MHN520E MM Term Project

7/31/2019 MHN520E MM Term Project

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MARKETINGMANAGEMENT

TERM PROJECT

ebnem BURNAZ, PhD.

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507111238 Bar BULUT507111244 Hande KILI507111246 Hayati KvanKUMBUTOLU507111256 Ulvi GVEN


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Haziran, 2012

The company: (Organization type & chart)

This company, Milk-ENG was established by young engineers newlygraduated fromEngineering Management Master of Science program.

The historical background of this company dates back to 1980s. Therewas a farm in Balkesir with 10.000 cattles which was started in 1980 bythe grandfather of these young engineers. In those years, this farm iscapable to produce 5 million liters milk in a year. For this reason thisfarm was become the one of the biggest supplier of the milk packagingplants and as years passed the picture has not changed and this farmcontinued to be the biggest supplier of the milk packaging plants.

However after the death of grandfather, this farm is inherited to theseyoung engineers. These young engineers got really interested in thisfarm because the major employer has been the agriculture in turkey andthe agriculture is a great contributor to GDP over the past years (Budak,B. D., Turkey Agripolicy,2009). According to the researches in 2009,the 1/3 of the agricultural activities relate to livestock farming, involvingabout 2.1 million enterprises and farms. Turkey is among the 15 largestmilk producers in the world with 12 billion liters milk production volume.Dairy sector is vital in Turkey since the sector is the provider oftraditional consumption goods. (Budak, B. D., Turkey Agripolicy,2009)

All these researchs shows that it will be beneficial to make theinvestment in the this market.Additionally, the milk industry has been growing as seen in the Figure1below in 2010. This graph shows the production volume of milk versusyears.

Figure1: Milk production (ton) vs. years

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Not only milk production but also individual milk consumption is in anincreasing trend; as seen in Figure 2.

Figure2: Milk consumption by individuals (kg/year)

However, there are many businesses involved in milk processing such as; pasteurised milk,

milk powder, sterilised milk, raw milk, flavoured milk, several cheese thypes (white,

kashaar,tulum, cream, edible, gruyere), yoghurt, ice cream, butter.. etc so it is hard to make

a decision in which business to invest with such a 10.000 castle capacity.

The market researches shows that the packed milk consumption volume versusyears has been gaining an acceleration; seen in Graph 2.

Figure3: Packed Milk Consumption (Source: TP, Canadean, AC Nielsen)

The industry has a growing trend. And as seen in the Figure2, the increase inpacked milk consumption give the investors, young engineers an inspriration to invest onvertical forward penetration and produce packed milk.

Not only business but also milk has different types serving for differenttarget consumer groups. There was a huge list of milk types. To decidewhich to choose is depend on their profitability and its being a growingmarket, gaining market shares.

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The main groups are listed as follows:(http://www.vegansociety.com/resources/animals/dairy-production.aspx)

.

1. Whole milk:

Whole standardised milkis standardised to a minimum fat contentof 3.5%.

Whole homogenised milkis identical in fat and nutrient content towhole standardised milk however it has undergone a specificprocess known as homogenisation which breaks up the fatglobules in the milk.

Natural whole milkis milk with nothing added or removed.

2. Semi skimmed milk:The fat content of semi skimmed milk is 1.7%,

compared to a minimum of 3.5% in whole standardised milk and 0.1%in skimmed milk.

3. Skimmed milk: Skimmed milk has a fat content of between 0-0.5%and an average fat content of 0.1%. Skimmed milk therefore hasnearly all the fat removed.

4. Organic milk: Organic milk comes from cows that have been grazedon pasture with no chemical fertilisers, pesticides or agrochemicalsusage.

5. Flavoured milk: The flavoured milk market is one of the fastestgrowing dairy sectors. There are a wide variety of flavours and

consistencies to cater for all ages and tastes with a choice of long-life(i.e. Ultra Heat Treated or sterilised) or fresh flavoured milk. Mostlyreduced fat milk varieties are used at a 1% level of fat content. Themost popular flavours are banana, strawberry and chocolate, howevermore sophisticated flavours such as peach, mocha or products madewith real Belgian and Swiss chocolate have been developed for themore adult market. In comparison with plain milks, flavoured milkstend to have slightly higher sugar content, however studies havesuggested that they are still a favourable option for children andteenagers as they provide a wide range of beneficial nutrients.Researchs show that children consuming flavoured milk are not

actually likely to have higher sugar or energy intakes as childrenconsuming flavoured milk would likely, consume fewer less healthysweetened drinks. Flavoured milk is also less likely to cause damageto teeth than sugary foods and drinks. Interestingly recent studieshave suggested that chocolate flavoured milk can be used as aneffective recovery aid after intense bouts of exercise.

6. Heat treated milks: Approximately 99% of milk sold in the UK isheat-treated, to kill harmful bacteria and to improve its shelf life.

7. Pasteurisation: Pasteurisation is the most popular method of heattreatment. It is a relatively mild form of treatment, which kills harmfulbacteria without significantly affecting the nutritional value or taste ofthe milk.

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http://www.vegansociety.com/resources/animals/dairy-production.aspxhttp://www.vegansociety.com/resources/animals/dairy-production.aspx


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8. Sterilised milk: Sterilised milk is available in whole, semi skimmedand skimmed varieties. It goes through a more severe form of heattreatment, which destroys nearly all the bacteria in it. Firstly the milkis pre-heated to around 50oC, then homogenised (see below for a briefoutline of homogenisation), after which it is poured into glass bottles

which are closed with an airtight seal.9. UHT milk: UHT or ultra heat treated milk is a form of milk that has

been heated to a temperature of at least 135C in order to kill off anyharmful micro-organisms (e.g. harmful bacteria) which may bepresent in the milk. The milk is then packaged into sterile containers.

10. Evaporated milk: Evaporated milk is concentrated twice whencompared to standard milk, sterilised milk product. The process ofproducing evaporated milk involves standardising, heat treating andevaporating the milk under reduced pressure, at temperaturesbetween 60C and 65C. The evaporated milk is then homogenised toprevent it separating under storage and then it is cooled.

11. Condensed milk: Condensed milk is concentrated in the same wayas evaporated milk, but with the addition of sugar. This product is notsterlised but is preserved by the high concentration of sugar. It can bemade from whole milk, semi skimmed or skimmed milk.

12. Raw (Untreated) milk: All milk sold via the supermarkets andmilkmen has to be heat-treated (pasteurised) to kill harmful bacteria.However, raw milk can be bought direct form a limited number offarm distributors in England and Wales. The farmer must hold alicence from DEFRA, the Department for Environment, Food and Ruralaffairs (formerly known as MAFF) to be able to sell this milk.

13. Filtered milks: Filtered milk goes through an extra, fine filtrationsystem, which prevents souring bacteria from passing through,fortunately, the nutritional content is not affected and advantageouslythe shelf life is increased.

14. Dried milk powder: Milk powder is produced by evaporating thewater from the milk using heat. The milk is homogenised, heat treatedand pre-concentrated before drying.

15. Homogenisation: Homogenisation of milk involves forcing the milkat high pressure through small holes. This breaks up the fat globulesin order to spread them evenly throughout the milk and preventseparation of a cream layer and increases the whiteness of milk

because the greater numbers of fat globules scatter the light moreeffectively.

Researchs shows that Flavoured milk has even better growth Flavoredmilk has had an 30% increase in the last years and it is assumed that in2012, it will have 21% increase again. Flavoured milk segment smaller(36 mio liters) is also growing double digit by 15% however consideringthe size of the kids segment in Turkey (6 mio of 7-12 years of age kids),there is still high potential for more growth.

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Figure 3: Flavored milk consumption Millt) vs. Years Source: Compass2010

LandCost(TL / m)

MilkProductionVolume(lt)

QualifiedOperatorsFound

AverageDistancefor Delivery(km)

Total

10% 30% 20% 40% 100%stanbul 0.011004 0.2424 0.2263 0.2538 0.2206

Ankara 0.165056 0.1768 0.2075 0.2283 0.2024zmir 0.064308 0.2141 0.3379 0.1626 0.2033Eskiehir 0.450153

0.1768 0.1606 0.2279 0.2213

Balkesir 0.30948 0.1899 0.0678 0.1274 0.1524Toplam 0.20 9,479,792 95.9 0.0114 1.0000

Table 1: Plant Location Selection

The plant is aimed to serve for all Turkey. The regions where most of the cattle ispurebred are Marmara, Aegean and central-southern regions. While thesethree regions contain about 30 percent of the total Turkish cattlepopulation, about 63 percent of this cattle population are purebred animals(FAO,Overview of the Turkish Dairy Sector within the frame work of EU-Accession, 2007. ) Moreover, the lowest percentage of purebred animals can

be found in northeastern Anatolia (5.3 percent) and in southeastern Anatolia(6.71 percent). The percentage of native breeds in these two regionsamounts to 65 percent. The two regions percentage in the national cattleherd is 27 percent.The main problem of dairy industry in Turkey is supply shortage and low quality of raw milk.

Small and low efficiency farms can be the reason for this problem(Budak, B. D., Turkey

Agripolicy,2009). Additionally, the low number of cattle per farm is a result ofthe poor quality of the farmland and the resulting low intensity of landcultivation (FAO,Overview of the Turkish Dairy Sector within the framework of EU-Accession, 2007). Here this need in the market stands as an advantage tomake the investment.

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For all these reasons and as seen in the Table 1 above; Eskisehir carried comparatively

advantages in milk production volume, its geographic position for transportation and delivery,

finding experienced operators and first investment amount ratios.

We will invest Tetra Pak processing and filling equipments as the aseptic

packaging technology is Tetra Pak's key innovation.What is aseptic, what are the advantages?In aseptic processing the product and the package are sterilizedseparately and then combined and sealed in a sterile atmosphere. Whenfilled with ultra-heat treated (UHT) foodstuffs (liquids like milk and juiceor processed food like vegetables and preserved fruits), the asepticpackages can be preserved without chilling for up to one year, with theresult that distribution and storage costs, as well as the environmentalimpact, is greatly reduced and product shelf life expanded.

Figure 1: Processing and Filling Machines

STRENGTHS WEAKNESSES

Owningafarm

C

ashFlow

&budget

Low

experiencein

Limitedqualified

Limitedcorporate

Lackofknowhow

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m

ilkpacking

industry

manp

ower

culture

OPPOR

TUNITIES

Market isgrowing

Gowernmentalsupports formilk

production

Flavoured milkgrowth

I

THREADS

Experiencedand well knownbrands in themarket

Consumerbehaviour

(loyalty)

Customer biasamongflavoured milk

Competitors:

In carton UHT flavoured milk industry, the best selling brand is Dostaccording the the market share results in 2012 year to date but it is aprivate label produced in different third party plants for BIM so it can notbe counted as a company product.

In flavoured milk industry, Nestle Nesquik is the market leader with 16%market share and 128 price index when 100 is given to the wholemarket.

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Nestle Nesquik is the founder of flavoured milk segment, and now tryingto defend the market share against strong challenger attacks. Theyhave a Quickie character (The Nesquik rabbit) which has a strong brandheritage. They use TV advertisements and added games in their webpage resulting with becoming the most popular page among its

competitors. They also added scratch and win feature to its packages,which could not be managed before, with help of a long cooperativeworking. By the help of this new feature, they could improveadvertisements like summer camp with sending an SMS of the numberon the packages. Tetra Paks innovative unique sensory straw whichprovides a totally new drinking experience with four perforated holes inthe drinking end of the straw squirting the product to taste-sensitiveareas in the mouth is unique for Nesquik.

Danone Disney is the first challenger with 13% market share and 113price index. Danone places itself in a little bit lower price than the marketleader. It aims front attack to the market leader. Danone multipacks theproducts which helps them to sell 6 packs at a time. This innovation canbe counted as distribution innovation. And Danone signed a licensingagreement with Walt Disney. It uses Disney characters in their productswhich made them prestige good in childrens eyes and increased theirsales incrementally.

Pinar Kido with 13% market share and 121 price indes, is the secondchallenger. Pinar Kido differentiated itself by help of product innovationand aims a flank attack for stable market leader product. Pinar uses

brand new flavour mix like wafer flavoured milk. And they launched anintensive advertisement promotion Kido yildizini ariyor, a 3Dadvertisement which had great attraction, increased product awarenessand resulted with sales improvements.

Other challengers and followers are listed as follows:Challengers:Sutas (10%, price index 111), Sek (10%, price index 104)Followers : Ulker icim (6%, price index 111), Aynes Kanki (3%, priceindex 90), Kay Zazu (3%, price index 69), Yorsan (3%, price index 103)

Strategy:

Specific points that need to be addressed in connection with the elaborationof a dairy sectorstrategy are: Milk collection the dispersed location of production units in much ofthecountry is the reason for a very costly and inefficient collection system ofmilk. Amore rational system of milk collection could be achieved through thedevelopment of cooperative unions that follow the pattern of cooperation oftherecent union formation of the industrialized dairy units in western Turkey. In

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addition to milk collection, these unions could also provide advisory servicestomilk producers, which at present is under-funded and not particularlyfocussed; Quality of raw milk this is considered one of the most important

problems ofthe sector. A system of payment for milk deliveries based on qualityconsiderations needs to be established. This however, depends very muchon therationalisation of the milk collection, which would allow a system of qualitycontrol conducive to the reduction of costs to the processors; Current high price of raw milk two issues emanate from this. On onehand thissituation feeds into the street milk sector, where uncontrolled,unpasteurised andlow quality milk is delivered to consumers at a low cost; on the other handtheprocessors are not able to produce dairy products at a cost that isaffordable to thecommon consumer and be compatible in the European context. Theresolution ofthis issue is closely related to a solution to the previous point on milkquality: The current production and distribution systems keeps a large number ofpersons employed and the necessary modernisation of the sector will haveto

take into consideration the employment aspect of this process; Reorganising the dairy sector will have to consider the production ofsheep/goat/buffalo milk with a view to building up a niche market for theseproducts - that certainly would have a market in Turkey and potentially inEurope; and Efforts to adjust to EU conditions should be supported through maximisingcontacts with dairy sectors in the EU. Of particular relevance would appeartobe contacts with Poland and Portugal, two countries that had to recently go

through similar adjustment processes.

sTrategy iin

Consumption habits and ratiosConsumption habits for the use of dairy products have a long tradition inTurkey and it is unlikely that they will change drastically in the short term.Similar to developments in Europesome decades ago, liquid milk, pudding and dessert processing willprogressively industrialiseand new products such as fruit yoghurt, cream cheese in modifiedpackaging will develop.However, the central items of Turkish consumption will remain yoghurt andbasic white

cheese.

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Pricing:

Real cost of milk:There is a significant difference in Turkey between themilk price paid to

the farmer and the raw milk cost really incurred by the dairy industry. Thishas three mainreasons: (a) milk composition (bacteria and fat content), (b) milk collectioncost and (c) thepoor milk quality. Turkish dairy industrialists estimate that poor quality milkmakes them

incur additional costs of between 10-15 percent of the milk price

Marketing

Dairy product marketingSupermarkets and Hypermarkets:Turkish dairy producers areexperiencing the sameconditions that producers met in Europe, namely they are underconsiderable pressure by thesupermarket chains to reduce their selling prices. It needs to be recognisedthat milk productsin Turkey are expensive, too expensive when one considers the purchasingpower of largesection of the consumer groups. Numerous dairy products are cheaper inFrench supermarkets

than in Turkish supermarket chains. The high price of these products is thereason that aconsiderable amount of milk and milk products are marketed by theinformal sector.Prices for industrial dairy products: Most of the large dairies admit thatcollection costsrepresent between 15-20 percent of the milk price. In addition, another 10-15 percent has tobe allowed for milk composition and poor milk quality. Most of this milkwould be rejectedby the EU dairies for quality reasons, hence additional costs for the dairy

producers need to beadded to the basic milk price, bringing amount to about 30 percent.Prices for mandra dairy products:The low prices for mandra productsare based on lowerproduction cost and reduced marketing expenses. In a transparentcompetitive situation theseproducts would not be not find the market position that they are holding atpresent.Import and export prices: For the time being, Turkeys imports of dairyproducts are ratherlimited. In the future this will largely depend on the ability of Turkishprocessors to adapt

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their production and processing structures to be competitive vis--vis EUproduced products.At the same time, Turkey is not a large exporter as its products are notcompetitive in terms ofprice and quality in the international markets. This situation is unlikely to

change in the nearfuture. Some niche markets could be developed for cheese made frombuffalo or sheep milk,but instead of providing support to this segment, it has been neglected.Domestic market:Turkey has a population of 72 million and the annualincrease is about onemillion. Domestic annual milk consumption appears to be stagnant at 130litres per capita.There is a considerable development potential for the domestic market.Turkey should notoverestimate its export potential or its import needs, but should focus ondomestic market

potential for dairy products.

Definition of target marketting:

Through market segmentation, companies divide large, heterogeneousmarkets into smaller segments that can be reached more efficiently andeffectively with products and services that match their unique needs.

For our company, we will follow up the mass segmentation; we will applythe logic that same products for all consumers.Flavored milk segment although smaller (36mio liters) is also growingdouble digit by 15% however considering the size of the kids segment inTurkey (6mio of 7-12 yrs of age kids), there is still high potential for moregrowth.Products to suit the tastes of individuals and locations (completesegmentation) which named as micromarketing will be our aim.According to bases for segmenting consumer markets, we will use mostlydemographic segmentation based on age, gender and family size.Effective segmentation occur with measurable size and purchasing

power, large or profitable to serve as substantial, has accessibility,respond to differentiability, able to attract for action.

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As we can figure out form the above analysis, packaged flavor milk in the3rd place at the all milk market. And it owns the most opened wide rangeof the market.While evaluating our target market we examine the information aboutthe market.

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That is the position that we

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Accoding to conversation map of milk market we will try to put ourselvesin green position. Packaged liquid white milk, packaged pasteurized milkand loose milk are the strong milk types in terms of commitment. We willseek to be like these types.Firstly, we analyzed the current sales, growth rates and expected

profitability for various segments. Then, we considered effects of:competitors, availability of substitute products and, the power of buyers& suppliers. And as intentionally, we understood clearly our companyskills & resources needed to succeed in that segment(s). At last, we seekfor competitive advantages which are lead us the good positioningcriteria.For choosing a target marketing strategy; these considerations aremade. As we had a farm, company resources are mostly in advance forour new brand. The degree of product variability specified from thesearches which are made previously. Products stages in life-cycle areapproximately generated by simulation analyses. Market variability datacollected from hired collector firms. Competitors market strategiesmonitored.While focusing on the target, we saw mothers of 1-12 years old childrenand younger ages are more open to new tastes in milk of drinking. Wesaw that, in the second step 12-18 years old teenagers are following thefirst segment of the market.Another important challenger factor is finding interested milkaromas/flavors. Below analysis aroma/flavor types were taken from theconsumers and 97% of the consumers, who searched for new tastes inmilk for drinking, do not mention any other aroma/flavor apart from the

ist which is in the below table. According to the table below strawberryand banana are the most interested. Then respectively coffee and cacaofollows.

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By the help of these researches, we taught that using the organic fruitson our products is the best choice for our brand. Because organic fruitwith the our milks content will have best taste, smell and after drinkpleasure.Positioning means that, the place the product occupies in consumers

minds relative to competing products. Also, the act of designing thecompanys offering and image, to occupy a distinctive place in the target

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markets mind can be said. Positioning is typically defined by consumers,on the basis of important attributes. It involves implanting the brandsunique benefits and differentiation in the customers mind. Whilechoosing our positioning strategies, we identified our possiblecompetitive advantages. After identification, we picked the right

competitive advantages. And of course, we communicate and deliver thechosen position. While we are identifying our competitive advantages,we understood our customers needs and buying processes better thanour competitors do, and deliver more value. Our differentiation will bedone by product, price and people and image.Position Statement;

To good taste milk for children our Milkeng is vital that healthy andfull of vitamins.Growing rate of flavored milk is very fast. Besides, the consumption of12Mlt at the mid-2003, nowadays 75Mlt (growth rate is 24%) flavoredmilk is consuming and collectors forecasting that, the consumption isexpecting to become 150Mlt at the end of 2014.

We figured out that 200ml packaged size is very popular and growingyear by year. Moreover, 1000ml is protecting its huge share on themarket. We decided to invest on both 200ml and 1000ml packaged sizedflavored milk. 200ml mostly consumes at outside and school times. Onthe other hand we thought that 1000ml will be good for homeconsumption based shopping. And fortunately, our vital rivals are notproducing 1000ml flavored milk packages.

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According to our target market, which are 1-12 years old children andtheir mothers, and 12-18 years old teenage people, multi packaging is abeneficial opportunity. We tried to reduce and control our packagingstrategy with multi-packaging.Functionality is most value at package. Consumer is seeking for thefunctionality. Package must have some characteristics which are definedby consumer. Such as, easy to open, hygienic, easy to pour, highlightedeffect on the store shells, visuality, durability, having helicap, easy toclose, easy to store. When we are designing our packages we tried tofocus on this values.

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We will use some fictional characters which kids admire. For examplePEPE, Queen Pearl etc. Sales promotion will be done at multi-packagedsize versions of the product mostly.

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MHN520E MM Term Project