SWOT ANALYSIS: ACI Foods Limited

Prepared for:

Dr. Syed Ferhat Anwar

Course Instructor

Strategic Marketing (M411)

Prepared by:

Sadia Musarrat Chowdhury Roll#09

Saddruzzaman Noor Roll#10

Rowena Afreen Roll#19

Tawsif Saleheen Roll #52

S.M. Albaab-Ur-Rahman Roll#59

BBA Batch 14

August 12, 2009

Institute of Business Administration

University of Dhaka

1.1 Advanced Chemical Industries Limited

As one of the leading conglomerates in Bangladesh, Advanced Chemicals Limited (ACI)

specializes in four primary sectors: Pharmaceuticals, Agribusinesses, and Consumer Brands and

Community Products. Then known as Imperial Chemical Industries, the organization started as a

pharmaceutical company in 1968, but moved on to initiate its Consumer Brands in 1995. The

organization has 3, 339 employees and in the year 2008 generated a net turnover of TK. 7, 365

millions.

ACI Foods Limited is one of the major subsidiaries of ACI. The leading brand of ACI Foods

Limited is 'Pure'. Under this brand ACI markets a number of food products which includes spice,

edible oil, snacks, and confectionary. ACI is responsible for simultaneously manufacturing,

marketing and distributing these food products. As a brand 'Pure' aims to cater to the demand of

Bangladeshi customers to have pure, healthy food. Products under the 'Pure' brand are also

exported to Australia, UAE, Kuwait, Saudi Arabia, Bahrain, Qatar and many other countries.

Our main objective is to construct a market strategy best suited for ACI Foods Ltd. to release a

new line of instant noodles.

1.1.1 ACI Foods Ltd.

ACI Foods Ltd. has gone through expansions in its product line to enter new markets left

untapped by its competitors. The basic categories of its product portfolio are:

Basic Spices

Mixed Spices

Snacks

Edible Oil

Confectionary

Among these categories, the snacks category is most appropriate for instant noodles. Other

products in this category include Puffed Rice and Pure Toast exclusively for the export market

and Fun Chanachur for local and export. As such, releasing the instant noodles would not conflict

or cannibalize the other products.

1.2 Nestle (Maggi)

Julius Maggi established the brand Maggi in 1884 with the intention to improve the diet of

laboring class. He first started with leguminous flour, highly nutritious, cheap source of protein,

easily digested and simple and quick to prepare. Later in 1886 he introduced Maggi Soups,

followed by “wurze”, giving a meaty, spicy taste to Maggi Soups and leguminous flour.

After success full test market with Malaysian Noodles in 1996, Maggi 2 Minute Noodles was

launched in Bangladesh in 1997 with local production. Maggi soup was launched in 2000.

Currently Maggi is leading the instant noodles and soups market.

1.3 Fu-wang Foods

Fu-wang Foods entered Bangladesh market in the Food & Beverage Processing Industry in 17

February 1997 and started production in the same year. It got its ISO certificate in 1998. It has

got listed into both Dhaka Stock Exchange and Chittagong Stock Exchange in July 2000. It

currently has two major product lines: A) Foods, B) Beverages. Under Foods it as three product

sub-lines:

A)

1. Fu-wang Bread & Biscuit

a. Chinese Bread

b. Egg Stick

c. Family Bread

d. Milk Bread

e. Mini Bread

f. Nutritious Biscuits

g. Sachima

h. Sweet Bread

i. Tiffin Bread

2. Fu-wang Cake

a. Birthday Cake

b. Flower Cake

c. Cheese Cake

d. Fruit Cake

e. Lemon Cake

f. Marble Roll Cake

g. Strawberry Cake

h. Vanilla Cake

3. Fu-wang Fast Food

a. Beef Burger

b. Chicken Burger

c. Chicken Sandwich

d. Chicken Pattie

e. Hot Dog

B) The beverage line includes:

1. Green Ten

2. Orange Please

3. Mango Juice

4. Mineral Water

5. Premium Pack Noodles

6. Family Pack Noodles

7. Fu-wang- Chips

2. Competitor Information

Web Address Employee

s

Annual

Sales

Revenu

e

Net

Incom

e

Asset Liabilit

y

Business

Value

Stock

Value

ACI http://www.aci-

bd.com/

3339 5756.8

1

Million

2,278

Million

1,076

Million

4,987

Millio

n

2,205

Million

Quality

Customer

Focus

Fairness

Transparenc

y

Continuous

Improvemen

t Innovation

521.3

0

Nestle N/A N/A N/A N/A N/A N/A N/A N/A N/A

Fu-

Wang

Foods

http://www.fu

wanggroup.com

/

N/A N/A N/A N/A N/A N/A N/A 45.00

Cocol

a

N/A N/A N/A N/A N/A N/A N/A N/A N/A

2.1 INTERNAL ENVIRONMENT – STRENGTH & WEAKNESS  ACI: Pure Nestle : Maggi Cocola Fu-Wang: Food

Strength        

What are your business advantages?

1.Strong financial backing 2.Production of raw

material(Flour and spices) needed for Instant noodles under the same brand name

Pioneer and market leader

(68%) in Instant Noodles

Lowest Price in the market.

Fulfills the quality gap

between Cocola and Magi

What are your core competencies

1. Making export quality goods for the local market

2. Own Product R&D facility 3. Synergistic product

diversification

1. Taste and perceived quality

2. Very strong brand image

   

Where are you making the most money? Pure Salt Instant Noodles   Toast

What are you doing well?1.Strong internal financial

accountability 2.Commitment to positive public image

1. Consistent taste and quality

2. keeping 100% TOM awareness in instant noodles

   

         Weakness        

What areas are you avoiding? BeverageIgnoring the

market for teens   

Where do you lack resources Poor market research facility      

  ACI: Pure Nestle : Maggi Cocola Fu-Wang: Food

What are you doing poorly1. Supply Chain Management

2. Trend follower

1. Low consumer household penetration

2. High MOGE

   

Where are you losing money? ACI Puffed Rice      

What needs Improvement? Supply Chain ManagementStagnating

product line   

         

2.2 EXTERNAL ENVIRONMENT – OPPORTUNITIES & THREATS

  ACI: Pure Nestle : Maggi CocolaFu-Wang:

FoodOpportunities        

Any beneficial trends?Over the last 15 years, people have

increased the proportion of income spent on food from 43% to 48%

Global product portfolio    

Niches that competitors are missing?   For teens For teens For teens

New Needs of Customers? Spicy Instant Noodles Spicy Instant NoodlesSpicy Instant

NoodlesSpicy Instant

Noodles

New TechnologiesImplementation of SAP will enhance

efficiencyOnly one using latest

air-dried noodles   

Threats        

Obstacles to overcome? ROI is low Low-price competitors    

Aggressive competitors? Instant Noodles: Fu-WangInstant Noodles: Fu-

wang   

Successful Competitors? Instant Noodles: Maggi Noodles: Cocola    

Negative economic factors?Income--because instant noodles is not a

commodityNestle has been affected

by global recession   

Government Regulations? Grey Market136% tax on imported

instant noodles   

Changing Business Climates? Invaded by foreign brandsInvaded by foreign

brandsInvaded by foreign

brandsInvaded by

foreign brands

Vulnerabilities?Changing taste and consumption

behaviorChanging taste and

consumption behavior

Changing taste and consumption

behavior

Changing taste and

consumption behavior

3. Competitive Analysis (SW) – Comparison Sheet

3.1 Product, Price and Selection

The market is divided into 2 sections: Traditional Noodles and Instant Noodles. Maggi is the sole

manufacturer of instant noodles, with some foreign brands taking a miniscule MS (0.01%). Fu-Wang

and Cocola are the primary competitors of Maggi in the traditional noodles section.

Currently, there are two flavors from Maggi locally available: The Curry Flavor and the Masala Flavor.

According to Mr. Rahman, approximately 75% of the revenue comes from the spicier Masala Favor.

Given below is a chart containing the SKU of the three main industry players, divided into 3 categories:

Light snack, Guest serving and the Family Pack:

BrandWeight Price

Light SnackMaggi 62gm Tk. 13Fu-Wang 70gm Tk. 12

Cocola 70gm Tk. 11

Guest Serving [4 packets]Maggi 248gm Tk. 50Fu-Wang 280gm Tk. 45

Cocola 280gm Tk. 33

Family Pack/8 PacketsMaggi 496gm Tk. 98Fu-Wang 560gm Tk. 85

Cocola 700gm Tk. 110

3.2 Analysis and recommendation

It is interesting to note that while Cocola provides the same or higher quantity than Fu-Wang at a lower

price, Fu-Wang noodles still has a higher MS (19%) than Cocola (17%). Maggi, which has the lowest

FMV among the three is the market leader with 68% MS. Thus, we can conclude the market is not

sensitive to price-quantity ratio and rather depends on taste and quality assurance.

Thus, if ACI chooses to enter the noodles market, its best bet would be to release instant noodles at the

FMV of Fu-Wang. Doing so, would help ACI achieve the taste and quality parity while providing

added convenience over Fu-Wang at a lower price than Maggi.

3.3 Quality

According to AC Nielsen’s market report on the consumption pattern in the noodles industry, Maggi

Instant Noodles enjoys the highest perceived quality followed by Fu-Wang and then Cocola Noodles.

The consumer perception of quality is most influenced by Brand Reputation [36%], followed by

Recommendations [28%] and Packaging [20%].

3.4 Image

Since its inception, ACI has created a place in the mind of consumers for their transparency and

reliability. They have worked very hard to maintain this image. For instance, when some employees

were caught importing goods without paying the proper taxes on behalf of ACI, the company

immediately dismissed those employees and made public apologies. On the other hand, Nestle also has

a very good reputation in the consumer’s mind and a very strong brand image.

3.5 Sales Method and location

ACI has a distribution channel widespread in Bangladesh and also abroad. If it tries to venture in instant

noodles industry, this sales force could be used. But apart from using its distribution networks Nestle

took some steps that enabled them to increase the popularity of Maggi more rapidly.

One of them is using a “Maggi Net Basket”. They hung a separate basket just for Maggi in every store.

This way the consumer is instantly exposed to “Maggi Noodles” upon entering a store. This has been a

great aid in building Maggi’s market share and creating TOM awareness in consumers’ mind. ACI can

follow such innovative method to break into the market. ACI can also set-up kiosks selling cooked

instant noodles in the places where footfall of the target consumers are highest in order to boost sales.

3.6 Advertising and promotion

As an international brand, Maggi has some advantages in advertising sector than ACI products. The

TVC’s of Maggi are telecasted in television channels in India by Nestle India. These television channels

are more popular to our target market rather than the local channels used by ACI. So in this aspect

Maggi has a clear advantage in creating awareness. Maggi also runs some very successful below the

promotion in order to give people an experience of their product. One of them being sending Maggi

Vans to schools across Bangladesh and feeding the kids noodles. Though this is a very costly campaign

( 17 tk per kids) but it is also very successful among the kids. Also Maggi regularly offers special

promotional campaign i.e. offering small gifts with the Maggi Noodles etc. ACI must need to use both

ATL and BTL activities if they venture into instant noodle market to capture their target market.

3.7 Appearance

Since snacks are impulse buys to a certain extent, catching the eye of the consumer is often half the

battle won. All the brands nowadays use the color yellow, red and green predominantly in their

packaging. It is noticeable that a package more successful noodles like Maggi Instant Noodles and Fu-

Wang Noodles contain the image of cooked noodles or the end product on their package.

3.8 Economy

Being manufacturers of mostly commodities and other small involvement products, ACI Limited has

not been negatively affected by the global recession. In 2008, ACI Limited had a Gross Profit of TK 2,

278 millions, which was significantly higher than the Gross Profit in the previous years. In 2007 the

Gross Profit was TK 1, 667 millions; whereas in 2006 it was TK 1, 176 millions. In the aforementioned

years, ACI Limited has increased its product lines with small involvement products. Thus despite the

bad economy ACI Limited has the opportunity to make more profit by extending its line of low

involvement products.

However, ACI Limited tried introducing higher end product in the form of Low GI Rice. The product

was marketed at selected outlets and was expected to expand to further outlets based on its sales.

However, being higher in price, the product did not receive popularity in the market. Such negative

reaction towards a higher end product can be attributed to the bad economy. (Information based on

interview with Ms. Luna, Brand Manager, Pure, ACI Foods Limited.)

Keeping this in mind, care should be taken so that the brand of noodles launched by ACI should not be

perceived as premium-priced in anyway.

3.9 Legal

Primary competitors of ACI Limited in the FMCG market are multinational companies (MNCs). Such

MNC’s are obliged to import various raw materials at a steep tax rate of 130%. Thus the legal

framework creates an opportunity for ACI to have cost effective advantage over its main competitors.

However, ACI Limited has factories in various locations based on availability of raw materials.

Factories at different locations, as well as transportation of products and raw materials have to face

extortion because of weak legal infrastructure. This has been a problem significant enough for them to

use the river network as much as possible to transport raw materials to the factory. (Information based

on interview with Ms. Luna, Brand Manager, Pure, ACI Foods Limited.)

3.10 International Trade

ACI is also exporting its Pure Brand products to Australia, UAE, Kuwait, Saudi Arabia, Bahrain, and

Qatar. Success of Pure Brand overseas suggests that ACI has the opportunity to promote Fun Brand in

the international arena. (Source: www.aci-bd.com)

ACI puffed rice has a good market in Saudi Arabia. However, due to low shelf life of puffed rice the

product is not being exported to other countries nor sold in the domestic one except in a limited way

during Ramadan. If ACI does not come up with alternate ways, the company would lose the market in

Saudi Arabia. (Information based on interview with Ms. Luna, Brand Manager, Pure, ACI Foods

Limited.)

3.11 People

ACI currently employs 3, 339 people. Departments in ACI are value driven, and each department has

its own P&L account. In fact, if any product requires input from another section – like Fun Chanachur

sometimes requires raw materials from Pure Ata – then they have to do so at close to market price at

certainly higher than cost price. Thus, internal competition further motivates the people in the

organization.

Lack of co-ordination between various departments hinders efficiency. No internal purchase is

practiced in the company. ACI brands purchase raw materials made within the same organization at

market price. This way the organization has the threat of losing cost effectiveness in the market as a

potentially profitable product may get unnecessarily overpriced.

3.12 Industry

Instant noodles are generally targeted towards children of 7-12 years of age. Though they are the core

target group, mothers (ages 25-40) are the secondary target audiences or shoppers. This instant noodles

are mainly targeted towards SEC A, B & C, urban and semi urban. In semi urban areas 80% buyers are

fathers, they buy for their children. Children find instant noodles tasty. They can have it whenever they

want to, usually breakfast and evening snacks. Mothers also like it because children like it and it easy to

cook as well as healthy.

There is an annual demand for more than 9,000 tons noodles, among which the demand for traditional

noodles is 4,000 tons. Top players in this market are Maggi (market share 68%, growing at 40%MAT),

Fu-wang (market share 19%) and Cocola instant (market share 18%).

3.13 Purchasing Power

Bangladesh having a GDP of 6,149,432 million BDT with 12.66% growth rate is often listed among

Least Developed Countries. Noodles are targeted towards SEC A, B and C, because it has become a

convenient snack for all the classes.

3.14 Social

According to a report on AcNielson (a leading Marketing Research firm) we found out that the noodles

are generally used as morning and evening snacks. Instant noodles are very popular among children

within the range of age of 7 to 15, because of its taste and preparation time. It has become the first

choice of mothers for its easy to prepare kind and taste attracting the core target group, the children. It

is also used to serve in front of guests in semi-urban areas. Currently ‘Maggi’ instant noodles brand

from Nestle is leading the instant noodles market with a market share of 68%, while ‘Fu-Wang’ noodles

are leading the traditional noodles market.

3.15 Media access

General people of Bangladesh are exposed to several media. Most of them are not open to internet yet.

So, companies producing consumer goods generally use these media tools:

- ATL

o Television

o Radio

o Billboards

o Printed Advertisements (both newspaper and specialty magazine)

o Internet (not yet used by any of the companies)

- BTL

o Sampling

o Road shows

o Activation campaigns

However, the growing teen population has become increasingly net savvy and completely detached

with local Television channels. Thus, a substantial potential lies in marketing strategies focusing less on

costly TV campaign and more cost-effective and accurate internet marketing.

3.16 Infrastructure

According to Mrs. Basrin Luna (Brand Manager, Pure, ACI Foods Limited) the highway transport of

Bangladesh is not reliable. So, they always use marine route to transport raw materials from their

factories to factories, although in case of distribution channel, they have to depend on highway

transport. Other companies, however, cannot take the advantage of this naval route because of their

factory location.

4.0 BCG Matrix

Product PositionPure Salt Cash Cow

Pure Atta Cash Cow

Pure Basic Spice Question Mark

Pure Mix Spices Star

Pure Cnfectionary Question Mark

Pure Snacks Dog

Positions:

1. Cash Cow (high market share, low growth)

2. Dog (low market share, low growth)

3. Star (high market share, high growth)

4. Question Mark (low market share, high growth)

CASH COW

Pure Salt, Pure Atta

STAR

Pure Mix Spices

DOG

Pure Snacks

QUESTION MARK

Pure Basic Spices, Pure

Confectionary

The position of products on BCG Matrix has been decided through extensive interview with the Brand

Manager of ACI Pure.

Market Share

Growth

Sir/ Madam,We are students of BBA Program of Institute of Business Administration (IBA) conducting a survey on the importance of various factors concerning a company that is important to a consumer. All information collected will be used for purely academic purpose and confidentiality and anonymity of the respondent will be strictly maintained. We would greatly appreciate your participation and insight concerning this matter.Thank you.

5.0 Consumers’ Viewpoint

The Importance of the variables to the consumer cannot be gauged as there is no accessible market

information in this area. However, we conducted a pilot survey on 15 individuals using this particular

questionnaire:

Rank the factors below according to their importance to you:

From the pilot survey, we found that the top 5 Internal

Factors are:

1. Quality

2. Selection

3. Price

4. Company Reputation

5. Advertising

The top 5 External Factors are:

1. Media Access

2. Technology

3. Social

4. Purchasing power

5. Economy

Based on these factors we will further focus on both the

internal strengths and weaknesses as well as external

opportunities and threats around these factors in order

to have a strategy more accurately reflecting the

consumers’ expectations.

A second part of the survey was also conducted to

gauge consumer perception and insight about the

noodles industry and its main players along with that of

ACI.

Factors Rank

Internal

1.      Products

2.      Price

3.      Quality

4.      Selection

5.      Expertise

6.      Company Reputation

7.      Location

8.      Appearance

9.      Sales Method

10.  Advertising

11.  Image

External

01.  Technology

02.  Economy

03.  Legal

04.  International Trade

05.  People

06.  Industry

07.  Purchasing Power

08.  Social

09.  Media Access

Pilot Survey For Consumer Insight Into Instant Noodles Industry

Dear Sir/Madam, we are a group of students from the Institute of Business Administration,

University of Dhaka, conducting a survey on consumer perceptions of the instant noodles

industry. Please fill up the questionnaire below to help us understand the current scenario

better. All the information provided by you will be used for educational purposes only and will

be kept strictly confidential.

Age: ______ Gender: M/F Occupation:____________ Monthly Income:

________

1. Have you ever purchased any product from ACI Pure brand? Yes √ No

2. If yes, what product did you buy?

Pure Salt ____

Pure Atta____

Pure Basic Spice____

Pure Mix Spice____

Pure Confectionary____

Pure Snacks____

3. How did you come to know about ACI Pure? Please Tick

Television Advertisement Newspaper

Magazine Family and/or Colleagues

Shopping Outlets Others ______________________

4. Have you purchased instant noodles? Yes No

5. What quantity of instant noodles do you purchase every month? Please Specify ______

6. How would you rank the following company’s instant noodles in terms of quality? [1 = Very

Poor, 5 = Very Good]

Maggi Noodles____ Cocola Noodles____ Fu Wang Noodles___

7. What level of importance do you attach to each of these features when purchasing instant

noodles? [1 = Not important at all, 3 = Indifferent, 5 = Very Important]

Feature 1 2 3 4 5QualitySelectionPriceCompany ReputationAdvertising

8. What do you think of the following company’s noodles in terms of the following features?

[1 = Very Poor, 3 = Neutral, 5 = Very Good]

Feature Maggi Noodles Fu-Wang noodles Cocola Instant Noodles

QualitySelectionPriceCompany ReputationAdvertising

9. Do you recall any advertisement of ACI Pure brand? Yes No

From the survey, the numbers were collated and resulted in the average scores for each

company given below:

Feature Maggi Noodles Fu-Wang noodles Cocola Instant Noodles

Quality 4.5 3.5 3

Selection 3 2 2

Price 3.5 4 4

Company Reputation 5 2.5 3

Advertising 4 2 3

This survey was conducted only to get a rudimentary idea of what consumer thoughts are on

the market and will be delved into further as we go into a proper survey ona much larger

sample group.