Prabhat DairyJMSB ConsultingGeorge EmeryJonathan SuproviciEliane RoyCinzia Ruberto

Recommendation Analysis Financials Alternatives Implementation

Mandate

What actions should Prabhat undertake to maintain and grow its market position?

Fierce competition

Tier 1 vs. 2 & 3 Farmers Logistics

Recommendation Analysis Financials Alternatives Implementation

The major player in Tier 2 & 3 in B2B & B2C

• Solidify agreements with farmers, rising milk & fodder pricing• Forward integration with Kirana’s and selling points

Manage the supply chain

• Ramp up production on Polypack and Value-Added products• Increase HR team to manage additional production

Utilize existing capacity

• Repackaging two brands that sit outside Prabhat label• Consistent Kirana branding and product portfolio

Branding and marketing

Restructure Prabhat to dominate Tier 2 & 3 sectors

Analysis

Recommendation Analysis Financials Alternatives Implementation

Urban mkt. in India is perfect for expansion

Prabhat can use its existing structure to capitalize on this

Rising annual income

Urban spend 187 Rs Total spend 20%

Recommendation Analysis Financials Alternatives Implementation

Competition is fierce in Tier 1

Cooperatives (Amul, Mothers Milk)

MNC’s (Danone, Nestle), private firms

40% move to Urban areas (predominately Tier 2 & 3)

Prabhat has a first mover advantage in Tier 2 & 3

Prabhat can be the major player in Tier 2 & 3 with SC adjustments

Recommendation Analysis Financials Alternatives Implementation

Prabhat’s supply chain needs adjustments

Milk supply Collection and manufacturing

Distribution and sales

Marketing and branding

Recommendation Analysis Financials Alternatives Implementation

Prabhat’s supply chain needs adjustments

Milk supply Collection and manufacturing

Distribution and sales

Marketing and branding

Recommendation Analysis Financials Alternatives Implementation

Prabhat’s supply chain needs adjustments

Milk supply Collection and manufacturing

Distribution and sales

Marketing and branding

Addressing the supply chain will allow Prabhat to grow and expand

- Fodder and feed- Rising milk prices

- Unutilized capacity - Pushing the Prabhat brands- Gain exclusivity

- Utilize the Prabhatname

Recommendation Analysis Financials Alternatives Implementation

A need to strengthen tie with Farmers

Cooperative model has strong bonds

Fodder and feed prices are rising

No long term agreements in place

Milk prices expected to rise 7-8%

It will be key for Prabhat to improve agreements for growth

Recommendation Analysis Financials Alternatives Implementation

Capacity and product expansion

• 50% capacityPolypack

• 20% capacity• Ghee, Curd, Flavored milk, Ice

creamValue Added

Financials

Recommendation Analysis Financials Alternatives Implementation

Investment Capabilities

27.3B Rs to invest

REVENUE 117B Rs

CASH ON HAND 11,7B Rs

LTD RATIO 4.5M Rs (7% of assets)

BORROWING CAPACITY 15.6B Rs (30% of assets)

Recommendation Analysis Financials Alternatives Implementation

Unused Capacity

117B Rs to 572B Rs sales (488%)

MILK28% of revenue = 32.8B Rs

32.8B Rs = 50% capacity32.8B Rs opporunity

VALUE ADDED

72% of revenue = 84.3 B Rs84.3B Rs = 20% capacity

421B Rs opporunity

Alternatives

Recommendation Analysis Financials Alternatives Implementation

Strategic Assessment

Market

• High competition • Tiers 1 v. Tiers 2 & 3• Rising milk prices

Core competency

• Operational efficiency• Supply issues with farmers• Idle capacity• Branding & distribution issues

Strategy

• Low-cost• 70% B2B - 30% B2C

Recommendation Analysis Financials Alternatives Implementation

Strategic Assessment

Market

• High competition • Tiers 1 v. Tiers 2 & 3• Rising milk prices

Core competency

• Operational efficiency• Supply volume with farmers• Idle capacity• Branding & distribution issues

Strategy

• Low-cost• 70% B2B - 30% B2C

Prabhat needs to adapt its strategy to attract B2C

Recommendation Analysis Financials Alternatives Implementation

Options to expand Tiers 1 v. Tiers 2 & 3

CriteriaCompetition

Brand recognition

Distribution

Value-added products competition

Tiers 1National Coop & MNC

Strong attachment to existing brands

Easier

High competition

Tiers 2 & 3First mover advantage

No big player

Favors regional coop

Limited competition

Recommendation Analysis Financials Alternatives Implementation

Options to expand Tiers 1 v. Tiers 2 & 3

CriteriaCompetition

Brand recognition

Distribution

Value-added products competition

Tiers 1National Coop & MNC

Strong attachment to existing brands

Easier

High competition

Tiers 2 & 3First mover advantage

No big player

Favors regional coop

Limited competition

Tiers 2 & 3 requires forward integration investment

Implementation

Recommendation Analysis Financials Alternatives Implementation

Implementation at a Glance2016 2017 2018 2019 2020

Improve Supply Chain

Branding & marketing

Negotiate Agreements with farmersPlan for Purchasing

Kirana’sOpen new Kirana1000 1000 1000 1000

Utilizing capacity

Increase polypack milk production

Increase value added milk production

Repackage all products to Prabhat Brand

Hire a marketing coordinator

Branded milk refrigerators

5000

Hire additional production staff

Introduce POS programs

Recommendation Analysis Financials Alternatives Implementation

Agreements with Farmers

Nurture relationships with farmers

Incentives if able to provide certain yield

Assist with mechanization & planning for improving yield

Recommendation Analysis Financials Alternatives Implementation

Purchasing Kirana’s

Hire team to negotiate agreements

Hire existing owner as manager

Take control of Kirana’s dairy mix exclusivity

Introduce branded refrigerated equipment

Gaining greater control of the entire supply chain

Recommendation Analysis Financials Alternatives Implementation

Products Available in Kirana’s

PolypackMilk

Powdered Milk

Condensed milk Ghee

Curd Flavored milk Ice cream

Full range of products available at Kirana’

Recommendation Analysis Financials Alternatives Implementation

Location of Kirana’s

Focus on Tier 2 & 3 cities in

Maharashatarstate

Look for expansion in Gujarat &

Madhya Pradesh

Recommendation Analysis Financials Alternatives Implementation

Prabhat StructureSarang Nirmal

Chairman & MD

B2B Division B2C Division Raw materials division

Operations manager

Kirana Division

Operations Manager

Marketing

Marketing Coordinator

Vivek NirmalJoin MD

Gaining greater control of the entire supply chain

Recommendation Analysis Financials Alternatives Implementation

Branding Initiatives

• Remove Flava & Milk Magic brands• Rebrand to Prabhat• Leverage 20 years of experiencde

Rebranding to Prabhat

• Instore POS initiatives• Branded refrigeratorsPromotion

• Bundle pricing to encourage purchasing Milk & value added productsPricing

Increase number of Prabhat dairy products being purchased

Recommendation Analysis Financials Alternatives Implementation

Financial Model

2017 2018 2019 2020 2021MILK 32.76 33.46 39.55 51.41 63.49VALUE ADDED 84.24 121.68 154.23 205.64 270.67TOTAL SALES 117.00 152.10 197.73 257.05 334.16OPERATING EXPENSE 102.00 106.47 172.03 223.63 290.72KIRANA 0.00 5000.00 6000.00 7000.00 8000.00KIRANA COST 3.25 0.65 0.65 0.65 0.65KIRANA EMPLOYEE 0.00 1.69 2.03 2.37 2.70MARKETING 0.07 0.07 0.07 0.07 0.07OTHER COST 11.70 15.21 19.77 25.70 33.42

PROFIT -0.02 28.02 35.00 36.20 37.40

Questions?