2. Sweet Drinks Ltd is a drinks company whose core business is manufacturing and selling soft drinks

Case study ans: Sweet Drinks Ltd is a drinks company whose core business is manufacturing and selling soft drinks to 80,000 outlets throughout India. The business of the company is good with annual turnover exceeding three billon of rupees. Profits are good and shareholders are often rewarded with lucrative dividends and bonuses. Four years back the company has diversified into the alcoholic drinks industry and has taken-over two small breweries located in western India. The company has also diversified into hotels with purchase of twenty-five hotels of three/four star category across the country. To its advantage the company has been able to obtain a monopoly for the sale of its soft drinks in its hotels and is beginning to establish itself as a brand name in the brewery industry. Part of the strategy of the company is to continue to purchase hotels, particular by targeting National Capital Region of Delhi where tourism is likely to pick up with the forthcoming Commonwealth Games. The company also intends to construct a five star hotel in Gurgoan to take tax advantage announced recently by the finance ministers. Everything was going on well until recently, when a Public Interest Litigation from NGO accused the company of indulging in surrogate advertising of its brewery products. In fact the company has similar brand names for its soft drinks and brewery products. This triggered a lot of protests and demonstrations against the company. Newspapers were flooded with the articles against the company. There were also some demonstrations and some small incidents of stone pelting in a few of its hotels.

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Hey Akshaya! The case study you shared about Sweet Drinks Ltd touches on several key issues spanning business diversification, branding, legal concerns, and tax planning. Here’s a structured answer and analysis based on the scenario:

Sweet Drinks Ltd: Case Study Analysis

1. Business Overview & Diversification

Core Business: Manufacturing and selling soft drinks to 80,000 outlets across India; very successful with turnover exceeding ₹3 billion.
Diversification: Into alcoholic drinks (two breweries in western India) and hospitality (25 three/four-star hotels nationwide).
Strategy: Monopoly on soft drink sales in its own hotels, building brand recognition in the brewery sector.
Future Plans: Purchasing more hotels in NCR Delhi due to upcoming Commonwealth Games; constructing a 5-star hotel in Gurgaon to avail recent tax benefits.

2. Legal and Ethical Issues: Surrogate Advertising

Allegation: NGO filed Public Interest Litigation (PIL) accusing Sweet Drinks Ltd of surrogate advertising — promoting alcoholic beverages indirectly by using similar brand names for soft drinks and breweries.
Impact:
- Negative public perception, protests, and media backlash.
- Demonstrations and minor violent incidents in some hotels.
Legal Risk: Surrogate advertising for alcohol is prohibited under various laws (e.g., Cable TV Networks Rules, ASCI code).

3. Tax Planning & Implications

Hotel Construction Tax Benefits:
The company plans to build a 5-star hotel in Gurgaon to take advantage of tax incentives announced by the Finance Minister.
Turnover & Profitability: High turnover with good profits and shareholder dividends — reflecting strong financial health.
Diversification Risks: New ventures like breweries and hotels may affect tax structure, compliance requirements, and profitability.

4. Branding and Marketing Risks

Using similar brand names for soft drinks and alcoholic beverages risks confusion and regulatory scrutiny.
Surrogate advertising allegations hurt brand image and may lead to legal penalties and restrictions on marketing.

Key Issues to Address for Sweet Drinks Ltd

Compliance with Advertising Laws
- Cease surrogate advertising practices immediately.
- Separate brand identities for alcoholic and non-alcoholic products to avoid legal action.
- Engage with regulatory bodies to clarify and comply with advertising norms.
Public Relations Management
- Manage public perception through transparent communication.
- Address protests and incidents proactively to protect the company's reputation.
Strategic Expansion
- Continue hotel acquisitions cautiously, balancing growth with legal and social responsibilities.
- Evaluate risks related to political/social factors in key markets like NCR.
Tax Planning
- Ensure all benefits from tax incentives are fully utilized while maintaining compliance.
- Maintain proper accounting and reporting for diversified business segments.

Conclusion

Sweet Drinks Ltd is a thriving company with well-planned diversification and tax strategies. However, legal issues surrounding surrogate advertising have posed a significant risk. The company should prioritize compliance and public image restoration to safeguard its business and shareholder value while continuing its growth trajectory.