Strategic Management of Engro Foods

2. PRESENT BY.
MASROOR

3. Industry Overview
 The food and its allied products industry is considered Pakistan’s largest
industry
 Pakistan’s food industry produces cooking oils, sugar, flour, dairy products
such as milk, butter, yogurt, cheese and ice-cream, biscuits, breads and
confectionery, fruit juices and fruit juice drinks, carbonated beverages,
snack foods based on rice, potatoes, corn and pulses, processed chicken,
jams, jellies, squashes, sauces, pickles, and some canned fruits
 Pakistan is the 4rth largest milk producing country in the world
 An estimated 33.25 billion liters of annual milk is produced
 Approximately 50 million animals managed by 08 million farming
households.
 The milk economy represents 27.7% of the total value of the Agriculture
sector.

4. 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 loose milk, people are attracting towards
processed milk.

5. Dairy Industrial SWOT Analysis
STRENGTH
•Good breed of buffalos and cows
•4rth Largest Industry Dairy Industry in Pak.
•Pak Dairy Industry is Cheaper than Austria,
America and other developed countries.
•Farmers are engaged in agriculture and dairy
at the same time.
WEAKNESS
•Small and scattered animal holding
•Prevalence of traditional raw milk marketing
system
•Milk processing predominantly dependant on
obsolete UHT technology
•Inadequate infrastructure and institutional
facilities and support
•Poor quality of animal health care and
breeding services; lack of professional
management
OPPORTUNITIES
•Huge unsatisfied demand of milk and milk
products
•Increase consumer awareness of healthy
eating
•There is an opportunity for companies to
introduce value-added products like ice
creams, flavored milk, dairy sweets, etc
•There is a phenomenal scope for innovations
in product development, packaging and
presentation
THREATS
•Unregulated imports of dairy products at
cheap prices
•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.

6. Diversified Portfolio of Engro Pakistan
Engro Corporation Limited (formerly known as .Engro Chemical Pakistan
Limited.) is one of the largest industrial corporations in Pakistan.
It has following subsidiaries business units
 Engro Fertilizer
 Engro Foods
 Engro Power Generation
 Engro Polymer & Chemical
 Engro EXIMP
 Engro Vopak Terminal
 Elengy Terminal Pakistan

7. Why did Engro enter the food business?
“Big opportunity due to
population growth and
indigenous sourcing. There is a
huge population. One seventy
million is a very big market.
There are only a few countries
with such a huge population in
the world. Besides, our people
spend a lot on food. Our
economy is agro-based. We get

8. Engro Foods (Pvt.) Limited (EFL)
 Engro Foods Limited was formed as a wholly owned
subsidiary of Engro Corporation in 2005.
 It start its operation in 2006 and engaged in the
manufacturing, processing and marketing of dairy products,
ice cream and fruit juices.
 The Plant Located at Sukkur on 23 Acre Land
 The Plant has been established at a Cost of Rs. 1 Billion
which provide direct employment to 1400 people.

9. Quick Facts & Figures
 1,243 Employees
 45% Market Share of Dairy Products
 Market in
 300+ Cities in Pakistan
 18+ states in USA
 4 Provinces in Canada
 18th Largest Customer of Tetra Pak World Wide
 2nd Largest Company of Chilled Milk Collection of Pakistan
 2000+ Milk Collection Centers
 35,000 farmers directly linked with EFL
 2 Milk Processing Plants
 Milk Production Capacity is 700 Thousand Liters per Day.
 Total Assets Rs. 24,046 Millions

10. Departments in Engro Foods
 Administration
 Finance and Accounts
 Human Resource
 Marketing
 Procurement
 Management Information System
 Production
 Quality Assurance
 Supply and Distribution

11. Products Portfolio

12. Vision Statement
Engro Foods will continue to make
investments
aimed at impacting lives and
delighting consumers
each day, every day, in a multitude
of ways.

13. Mission Statement
“Build Branded food business to
improve quality of life by offering
tasty, affordable and highly
nutritional products to our
consumers while maximizing stake

14. Objective
Engro foods main objectives are to
supply everyone their favorite Dairy
Products and to satisfy the
consumer needs and wants. Engro
foods second main objectives are
to provide profit to the
shareholders and increase the

15. EFL-SWOT ANALYSIS
Strengths Weaknesses Opportunities Threats

16. SWOT ANALYSIS
STRENGTHS
Relation
with
Farmers
• Strong bond
Customer
Response
• Positive
response,
crossing
over 1.4
billion sales
Quality
• World class
quality
Technology
• Third
generation
plant,
• Bactofuge
tehnology

17. SWOT ANALYSIS
WEAKNESSES
• Outside farmers
Milk Supply
• Dependent upon Tetra
PakPackaging
• Hindrance of place
Distribution

18. SWOT ANALYSIS
OPPORTUNITIES
Govt. Funding
• Funding to
farmers
Consumption
• Increased
consumption
of Processed
Liquid Milk
Awareness
• Dissatisfaction
with loose
milk
Increased
Population
• Increase in
consumption
of process
milk

19. SWOT ANALYSIS
THREATS
Severe
Competition
High Prices Threat

20. Dairy Market Share
MARKET SHARE
Nestle
35%
Engro
27%
Uniliver
21%
Haleeb
17%
Sales

21. CORE COMPETENCIES
 Good brand name
 Doing business without interest
 Latest technology and has a high production capacity.
80,000 liters
 Distribution networks (600 distributors across Pakistan )

22. KEY SUCCESS FACTORS
 Research & Development
 Financial Position
 Market Share
 Product Quality
 Price Competitiveness
 Management
 Global Expansion
 Customer service
 Network Sales And Distribution
 Production Capacity

23. PESTEL Analysis
o EFL make strategies according to the laws and legislations.
o EFL abides to laws set by the government for trade policies,
government policies and completes its responsibilities in a
better manner.
P - POLITICAL FACTOR

24. PESTEL Analysis
 EFL is strongly affected by both the Economic and the
Demographic.
E - ECONOMICAL FACTOR

25. PESTEL Analysis
 EFL has helped to bring about a change in life style of the
Pakistani People by introducing Bactofuge technology
 People awareness program for Olpers and Tarang
Bactofuge treated milk, which helps to improve the sale.
 Usage of open Gawala milk & standardized packed milk.
S - SOCIAL FACTORS

26. PESTEL Analysis
 Use of new technology gives firm there competitive
advantage.
 EFL adopted Bactofuge Technology (Whereas Haleeb use
UHT Technology)
T – TECHNOLOGICAL FACTORS

27. PESTEL Analysis
• Environmental changes can cause failure of strategic plans
• EFL is using environment friendly Technology
• EFL has a friendly environmental culture within the
organization to make their employees comfortable and to
deal with the external problems
E - ENVIRONMENTAL FACTOR

28. PESTEL Analysis
o Check government policy about milk industry
o EFL strictly follows laws like, Minimum wage, working time,
minimum working age, & Environmental regulations
L – LEGAL FACTOR

29. PESTLE Analysis
 EFL renowned company since 2006, and the reason for its
important ethical value.
 They don’t sale on credit or on interest because they
consider it unethical and not according to the law of our
religion
E - ETHICAL FACTOR

30. Marketing Mix

31. Marketing Mix
 Eye catching distinctive packaging of Olper’s Milk (Red
Color)
 Olwell will be positioned in a way that it will target people who
are goal-oriented and focus on their careers
POSITIONING

32. Marketing Mix
 A massive advertisement campaign with Olper's logo on
every bill board, ads and newspapers
 Free Tea using Olper’s Milk will provided to the potential
buyers at major departmental stores for testing purposes
PRODUCT STRATEGY

33. Marketing Mix
 Adopting competitive pricing strategy
 Prices of the competitors are studied
 Milk pack is around 70 Rs, we will introduce our milk with a
price slightly lower than this.
PRICING STRATEGY

34. Marketing Mix
 Olper's milk launched in many major cities
 Distribution into five major regions Lahore, Karachi, Multan,
Islamabad and Peshawar
 Efficient transport facilities as well as warehouses and
storages in different cities
 Trained & Experienced personals will be hired & 5% fixed
commission rate
 Sales target set twice a month after discussion the market
situation with distributor
 Incentives, bonuses, increments, and training will be provided
to the distributors and staff for further improvement in the
distribution field
DISTRIBUTION STRATEGY

35. COMPETITIVE ANALYSIS
 As a new entrant EFL focused more on advertising to
compete with old one’s like Haleeb, Nestle
 Nestle maintained its value of gross profit margin around or
above 30% to ensure that it has a strong control over its
costs, and the efficiency of production. But on the other
hand, Haleeb faced a bit of down fall when Olper’s
introduced their campaign

36. Product Life Cycle Omore
OMORE is at the introductory phase at the life cycle phase as it was
launched in 2009.
At the introduction stage, you should focus on the following
marketing factors:
 pricing
 distribution
 promotion

37. omung lassi’s 2013 campaign

38. omung lassi’s 2013 campaign
An extension from its 2012 campaign, Omung
Lassi's 2013 campaign was geared towards
emphasizing love as a way to target young
audiences. In 2013, Omung Lassi launched its
Pyar Ko Vote Do campaign targeted to its young
market — the energetic, and lively which are
dispersed in the country's colleges and
universities.

39. tarang IIFA 2013

40. Tarang IIFA 2013
Tarang’s promise for bringing something
dhamakedaar every time for consumers led to its first
cross-border consumer promotion initiative in the
STC category ever - Tarang IIFA 2013. This campaign
was not only a new way to garner consumer interest,
but also excited Tarang lovers. With their daily
purchase of Tarang, consumers were offered the
opportunity to attend IIFA Awards 2013. The selection
took place over a lucky draw

41. Omore's monkey peel

42. the launch of mabrook

43. the launch of mabrook
For the first time, Engro Foods has taken the front-end
retailer model to market Mabrook. Mabrook is available
at dedicated Mabrook Milk Shops - retail outlets - that
are spread across Karachi, offering milk from dispenser
and pre-packed pouches.

44. Financial
Evaluation
of EFL

45. Business Revenue (Rs. in billions)

47. Ratio Analysis

48. Ratio Analysis

49. Comments on Some Financial Indicators
o Gross Profit Ratio
Decline in 2013 compared to last year was due to high inflation in input and utilities cost.
o Net Profit to Sales / EBITDA Margin to Sales
Externalities like aggravating power crises, law and order situation together with
distribution issues & one-time charges led to the deterioration of these ratios in 2013
o Return on Equity
From 2010 to 2012 these returns witnessed improvement on account of business
performance and growth. Decline in 2013 is mainly due to one-time charges coupled
with other issues discussed above
o Return on Capital Employed
This is in line with the profitability; the year 2013 was a test of Company’s resilience to
face turbulent times after a smooth ride for few years back to back.
o Current Ratio / Acid Test Ratio
As a best practice, the Company intends to keep its current ratio higher than one. In
2013 this ratio was impacted due to the utilization of short term investments to finance
capital commitments.

50. Comments on Some Financial Indicators
o Cash to Current Liabilities
The Company has maintained a consistent ratio throughout
o Cash Flow from Operations to Sales
Due to burn up of cash in earlier years, the ratio was negative. However, with the
increased cash generation, the ratio has improved in recent years.

52. Future Strategy
In January 2014, the company has also taken price increase
in one of its brands to arrest the declining margins. The
Company is also working on various efficiency projects
including the Heavy Fuel Oil based power plant which will
result in lower energy costs. Moreover, the new powder plant
at Sahiwal which will be operational shortly is expected to
contribute towards stabilizing the Company’s margins.
The management will continue to focus on key growth
parameters of innovation, brand differentiation and
continuous business expansion including expansion in new
products, e.g., pilot project for “Mabrook” (the fresh dairy
segment).

53. WHY WE
BELIEVE
ENGRO FOODS
IS A SUCCESS
STORY

54. Success Points
Growth in a short span of time:
The company laid its foundation few
years ago in 2004 and within such short
span of time Engro foods has shown
stupendous and extraordinary growth
compared to other dairy product
manufacturing companies.

55. Success Points
Dominating the market giants:
One of the key features that highlight
Engro foods as a success story is the
way company wiped out some of the
leading marketing giants such as
Haleeb off the charts and even giving
hard time to Nestle, Unliver etc. .

56. Success Points
Quality Product and Customer Trust:
A company is nothing without its customers
and from the very beginning Engro foods has
given notable significance to its customers by
providing them with quality products of
international standards at economical prices.

57. Recommendations/ Suggestions
 Engro Foods should have much diversified bi-product line of
dairy products like Nestle & Haleeb
 They should introduce new promotions to get customers’
attention
 EFL should expand its dairy farms so that they can get
competitive advantage
 EFL should focus on Market Penetration, Market
Development and Product Development strategies with
more efforts to be the market leader

58. Recommendations/ Suggestions
 They should go expand its capacity to enter into in
international market like Nestle.
 Engro Foods can be into Co-branding with other brands like
Olper’s with Lipton tea bags, Olper’s with different biscuits
etc. to increase their sales
 They can also move towards other foods products like
Nestle launch Kit Kat Chocolate, Meggi Noodles, Sweets
Candies etc.