PROJECT APPROVAL 01
CONTEXT OF SPICE BUSINESSES IN PAKISTAN 03
INTRODUCTION TO SHAN FOODS 04
ORGANISATIONAL STRUCTURE 07
EXTERNAL ENVIRONMENT 09
INTERNAL ENVIRONMENT 12
BUSINESS-LEVEL STRATEGIES 13
RATIO ANALYSES 16
STUDENT NAMES AYESHA SALEEM, FAISAL MALIK, FARHEEN, NABIHA ZEESHAN,
SHAN FOODS - A STRATEGIC BUSINESS
MR. NAEEM BHOJANI
10 NOVEMBER, 2014
MR. ADNAN ANWAR
COLLEGE OF MANAGEMENT SCIENCES, PAF-KIET
All praise be to Allah, the most beneficent and the most merciful.
We would like to express our deep gratitude to Mr. Naeem Bhojani, our report
supervisor, for his patient guidance, enthusiastic encouragement and useful
critique of this report. This report would also not have been possible by the
co-operation of Ms. Asma Aman, the marketing manager of Shan Foods who
took out time to answer crucial questions for this analysis.
The spice industry of Pakistan annually grows at a rate that is above 50%.
Within this industry, 80% market share is with unbranded loose spices and
the rest with branded packed spices.
Pakistan is the world’s ninth largest market with an estimated 170 million
consumers. Experts believe that the food retail market in Pakistan is in the
throes of landmark changes, with the total number of retail outlets expected
to have grown by 15% in the1990s, presently resting at 286,774 outlets.
Share of food in household budget is 48.3% in Pakistan. As indicated in
Figure below, it is apparent that 48.3% of the monthly expenditure is on food,
beverage and tobacco’, followed by ‘rent’. This clearly depicts the consump-tion
pattern of an average person living in a developing country like Pakistan.
The Pakistani spice industry can be divided into branded and unbranded
industry. SMEDA found out that there are about 7000 spices and salt grind-ing
units operating in Pakistan, 60% of which are rural based.
Shan Foods began as a cottage industry in 1981 by Sikandar Sultan, the
managing director. A few years later it started exporting to Europe, United
Kingdom, United States and the Middle East. Within a decade, Shan was
exporting to 25 countries. In 2000, Shan increased its penetration in the
central and northern regions of Pakistan, and officially launched in India in
2004. Shan exports to 65 countries making it Pakistan's largest exporter of
packaged spice, food, and rice mixes. The company also sponsors cooking
VISION: A global food brand offering premium quality innovative products,
which delight our consumers.
MISSION: Shan, a responsible corporate citizen, adhering to its core
values, trusted globally for providing great tasting consistent quality food
products. We are determined to reach every kitchen by diversifying into
growing food categories through innovative, healthy & safe products for the
ultimate delight of our consumers. We will enhance shareholders value
through sustainable growth, develop strategic relationship with our business
partners and ensure safe work environment for our employees.
Shan Foods uses the resource-based model for above-average returns.
Shan Foods is a private company and therefore, does not have any capital
market stakeholders. It is 100% equity based and Shariah compliant and
does not rely on bank loans or interest to run the company.
PRODUCT MARKET STAKEHOLDERS:
Customers: Shan Foods targets females ranging from 18 to 45 years.
She belongs to the socio-economic class of middle lower of above. Her
marital status can be married or single, cooking for the household or just
trying out new things.
Suppliers: Farmers who grow spice crops, spice distributors.
Unions: There are no particular unions in Pakistan.
Employees, Managers, Non-managers: 360 management work-ers,
281 non-management staff. In total 1000 employees.
1. Supply Chain
2. Information Technology
5. Engineering & Services
8. Human Resource
11. Quality Control
12. Research & Development
Sikandar Sultan is a Pakistani entrepreneur and philanthropist who is the
founder and CEO of Shan Foods Ltd.. He is a renowned and influential
businessman in the Pakistani food industry. In 1981, Sultan was the first
one to recognize the potential of launching an independent company that
produced hygienic and first-rate recipe mixes and plain spices. During
this period, he decided to take the national heritage of spice mixes and
develop an entire food enterprise.
Together, Sikandar Sultan and his son are the strongest strategic lead-ers
in Shan Foods.
OPPORTUNITY: Sultan found a gap in the food industry of Pakistan,
where ready-made spice mixes were unheard of.
THREAT: Loose unhygienic spices or home-grown spices.
INDUSTRY COMPETITION: National Foods, Chef’s Pride, Mehran
Foods, Ahmed Foods, Habib Foods, Zaiqa Foods, Ronaq Masaley, Kitchen
National Foods is the biggest competitor in pickles and salt categories as
well. In traditional desserts, Laziza. and in contemporary desserts, Rafhan
gives a run for the money. Shoop competes with Maggi and Knorr.
THREAT OF NEW ENTRANTS: High
RIVALRY AMONG COMPETING FIRMS: High
THREAT OF SUBSTITUTE PRODUCTS: Low
BARGAINING POWER OF BUYERS: High. Buyers spend 40%-55%
monthly on food, beverages and tobacco in the rual and urban areas of
Pakistan. The sales of spices makes a significant portion of Shan’s revenue.
Buyers can quickly switch to other brands, or unbranded spices for little
BARGAINING POWER OF SUPPLIERS: Medium. Shan Foods is a big
corporation and suppliers tend to bargain for the best prices.
FIVE FORCES MODEL
Shan Foods is the only spice company in Southeast Asia with cryogenic technology
that preserves the taste of 1600-1700 tons of spices when it is ground, by maintaining
freezing (0 degree Celcius) temperature and killing heat produced from friction.
FIRST MOVER ADVANTAGE:
Shan Foods has the advantage of being the first mover for branded spices in Pakistan,
and now in India as well. It has created a positive reputation for itself in the spice
market focusing on Shariah and Pakistan’s traditions.
STANDARD CYCLE MARKET:
The market of spices is a standard cycle
market where new entrants can come in
quickly and sell spices on a small scale.
Shan Foods has to sell fast movers at a loss
due to the price imparity with unbranded
spices. If they raise prices, the buyers would
switch to unbranded or home-grown spices.
Although Shan shares the same market with
National Foods, it is less popular in the north
because of its spicy flavour. Shan Foods has
a strong hold in southern parts of Pakistan.
Apart from the crygenic technology,
Shan Foods’ other major resource
expenditure is on maintaining the ERP
systems. It is also looking to implement
SAP through Arm Tech in the future.
Shan Foods hires trainees once a year
and focuses on their individual develop-ment.
These trainees are later hired into
Shan Foods has recently focused on becoming a “House of Brands” like
Unilever and P&G. Instead of launching desserts, basmati and soups
under Shan’s name, they launched separate brands - Delve Desserts, Maa
and Shoop respectively.
Unlike National Foods, which focuses on export, Shan Foods focuses on
the local market and its marketing department handles the export side.
During recession, Shan Foods continues the hiring process and shows
growth specially in lower SKUs where their sachets sell well.
COST LEADERSHIP: Shan Foods cannot lower its price too much
because it needs to support its cryogenic units to maintain taste. However,
it does sell fast movers at a loss to give its customers the best price in the
market. It is currently impossible for Shan Foods to compete with unbrand-ed
DIFFERENTIATION LEADERSHIP: Shan’s taste is slightly spicier
owing to the fact that they maintain the rich flavour of the ingredients even
after they are ground. Apart from quality, Shan focuses on giving variety,
better packaging, brand reputation, easier recipes and greater availability.
HOW DO THEY LEAD?
SHAN FOODS focuses on the Return of Investment of every activity they
do. From human resource planning to sifting through raw material to deliver-ing
marketable goods, their strategy is to focus on quality at every step.
The Quality Control (QC) department ensures that the ingredients are the
very best, chosen from a variety of crop yields and that the process brings
out the right taste in each spice. The end result is a packaged Fast-Mov-ing-
Consumer-Good that has become a household name in Pakistan.
A MYTH OR REALITY?
Current assets/ Current libailities: 3,114,550/ 3,654,457 = 0.851597242121519
Sales/ Inventory of finished goods: 26,744,359/ 2,551,752 = 10.48078300712608
FIXED ASSET TURNOVER:
Sales/ Fixed Assets: (26,744,359/ 3,947,210) * 100 = 67.8%
ANNUAL FIXED COST:
TOTAL VARIABLE COST:
Shan Foods should create a separate
department for exports to lessen the
burden on marketing department.
To increase market share, Shan Foods
should invest more in marketing to the
foreign markets such as Africa, West
Indies, Zimbabwe, Sri Lanka, Bhutan,
Central Asia and Mexico. The middle
class market is already saturated.