New Milk Road TO SARANG & VIVEK, & EXECUTIVE BOARD OF PRABHAT DAIRY. Amoy Consultants: Neil Zhang, Iris Zhao, Mia Yuan, Noah Zhou

Transcription

1 New Milk Road TO SARANG & VIVEK, & EXECUTIVE BOARD OF PRABHAT DAIRY Amoy Consultants: Neil Zhang, Iris Zhao, Mia Yuan, Noah Zhou

2 Agenda 1 Key Issue & Solution 2 Analysis 3 Alternatives 4 Implementation 5 Financial Forecast & Risks 6 Conclusion

3 Key Issue & Solution BY NOAH

4 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

5 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

6 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 manufacturing plants in Maharashtra; 1.5million liters of milk per day In 2015, debt reached 2.4 billion Rupees IPO in Sep that raised 3 billion Revenue reached 11 billion, 70% from B2B

7 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

8 Our Recommendation Supply Chain Cooperation Model Selling Market Distribution Brand Allocation B2B V.S. B2C 50:50 Launch new value added products in T2, T3 cities to improve B2C B2B V.S. B2C 70:30 Cooperate with GCMMF in big cities to improve B2B

9 Analysis BY MIA

10 Gujarat Cooperative Model Multi-tier structure: GCMMF District-level cooperative (33) Village cooperatives (18536) Milk producers GCMMF: 25% organized sector dairy GM: 47% NP: 0.2%

11 Amul Model Selling branded milk & milk products Single brand name In Maharashtra (Bombay, Mumbai) Competition amongst District milk unions State cooperatives State Gov. Individual brands lose economical scale

12 ? 65 million dairy farmers not in the cooperative system Pricing policy Fat content of milk V.S. flat rate per liter Cross breed cows V.S. buffaloes More milk yield, but buffaloes more suitable for Indian Payment term Weekly V.S. daily

13 India Pricing policy Fat content of milk V.S. flat rate per liter Cross breed cows V.S. buffaloes More milk yield, but buffaloes more suitable for Indian Payment term Weekly V.S. daily

14 The Dairy Supply Side in India Production Famers Self-consumption Unorganized sector Organized sector 6% 24% 20% 50% Private players Self-consum Unorganized Organized Private

15 The Dairy Demand Side in India Northern India 18.7%: rural areas 20.3%: urban areas POPULATION Rural Cities

16 India Diary Products Product Market Size(Billion) Market percentage Margin (%) Milk 35, % 6-7 Ghee (Butter) 5,275 8% N Gurd (plain Indian yogurt) 5,038 8% Flavored milk 2,466 N Ice Cream 2,500 N Paneer 399 N N Yogurt 179 N N

17 India Diary Products Product Market Size(Billion) Market percentage Margin (%) Milk 35, % 6-7 Ghee (Butter) 5,275 8% N Gurd (plain Indian yogurt) 5,038 8% Flavored milk 2,466 N Ice Cream 2,500 N Paneer 399 N N Yogurt 179 N N

18 Supply Chain Purchase milk (65% farmer,35% 3 rd party) 450 milk collection points 15 centers

19 Alternatives BY MIA

20 Alternative I Pros Cons Focus on B2B sector in t1 city in India

21 Alternative II Pros Cons Proceed B2C business with new products from T1 city

22 Alternative III Pros Cons Proceed B2C business with new products start from T2, T3 cities and then T1 cities

23 Evaluation of Alternatives Revenue increase Profit increase Possibility on time I II III

24 Implementation BY IRIS

25 Implementation Model Supply Chain B2B V.S. B2C 70:30 Cooperation Model Selling Market Distribution Brand Allocation B2B V.S. B2C 50:50 Supply & demand balance Cash Flow EBIT Net profit Receivable cycle period

26 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

27 Implementation supply Pain point PRABHAT facility Optimization Distribution 500 distributors 250 sales people facility Chain Store & Kirana Store 1.Divide sales groups as specific regions 2.Priority product life deliver level PRABHAT facility Short shelf life Long shelf life Chain Store & Kirana Store Distribution 350 distributors 150 sales people facility

28 Implementation Cooperation Model India states and union territories [GCMMF] Gujarat Maharashtra N Milk Value added dairy products Cooperate with GCMMF

29 Implementation Cooperation Model India states and union territories N Short term Long term Milk Maharashtra Value added dairy products B2C in T2, T3 cities Kick off B2B:B2C 50:50

30 Implementation marketing T1 Maintain B2B business install base e.g. sweetened condensed Single brand B2C marketing share expand T2 T3 Kick off B2C business model Sign off customer awareness Allocated brand in new market

31 Implementation Brand & Products Product Brand City Model Gheel Prabhat T1 B2B Gurd Amul T2, T3 B2C Flavored milk Flave T2, T3 B2C Ice cream Amul T1, T2, T3 B2B+B2C

32 Implementation Milestone Supply Expand cooperate Enhance relationship Narrow down payment Business model Co-work with GCMMF Brand Allocate product Create one brand Market distribution Retail relation management 6 Months 1 Year 2 Year 3 Year

33 Financial Forecast & Risks BY NEIL

34 2, Prabhat Dairy's Financial Forecast (Million rupees) 140 1, , , , , Revenue Operating Expenses Profit after Tax

35 Break down of Prabhat Dairy's Revenue (Million rupees) 2, , , , , , B2B B2C

36 (2/10,30) Inventory days Receivable period Operating cycle Working Capital Required (Million rupees)

37 Risks & How to Mitigate Risks New product performance Local policy Brand awareness Mitigation Deep investigation Strong consultant team AD on mobile phone new media

38 Conclusion BY NEIL

39 Our Recommendation Supply Chain Cooperation Model Selling Market Distribution Brand Allocation B2B V.S. B2C 50:50 Launch new value added products in T2, T3 cities to improve B2C B2B V.S. B2C 70:30 Cooperate with GCMMF in big cities to improve B2B

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41 Appendix I (2/10,30) Inventory days Receivable period Operating cycle Working Capital Required (Million rupees) % 60% 50% Current assets current liabilities

42 Appendix II Prabhat Dairy's Financial Forecast (Million rupees) Revenue 1, , , , , Operating Expenses , , , , Personnel Cost Depreciation Interet & Financing cost Provision for Taxation Profit after Tax % 2% 5% 5% 6% Break down of Prabhat Dairy's Revenue (Million rupees) B2B B2C B2B growth rate 5% 5% 5% B2C growth rate 20% 50% 50%