Strategic Management of Engro Foods
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PRESENT BY.
MASROOR
Industry Overview
The food and its allied products industry is considered Pakistan’s largest industry
Pakistan’s food industry produces cooking oils, sugar, flour, dairy products such as milk, butter, yogurt, cheese and ice-cream, biscuits, breads and confectionery, fruit juices and fruit juice drinks, carbonated beverages, snack foods based on rice, potatoes, corn and pulses, processed chicken, jams, jellies, squashes, sauces, pickles, and some canned fruits
Pakistan is the 4rth largest milk producing country in the world
An estimated 33.25 billion liters of annual milk is produced
Approximately 50 million animals managed by 08 million farming households.
The milk economy represents 27.7% of the total value of the Agriculture sector.
Market Trends
The growth of processed milk is increasing by 20% annually.
People are getting more quality and health conscious with the
passage of time.
Due to impurities of loose milk, people are attracting towards
processed milk.
Dairy Industrial SWOT AnalysisSTRENGTH• Good breed of buffalos and cows• 4rth Largest Industry Dairy Industry in Pak. • Pak Dairy Industry is Cheaper than Austria,
America and other developed countries. • Farmers are engaged in agriculture and dairy
at the same time.
WEAKNESS • Small and scattered animal holding• Prevalence of traditional raw milk marketing
system• Milk processing predominantly dependant on
obsolete UHT technology• Inadequate infrastructure and institutional
facilities and support• Poor quality of animal health care and
breeding services; lack of professional management
OPPORTUNITIES • Huge unsatisfied demand of milk and milk
products• Increase consumer awareness of healthy
eating• There is an opportunity for companies to
introduce value-added products like ice creams, flavored milk, dairy sweets, etc
• There is a phenomenal scope for innovations in product development, packaging and presentation
THREATS • Unregulated imports of dairy products at
cheap prices• Very low quality milk is provided by the
milkmen to dairy farms which is a very big threat for the entire market.
• The shortage of milk providing animals is also a threat for entire milk industry.
Diversified Portfolio of Engro Pakistan
Engro Corporation Limited (formerly known as .Engro Chemical Pakistan Limited.) is one of the largest industrial corporations in Pakistan. It has following subsidiaries business units
Engro Fertilizer
Engro Foods
Engro Power Generation
Engro Polymer & Chemical
Engro EXIMP
Engro Vopak Terminal
Elengy Terminal Pakistan
Why did Engro enter the food business?“Big opportunity due to population growth and
indigenous sourcing. There is a huge population. One
seventy million is a very big market. There are only a few countries with such a
huge population in the world. Besides, our people spend a lot on food. Our
economy is agro-based. We get raw material at the
local level.”
Engro Foods (Pvt.) Limited (EFL)
Engro Foods Limited was formed as a wholly owned
subsidiary of Engro Corporation in 2005.
It start its operation in 2006 and engaged in the
manufacturing, processing and marketing of dairy products,
ice cream and fruit juices.
The Plant Located at Sukkur on 23 Acre Land
The Plant has been established at a Cost of Rs. 1 Billion
which provide direct employment to 1400 people.
Quick Facts & Figures 1,243 Employees 45% Market Share of Dairy Products Market in
300+ Cities in Pakistan 18+ states in USA 4 Provinces in Canada
18th Largest Customer of Tetra Pak World Wide 2nd Largest Company of Chilled Milk Collection of Pakistan 2000+ Milk Collection Centers 35,000 farmers directly linked with EFL 2 Milk Processing Plants Milk Production Capacity is 700 Thousand Liters per Day. Total Assets Rs. 24,046 Millions
Departments in Engro Foods
Administration
Finance and Accounts
Human Resource
Marketing
Procurement
Management Information System
Production
Quality Assurance
Supply and Distribution
Products Portfolio
Vision Statement
Engro Foods will continue to make investments
aimed at impacting lives and delighting consumers
each day, every day, in a multitude of ways.
Mission Statement
“Build Branded food business
to improve quality of life by
offering tasty, affordable and
highly nutritional products to
our consumers while
maximizing stake holders'
value”
Objective
Engro foods main objectives
are to supply everyone their
favorite Dairy Products and
to satisfy the consumer
needs and wants. Engro foods
second main objectives are to
provide profit to the
shareholders and increase
the market share
EFL-SWOT ANALYSIS
Strengths Weaknesses Opportunities Threats
SWOT ANALYSIS
STRENGTHS
Relation with Farmers• Strong bond
Customer Response• Positive
response, crossing over 1.4 billion sales
Quality• World class
quality
Technology• Third
generation plant,
• Bactofuge tehnology
SWOT ANALYSIS
WEAKNESSES
Milk Supply •Outside farmers
Packaging •Dependent upon Tetra Pak
Distribution •Hindrance of place
SWOT ANALYSIS
OPPORTUNITIES
Govt. Funding
•Funding to farmers
Consumption
•Increased consumption of Processed Liquid Milk
Awareness
•Dissatisfaction with loose milk
Increased Population
•Increase in consumption of process milk
SWOT ANALYSIS
THREATS
Severe
Competition
High Prices
Threa
t
Dairy Market Share
MARKET SHARE
Nestle35%
Engro27%
Uniliver21%
Haleeb17%
Sales
CORE COMPETENCIES
Good brand name
Doing business without interest
Latest technology and has a high production capacity.
80,000 liters
Distribution networks (600 distributors across Pakistan )
KEY SUCCESS FACTORS Research & Development
Financial Position
Market Share
Product Quality
Price Competitiveness
Management
Global Expansion
Customer service
Network Sales And Distribution
Production Capacity
PESTEL Analysis
o EFL make strategies according to the laws and legislations.
o EFL abides to laws set by the government for trade policies,
government policies and completes its responsibilities in a
better manner.
P - POLITICAL FACTOR
PESTEL Analysis
EFL is strongly affected by both the Economic and the
Demographic.
E - ECONOMICAL FACTOR
PESTEL Analysis
EFL has helped to bring about a change in life style of the
Pakistani People by introducing Bactofuge technology
People awareness program for Olpers and Tarang
Bactofuge treated milk, which helps to improve the sale.
Usage of open Gawala milk & standardized packed milk.
S - SOCIAL FACTORS
PESTEL Analysis
Use of new technology gives firm there competitive
advantage.
EFL adopted Bactofuge Technology (Whereas Haleeb use
UHT Technology)
T – TECHNOLOGICAL FACTORS
PESTEL Analysis
• Environmental changes can cause failure of strategic plans
• EFL is using environment friendly Technology
• EFL has a friendly environmental culture within the
organization to make their employees comfortable and to
deal with the external problems
E - ENVIRONMENTAL FACTOR
PESTEL Analysis
o Check government policy about milk industry
o EFL strictly follows laws like, Minimum wage, working time,
minimum working age, & Environmental regulations
L – LEGAL FACTOR
PESTLE Analysis
EFL renowned company since 2006, and the reason for its
important ethical value.
They don’t sale on credit or on interest because they
consider it unethical and not according to the law of our
religion
E - ETHICAL FACTOR
Marketing Mix
Eye catching distinctive packaging of Olper’s Milk (Red
Color)
Olwell will be positioned in a way that it will target people who
are goal-oriented and focus on their careers
POSITIONING
Marketing Mix
A massive advertisement campaign with Olper's logo on
every bill board, ads and newspapers
Free Tea using Olper’s Milk will provided to the potential
buyers at major departmental stores for testing purposes
PRODUCT STRATEGY
Marketing Mix
Adopting competitive pricing strategy
Prices of the competitors are studied
Milk pack is around 70 Rs, we will introduce our milk with a
price slightly lower than this.
PRICING STRATEGY
Marketing Mix
Olper's milk launched in many major cities Distribution into five major regions Lahore, Karachi, Multan,
Islamabad and Peshawar Efficient transport facilities as well as warehouses and
storages in different cities Trained & Experienced personals will be hired & 5% fixed
commission rate Sales target set twice a month after discussion the market
situation with distributor Incentives, bonuses, increments, and training will be provided
to the distributors and staff for further improvement in the distribution field
DISTRIBUTION STRATEGY
COMPETITIVE ANALYSIS As a new entrant EFL focused more on advertising to
compete with old one’s like Haleeb, Nestle
Nestle maintained its value of gross profit margin around or
above 30% to ensure that it has a strong control over its
costs, and the efficiency of production. But on the other
hand, Haleeb faced a bit of down fall when Olper’s
introduced their campaign
Product Life Cycle OmoreOMORE is at the introductory phase at the life cycle phase as it was launched in 2009.
At the introduction stage, you should focus on the following marketing factors: pricing distribution promotion
omung lassi’s 2013 campaign
omung lassi’s 2013 campaign
An extension from its 2012 campaign, Omung
Lassi's 2013 campaign was geared towards
emphasizing love as a way to target young
audiences. In 2013, Omung Lassi launched its
Pyar Ko Vote Do campaign targeted to its young
market — the energetic, and lively which are
dispersed in the country's colleges and
universities.
tarang IIFA 2013
Tarang IIFA 2013Tarang’s promise for bringing something
dhamakedaar every time for consumers led to its first
cross-border consumer promotion initiative in the
STC category ever - Tarang IIFA 2013. This campaign
was not only a new way to garner consumer interest,
but also excited Tarang lovers. With their daily
purchase of Tarang, consumers were offered the
opportunity to attend IIFA Awards 2013. The selection
took place over a lucky draw
Omore's monkey peel
the launch of mabrook
the launch of mabrook
For the first time, Engro Foods has taken the front-end
retailer model to market Mabrook. Mabrook is available
at dedicated Mabrook Milk Shops - retail outlets - that
are spread across Karachi, offering milk from dispenser
and pre-packed pouches.
Financial Evaluation
of EFL
Business Revenue (Rs. in billions)
Ratio Analysis
Ratio Analysis
Comments on Some Financial Indicators
o Gross Profit RatioDecline in 2013 compared to last year was due to high inflation in input and utilities cost.
o Net Profit to Sales / EBITDA Margin to SalesExternalities like aggravating power crises, law and order situation together with distribution issues & one-time charges led to the deterioration of these ratios in 2013
o Return on EquityFrom 2010 to 2012 these returns witnessed improvement on account of business performance and growth. Decline in 2013 is mainly due to one-time charges coupled with other issues discussed above
o Return on Capital EmployedThis is in line with the profitability; the year 2013 was a test of Company’s resilience to face turbulent times after a smooth ride for few years back to back.
o Current Ratio / Acid Test RatioAs a best practice, the Company intends to keep its current ratio higher than one. In 2013 this ratio was impacted due to the utilization of short term investments to finance capital commitments.
Comments on Some Financial Indicators
o Cash to Current LiabilitiesThe Company has maintained a consistent ratio throughout
o Cash Flow from Operations to SalesDue to burn up of cash in earlier years, the ratio was negative. However, with the increased cash generation, the ratio has improved in recent years.
Future Strategy
In January 2014, the company has also taken price increase in one of its brands to arrest the declining margins. The Company is also working on various efficiency projects including the Heavy Fuel Oil based power plant which will result in lower energy costs. Moreover, the new powder plant at Sahiwal which will be operational shortly is expected to contribute towards stabilizing the Company’s margins.
The management will continue to focus on key growth parameters of innovation, brand differentiation and continuous business expansion including expansion in new products, e.g., pilot project for “Mabrook” (the fresh dairy segment).
WHY WE BELIEVE
ENGRO FOODS IS A SUCCESS
STORY
Success Points
Growth in a short span of time:
The company laid its foundation few
years ago in 2004 and within such short
span of time Engro foods has shown
stupendous and extraordinary growth
compared to other dairy product
manufacturing companies.
Success Points
Dominating the market giants:
One of the key features that highlight
Engro foods as a success story is the
way company wiped out some of the
leading marketing giants such as
Haleeb off the charts and even giving
hard time to Nestle, Unliver etc. .
Success Points
Quality Product and Customer Trust:
A company is nothing without its customers
and from the very beginning Engro foods has
given notable significance to its customers by
providing them with quality products of
international standards at economical prices.
Recommendations/ Suggestions Engro Foods should have much diversified bi-product line of
dairy products like Nestle & Haleeb
They should introduce new promotions to get customers’
attention
EFL should expand its dairy farms so that they can get
competitive advantage
EFL should focus on Market Penetration, Market
Development and Product Development strategies with
more efforts to be the market leader
Recommendations/ Suggestions They should go expand its capacity to enter into in
international market like Nestle.
Engro Foods can be into Co-branding with other brands like
Olper’s with Lipton tea bags, Olper’s with different biscuits
etc. to increase their sales
They can also move towards other foods products like
Nestle launch Kit Kat Chocolate, Meggi Noodles, Sweets
Candies etc.
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