Breweries and Distillery Industry

Bargaining power of suppliers

Attractiveness

Remark

Low

High

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Number of suppliersSmallPC

X

Tea stallLargeMany, but limited to within the state

Availability of substitutesFewPC

X

Tea stallManyOnly Grain can be used

Switching costHighPC

XGarmentLowMolasses is a commodity item and easily available

Suppliers threat of forward integrationHighPC

XWide bodied jetlinerLow

Industrys threat of backward integrationLowPetrol pumps

X

Garment retailersHigh

Contribution to qualityHighPC

XLow end packagingLowMolasses is a commodity product

Contribution to costLowTalcum powder

X

Oil refiningHigh

Industrys importance to supplierLow

X

CarsHighCan also sell for industrial use and Biofuels

Production method for IMFL

For the purpose of our study our focus would be on the Indian distilleries and more specifically the portable liquor Industry producing Indian Made Foreign Liquor (IMFL).

Indian manufactures have traditionally used molasses, a byproduct of sugar industry, for the production of Whiskey, Rum, Brandy and Vodka. After fermentation of molasses the liquid is heated to 175 degrees Fahrenheit, evaporating the alcohol and resulting in raw alcohol, which is 70- 95% raw alcohol, by volume. The final product is made by adding flavorings and colorings to the neutral spirit and then bottled.

Due to increasing need for premiumization Indian manufactures are increasing adopting the global standards of grain based alcohols for their premium products.

Supply of Molasses

Sugar Industry is the only supplier for Molasses and it is produced as a by-product during the production of sugar. Nearly 90% of all Molasses produced in India is utilized for industrial alcohol production and rest is used up in the production of portable alcohol. Due to production of sugar cane being cyclical in nature, consequently the supply and price of molasses varies greatly from year to year. The sugar industry which is controlled by the state governments is highly regulated and the states levy an export tax if the molasses is transferred outside the state of manufacture leading to restrictions on easy availability of raw material to IMFL producers. Till 2014 the export of molasses outside the country was banned to protect the local produces whereas the import was also tightly regulated.