This third - and penultimate - part of October's management briefing, looking at the logistics landscape, shines the light on Asia Pacific.


The daily Indian struggles that exist in terms of bureaucracy and bad roads have kept beverage industry logistics at a basic level, according to Cedric Vaz, executive VP of manufacturing at India’s United Breweries. There are several challenges, he feels, that exist around transporting alcoholic beverages specifically in India, including excise permits, road conditions and lack of storage space.

In general, the dispatch of finished goods requires an excise permit – with this, the expiry of permits (either due to non-availability of stock-keeping units or transportation issues) and the revalidation of those expired permits present a major hurdle to the industry. Furthermore, consignment has to move as per the prescribed excise route only, says Vaz: any violation could result in the entire consignment being seized by the excise department.

Pradeep Gidwani, former MD of both Foster's and Carlsberg in India, concurs: “Currently, 99% of alcohol is transported by road in India," he says. "The condition of roads, especially during the prolonged monsoon months, is appalling and results in breakage and in transit losses.” Because of this, shrink-wrapping of cartons, along with criss-cross stacking are some of the options companies employ in transporting alcoholic drinks. This tends to rachet up costs, however, thereby damaging demand in an already cost-sensitive market.

As alternatives, some brewers are  experimenting with PET packaging in India. SABMiller, for example, launched Foster’s Draught in 1-litre PET packs in 2011. Companies such as the UB Group (which produces Heineken in India) have also been using sturdier boxes and dedicated robust vehicles for transporting alcoholic drinks, ensuring the hygienic condition of warehouses and vehicles through proper waterproofing so that water seepage is avoided. Educating depot managers in drinks storage, and hence improving hygiene and the handling of goods to minimise breakages, is another important step towards bettering industry logistics.

Overall, India’s alcoholic beverage distribution storage space has not kept pace with the growth in both supply and demand in recent years, claims Vaz. Gidwani adds that weaknesses in computerisation of warehousing controls - the consignment first in is not always the consignment first out - remains a problem for perishable items such as beer.

For UB Group’s Vaz, educating retailers about good practices in storage, providing them with visi-coolers, and conducting regular audits to ensure that these practices are being followed are all very important.


As the popularity of online shopping continues to grow in China, more drinks companies in the country are venturing into the virtual market, in the hope of securing big returns.

One recent example of this is Tibet 5100 Water Resource Holdings, a Beijing-based company that sells high-end mineral water under the brand name Tibet Spring. The product was mainly sold in China’s expensive, high-speed trains until late June, when the company began selling ‘water cards’ online, partnering with established e-commerce sites such as Amazon China and

With the cards – priced at CNY500 (US$78.90), CNY600 and CNY800 – consumers in 44 cities can call a customer service number to receive deliveries of the bottled water. According to Tibet 5100, through this method, the company does not need to pre-stock inventory in the warehouses around the country (which would increase cost and supply issues), but instead, sends water from its own smaller network of warehouses, using two shipping service companies - FedEx and China Railway Express.

Beverage giants PepsiCo and Coca-Cola have also been refining their e-commerce logistics, working with renowned business-to-consumer e-commerce sites like Tian Mao and Yihaodian to push sales further by arranging private local deliveries. One big advantage of e-commerce in China, especially, is that it can instantly reach the country’s huge but highly-fragmented market. Last year, for example, Swiss multi-national Nestlé acquired Xiamen-based drinks maker Yinlu to gain its extensive distribution network in lower-tier cities and small towns.

In contrast, some multi-national retailers have been struggling – and even closing stores in China. Walmart, for example, admitted in August that it had been “expanding too fast” in China, and also in August, British grocery retailer Tesco closed its store in Tieling City, Liaoning province, after just three years of operation.


Japan's more mature beverages logistics industry, meanwhile, is widely recognised as being one of the most advanced and efficient in the world, with retailers and consumers - who are known for being demanding - benefitting from a network that ensures swift delivery with an emphasis on safety and freshness. To Japanese consumers, the security of their food is of huge importance; any company that forgets that basic tenet will inevitably feel a backlash from consumers.

In late 2008, Osaka-based Mikasa Foods came under fierce criticism after it sold around 400 tonnes of rice classified as inedible for humans to Asahi Breweries, Japan's largest alcohol manufacturer, to be used in high-end ‘shochu’ spirits. The subsequent product recall cost for Asahi was estimated at JPY1.5bn (US$19.2m). 

The high logistics standards already operated by drinks companies, however, mean that there have been relatively few innovations in recent years, according to some analysts. "Large drinks companies have operated their delivery systems in a couple of ways, with firms like Coca-Cola setting up regional bottlers to deliver their products," says Tomoyuki Niikura, industry analyst with the Fuji-Keizai research firm. "Others - such as Suntory or Asahi - preferred to operate on a national scale.”

There was a degree of rethinking of those strategies in the aftermath of the east Japan earthquake in March 2011, which caused extensive damage to industrial facilities in Japan’s north-east. According to Niikura, drinks companies have introduced new plans that will allow them to be more flexible in delivering products to areas affected by natural disasters.

Drinks firms are also trying to reduce the weight of plastic bottles by using advanced new resins, which make the bottles thinner, and easier to recycle.

That said, Kazumi Yanagisawa, a researcher at the Tokyo-based Yano Research Institute, adds: "In general, the drinks industry has been making continuous big efforts to reduce logistics costs by using advanced IT solutions." She says: "One solution is the use of optimum efficiency in transportation routes to retailers, which in Japan means primarily to vending machines. Another solution, says Yanagisawa, has been the use of outsourcing services. “It is common sense for deliveries of small lots to outlets with low turnover to be outsourced … On the other hand, these companies are holding on to deliveries of large lots and to retailers with high turnovers," she says.

To go back to the second part of this briefing, click here. The final part can be found here.