4. SECTOR - ANALYSIS
FMCG sector has generated total revenue of $288
billion worldwide.(INR1900800 crore)
UK has the highest share, $87.9 billion, among all
the countries.
2 biggest growing economies (India &
China)contributing $65.6 billion & $46.6 billion.
There are more 400 reputed FMCG companies in the
world.
5. SECTOR ANALYSIS
2014/15 is further evidence of the market volatility
expected to continue in global dairy markets
The price recovery is likely to be more prolonged than
seen in 2009/10 and in 2012/13
Farm business resilience and maintaining
competitiveness will determine ongoing success
Milk prices will rise again, but it will be important to
manage what you can influence
8. COMPANY - ANALYSIS
The La Fageda is a company with social purposes
located in the "Jorda Beech Forest"
Employs people with intellectual disabilities or chronic
mental illness founded at 1982.
It was founded by Cristobala Colon…..
9. BUSINESS OVERVIEW
Scope
Local Production
High quality dairy product
Catalonian consumers
Facts
270 employees
Catalonia’s 3rd largest yogurt producer
Social non profit project
60% of the workers are mentally challenged
10. Mission, Vision & Values
• Mission
To provide meaningful work, offer support and socially
integrate the mentally challenged people
• Vision
Providing best careful solution for mentally and phisically
challenged people with stable psychopathological
conditions.
• Values
People-focused
Integrity
Faith
Responsibility and enthusiasm
11. STRATEGY
• Mission Alignment
To provide meaningful work, offer support and socially
integrate the mentally challenged people
• Strategic Objectives
Improve the quality of care for mentally and
challenged people with stable psychopathological
conditions of the region of Garrotxa.
12. • Smart Goals
Increase the number of care personnel in comparison with
previous year
Increase the capacity of the residential services
Increase net revenues and amount of government assistance
Increase the product range
Sell the new product line
Increase the amount of dairy cows
Increase investments in product-related R&D
13. PRODUCT & BRAND IMAGE
Product-related
Focus on high quality natural products
Promoting local milk poduction
Responding to the customer needs aiming to live healthier and
consume high-quality dairy products
Higher product prices justified by 100% natural ingredients
from Catalonia
Brand-related
Improve life-quality of disabled people
Narrow the existing welfare gap by offering disabled people
paid jobs
Purchases of La Fageda products = Support jobs for disabled
people and the local nature
14. ANALYSIS OF COMPETITORS
Before :- Only hospitals
Now days :- widely available on the high consumption market
Yogurt market :- dominated by Danone
Real Competitor :- Nestle La Lechera , Muller & Asturiana
Top three manufacturer of Yogurt are:-
Danone
Nestle
LaFegeda
15. DANONE
Danone is the leader competitor of the fresh dairy products
sector.
Created in 1919 with headquarter in France.
In Danone works more than 88000 employees around the
world and the company operates in 140 different countries with
a 14.98 billion euros of sales in 2011 and 88% of market share.
It has four business lines: Fresh Dairy products, Waters, Early
Life Nutrition and Medical Nutrition. Fresh Dairy Products is
Danone's largest segment, contributing 57% of the company’s
total sales.
They are a experienced and strong brand that due to their large
amount of customers, supply power, high production and
financial power they can offer lower prices than La Fageda.
17. SELF IMPOSED RESTRICTION
• Using local language
• Not having much capital for transportation
in entire state
• Not to ambitious – only for mentally
challenged people.
18. SWOT ANALYSIS
Strengths
Production of local naturally-made farm products
Social non-profit project: Provide meaningful work, offer
support and socially integrate the mentally challenged
Integrated high-quality milk production by keeping 500
Pedigree cows
Weaknesses
Low product variety
Limited distribution (No hard discount chains, no
restaurants, selected supermarket chains in Catalonia)
19. SWOT ANALYSIS (Cont.)
Opportunities
New healthy premium dairy product market trends
Increment of financial assistance for social projects (over
1.2 million € per year from Catalan government)
Providing working and living space for more disabled
people
Threats
Distribution networks to supermarkets are controlled by
main competitors
20. MARKET SEGMENTATION
Types of customers:-
Heavy-users
Moderate-users
Light-users
Focusing on heavy users
Younger with higher income (low price-sensitivity)
65-year old plus segment valuating higher quality natural
products
21. PEST - ANALYSIS
• Political
The Catalan government funds research, development and
innovation of companies and not-for-profits in Catalonia
La Fageda's financial assistance from the
government of Catalonia (over 1.2 million € per year,
2009: covered 14% of expenses)
Subsidy for disabled employees:
– 12,000€ per stable job created
– 50% of minimum salary
– 100% of social security
22. PEST – ANALYSIS(Cont.)
Cost structure:
– 19% labor
– 59% production (23% than industrial)
– 23% others
Catalonia’s governemt health care program which it direct to fund
the health and therapeutic services.
Unique culture of Catalonia: Patriotism, independance movement
from Spain
No export/ import control and taxes in the EU
1992: Imposition of milk production quotas throughout Spain due
to new regulations by the EU to reduce milk surpluses
23. PEST FACTOR (Cont.)
• Economic
Economic crisis in Spain/ Europe: Cutbacks in subsidies,
decreasing sales
Catalonia's economy is the strongest in Spain
Population of Catalonia: 7,504,811(Barcelona represents
73% of volume)
Population of Spain: 46,951,500
61% of La Fageda purchases are made in Girona
24. PEST – FACTOR (Cont.)
• Social
Emerging trend of slow-food (as countermovement to the US fast-
food trend)
Emerging trend of healthy food and ecologic ingrediences
High youth unemployment rate in Spain/ Catalonia Increased
Migration of young Catalans to foreign countries
Cultivation of Catalan language: 43% consider Catalan as their
own language, 31% Spanish, 26% both
La Fageda employs all disabled persons in the Garrotxa region
25. PEST – FACTOR (Cont.)
• Technology
Dynamism of the constantly evolving dairy industry require
high investment in R&D and manufacturing equipment
Mentally challenged people would not adapt well to
constantly changing technological changes
26. PORTER FIVE FORCE MODEL
• Threat of substitutes
Many alternatives to produce dairy products without
cow's milk as goat, soy, rice and coconut milk.
Ingredients substituting yoghurts are soy and goat milk
as serving an ecological and hand-made image
But higher prices and not as "mainstream" as dairy
products
27. PORTER FIVE FORCE MODEL
(Cont.):---
• Threat of entry
Securing a reliable supply of high quality milk at low
cost (principle entry barrier) through:
– Outsourced milk production: Necessity of managing
the volume demands from retailers while managing
the supply of milk coming from milk farmers
– Integrated milk production: Challenging cost structure
of high relative costs for staff, maintenance of cattle
and infrastructure which needs to be absorbed by a
high distribution volume
28. PORTER FIVE FORCE MODEL
(Cont.):---
• Ability to adapt to the dynamism of the constantly
evolving yogurt and dairy dessert sector
– Expensive communication and marketing strategies
(including celebrities)
– High investments in R&D and manufacturing
equipment: Volatile market (regular introductions of
various similar products) requires constant innovation
(new combination and flavors)
– Manage larger trends (drinkable yogurt substituting
regular spoonable yogurt, bifidus and skimmed
products reaching hight unit volumes)
• Distribution networks to supermarkets (incl. truck fleets)
are controlled by Danone and Nestlé
29. PORTER FIVE FORCE MODEL
(Cont.):---
• Industry rivalry
Competition on price or quality
– Farm yogurt: High quality as labor intensive
production preclude low prices (19% labor
costs, 59% fermentation and raw materials,
23% other expenses)
– Industrial yogurt: Low prices (35% less than
farm yogurts) through high volumes and
automation to meet the demands of national
supermarket chains
30. PORTER FIVE FORCE MODEL
(Cont.):---
• Exclusively competing in Catalonia by being the third
largest yogurt producer after Danone (competitive
product "El Griego") and Nestlé
• Competitors with substantially lower prices for the same
type of product but lower qulity (no "naturally-made farm
yogurt")
• Various competitors making private label products
31. PORTER FIVE FORCE MODEL
(Cont.):---
• Disadvantaging factors of La Fageda:
– No investments in major marketing campaigns (focus
on in-store presence, product sampling, visits to the
farm and product relations)
– Low investments in R&D and manufacturing
equipment (focus on producing a small yogurt line
without expensive technology as mentally challenged
staff would't adapt to contantly changing
technologies)
– Relative low production volume
– Low product variety
– Limited distribution: No hard dicount chains, no
restaurants, selected supermarket chains in Catalonia
32. PORTER FIVE FORCE MODEL
(Cont.):---
• Distribution advantages of La Fageda:
– Using the existing supply network by adding the
relative low volumes to trucking fleets without having
to take away space from Danone and Nestlé
– Low shelf life allows to more frequent replenishment
of smaller batches justifying higher prices
(compensating higher distribution costs)
33. PORTER FIVE FORCE MODEL
(Cont.):---
• Bargaining power of buyers
High power of final consumers:
No switching costs for customers as La Fageda product's
are the highest-prized in the industry and customers could
safe money by switching
Dependend on the customer's willingness to pay more for:
– Superior taste
– Healthy and natural products
– Regional solidarity
– Support of a social non-profit project
La Fageda farm visits by students influence purchasing
decisions of entire families (anually 40,000 visitors)
34. PORTER FIVE FORCE MODEL
(Cont.):---
• High power of distributors and retailers
Consolidation of distributors
Consolidation of producers and retailers
Requiring a certain amount of product selection and
benefits by having local products
Not able to demand high volume rabates becuase of the
uniqueness of La Fageda products
Considerably high sales-numbers and margin
35. PORTER FIVE FORCE MODEL
(Cont.):---
• Bargaining power of suppliers (MEDIUM)
Low power of goods suppliers:
La Fageda has integrated the entire production process
from the milk by keeping 500 cows to the finished dairy
product
The bargaining power of packaging suppliers is
considered as insignificant as this inexpensive and
offered by various suppliers
High power of financial supporters:
Dependent on the financial assistance from the
government of Catalonia (over 1.2 million € per year)
36. ACTION PLAN
• Increase the number of care personnel of 2011 by 10% (=55
=3.2 per mentally challenged) in comparison with 2010
• Increase the capacity of the residential services from 36 to 50
beds by building a third residential complex in the next 18
months
• Increase net revenues of 2010 by 5% and increase investments
in product-related R&D
• Increase the amount of government assistance of 2010 by 10%
in comparison to 2009
• Increase the number of retailers offering La Fageda products in
Catalanonia by 10% in the next 12 months
• Increase the amount of dairy cows of 2011 by 5% (=525) in
comparison with 2010
37. Channel and Retail
distribution of La Fageda
Sell products through 1300 retail locations
Top retailers:-
Caprab, Ban Prreu, Carefoum, Candis.
350 supermarket where 264 were located in catalonia.
Caprabo sold 75% of it share to the worker coperative
chain, Eroski
Eroski employed 50,000 people with sales of 6.5billion
and had more than 1200 stores throughout spain
39. ICE CREAM
• Started with five flavors and secured shelf
space from caprabo
• In the first year they achieve a revenue of
euro 250000 in 60000 units
• Spanish market summed to 228 million ltrs
for a total of 1.5 billion in 2009
40. CONCLUSION
La Fageda is unlike all of its competitors in that it is a worker's
cooperative with 60% mentally challenged employees.
Although, these conditions appear to make competition with big
international giants impossible, this organization has been
lauded around the world for its dual achievement of social good
and economic success.
From this case study we got the information that how it is
interesting how seemingly "old fashioned" companies can
survive in the nowdays globally and highly competitive
economy. La Fageda is an admirable example that money and
power is not always the mighty key to sucess.
