new milk road - mbacasecomp.com milk road to sarang & vivek, & executive board of prabhat...

New Milk RoadTO SARANG & VIVEK,& EXECUTIVE BOARD OF PRABHAT DAIRYAmoy Consultants: Neil Zhang, Iris Zhao, Mia Yuan, Noah Zhou

Xiamen University – Amoy Consultants


Agenda

6 Conclusion

1 Key Issue & Solution

2 Analysis

3 Alternatives

4 Implementation

5 Financial Forecast & Risks


Key Issue & SolutionBY NOAH


Key Issue Analysis Alternatives Implementation Financials Conclusion

Current Industry

Second biggest population in the world and half of Indian is under 30

1% annual income higher than $11,000. 9% in 2020, 24% in 2030

By 2030, 40% of India’s population would move to urban area

Food accounted for 51% of total annual expenditures

Unclear families with dual incomes are increasing



Current Industry

Milk and cheese usage were decreasing, whereas yogurt was

increasing

India’s dairy market growth rate at 10% versus supply growth rate 7%

Farmer cooperative organization, GCMMF, has controlled marketing

and administration



A Glimpse of Prabhat Dairy

1998• Founded as private

family business• Seller of polypack

milk(B2C)• In Maharashtra

2010• Cadbury approached

with opportunity• Turned to B2C• New factory &

obtaining ISO certification

• Acquiring clients• Engaged with

HORECA by expand value-added products

2016• 2 manufacturing plants

in Maharashtra; 1.5million liters of milk per day

• In 2015, debt reached 2.4 billion Rupees

• IPO in Sep. 2015 that raised 3 billion

• Revenue reached 11 billion, 70% from B2B



What’s Wrong?

1. Margin is declining

2. How to balance B2C and B2B proportion

3. Working capital situation is worsen

Key Issue: You need to leveraging B2C & B2B proportion as well as improve operating status in order to increase your revenue and margin



Our Recommendation

Supply Chain

B2B V.S. B2C70:30

B2B V.S. B2C50:50

Cooperation Model | Selling

Market Distribution

Brand Allocation

Cooperate with GCMMF in big cities to improve B2B

Launch new value added products in T2, T3 cities to improve B2C


AnalysisBY MIA



Gujarat Cooperative Model

Multi-tier structure: GCMMF

District-level cooperative (33)

Village cooperatives (18536)

Milk producersGCMMF: 25% organized sector dairyGM: 47%NP: 0.2%



Amul Model

District milk unions

Selling branded milk & milk products Single brand name In Maharashtra (Bombay, Mumbai) Competition amongst

State cooperatives State Gov.

Individual brands lose economical scale



? 65 million dairy farmers not in the cooperative system

Pricing policyFat content of milk V.S. flat rate per liter

Cross breed cows V.S. buffaloesMore milk yield, but buffaloes more suitable for Indian

Payment termWeekly V.S. daily



India

Pricing policyFat content of milk V.S. flat rate per liter

Cross breed cows V.S. buffaloesMore milk yield, but buffaloes more suitable for Indian

Payment termWeekly V.S. daily



The Dairy Supply Side in India

Famers

Self-consumption

Unorganized sector

Organized sector

Private players

50%

20%

24%

6%

Production

Self-consum UnorganizedOrganized Private



The Dairy Demand Side in India

Northern India

18.7%: rural areas

20.3%: urban areas

72

28

01020304050607080

Rural Cities

POPULATION



India Diary Products

Product Market Size(Billion) Market percentage Margin (%)Milk 35,996 56.5% 6-7

Ghee (Butter) 5,275 8% N

Gurd (plain Indian yogurt) 5,038 8% 25-30

Flavored milk 2,466 N 30-35

Ice Cream 2,500 N 30-35

Paneer 399 N N

Yogurt 179 N N



Supply Chain

Purchase milk(65% farmer,35% 3rd party) 450 milk collection points

15 centers


AlternativesBY MIA



Alternative I

Pros Cons

Focus on B2B sector in t1 city in India



Alternative II

Pros Cons

Proceed B2C business with new products from T1 city



Alternative III

Pros Cons

Proceed B2C business with new products start from T2, T3 cities and then T1 cities



Evaluation of Alternatives

Revenue increase

Profit increase

Possibility on time

I

II

III


ImplementationBY IRIS



Implementation | Model

Supply Chain

B2B V.S. B2C70:30

B2B V.S. B2C50:50


Market Distribution

Brand Allocation

Supply & demand balance Cash Flow EBIT Net profit Receivable cycle period



Implementation | Supply

Expand number of milk cooperatives as 20%+ growth

Encourage former raise buffaloes

Narrow down payment term from weekly to daily

Bring supply & demand balance Minimized lead time Enhance brand image

Maintain strong supply relationship



Implementation | supplyPain point

PRABHATfacility

Distribution500

distributors 250 sales

peoplefacility

Chain Store & Kirana

Store

Optimization

PRABHATfacility

1.Divide sales groups as specific regions2.Priority product life deliver level

Short shelf life

Long shelf life

Chain Store & Kirana

Store

Distribution350

distributors 150 sales

peoplefacility



Implementation | Cooperation Model

[GCMMF]Gujarat

N

Maharashtra

India states and union territories

Milk Cooperate with GCMMF

Value added dairy products



Implementation | Cooperation Model

N

Maharashtra

India states and union territories

Short term Long term

Milk

Value added dairy

products

B2C in T2, T3 citiesKick off

B2B:B2C50:50



Implementation | marketing

T1

T2T3

Maintain B2B business install base e.g. sweetened condensed Single brand B2C marketing share expand

Kick off B2C business model Sign off customer awareness Allocated brand in new market



Implementation | Brand & Products

Product Brand City ModelGheel Prabhat T1 B2B

Gurd Amul T2, T3 B2C

Flavored milk Flave T2, T3 B2C

Ice cream Amul T1, T2, T3 B2B+B2C



Implementation | Milestone

6 Months 1 Year 2 Year 3 YearSupply

Expand cooperateEnhance relationship

Narrow down paymentBusiness model

Co-work with GCMMFBrand

Allocate productCreate one brandMarket distribution

Retail relationmanagement


Financial Forecast & RisksBY NEIL



0

20

40

60

80

100

120

140

-

200.00

400.00

600.00

800.00

1,000.00

1,200.00

1,400.00

1,600.00

1,800.00

2,000.00

2015 2016 2017 2018 2019

Prabhat Dairy's Financial Forecast (Million rupees)

Revenue Operating Expenses Profit after Tax



820.4 861.4 904.5 949.7

351.6 421.9

632.9

949.3

-

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

1,600.0

1,800.0

2,000.0

2016 2017 2018 2019

Break down of Prabhat Dairy's Revenue (Million rupees)

B2B B2C



(2/10,30)2015 2016 2017 2018 2019

Inventory days 23 23 21 12 10Receivable period 76 60 14 13 10Operating cycle 99 83 35 25 20

2015 2016 2017 2018 2019Working Capital Required (Million rupees) 37.42 221.98 110.99 66.59 33.30



Risks• New product

performance• Local policy• Brand awareness

Mitigation• Deep investigation• Strong consultant team• AD on mobile phone

new media

Risks & How to Mitigate


ConclusionBY NEIL



Our Recommendation

Supply Chain

B2B V.S. B2C70:30

B2B V.S. B2C50:50


Market Distribution

Brand Allocation

Cooperate with GCMMF in big cities to improve B2B

Launch new value added products in T2, T3 cities to improve B2C



(2/10,30)2015 2016 2017 2018 2019

Inventory days 23 23 21 12 10Receivable period 76 60 14 13 10Operating cycle 99 83 35 25 20

2015 2016 2017 2018 2019Working Capital Required (Million rupees) 37.42 221.98 110.99 66.59 33.30

50% 60% 50%

2015 2016Current assets 184.31 323.74current liabilities 146.89 101.76

Appendix I



Prabhat Dairy's Financial Forecast (Million rupees) 2015 2016 2017 2018 2019Revenue 1,004.33 1,171.97 1,283.31 1,537.33 1,898.99 Operating Expenses 874.25 1,023.07 1,090.46 1,306.31 1,613.62

Personnel Cost 25.6 28.19 30.9 37.0 45.7

Depreciation 34.4 39.9 43.7 52.3 64.7

Interet & Financing cost 41.2 42.7 42.7 42.7 42.7

Provision for Taxation 2.9 13.59 14.4 15.3 16.2

Profit after Tax 25.98 24.52 61.11 83.91 117.72 3% 2% 5% 5% 6%

Break down of Prabhat Dairy's Revenue (Million rupees) 2016 2017 2018 2019B2B 820.4 861.4 904.5 949.7

B2C 351.6 421.9 632.9 949.3 B2B growth rate 5% 5% 5%B2C growth rate 20% 50% 50%

Appendix II

new milk road - mbacasecomp.com milk road to sarang & vivek, & executive board of prabhat...

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