prabhat dairy - mbacasecomp.comtaking a closer look at the indian dairy market. politically...
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Recommendation: Build Prabhat into a stronger household brand with Tier 1 markets
Increase sales of value-add products
Hire in-house marketing team
Collaborate with local farmers to reduce operational costs
Recommendation: Build Prabhat into a stronger household brand with Tier 1 markets
Increase sales of value-add products
Hire in-house marketing team
Collaborate with local farmers to reduce operational costs
Recommendation: Build Prabhat into a stronger household brand with Tier 1 markets
Increase sales of value-add products
Hire in-house marketing team
Collaborate with local farmers to reduce operational costs
A snapshot of Prabhat Dairy
Past• Found footing and
capitalized off the B2B market
• Privately founded• Core competencies in
operations and production
Present• Moving into B2C requires
more brand awareness• Award for “Asia’s Fastest
Growing Marketing Brands”• Fragmented relationships
with dairy farmers
Future• Goal of 50:50 business• Growing dairy consuming
population• Household name with
B2C
Taking a closer look at the Indian dairy market
Politically sensitiveCow slaughter results in seven year prison sentence
India is the 7th largest economy in the world with $180B GDP
Dairy cooperatives have lots of control and powerRapidly growing population resulting in difference in social norms
Payment collection systems are not advanced resulting in increased bad debtAdvancements in breeding technology leading to increased output for farmers
Legally mandated floor prices results in farmers receiving 77% of retail price
P
E
S
T
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Where is the Indian population going?
1.254B people in India17.5% of world population
28% of population in cities nowRapidly growing middle class
40% of population in cities by 2030Especially Tier 2 & Tier 3
The dairy production industry in India in growing
Demand growth of
10%
Supply growth of
7%
3.9B litre opportunity
Dairy production in India is currently 131B litres annually
The Indian dairy market is currently very segmented, with little brand loyalty
The population consumes1/3 L of dairy per day, growing at 16% year over year
Buyers are price-sensitive
due to low incomes
Value-added products are
growing at 20-30% year over
year
There are some key competitors, with Prabhat being one of the more affordable brands
Prabhat Cooperatives (e.g. Amul)
MNCs (e.g. Nestle)
Coverage • Tier 2 + 3• Presence in 10 of 36
states & territories
• All Tiers• Dominant market
share & coverage
• Primarily Tier 1
Products • Liquid milk• Cheese• Paneer
• Liquid milk• Value-add
• Primarily value-add
Price of Milk
65 Rs 70 Rs 75 Rs
Retailing is also very sequestered and difficult to control
Unorganized retail management presents a large growth opportunity as the population ages and technologically advances
$534B (2014) growing to $948B by
2019
Food & Beverage fasting growing retail
category (60% of total retail)
Urban areas are more organized than rural, easier to work
with and deliver refrigerated
products
To expand, we have 3 options:
• Target Tier 2 & 3 customers
1
• Focus on Tier 1 and follow with Tier 2 and 3 later
2
• Focus solely on B2B businesses
3
Recommendation: Build Prabhat into a stronger household brand with Tier 1 markets
Increase sales of value-add products
Hire in-house marketing team
Collaborate with local farmers to reduce operational costs
Recommendation: Build Prabhat into a stronger household brand with Tier 1 markets
Increase sales of value-add products
Hire in-house marketing team
Collaborate with local farmers to reduce operational costs
We recommend focusing on Tier 1 as it allows us to build a stronger brand
• Tier 1 is larger and growing rapidly
• Tier 1 has a higher disposable income
• Tier 1 is more consolidated with more established and efficient distribution channels
Upselling customers is cost-effective and helps improve profit margins
Value-added dairy products have a higher profit margin• 30% for value add vs. 6-7%
for milk
Market for value-added products is growing faster than milk• 20-30% growth YoY
Tier 1 market’s demand for value-added products is increasing
They have higher disposable incomes relative Tier 2 & 3
Westerners are more likely to live in Tier 1 cities, and have a higher influence
Tactics for upselling:
Couponing and bundling
Closer positioning in retail stores
Point-of-sale discounts
Recommendation: Build Prabhat into a stronger household brand with Tier 1 markets
Increase sales of value-add products
Hire in-house marketing team
Collaborate with local farmers to reduce operational costs
Becoming a household brand has proven to be effective
Builds brand loyalty Establishes a routine
Examples include: Kleenex, Tide, and Cheerios
Hiring an in-house marketing team will establish Prabhat as a household name
Creates one consistent brand image
Streamlines marketing efforts
Creates brand loyalty in a price-sensitive market
Becoming a household brand has proven to be effective
Builds brand loyalty Establishes a routine
Examples include: Kleenex, Tide, and Cheerios
Suggested marketing team structure
1 Senior and 1 Junior Manager
Responsible for branding strategy, execution, and development of creative
pieces
Reports to CEO
Recommendation: Build Prabhat into a stronger household brand with Tier 1 markets
Increase sales of value-add products
Hire in-house marketing team
Collaborate with local farmers to reduce operational costs
We should collaborate with small local farmers
Small farmers account for 80% of production with more cows being less productive than other nations
India: 1.3 tonne yield per cow annually
Compared with…
USA: 9.1 tonne yield per cow annuallyEU 6.2 tonne yield per cow annually
How will farmer collaboration benefit us?
Small farmers are unable to achieve
economies of scale
We have the capabilities and
knowledge to help them increase output to meet growing demand
The potential increase is ~ 500% (EU) - 900% (US)
Smaller farmers with bigger production
2. Help grow and
automate production
3. Improve productivity
(higher output,
lower cost)
4. Reduce procurement
costs
5. Provide farmers with
a better alternative than coops
1. Establish a more
collaborative relationship with farmers
What is the required growth in sales to meet 50:50?
Now
• Sales in 2016: 11.7B• Growth of 13.6B
Assuming
• B2B remains constant• B2C current sales: 3.51B
Goal
• Increase of 3.29B to meet 50:50 goal• By end of 2018
What do we need to make this happen?
Current Average customer
97L of dairy/year
CAGR 10%70L of milk
77L x 60 rupees
20% CAGR30L of value added
36L x 80 rupees
7500 rupees
KPIs: What does success look like?
Increase average basket size by 15%
Increase repeat purchases by 25%
Increase productivity yield by 100%
Financial Analysis
2.1-2.5% profit margin
17% sales growth rate
1.16B rupees in cash
*Numbers are in 10 million rupees
Budgeting based on implantation plan
500M rupees
400M rupees for feasibility and building
of milking facilities
100M rupees for marketing efforts
Higher ROI because we are selling higher margin goods
Break even before the end of the year
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