Pure Liquid Milk 1

Industry Report

The livestock sector plays a vital role in the economies of many developing countries. It provides
food (specifically, animal protein) in human diets, income, employment and possibly foreign
exchange. Consumption of livestock products in developing countries, though starting from a
low base, is growing rapidly. Milk provides relatively quick returns for small-scale livestock
keepers. Small milk holders produce the vast majority of milk in developing countries where
demand is expected to increase by 25 per cent by 2025. Over 80 per cent of milk consumed in
developing countries (200 billion litres annually) is handled by informal market traders with
inadequate regulation.
In dairy production Pakistan out performed its South Asian neighbors, lagging way behind China
in productivity growth but was way ahead in per capita milk consumption. According to FAO
(Food and Agriculture Organization) statistics the per capita milk consumption in Pakistan
increased from 126.1 kg per annum to 158.3kg per annum registering an increase of 2.3 per cent.
The global average per capita milk consumption is 82.1 kg per annum and Pakistan's
consumption of milk is almost the double of global average but is not the highest in the world..
Livestock is a major activity that helps people come out of poverty. It states that 47 per
cent of the rural households in Pakistan own livestock and 11 per cent of their income come from
livestock. Rising incomes and the novelty of liquid dairy products as a new addition to people’s
diets, liquid milk and other liquid dairy products (LDP) in developed economies, which represent
32% of global LDP consumption, are faced with already high levels of consumption, many other
beverage options and a highly competitive market where established brands compete with in-
store labels for consumer attention. Of the total LDP (ambient and chilled) production in
developed countries milk reigns with a 76% market share, of which ambient milk, with
consumption volumes of 46.1 billion liters, holds a 69% share and chilled, with 19.5 billion
liters, a 29.2% share.
Many consumers in developed countries are also turning to discount retailers. With the developed markets
full and saturated, milk (and most of its derivatives) have become an ordinary commodity. The dairy
industry has to look for innovations in products and packaging to maintain their market position while
supermarkets and discount retailers are using milk for price dumping to attract customers.

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World milk production: Two thirds of total world milk is produced by India, U.S, Russia and
Pakistan etc.

Global exports of key milk products, in milk equivalent terms, may reach 40.4million tonnes in
2008, up almost 3percent from the previous year. Growth are adding considerable uncertainty to
the present outlook.
Growth in milk production in the developing countries:

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In the previous table, we saw the total world milk production was about 600 million
metric tonnes. Developing countries produced one third of total world milk
production in 2000 (216 million metric tones) and this is increasing. According to
FAO estimates, it is projected to reach 475 million metric tonnes in 2030. Figure 2.2
gives projected estimates of growth of milk production in developing countries.India is the largest
producer of dairy products in the world. There is a great deal of variation in the pattern of dairy
production worldwide. Many countries which are large producers, consume this internally, while
others — in particular New Zealand — export a large percentage of their production. Internal
consumption is often in the form of liquid milk, while the bulk of international trade is in processed dairy
products such as milk powder.

PEST ANALYSIS
POLITICAL

Dairy Sector in the Policy Context: The planners in Pakistan have always been more
concerned about development of the crop sector than dairying in the agriculture economy of the
country. After in dependence, the livestock population in Pakistan significantly deteriorated due

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to good stock was taken away by evacuees, indiscriminate slaughter of animals by incoming
refugees, dry cows and buffaloes brought from rural areas by milk dealers for supply of milk in
urban areas were slaughtered at the end of lactation period, and increased demand for meat due
to growth of population and incomes. Urban areas faced acute shortage of milk and dairy
products. The planners faced a policy dilemma of how to increase draught power and milk
production simultaneously. Efforts were made to improve stock of cattle by breeding of
indigenous animals, but output of improved stocks was inadequate to make a dent on the
dwindling supplies of improved cattle and buffaloes in the country. The First Five Year Plan
(1955-60) recognizes the importance of improving breeding centers, operating more hospitals,
dispensaries and mobile dispensaries to check spread of contagious diseases for animals, in
addition to providing for research on increasing supplies of feeds and fodders, and starting pilot
schemes for artificial insemination for improvement of cattle [Government of Pakistan (1957)].
The First Plan was very specific in removing gujar (a cast of milkmen) colonies from cities like
Lahore to outskirts and in recommending milk supply schemes for Karachi and Lahore on a pilot
basis. Under the scheme government was to buy milk from gawalas (milkmen) residing in gujar
colonies and supply pasteurized milk in sealed bottles through registered milk depots. To reduce
adulteration in milk, the Plan recommended testing of milk for purity. The Plan also suggested
that most of the milk would be produced in villages near the cities where small farmers would
specialize in dairying by keeping half dozen or more cows, produce their own feed and organize
them selves in to cooperatives for assembling, transport and even processing of milk. Soon it
became clear that the First Plan, which articulated the problems at hand quite well proved to be
too ambitious in their implementation as compared to the Plan target. The question of how to
improve milk production capacity remained un-addressed even in the Second Five Year Plan
(1960-65), which experienced major policy shift toward development of the large-scale
manufacturing sector. Hence there was very little planned effort, if any, for the development of
the dairy sector.2In the Third Five Year Plan (1965-70) there was renewed emphasis on
agriculture development with the help of the seed-fertilizer-water technologies (the Green
Revolution technologies) for higher yields in the crop sector.

However, the dairying sector went into oblivion. The milk supply schemes envisaged in
the First Plan for Karachi and Lahore first became operational in Karachi in 1965. With the
support from UNICEF (United Nations Children’s Fund), in later part of sixties, subsidized milk

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was made available in Karachi to low-income families and school children. This plant had to be
shut down in 1980 after running in deficit for fifteen consecutive years. Similarly, the Pilot Milk
Supply Project in Lahore also went into production in 1967, but like the project in Karachi this
project also failed to receive the patronage of successive government sand hence was abandoned.
Milk processing industry got a boost as part of the development of the manufacturing sector in
the country somewhere between sixties and seventies, when the private sector established 23
milk pasteurization and sterilization plants around three big cities, e.g., Karachi, Lahore, and
twin cities of Rawalpindi and Islamabad. These plants relied on supplies of skim milk powder
coming under the auspices of the World Food Program, which was recombined and pasteurized
before being sold to consumers. These plants failed mainly due to weak acceptance of the
recombined milk by consumers and its short shelf life. In other words, inadequate supplies of
fresh milk to milk processing industry proved to be the major hurdle in their success. There was
a renewed interest in the milk processing industry in late-seventies and early-eighties when
policy support was provided by the Government in the form of exemptions in income tax, duty
free import of machinery and equipments, and availability of domestic and foreign currency
financing [Government of Pakistan (1990)].

Government has always tried promoting dairy industry within the country. For this
government has given lots of relaxation to milk industry for instance there is no tax or excise
duty on milk products. Government has a complete and comprehensive legal framework for milk
industry to keep things in flow and up to mark within the industry. At the same time government
keeps on revising its policies that could help improving overall industry. But when we say that
there are good policies and regulations to promote industry it also require some attention in terms
of implementation of these regulations and governments have never been able to make industry
follow these regulations and promotional policies due to not so keen interest of governments
officials and also the implementation process has been designed so complicatedly that things
never go smooth when it comes to implement or adopt these policies for industry players. The
reason comes as government couldn’t streamline the things for being practically observed by the
industry or government was not able to regulate the policies in a way that could reduce irritation
and long processing times for the companies.

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ECONOMICAL: The main economic factor acting for this industry is uneducated
suppliers of raw material, so lots of raw material is affected in terms of its quality and
preservation issues and a big percentage of raw materials go to waste before its being processed.
But at the same time UHT milk doesn’t have any kind of taxes on it which makes it a good
economic factor for the industry growth and improvements in its production. As UHT milk is a
bit costly than the ordinary milk or non processed milk so income factor of consumer is always
an important economical factor for the industry players. UHT milk industry carry consumers
from upper middle and upper class and income level for this class has increased over time which
is something in favor for the industry.

SOCIAL:
Socially the most important thing for the industry is that people have realized the importance of
UHT milk because of its safety and better health issues than ordinary milk that could carry lots of bacteria
and germs during its complete delivery to the end user. But at the same time people avoid using UHT
milk due to its cost factor, being costly consumption of UHT milk is far less than other un processed milk,
but with the time and awareness among people they have realized that the cost they are paying does pay
them back good enough in terms of health issues and quality of milk. So with time this issue is decreasing
as people have got to know the value of what they are paying for. Critical social issue going around
among consumer about UHT milk is that its something treated or created artificially, which is required to
be taken care of by industry player through their awareness and information campaigns for their
consumers to make them clear about such thoughts they carry about UHT milk to utilize better potential
from the market.
TECHNOLOGICAL:
First of all because the farmers or Gawala don’t have the means of transportation to
deliver the milk up the value chain themselves, and they also don’t have the means to maintain
the freshness of the milk (refrigeration) so that the milk retains its actual value. Both issues are
related to the availability of appropriate technologies. Technology is, in this case primarily a
function of capital. In milk and specially UHT milk industry technology is a critical factor in
terms of barriers to entry. Although the market is already saturated, downward pressure on UHT
milk prices could be created through either meeting existing capacity, or the establishment of
new UHT plants. The downward price pressure would then induce new section of socio-
economic cross section to enter the market as consumer of UHT milk. Custom duties on the
import of packaging machinery, which is at the heart of the UHT segment of the industry (either

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TetraPack technology, or alternatives), are prohibitively high. The artificial cap on increase on
demand of UHT there fore creates a negative impact on small farmers, who must continue to
supply to the informal sector where they are subject to the Gawala. So because being expensive
as high capital investments are required for establishing UHT milk plants due to heavy capital
cost on machinery this industry is suffering.

PORTER FIVE FORCES

THREAT OF NEW ENTRANTS:

There was a time when there was not a big threat of new entrants in this industry,
however with time and with maturity of dairy industry infrastructure threat of new entrants has
increased slightly. As in past it was considered to be a very expensive and costly industry in
terms of plants for packaged and pasteurized milk, whereas now with some government support
and so many options in terms of financing activities, entering dairy industry is not longer a big
deal. As with time and within couple of years so many companies have entered the market which
was never the case if we look back into last 3 or 4 years. So, dairy industry will be facing higher
threats if we look into current situation of market opportunities and market potential, because
dairy industry does carry a high potential of growth in it.This factor can also be justified with the
fact that this industry was not well established in terms of technology and knowledge base of not
only consumers but the producers of raw material and production so as the information and

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system is being developed, with good potential of growth this industry will definitely be having
new entrants in coming period of time.

BARGAINING POWER OF SUPPLIERS:

Bargaining power of suppliers is not very high in this industry as mostly the suppliers’
lack of knowledge in their field and otherwise the milk collections centers are owned by the
processors themselves or either they have a long term contracts with these collection centers. On
the other hand the processing plants or buyers offer lower price to these collection center based
on the fact that these collection centers have their own system of payments to the farmers, based
on the more the payment is paid in advance less is the price in terms of litters, so same is going
through the suppliers and processing units.

BARGAINING POWER OF CUSTOMERS:

Bargaining power of customers is relatively improving with time as new entrants have
entered the market. But still as this industry is something that relates to health issues and requires
sensitive and taste related issues so bargaining power has been reduced by some major players
using their brand image and quality image in the market. But with time and awareness in the
market, which include both the customers and the suppliers the bargaining power of customers
has been improving but still it’s not something that can create big fear for the market players to
be afraid of.

THREAT OF SUBSTITUTES
The UHT milk industry has the highest threat of substitute from the Gawalla market,
where a Gawalla (milk man) delivers the Open milk in the homes by himself. The UHT milk
industry has it the highest threat because the Gawalla market is capturing 94% share of the total
milk industry and processed or packed milk industry has only 6% of the total market share. Now,
in that 6% of the packed milk industry, UHT milk has 90% market share. Therefore the only
major and biggest substitute of UHT milk industry is Gawalla industry. It is the fact that the
consumers may quickly switch to the open milk when there is an increase in the prices of UHT
milk products or decrease in the quality of the UHT milk.

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INTERNAL RIVALRY:
Direct competitors includes all powered milks which are like () and our indirect
competitors are Haleeb, flavored milk.

PEST V POTER (Summary):

Pest Analysis shows that dairy industry is very attractive and there are many
opportunities for the companies, but as we know that there are many companies in the ground for
playing. Penetration and awareness are main tools for the success of any company. Suppliers are
getting more benefit from the companies due to internal competition. Customer has more choices
then previous and his economical condition is better that’s why he wants more choices. The
power of the customer in being increased by the available choices in the market.

It comes out clearly from an historical review of the past dairy policies in Pakistan that
policy makers never had faith in the development of the dairy sector. For example, a cursory
look at the Five-Year Plans shows that the policy interventions for dairy development were very
few and far between, which also reflects in the poor showing of milk yields per animal, and in
the way milk supply channels are currently organized. In this section, we present a preliminary
review of Pakistan’s dairy development policies in an historical perspective, and highlight the
role played by the market forces in creating incentives for higher milk production by subsistence
and market oriented milk farmers in the country. If we talk about the powers, if supplier power
will increase then company will increase the price and penetrate in lower level and use those
benefits which are given by the Government of Pakistan. If customer bargaining power will
increase, then company will start tactical promotional activities to reduce the bargaining power
of the customer.

Competitor Analysis: As we are the only baby liquid milk producers but our direct and indirect
competitors are given below.

Competitors names: Age Price

Morinaga BF-1 (Under one year) 440 (400Grms)

Morinaga BF-2 (Under two year) 440(400Grms)

NEO-LAC-1 (Under one year) 530(400Grms)

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MEIJI FM-T (Under one year) 440(400Grms)

MEIJI FU (Under two year) 440(400Grms)

MEIJI Big (Above two year) 530(400Grm)

Nestle (NAN-1) (Under six months) 480(400Grm)

Nestle (NAN-2) (Above six months) 480(400Grm)

Nestle and Morinaga are using penetration strategy and they are targeting only cities, they are not
focusing on the ruler areas. We will use the Skimming pricing policy because we are creating
differentiation and giving the customers new idea.

Marketing and Product Objectives:

Our marketing aim is to become the market leader by positioning our product as high quality and
also give feelings to consumers less and more concept, and to seek major market share. This will
build the platform for the company’s other products. Another marketing objective is to create
Nation Wide distribution almost within 10 years

Customer Analysis:

In terms of customer analysis, this section describes, (1) the characteristics of customers
expected to buy our products and, (2) health and nutrition concerns.

Segmentation:

Demographic: Demographically, milk products are generally purchased by customers

representing the socioeconomic backgrounds. It is purchased for consumers from 1-5 years old
children. As Lactose cause major gastrointestinal disturbance and most of the brands that are
available in the market use Lactose in their milk products.

Health and Nutrition: “Milk is perfect a diet for the babies”, is the sentence almost known by all,
the reason is increasing awareness of Health concerns. So, keeping in view that, this aspect
company will try creating credibility by providing a balanced proportion of Vitamins, Calcium,
Minerals, and Proteins and as well as vitamin K, C etc.

Target Market: The primary target market of the “Pure liquid Milk” is children aging 1-5 years in
the Lahore and we will influence the mothers who will buy this product for their children’s. On
the basis of our differentiated formula our company is focusing its product to the unique target

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audience in an entirely differentiated way like as the small children’s and their parents are more
concerned about their health.
Positioning:

Regarding positioning of the product of the company, the strategy will be to focus on “One
consistent positioning”. In this point, company will position its product by focusing the
characteristics of (1) Skimming pricing . (2) High quality. (3) Liquid pure full of extra vitamins
which are needed for children’s . Company will use different positioning for the different
products.

Current Market:

By the End of five years (in 2015) company will market its three more brands of flavored
milk in the current market of Lahore. Furthermore, company will try to grow its sales in the same
market through same retailers and distributors by creating consumer awareness and make the
customer loyal.

New Markets:

Company’s goal is to expand the product to all over Pakistan therefore targeting different areas
with different product and marketing mix and it really requires the extra skilled sales force and
equipment. By the End of 2020 company planned to attain the Nation-Wide distribution.

Target Market: The primary target market of the “Pure liquid Milk” is children aging 1-5
years in the Lahore and we will influence the mothers who will buy this product for their
children’s.

Point of Difference: The point of difference means- the characteristics that make “Pure liquid
Milk “unique relative to its competitors-fall into three important areas:

Unique formula. No one competitor is offering the unique formula that our company is
providing balanced quantity of vitamins, minerals, calcium and proteins. Specially, the company
is providing lactose free milk. Other direct/indirect competitors are providing powdered milk for
this target market but we are providing liquid milk which will save time for using it.
Unique way of collection of raw material. The company has decided to join hands with the
ultimate milk man by forming their “Managing Committees” on village level to enhance and
improve the collection of milk and to focus the milkman and try to help them out too.

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Unique target audience. On the basis of our differentiated formula our company is focusing its
product to the unique target audience in an entirely differentiated way like as the small children’s
and their parents are more concerned about their health.
• Imitable product. Our company is providing unique product to its customers and its
formula is imitable which main advantage for this company.
Core Competency and sustainable competitive Advantage:

Resource Based View: RBV is the marketing technique in your company can differentiate its
products from other competitors. So in the result of that you have a competitive edge against your
competitors.

Valuable: We are providing value I our product in that way, we are the only company that are
providing liquid milk for now born babies. In this we have used a unique all kind of ingredients which are
helpful for the grown baby. Our product is the convince product for the mothers either they are in home
or traveling. Because they are not facing the problem to mix the powder milk in the water.

Rare: Company Analysis: Our product is the only liquid milk product for new born babies in
the market so it is rare.

Inimitable: Our formula is such a unique formula and as we are the only one in the market who
are producing liquid milk, so it will take time and would be difficult for the other competitors to
copy our formula.

1. Almost all the packed milk product producing companies use Vitamins, Mineral,
Calcium and Proteins but our company will differentiate its differentiate its product
by adding Vitamin K, C and Poly Unsaturated Fats and specially extract out
“LACTOSE” for lactose intolerant people that usually avoid drinking packed rather
any kind of milk due to Gastrointestinal problem and we will also provide flavored
liquid milk for childerns. This product will better serve this kind of people.

2. To deliver our product to customer’s table using effective manufacturing and

distribution system that maintain the company’s quality standards.

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To translate these core competencies into a sustainable competitive advantage, the Company will
work closely with the key suppliers and distributors to build the relationships and alliances
necessary to satisfy the high taste standards of our customers.

Marketing Plan:
Objectives: Our Company’s marketing objectives are

• To maximize profit
• To seek 20% market share of the whole market
• To position our product as quality and unique.

Marketing plan:

Target Market: The primary target market of the “Pure liquid Milk” is children aging 1-5 years in
the Lahore and we will influence the mothers who will buy this product for their children’s. On
the basis of our differentiated formula our company is focusing its product to the unique target
audience in an entirely differentiated way like as the small children’s and their parents are more
concerned about their health.
Product:

Product variety: Liquid milk for Childers

Brand Name: Pure Liquid Milk

Size: 400Grms

Features: Vitamin K, C, Calcium, Proteins and Poly unsaturated fat.

Expiry Date: 5 months.

Services for distributors: Expiry milk is heartedly accepted and if you want to return the
stock company will happily accepted.

Price:

The following mentioned prices are for the ultimate users. Note that these prices are not for Distributors
and retailers. 625 for 400Grms

Promotion:

Our main aim will be on this methodology. We will make aware to mothers of the children’s and
also do promotion with the help of Gynecologists, Maternity homes and hospitals. We will also start the
awareness programs for the mothers on the TV and also target the villages with the help of direct

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marketing . We will also do advertise in the family planning offices that mothers of villages or that are
not aware with this could be aware with this and take our product.

Advertising: We will do advertise with the help of Sign Boards, Print Media, Electronic Media,
Internet and one the one marketing.

Direct Marketing: In the ruler areas

On Road publicity

Factory Fair price shops

Bonuses: Company will give incentives on the basis of purchasing 20packs and then they will get
1 pack extra as a bonus to the Distributors and Retailers and whole-sellers.

Seminar and opinion leaders: We will also take help of famous celebrities which will work as a
influencer and opinion leader.

Positioning:

Regarding positioning of the product of the company, the strategy will be to focus on “One
consistent positioning”. In this point, company will position its product by focusing the
characteristics of (1) Skimming pricing . (2) High quality. (3) Liquid pure full of extra vitamins
which are needed for children’s . Company will use different positioning for the different
products.

Slogan:

“Wo sb kush jo ap k bchay ki zrort hay”

Place:

Channels of Distribution: Fair price shop

Distributors

Whole Sellers

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Retailers

Locations: Available at all authorized dealers, retailers, whole seller, grocery shops and
kiosks. Company will also place its product at three factory fair price shops. We
will also Put our product in the front side of shelves, so that customers could take
it easily.

Collection Centre:

Company will collect raw milk from the following paces.

• Gujranwala
• Okara
• Sahiwal
Other surrounded villagesPackaging:

Many people are thinking that powdered milk is used little and other does not spoiled, but we will

Introduce them liquid milk in tetra pack and with the help of cape or the bottle which can be sued for

longer time. If you are in way its not easy to travel with your children’s and prepare powdered milk so

we have great advantage with the help of our product.

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SUMMARY
After completion of the project, Dairy Industry is very attractive and there is a big room for

improvement and for the new products. Growth rate is very high and many companies are

coming and many new products are also coming in the market. Competition level is very high

and customer and suppliers powers are increasing. Media can play important role in the game

and who will use it he will be the top position

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