To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the

firm?

INTERNAL ASSESSMENT

BUSINESS AND MANAGEMENT

HIGHER LEVEL

TITLE – PRODUCT DEVELOPMENT AS A GROWTH STRATEGY

Research Question:

To what extent would developing a new healthy beverage by LAHAG SPIRITS

would be a financially viable investment for the firm?

Word Count:
Research Proposal: 500
Executive Summary:194
Written Report: 2000

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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

RESEARCH PROPOSAL

Research Question:

To what extent developing a new healthy beverage by LAHAG SPIRITS would be a financially

viable investment for the firm?

PROPOSED METHODOLOGY INCLUDING:

Rationale:

LAHAG Sprits is a company that was established in 2003 and diversifies in producing various

alcoholic beverages in India.1 Due to the saturation in the alcohol industry and increase

competitor’s, the overall revenue of the firm has decreased over the last 2 years. Furthermore,

various new firms have also entered the alcohol industry hence decreasing the market share of

LAHAG. The firm now aims to introduce a new healthy beverage in the market, to diversify its

product portfolio as well as target new customer base. This research will focus on whether the

introduction of new health beverage will help the company to solve the problem of low profits.

1
2019. LAHAGspirits.Com. Accessed July 28 2019. https://LAHAGspirits.com/vodka-manufacturer-in-india.html.
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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

Theoretical Framework And Key Areas Of The Syllabus To Be covered :

Unit Tool Purpose

The Four P’s Force Field It is a change management technique that analyses the forces

Analysis driving or restraining towards a change.

Organizational Ansoff Matrix Analytical tool that helps devise various products and market

Objective growth strategies.

Investment Payback Allows to calculate the amount of time needed to recover

Appraisal Period and initial cost. While ARR would allow to calculate the average

ARR profit on the investment.

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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

Possible Sources Of Information and Methodology Of Research:

Primary Research:

OFFICIAL APPROACHED METHOD PURPOSE

Managing Director  Interview- Qualitative To understand the trends and the
Mr. Pranay Aneja  Research Tool  current position of the alcohol
industry. Furthermore, understand
the challenges faced by the firm
in the market.
CFO-Chief Financial Officer Interview- Data To understand the current funds
Mr. Rishabh Aneja Collection- Qualitative available and the expected cost of
and Quantitative the venture. 
Regional Sales Manager Interview- Data Collection To understand the current level of
Mr. Aman Agarwal  demand of alcohol, which help
understand the current market
base. 
Potential and Current Customer Survey- Quantitative and To understand the consumer
Qualitative of sample 100 behaviour and their preferences.
Researcher Observation To get better insight of the
Myself workforce, factory and the
industry.
Head of Marketing and Product Observation  To get inputs for product position
Development, MD and Owner  map to know the present
perception of the product.

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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

Secondary Research:

SOURCES PURPOSE
Internet To research about the current competitors and
various other evolving products in the market.
Books – Business Management Research on Various strategies and
understanding of business tools
Financial Website – ZubaCorp Get Quantitative Analytical Data such as profit
loss, revenue and product line information.

Anticipated Difficulties and Possible Solution:

PROBLEM EXPLANATION SOLUTION

Confidentiality Unwillingness of the company to Signing of confidentiality agreement.

provide some data.

Language Respondents may not be Questionnaire to be developed in

proficient in English. English and Hindi.

Limited Time Varied Respondents to be reached Use of other online platform to

period in short span of time. conduct survey.

5
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

ACTION PLAN

X- Modifications
6
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

TABLE OF CONTENT

S
LETTER OF AUTHENTICATION............................................................................................9
ACKNOWLEDGEMENT..........................................................................................................10
EXECUTIVE SUMMARY.........................................................................................................11
Research Question...............................................................................................................................11
Scope....................................................................................................................................................11
Conclusion...........................................................................................................................................11
INTRODUCTION.......................................................................................................................13
METHODOLOGY EMPLOYED..............................................................................................14
Primary Research................................................................................................................................14
Tools.....................................................................................................................................................15
Limitation............................................................................................................................................15
MAIN RESULTS AND FINDINGS...........................................................................................16
Figure 1: Alcohol Industry Growth Rate (Managing Director).......................................................16
Figure 2: Market Share 2017..............................................................................................................17
Figure 3: Market Share 2019 .............................................................................................................17
Figure 4: Fall in Profits.......................................................................................................................18
Figure 5: Annual Sales of Company..................................................................................................19
Figure 6: BRAND Awareness of LAHAG Spirits.............................................................................20
Figure 7: Reasons for Consumer Preferences...................................................................................20
Figure 8: Needs of Customers in the Market (Delhi NCR)..............................................................21
Figure 9: Consumer Preference on Health Drink vs Alcohol Based Drink ...................................21
Figure 10: Consumer Exposure to Various Health Drink Brands..................................................22
Figure 11: Initial Investment vs Annual Return...............................................................................22
Figure 12: Geographical Location of Sales (Revealed through revenue charts and interview)....23
Figure 13: Product Position Map (Market Observation – Appendix 9)..........................................23
Figure 14: Current Workforce vs Workforce Needed......................................................................24
Figure 15: Workspace:........................................................................................................................24
ANALYSIS OF TOOLS..............................................................................................................25
ANSOFF MATRIX.............................................................................................................................25
FORCE FIELD ANALYIS.................................................................................................................27
FINANCIAL ANALYSIS...................................................................................................................29
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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

Investment appraisal analysis help the firm to access the venture potential and its monetary
benefits for the company.....................................................................................................................29
A) PAYBACK PERIOD...............................................................................................................................29
B) AVERAGE RATE OF RETURN -........................................................................................................30
CONCLUSION............................................................................................................................31
RECOMMENDATIONS............................................................................................................32
AREA OF FURTHER STUDY..................................................................................................32
LIMITATION…………………………………………………………………………………..32
BIBLIOGRAPHY........................................................................................................................33
APPENDCIES..............................................................................................................................34
APPENDIX 1: INTERVIEW OF DIRECTOR (TRANSCRIPT)....................................................34
APPENDIX 2: INTERVIEW OF REGIONAL MANAGER (TRANSCRIPT)............................36
APPENDIX 3: INTERVIEW OF CFO (CHIEF FINANCIAL OFFICER)....................................37
APPENDIX 4: SWOT ANALYSIS....................................................................................................38
APPENDIX 5: BCG MATRIX...........................................................................................................40
APPENDIX 6: LAHAG WEBSITE TO UNDERSTAND THE PRODUCT PORTFOLIO..........42
APPENDIX 7: PRODUCT POSITION MAP...................................................................................43
APPENDIX 8: SURVEY QUESTIONS (GOOGLE FORM)...........................................................43
APPENDIX 9: OBSERVATION........................................................................................................44

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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

LETTER OF AUTHENTICATION

9
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

ACKNOWLEDGEMENT

 I would like to express thanks to Mrs. Rajni Aneja, the founder, for the assistance and

granting me the data and allowing me to do this research on the company.

 I would like to express my thank to Mr. Rishabh and Pranay Aneja the directors of

LAHAG, who helped me with the interviews and helped me access the data required for

research.

 I would also like to thank the whole organizational team of LAHAG, for their invaluable

guidance and at each and every stage of my findings.

 I would also like to thank all the valuable customers who gave their precious time in

taking the survey.

 I would even like to thank Mrs. Suman Agnihotri, my business teacher who has guided

me at each and every step of my IA.

10
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

EXECUTIVE SUMMARY

Research Question

To what extent developing a new healthy beverage by LAHAG SPIRITS would be a financially

viable investment for the firm?

Scope

LAHAG Spirits India, an alcoholic manufacturing firm has experienced high profits over the

years. However, the alcohol industry has saturated in the last few years and several new firms

such as BIRA and Sailor have penetrated the market with competitive pricing, hence impacting

the overall revenue and decreasing 16% profits of LAHAG2, the company’s decision dilemma of

coming up of financially viable diversified product portfolio was explored quantitatively and

qualitatively by using business tools such as Ansoff Matrix, Force Field Analysis and Financial

Analysis based on the data collected both by undergoing varied primary and secondary research

comprising of Surveys, Financial Statements, Observation and Interviews.

Conclusion

Based on the clinical assessment of quantitative and qualitative sources, it is concluded that

LAHAG should venture in the health drink industry as it has a high payback period of 3 Years

and a high ARR of 33 %3. However, It’s recommended to firm be aware of various Competitor’s

and respond to practices of their rivals.

2
Refer to Appendix 1
3
Refer to Financial Analysis
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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

Word count: 194

WRITTEN REPORT

Research Proposal – 500 Words

Executive Summary – 194 Words
Main Body – 2000 Words

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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

INTRODUCTION

LAHAG is a company that was established in 2003, known for its diverse range of alcohol

beverages ranging low prices to high prices, it also diversifies in various industries, such as

Hospitality Industry, Alcohol Manufacturing, Food and Drinks and Real Estate. 4 The major

scope for profit for firm has been in the beverages industry, which has boomed over the years.

The firm caters to whole sellers, through which goods are linked to a three-channel distribution.

However, the alcohol industry has saturated in the last few years and several new firms such as

BIRA and Sailor have penetrated the market with low pricing, hence decreasing the overall

revenue for LAHAG. Due to this saturation in the market and intense competition, availability of

low-priced beverages the firm has been facing difficulty to increase its profit. The Director of the

Company, Mr. Pranay Aneja has claimed that “there are various new competitors in the market

and consumers have started to become more concerned about their health, hence causing a

decrease in our profitability”5. Currently, the LAHAG Spirits hold 14% Market Share in Uttar

Pradesh.6  The Director of the company is planning to introduce more healthy option to the

customers in order to increase its sales revenue. However, due to the current saturation in the

beverage market the director lacked confidence whether changing product portfolio by

introducing more healthy beverages would be a financially viable decision.  

4
"Alcohol, Liquor Manufacturer in India - LAHAG Group." LAHAG Spirits, LAHAGspirits.com/liquor-manufacturer-in-india.html. Accessed
15 July 2019.
5
Refer to Appendix- 2
6
Refer to Appendix - 3
13
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

In order to investigate whether the introduction of new health beverage is financially viable

option its being analysed with this report

‘To what extent  would developing a new healthy beverage by LAHAG SPIRITS would be a

financially viable investment for the firm”?

METHODOLOGY EMPLOYED

Primary Research

An interview with the Managing Director of LAHAG was conducted in order to understand

the growth in the Alcohol market and  the market share of LAHAG in this industry. Furthermore,

another interview with the Reginal Sales Manager was conducted to evaluate the current

product portfolio of the firm and evaluate the current workspace available. The primary research

was further strengthened by conducting Interview of CFO (Chief Financial officer) to inquire

about the current revenue, profit of the firm and the funds available for the new health drink

venture.7

Consumer survey was conducted with help of both open ended and multiple-choice

questionnaire consisting of 20 questions on 100 customers randomly chosen from the area. 8The

main purpose of this survey was consumer’s preference in order to identify the current and

potential customers who would be willing to buy more healthy beverages. A Company

Shadowing as an observation was conducted to explore the possible viability of the decision of

the firm to introduce a new product in the form of health beverage. Furthermore, a Market

Observation was conducted of 4 distributors in Easter Region to see the likely perception of

customers towards LAHAG’s products.

7
Refer to Appendix 3
8
Refer to Appendix 8
14
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

Tools

To successfully evaluate the decision of introducing new healthy beverage in the market, the

following analysis was done: Ansoff Matrix, Financial Analysis & Force Field Analysis. The

Ansoff Matrix was helpful in analyzing the risk involved in undergoing the possible growth

strategy and the Force field Analysis has helped in evaluating the decision of the venture by

considering the restraining and driving forces. It has also helped to evaluate whether LAHAG

should invest in non-alcoholic healthy beverages to increase its market growth. The financial

analysis included the Payback Period and ARR that allowed to access the financial viability of

the health drink to be launched by LAHAG. Furthermore, SWOT analysis was used to capitalize

firm’s strength in capturing opportunities available in the external environment which is

analyzed

with the aid of BCG matrix and Product Position map.

Limitation

The research is majorly based on Primary Sources, to scrutinize and evaluate the venture further

a detailed analysis of secondary data including the historical trends must be done. The survey is

limited to only 100 customers, hence for a much better response a wider audience could have

been used. A detailed competitive analysis has not been made due to the limitation of time and

word count.

15
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

MAIN RESULTS AND FINDINGS

Findings from the Observation and Interview of Managing Director:

Figure 1: Alcohol Industry Growth Rate (Managing Director)9

ALCOHOL INDUSTRY GROWTH RATE

20
18 18
17
16
15
14 14
Growth Rate %

12
11
10
8
6
4
2
0
2015 2016 2017 2018 2019 Year

The interviews & observation reveal that the beverage manufacturing business especially the

alcohol-based beverages have a positive growth rate in the Indian Market despite the industry

getting a little saturated over the last few years. Despite the overall economic slowdown, the

average industry growth rate was 15 % for the last 5 years. 1011 However the aftereffects of

demonetization & GST have created volatility and the growth rate has fallen particularly in the

last

2 years.12

9
Refer to Transcript of Interview with Managing Director – Question No. 8
10
"India Alcoholic Beverage Market 2016-2024: Industry Trends, Size, Growth and Demand Analysis ". 2020. Goldsteinresearch.Com.
https://www.goldsteinresearch.com/report/india-alcoholic-beverages-market-analysis
11
Refer to Appendix 2
12
Refer to Appendix 1
16
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

Figure 2: Market Share 201713

13
Refer to Appendix 1- Interview with Managing Director
17
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

Figure 3: Market Share 2019 14

14
Distilled Spirits Market - Global Industry Analysis, Size, Share, Trends, Forecast 2025". 2020. Transparencymarketresearch.Com.
https://www.transparencymarketresearch.com/distilled-spirits-market.html.
18
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

As mention by the managing director and through my observation, the market share of LAHAG
has decreased 1% over the last 2 years due to the saturation in the market and due various new
Due to this decreasing market share, the Managing Director believes that the market is saturated
firm entering the market,
and is sceptical about the feasibility of the health drink being launched.15

Finding from the Interview of CFO:

Figure 4: Fall in Profits

Profit Margin
35
33
30 31
29
25 27
24
Amrgin in %

20

15

10

Year

15
Refer to Appendix 1
19
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

The CFO of LAHAG is of the believe that the increase in allowance of FDI in the spirits and

alcohol beverage market has led to increase in competition which the main reason for the fall in

profit and market share. 16

Fall in Annual Sales

The spirit and alcohol and beverage based companies such as Gold Spot, Global Spirits &

Radico have successfully been able to penetrate the industry and have negatively affected the

growth prospective of LAHAG private limited. 17

The managing Director (Operation) of LAHAG Pvt wants the company to outsource the

manufacturing process to a specialised firm in order to benefit from lower and high efficiency.
18
Moreover, the company has tied up with various hotel and commercial bars so that there is

exclusive availability of the products to the consumer under the product portfolio of LAHAG

Brand.

16
Refer to Appendix 2
17
"Top Breweries & Distilleries Companies In India, Top Breweries & Distilleries Stocks In India By Total Assets,
18
Refer to Appendix 2
20
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

Figure 5: Annual Sales of Company19

Annual Sales in Units of LAHAG Beverages

450000

400000

350000

300000
Sales in units

250000

200000

150000

100000

50000

Year

Findings from the Survey

A survey of 100 potential and existing customers of LAHAG Private Limited revealed the

following. 20

Figure 6: BRAND Awareness of LAHAG Spirits21

BRand Awareness

Aware
23%

Aware and
Not Aware Consumer
64% 13%
19
Appendix 3- Question 2
20
Refer to Appendix 8
21
Refer to Survey Results in Appendix 8
21
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

Figure 7: Reasons for Consumer Preferences

Reasons for Consumer Prefrences of a Particular brand

ProductRecommendations Brand
Availablity 8% Image
10% 30%

Quantity
12%

Price
15% Product
Quality
25%

Figure 8: Needs of Customers in the Market (Delhi NCR)

Current Need of Customer

Figure 9: Non Alcoholic Consumer

for Teens Preference on
20% Health
Health Drinks
Drink vs
Alcohol 36% Based Drink 22

Real
Fruit
18%

Energy More Alcohol

12% 14%

22
Refer to Appendix 8- Potential and Current Customers
22
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

Preference in %

Alcohol Based Drinks Vs Health Drinks

80

70
71

60
58
50 54 53
52
48 47
46 Health
40 42
Health Alcohol Alcohol Health
Health Alcohol Health
Alcohol
30 Alcohol
29
20

10

Category

Figure 10: Consumer Exposure to Various Health Drink Brands

Market Share of Existing Healthy Drinks Pro-

duction Companies

Naturals
20%
Pro 360
21%

Scorlife
11%

Raw Pressery
12%
Others
19% Yakult
17%

23
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

Findings from the Interview of Chief Financial Officer

Figure 11: Initial Investment vs Annual Return

Figure 12: Geographical Location of Sales (Revealed through revenue charts and interview)

The following map reveals the current customer base for the alcohol beverages. The new beverage
would
24 be introduced in the following regions (Color-Green), as the brand is already established and
would help LAHAG to quickly increase their sales.
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

Figure 13: Product Position Map (Market Observation – Appendix 9)

LAHAG maintains a lower price

range of beverages with medium
quality of beverages. The
following map is made through
the market observation.

Figure 14: Current

Workforce vs Workforce
Needed

F
i
g
u
r
e

15: Workspace:

25
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

The following graph depicts the current workforce and the workspace available as well as needed for
the new health drink venture.ANALYSIS
(Revealed through Shadowing in the Firm and Observation)
AND EVALUATION
0
ANSOFF MATRIX

Ansoff's Matrix is a marketing planning model that helps a business determine its product and

market growth strategy.23

23
The Ansoff Matrix: Understanding The Risks Of Different Options". 2019. Mindtools.Com. Accessed July 28 2019.
https://www.mindtools.com/pages/article/newTMC_90.htm.
26
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

The Ansoff matrix analysis reflects that the organic growth strategy to be undertaken by LAHAG

Spirits is similar to the growth strategy of Product Development as the company is launching an

entirely new beverage prototype in the existing market and is targeting the existing market base

along with some new potential customers. Thus, it is a medium risk strategy for the company.

The risk of launching a new product can be managed efficiently by the company as the company

is already an established brand in the beverage industry as showcased in Figure 3, then the

venture seems beneficial for LAHAG Spirits private limited. 24Also, the increasing need of the

customers for health drink (36 %) and increased brand awareness of 23% as shown in figure 6

decreases the risk involved in launching the new beverage (Refer to Figure 8) But the dynamic

nature of external environment is difficult to be predicted .However, to analyze the feasibility of

the change in product portfolio, Force Field Analysis, a decision management tool would be

used.

24
Refer to SWOT Analysis- Appendix 4
27
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

FORCE FIELD ANALYIS

 Change management technique that would allow to analyze the restraining and driving

forces of the venture. 25

The Force Field Analysis conducted through the Primary Research has revealed various driving

and restraining forces for the venture. The Driving forces of the venture overweigh the

restraining forces, revealed through the questionnaire filled by the Managing Director. The

company has an experienced labor who have been producing alcohol for over 20 years which

will allow the implementation to be successful (Refer to Interview of Director), however the

workforce and the workspace needs to be increased to make the venture feasible (Refer to Figure

25
"Force Field Analysis: Analyzing The Pressures For And Against Change". 2020. Mindtools.Com.
28
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

14 & 15), hence may become a restraining force. As showcased in the Figure 8, The quick

changing needs for the new products by the customers and stagnant profitability is a driving

force for the company, hence requiring a change in product portfolio. The increased health

consciousness of consumers in the market increase the probability of sales of the new healthy

drink (Refer to Interview of Director).

The high cost of investment and the promotional expenses are restraining forces for the

company, however the increasing demand by customers should allow to cover up the expenses.

As showcased in the Figure 1, the alcohol market has been saturated and due to various new

competitors26, the revenue has fallen, this is a threat to the company as this may also occur in the

health drink market (Observation and Interview of CFO)27. However, the experience of LAHAG

and the product quality (Refer to Figure 13) must allow them to quickly capture the market.28

Despite some restraining forces revealed in the force field analysis, the driving forces outweigh

the drawback and thus the venture seem feasible for LAHAG Spirits private limited. But

weightages given are from external stakeholders which could be biased

For a more comprehensive analysis, financial analysis would be conducted to understand the

Payback Period and ARR for the new venture.

26
Refer to Appendix 5 (BCG Matrix)
27
Refer to Appendix 2
28
Refer to Strength Potion of the SWOT Analysis
29
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

FINANCIAL ANALYSIS

Investment appraisal analysis help the firm to access the venture potential and its

monetary benefits for the company.

A) PAYBACK PERIOD: It is capital budgeting referred to the period of time required to

recoup the funds expended in an investment. 29

The company would require $10 Million for covering the overall cost of the venture (includes

only setup costs), the average annual return would be $3.2 Millions. (Refer to Figure 11)

Thus, the payback period would be:

- Initial Investment/ Annual Return

- $10 Million/$3.2

- 3 Years and 1 Month

The initial investment for LAHAG, Spirits private limited in launching a health drink can be

recover in a reasonable time frame off 3 years 1 month and hence it seems to be a favorable

venture for LAHAG.

29
"How Payback Periods Work". 2020. Investopedia. https://www.investopedia.com/terms/p/paybackperiod.asp.

30
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

B) AVERAGE RATE OF RETURN - The average rate of return is the average annual amount

of cash flow generated over the life of an investment.30

Annual Return
×100
Initial Investment

3.2 Million
× 100
10 Million

= 32 %

The ARR for this health drink venture is estimated to be 33% which is financially viable

investment as the present rate of interest is 7.4% in India, hence the real rate of return in 25.6 %

(33-7.4%) which is approx. 4 times more than next best alternative. But this method ignores the

timing of cash inflows, hence is subjected to forecasting errors.

The financial analysis done using the payback period and average rate of return seems

completely in favor of the health drinks venture.

30
"What The Accounting Rate Of Return Shows". 2020.  Investopedia. https://www.investopedia.com/terms/a/arr.asp.

31
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

CONCLUSION

Based on the clinical assessment from the research data which was collected through the relevant

primary as well as some secondary sources, it can be concluded that LAHAG shall indeed

venture in the health drink industry by launching its own health beverage under its brand name

which is estimated to give average rate of return of 33% and real return of 24.6% with a

healthy payback period of 3 years and 2 months.31 This is likely to increase its consumer base

and enhancing the market presence. The qualitative analysis through Force Field analysis favors

the company’s decisions as the driving forces to invest in health beverage outweighs the

restraining forces. The growth strategic tool of Ansoff matrix reveals that this medium risk

strategy will help the firm spread its risks of failure thus enabling firm to earn more profits and

increase its market presence which is step towards becoming conglomerate.

31
Refer to Financial Analysis
32
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

RECOMMENDATIONS

This report recommends LAHAG to emphasize on the marketing and promotions with a mix of

ATL and BTL so has to establish brand awareness and hype in the market before the launch of

the health drink. LAHAG is also recommended to be aware of various Competitor’s as

represented in Figure 10 and respond to practices of their rivals.

AREA OF FURTHER STUDY

A further area of study which could impact the findings of analysis is the NPV method of

investment appraisal which could also be used to judge the financially viability of the project.

This report does not analyze ‘the cost to buy or cost ‘to make of the health drink by LAHAG,

which would further allow to access the opportunity cost.

LIMITATION

The analysis is subjected to limitations as quantitative analysis is based on estimated cost of

investment which could be different than the real investment once the project rolls out along with

total profit earned as well as contribution per month is also pure estimation of MD.

The qualitative analysis involving weighing of driving forces is the estimation of the Managing

Director and the CFO which might have been done subjectively rather based on facts and

evidence.

33
 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

BIBLIOGRAPHY

Books-

 Hoang, Paul. International Baccalaureate Business and Management. Ibid Press, 2014.
 The Fundamentals Of Branding." Google Books. N. p., 2019. Web. 2 Feb. 2019.

Websites-
 "User Account | Zauba Corp". 2019. Zaubacorp.Com. Accessed July 28 2019.
https://www.zaubacorp.com/my-documents/U15500HR2008PTC076774.
 Jurevicius, Ovidijus. 2013. "How To Focus On The Stars With A Clever BCG
Matrix". Strategic Management Insight. Accessed July 28 2019.
https://www.strategicmanagementinsight.com/tools/bcg-matrix-growth-share.html.
 2019. LAHAGspirits.Com. Accessed July 28 2019.
https://LAHAGspirits.com/vodkamanufacturer-in-india.html.
 "The Ansoff Matrix: Understanding The Risks Of Different Options".2019.
Mindtools.Com. Accessed July 28 2019.
https://www.mindtools.com/pages/article/newTMC_90.htm.
 "What The Accounting Rate Of Return Shows". 2020.
Investopedia.https://www.investopedia.com/terms/a/arr.asp
 How Payback Periods Work". 2020. Investopedia.

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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

APPENDCIES

APPENDIX 1: INTERVIEW OF DIRECTOR (TRANSCRIPT)

Q1. What is your Role in the Firm?

A1. I am the Director of the Company and decide on all decisions that the firm needs to take; I
also look at the production and financial part of the firm.

Q2. What does the Company do and how many factories do you have?

A2. The company is in manufacturing alcoholic and Non-Alcoholic beverages and spreads
around in India with 5 Factories, which includes factories in Aurangabad, Sikkim, Haridwar and
Uttarakhand.

Q3. Could you tell me more about your products?

A3. Basically, we produce Non-Alcoholic beverages that are sold all around India and have
successfully created a wide range of products but are hoping to make some changes to our
product line.

Q4. What is your vision and policy in manufacturing?

A4. The firms follows a strict policy of maximizing output by active participation in marketing,
procurement and contracting – thus achieving increased productivity and enhanced business
growth.

Q5. What is your current workforce and how has it changed over the years ?

A5. We started with a workforce of just 25 People in 2003 and have expanded to over 15000
workers working under the name.

Q6. As the company aims to introduce a new product line of Non Alcoholic Healthy Health
Drinks, what response do you hope from the Market ?

A6. Our Aim is to target the market segment with the State of Uttar Pradesh and Haryana, we
will later expand to other states as well. Our prices would be competitive and the drink would be
a new of a kind in the market. Hence, hoping to raise high revenue through it.

Q7 What would be the initial cost including the Production cost of the LAHAG Health
Beverage?.

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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

A.7 The total cost of the plant including the first set of production would be 7 Crores and we
expect a total return of 13 Crores by the end of the Year.

Q8. How much sales do you expect from the new product line and what pricing strategy
would you prefer to use.
A8. We expect a 100 percent sales, as you know the beverage industry is very competitive, so
our pricing would be very competitive with less than 90Rs.

Q9. Where would the manufacturing of the drink take place and how impactful would it be
in terms of cost and expenses ?

A9. The manufacturing would take place in the city of Aurangabad, where the factory has the
ability to produce lot of beverages. We are already paying for the electricity cost and this
production would be beneficial, in terms it aims to generate profits and should overtake the cost
of it.

Q9. Where is the Growth Rate in the Alcohol Industry ?

A9. The growth rate in the Industry was increasing from 2015 and reached the peak at 17% by
2017, however it decreased the last 2 years reaching 11 % in 2019.

Q10. What is the market share of LAHAG and how has it changed after this slowdown and
saturation in the alcohol industry ?

A10. The market share of the company has decreased by 1% in the last 2 years, the market share
of the company reached 5% in 2017 and decreased to 4 % in the year 2019.

Thank You so much for you time, I would now request you to please fill the following
Questionnaire:

What do you think are the driving forces for the change, (Please explain them and give them
ratings on their importance on a scale of 5)
Response by Managing Director

Need for new products by Customers 4

The profit is stagnant 4
Saturation in the Alcohol Market 4
Health Consciousness is increasing 3
Experience Labour, Easy to implement the change 4
Economies of Scale 4

What do you think are the restraining forces for the change, (Please explain them and give
them ratings on their importance on a scale of 5)

Response by Managing Director:

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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

High Cost of Investment for the Project 10 Million 4

Distribution Channel – New 3
There are some strong competitors 4
Government Regulations 2
Promotional Expenses 3

APPENDIX 2: INTERVIEW OF REGIONAL MANAGER (TRANSCRIPT)

Q1. What is your Role in the Firm?

A.1 I am the Regional Sales Manager of the company LAHAG Spirits

Q2. As being the Regional Sales Manager of LAHAG Spirits, which is your vision in the
coming years.
A.2 We are aiming to produce the maximum range of products with the State of Art factories at
the highest point in India, located in Sikkim. We have been awarded for our commitment in this
sector and our mission is to maximize the profits level and provide exceptional quality of drinks.

Q3. As we know that the company is well established, what problems could arise when
introducing new Health Beverage?
A3. We have specialized in producing a wide range of Alcoholic Drinks, therefore this new
range of Healthy Health Drinks, may be challenging for us. We do have the infrastructure and
the Machinery required to manufacture the drinks, but there would be some initial set up cost.
Also, some of the products are not giving us good returns, therefore, it may pose a challenge to
our other products in the market.

Q4. What do you think would be the best strategy while introducing the new product line
in market?
A4. We feel that penetration in the market would be vital for the firm and using price penetration
would be a great idea to create a good customer base and allow customer to switch to LAHAG’s
Health Beverage.

Q5. What do you expect from the Market, and do you think the new product line would
help gain profit?

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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

Well. Almost all our products do take a share in our profit and we expect a good return from the
market, we hope for 100% sales and we would make sure that the quality of our product is
assured, and our consumer base is widening.

Q9. Where would the manufacturing of the drink take place and how impactful would it be
in terms of cost and expenses?

A9. The manufacturing would take place in the city of Aurangabad, where the factory has the
ability to produce lot of beverages. We are already paying for the electricity cost and this
production would be beneficial, in terms it aims to generate profits and should overtake the cost
of it. The new factory would be set near to this plant and the initial investment would be around
10 Million Dollars.

Q10. What is the current Market share and how has it changed over the last few years?
A10. The current market share of the company is 4% and has decreased in the last 2 years due to
the saturation in the market.

APPENDIX 3: INTERVIEW OF CFO (CHIEF FINANCIAL OFFICER)

Q1. What is your Role in the Firm?

Ans1. I am responsible for maintaining the financial position of the company, my responsible is
maintain the internal and external financial report of the company.
Q2. How are the annual sales of the company currently?
Ans2. If, I look at the stats, the sales of the company were around 175000 in the years 2015,
increased by 40% in 2016, and reached 4,20,000 in the years 2018. However, the sales in the last
2 years sales have decreased to 3,80,000 in 2018 and 3,68,000 in the year 2019.
Q3. What is the major reason for the decrease in revenue and profit?
Ans3. The increase in allowance of FDI in the spirits and alcohol beverage market has led to
increase in competition, hence decreasing our revenue.
Q4. What do you believe about LAHAG’s venture into the Health Drink Market?
Ans3. Well, I am a bit unsure about the venture, however I feel that the Alcohol Market is
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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

getting saturated and there is a need to diverse our product portfolio. The company has a strong
financial position, even though the revenue has decreased in the last 2 years. Thus, I believe our
venture should be successful.

APPENDIX 4: SWOT ANALYSIS

SWOT Analysis

- It is a strategic planning technique used to help a person or organization identify

strengths, weaknesses, opportunities, and threats related to business competition or

project planning.

Strengths Weakness
 Strong financial position  Restricted Distribution Channels
 Quality and Wide Product Range only in some states of India.
 High Market Share in Alcohol  Inexperience in the marketing
Industry in Uttar Pradesh team.
Opportunities Threats
 Capability to Increase Margins  New Competitors in the Market
 Possible Achievement of has made the market saturated.
Economies of Scale  The introduction of the GST has
 Development in Product Diversity led to higher rate of tax being
will reduce the risk margin imposed on beverages including
 Introducing New Healthy non-alcohol and alcohol
Beverages, improving brand beverages.
awareness.  The relaxation of norms in FDI
has further increased competition
in the industry.

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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

The Swot Analysis conducted through the primary research has revealed various strengths and

opportunities for LAHAG Spirits Pvt Limited. The company is likely to achieve economies of

scale while expanding its product portfolio. Moreover, the company would be able to diversify

into non-alcoholic beverages which will spread out the risk for the company and is also likely to

strengthen its brand awareness in the Indian market. The company boost off a strong financial

position and the deep pockets of the company will allow smooth implementation of the health

drink venture.

However, certain weakness and threats were also revealed by the swot analysis such incapability

of LAHAG Spirits Pvt Limited to expand in India. The company also does not have an

experience marketing team which can be a major drawback during the promotions and marketing

of the new health drink while being launched. There is also a major threat of new increased

competition in the market which has led to market saturation. The introduction of GST and

higher FDI in the industry has led to high cost of factors of production and high inflow of foreign

competition.

Despite some manageable weakness and threats, the strength and opportunities revealed by the

swot analysis outweigh the drawback and thus the venture seems feasible for LAHAG Spirits

private limited.

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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

APPENDIX 5: BCG MATRIX

BCG Matrix is a planning tool created by the Boston Consulting Group to evaluate the strategic

position of a firm’s product portfolio and its potential. It classifies the Business portfolio into

four main categories based on the industries attractiveness with the growth rate of the industry

and the competitive position which is relative market share.

If

the products of LAHAG are classified, its Rum are Cash Cows with a high Market Share of over 2

% which is high according to the concentration ratio in the Alcohol Industry. For LAHAG, rums

have a low growth rate however have a high market share which allows them to attract huge

revenue.

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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

Its Zong Wine are Dogs with a Market share of less than 1 %. Zong Wines have a low market

growth as well has low market share, however the ability to charge premium prices, the Wine

allows it to make strong financial contributions to the company.

The various RTD (Ready to Drink) beverages come under question marks where the market

growth of the product is high, and the demand is constantly increasing. Therefore, an increase

in the production of similar drinks (Health Drinks) would allow LAHAG captivate attention in the

industry.

These factors must be considered while increasing the profitability of the firm. However, if the

firm introduces a health Beverage as a new product, it will have to flow at very competitive

prices while establishing its name. Moreover, this beverage would contain less sugar and would

be a healthy product, therefore it must have a constant growth and high market growth. Hence

this product may fall under ‘Question Mark’. Moreover, the beverages would require more

resources to build its high market share and move towards Star Product in the long run, with

high cost of advertising and various sponsorships. However, the main purpose of the firm is to

increase its profitability, therefore a financial analysis is also important.

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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

APPENDIX 6: LAHAG WEBSITE TO UNDERSTAND THE PRODUCT PORTFOLIO

List of Shareholders:

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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

APPENDIX 7: PRODUCT POSITION MAP

APPENDIX 8: SURVEY QUESTIONS (GOOGLE FORM)

The result of the following

Survey is displayed in the
Research and Finding Section.

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 To what extent would developing a new healthy beverage by LAHAG SPIRITS would be a financially viable investment for the firm?

APPENDIX 9: OBSERVATION

The observation was carried out for 15 days in the organization to explore the possible viability

of the decision of the firm to introduce a new product in the form of health beverage. The firm is

currently into the beverage industry having product ranges from liquor, sparkling water to energy

drinks. The company has wide variety of alcohol ranging from Rum, Whisky and Wine. The

company intends to come up with a health beverage due to its stagnant profits.

I have observed 4 distributors in the Easter Region for a day, In order to see the likely

perception of customers towards the various alcoholic based brands.

A product position map was made through the observations above that allowed to understand
the
current position of the company. (Figure 13)

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