Strategic Marketing Project Report On

NESTLE MILKPAK

Submitted To: Mr. Jawad Saleem Submitted By:

Naveed Ahmed 071191 Rehman Baig 071172 Tariq Waseem 071194 Mazhar Cheema 063171 Hamza Ahmed 083606

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 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

yOnly 0.52 Billion liters UHT and 0.5 Billion liters pasteurized milk is available in the country. yIn urban areas 4.7 Billion liters milk is provide by Gawalas. y1.27 Billion liters processed milk is sold by the milk shops. yThere is a potential of about 5 billion liters of milk sold in the urban areas. yIn 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
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: 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
yPopulation: 180,000,000

(2008 EST.)

yGrowth rate: 1.828% (2007

EST.)

yBirth rate:

27.74 births/1,000 population (2007 EST.)

yDeath rate:

8 deaths/1,000 population (2007 EST.)

yNet

migration rate: -1.24 migrant(s)/1,000 populations (2007 est.)

Age Structure
y0-14

years: 40% (male 33,293,428; female 31,434,314)

y15-64

years: 56.9% (male 48,214,298; female 46,062,933)

y65

years and over: 4.1% (male 3,256,065; female 3,542,522) (2007est.)

ySex

ratio at birth: 1.05 male(s)/female

yunder 15

years: 1.06 male(s)/female

y15-64

years: 1.05 male(s)/female

y65

years and over: 0.92 male(s)/female

yTotal

population: 1.05 male(s)/female (2007 EST.)

Literacy:
Definition: Over the age of 15 and can read and write.

yTotal

population: 54% (2004 EST.)

yMale: 60%

yFemale: 40%

Population of Major Cities of Pakistan

Cities Karachi Lahore Rawalpindi Faisalabad Multan Gujranwala

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

Hyderabad Islamabad

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 Annual Production Of Milk

180000000

(Billion Liters) Total market of Gawala (96%) Billion liters Total EXISTING market of processed milk (4%) Billion Liters

33.25 31.92

1.33

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

Supply of fresh milk Year (Million liters) 2007-08 2008-09 33805.10 35495.25

Supply of UHT milk

(Million liters) 557.72 648.43

Projections of Fresh Milk Production and Consumption Up to 2008 09

Annual Production Years (million liters)

Annual Consumption

(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 Year (million liters)

Annual Consumption

(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.

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:

yPakistan dairy industry is the Worlds fifth largest industry

yPakistan Dairy Industry is Cheaper than Austrai, America and other deveolped countries.

yFarmers are engaged in agriculture and dairy at the same time.

yBy-product of Agriculture is used in Dairy

yBy-product of dairy is used in agriculture. Weaknesses:

yPoor profitability for farmers.

yLack of contact for farmers to the market mechanism.

yPoor dairy infrastructure in rural areas.

yLack of education among the farmers is making it difficult to change farm and dairy management systems.

yLack of knowledge about optimal feed.

yLack of a cold chain to protect milk quality.

yLack of access to well trained support service staff such as Veterinarians.

yDespite the huge volume of milk produced in Pakistan, processors find it hard to procure sufficient milk to meet future consumer demand.

yIncreasing demand for imported products.

yThe product range offered to consumers is not well developed.

yProduction of milk falls to 55% of peak production at its lowest point in mid-June.

yThe demand increases 60% during June compared to December when the milk supply is ample. Opportunities:

yThere is an opportunity for companies to introduce value-added products like shrikhand, ice creams, paneer, khoya, flavored milk, dairy sweets, etc.

yThere is a phenomenal scope for innovations in product development, packaging and presentation.

Threats:

yVery low quality milk is provided by the milkmen to dairy farms which is a very big threat for the entire market.

yThe shortage of milk providing animals is also a threat for entire milk industry.

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:

yDemand profile:

Absolutely optimistic

Margins:

Quite reasonable, even on packed liquid milk.

yFlexibility of

product mix:

Tremendous with balancing equipment, you can keep on adding to your product line.

yAvailability of raw

material:

Presently, more than 80 per cent of milk produced is flowing into the unorganized sector, which requires proper channelization.

yTechnical

manpower:

Professionally-trained, technical human resource pool, built over last 30 years.

Weaknesses:

yPerishability: 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.

yLack 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.

yLogistics

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.

yProblematic

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!

yCompetition:

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:

yValue

addition:

There is a phenomenal scope for innovations in product development, packaging and presentation.

Given below are potential areas of value addition:

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.

Addition of cultured products like yoghurt and cheese lend further strength - both in terms

of utilization of resources and presence in the market place.

A lateral view opens up opportunities in milk proteins through casein, and other dietary

proteins, further opening up export opportunities.

Yet another aspect can be the addition of infant foods, geriatric foods and nutritional.

yExport 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 agriproducts in general and dairy products in particular.

Threats:

yMilk 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 costeffective 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

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

yDemographic 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 Milkpak Haleeb Olpers Dairy Queen Good Milk Nurpur

Awareness (%) 43 38 9 7 2 1

Market Share (%)

Good Milk

Milk Pak Dairy Queen Haleeb Olpers

45 9 22 17

Nur Pur Others

4 2

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:

yStrong Brand image: Nestle has been serving the Pakistani consumers since 1988, and it has built a strong brand image due to its quality products.

yQuality product: Nestle Milkpak is known as the best UHT milk in Pakistan due to consistency in quality.

ySolid Financial position: Nestle Milkpaks annual turnover is Rs.30 Billion which provides it a financial edge over its competitors.

yStrong supply chain network:

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.

yQualified work force yCommitment to High Quality Products yFocus 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:

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:

Manufacturer Distributor Wholesaler Retailer Consumer

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
yThe immense competition is going in the market so Nestle Milkpak should penetrate more and more in the market.

yOnly 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.

yNestle 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