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PRABHAT DAIRY – A SWEET SOLUTION

EDGE CONSULTING

University of Alberta

ISSUE IDENTIFICATION

How does Prabhat Dairy increase their branding and presence in the B2C Indian market?

ISSUE ANALYSIS OPTIONS SOLUTION IMPLEMENT RISKS SUMMARY

SOLUTION

THE PRABHAT SWEET SOLUTION


CURRENT SITUATION

Local player in the Indian market

70 / 30 B2B versus B2C revenue. Only 20% of B2C capacity used

Pricing is lower

Products include condensed milk, polypack milk, ghee

B2B has high logistical requirements


KEY TAKE AWAY: B2B creates logistical and financial challenges

ANALYSIS

Strengths:- ISO certified- Established- Great relationships with supply chain- Wealth of knowledge

Weaknesses:- Low presence in the B2C

- No branding - Missing marketing and distribution

Opportunities:- Distribution Models- Grow in B2C market- Value added products- Yogurt

Threats:- Multinational companies in Tier 1 cities

- Local co-ops in Tier 2 and 3 cities - Growing too fast in B2B

SWOT


KEY TAKE AWAY: Opportunity in B2C

THE 5 FORCES

Rivalry10 / 10

New Entrants6 / 10

Buyer Power6 / 10

Substitutes2 / 10

Supplier Power4 / 10


KEY TAKE AWAY: Competition is high in this market

THE 4 P’S

•Slightly below Amul

•15% below MNC

• Polypack, condensed, flavoured milk

• Yoghurt• Ghee• Paneer

•Kirana stores – Mini stockists

•Large chain stores

•Mahashtra and nearby areas

•Large chain stores•15,000 Kirana

stores

Place Promotion

PriceProduct


Brands:• Prabhat• Milk Magic• Flava

KEY TAKE AWAY: Pilots in Tier 1 cities were very effective

ANALYSIS

PRODUCT MARKET SIZE CAGR (%) RETAIL PRICE MARGIN (%)Milk 35,996 16 17-25 6-7Ghee 5,275 11 25-58 N/ACheese 997 22 23-62 35-40Curd 5,038 28 100-120 25-30Paneer 399 15 25-38 N/AYogurt 179 32 312-438 N/AFlavored Milk 2,466 28 85-143 30-35Ice Cream 2,500 30 300-950 30-35


KEY TAKE AWAY: High market opportunity and margin in the sweet value added products

DAIRY IN INDIA: Products and Market


YOGURT34%

MILK33%

CHEESE33%

Products

YOGURT MILK CHEESE

• India has high demand growth = 10%

• Northern India consumes more milk

• City consumption of milk products is higher than rural

• Milk vs. value-added milk products

• Buffalo milk

KEY TAKE AWAY: Consumption is higher is Tier 1 cities

DAIRY IN INDIA:


CooperativesMultinational companies (MNCs) Private domestic playersKEY TAKE AWAY: Diverse competitive landscape

CUSTOMER EXPERIENCE


Think and Feel

See

Say and Do

Hear

- A lot of good “sweet” products- Many options

- Prabhat + Flava + Milk Magic

- Large chain stores- Kirana stores

- Purchase mostly milk and some value-added products

- Award winning- Great quality

KEY TAKE AWAY: Customer loves sweet products

FINANCIAL SUMMARY


IPO capital $ 45 millionWorking capital Account Receivables (35 to 76 days) High Inventory holding costs (17 days to 23 days) Profit decreasing ( -6%)KEY TAKE AWAY: B2C market will lower or eliminate these challenges

FINANCIAL SUMMARY B2C

2015 2016 Total Food and Beverage Market

$4,782,089,552 $5,499,402,985

Current Market Capture 3.653% 3.653%

B2C Operations Percentage

30% 30%

Revenue $44,970,000 $52,410,448

*Values in USD


KEY TAKE AWAY: Growing market

CURRENT REVENUE FORECAST

$- $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000 $80,000,000 $90,000,000

2015 2016 2017 2018 2019

*Values in USD


KEY TAKE AWAY: Approx. 15% market growth year over year

THE SWEET SOLUTION REVENUE FORECAST

*Values in USD


$- $20,000,000 $40,000,000 $60,000,000 $80,000,000

$100,000,000 $120,000,000 $140,000,000 $160,000,000 $180,000,000

2017 2018 2019

B2C Forecast 50:50 B2C

KEY TAKE AWAY: Approx. 95% market growth year over year

ALTERNATIVES


Option Distribution Cost Growth Competition

1. Enter internationalmarkets2. Focus in Tier 2 + 3 Cities

3. Focus on Tier 1 cities

ALTERNATIVE 1: International Markets

PROS CONS- Have supply chain

knowledge- New markets

- New regulations- High capital requirements- Distribution challenges- Local competitors- Foreign markets


ALTERNATIVE 2: Focus on Tier 2 and 3 cities


PROS CONS- Already present in some

Tier 2 and 3 cities- Distribution network

challenges are large- Large geographic spread- Marketing for small cities is

hard

ALTERNATIVE 3: Focus on Tier 1 cities


PROS CONS- Growth potential- Cheaper pricing

compared to competitors- Already established in

Mumbai

- High competition- Will incur marketing costs

RECOMMENDATION

PRABHAT SWEET SOLUTION

Tier 1 cities Value Add Products Growth Marketing


IMPLEMENTATION


Expand marketing in MumbaiOrganize for growth

Increase retail

Silvassa

Gandhinagar

Jaipur

New DelhiYear 0 Year 1 Year 2 Year 3

SHORT TERM


Action Timeline Cost Key Performance Indicator(s)Expand marketing efforts in Mumbai

1 – 3 months $2 million Brand perception >80%

Hire sales peopleIncrease marketing teamHire ice cream developers

1 month $250K$100K$100K

50 salespeople5 marketers5 product developers

Secure large chain and Kirana stores

2 – 6 months 10 large chains10,000 stores

Apply Raftaar model to SilvassaMini stockist model

6 – 12 months $7.5 million Brand perception >50%20 distributors5 large chains10,000 Kirana stores

MEDIUM TERM


Action Timeline Cost Key Performance Indicator(s)Apply model to Gandhinagar

12 -24 months $ 7.75 million Brand perception >50%20 distributors5 large chains10,000 Kirana stores

LONG TERM

Action Timeline Cost Key Performance Indicator(s)

Apply model to Jaipur and New Delhi

24 – 48 months $ 15 million Brand perception >50%50 distributors10 large chains20,000 Kirana stores


CUSTOMER PROFILES


Abhishek the Chai Walla

15, male

Works every day

Loves to end the day with his favorite ice cream

Priorities: cost, convenience

Komal the Working Mother

35, female, educated, working

2 children

Provides Flava milk and yogurt to the children as a treat because it is ISO certified

Priorities: health, convenience, appeal to children

THE 4 P’S

•Slightly below Amul

•15% below MNC

• Flavored milk• Yogurt• Ice Cream

•Kirana stores – Mini stockists

•TV Ads•Endorsements•Packaging

•Tier 1 Cities•Large chain stores•Kirana stores

Place Promotion

PriceProduct


FINANCIAL INVESTMENT

IPO Capital $44,776,119

4 Year Investment $40,000,000


INVESTMENT BREAKDOWN

2016 2017 2018 2019 20203,000,000$ 3,000,000$ 3,000,000$ 3,000,000$ 3,000,000$ 2,000,000$ 4,750,000$ 6,000,000$ 6,000,000$ 6,000,000$

250,000$ Total Cost per year 5,250,000$ 7,750,000$ 9,000,000$ 9,000,000$ 9,000,000$


FINANCIAL RESULT *Result in 10% Growth over and above existing rate

2016 2017 2018 2019 2020B2C Forecast $52,410,4 $60,272,0 $75,340,0 $94,175,0 $117,718,

$- $20,000,000 $40,000,000 $60,000,000 $80,000,000

$100,000,000 $120,000,000 $140,000,000


PROFIT

$-

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

2,016 2017 2,018 2019 2,020


OBSTACLES

0

1

2

3

4

5

6

7

8

9

10

11

0 1 2 3 4 5 6 7 8 9 10 11

Impa

ct o

n Pr

abha

t

Probability


• Regulations• Market

Penetration• Competitors

MITIGATION

Obstacle MitigationRegulations - Keep communications with

government open- Build in increased costs in pricing

Market Penetration - Test markets in new cities- Periodic assessments for consumer awareness

Competitors’ Actions - Maintain Pricing strategy- Monitor competitor behavior- Reinforce relationships with suppliers- Continue R&D


TAKE AWAY

Tier 1 Cities

Sweet Products

B2C = B2B


APPENDIX% of Market 2015 2016 2017 2018 2019 2018 2019

Food and beverage 60%534,000,000,000.00 614,100,000,000.00 706,215,000,000.00 812,147,250,000.00

933,969,337,500.00

1,074,064,738,125.00

Portion of Market 320,400,000,000.00 368,460,000,000.00 423,729,000,000.00 487,288,350,000.00

560,381,602,500.00

644,438,842,875.00

60$

4,782,089,552 $

5,499,402,985 $

6,324,313,433 $

7,272,960,448 $

8,363,904,515 $

9,618,490,192

2015 2016 2017 2018 2019

% of F&B Market Capture 3.653%

Current Forecast Rupees 11,705,000,000 13,460,750,000 15,479,862,500 17,801,841,875 20,472,118,156 23,542,935,880 27,074,376,262

Current Forecasted Revenues USD

$ 174,701,493

$ 200,906,716

$ 231,042,724

$ 265,699,132

$ 305,554,002

$ 351,387,103

2015 2016 2017 2018 2019

B2C Forecast $

44,970,000 $

52,410,447.76 $

60,272,014.93 $

69,312,817.16 $

79,709,739.74 $

91,666,200.70 $

105,416,130.80

APPENDIX – GROWTH OPPORTUNITIES FUTURE

Protein ShakeVitamin enriched milk productsBranded flavored powdered milks

APPENDIX

•Stable•Different states have different systemsPolitical•High Growth•Increasing disposable incomeEconomic•Caste system•Growing middle classSocial•Developed•Equipment availableTechnology

•Some regulationLegal

•Little environmental regulationEnvironmental


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