GCMMF Group 6

8/6/2019 GCMMF Group 6

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CASE : GCMMF LTDCASE : GCMMF LTD


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Problem StatementProblem Statement

Whether GCMMF should stick to its corebusiness in dairy products ?

(or)

To diversify into other products,particularly into processed foods


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Key differentiators ofKey differentiators ofGCMMFGCMMF

Business Model - Cooperative style ofmanagement

Run by farmers for the benefit of farmersand end consumers transparent andfair

Lean organizational structure > low cost Strong brand name for purity and quality

Trust created among the consumers Scale and scope of operations

Robust distribution network Cold chain network


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Product PortfolioProduct PortfolioCategory Market

share

Market

position

Growth Rate

(98-99)

Competition Profitability

Liquid milk N.A 1 10 % Local players,Nestle

Low (basic)

Butter 80-85% 1 13% HLL, Nestle High margin

Milk powder 60-80% 1 18% Nestle, Glaxo,

Heinz

Medium

Cheese 50-100% 1 39% HLL, Britannia High

Ice cream 30% 2 100% HLL, Regionalplayers (Vadilal)

High

Edible oils 12% N/A ITC, Localbrands

Low (basic)

Processed Food- - High growthrate

HLL, Nestle


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Analysis of Current portfolio andAnalysis of Current portfolio andBusiness Potential Milk productsBusiness Potential Milk products

Milk Production in India in 1998-99 : 86m ton

Procurement by organized sector : 40 mton

Milk procured by GCMMF : 4.6 m ton(12%)

Demand for milk (growth) : 8-10% per annumSupply (growth) : 6 % per annumSupply growth can be improved in long term (1000 kg perlactation per animal vs 2000 kg in Dairy countries)

Per capita consumption of milk in India is 225 grams perday (600 grams in other countries)

Sourcing and Processing Excellent Infrastructure

created by GCMMF which is its core competency

Potential available for further g


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Analysis of Current portfolio andAnalysis of Current portfolio andBusiness Potential ProcessedBusiness Potential Processed

foodfood

Processed food market in India : Rs 20 billion

Premium food consumption is likely to increase dueto high disposal income

Only 1.3% of total fruit & vegetable processed ascompared to 70 % in US > Good potential forprocessed food

Fruit and vegetable availability : spread across manystates

Food processing industry is highly fragmented Huge storage facilities, strong logistics / distribution

net work to be created

Competitors (HLL, Nestle) First mover advantages

Competition GCMMF did not have a level playingfield


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BCG MatrixBCG Matrix

rowth Rate

Market Share High

Low

High

Low

20 %

30 %


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Critical questions forCritical questions fordiversification success (Processeddiversification success (Processed

FoodFood))

What can GCMMF do compared tocompetitors? Needs to further investment, separate

processing set required

What strategic assets required? processing plants, existing cold storage

network?

Can we leapfrog competitors? No. Competitors are MNC with strong

resources; Already in the business (Firstmover advantage for them)


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Critical questions forCritical questions fordiversification success (Processeddiversification success (Processed

Food)Food)

Will diversification break up strategicassets?Yes, Milk products and processed food

requires different set of assets

Will be a player or winner in new market? Only a player

What GCMMF learn by diversification? Nothing specific to core business


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ConclusionConclusion

Create awareness among users for moreconsumption (health, advertisementcampaign)

Improve supply side bottlenecks Continue and focus in Milk and dairy

products

Exit processed food business


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THANK YOUTHANK YOU

Documents

GCMMF Group 6