Everybody remembered the 1994 launch. Amidst pirouetting belly dancers and firecrackers that lit the sky, was born the whisky brand Philly. The marketing team couldn't stop talking about the brand's many 'firsts'-the tamper-proof guala-cap, the unbreakable flexi-bottle, and the richly embossed label (a first for a whisky in the popular price band). It looked world class.

For the Indian arm of Universal Spirits (US), the company behind the brand, it was a strategically bold move. A domestic brand priced at Rs 140 for 750 ml, a mere Rs 20 premium over the country's largest selling brand Macduff, Philly was intended to fetch US handsome volumes in the regular whisky segment (18 million cases a year). And with an ad campaign crafted to lead the consumer up the self-destiny-defining curve, Deep Rajan, the then CEO of US' Indian unit, was sure it would be a winner.

So it was, selling an amazing 2 million cases in 2001-02. That was less than half what No. 1 Macduff did (over 5 million cases), and less than two other brands that were older, but it was still "one helluva lot", as Rajan saw it. More, in fact, by about 10 times, than the entire Indian Scotch market. The brand's contribution to the topline? A healthy Rs 150 crore.

But that was then. At the moment, Philly was up for sale. The company's UK headquarters wanted it sold. Its reasoning: as a global company, it no longer wished to sell a local brand, that too at the lower end of the market. That was not the only change at US. Rajan was no longer chief of the Indian arm. Yet, he was somehow still attached to the brand that had been his career's biggest success. Attached enough to float his own firm and make his own bid for it.

Now, here he was, at the office of Rockport Frapp, the investment banker appointed by US to valuate the brand, wondering what was taking so long. Executives from US, who were also present, were ready to do most of the talking.

"It's been awhile, hasn't it?" asked Rajan, "Any second thoughts?"

Pratyush Jain, Chief Investment Analyst, Rockport Frapp, looked distinctly uncomfortable. Vivek Seth, Vice President (Marketing), US, shot a glance at his CEO, Umar Singhal, and then replied: "It's not an easy valuation exercise, and since building a liquor brand in a restricted market is such a gruelling task, we have very few guideposts to go by."

"There's Wings," said Rajan, referring to the sale some years ago of another regular whisky brand, "which does about 3.5 million cases."

Singhal spoke next. "Rajan," he began, "we've seen that data, and you know better than us that we invested more in terms of both money and effort, in creating Philly. The brand also has higher long-term potential than Wings. Given the requisite inputs, Philly could even overtake Macduff for segment leadership. Had US not wanted to play only at the upper-end of the liquor market, it would be a terrific asset."

Asset, it certainly was. An asset that existed in people's heads. At US, occupying a well-defined portion of the consumer's mind was a non-negotiable. Its vodka, Dostoevsky, was selling transformatory transparency, while its well-recognised Scotch brand, Adam Hume, was selling forward mobility. Philly had also lodged itself neatly in its target's mindspace. "Philly is profitable," added Seth, "and that's because the consumer remains in sync with the brand proposition of 'success'."

This was getting awkward for Rajan, who didn't want to underplay the brand success, but he wanted the best bargain he could get. Paying a 'sentiment surplus' was not good business. Plus, there were other Indian marketers in the running for Philly too. Most of these companies had better production and distribution capabilities, and deeper pockets than Rajan's company. Yet, he saw himself as the rightful steward of the brand, the one best placed to help it evolve. Given his limited resources, much depended on the brand's perceived value amongst a handful of bidders-something that could be influenced by the auction's floor price.

Rajan was aware of the likelihood that rival bidders could be dissuaded. The industry grapevine had been whispering that Philly was actually a loss-making brand, since the payments to the 12 third-party manufacturers were just too high for such a low-realisation brand. The packaging was overly expensive too, and cost-cutting could take some of the sheen off the brand.

Singhal, however, was confident of attracting impressive bids from almost every liquor marketer in India. Kiddo India, a subsidiary of Kiddo International, had indicated that it was open to local acquisitions to augment its organic global brand-led growth. Others in the fray included Highlands, Bernard Wyss and Raspsons.

Jain, who was watching the meeting unfold quietly all this while, finally decided to address Rajan's key concerns. "It will take another week," he said, "since we're still studying the market's prospects. But, off the record, the floor price of Rs 100 crore mentioned in the press may be an under-estimate. That's what the discounted future cash-flow method indicates, by our preliminary calculations. And we don't want frivolous bids from non-players. Also, with clamps on brand communication getting tighter, the replacement cost of the brand is higher than before. Take that into account as well. It's not a normally competitive market, but if there's a boom later, the brand will be ready to capitalise on it. Current figures are not the only consideration."

"Precisely," interjected Singhal, "and at the end, I know that US will listen to business sense. If we find that the brand is significantly worth more than Rs 100 crore, then maybe disposing of it isn't such a good idea. The asset still has scope to appreciate, and maybe we can even have a cut-off of Rs 150 crore."

"I'm not sure about appreciation," responded Rajan, "given the advertising restrictions you spoke of. Also, don't forget the problem with Philly mineral water-it didn't do very much for the brand, as market research showed."

"Yes," smiled Seth, "but the brand's gene code remains with US, and it's a matter of finding creative expression. The brand's growth curve hasn't plateaued yet. By 2007, we could be No 1. Investors would pay anything for a market leader in such a difficult category."

"Really?" asked Rajan, a little hot around the collars by now. "Then why don't you fight headquarters to keep Philly? If the world's biggest brand can keep a local cola, then why not you? Ah, because it just won't get due attention, and won't reach No 1. This could happen with any acquirer- the bigger it is, the less attention it gets. It's in your interest to see that the buyer is able to extract the best value from the brand. Why price yourself out of the range of small bidders?"

It was Jain's turn to intervene. "The US does not want to narrow the field-but it does not want to sell Philly short either, as simple as that. It's a good brand, and deserves a high floor price as a signal of its worth. This isn't a distress sale, you know."

"But you don't have much room in your portfolio to keep it," said Rajan, "So if nobody matches your minimum bid, you'll have a lot of explaining to do to your global headquarters. I won't recommend taking that risk."

Should US' Indian arm go for a high or low floor price for Philly's auction?

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