Report on Marketing Strategy of Nestle MILKPAK

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Report on Marketing Strategy of Nestle MILKPAK

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Strategic Marketing Project Report On

NESTLE MILKPAK
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Submitted To: Mr. Jawad Saleem Submitted By:

Naveed Ahmed 071191 Rehman Baig 071172 Tariq Waseem 071194 Mazhar Cheema 063171 Hamza Ahmed 083606 Table of Contents Executive Summary 4 NESTLE 5 HISTORY OF NESTLE 5 COMPANY VISION 5 COMPANY MISSION 5 PRODUCTS 6 NESTLE IN PAKISTAN 6 NESTLE MILKPAK 6 COMPETITORS 7 Competitive Advantage 7 Demographics of Pakistan 8

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Pakistan Milk Market/Industrial Analysis 9 MILK Flow Channels in Pakistan 12 Industry SWOT Analysis 13 Strenghts 13 Weaknesses 13 Opportunities13 Threats13 Milk Supply Chain in Pakistan 14 Milk Industry of India (SWOT).....15 Market Segmentaion of Nestle Milkpak 18 Geographic Segmentation 18 Demographic Segmentation 18 Targeting 18 Situation Analysis 18 Awareness: 18 Top of the mind recall 18 Market Share (%) 19 Market Trends 20 Market Potential 20 SWOT Analysis (Nestle Milkpak) 20 Strengths 20 WEAKNESSES 21 OPPORTUNITIES 21 THREATS 21 Positioning Strategy 22 Differentiation 22 Marketing Mix 22 PRODUCT 22 PRICE 22 PLACEMENT 23 Distribution Channels 23 PROMOTION 23 Marketing Strategy 23 Recommendations 23 BIBLIOGRAPHY 24

Executive Summary
Pakistan is an agricultural country. According to Ministry of Food, Agriculture and livestock, agriculture accounts for 20.9 percent of the GDP. Dairy industry contributes 49% to the agriculture

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value and 11% to the GDP. Annual production of milk is 35.25 Billion liters in the country; But the Processed milk is only 4% of the total production. Like other countries Dairy is not a dedicated profession of the people, farmers is associated with dairy and agriculture at the same time, Profitability for the farmers is very less. Infrastructure is not developed, cooling tanks and other facilities are not available, and the large part of milk production is wasted. There is a multi-hierarchal distribution system of the milk; the farmers are not getting reward of their work. All these factors are making this industry unattractive for the farmers and the industry is no developing up to the mark. Only 4% of the total milk production is processed and used in urban areas of the country. According to Pakistan Dairy Development Authority Only 0.52 Billion liters UHT and 0.5 Billion liters pasteurized milk is available in the country. In urban areas 4.7 Billion liters milk is provide by Gawalas. 1.27 Billion liters processed milk is sold by the milk shops. There is a potential of about 5 billion liters of milk sold in the urban areas. In urban areas people are more health and quality conscious, the income level of urban population is also good so this segment has potential for UHT and Pasteurized milk. Nestle is the world largest food company and nestle MilkPak is Nestls famous UHT milk brand. Nestle Milkpak has south Asias biggest Plant at Kabirwala. It is targeting upper and middle class. It is differentiating its brand by adding Iron and Vitamin C. The Nestle MilkPak is following growth strategy. The immense competition is going in the market; it is recommended that Nestle Milkpak should invest more in milk business and other value added milk products. In this way Nestle Milkpak can fulfill the local demand by locally processed milk and milk products instead of the imported milk products. Nestle has brand recognition throughout the world and they can export milk powder and other value added products in future.

Nestle
Nestle is the largest food company in the world. It is present in all five continents, has an annual turnover of 74.7 billion Swiss Frances. There are 509 factories are running in 83 countries, having 231,000 employs.

History Of Nestle
Our story begins in 1867, when Henry Nestle developed a baby formula that saved childs life and marked the beginning of Nestle. It is originally consisted of two companies and two products, Henry Nestle and His baby food in Vevey, and the Anglo Swiss Condensed Milk company and its condensed Milk in Cham, both in Switzerland. His first factory was located in Vevey. In 1875, He sold His Company and retired. In 1880, second factory was built in bercher In 1883, first time Nestle built a factory abroad, in Edlitz Grimmenstein In 1890, Vevey factory produced 28 billion cans of Milk food and 2.2 million cans of condensed Milk. In 1912, Nestle begins it long relationship with South Asia when Nestle condensed Milk company start. In 1979, Milkpak Ltd. Is founded by Syed Baber Ali. It manufactures UHT Milk, Cream and Butter as well as fruit Juices.

Company Vision

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Vision of Nestle Milkpak is to expand business according to the increasing demand of market. As per our company vision in 2020 production capacity of all plants working in Pakistan is being increased. So extension of Kabirwala Plant is the example of our company vision.

Company Mission
At Nestle, we believe that research can help us to make better food, so that people live a better life. Good food is the primary source of good health, so we are trying to make good food. To provide fresh and pure products to the customers, we introduced (SHE) Safety, Health and environment policy to protect health of our employs and keep clean our surrounding environment.

Products
Bottled water Baby food Dairy products Breakfast cereals Nutrition Prepared food

Nestle In Pakistan
Nestle have been serving Pakistani consumers since 1988 when the parent company Switzerland based on Nestle first acquired share in Milkpak. Nestle acquires 40% share in Milkpak. In 1990, Sheikhupura factory started the production of Nido Milk Powder cereals; 1n 1992, Nestle took over the running of company (Kabirwala plant) and began to develop its Milk collection network. In 1996 Milkpak was renamed to Nestle Milkpak Ltd. In 1997, It becomes a fully owned unit of Nestle Pakistan. 1n 1998, Nestle Milk collection system in Punjab matures and company is able to buy all its Milk from Farmers instead of relying on contractors. In 2005, Nestle Milkpak Ltd. Is renamed again Nestle Pakistan.

Nestle Milkpak Dhood ki Qudrati Ghizayat Pure, nutritious goodness of Milk

Pure, rich and delicious Nestle Milkpak standardized (UHT) benefits from Nestles expertise in bringing you the best life has to offer and benefits from 140 years of consumers trust. Encourage your family to exercise regularly, eat a healthy, well balanced diet and drink pure, nutritious Milk for good health. Milk is a must drink for your children as it is a rich source of calcium that helps in the growth and development of strong bones and teeth. A 250ml Nestle Milkpak Glass consist of followings:

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27-30% of calcium, 15-18% of protein, 31-34% of phosphorous,6-9% of Vitamin A and 160-169 k Cal of energy, as recommended dietary allowance by national Academy of Science (USA). The contents of the above said products have the following fruitful benefits for health improvement of Human body. Calcium It is important for the growth of strong bones and teeth. Protein It is necessary for cell and tissue growth. Phosphorous It is important for healthy bones and teeth. Vitamin A It improves vision and keeps skin and hair healthy

Competitors
The main competitors of Nestle Milkpak are: Haleeb Milk Olpers milk Good Milk Dairy Queen Milk

Competitive Advantage
Nestle Milkpak never compromises on quality. Nestle Milkpaks extensive milk collection system ensures that the milk you get is of the finest quality. Nestles products are available in every city and town Nestle is using the latest technology in its production units. Nestle makes milk powder of the surplus milk in winter and converts this milk powder into UHT milk in summer.

Demographics of Pakistan
Pakistan is a small country with limited resources. But the population of Pakistan is 180,000,000. Pakistan has 6th number in population in the world.

Population and Growth

Population: 180,000,000 (2008 EST.) Growth rate: 1.828% (2007 EST.) Birth rate: 27.74 births/1,000 population (2007 EST.) Death rate: 8 deaths/1,000 population (2007 EST.) Net migration rate: -1.24 migrant(s)/1,000 populations (2007 est.)

Age Structure
0-14 years: 40% (male 33,293,428; female 31,434,314) 15-64 years: 56.9% (male 48,214,298; female 46,062,933) 65 years and over: 4.1% (male 3,256,065; female 3,542,522) (2007est.)

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Sex ratio at birth: 1.05 male(s)/female under 15 years: 1.06 male(s)/female 15-64 years: 1.05 male(s)/female 65 years and over: 0.92 male(s)/female Total population: 1.05 male(s)/female (2007 EST.)

Literacy:
Definition: Over the age of 15 and can read and write.
Total population: 54% (2004 EST.) Male: 60% Female: 40%

Population of Major Cities of Pakistan

Cities
Karachi Lahore Rawalpindi Faisalabad Multan Gujranwala Hyderabad Islamabad

Population
15 Million 9 Million 3 Million 2.6 Million 1.6 Million 1.3 Million 1.3 Million 1.3 Million

Peshawar

1.0 Million

Pakistan Milk Market/Industrial Analysis

Pakistans economy is predominantly agrarian in nature. Agriculture accounts for 20.9 percent of the GDP. 43.4 percent of the total work force is from agriculture sector and it is the main source of livelihood for 66 percent of the countrys population living in rural areas. Growth in the agriculture sector registered a sharp recovery in 2006-07 and grew by 5%. Pakistan is the 5th largest milk producing country in the world. An estimated 33.25 billion liters of annual milk is produced. Approximately 50 million animals managed by 8 million farming households. Contribution of the livestock sector to Pakistans GDP is at 11% while the processed milk sector contributes about 0.43 per cent. The milk economy represents 27.7%2 of the total value of the Agriculture sector.

Total Target Market Of Milk

180000000

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Annual Production Of Milk (Billion Liters) 33.25

Total market of Gawala (96%) Billion liters

31.92

Total EXISTING market of processed milk (4%) Billion Liters

1.33

Need Analysis (UHT and Loose Milk) Predicted Supply of Fresh and UHT Milk
Supply of fresh milk Supply of UHT milk

Year (Million liters) (Million liters)

2007-08

33805.10

557.72

2008-09

35495.25

648.43

Projections of Fresh Milk Production and Consumption Up to 2008 09

Annual Production Annual Consumption

Years (million liters) (million liters)

2008-09

35495.25

36361.25

2009-10

37669.75

38188.92

About 1.02 billion liters milk is imported.

Projections of UHT Milk Production and Consumption up to 2008 09

Annual Production Annual Consumption

Year (million liters) (million liters)

2008-09

648.43

353.71

2009-10

753.89

372.05

Our projections show increasing deficits in fresh milk production and increasing surpluses in UHT milk market in the run up to 2009-10, which suggests that the industry should get ready to face challenges. The analysis shows that Pakistans milk yields are very low, and even simple management of feed (proper timing, proper mix and so on) can increase yield substantially. This requires intervention at two levels: a) The farmers need to have better knowledge of feed management. This can be done by involving milk plants and provincial livestock departments who can provide training and extension services to dairy farmers. b) The feed industry needs to be developed substantially to provide better quality animal feed at affordable prices. Currently we do not have sufficient supply of high quality nutrients and additives, especially in rural areas. A specific package needs to be developed with the help of the government and in partnership with the private sector that would facilitate and encourage the development of a modern feed industry. Further, the vast potential of using molasses as concentrate in animal feed also need to be taped.

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Milk Flow Channels in Pakistan

Dairy Farmer
Formal sector 4% Share Informal Sector 96 % Share

Gawala (Milkman)

Retailer
Milk Collector
Distributor/Retailer

Milk Processing Plant Milk Collection Agency

Customer
Industry SWOT Analysis
Strenghts: Pakistan dairy industry is the Worlds fifth largest industry Pakistan Dairy Industry is Cheaper than Austrai, America and other deveolped countries. Farmers are engaged in agriculture and dairy at the same time. By-product of Agriculture is used in Dairy By-product of dairy is used in agriculture. Weaknesses: Poor profitability for farmers. Lack of contact for farmers to the market mechanism. Poor dairy infrastructure in rural areas. Lack of education among the farmers is making it difficult to change farm and dairy management systems. Lack of knowledge about optimal feed. Lack of a cold chain to protect milk quality. Lack of access to well trained support service staff such as Veterinarians. Despite the huge volume of milk produced in Pakistan, processors find it hard to procure sufficient milk to meet future consumer demand. Increasing demand for imported products. The product range offered to consumers is not well developed. Production of milk falls to 55% of peak production at its lowest point in mid-June. The demand increases 60% during June compared to December when the milk supply is ample. Opportunities: There is an opportunity for companies to introduce value-added products like shrikhand, ice creams, paneer, khoya, flavored milk, dairy sweets, etc. There is a phenomenal scope for innovations in product development, packaging and presentation. Threats: Very low quality milk is provided by the milkmen to dairy farms which is a very big threat for the entire market. The shortage of milk providing animals is also a threat for entire milk industry.

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Milk Supply Chain in Pakistan

Consumer
Gawala (Milkman) Halwai (sweet shop)

De-creamer
Milk Collector Dairy Farmer Retailer Milk Industry of Neighbour Country (India ):
Strenghths: Demand profile: Absolutely optimistic Margins: Quite reasonable, even on packed liquid milk. Flexibility of product mix: Tremendous with balancing equipment, you can keep on adding to your product line. Availability of raw material: Presently, more than 80 per cent of milk produced is flowing into the unorganized sector, which requires proper channelization. Technical manpower: Professionally-trained, technical human resource pool, built over last 30 years. Weaknesses: Perishability: Pasteurization has overcome this weakness partially. UHT gives milk long life. Surely, many new processes will follow to improve milk quality and extend its shelf life. Lack of control over yield: Theoretically, there is little control over milk yield. However, increased awareness of developments like embryo transplant, artificial insemination and properly managed animal husbandry practices, coupled with higher income to rural milk producers
should automatically lead to improvement in milk yields.

Logistics of procurement: Woes of bad roads and inadequate transportation facility make milk procurement problematic. But with the overall economic improvement in India, these problems would also get solved. Problematic distribution: Yes, all is not well with distribution. But then if ice creams can be sold virtually at every nook and corner, why cant we sell other dairy products too? Moreover, it is only a matter of time before we see the emergence of a cold chain linking the producer to the refrigerator at the consumers home! Competition: With so many newcomers entering this industry, competition is becoming tougher day by day. But then competition has to be faced as a ground reality. The market is large enough for many to carve out their niche. Opportunities: "Failure is never final, and success never ending. Dr Kurien bears out this statement perfectly. He entered the industry when there were only threats. He met failure head-on, and now he clearly is an example of never ending successes! If dairy entrepreneurs are looking for opportunities in India, the following areas must be tapped: Value addition: There is a phenomenal scope for innovations in product development, packaging and presentation.

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Given below are potential areas of value addition: o Steps should be taken to introduce value-added products like shrikhand, ice creams, paneer, khoa, flavored milk, dairy sweets, etc. This will lead to a greater presence and flexibility in the market place along with opportunities in the field of brand building. o Addition of cultured products like yoghurt and cheese lend further strength - both in terms of utilization of resources and presence in the market place. o A lateral view opens up opportunities in milk proteins through casein, and other dietary proteins, further opening up export opportunities. o Yet another aspect can be the addition of infant foods, geriatric foods and nutritional. Export potential: Efforts to exploit export potential are already on. Amul is exporting to Bangladesh, Sri Lanka, Nigeria, and the Middle East. Following the new GATT treaty, opportunities will increase tremendously for the export of agri-products in general and dairy products in particular. Threats: Milk vendors, the un-organized sector: Today milk vendors are occupying the pride of place in the industry. Organized dissemination of information about the harm that they are doing to producers and consumers should see a steady decline in their importance. The study of this SWOT analysis shows that the strengths and opportunities far outweigh weaknesses and threats. Strengths and opportunities are fundamental and weaknesses and threats are transitory. Any investment idea can do well only when you have three essential ingredients: entrepreneurship (the ability to take risks), innovative approach (in product lines and marketing) and values (of quality/ethics). The Indian dairy industry, following its deli censing, has been attracting a large number of entrepreneurs. Their success in dairying depends on factors such as an efficient yet economical procurement network, hygienic and cost-effective processing facilities and innovativeness in the market place. All that needs to be done is: to innovate, convert products into commercially exploitable ideas. All the time keep reminding yourself: Benjamin Franklin discovered electricity, but it was the man who invented the meter that really made the money.

Market Segmentaion of Nestle Milkpak Geographic Segmentation:

Milkpak has segmented the market on the basis of Geographic segmentation and its target market is major populated cities of pakistan

Demographic Segmentation:
Nestle Milkpak is also segementing the market on the basis of Income level of the people. Three Income level has been defined; Higher, middle and lower income classes.

Targeting
Urabn areas of the country Upper and Middle income class

Situation Analysis Awareness:

Top of the mind recall Due to strong brand positioning and effective advertising, Milkpak has highest awareness level.

Brand

Awareness (%)

Milkpak

43

Haleeb

38

Olpers

Dairy Queen

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Good Milk

Nurpur

Market Share (%)

Good Milk 1

Milk Pak

45

Dairy Queen

Haleeb

22

Olpers

17

Nur Pur

Others

The table shows that Milkpak has the highest market share due to its consistent quality.

Market Trends
The growth of processed milk is increasing by 20% annually People are getting more quality and health conscious with the passage of time Due to impurities of Gawala milk, people are attracting towards processed milk Key factors are: Changing lifestyle Influence of foreign media

Market Potential
At an average, a Pakistani consumer spends 42 % of income on food Consumer often prefer branded food items for both quality and status reasons Per capita real GDP has increased at an average of 5.6 % per annum during the last three years This increase has led to a rise in average income of people and an increase in consumer spending.

SWOT Analysis (Nestle Milkpak)

Strengths: Strong Brand image: Nestle has been serving the Pakistani consumers since 1988, and it has built a strong brand image due to its quality products. Quality product: Nestle Milkpak is known as the best UHT milk in Pakistan due to consistency in quality. Solid Financial position: Nestle Milkpaks annual turnover is Rs.30 Billion which provides it a financial edge over its competitors. Strong supply chain network:

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Nestle collects Milk directly form the farmers instead of relying on the contractors. And it distribution is also very strong. In this way it has a complete control over its supply chain.

Qualified work force Commitment to High Quality Products Focus on research and development
Weaknesses: The target market of Nestle Milkpak is upper middle and high class because lower middle and poor class cannot afford to buy UHT milk due to its premium price. This is the only weakness of Milkpak. Opportunities: Estimations of UHT Milk Production and Consumption up to 2008 09

Annual Production Year (million liters)

Annual Consumption (million liters)

2008-09

648.43

353.71

2009-10

753.89

372.05

The projected values of UHT Milk consumption and production are obtained from the ARIMA model. More people are coming towards processed milk because loose milk is dangerous for health due to a lot of contamination. Growth of processed milk is increasing with 20% annually so Nestle Milkpak has the opportunity to capture a large share of market. Threats: Two main competitors Haleeb and Olpers are main threat for Milkpak especially the Olpers is growing very fast. Inflation is getting higher and higher so the purchasing power of the people is decreasing day by day. There is no entry barrier for new entrants as the Olpers has come in the market.

Positioning Strategy
Functional Positioning Nestle Milkpak has adopted the functional positioning strategy like: Khaalis He Sab Kuch Hai Wohi Qudarti Maza Jaan Banaoo

Differentiation
Addition of IRON and Vitamin A & C

Marketing Mix
Product: Quality Product Nestle Milkpak has the largest market share due to its consistent quality. Product Style and logo Nestle Milkpak is available in different product range and stylish packaging. Product Lifecycle Nestle Milkpak has been in the market for a very ling time and it is at maturity stage. Price:

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Competition Based Pricing Milkpak is holding a large share in the market due to its quality at same price as compared to competitors. Placement: Distribution Channels: Milkpak is not sold directly to consumers and the complete distribution process is followed. It uses indirect channels for distribution like: ManufacturerDistributorWholesalerRetailerConsumer Promotion: Focusing on health conscious people in their advertisement. Promotion Mix Advertisement Public relations

Marketing Strategy
Nestle is pursing growth strategy. They have invested $ 70 billion at Kabirwala Plant and they are planning to invest $ 381 billion in the milk business.

Recommendations
The immense competition is going in the market so Nestle Milkpak should penetrate more and more in the market. Only 4 % milk is being processed and 96% people are using loose milk so Nestle Milkpak has the opportunity to capture a large share of the market through more creative advertising and other promotional activities. Nestle Milkpak should invest more on research and development because customers using loose milk are getting a lot of contaminations especially in urban areas so Nestle Milkpak can provide awareness to people in this aspect.

Bibliography
Mr. Imran Rasool: Executive Marketing, Nestle MilkPak. Mr. Shehzad Anwar: Assistant Area Sales Executive Nestle Milkpak. Mr. Mustafa Zaidi: Joint Director Research and Development, Lahore Chamber of Commerce. Dairy reports: White Revolution by Pakistan Dairy Development Company Year book 2006-07, By Ministry of Food, Agriculture and Livestock. Websites: http://www.google.com http://www.wikipedia.com

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