pakistan milk industry

Pure Liquid Milk 1

Industry Report

The livestock sector plays a vital role in the economies of many developing countries. It provides

food (specifically, animal protein) in human diets, income, employment and possibly foreign

exchange. Consumption of livestock products in developing countries, though starting from a

low base, is growing rapidly. Milk provides relatively quick returns for small-scale livestock

keepers. Small milk holders produce the vast majority of milk in developing countries where

demand is expected to increase by 25 per cent by 2025. Over 80 per cent of milk consumed in

developing countries (200 billion litres annually) is handled by informal market traders with

inadequate regulation.

In dairy production Pakistan out performed its South Asian neighbors, lagging way behind China

in productivity growth but was way ahead in per capita milk consumption. According to FAO

(Food and Agriculture Organization) statistics the per capita milk consumption in Pakistan

increased from 126.1 kg per annum to 158.3kg per annum registering an increase of 2.3 per cent.

The global average per capita milk consumption is 82.1 kg per annum and Pakistan's

consumption of milk is almost the double of global average but is not the highest in the world..

Livestock is a major activity that helps people come out of poverty. It states that 47 per

cent of the rural households in Pakistan own livestock and 11 per cent of their income come from

livestock. Rising incomes and the novelty of liquid dairy products as a new addition to people’s

diets, liquid milk and other liquid dairy products (LDP) in developed economies, which represent

32% of global LDP consumption, are faced with already high levels of consumption, many other

beverage options and a highly competitive market where established brands compete with in-

store labels for consumer attention. Of the total LDP (ambient and chilled) production in

developed countries milk reigns with a 76% market share, of which ambient milk, with

consumption volumes of 46.1 billion liters, holds a 69% share and chilled, with 19.5 billion

liters, a 29.2% share.

Many consumers in developed countries are also turning to discount retailers. With the developed markets

full and saturated, milk (and most of its derivatives) have become an ordinary commodity. The dairy

industry has to look for innovations in products and packaging to maintain their market position while

supermarkets and discount retailers are using milk for price dumping to attract customers.

University of Management and Technology

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World milk production: Two thirds of total world milk is produced by India, U.S, Russia and

Pakistan etc.

Global exports of key milk products, in milk equivalent terms, may reach 40.4million tonnes in

2008, up almost 3percent from the previous year. Growth are adding considerable uncertainty to

the present outlook.

Growth in milk production in the developing countries:


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In the previous table, we saw the total world milk production was about 600 million

metric tonnes. Developing countries produced one third of total world milk

production in 2000 (216 million metric tones) and this is increasing. According to

FAO estimates, it is projected to reach 475 million metric tonnes in 2030. Figure 2.2

gives projected estimates of growth of milk production in developing countries.India is the largest

producer of dairy products in the world. There is a great deal of variation in the pattern of dairy

production worldwide. Many countries which are large producers, consume this internally, while

others — in particular New Zealand — export a large percentage of their production. Internal

consumption is often in the form of liquid milk, while the bulk of international trade is in processed dairy

products such as milk powder.

PEST ANALYSIS

POLITICAL

Dairy Sector in the Policy Context: The planners in Pakistan have always been more

concerned about development of the crop sector than dairying in the agriculture economy of the

country. After in dependence, the livestock population in Pakistan significantly deteriorated due


http://en.wikipedia.org/wiki/Milk_powder

http://en.wikipedia.org/wiki/Dairy_products

http://en.wikipedia.org/wiki/Dairy_products

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to good stock was taken away by evacuees, indiscriminate slaughter of animals by incoming

refugees, dry cows and buffaloes brought from rural areas by milk dealers for supply of milk in

urban areas were slaughtered at the end of lactation period, and increased demand for meat due

to growth of population and incomes. Urban areas faced acute shortage of milk and dairy

products. The planners faced a policy dilemma of how to increase draught power and milk

production simultaneously. Efforts were made to improve stock of cattle by breeding of

indigenous animals, but output of improved stocks was inadequate to make a dent on the

dwindling supplies of improved cattle and buffaloes in the country. The First Five Year Plan

(1955-60) recognizes the importance of improving breeding centers, operating more hospitals,

dispensaries and mobile dispensaries to check spread of contagious diseases for animals, in

addition to providing for research on increasing supplies of feeds and fodders, and starting pilot

schemes for artificial insemination for improvement of cattle [Government of Pakistan (1957)].

The First Plan was very specific in removing gujar (a cast of milkmen) colonies from cities like

Lahore to outskirts and in recommending milk supply schemes for Karachi and Lahore on a pilot

basis. Under the scheme government was to buy milk from gawalas (milkmen) residing in gujar

colonies and supply pasteurized milk in sealed bottles through registered milk depots. To reduce

adulteration in milk, the Plan recommended testing of milk for purity. The Plan also suggested

that most of the milk would be produced in villages near the cities where small farmers would

specialize in dairying by keeping half dozen or more cows, produce their own feed and organize

them selves in to cooperatives for assembling, transport and even processing of milk. Soon it

became clear that the First Plan, which articulated the problems at hand quite well proved to be

too ambitious in their implementation as compared to the Plan target. The question of how to

improve milk production capacity remained un-addressed even in the Second Five Year Plan

(1960-65), which experienced major policy shift toward development of the large-scale

manufacturing sector. Hence there was very little planned effort, if any, for the development of

the dairy sector.2In the Third Five Year Plan (1965-70) there was renewed emphasis on

agriculture development with the help of the seed-fertilizer-water technologies (the Green

Revolution technologies) for higher yields in the crop sector.

However, the dairying sector went into oblivion. The milk supply schemes envisaged in

the First Plan for Karachi and Lahore first became operational in Karachi in 1965. With the

support from UNICEF (United Nations Children’s Fund), in later part of sixties, subsidized milk


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was made available in Karachi to low-income families and school children. This plant had to be

shut down in 1980 after running in deficit for fifteen consecutive years. Similarly, the Pilot Milk

Supply Project in Lahore also went into production in 1967, but like the project in Karachi this

project also failed to receive the patronage of successive government sand hence was abandoned.

Milk processing industry got a boost as part of the development of the manufacturing sector in

the country somewhere between sixties and seventies, when the private sector established 23

milk pasteurization and sterilization plants around three big cities, e.g., Karachi, Lahore, and

twin cities of Rawalpindi and Islamabad. These plants relied on supplies of skim milk powder

coming under the auspices of the World Food Program, which was recombined and pasteurized

before being sold to consumers. These plants failed mainly due to weak acceptance of the

recombined milk by consumers and its short shelf life. In other words, inadequate supplies of

fresh milk to milk processing industry proved to be the major hurdle in their success. There was

a renewed interest in the milk processing industry in late-seventies and early-eighties when

policy support was provided by the Government in the form of exemptions in income tax, duty

free import of machinery and equipments, and availability of domestic and foreign currency

financing [Government of Pakistan (1990)].

Government has always tried promoting dairy industry within the country. For this

government has given lots of relaxation to milk industry for instance there is no tax or excise

duty on milk products. Government has a complete and comprehensive legal framework for milk

industry to keep things in flow and up to mark within the industry. At the same time government

keeps on revising its policies that could help improving overall industry. But when we say that

there are good policies and regulations to promote industry it also require some attention in terms

of implementation of these regulations and governments have never been able to make industry

follow these regulations and promotional policies due to not so keen interest of governments

officials and also the implementation process has been designed so complicatedly that things

never go smooth when it comes to implement or adopt these policies for industry players. The

reason comes as government couldn’t streamline the things for being practically observed by the

industry or government was not able to regulate the policies in a way that could reduce irritation

and long processing times for the companies.


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ECONOMICAL: The main economic factor acting for this industry is uneducated

suppliers of raw material, so lots of raw material is affected in terms of its quality and

preservation issues and a big percentage of raw materials go to waste before its being processed.

But at the same time UHT milk doesn’t have any kind of taxes on it which makes it a good

economic factor for the industry growth and improvements in its production. As UHT milk is a

bit costly than the ordinary milk or non processed milk so income factor of consumer is always

an important economical factor for the industry players. UHT milk industry carry consumers

from upper middle and upper class and income level for this class has increased over time which

is something in favor for the industry.

SOCIAL:

Socially the most important thing for the industry is that people have realized the importance of

UHT milk because of its safety and better health issues than ordinary milk that could carry lots of bacteria

and germs during its complete delivery to the end user. But at the same time people avoid using UHT

milk due to its cost factor, being costly consumption of UHT milk is far less than other un processed milk,

but with the time and awareness among people they have realized that the cost they are paying does pay

them back good enough in terms of health issues and quality of milk. So with time this issue is decreasing

as people have got to know the value of what they are paying for. Critical social issue going around

among consumer about UHT milk is that its something treated or created artificially, which is required to

be taken care of by industry player through their awareness and information campaigns for their

consumers to make them clear about such thoughts they carry about UHT milk to utilize better potential

from the market.

TECHNOLOGICAL:

First of all because the farmers or Gawala don’t have the means of transportation to

deliver the milk up the value chain themselves, and they also don’t have the means to maintain

the freshness of the milk (refrigeration) so that the milk retains its actual value. Both issues are

related to the availability of appropriate technologies. Technology is, in this case primarily a

function of capital. In milk and specially UHT milk industry technology is a critical factor in

terms of barriers to entry. Although the market is already saturated, downward pressure on UHT

milk prices could be created through either meeting existing capacity, or the establishment of

new UHT plants. The downward price pressure would then induce new section of socio-

economic cross section to enter the market as consumer of UHT milk. Custom duties on the

import of packaging machinery, which is at the heart of the UHT segment of the industry (either


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TetraPack technology, or alternatives), are prohibitively high. The artificial cap on increase on

demand of UHT there fore creates a negative impact on small farmers, who must continue to

supply to the informal sector where they are subject to the Gawala. So because being expensive

as high capital investments are required for establishing UHT milk plants due to heavy capital

cost on machinery this industry is suffering.

PORTER FIVE FORCES

THREAT OF NEW ENTRANTS:

There was a time when there was not a big threat of new entrants in this industry,

however with time and with maturity of dairy industry infrastructure threat of new entrants has

increased slightly. As in past it was considered to be a very expensive and costly industry in

terms of plants for packaged and pasteurized milk, whereas now with some government support

and so many options in terms of financing activities, entering dairy industry is not longer a big

deal. As with time and within couple of years so many companies have entered the market which

was never the case if we look back into last 3 or 4 years. So, dairy industry will be facing higher

threats if we look into current situation of market opportunities and market potential, because

dairy industry does carry a high potential of growth in it.This factor can also be justified with the

fact that this industry was not well established in terms of technology and knowledge base of not

only consumers but the producers of raw material and production so as the information and


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system is being developed, with good potential of growth this industry will definitely be having

new entrants in coming period of time.

BARGAINING POWER OF SUPPLIERS:

Bargaining power of suppliers is not very high in this industry as mostly the suppliers’

lack of knowledge in their field and otherwise the milk collections centers are owned by the

processors themselves or either they have a long term contracts with these collection centers. On

the other hand the processing plants or buyers offer lower price to these collection center based

on the fact that these collection centers have their own system of payments to the farmers, based

on the more the payment is paid in advance less is the price in terms of litters, so same is going

through the suppliers and processing units.

BARGAINING POWER OF CUSTOMERS:

Bargaining power of customers is relatively improving with time as new entrants have

entered the market. But still as this industry is something that relates to health issues and requires

sensitive and taste related issues so bargaining power has been reduced by some major players

using their brand image and quality image in the market. But with time and awareness in the

market, which include both the customers and the suppliers the bargaining power of customers

has been improving but still it’s not something that can create big fear for the market players to

be afraid of.

THREAT OF SUBSTITUTES

The UHT milk industry has the highest threat of substitute from the Gawalla market,

where a Gawalla (milk man) delivers the Open milk in the homes by himself. The UHT milk

industry has it the highest threat because the Gawalla market is capturing 94% share of the total

milk industry and processed or packed milk industry has only 6% of the total market share. Now,

in that 6% of the packed milk industry, UHT milk has 90% market share. Therefore the only

major and biggest substitute of UHT milk industry is Gawalla industry. It is the fact that the

consumers may quickly switch to the open milk when there is an increase in the prices of UHT

milk products or decrease in the quality of the UHT milk.


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INTERNAL RIVALRY:

Direct competitors includes all powered milks which are like () and our indirect

competitors are Haleeb, flavored milk.

PEST V POTER (Summary):

Pest Analysis shows that dairy industry is very attractive and there are many

opportunities for the companies, but as we know that there are many companies in the ground for

playing. Penetration and awareness are main tools for the success of any company. Suppliers are

getting more benefit from the companies due to internal competition. Customer has more choices

then previous and his economical condition is better that’s why he wants more choices. The

power of the customer in being increased by the available choices in the market.

It comes out clearly from an historical review of the past dairy policies in Pakistan that

policy makers never had faith in the development of the dairy sector. For example, a cursory

look at the Five-Year Plans shows that the policy interventions for dairy development were very

few and far between, which also reflects in the poor showing of milk yields per animal, and in

the way milk supply channels are currently organized. In this section, we present a preliminary

review of Pakistan’s dairy development policies in an historical perspective, and highlight the

role played by the market forces in creating incentives for higher milk production by subsistence

and market oriented milk farmers in the country. If we talk about the powers, if supplier power

will increase then company will increase the price and penetrate in lower level and use those

benefits which are given by the Government of Pakistan. If customer bargaining power will

increase, then company will start tactical promotional activities to reduce the bargaining power

of the customer.

Competitor Analysis: As we are the only baby liquid milk producers but our direct and indirect

competitors are given below.

Competitors names: Age Price

Morinaga BF-1 (Under one year) 440 (400Grms)

Morinaga BF-2 (Under two year) 440(400Grms)

NEO-LAC-1 (Under one year) 530(400Grms)


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MEIJI FM-T (Under one year) 440(400Grms)

MEIJI FU (Under two year) 440(400Grms)

MEIJI Big (Above two year) 530(400Grm)

Nestle (NAN-1) (Under six months) 480(400Grm)

Nestle (NAN-2) (Above six months) 480(400Grm)

Nestle and Morinaga are using penetration strategy and they are targeting only cities, they are not focusing on the ruler areas. We will use the Skimming pricing policy because we are creating differentiation and giving the customers new idea.

Marketing and Product Objectives:

Our marketing aim is to become the market leader by positioning our product as high quality and also give feelings to consumers less and more concept, and to seek major market share. This will build the platform for the company’s other products. Another marketing objective is to create Nation Wide distribution almost within 10 years

Customer Analysis:

In terms of customer analysis, this section describes, (1) the characteristics of customers expected to buy our products and, (2) health and nutrition concerns.

Segmentation:

Demographic: Demographically, milk products are generally purchased by customers representing the socioeconomic backgrounds. It is purchased for consumers from 1-5 years old children. As Lactose cause major gastrointestinal disturbance and most of the brands that are available in the market use Lactose in their milk products.

Health and Nutrition: “Milk is perfect a diet for the babies”, is the sentence almost known by all,

the reason is increasing awareness of Health concerns. So, keeping in view that, this aspect

company will try creating credibility by providing a balanced proportion of Vitamins, Calcium,

Minerals, and Proteins and as well as vitamin K, C etc.

Target Market: The primary target market of the “Pure liquid Milk” is children aging 1-5 years in

the Lahore and we will influence the mothers who will buy this product for their children’s. On

the basis of our differentiated formula our company is focusing its product to the unique target


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audience in an entirely differentiated way like as the small children’s and their parents are more

concerned about their health.

Positioning:

Regarding positioning of the product of the company, the strategy will be to focus on “One

consistent positioning”. In this point, company will position its product by focusing the

characteristics of (1) Skimming pricing . (2) High quality. (3) Liquid pure full of extra vitamins

which are needed for children’s . Company will use different positioning for the different

products.

Current Market:

By the End of five years (in 2015) company will market its three more brands of flavored

milk in the current market of Lahore. Furthermore, company will try to grow its sales in the same

market through same retailers and distributors by creating consumer awareness and make the

customer loyal.

New Markets:

Company’s goal is to expand the product to all over Pakistan therefore targeting different areas

with different product and marketing mix and it really requires the extra skilled sales force and

equipment. By the End of 2020 company planned to attain the Nation-Wide distribution.

Target Market: The primary target market of the “Pure liquid Milk” is children aging 1-5 years in the Lahore and we will influence the mothers who will buy this product for their children’s.

Point of Difference: The point of difference means- the characteristics that make “Pure liquid Milk “unique relative to its competitors-fall into three important areas:

Unique formula. No one competitor is offering the unique formula that our company is

providing balanced quantity of vitamins, minerals, calcium and proteins. Specially, the company

is providing lactose free milk. Other direct/indirect competitors are providing powdered milk for

this target market but we are providing liquid milk which will save time for using it.

Unique way of collection of raw material. The company has decided to join hands with the

ultimate milk man by forming their “Managing Committees” on village level to enhance and

improve the collection of milk and to focus the milkman and try to help them out too.


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Unique target audience. On the basis of our differentiated formula our company is focusing its

product to the unique target audience in an entirely differentiated way like as the small children’s

and their parents are more concerned about their health.

Imitable product. Our company is providing unique product to its customers and its

formula is imitable which main advantage for this company.

Core Competency and sustainable competitive Advantage:

Resource Based View: RBV is the marketing technique in your company can differentiate its

products from other competitors. So in the result of that you have a competitive edge against your

competitors.

Valuable: We are providing value I our product in that way, we are the only company that are

providing liquid milk for now born babies. In this we have used a unique all kind of ingredients which are

helpful for the grown baby. Our product is the convince product for the mothers either they are in home

or traveling. Because they are not facing the problem to mix the powder milk in the water.

Rare: Company Analysis: Our product is the only liquid milk product for new born babies in

the market so it is rare.

Inimitable: Our formula is such a unique formula and as we are the only one in the market who

are producing liquid milk, so it will take time and would be difficult for the other competitors to

copy our formula.

1. Almost all the packed milk product producing companies use Vitamins, Mineral,

Calcium and Proteins but our company will differentiate its differentiate its product

by adding Vitamin K, C and Poly Unsaturated Fats and specially extract out

“LACTOSE” for lactose intolerant people that usually avoid drinking packed rather

any kind of milk due to Gastrointestinal problem and we will also provide flavored

liquid milk for childerns. This product will better serve this kind of people.

2. To deliver our product to customer’s table using effective manufacturing and

distribution system that maintain the company’s quality standards.


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To translate these core competencies into a sustainable competitive advantage, the Company will

work closely with the key suppliers and distributors to build the relationships and alliances

necessary to satisfy the high taste standards of our customers.

Marketing Plan:

Objectives: Our Company’s marketing objectives are

To maximize profit To seek 20% market share of the whole market To position our product as quality and unique.

Marketing plan:

Target Market: The primary target market of the “Pure liquid Milk” is children aging 1-5 years in

the Lahore and we will influence the mothers who will buy this product for their children’s. On

the basis of our differentiated formula our company is focusing its product to the unique target

audience in an entirely differentiated way like as the small children’s and their parents are more

concerned about their health.

Product:

Product variety: Liquid milk for Childers

Brand Name: Pure Liquid Milk

Size: 400Grms

Features: Vitamin K, C, Calcium, Proteins and Poly unsaturated fat.

Expiry Date: 5 months.

Services for distributors: Expiry milk is heartedly accepted and if you want to return the stock company will happily accepted.

Price:

The following mentioned prices are for the ultimate users. Note that these prices are not for Distributors and retailers. 625 for 400Grms

Promotion:

Our main aim will be on this methodology. We will make aware to mothers of the children’s and also do promotion with the help of Gynecologists, Maternity homes and hospitals. We will also start the awareness programs for the mothers on the TV and also target the villages with the help of direct


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marketing . We will also do advertise in the family planning offices that mothers of villages or that are not aware with this could be aware with this and take our product.

Advertising: We will do advertise with the help of Sign Boards, Print Media, Electronic Media, Internet and one the one marketing.

Direct Marketing: In the ruler areas

On Road publicity

Factory Fair price shops

Bonuses: Company will give incentives on the basis of purchasing 20packs and then they will get 1 pack extra as a bonus to the Distributors and Retailers and whole-sellers.

Seminar and opinion leaders: We will also take help of famous celebrities which will work as a influencer and opinion leader.

Positioning:

Regarding positioning of the product of the company, the strategy will be to focus on “One

consistent positioning”. In this point, company will position its product by focusing the

characteristics of (1) Skimming pricing . (2) High quality. (3) Liquid pure full of extra vitamins

which are needed for children’s . Company will use different positioning for the different

products.

Slogan:

“Wo sb kush jo ap k bchay ki zrort hay”

Place:

Channels of Distribution: Fair price shop

Distributors

Whole Sellers


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Retailers

Locations: Available at all authorized dealers, retailers, whole seller, grocery shops and kiosks. Company will also place its product at three factory fair price shops. We will also Put our product in the front side of shelves, so that customers could take it easily.

Collection Centre:

Company will collect raw milk from the following paces.

Gujranwala Okara Sahiwal

Other surrounded villagesPackaging:

Many people are thinking that powdered milk is used little and other does not spoiled, but we will

Introduce them liquid milk in tetra pack and with the help of cape or the bottle which can be sued for

longer time. If you are in way its not easy to travel with your children’s and prepare powdered milk so

we have great advantage with the help of our product.


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SUMMARY

After completion of the project, Dairy Industry is very attractive and there is a big room for

improvement and for the new products. Growth rate is very high and many companies are

coming and many new products are also coming in the market. Competition level is very high

and customer and suppliers powers are increasing. Media can play important role in the game

and who will use it he will be the top position


pakistan milk industry

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