IQRA UNIVERSITY

IU

REPORT TITLE MARKETING PLAN HABIB COOKING OIL

COURSE MARKETING MANAGEMENT

GROUP NAME ANGELS

GROUP MEMBERS ALIYA JABEEN 1583 SIDRA SHARFI 1499 SANAM ZEHRA SARAH ARIF

SUBMITTED TO Sir. MAZHAR ALI

DATE 28th NOVEMBER 2009

ACKNOWLEDGMENT This project has proved to be an excellent learning experience for us regarding the area of Marketing Management. Our sincere thanks and gratitude go to our instructor, Sir. Mazhar Ali, who guided us throughout this project and encouraged us to perform at the best. Our key contributor in this project was Assistant Brand Manager of Habib Oil Mills, Mr. Umair Feroze, who attempted at his best to solve our queries regarding the project and provided us all the relevant information. Lastly, we are also thankful to the Program coordinators of our University for their contribution in arranging our visit to the concerned organization.

TABLE OF CONTENTS S.NO. CONTENTS EXECUTIVE SUMMARY MARKETING PLAN DESCRIPTION 1 2 3 4 5 6 Current Market Situation Recent Market Developments Our Performance in Edible Oil Market Distribution Situation Competitive Analysis Customer and Success Factors Major Assumptions Customers Competitors Environment Goals Our Marketing Program for Habib Cooking Oil Positioning Product packaging and labeling Price Advertising Sales Promotion Place / Distribution Outlets Specific Action Programs Competitor Reactions to our Marketing Programs Implementations Issues and Procedures Contingency Plans PAGE 4 6 6 7 7 8 8 9 10 10 10 10 11 11 11 12 12 12 13 13 13 14 14 15

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4 EXECUTIVE SUMMARY Habib Cooking Oil, being one of the leading brands of Habib Oil Mills, contributes 20% to the premium-priced edible oil market of Pakistan in terms of volume and 30% in terms of amount. Although it targets not only the consumers (women of Pakistan belonging to upper-middle and upper-upper class) but also the institutional markets, its almost 95% of the revenue accounted to end consumers. Among its competitors Dalda and Soya supreme each contributes to 40% of market in terms of amount. While, in terms of volume, Dalda contributes 30% and soy supreme 40%. Both of its competitors have been successful in positioning their respective brands in terms of a health-oriented image. Habib and its competitors have also reflected the emotional sides of their brands. The distribution network of Habib as well as its competitors is very extensive for the end consumers throughout Pakistan. However, for institutional customers, distribution network of Habib cooking is loosely developed as compared to its competitors, and this accounts for its lower earning from these institutional customers. Over the years, Habib cooking oil has earned a mature and healthy image among targeted female consumers. However, due to increase in cost of its raw materials, its increasing prices have led to decrease in its demand over the last two years. This has decreased the profitability of the product. Following this scenario, the target for the increase in profitability has been set as 5% and thus target increase in sale volume is set as 16% leading to 23% share of the product. As the growing preferences of people towards health consciousness is urging them to have healthy and low-fatty edible oils, Habibs current respective image reflects its strength to retain its consumers. The main strategy in this regard would be to go for developing the functional side of brand rather than the emotional one. This would include introducing and communicating a coin term VEFA 5 on the back of packaging of the products with labels of VEFA 5, TVCs and printed ads, and other sales promotion activities that are TV shows and Door-to-Door Selling activities. Although, all of the premium-priced edible oils have been marketed as healthy brands along Habib, introducing this term would concretely describe this health-focused image of Habib cooking oil to women. Besides, the doctors would be consulted for TV shows and Door-to-Door selling activities to describe women about the essential vitamins and fatty acids for good health reflected in the term VEFA 5 Vitamins Essential Fatty Acids Omega 5 and 6.

5 Communicating its healthy image through using this term would facilitate in intensifying this image as well as promote word-of-mouth marketing. These marketing campaigns led to increase in marketing budget by 20% majority of which would account for promotional activities like TV shows and Door-to-Door Selling. The price wouldnt be changed to become competitive due to the increasing cost of imported raw edible oils and also because it would severely affect profit margin per unit. The product would also be distributed to more number of outlets than distributed to existing ones. On the basis of this campaign, the sale of Habib cooking oil is expected to be increased by 16-18 percent and profitability by 5%. This doesnt involve any improvement in sales form institutional customers because the management wants to improve the products performance in market of end consumers only as it is unable to invest in the distribution network for institutional customers to increase sale from this category. Throughout the implementation of this marketing plan, control measures would be taken to assure that targets would be achieved within the time and the budget limits set for the implementation.

6 MARKETING PLAN DESCRIPTION Current Market Situation: The industry size of cooking-oil products is 300,000 tons in terms of volume. To this volume, half is branded oil that falls in category of premium-price and half is loose oil that falls in category of lower price. To the high-priced cooking-oil, Habib cooking oil accounts for 20% i.e. its market size is 30,000 tons in volume. However, to all cooking oil products, its share is just 10% revealing the higher demand of low-priced cooking oil in Pakistan. Per capita consumption of edible oil in Pakistan is about 15 liters. The demand for cooking oils is projected to grow by 4.4 per cent per annum on the average. The product caters consumers having income level fall in A and B+ category i.e. above Rs. 30,000; these can be also known as people belonging to upper middle class and upper-upper class. Geographically, it is sold more in metropolitan cities and in areas within cities having higher proportion of consumers belonging to upper middle and upper-upper class. Basically, the opinion leaders of Habib cooking oil are women; this means it is preferred by women or mother that which cooking oil is to be purchased. And, the market which this product covers on basis of income level includes those women and mothers which prefer cooking oil directed towards human health and thats a reliable and common brand over a long period regardless of the taste and aroma in it. These target women are willing to pay for the product claiming for the maintenance of their health. So far the buying behavior of target market, its consumers belonging to upper middle and upperupper class usually prefer to purchase it at the start of the month. And, usually, cooking oil is one of the most expensive commodities among shopping products of consumers. A part of its sale to consumers, Habib cooking oil also covers market of institutional customers which include restaurants, but this market is not earning much and just accounts for 5 to 8 percent of total sale. Thus, the main market of Habib is end consumers. (The market size in terms of amount wasnt disclosed by the consulted person of this organization as per the policy).

7 Recent Market Developments: Consumers are becoming more health conscious regarding their choice of cooking oil. The increasing awareness among people regarding the use of low-fats and vitamins-enriched food is leading them to use low-fats and healthy edible oil to cook the food. Women and mothers now seek for products enriched with ingredients that dont affect ones health. Besides, FMCGs consumers are shifting from small general stores and from small retailers located at road side towards Makro and other super stores alike. Our Performance in Edible Oil Market: Habib cooking oil is a mature brand. It is promoted through both push strategy giving incentives to retailers and pull strategy communicating strong and health-oriented brand image of Habib through TVC and printed ads. Habib Cooking Oil commenced a hearty campaign called, Dil ki batoon ko Dil wala hi samjhta hai last year. The main objective of the campaign was to introduce and use heart as a communication element because it is a vital organ from which feelings are felt and emotions take birth. Thus, representation of its health-oriented and emotional brand image has mounted its demand. However, the demand of Habib cooking oil is decreasing over the last two years due to its increase in prices that is contributed to increase in prices of imported raw oils and increase in import duties. Furthermore, due to recession too, its consumers are shifting to low-priced cooking oil of Habib Oil Mills and of other companies. Its profits also declined due to increasing cost and decreasing sales at the same time. Responding to this decreasing demand, Habib Oil Mills needs to launch new and more focused campaigns to restore the target consumers of Habib. Among, institutional investors its demand also declined but at a very insignificant level. Its price structure is as follows: Rs.140 for its 1 liters pouch, Rs. 352 for 2.5 liters tin, Rs. 685 for 5 liters tin and Rs. 900 for 10 liters tin. It gives margin to retailers of Rs. 8 for 1 liters pouch, Rs. 22 for 2.5-liters, and Rs. 30 for 5-liters tin. Among these variants, the sale of its 1 liters pouch is highest due to its portability and flexibility. Throughout the year, its sale remains even, except in month of Ramadan and Eid, in which promotional efforts are also increased throughout the two months. In Ramadan, it also follows the tactic of co-branding and sells different Masala products free with Habib cooking oil. (The data regarding the financial results in terms of sales, cost, contribution margin, and net profit were not disclosed by the concerned employee of Habib Oil Mills.)

8 Distribution situation: The distribution network of Habib is very extensive. Its distribution network is divided among three regions: Southern region which includes Karachi, Quetta, Hyderabad, and Sukkur; Northern region which includes Islamabad, Peshawar, and Gujranwala; and Central region which includes Faisalabad, Lahore, and Multan. Its distributors supply product to the retailers and super stores accordingly. The retailers in areas resided with high-income people are preferred to be supplied with more volume of Habib cooking oil because sale of the product is higher there. The retailers are provided with price and quantity incentives to push product to people. Its sale in general stores is higher compared to regionally scattered super stores. The introduction of Makro and Metro super stores has shifted much of its sales from small general stores and to there. However, the sale of Habib cooking oil is still higher in general stores. The product has around 50,000 retail outlets throughout Pakistan. On the other hand, its distribution network covering institutional customers is very week and limited. For institutional customers, there are separate distributors but Habib Oil Mills has lost its major distributors catering institutional customers and after this, it couldnt find any distributors for them. This is because, institutional customers demand for long credit periods i.e. of 3-4 months and so distributors are unwilling to take risk of these institutions liabilities bound to 3-4 months. Competitive Analysis: Habib cooking oil is a blend of three oils Soybean, canola, and sunflower. So, it takes those cooking oil manufacturers as its competitors which are the blend of oils because generally families use these blended oils. On the other hand those which include in its ingredients single oil cover other markets; usually those brands are prescribed by doctors regarding use of particular oil. Thus Habib Oil Mills categorizes its competitors not only on basis of price but also on ingredients due to the difference in market associated with these categories. In this regard, the major competitor products, which are high-priced cooking oil in blended form, are Dalda and Soy Supreme. Daldas market share is 40% throughout Pakistan due to its lower price. However in terms of revenue the market share of Dalda is same as of Habib i.e. 30%. Also, Dalda brand is perceived as uncommon to Habib among consumers. In terms of consumer price, Habib and both of its competitors go under price wars especially in month of Ramadan. Market share of Soy Supreme is 40% in sale amount as well as in volume. Also, the share of Soy supreme share is more

9 in Karachi and Lahore around 45% - as compared to in other cities. It is more in Karachi because Soy Supreme is preferred mostly by people belonging to Agha Khan Caste as it is Agha Khanis brand and this class is mostly prevailed in Karachi as compared to other reasons. Other reason for the higher share of Soy Supreme in Karachi as well as in Lahore is that the properties of this cooking oil make it good for frying the food as compared to Habib and Dalda, and thus, this results more crispy nature of food. So, this makes the oil popular among restaurants, which are more in Karachi and Lahore as compared to other cities. In terms of quality, it is same for all the competitors, both actual and perceived. The expenditure on marketing research is same among competitors and Habib. The expenditures on marketing activities of Dalda are approximately same as of Habib. However, marketing expenditures of Soy Supreme are more than Dalda and Habib. Soy supreme go for more advertisements, TV programs, shows, campaigns etc. than Habib and Dalda. In terms of giving price and quantity discounts to distributors and retailers, Dalda is ranked equally as Habib. However, soy supreme gives margin to retailers of Rs. 12 for 1-liters pouch, Rs. 27 for 2.5-liters tin, and Rs.45 for 5-liters tin. Customers and Success Factors: The increasing health consciousness among consumers is termed as a potential success factor for Habib cooking oil because of its positioning among consumers as a health-focused product. Being a mature and reliable brand, Habib cooking oil can better capitalize this opportunity and in this way it can attract its health-conscious target and potential consumers. The strength of Habib cooking oil lies in its strong and health focused brand image. It is perceived as a mature, old brand among competitors rather than a young, vibrant brand. This is served as its advantage because this perception positions the brand as a brand to be trusted and relied on in terms of its quality as well as its role in maintaining health. Habibs association with heart in ads and other campaigns over the years has intensified its position among health-oriented products. Besides its strong, trusted and friendly brand image, its other strength lies in its extensive and well established distribution network and system. Its warehouses in 10 locations throughout the above mentioned cities facilitate its distribution efficiency and the efficient product supply to retailers and thus availability is on-time to final consumers. However, the main weakness of Habib cooking oil is that for institutional customers, its distribution network is weak and limited which may result in lower revenue from institutional

10 customers than cost of handling its existing limited distributor base. Its other weakness is its lower expenditure on marketing and promotional activities and thus limited coverage of these activities as compared to its competitor Soy Supreme. Also, its distribution coverage in few areas, where retail outlets are catering its target market, is lower than its competitors and it has to improve here. Besides this, Habib cooking oil cant reduce its cost further; it cant offer competitive prices like its competitor Soy Supreme. Major Assumptions: Customers: As, the target market of Habib is women belonging to high-income class, these women are willing to pay high for the product which proves to be effective for human health. This healthorientation is further sharpened for edible oil because edible oils are perceived as being fatsenriched. This reflects that growing health-consciousness among people, especially among educated women, is urging them to use reliable and health-focused food products. Competitors: The consumers of Habib cooking oil tend to switch to competitors products with a little change in price, showing its price sensitivity among consumers. Also, many consumers dont perceive Habib cooking oil as a separate brand and mostly associate it with Dalda, its competitor. Thus, the distinction between the two brands is much blur in the perception of these consumers and there is no clear brand identity regarding Dalda and Habib for them. The distribution network of the competitors is as extensive as of Habib. In terms of marketing positioning, Dalda has been positioned for mothers and the brand is linked to mothers / motherhood. Soya supreme is also positioned as a healthy product; however it communicates this through claiming notably that it is ultrahigh temperature (UHT) treated. Environment: The major environmental threat being faced by Habib is that due to recession, consumers are shifting to medium-priced cooking oil products. The political and social instability is also a threat as it can affect the cost and product supply of Habib cooking oil. Since the production of Habib

11 cooking oil is to be done on daily basis to cater its entire market, even a gap of one day can affect its responsiveness to the market. Another problem at macroeconomic level includes increasing cost of imported raw edible oil and heavy custom duties on it. Also, fluctuations in exchange rate are causing increasing raw material cost and all of this is leading to low margin of edible oils. The legal issues are not much the matter of concern for Habib cooking oil. So far its waste, it is sold to soap makers so there is no need of sinking it to sea. Goals: Decreasing sale volume of Habib oil and increase in its fixed and variable cost has affected much of its profitability. Thus, the management of Habib Oil Mills has set its target to increase its profitability to about 5%. (The figures about target ROI and target cash flows werent disclosed by the consulted person). In order to achieve its desired financial target, the sale volume is targeted to be increased to 16% i.e. target sale volume of 35,000 tons or more in a year and thus increase market share of around 23% or more. (The sale amount wasnt disclosed by the consulted employee of Habib Oil Mills). Our Marketing Program for Habib Cooking Oil: To meet these challenges and opportunities, our marketing program will have following key components: Positioning: As the price of Habib cooking oil cant be decreased due to the cost constraints, the management of Habib Oil Mills should position the product in the mind of customers in a way that they would be willing to pay for its premium price and retain to it. For this sake, the management would go for strengthening its existing position as a functional brand rather than emotional one that is adopted by its competitor Dalda. This is because the health conscious customers would prefer the product imaged as a healthy product. Further, functional side of brand would be more lasting than the emotional one particularly for a product that is considered to be a healthy one and that is essentially to be used on almost daily basis rather than being used on some emotional

12 influences. Although, its present marketing campaigns already target the product as a healthy one while associating it with heart, the competitors especially Soy supreme are also targeted as same. Also, its unique selling proposition is well defined in terms of its reliable and the most mature brand image. So, in order to intensify existing health-focused image of the product and to highlight this image over the competitors, the management would communicate a coin term vefa 5 in its TVCs, print ads, leaflets, etc. Here vefa would be described as Vitamins, Essential Fatty Acids, and 5 is referred for 5 items Vitamins A, D, E, Omega 3, and Omega 6. In this way, through concrete message, customers are made to know clearly that how the product is providing healthy ingredients compared to other products. According to the study of consumer insight by the management, it can persuade customers and retain them to Habib through communicating this fundamental position of the product to them. Product Packaging and Labeling: To highlight the vefa 5 components of Habib, the logo of vefa 5 would be added to its packaging to solidify the health-focused image of Habib. Price: Due to the cost limitations, its price cant be decreased to make it competitive. Instead of this, the management should arrange to intensify its positioning in a way that consumers would be willing to pay for its premium price. Advertising: The consistency in promoting the healthy image of the brand on the basis of its functionalities would be further reflected through communicating the vefa 5 term in TVC ad campaigns and Radio jingles. The TV channels would be Geo TV, ARY, and Masala TV. The new labeling on the package as well as the importance of the vefa 5 items would also be highlighted in printed ads. The overall budget for this marketing campaign would be increased by 20% from the last year. (The amount of budget allocated has not been disclosed by the concerned personnel of HOM). TVCs would receive 35% out of the total budget assigned to this promotional campaign, while, printed ads would receive 25% comparing to last year allocations of 35% for each TVCs and printed ads. This means the increase in budget for this marketing campaign is accounted more

13 to TVCs than printed ads. This is because TVCs are found to be more effective for communicating the promotions associated with new campaigns to women, as compared to Printed Ads. Sales Promotion: In order to personally inform the women about its healthy ingredients, the DDS Door-toDoor Selling activities would be conducted in the high- and middle-income areas of Karachi. Further, through TV shows the product would be promoted. All of these sale promotion activities would account for 40% of the total budget comparing to 30% of last year. This is because consumers can be better aware of the coin term introduced for Habib through BTL (Below the Line) activities like Door-to-Door Selling and TV shows. Place / Distribution outlets: Habib cooking oil would be made available to more number of outlets throughout Pakistan in order to extend its distribution network. The target number of distribution outlets would be increased from 50,000 to 55000. Specific Action Programs:

Habib oil mills would place the launch a new TVC ad campaign. The term would be highlighted in new ad campaigns in which the message of heart and health would remain there but through different wordings, slogans, and situations. It would also be communicated through leaflets, posters, banners, and buntings.

Within two or three weeks, the ad would be placed at print media in newspapers Jang and regional newspapers and periodic home magazines Stalls would be set up around the retail outlets to conduct trial marketing practices in which free samples would be given to people and they would be made aware about the new coin term vefa 5.

After sale of existing old stock, the products with new labeling would be distributed to existing outlets as well as some new outlets would also be added throughout the areas covering target market.

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In TVCs, Radio jingles, and in cooking shows and others that are popular among women like Nadia Khan Show and Shaista Wahidi Show at TV channels Masala and Geo a brief description of the vefa 5 term would be given to educate consumers about it.

Within two months, DDS (Door-to-Door Selling) activity would be conducted in which a mobile health unit would be set up which facilitates the visit of sales persons along with doctors to the customers places in branded van. The doctors would provide free medical check up to people in each customers place on purchasing Habib cooking oil. In effect of these marketing campaigns, sale volume is expected to be increased to around

16-18 percent. This would also increase its sale revenue. The advertising cost is expected to be increased but this would lead to much increase in revenue that can lead to acceptable profit. Profit is expected to be increased by 5%. (The projected amount of sales, cost of production, contribution margin, and marketing and other expenses, net profit, and range of amount of investment and other expenditures required were not disclosed by the consulted person as per the organizations policy). Competitor Reactions to Our Marketing Programs: An important dilemma considered is of competitive-priced products of edible oil companies that are competitors of Habib cooking oil. As competitors are also claiming their products as health-focused while offering economical prices as compared to Habib cooking oil to the same target market, they may have more potential to lead the market. These responses have already been catered by our marketing strategy. Implementation Issues and Procedures: While implementing this plan, variances can be observed b/w the actual and targeted result of door-to-door selling activity. Specifically there can be comparatively little productivity from this activity as the one set as target. Different control plans have been developed to check and rectify variances during each stage of implementation of the plan. There would be tight controls in terms of comparing target and actual time in implementing a marketing activity effectively. In order to respond to aforementioned issue of door-to-door selling activity, the timing of this activity would be changed from afternoon to evening timings as women were found reluctant to engage in the activities

15 during these timings. Due to this changes in timings, increase in productivity is expected from this Below-the-line DDS activity. Besides these measures, other measures of control would also be taken in terms of implementing marketing programs within the budget limits. Contingency Plans: Major contingency include unexpected inflationary pressures that may force to push up the market price of Habib Cooking Oil. Since, its prices has not intended to undergo any change for this marketing campaign and kept as a premium price, any such inflationary pressure may push its price above the acceptable range. In such case, the management is meant to reduce expenditures of DDS activity by reducing its time period by one month because other action programs are estimate to be more fruitful than DDS activity. In this way, the effect of rise in raw material cost should be overcome. Besides, the product supply chain at retail end may suffer due to the political instabilities and similar issues. For this purpose, the companys management is intended to have an agreement with Makro to ensure its timely replenishment while envisaging upcoming problems regarding outbound logistics in FMCGs. The supply commitment with Makro will also be facilitated for the increasing trend among consumers to shift to major super stores to shop at discounted prices.