prabhat dairy - mbacasecomp.com •low-cost •70% b2b ... criteria. competition. brand recognition....
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Recommendation Analysis Financials Alternatives Implementation
Mandate
What actions should Prabhat undertake to maintain and grow its market position?
Fierce competition
Tier 1 vs. 2 & 3 Farmers Logistics
Recommendation Analysis Financials Alternatives Implementation
The major player in Tier 2 & 3 in B2B & B2C
• Solidify agreements with farmers, rising milk & fodder pricing• Forward integration with Kirana’s and selling points
Manage the supply chain
• Ramp up production on Polypack and Value-Added products• Increase HR team to manage additional production
Utilize existing capacity
• Repackaging two brands that sit outside Prabhat label• Consistent Kirana branding and product portfolio
Branding and marketing
Restructure Prabhat to dominate Tier 2 & 3 sectors
Recommendation Analysis Financials Alternatives Implementation
Urban mkt. in India is perfect for expansion
Prabhat can use its existing structure to capitalize on this
Rising annual income
Urban spend 187 Rs Total spend 20%
Recommendation Analysis Financials Alternatives Implementation
Competition is fierce in Tier 1
Cooperatives (Amul, Mothers Milk)
MNC’s (Danone, Nestle), private firms
40% move to Urban areas (predominately Tier 2 & 3)
Prabhat has a first mover advantage in Tier 2 & 3
Prabhat can be the major player in Tier 2 & 3 with SC adjustments
Recommendation Analysis Financials Alternatives Implementation
Prabhat’s supply chain needs adjustments
Milk supply Collection and manufacturing
Distribution and sales
Marketing and branding
Recommendation Analysis Financials Alternatives Implementation
Prabhat’s supply chain needs adjustments
Milk supply Collection and manufacturing
Distribution and sales
Marketing and branding
Recommendation Analysis Financials Alternatives Implementation
Prabhat’s supply chain needs adjustments
Milk supply Collection and manufacturing
Distribution and sales
Marketing and branding
Addressing the supply chain will allow Prabhat to grow and expand
- Fodder and feed- Rising milk prices
- Unutilized capacity - Pushing the Prabhat brands- Gain exclusivity
- Utilize the Prabhatname
Recommendation Analysis Financials Alternatives Implementation
A need to strengthen tie with Farmers
Cooperative model has strong bonds
Fodder and feed prices are rising
No long term agreements in place
Milk prices expected to rise 7-8%
It will be key for Prabhat to improve agreements for growth
Recommendation Analysis Financials Alternatives Implementation
Capacity and product expansion
• 50% capacityPolypack
• 20% capacity• Ghee, Curd, Flavored milk, Ice
creamValue Added
Recommendation Analysis Financials Alternatives Implementation
Investment Capabilities
27.3B Rs to invest
REVENUE 117B Rs
CASH ON HAND 11,7B Rs
LTD RATIO 4.5M Rs (7% of assets)
BORROWING CAPACITY 15.6B Rs (30% of assets)
Recommendation Analysis Financials Alternatives Implementation
Unused Capacity
117B Rs to 572B Rs sales (488%)
MILK28% of revenue = 32.8B Rs
32.8B Rs = 50% capacity32.8B Rs opporunity
VALUE ADDED
72% of revenue = 84.3 B Rs84.3B Rs = 20% capacity
421B Rs opporunity
Recommendation Analysis Financials Alternatives Implementation
Strategic Assessment
Market
• High competition • Tiers 1 v. Tiers 2 & 3• Rising milk prices
Core competency
• Operational efficiency• Supply issues with farmers• Idle capacity• Branding & distribution issues
Strategy
• Low-cost• 70% B2B - 30% B2C
Recommendation Analysis Financials Alternatives Implementation
Strategic Assessment
Market
• High competition • Tiers 1 v. Tiers 2 & 3• Rising milk prices
Core competency
• Operational efficiency• Supply volume with farmers• Idle capacity• Branding & distribution issues
Strategy
• Low-cost• 70% B2B - 30% B2C
Prabhat needs to adapt its strategy to attract B2C
Recommendation Analysis Financials Alternatives Implementation
Options to expand Tiers 1 v. Tiers 2 & 3
CriteriaCompetition
Brand recognition
Distribution
Value-added products competition
Tiers 1National Coop & MNC
Strong attachment to existing brands
Easier
High competition
Tiers 2 & 3First mover advantage
No big player
Favors regional coop
Limited competition
Recommendation Analysis Financials Alternatives Implementation
Options to expand Tiers 1 v. Tiers 2 & 3
CriteriaCompetition
Brand recognition
Distribution
Value-added products competition
Tiers 1National Coop & MNC
Strong attachment to existing brands
Easier
High competition
Tiers 2 & 3First mover advantage
No big player
Favors regional coop
Limited competition
Tiers 2 & 3 requires forward integration investment
Recommendation Analysis Financials Alternatives Implementation
Implementation at a Glance2016 2017 2018 2019 2020
Improve Supply Chain
Branding & marketing
Negotiate Agreements with farmersPlan for Purchasing
Kirana’sOpen new Kirana1000 1000 1000 1000
Utilizing capacity
Increase polypack milk production
Increase value added milk production
Repackage all products to Prabhat Brand
Hire a marketing coordinator
Branded milk refrigerators
5000
Hire additional production staff
Introduce POS programs
Recommendation Analysis Financials Alternatives Implementation
Agreements with Farmers
Nurture relationships with farmers
Incentives if able to provide certain yield
Assist with mechanization & planning for improving yield
Recommendation Analysis Financials Alternatives Implementation
Purchasing Kirana’s
Hire team to negotiate agreements
Hire existing owner as manager
Take control of Kirana’s dairy mix exclusivity
Introduce branded refrigerated equipment
Gaining greater control of the entire supply chain
Recommendation Analysis Financials Alternatives Implementation
Products Available in Kirana’s
PolypackMilk
Powdered Milk
Condensed milk Ghee
Curd Flavored milk Ice cream
Full range of products available at Kirana’
Recommendation Analysis Financials Alternatives Implementation
Location of Kirana’s
Focus on Tier 2 & 3 cities in
Maharashatarstate
Look for expansion in Gujarat &
Madhya Pradesh
Recommendation Analysis Financials Alternatives Implementation
Prabhat StructureSarang Nirmal
Chairman & MD
B2B Division B2C Division Raw materials division
Operations manager
Kirana Division
Operations Manager
Marketing
Marketing Coordinator
Vivek NirmalJoin MD
Gaining greater control of the entire supply chain
Recommendation Analysis Financials Alternatives Implementation
Branding Initiatives
• Remove Flava & Milk Magic brands• Rebrand to Prabhat• Leverage 20 years of experiencde
Rebranding to Prabhat
• Instore POS initiatives• Branded refrigeratorsPromotion
• Bundle pricing to encourage purchasing Milk & value added productsPricing
Increase number of Prabhat dairy products being purchased
Recommendation Analysis Financials Alternatives Implementation
Financial Model
2017 2018 2019 2020 2021MILK 32.76 33.46 39.55 51.41 63.49VALUE ADDED 84.24 121.68 154.23 205.64 270.67TOTAL SALES 117.00 152.10 197.73 257.05 334.16OPERATING EXPENSE 102.00 106.47 172.03 223.63 290.72KIRANA 0.00 5000.00 6000.00 7000.00 8000.00KIRANA COST 3.25 0.65 0.65 0.65 0.65KIRANA EMPLOYEE 0.00 1.69 2.03 2.37 2.70MARKETING 0.07 0.07 0.07 0.07 0.07OTHER COST 11.70 15.21 19.77 25.70 33.42
PROFIT -0.02 28.02 35.00 36.20 37.40