Case Study: Seven Star Beverage Limited Seven Star Beverage Limited (SSBL) was making cola drinks and sports drinks and selling in the Northern and Western India since 90's, based on the encouragement given by the Govt.of India New Industrial Policy. However, they remained a small player serving some district markets only. Encouraged by the entered the opening out of the Indian economy and the growth of new middleclass population, many of them globe-trotters, SSBL entered the Indian wine industry in 2000 by acquiring the Himachal Wine Company and three other smaller wine companies near Hyderabad and Nasik.by investing Rs.1 crore. The Indian market for wine is growing fast at the rate of 20% CAGR. But compared to developed countries our annual consumption is less than 0.01%. Everyone was enthusiastic. It was kind of fragmented set up all over India. Many of the old timers in the industry predicted that SSBL would very soon fail. Many were hostile to the entry of SSBL. But it performed well with a volume of 4 lakh cases per month within three years of their first full year of operation. They advertised heavily. They also set up R&D facility and standardised the taste of its wines. They also invested Rs. 1 crore in a new winery at Nasik. By now they came up within the top 10 companies in India the competition also reacted by tripling their combined advertising expenditure. Many top companies resorted to some heavy sales promotion. With liberalization of imports, many good foreign wines of South African, South America and the developed countries have started coming in large quantities. Soon the Indian wine industry growth rate reduced to single digit. In 2010 Mr. R. Goel became the Managing Director of SSBL. In a high-level review, they noted that the company was losing its hold over the market, competition from Indian and imported wines were fierce, operating margins were reducing and it was not getting the return as expected. They compared and found that the company's older business lines in standard and specialty beverages performance was good and steady. Board decided to sell out to ABC Winery Ltd. one of the competitors, get back valuable capital and invest in various non- alcoholic beverages and grow. Within 1 year of the combined operations ABC Winery Ltd moved up from the eighth position in the industry to a strong third place with 15% market share. The Chairman and MD of ABC WL was happy and commented in the Board Meeting that their decision to buy the winery business from SSBL had been a good one. He said "Instead of remaining as a small specialty wine player we have now become a fairly large operation with economies of scale" Mr. Harish, Marketing Manager of SSBL was feeling that they should not have sold their winery business to ABC WL. He said" We could have invested and persisted for few more years, compete with our competitors successfully and improve our market share and become industry leader if we had manufactured wines of new exotic qualities to suit the varied preferences and pockets of diverse sections of society, particularly in the top 40 urban and rich semi-rural locations. Questions to be answered: (each Question carries 5 Marks - Total 20 Marks) 1. Was the diversification adopted by SSBL concentric or conglomerate? Explain the meaning of Concentric and Conglomerate and then substantiate your answer