Prabhat Dairy NANYANG. To the Board of Prabhat Dairy From Nanyang Consulting

Transcription

1 Prabhat Dairy To the Board of Prabhat Dairy From Nanyang Consulting Nanyang Business School Deeksha Bajaj Bohao Zou Zeeshan Ashraf Wendell Shirley

2 Agenda Problem Statement Analysis Recommendation Evaluation of Alternatives Implementation for o Portfolio expansion and brand building o Multichannel regional distribution strategy o Farmer support program Balanced Scorecard Financial Management Implementation Timeline Risk Mitigation Key Takeaways 2

3 Problem Statement Overall B2B business B2C business Rising milk procurement prices Increase in inventory days (17 to 23 days) Declining working capital Lack of branding and marketing experience Selection of value-added dairy product Selection of target market and distribution channels Intense competition in the market (e.g. Amul) Whether Prabhat change the balance between B2B and B2C? How can it successfully expand its footprint in Indian B2C market? 3

4 Analysis Current Portfolio Prabhat Parag Kwality Hatsun Agro Milk 28% 43% 49% 18% Value-added milk 1% 25% 51% 74% Value-added milk products 71% 32% 0% 8% Value-added products constitute the majority share of Prabhat s product portfolio 4

5 Analysis Market RETAIL CHANNELS Kirana Stores Tier 1 Tier 2 Tier 3 Villages Chain Retail Stores X X TARGET SEGMENTS Female members of the family Young people X X The target customer segments and retail channels vary by cities in India 5

6 Recommendations 1 B2C Expand product portfolio and build umbrella brands 2 B2C Use multichannel regional distribution strategy 3 B2B and B2C Launch a farmer support program microfinance and trainings 6

7 Evaluation of Alternatives Profitability Increase in customer base Relationship management Working capital Overall Expand B2B business Expand in B2C market Launch new products and build brand Expand internationally - - Launch farmer support program Changing the distribution strategy Favorable Unfavorable 7

8 B2C - Expand product portfolio and build umbrella brands 8

9 Portfolio expansion and brand building CATEGORY SELECTION Size Potential Growth Profitability Competition Overall Milk Ghee - Curd Flavored Milk Yogurt Favorable Unfavorable Launch new value-added milk product categories Flavored Milk and Yogurt 9

10 Portfolio expansion and brand building LAUNCH PLAN Marketing Build umbrella brands (Prabhat choka, Prabhat yogurt) Example: Patanjali (range of products including skin care and pulses) Price Lower compared to MNCs Example 250ml for INR Product Format Smaller packages to test the market Example shampoo sachet Build umbrella brands to increase market reach 10

11 Portfolio expansion and brand building MARKETING 1 Bollywood star brand ambassadors (e.g. Amir Khan and Salman Khan) 2 3 Traditional advertising out-of-home (e.g. banners) and TV advertisements Special packaging for kids and teenagers (e.g. Kinder Joy) 4 Social media campaigning Facebook (12 M users) Launch products with local marketing campaigns 11

12 Multichannel regional distribution strategy 12

13 Multichannel regional distribution strategy DISTRIBUTION IN TIER 1 CITIES Online retailing Potential partners big basket and flipkart Example: T-supermarket of Alibaba Delivery Free delivery for more than CAD 10 Location Wave 1 Mumbai Wave 2 Delhi and Bangalore Expand in Tier 1 cities using online retail channels 13

14 Multichannel regional distribution strategy DISTRIBUTION IN TIER 1 CITIES Traditional Stores Keep the same pace of expanding in Tier 1 market Benefits Low Investment, existing infrastructure Huge market potential Avoid direct offline competition Launch multi-channel distribution in Tier 1 cities 14

15 Multichannel regional distribution strategy DISTRIBUTION IN TIER 2 and TIER 3 CITIES Partner with regional distributors Go against the local cooperatives Be the first mover in tier 2 and Tier 3 cities Grow Prabhat to a national brand Penetrate Tier 2 and Tier 3 cities 15

16 Launch farmer support program 16

17 Launch farmer support program STAKEHOLDERS Supply Dairy Farmers Prabhat Demand Consumers / Businesses Largest cow population 80% small farmers Challenges Lack of scale to offset capital costs Lack of Indian fodder Increasing price of fodder Increase supply to satisfy the pent-up demand 17

18 Launch farmer support program MICROFINANCE FOR FARMERS Microfinance partners such as Mahindra Prabhat Buy milk at lower prices Farmers Strengthen the base of dairy farmers 18

19 Launch farmer support program LAUNCH PLAN Set up manufacturing plants and collection points in Haryana (to cater to expansion plans in northern india) Build relationships with farmers around the plants for micro-finance and trainings Utilize new and old collection points for promoting the support program 4 5 Set up a team in Mumbai to work with micro-financers and manage the program Purchase milk at lower prices and share profits with micro-financers Support program will help to strengthen B2B and B2C businesses 19

20 Balanced Scorecard 20

21 Balanced Scorecard Learning and Development How long does it take to develop new products? How long for microfinance project? Internal How long and how much does it take to incorporate the new production lines? How many partners for microfinancing? Customer What is the market share of the valueadded milk product market? (B2C) How many farmers are taking microfinancing? Financial What is the payback period for new production times? What is the default rate of microfinancing? 21

22 Finance, Implementation and Risk Mitigation 22

23 Financial Management 90% 2% The grocery industry has razor-thin margins due to high operating costs 23

24 Financial Management Assumptions CAD $.42 retail price per liter for milk CAD $2.28 retail price per liter for flavored milk CAD $7.50 retail price per liter for yogurt 1% market share growth in first 3 years, 2% in 4 th year onward 16% CAGR in milk, 32% CAGR in milk, 28% CAGR in milk 20% target market out of Indian market based on tier-city focus Use short-term debt financing and free cash flow from IPO equity 25% Permanent Reduction in D/E Ratio 20% Year-over-year increase in Operating Case flow 15% First year Top-line revenue growth 24

25 Financial Management Prabhat can increase its market share through targeted market offerings by 132% by

26 Implementation Timeline Expand product portfolio and build brand Undertake market research for consumer preference R&D for new value-added dairy products Set up new production lines Traditional Advertising Celebrity/Entertainment Endorsement Online marketing campaign Multichannel distribution Refine warehousing capabilities Partner with online retailing platforms Partner with T2 and T3 regional distributors Farmer support program Partner with microfinancing institutions (Mahindra) Establish Haryana manufacturing facility Acquire farmers in new regions Q1 Q2 Q3 Q4 H1 H2 H1 H2 H1 H2 H1 H2 Long-term Strategy a) New product development and investment in manufacturing capability b) Servicing international B2B customers Expand into international B2C market in SE Asia for Indians abroad Strengthen internal competencies and diversify products to penetrate Indian market 26

27 Risk Mitigation Identified Risk Increasing competition in valueadded milk products from international players Proposed Mitigation Leverage on increased yield for farmers through micro-financing benefit to gain supplier loyalty Initial lack of consumer awareness for new product lines Partner with market research firm to validate advertising of product launch High defragmentation of competitor presence in multichannel market Offer bundled dairy product promotions to gain marketing advantage Combat headaches of product and market diversification by expanding internal competencies 27

28 Key Takeaways Whether Prabhat change the balance between B2B and B2C? How can it successfully expand its footprint in Indian B2C market? B2C Expand product portfolio and build umbrella brands B2C Use multichannel regional distribution strategy Launch a farmer support program microfinance and trainings 28

29 Questions? 29