The Mandalay Spirit

By: Charlie Lancaster - Posted on: October 13, 2010 | Business

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It’s midnight in Yangon and a businessman is singing into his now empty bottle of rum. He mumbles incoherently to no one in particular and stumbles off into the night. Little did he know that for the last hour he had been sitting next to the man behind the bottle.

Ajay Advani is the driving force of Myanmar’s best selling rum – Mandalay Rum. Responsible for improving the production and quality of the rum, the CEO of Victory Myanmar Group Co Ltd (VMGCL) wants to make his company the number one producer of alcoholic beverages in the country.

And his job is made a little easier by the simple fact that Myanmar loves rum.

“Myanmar is a coloured spirits market, with whiskey and rum amounting to about 95% of the hard alcohol market,” says the Indian national who moved to Myanmar in 2002.

The Mandalay Distillery was built in 1886, and its second factory opened in Zeyawaddy in 1972. However, when Myanmar gained independence from Britain in 1948, the brewing industry became the property of the government.

Mandalay Army RumThe original products were Mandalay Rum and Mandalay Army Rum. While the former was marketed at the civilian population, the latter, as the name suggests, was produced for the armed forces. The army blend was originally mixed with quinine, which made it an effective anti-malarial drug as well as a lubricating tonic for the soldiers.

Unlike other distilleries around the world, which use oak wood to mature the rum, Mandalay Rum is aged in yamanay wood, which imparts a fragrant odour with a smoky palette. “Most world rums, including Caribbean rums are artificially flavoured and coloured and are much sweeter than Mandalay Rums. Our customer base prefers the smoky taste,” Advani says.

In 2009, the government decentralised all its non-core businesses and sold both factories to the Union of Myanmar Economic Holdings Limited, a semi-government organisation headed by Gen. Tin Aye. This organisation then formed a joint venture with VMGCL, which is in charge of investments, technology and marketing of the factories and employs nearly 600 people.

Despite whiskey replacing rum as the largest selling alcohol in Myanmar over the last 15 years, Mandalay Rum enjoys an 85% market share of the total rum market. Advani’s company generates $1.5m-worth of revenue every month – a figure he believes will only increase with time.

“Myanmar men are big drinkers, but in recent years we have witnessed an increase in the number of urban females drinking alcohol,” says the 40-year-old who has been working in the alcoholic beverage industry since 1995. In response to evolving consumer trends, a coffee liqueur and more whiskey brands will be added to the company portfolio which already includes a 12-year-old rum, brandy and gin.
But shifting social habits aren’t the only factor behind his optimism.

Advani is also confident that the November 7 election, the first in two decades, will open up the country to international business. Since economic sanctions were imposed by the United States in 1997, with the European Union quickly following suit, Myanmar’s fragile economy has been excluded from major markets. The rum industry, like other local industries, has had to rely on local markets for sales. But that could soon change, Advani says.

“After decades of financial isolation, investors are beginning to see Myanmar as a land of opportunity. After all, no country in the world would want to neglect business in Asean’s largest country.”

Despite the opportunities made available by untapped natural resources and an educated and skilled workforce, two obstacles facing businesses in Myanmar are communication and the lack of infrastructure.

“All buyers and sellers including big businesses communicate in the local language, even technological terms have a Myanmar equivalent. Additionally, there is a limited manufacturing base in the country so even small packaging items like crown closures and bottle caps have to be imported, as well as bigger items like the glass bottles and machinery. This affects our ability to implement creative and innovative ideas within the country.”

Additionally, a ban on alcohol advertisements requires extra creativity, but the company finds alternative ways to promote their products across the country. “Happy hour promotions and portable items like lighters, pens and ashtrays are a good way to advertise without advertising.”

However, without doubt the biggest obstacle to doing business in Myanmar is the economic sanctions.

“Our intention is not just to compete with others in the local market, but also to keep quality high enough to penetrate foreign markets. We have a lot of enquiries for the import of Mandalay Rum to European countries, but we have yet to find a way to export because of the economic sanctions imposed by the European Union,” says Advani. “However, we have firm enquiries from New Zealand, which is a huge rum market, and we hope to begin exporting soon there as well as to West Africa, Cambodia and Vietnam.”

Despite all the difficulties, Advani is confident of the opportunities for business in the country.

“If sanctions are lifted, I see coke being bottled in Myanmar by 2015 and the first McDonald’s and KFC outlet a little before then.”

Perhaps then, drunken businessmen will have even more to sing about.