Prabhat Crossover Plan

Transcription

1 Prabhat Crossover Plan Presenting as a team of PBS consultants to Vivek and Sarang Nirmal Team PBS consultants Fernando Santos Harsha Bhatia Sara Da Silva Vitor Ferreira

2 Agenda Key Issues Analysis Alternatives Recommendations Financials Plan and Risks Summary

3 Our challenge today is Given that Prabhat is one of the most profitable diary companies in the B2B segment in India, How can you crossover to B2C segment and be profitable

4 What are your key issues? Competition from Cooperatives Decreasing Working capital Distribution challenges Low brand awareness

5 Analysis

6 Prabhat is one of the leading Diary company in India Prabhat is based in Maharashtra region of India with 1.5 million litres of milk processing capacity Prabhat owns all aspects in the Diary industry value chain adds a competitive advantage Prabhat has a higher presence in B2B market especially with its condensed milk product Prabhat has a product mix of 50% polypack milk and 20% value added diary products Third-Party (35%) Farmers (65%) Collecting points (450) Chilling centes (15) Milk coolers (80) Facilities (2 unit/1.5m liters per day B2B (70%) B2C (30%)

7 Macro-view of the Indian Market Government regulations and creation of Co-operatives in Diary Industry Liberalization of Indian Economy Majority vegetarian and religious population of India where cow is considered as God India has tropical climate, especially in Maharashtra with heavy rainfall and summers Regulations in floor prices, high government percentage - 77% of retail this causes profit margins to go low

8 Diary Industry Diary is food staple in the FMCG category which cannot be substituted easily There is high competitive rivalry Threat of new entrants India comprises of 7% of the world supply 131 billion L/yr There is a pent up demand with a growth potential of 10% India is low on organized retail Competitive Rivalry Demand India Threat of substitution Supply Diary Industry in India is 4-quadrant China 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Organized retail India China Taiwan US Large Small Small Rural Personal Consumption US MNCs Mass Distribution Co-ops Prabhat

9 How does your target market look like? India on the world map India has the second highest population in the world with 1.25 billion people Target segments High Income World India High Income Target region Northern and Central states Other part.6 billion people reside in the northern and central states Rural Urban.16 billion reside in the urban areas of the target region Indian demographic is becoming younger, richer and more urban Population in Urban Areas Population in Urban Areas

10 The diary consumers in India can be segmented as Rural Value natural form of the produce Prefer to produce diary and diary products for their own consumption No access to supermarkets Tier 2 and 3 Urban Increasing nuclear families with increasing working women Value cost and freshness Prefer to have milk delivered to home from the local diaries Limited access to retail outlets and big brands Big Cities Dual income families Value convenience Prefer quality and accessibility to diaries, would pay more to purchase more healthy substitutes for milk Have high exposure and preference for global brands Tier 2 and 3 city consumers are more likely to value Prabhat products

11 Prabhat faces high competition Supply of milk in India is distributed MNCs like Nestle and Danone are investing locally Consumption Private and Domestic firms like GCMMF, Amul and other co-ops occupy 80% of the market share 10-15% price advantage Farmer Cooperatives Multinational Hand to hand Small farmers produce 80% of the milk Price MNCs Co-op own < 2 cows with low production capacity and no mechanization 25% of farmers are unorganized Prabhat Prabhat has high pricing advantage Production

12 To sum up the analysis S Pricing advantage by owning the supply chain W Branding and Retail Marketing Decreasing working capital O Decreasing average age and increasing urban population in Tier 2-3 cities T Growing milk co-operative societies

13 Recommendations

14 The key issues are Given that Prabhat is one of the most profitable diary companies in the B2B segment in India, How can you crossover to B2C segment and be profitable Competition from Cooperatives Decreasing Working capital Distribution challenges Low brand awareness

15 Which should be Prabhat s expansion strategy? Business-to-Business Avoidance strategy: Tier 2/3

16 Which should be Prabhat s expansion strategy? B2B B2C Value Market Size Profitability Investment

17 Which should be Prabhat s expansion strategy? B2B B2C Mix (50/50) Value Market Size Profitability Investment

18 The two pillars of growth Markets Products

19 The two pillars of growth Markets Products

20 Which should be Prabhat s expansion strategy? City-by-city assault: Tier 1 Avoidance strategy: Tier 2/3

21 Which should be Prabhat s expansion strategy? Market Size Distribution challenges Competition Brand Tier 1 Tier 2 / 3 Rural areas Prabhat needs to strengthen their position within Tier 2 and Tier 3

22 The two pillars of growth Markets Products

23 Value added dairy products Market size CAGR% Retail price Margin Market dynamics Competition Ghee - Curd Yougurt - Flavored milk Ice cream Introduce yogurt as a value added milk product

24 Which should be Prabhat s expansion strategy? Product Place Price Promotion What Expand to offer yogurt products Why Adjust offers to the needs from the Indian B2C markets How Procure farmers selling Bufallo milk for dairy products (more adjusted to Indian preferences, higher fat content, more profits for farmers, less cholesterol) Allocate excess production capacity

25 Which should be Prabhat s expansion strategy? Product Place Price Promotion What Target urban cities pune, kolhapur Why Population is moving to tier 2 and tier 3 cities Pune has a growing IT infrastructure attracting more people for work How Implement innovative distribution methods Expand project Raftaar beyond the short-life products and packaged milk into the full product offers Bypass distributors by increasing workforce of salespeople and chilled vans Expand distribution into smaller kirana stores

26 Which should be Prabhat s expansion strategy? Product Place Price Promotion What Price competitively compared to MNCs Why They are the only key players Want to attract people on price because of low brand awareness How Better distribution and more cost effective Buffalo milk will allow you to leverage suppliers

27 Which should be Prabhat s expansion strategy? Product Place Price Promotion What Women as a targeted segment Why How Responsible for shopping Care about family and health Re-package products and design packages with nutricional value, health benefits, quality of milk

28 Financials

29 CAPEX INR Year Capital expediture Production adaption 30 New package 10 Total

30 OPEX INR Year Operational expediture Marketing HR Leasing machinary Total

31 Revenues INR Year Revenues Operational Total

32 In summary WACC 10.4% Equity Debt 78% 22% 15% 6% C. Taxes 22% INR Year Expenses Revenues Cash-flow DCF R. value NPV 1274,2

33 Plan & Risks

34 What is the implementation plan? Q1 Q2 Q3 Q4 Increase production for value add products Recruit and hire sales people Hire marketing firm Create marketing plan Recruit sales people Improve with kirana Launch marketing Start delivering product

35 Probability What are the risks? Antagonize distributors by-passing them Focus on kirana with new product and distributors work in smaller stores Risk