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PRABHAT DAIRY – A SWEET SOLUTION
EDGE CONSULTING
University of Alberta
ISSUE IDENTIFICATION
How does Prabhat Dairy increase their branding and presence in the B2C Indian market?
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
SOLUTION
THE PRABHAT SWEET SOLUTION
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
CURRENT SITUATION
Local player in the Indian market
70 / 30 B2B versus B2C revenue. Only 20% of B2C capacity used
Pricing is lower
Products include condensed milk, polypack milk, ghee
B2B has high logistical requirements
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
KEY TAKE AWAY: B2B creates logistical and financial challenges
ANALYSIS
Strengths:- ISO certified- Established- Great relationships with supply chain- Wealth of knowledge
Weaknesses:- Low presence in the B2C
- No branding - Missing marketing and distribution
Opportunities:- Distribution Models- Grow in B2C market- Value added products- Yogurt
Threats:- Multinational companies in Tier 1 cities
- Local co-ops in Tier 2 and 3 cities - Growing too fast in B2B
SWOT
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
KEY TAKE AWAY: Opportunity in B2C
THE 5 FORCES
Rivalry10 / 10
New Entrants6 / 10
Buyer Power6 / 10
Substitutes2 / 10
Supplier Power4 / 10
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
KEY TAKE AWAY: Competition is high in this market
THE 4 P’S
•Slightly below Amul
•15% below MNC
• Polypack, condensed, flavoured milk
• Yoghurt• Ghee• Paneer
•Kirana stores – Mini stockists
•Large chain stores
•Mahashtra and nearby areas
•Large chain stores•15,000 Kirana
stores
Place Promotion
PriceProduct
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
Brands:• Prabhat• Milk Magic• Flava
KEY TAKE AWAY: Pilots in Tier 1 cities were very effective
ANALYSIS
PRODUCT MARKET SIZE CAGR (%) RETAIL PRICE MARGIN (%)Milk 35,996 16 17-25 6-7Ghee 5,275 11 25-58 N/ACheese 997 22 23-62 35-40Curd 5,038 28 100-120 25-30Paneer 399 15 25-38 N/AYogurt 179 32 312-438 N/AFlavored Milk 2,466 28 85-143 30-35Ice Cream 2,500 30 300-950 30-35
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
KEY TAKE AWAY: High market opportunity and margin in the sweet value added products
DAIRY IN INDIA: Products and Market
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
YOGURT34%
MILK33%
CHEESE33%
Products
YOGURT MILK CHEESE
• India has high demand growth = 10%
• Northern India consumes more milk
• City consumption of milk products is higher than rural
• Milk vs. value-added milk products
• Buffalo milk
KEY TAKE AWAY: Consumption is higher is Tier 1 cities
DAIRY IN INDIA:
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
CooperativesMultinational companies (MNCs) Private domestic playersKEY TAKE AWAY: Diverse competitive landscape
CUSTOMER EXPERIENCE
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
Think and Feel
See
Say and Do
Hear
- A lot of good “sweet” products- Many options
- Prabhat + Flava + Milk Magic
- Large chain stores- Kirana stores
- Purchase mostly milk and some value-added products
- Award winning- Great quality
KEY TAKE AWAY: Customer loves sweet products
FINANCIAL SUMMARY
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
IPO capital $ 45 millionWorking capital Account Receivables (35 to 76 days) High Inventory holding costs (17 days to 23 days) Profit decreasing ( -6%)KEY TAKE AWAY: B2C market will lower or eliminate these challenges
FINANCIAL SUMMARY B2C
2015 2016 Total Food and Beverage Market
$4,782,089,552 $5,499,402,985
Current Market Capture 3.653% 3.653%
B2C Operations Percentage
30% 30%
Revenue $44,970,000 $52,410,448
*Values in USD
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
KEY TAKE AWAY: Growing market
CURRENT REVENUE FORECAST
$- $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000 $80,000,000 $90,000,000
2015 2016 2017 2018 2019
*Values in USD
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
KEY TAKE AWAY: Approx. 15% market growth year over year
THE SWEET SOLUTION REVENUE FORECAST
*Values in USD
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
$- $20,000,000 $40,000,000 $60,000,000 $80,000,000
$100,000,000 $120,000,000 $140,000,000 $160,000,000 $180,000,000
2017 2018 2019
B2C Forecast 50:50 B2C
KEY TAKE AWAY: Approx. 95% market growth year over year
ALTERNATIVES
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
Option Distribution Cost Growth Competition
1. Enter internationalmarkets2. Focus in Tier 2 + 3 Cities
3. Focus on Tier 1 cities
ALTERNATIVE 1: International Markets
PROS CONS- Have supply chain
knowledge- New markets
- New regulations- High capital requirements- Distribution challenges- Local competitors- Foreign markets
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
ALTERNATIVE 2: Focus on Tier 2 and 3 cities
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
PROS CONS- Already present in some
Tier 2 and 3 cities- Distribution network
challenges are large- Large geographic spread- Marketing for small cities is
hard
ALTERNATIVE 3: Focus on Tier 1 cities
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
PROS CONS- Growth potential- Cheaper pricing
compared to competitors- Already established in
Mumbai
- High competition- Will incur marketing costs
RECOMMENDATION
PRABHAT SWEET SOLUTION
Tier 1 cities Value Add Products Growth Marketing
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
IMPLEMENTATION
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
Expand marketing in MumbaiOrganize for growth
Increase retail
Silvassa
Gandhinagar
Jaipur
New DelhiYear 0 Year 1 Year 2 Year 3
SHORT TERM
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
Action Timeline Cost Key Performance Indicator(s)Expand marketing efforts in Mumbai
1 – 3 months $2 million Brand perception >80%
Hire sales peopleIncrease marketing teamHire ice cream developers
1 month $250K$100K$100K
50 salespeople5 marketers5 product developers
Secure large chain and Kirana stores
2 – 6 months 10 large chains10,000 stores
Apply Raftaar model to SilvassaMini stockist model
6 – 12 months $7.5 million Brand perception >50%20 distributors5 large chains10,000 Kirana stores
MEDIUM TERM
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
Action Timeline Cost Key Performance Indicator(s)Apply model to Gandhinagar
12 -24 months $ 7.75 million Brand perception >50%20 distributors5 large chains10,000 Kirana stores
LONG TERM
Action Timeline Cost Key Performance Indicator(s)
Apply model to Jaipur and New Delhi
24 – 48 months $ 15 million Brand perception >50%50 distributors10 large chains20,000 Kirana stores
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
CUSTOMER PROFILES
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
Abhishek the Chai Walla
15, male
Works every day
Loves to end the day with his favorite ice cream
Priorities: cost, convenience
Komal the Working Mother
35, female, educated, working
2 children
Provides Flava milk and yogurt to the children as a treat because it is ISO certified
Priorities: health, convenience, appeal to children
THE 4 P’S
•Slightly below Amul
•15% below MNC
• Flavored milk• Yogurt• Ice Cream
•Kirana stores – Mini stockists
•TV Ads•Endorsements•Packaging
•Tier 1 Cities•Large chain stores•Kirana stores
Place Promotion
PriceProduct
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
FINANCIAL INVESTMENT
IPO Capital $44,776,119
4 Year Investment $40,000,000
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
INVESTMENT BREAKDOWN
2016 2017 2018 2019 20203,000,000$ 3,000,000$ 3,000,000$ 3,000,000$ 3,000,000$ 2,000,000$ 4,750,000$ 6,000,000$ 6,000,000$ 6,000,000$
250,000$ Total Cost per year 5,250,000$ 7,750,000$ 9,000,000$ 9,000,000$ 9,000,000$
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
FINANCIAL RESULT *Result in 10% Growth over and above existing rate
2016 2017 2018 2019 2020B2C Forecast $52,410,4 $60,272,0 $75,340,0 $94,175,0 $117,718,
$- $20,000,000 $40,000,000 $60,000,000 $80,000,000
$100,000,000 $120,000,000 $140,000,000
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
PROFIT
$-
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
2,016 2017 2,018 2019 2,020
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
OBSTACLES
0
1
2
3
4
5
6
7
8
9
10
11
0 1 2 3 4 5 6 7 8 9 10 11
Impa
ct o
n Pr
abha
t
Probability
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
• Regulations• Market
Penetration• Competitors
MITIGATION
Obstacle MitigationRegulations - Keep communications with
government open- Build in increased costs in pricing
Market Penetration - Test markets in new cities- Periodic assessments for consumer awareness
Competitors’ Actions - Maintain Pricing strategy- Monitor competitor behavior- Reinforce relationships with suppliers- Continue R&D
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
TAKE AWAY
Tier 1 Cities
Sweet Products
B2C = B2B
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY
APPENDIX% of Market 2015 2016 2017 2018 2019 2018 2019
Food and beverage 60%534,000,000,000.00 614,100,000,000.00 706,215,000,000.00 812,147,250,000.00
933,969,337,500.00
1,074,064,738,125.00
Portion of Market 320,400,000,000.00 368,460,000,000.00 423,729,000,000.00 487,288,350,000.00
560,381,602,500.00
644,438,842,875.00
60$
4,782,089,552 $
5,499,402,985 $
6,324,313,433 $
7,272,960,448 $
8,363,904,515 $
9,618,490,192
2015 2016 2017 2018 2019
% of F&B Market Capture 3.653%
Current Forecast Rupees 11,705,000,000 13,460,750,000 15,479,862,500 17,801,841,875 20,472,118,156 23,542,935,880 27,074,376,262
Current Forecasted Revenues USD
$ 174,701,493
$ 200,906,716
$ 231,042,724
$ 265,699,132
$ 305,554,002
$ 351,387,103
2015 2016 2017 2018 2019
B2C Forecast $
44,970,000 $
52,410,447.76 $
60,272,014.93 $
69,312,817.16 $
79,709,739.74 $
91,666,200.70 $
105,416,130.80
APPENDIX – GROWTH OPPORTUNITIES FUTURE
Protein ShakeVitamin enriched milk productsBranded flavored powdered milks
APPENDIX
•Stable•Different states have different systemsPolitical•High Growth•Increasing disposable incomeEconomic•Caste system•Growing middle classSocial•Developed•Equipment availableTechnology
•Some regulationLegal
•Little environmental regulationEnvironmental
ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY