The History of United Breweries 

The United Breweries Group was established by Scottish businessman Thomas Leishman in 1915 when he compiled the Castle Brewery and Nilgiris Breweries (1857), Bangalore Brewery Company (1885), British Brewery Corp. (1903) and BBB Brewing Company Limited (1913) into a union of brewing companies. The group took a beginners route in beer making and brewing by learning from a British brewery in South India. 

The UB Group made its first impression by brewing beer for British troops before India gained independence in 1947. They transported beers in giant barrels or “Hogsheads”. Eventually, in 1947, Vittal Mallya was elected the company’s first Indian director at 22. A year later, he replaced RGN Price as the company’s President.

Vittal Mallya bought the business in 1947 and tried to succeed in the Indian markets while expanding globally. Kingfisher, the group’s most visible and profitable brand, made space for itself in the Indian markets in the 1960s. In the 1950s and 1960s, the company expanded significantly through the acquisition of other breweries. Today, each of India’s 89,763 breweries sells at least one United Breweries brand.

But what happened to Vijay Mallya and his brand is hidden from no one.

Yet, even as Kingfisher Airlines proved to be Vijay Mallya’s failure, there are some key economics lessons to be absorbed from the stumbles of this once high profile liquor baron.

Don’t venture into uncharted territory without experts on board

Vijay Mallya ran a successful group of companies before founding Kingfisher Airlines. But he had no experience in the extremely tricky airline industry. Because of poor strategy, Kingfisher’s lenders and shareholders paid for the heavy losses. The lesson here is that investors should not be tempted by attractive assets, core holdings, new derivatives and other foreign financial products alone. They should invest in tangible projects rather than in speculative “dream” projects.

The vicious cycle of the debt trap

While Kingfisher Airlines was severely underperforming, Mallya continued to spend a lot of money in efforts to maintain the high-end airlines’ operations. He took a bunch of money from the banks to help the sinking airline. The banks also ignored Kingfisher’s growing losses and continued to sanction loans. This overleveraging took Mallya down in a significant blow. Kingfisher accumulated losses of Rs 4,301 crore and, as of March 2021, owes over Rs 9,000 crore to a string of Indian banks.

Check performance and change the trajectory

Even though everyone comprehended it, Mallya denied acknowledging the obvious, let alone made any efforts to make amends. He continued to deny Kingfisher Airlines’s critical situations and portrayed a false image to investors. To avoid being prey to such mega-scandals, investors should regularly review the services of the businesses they have invested in and take corrective action if necessary. 

Financial investments should be strategic rather than heartfelt

Any new industry is hazardous and often a weapon of large-scale destruction of wealth if it is explored unguided. Ordinary investors should stick to investment options like PPFs, time deposits, and mutual funds. Putting money just on the face of a glamorous mogul and their air castles lead to the avalanche that Mallya’s Kingfisher suffered.

Unmerited pride harms a business’ future

Pride played a crucial role in Mallya’s downfall. It was only because of his other ventures’ good performance that Mallya was convinced his Kingfisher Airlines would also be successful. Investors and stockholders should not rely too much on pride-driven revenue streams and weigh their options before putting in the money. Overconfidence and too starry of an image lead people to invest in capital directly rather than participating in a business’s services, and that is precisely what should be avoided.