverage
MSIL differ from MOT and MRP in terms of ownership, as it is owned by government manufacturer
and sells the product at a price lesser than that of MRP and MOT. MRP outlets are
further categorized into group outlets, government shops and other miscellaneous 177
outlets. Sales team in the company function by having individual sales executives and
targets for different channels. Hence, channel-wise sales distribution is prepared by
exhibiting number of outlets to be focused in each channel by each brand manager and
sent to sales team.
5.1.3 Role of government in downstream SC. All the outlets belongs to one of the six
distribution channels identified. Different types of outlet licenses have been framed by
the government for different channels. Each license type has its own regulations and
fees established by the State Government for the conduct of the outlets. Table V lists the
MOT MRP
Table IV.
Each SKU need to be registered by the No requirement of registration Difference between
company with the MOT outlets MOT and MRP
Exists within malls and supermarkets Exists as separate individual outlets as well as group outlets outlets
Figure 4.
Channel-wise sales of
a wine product
the case company in
Karnataka market
JIBR major types of outlet licenses that prevailed in the market. These licenses in the market
7,2 ultimately clustered the outlets into their corresponding channels. Thus, it can be seen
that the Government plays a significant role in establishing the distribution channel.
Recently, the Government of Kerala has brought in a policy to make the Kerala state
liquor-free gradually. In the process, they have revoked the licenses of many hotels
(excluding the five-star, four-star and heritage hotels) and bars. This resulted in
178 reduction in the distribution channels. Thus, it is very clear that the State Government
also has a key role in the design of downstream SC of the alcoholic beverage
manufacturer.
Second, the produced products from the distilleries were moved to Karnataka State
Beverage Corporation Limited (KSBCL) depots (government warehouses) after
packaging. The output stay in these depots till the outlets from different channels placed
their order and lifted the stock. KSBCL depots act as regulatory body in this SC, which
monitors the amount of incoming and outgoing of the products produced by different
manufacturers on daily basis and, thereby, makes the placement and sales data
available for all manufacturers and channel outlet owners through online interface.
KSBCL depots supplies to outlets of different channels with 0.5 per cent margin, which
were, in turn, sold to consumers with 10 per cent margin. Figure 5 provides the details of
the margin charged on the price of the products at different nodes of the SC.
Transportation of end products through company-owned trucks or contractors’
trucks from the distillery to KSBCL depots and, in turn, from there to different outlets is
taken care by the distillery and KSBCL depots, respectively. Outlets-placed orders for
different brands based on their demand and the outlets are responsible for picking the
orders from the KSBCL depots. The transportation cost incurred by the outlets is
already accounted within the margin allocated for the outlets. Distilleries moved their
stocks to depots based on the inventory of their stocks already existing in the depots, as
they attract penalty of Rs. 60 per case per month (one case ⫽ 12 bottles of 750 ml) when
they stayed in depots without liquidation for more than three months.
Another unique aspect of the SC of alcoholic beverage manufacturer is that these
depots were directly monitored by the government. Government excise department
regulated the flow of goods from plants to distribution channels through KSBCL depots
to ensure zero black marketing operations in the market. In the case of SCs of other
Major licenses Outlet types
CL2 MRP and MOT

Table V. CL4 Clubs and institutions
Major types of outlet CL7 Resort, boarding and lodging
licenses CL9 Bars and restaurants
Figure 5.
Details of the margin
charged on the price
of the product at
different nodes of SC
industrial sectors, the role of government is minimally direct. The SCs might be affected Indian
by the policy of governments or with the intervention of customs department during alcoholic
production, inter-state movements and import/export.
5.1.4 Role of information technology in downstream SC. KSBCL maintains an online
beverage
interface where all distilleries and outlets have access to regularly monitor and track the manufacturer
status of their stocks and orders at KSBCL depots. This particular feature provides
adequate information such as brand-wise purchase and selling, volume of sales and date 179
of purchase. Sales and marketing department of different distilleries identify the
demand for their brands and competitor brands through this information system and
design marketing and promotion strategies accordingly. Excise department which has
access to this information cross-checks the purchased, sold and available quantity at
any outlet. Each outlet has to submit their sales report to KSBCL auditors at regular
intervals, and they also need to maintain a log book noting quantity of sales and
purchases happening at their outlets. Excise department also checks regularly the
quantity of beverage under storage, production and finished inventory in each distillery
and the amount dispatched to KSBCL to ensure the authorized supply of goods from
suppliers’ end. Table VI depicts the content of the register maintained by the distillery
for KSBCL auditors (excise authorities). Registers are checked and validated by KSBCL
auditors at any time in a day and, hence, needs to be constantly updated by the distillery.
Table VII shows the snapshot of the register maintained in the outlets which are also
regularly reviewed by the KSBCL auditors.
Thus, utilizing the information technology (IT) resources helped not only the case
organization but also the other alcoholic beverage manufacturer in the state in reducing
the impact of bull whip effect – which arises due to improper flow of information,
especially from the different downstream stages of SC. Thus, it can be seen that IT
interface plays a key role in the SC by providing sufficient information to the
government to monitor and control the manufacturer and the network of organizations
on the downstream SC.
5.2 Practices followed in alcoholic SC

5.2.1 Supplier– distributor relationship. Sales team in the company functions by having
individual sales executives and respective targets for set of outlets belonging to a
channel. Individual channel heads are also responsible for taking care of achieving
targets in their channels notified by individual brand managers. Salesmen act as the
interface between the company and outlet and, hence, are the key personnel having the
Serial Date and Pack No. of cases Opening No. of cases moved Closing Table VI.
no. time Brand size produced inventory to KSBCL depots inventory Content of the
register maintained
1 19 Nov 13; AAA 750 ml 40 80 50 70 at distillery for
11:00 AM KSBCL auditors
Table VII.
Serial no. Date and time Brand Pack size No. of packs sold Inventory remaining Content of the
register maintained
1 19 Nov 13; AAA 750 ml 40 80 at the outlets for
11:00 A.M. KSBCL auditors
JIBR knowledge of the entire downstream SC. Interviews and outlet visits with salesmen for
7,2 this study helped in understanding different supplier– distributor relationship existing
in the market. Relationship was also observed to help in faster liquidation of the
products from the shelf in outlets and, hence, is given huge importance by the case
company to sustain such relationships efficiently.
Revenue-sharing system have been adopted by suppliers, i.e. the distilleries through
180 which certain percentage of net sales revenue are shared with the in-charge of the
outlets, thereby motivating and incentivizing them to push their company products to
consumers. However, it was found that revenue-sharing percentages were noticed to
differ across the companies and brands. Nevertheless, this mechanism also helped
distilleries to liquidate their products from KSBCL as and when cases stayed without
liquidation beyond three months. Outlets frequently place orders of those company
brands which shared maximum percentage of revenues. Most of the revenue-sharing
contracts with outlets have fixed lookup table developed by individual distilleries
stating the amount to be shared per case (primarily depends on the MRP of the product
variant) for a particular brand. Sales executives using these lookup tables calculate the
revenue to be shared with each outlet, and the same are shared at the beginning of every
month for the previous month through account payable cheques.
5.2.2 Role of promotions. The study also inferred two types of promotional schemes
prevailing in the market, namely, outlet-specific and brand-specific. Table VIII lists the
examples of these two offers observed during the market visits. Outlet-specific offers
were provided by companies for their brands to only specific outlets which have large
footfalls, thereby helping to liquidate their products faster. Brand-specific offers were
those offers provided exclusively by the company for that brand across all the outlets in
the market. Both the offer types helped in gaining visibility for the brand from
consumers which played a major role in successful liquidation, tertiary movement of the
brand and ultimately enhanced consumer attention and engagement toward the brand.
Packaging and positioning in outlet shelves played a major role in driving visibility
and liquidation of the brand among consumers. Company having a strong relationship
with outlets was able to place its products at strategic locations in the shelves that
would attract visibility of the entering consumers. Free samplings, on pack offers,
merchandises, hoardings, standees and event sponsorships are some of the promotional
strategies identified to be adopted by most of the manufacturers in the market to
incentivize counter salesmen to liquidate their company brands at a faster rate.
5.2.3 Risk pooling and seasonality. Risk pooling activity was noticed to be efficiently
implemented by the case company. As KSBCL depots act as company’s centralized
warehouse for set of outlets in that region, distribution systems by itself average the
Brand-specific offers Outlet-specific offers
Different offers on purchase Price offer

of 2 liters Belt, sports bag, travel bag, gift voucher, tickets for IPL matches and
Price offer concerts, etc.
Table VIII. One glass free for 750 ml For INR 10,000 worth purchase dinner set of 3,000 is free
Example of offers Combo pack (Soft drink Club channels provide offers on the quantity of liquor to be sold. For
that were noted (lime) ⫹ Soda) example, Brand A ⫺ 1 ⫹ 1 (buy one, get one), Brand B ⫺ 2 ⫹ 1 (buy
during market visits 2, get 1), etc.
demand across the outlets there by risk pooling the demand of the market. Hence, the Indian
variations in the demand were reduced at the distillery level. Channel-wise sales target alcoholic
prepared for sales team by individual brand managers after averaging the demand of
the group of outlets falling under a depot in each channel ultimately performed risk
beverage
pooling of the demand of the entire market. Figure 6 represents the risk pooling manufacturer
performed through the distribution channels. Seasonality in sales of different beverages,
namely, brandy, whisky, rum, etc., were clearly identified through market visits (can 181
also be seen in Figure 2(a)), and they were also noticed to be influenced by geographic
location and demographics of population living around a particular outlet.
5.2.4 Reverse logistics. Reverse logistics has been employed by the case company by
designing a reverse SC from consumers to manufacturers through the distribution
channels to collect back used empty bottles of certain brands and size. Some of the high
volume, fast-moving and costlier liquor bottles were collected and routed back to the
plant for reuse. Reverse logistics process resulted in reduction of cost of raw materials
and better orientation toward environmental sensitivity of the company. Reverse
logistics process in the case company is as depicted in Figure 7. Bottles are collected
through trucks from the outlets and are reached to distilleries to reuse them after
subjecting the same to cleansing process. Bottles that are returned in poor quality are
directly discarded, and remaining bottles are cleaned to remove the stickers, bottle neck
cap ring and internal remnant liquor of the bottle.
5.3 Comparison with similar SC

Table IX lists the characteristics of three different SC, namely, meat, milk and
pharmaceutical. These three SC are chosen, as they are closer to liquor SC in terms of the
nature of the product produced and their SC configuration. Few unique differences
identified for liquor SC when compared to these three SC are as follows:
Figure 6.
Risk pooling activity
Figure 7.
Reverse logistics
adopted by the case
company for
procuring used
bottles
JIBR SC and reference Characteristics
7,2
Meat (Buhr, 2003) Contracts and vertical coordination provide an efficient means of organizing
markets by reducing transactions costs
Information technology and information systems have made it economically
feasible to develop logistics management and monitoring enabling
182 traceability
Traceability is primarily used in this sector to overcome the perceived
information asymmetry between the final product handler and the
consumer
Traceability systems extend from the feed, farm, slaughter and retail
Production protocols are enforced at all stages of the production process by
third-party or government auditing of production records and quality
Pharmaceutical (Shah, Typical pharmaceutical SC consists of one or more of the following nodes:
2004; Koh et al., 2003; primary manufacturing, secondary manufacturing, market warehouses/
Pedroso and Nakano, distribution centers, wholesalers and retailers/hospitals
2009) Pharmaceutical products involve primary active ingredient production and
secondary (formulation) production. Both the stages are characterized by
low manufacturing velocities and are hampered by the need for quality
assurance
Time to market is a very important driver in the pharmaceutical industry
Estimate of £200-400 m is required to launch a new drug, and an average of
8-12 years elapses from patent filing to first sale
Primary production is effectively a “push” process, driven by medium- and
long-term forecasts
Different nodes are not really aware of upstream nodes’ resource
constraints, and orders may be filled in order of receipt, rather than on an
economic basis
Overall SC cycle time is between 100-300 days
Pharmaceutical companies deliver technical information directly to
physicians, they do not focus on the intermediate stages of the SC
ICT-based systems play only a limited, supporting role in delivering
technical information and flow management. Personal communication plays
a key role in order winning
Regulations are different from country to country
Significant improvements to manufacturing technology have not been of the
highest priority in this field to date
Milk (Abdulai and Units in milk SC are farm, transport, collecting center, dairy co-operatives/
Birachi, 2009; Gale and private plants, private traders/milk vendors and consumers
Hu, 2009; Kumar, 2010; In India, milk production is dominated by smallholder producers (about
Faye and Loiseau, 69%) having only a few buffaloes or cattle, in systems closely integrated
2000) with crop production through use of crop residues such as rice and wheat
straw
Two alternative models to ensuring dairy product safety: regulatory control
and sterilization and managing quality and safety along the chain, from the
Table IX. cow to the consumer. Latter approach is found to be more appropriate in the
Characteristics of developing country context, where regulatory systems are weak and where
other similar SC contamination problems occur all along the chain
• Government owns a node (warehouse) in liquor SC that is between the producer Indian
and distributing outlets. alcoholic
• Every producer has to work almost on the same SC and go through the node beverage
owned by the government. manufacturer
• Distinct demarcation in channels exists to segment their end customers.
• Online database where all producers, all distributors and government own an
account to instantaneously monitor the happenings in market. For instance, each
183
account holder can monitor production output at a distillery, number of units of
different brands at government warehouse and number of units ordered by the
distributing outlet.
• Open access to entire SC information to all the players in the market.
• Competitor’s products available in the market play a key role in making decisions
on positioning the new products in the market.
5.4 Influence of distribution channels on new product development strategic decision

Case company has planned to launch two new products to cater to the premium segment
of the market, one in brandy and another in whisky category. Appropriate strategies at
different levels of the organization have been adopted to reach the product to the market
and achieve the sales targets successfully. The study revealed interesting and
counter-intuitive insights about the influence of existing distribution channels and
competitors in the market over the strategic decisions of new product development
and pricing of the new product that are developed and launched. Existing distribution
channels and competitors within were seen to influence individual operations, sales and
marketing, human resource and finance functions. As the product to be launched was a
premium segment brandy, competitor premium products were identified by comparing
their ex-distillery price (EDP) (refer to Table X for close competitors in the market for the
new premium brandy to be launched). EDP can be defined as the price per case at which
the distillery delivers its products to depots. EDP plays a key role in deciding its
potential consumer segment and, thereby, the competitors for the product to be
launched. Identified competitors sales were analyzed across different channels to draw
inferences to plan for the launch of the new product (refer to Table XI for total and target
outlets in different distribution channels). “Total outlets” column in Table XI indicates
the number of outlets in different channels where the products of the four chosen
competitors are sold.
EDP (per case) MRP (750 ml) Annual sales

Item name (in INR) (in INR) (in cases)
Launch product (targeted for premium

brandy segment) 4,889 (targeted) 939.58 (planned) To be launched
Competitor 1 2,319 702.82 2,423
Competitor 2 2,540 723.18 12,242 Table X.
Competitor 3 3,400 802.41 642 EDP, MRP and sales
Competitor 4 7,573 1,256.81 758 of the launch product
Annual industry potential 2012-2013 16,065 and competing
Average monthly sales 1,339 brandy brands
7,2
184
JIBR
Table XI.
across different
and target outlets
channels based on
Distribution of total
competitors presence
Total Target
Annual sales of identified four Annual sales of identified four
Total competitors in total outlets % of sales Target competitors in target outlets % of sales
Outlet type outlets (in cases) contribution outlets (in cases) captured
Club 50 583 4 31 537 92

Institutions 63 99 1 4 25 25
MOT 44 1,558 10 39 1,544 99
MRP 85 ,2698 17 81 2,690 100
MSIL 63 492 3 26 430 87
Retails/Bars 1,650 10,635 65 552 8,750 82
TOTAL 1,955 16,065 100 733 13,976 87
“Annual sales of identified four competitors in total outlets” column lists the sum of Indian
sales of all the four competitors under each of the distribution channels. “Per cent of sales alcoholic
contribution” lists the contribution of the total sales of the competitor products identified beverage
across each of the channels. “Target outlets” column in Table XI indicates the number of
outlets chosen by the case organization from the total outlets in different channels to manufacturer
capture the maximum amount of “Annual sales of identified four competitors in target
outlets” with minimum number of outlets to be resource efficient. Final set of 733 target 185
outlets, i.e. 37 per cent of the total outlets chosen across different distribution channels,
contributes to 87 per cent of total sales. Therefore, by studying the sales trend of
competitors across different distribution channels, potential outlets for launching the
new product is identified.
Post-identifying the target outlets in each of the distribution channels, brand
manager of the launching product forwards them to individual distribution channel
heads to devise action plans by consulting with their sales and marketing team for
launching the product in those outlets. It further moves down the hierarchy to individual
sales person of different channels, conveying their monthly and quarterly targets at
each of the outlets or pooled outlets located at a particular region. The entire action plan
for launching the product is highly dependent on the right choice of competitors across
different distribution channels that is made at the very beginning of the process.
5.4.1 Influence on operations activities. The identified channels influence the nature
of processes to be adopted by operations department for the new product. Raw
materials procurement, quality characteristic, bottling and packaging performed
were found to be influenced by the close competitors operating in the identified
potential distribution channels. For example, bottle design and quality of premium
products were found to act as order winner amongst the competitors in that specific
distribution channel. Hence, the new product to be launched in the segment attempts
to imbibe these order winner dimensions. The quality of the competitor’s products in
terms of appearance and raw materials used determines the raw material supplier to
be chosen by the case company for its new product that is to be launched in that
segment. Fast-moving packet size of the competitor’s products determines the
packet size of the product to be launched. In the case of premium brandy to be
launched by the case company, 750 and 180 ml pack size of competitors had nearly
85 per cent of total sales (Table XII), and hence, the case company decided to start
manufacturing the new product in those two packet sizes. Therefore, leading
competitors in different channels highly influence the nature of procurement SC, i.e.
upstream SC, for its new product to be launched. Close competitors were identified
based on the EDP and not based on their selling price to the customer.
Brand-wise sales (2012-2013) (in cases) 750 ml 375 ml 180 ml 60 ml 50 ml Total
Competitor 1 1,341 361 721 2,423

Competitor 2 5,443 1,976 4,451 372 12,242
Competitor 3 625 1 16 1 643 Table XII.
Competitor 4 582 176 758 Competitors sales
Grand total 7,991 2,338 5,364 372 1 16,065 classified based on
Pack-wise sales (%) 50 15 33 2 0 100 pack size
JIBR 5.4.2 Influence on sales and marketing activities. Sales and marketing function designed
7,2 their strategies completely based on the distribution channels through which the new
product is expected to flow to consumer. Geographic location and economic activities in
the surrounding location played a significant role in deciding whether the outlet had
potential for the premium brand. Outlets selling good volumes of close competitors were
seen to contain a huge potential for placing the cases of newly introduced product. As
186 the product to be launched in the case organization was catering to premium segment,
distribution channels such as bars, clubs and institutions were of prime importance
along with few premium outlets in MOT and MRP channels. Marketing activities in
MOT and MRP outlets were primarily based on price offers followed by colorful shelf
displays, banners, standees, free glass offers, critical shelf choices, etc. On the other
hand, marketing activities in bars and clubs were primarily focusing on switching
customers from their regular brand to the newly launched brand by providing them
with free samples, complete detailing in the bar by a dedicated salesmen on the
uniqueness of the newly launched product, designing a standalone counter in the bar for
the newly launched product with free deliveries of accessories associated with the
product, etc. Revenue-sharing contracts were adopted in all the channels for the new
product to be launched with different schemes and share percentages. A grand launch
was organized inviting the owners of the potential outlets across all the channels to
uniquely register the brand in their portfolio. These identified distribution channels
were found to significantly affect the sales team target and market share target fixed for
the new product to be launched.
5.4.3 Influence on human resource department activities. Human resource
department were also affected based on the distribution channel primarily targeted for
the new product as number of salesmen to be employed differed across the channels.
Required competencies of the salesmen also differed between the channels. For instance,
salesmen employed for bars and clubs would be more experienced than the ones
employed for MRP and MOT. Trainings were also provided for employees based on
their competencies to cater to the job requirements of their respective channels. Based on
the types of channels utilized, modifications in reporting structure were also affected, as
employees of those channels have to be made to report to the respective channel heads
and brand managers.
5.4.4 Influence on pricing. The study also provided evidence for the influence of
distribution channels utilized over the pricing of the new product to be distributed
through those channels. Price of the product developed are decided based on the EDP of
the close competitors brand operating in the distribution channels at which the new
product was to be launched. In this industry, taxes were charged based on tax bracket,
which is determined by the EDP of the product. It was observed that companies mostly
attempted to move their EDP toward the upper end within the tax bracket to leverage
the tax benefits. For example, if the cost of the product to be launched falls in the tax
bracket between 700 and 1,000, the EDP of the product would be moved close to 1,000 to
attain maximum tax benefits, as the tax is fixed within a bracket, i.e. in this case, the
amount of tax paid when EDP is either 700 or 1,000 remains the same. Hence, choice of
the distribution channel was noticed to affect the sample of competitors for the new
product and, thereby, its EDP which was subjected to the pricing of the product based on
the available tax brackets.
Yin (2014) while listing the advantages of case study inquiry methodology clearly Indian
mentions one of the key advantage to be the benefits of developing theoretical propositions alcoholic
to guide future data collection and analysis. Based on the detailed case study carried out in
alcoholic beverage SC and observations made during the field visit, three propositions were
beverage
generated. Propositions listed below were also discussed with respondents during the final manufacturer
days of field visits (Yin, 2014), and we propose it as the basis for further inquiry on the
importance of downstream SC on several strategic decisions made: 187
P1. Distribution channel targeted for the new product influences the new product
development process and characteristics of the final new product developed.
P2. Type of the distribution channel acts as a surrogate for inferring about the
attributes of the product sold within them.
P3. Price of the new product depends on the distribution channel targeted and
competitors within the distribution channels.

P1 was generated from the experience of the alcoholic beverage case company in launching
its two new premium products. Predominant design aspects such as bottle and carton of the
new product to be launched were back engineered based on the distribution channel being
targeted and competitor close to the attributes of the new product in the channel. Therefore,
we expect the distribution channel targeted for the new product to influence the new product
development process and characteristics of the final new product launched. P2 claims that
based on the type of distribution channel in which the product exists, attributes of the
product can be predicted. We expect products in a particular distribution channel to
resemble the attributes of its close competitors within that distribution channel. Finally, P3
is written from the experience of pricing the new products that was launched by the case
company. Premium Brandy launched by the case organization was priced by evaluating the
prices of different close competitors within the distribution channel. Based on the price of
competitors, cost that should be incurred in manufacturing the new product was determined.
Future study would attempt to test the generalizability of these three propositions by
collecting data from several other alcoholic beverage firms.
5.5 Alcoholic beverage SC quality assessment

To assess the alcoholic beverage industry’s SC quality with respect to the international
standard, we use “six Ts” food SC quality framework proposed by Roth et al. (2008) after
analyzing the quality problems associated with foods and ingredients imported from
China. Six main factors in the framework were as follows:
(1) traceability (ability to track a product’s flow throughout the SC);
(2) transparency (lack of secrecy);
(3) testability (ability to detect an attribute of a product);
(4) time (duration of specific processes);
(5) trust (expectation that parties will make a good-faith effort to behave in
accordance with any commitments); and
(6) training (systematic process of developing knowledge, skills and attitudes
regarding international standards of quality, food safety and best practices)
(Roth et al., 2008).
JIBR Table XIII documents the status of alcoholic beverage SC studied over these factors.
7,2 Alcoholic beverage SC performs in par with the set standards of quality in
robustness factors and enabling factors. Downstream SC of alcoholic beverage
industry satisfies the requirements of trust factor by implementing several practices
as listed in Table XIII. Training factor can be further improved by providing
salesmen with the necessary exposure of best practices. Roth et al. (2008) inferred
188 that traceability and transparency in food SC are affected by three major forces,
namely, globalization, consolidation and commoditization. As the market chosen for
study was high on all these three factors, traceability and transparency have been
well-achieved in alcoholic industry SC. Effort needs to be taken to improve the
Factor type Factor Status of alcoholic beverage industry in India
Enablers Trust Due to highly robust regulatory mechanism in the market and
absence of opportunistic behavior at self-interest, trust is
automatically established between the players in the SC
Salesmen at the downstream SC establish long term relationships
with the outlets owners and earn their trust. Revenue sharing
contracts also establishes trust
Excise officials regularly visit the plants and outlets to assess the
practices followed. A plant or outlet with zero complaints or
issues from excise bodies automatically gains trust from rest of
the players in the SC
Certifying agencies can be implemented for rating the
manufacturing plants and outlets in different channels
Training Training that includes technical assistance for transferring best
practices within and across industries through formal and
informal means is necessary
Knowledge sharing across industries would make the SC efficient
Robustness Traceability Efficient government regulation
factors Entire path of products from factories to store shelves is traced
using markers and software
Transparency Information technology and captured knowledge enables
physical transparency of documents, information and products
and thereby removes deception and opportunistic behaviors
Complicating Testability Government as a regulatory board plays a key role in
factors implementing this factor
No solution so far for detecting problems in the products that
have aroused after passing inspection at the factory. It is
normally discovered after a critical number of end users
experience problems
Time Time in transit – Not much applicable, as the shelf life is much
higher in comparison to perishable goods
Table XIII. Time between the discovery and reporting of problems:
Status of SC quality Efficiency here can be improved by developing systems that
factor in alcoholic involve the present excise members and regulatory bodies with
beverage industry an online interface displaying the status of cases being processed
present status of alcoholic beverage industry’s SC for the complicating factors, i.e. Indian
the testability and time. alcoholic
beverage
6. Conclusion manufacturer
Priem and Swink (2012) stated that the existing SCM literature offered very few
examples of the downstream SC perspective, keeping it an unfulfilled opportunity and
finally called researchers to study the same to provide new insights and a more complete
189
understanding of SCM. Building onto this research gap, the current study started with a
claim that not many works were available about the downstream design of SC apart
from highlighting that no studies are available that describe the SC of alcoholic beverage
industries in India. A literature review carried out also supported these statements apart
from identifying various research gaps. These gaps are addressed in this study by using
a case study approach.

Current study revealed various interesting aspects by answering the research questions
raised. First research question is answered by documenting the configuration of upstream
and downstream SC networks for alcoholic products. Highly segmented distribution
channels, role of government in monitoring and ensuring authorized sales through its depots
and government-controlled open information availability about SC transactions to both
distilleries and outlets were some of the unique attributes of the downstream SC of alcoholic
beverage industry. In addition, practices followed in the downstream SC such as
revenue-sharing contracts, role of promotions, risk pooling, seasonality and reverse logistics
were also documented in detail. Although the overall configuration was found to be similar
with other conventional SC, it had significant differences in terms of the role played by the
government to regulate the market, risk pooling, revenue-sharing contracts and the extent of
IT technology used to ensure efficient exchange of information.
Another unique observation was that the downstream distribution channels
influenced strategic decisions of a firm on its new product development including the
pricing of the product to be launched, which thereby answers the second research
question. The study revealed an interesting counter-intuitive inference that the
distribution channels utilized for reaching the product to customers and the competitors
using those same channels significantly impacts the strategic decisions of the firm with
respect to the product. Impact on strategic decisions of the product was explained across
different functions such as operations, sales, marketing and human resource
department. Types of distribution channels were used as a proxy to understand the
needs of the consumer addressed through that channel, thereby influencing the new
product that is to be primarily targeted for a particular distribution channel. Based on
this case study, propositions are developed for future testing.
To answer the third research question, alcoholic beverage industry’s SC quality was
assessed using “six Ts” food SC quality framework proposed by Roth et al. (2008).
Alcoholic beverage SC performs in par with the set standards of quality in robustness
factors and enabling factors but underperforms in the complicating factors, i.e. the
testability and time. Alcoholic beverage industry can focus on these underperforming
best practices to improve its efficiency in future. This indicates the implications that the
global models and practices have on the Indian industries like alcoholic beverage
manufacturer considered in this study.
JIBR 6.1 Implications of the study
7,2 Academicians and practitioners can consider this paper as a source to understand the
configuration of downstream SC in India with respect to alcoholic beverage industry.
More than that, this study provides a counter-intuitive inference for researchers and
practitioners that choice of distribution channels have influence on the pricing strategy
and strategic decisions taken by the firms with respect to the product. Therefore, it
190 becomes necessary to factor in the target distribution channel at the product design
phase to take a systemic approach of the entire SC. This study may also help other
researchers in performing a comparative study of downstream SC – especially the
distribution network of different industries – and identifying best practices that can be
adopted across the industries. According to the author’s knowledge, this study is
believed to be the first to report the configuration of downstream SC of the alcoholic
beverage industry specifically from India apart from describing their influence on
strategic decisions of the company.

Assessment of the quality of the Indian alcoholic beverage SC literature using “six
Ts” food SC quality framework revealed the existing deficiencies and potential
improvement opportunities for future. By overcoming these deficiencies, Indian
alcoholic beverage SC will be satisfying the standards of global SC. The current study
not only proposes improvement opportunity for Indian alcoholic beverage SC by
comparing with international standards but also provides several insights for foreign
alcoholic beverage manufacturers who are planning to enter Indian market by
documenting the structure and functioning of its alcoholic beverage SC.
6.2 Limitations and future scope

Premises considered and methodology adopted for the current study present few
limitations which, in turn, attract the need for further study in future. A single case
study method was utilized for observing the phenomenon predicted, and hence, it cannot
be generalized. To generalize the same, the findings have to be validated across different
companies. We also do not claim that the SC structure presented in this study is what is
existing in all other states of the country, but we definitely feel that many best practices
can be transferred from this state to others. Extension of this study across different
demographics can be carried out to understand how external influence of stakeholders
such as government regulations affects the configuration of distribution channels in
other states of India or abroad.
As the best practices that the alcoholic beverage SC should engage in future to
improve its efficiency has been discussed, future study could understand their
implementation procedures at different nodes in the SC. Future study could compare the
alcoholic beverage SC practices followed in different countries and develop a complete
set of best practices by borrowing from multiple countries to assist the liquor SC to
operate at its maximum efficiency. Scope also exists to study how the foreign alcoholic
beverage manufacturers entering India adapt to this highly regulated SC.
Note
1. An initial version of the paper was presented in the International Conference on Supply Chain
& Logistics Management (ICSCLM 2013) on the theme “Global Supply Chains and Emerging
Markets”, 5-7 December, 2013, organized by Birla Institute of Management and Technology
(BIMTECH), New Delhi, India.
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About the authors Indian
Gopalakrishnan Narayanamurthy is currently pursuing his Fellow (Doctoral) Program in
Management in Quantitative Methods and Operations Management in Indian Institute of alcoholic
Management Kozhikode, Kerala, India. His research interests include lean thinking, health beverage
care, process improvement, services operations management and global supply chain manufacturer
management.
Anand Gurumurthy is an Associate Professor in the area of “Quantitative Methods and
Operations Management” at the Indian Institute of Management, Kozhikode, Kerala, India. Prior 195
to this appointment, he was working as an Assistant Professor with the Mechanical Engineering
Department of Birla Institute of Technology & Science Pilani, Pilani Campus, Rajasthan, India,
where he also completed his PhD in the area of Lean Manufacturing and ME in Manufacturing
Systems Engineering. He received his BE in Mechanical Engineering from the University of
Madras, India. He has around 11 years of teaching/research experience. He started his career as a
Production Engineer with one of India’s leading industrial houses – the TVS Group. He has
published around 40 papers in peer-reviewed national and international journals and presented
many papers in various national/international conferences. His current research interests include
lean thinking, application of lean thinking in other sectors, operations management and
world-class manufacturing. Anand Gurumurthy is the corresponding author and can be contacted
at: anandg@iimk.ac.in
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Journal of Indian Business Research

A case study on downstream supply chain of an Indian alcoholic beverage

Downloaded on: 26 July 2016, At: 00:35 (PT)

A case study on downstream Indian

1.1 Motivation for the study

players. On the other hand, the downstream SC of the alcoholic beverage

3. An overview of the case company

Reference Industry Methodology Contribution SC attributes

Reference Industry Methodology Contribution SC attributes

Reference Industry Methodology Contribution SC attributes

manager, distribution channel manager, company salesmen, depot/warehouse officials,

marketing office for this whole month

5. Results and discussion

5.1 Configuration of upstream and downstream SC network

3 Crafting instruments Developed semi-structured interview protocols that was

by individual brand managers. These brand managers arrive at the requirements by

Major licenses Outlet types

CL2 MRP and MOT

5.2 Practices followed in alcoholic SC

Brand-specific offers Outlet-specific offers

Different offers on purchase Price offer

5.3 Comparison with similar SC

on positioning the new products in the market.

5.4 Influence of distribution channels on new product development strategic decision

EDP (per case) MRP (750 ml) Annual sales

Launch product (targeted for premium

Club 50 583 4 31 537 92

Brand-wise sales (2012-2013) (in cases) 750 ml 375 ml 180 ml 60 ml 50 ml Total

Competitor 1 1,341 361 721 2,423

competitors within the distribution channels.

5.5 Alcoholic beverage SC quality assessment

Factor type Factor Status of alcoholic beverage industry in India

a case study approach.

strategic decisions of the company.

6.2 Limitations and future scope

integration and strategic investments”, Production and Operations Management, Vol. 22

International, Vol. 43 No. 7, pp. 1925-1935.

Vol. 21 No. 1, pp. 23-48.

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