Olfrute

EXECUTIVE SUMMARY

RESEARCH OBJECTIVE
The aim is to analyze the performance of Olfrute in the market and the reasons which lead to its downfall.

INTRODUCTION
This research is about Olfrute which is a juice brand under the banner of Engro Foods. There have been serious issues with this brand, and this will serve as the basis of this report. 4 Ps of Olfrute have been tackled separately and problems in each of them have been identified and explained. Repositioning of Olfrute has also been discussed along with the pros and cons of it. An overview of its financial statements for the recent years is also given. Quantitative portion of the report deals with the numerical findings from sample survey of 50 respondents. In the end, future plans of Engro Foods with regards to Olfrute have been discussed along with some recommendations.

COMPANY OUTLOOK
Engro Corporation Limited is clearly a company which needs no introduction. With just a few years in its court as Engro Corporation Limited it has managed to get considerable success and is growing exponentially. It consists of various subsidiaries such as Engro Foods, Engro Polymer and chemicals, Engro Fertilizers, Engro Powergen and Engro Eximp. For the sake of the nature of the research objective, Engro Foods and its product Olfrute will be majorly focused up on. Engro Foods was officially launched as a subsidiary of Engro Corp in 2007. It launched itself with Olpers. It just did not enter the market but hit it with a bang loud enough to literally shake already existing players in the industry. The immediate success of Olpers really helped create Engro Foods brand equity. This triggered its growth in dairy sector. The financials related to this have been given below. In order to diversify, Engro Foods entered ice-creams and beverage industry. Engro Corporation is an epitome of diversification; one of its employees said, We are never afraid of trying new things here. The success of Engro Foods is attributed to this attitude which is ingrained in each and every one of us here.

FINANCIAL ANALYSIS
Financially Engro has been performing considerably well in the market. Total revenue of Engro Corporation has gone up from PKR 78824 million in 2011 to PKR 82937 million in 2012. Of all the subsidiaries, Engro Foods has contributed maximum in this increase in revenue. Revenue of Engro Foods went up by 34.4% which is maximum out of all the Engro subsidiaries. Engro Polymer is the next in line after Engro Foods. However, two subsidiaries namely Engro Fertilizer and Engro Eximp witnessed negative growth in its revenue for the year 2011-2012. Issue with Engro Fertilizer is the drop in sales from 4.2 million tons to 3.7 million tons. Also, a decline in production is very obvious in the financial statements. Crop economics have not just hit Engro but the whole fertilizer industry. On the other hand, Engro Eximp is faced by high fixed cost. Its gross profit went up but the higher cost of machinery and financial charges impacted heavily on it. This particular subsidiary is at a nascent stage where it is trying to stabilize its production capacity. Once this is done, its financials would be a lot better. The market share of Engro Foods is continuously rising. Specifically UHT dairy market share went up to 51% in 2012 from 43% in 2011. This means that Engro Foods now has more than 50% of the market in its pocket. Tarang can be tagged as the main growth driver with 67% market share in 2012. Over all financials say that everything is very rosy in Engro Foods with volumes booming and market share rising. However this is not the case unfortunately. Some brands are undoubtedly doing commendable under Engro Foods but some are undergoing serious problems, Olfrute being one of them. The total market value of the Juice and Nectar segment in Pakistan is 507 million liters which roughly translates into a market value of PKR 31 Billion. Engro Foods plan to focus on the Juice and Nectar Category (JN) and Value Added Still Drinks (VASD) category which have a total market size of 114 million liters and a total market value of PKR 11.4 billion. As of 2010, the total market share of Engro in the Juice category was merely 1% and it plans to increase its share and be the #2 player after Nestle, which is a leader in this category.

4 Ps of Olfrute
In order to thoroughly internalize the causes of Olfrutes failure we will try to understand the strategy Engro Foods employed in light of the 4Ps of marketing, to understand the lacking in product, price, promotion and placement.

Product
Olfrute was launched in 2010 under the banner of Engro Foods with the tag line idhar udhar idhar udhar. At the same time Popular Juices had recently launched Country Juice as a direct competitor to Fruita Vitals and Olfrute, this was priced less and contained 50ml more than both the other brands. Olfrutes taste however was not starkly different from Fruita Vitals across the range of flavors available and was also priced the same. Initially Olfrute was only available in 5 classic flavors, namely apple, mango, grapes, guava and orange. Also, it was only available in 1 liter packs. This means that even if someone wants to give it a try, s/he can be hesitant because small packs are not available. At this point one can say that nothing new was offered to consumers. Olfrute did not give a reason to people to switch from other juice and nectar brands. When asked about it the interviewee replied, Yes initially we did not offer anything different from what our competitors were offering. Hence, this might be a reason behind not-so-satisfactory performance of Olfrute. Olfrute did however offer 2 new flavors when it was repositioned. These flavors were apricot and green cocktail. Now these are the flavors which are different and not been tried before so people can be expected to at least taste it. Secondly, packaging was modified giving a livelier look plus small packs were made available. As far as the product and packaging is concerned, repositioning did work but Olfrutes image and market perception did not improve substantially. However, perceived quality of Fruita Vitals is considered to be higher than that of Olfrute and therefore the greatest number of sales coming in from impulse purchase nature of this product went to Fruita Vitals.

Price
The pricing strategy followed by Olfrute is competitive pricing. Since the time it was launched, price is similar to the major player in the industry. This evidently shows that pricing has never been a distinguishing feature for Olfrute. It was the right move also because competitive pricing strategy was in line with other components of its marketing mix. Some people who were asked about Olfrutes pricing for the sake of this research said that because it was priced the same as the market leader, it did not offer a strong value proposition to many regular consumers of juices and nectars.

Promotion
When Olfrute was launched in May 2010, the first advertising campaign of Olfrute, zindagi ka yeh safar was launched. This campaign targeted the women who are trying to balance their life between work and home, and who need something healthy to balance their dietary habits as well. However, it seemed that this message for a new brand was quite confusing and difficult for the customer to relate with. This is one of the reasons why Olfrute did not have a good market performance in the first year of tis launch. In 2011, Olfrute was launched again with a simplified advertising campaign in order to reach out to the customers. The new advertising campaign was based on the message Taazgi Jaga Re, which attempted to product as refreshment. This new campaign better reached out to customers, contributing to a twofold growth in sales of Olfrute. However, with a very low market share already, the advertising campaign of Olfrute did not gain substantial consumer interest. When asked why Engro foods did not invest heavily in the marketing of Olfrute, despite of huge competitive pressure from Nestle Fruita Vitals, the assistant brand manager of Olfrute explained, There are two strategies when investing in a product; either you heavily invest in the marketing until the results are seen, or invest less initially, and start investing heavily if the results are good. We follow the second one. This seems to be the reason why Engro Foods did not invest much in Olfrutes promotion, even in face of tough competitive pressure from Nestle Fruita Vitals.

Place
Engro faced severe distribution issues when it launched Olfrute in 2010. This is because the distribution channel Engro Foods used for Olfrute was the same as that of its dairy product, Olpers. Therefore perhaps the reach of Olfrute was not in synchronization with the demographic spoken of its target market. Olfrute was however available at all leading retail and wholesale outlets such as Hyper Star, Makro, Imtiaz and some popular Class B stores in various locations. But because the brand identity was weak, Olfrute needed more strategic placement in the retail setting to induce trial. Olfrute even introduced small fridges but these were never kept in prime locations in the retail setting.

Quantitative findings
A sample of 50 customers was taken to fill out the questionnaire designed to understand the standing of Olfrute in the market, and the customers perceptions about the reasons behind its failure. Olfrutes Standing in Engro Foods Custome rs rating of Olpers N Valid Missing Mean Mode Skewness Std. Error of Skewness Minimum Maximum 50 0 4.22 5 -1.044 .337 2 5 Statistics Custome rs rating of Tarang 50 0 2.44 2 .378 .337 1 5 Customer s rating of Omung Lassi 50 0 2.00 1 .731 .337 1 5 Customer s rating of Omore 50 0 3.68 4 -.395 .337 1 5 Custome rs rating of Olfrute 50 0 3.26 3 .080 .337 2 5

When asked to rate various products of Engro foods on a Likert scale, customers tend to give the highest mean rating of 4.22 to Olpers. Also, the mode rating for Olpers is 5, which shows that most of the customers rated Olpers to be the most preferred. The second highest mean rating was given to Omore, which shows that Omore is an above average product of Engro foods as per customer perception. Olfrute stood on the third highest mean rating of 3.26, which clearly shows that Olfrute has a close to average preference among the customers. The mode rating is also 3, which shows that customers consider it to be an average product by Engro Foods. Lastly, the ratings of Omung Lassi and Tarang are below average, as the customers taken in the sample were mostly from social class A and B which do not use these products as much. The Skewness of these ratings measure that whether the ratings of these products lie mostly in the above average region or the below average region. Olfrute, Omung lassi and Tarang have positive Skewness which clearly shows that their ratings are right tailed. This means that most of the ratings lie in the below average region, causing them to be below average or close to average products. On the other hand, the negative Skewness of Omore and Olpers show that most of the ratings these products lay in the above average region,

and the data is left tailed. This means that customers consider these products of Engro Foods to be better than Olfrute. The minimum and maximum ratings given to Olpers and Olfrute are the same, which shows that some customers also consider Olpers to be a below average product, and also Olfrute to be an above average product. From the analysis done above, it can be fairly concluded, that Olfrute seems to be an average product, about which most customers do not have any strong perceptions

The above bar charts show that what percentage of customers have given a bad, unsatisfactory, average, satisfactory or the best rating to these products. About 40% of customers think that Olfrute is average product, while 34% consider it to be satisfactory. This is well below in contrast with Olpers, where 40% consider Olpers to be a satisfactory product, while 44% consider it to be the best one. Also, Olfrutes standing is weaker than Omore in the Engro foods portfolio, as 34% consider Omore to be an average product, while 38% consider it to be a satisfactory one. On the positive side, Olfrutes standing seems to be better than Omung Lassi, where most of the customers do not seem to have good perceptions about the product.

Olfrutes Marketing Mix

Statistics Custome rs rating of Olfrutes taste

Valid Missing

50 0 3.34 3 .034 .337 2 5

Custome rs rating of Olfrutes packagin g and branding 50 0 3.30 3 -.511 .337 1 5

Custome rs rating of Olfrutes price

Customers rating of Olfrutes advertising

50 0 3.20 3 -.177 .337 1 5

50 0 2.82 2 .098 .337 1 5

Mean Mode Skewness Std. Error of Skewness Minimum Maximum

When asked to rate Olfrutes taste, packaging, price and advertising on a Likert scale, customers gave the highest mean rating of 3.34 to Olfrutes taste. This means that customers perceive Olfrutes taste to be slightly above than average. The mode rating again confirms the earlier analysis, that most customers consider Olfrute to be average, in this case with regard to its taste. The mean ratings of Olfrutes packaging and price also remain to be close to average, while the ratings of Olfrutes advertisements seem to be considerably lower. Olfrutes advertisements have been given a mean rating of 2.82, which is below average, and a mode rating of 2, which means that most customers consider its advertising to be unsatisfactory/below average. The Skewness of ratings of Olfrutes advertising and taste is positive, which indicate that their ratings are right tailed, and most of the customers ratings fall in the below average region. For advertising, this is confirmation with the earlier analysis, as the lowest mean and mode ratings are given to Olfrutes advertising. The Skewness of Olfrutes price and packaging is negative, shows that the data is left tailed, and most of its ratings fall in the above average and close to average region. This shows that most customers consider Olfrutes packaging and price to be better than its advertising and taste. The minimum and maximum ratings given the Olfrutes price, packaging and advertising are the same, while the minimum rating of its taste is slightly better than others. This confirms the earlier analysis, where its taste has a better mean rating than the rest of three factors. From the above analysis, it can be fairly concluded, that although Olfrutes packaging, taste, and price are considered to be average, its advertisements are not perceived to be

effective by the customers. Therefore, ineffective advertisement campaigns may have a greater contribution to the failure of Olfrute

The above bar charts show the percentages of customers who gave various ratings to the taste, price, packaging and advertising of Olfrute. As confirmed by the earlier analysis on Olfrutes taste, 38% of respondents consider Olfrutes taste to be average, and 36% consider it to be satisfactory. The packaging and branding of Olfrute also has most of the respondents rating it as average and satisfactory, with 40% rating its packaging as average, and 36% satisfactory. This shows that even packaging may not be a very serious pitfall that has led to the lower profitability of Olfrute. The price ratings follow a fairly normal distribution with most of the respondents (46%) rating it to average, and 32% rating it to be reasonable. Finally, the bar chart on advertising ratings clearly indicate that the highest percentage of respondents (30%) perceive Olfrutes advertising to be less

effective, while 28% consider it to be average. This confirms the earlier analyses which indicate, that advertising might be the most serious pitfall in Olfrutes marketing mix. Competitive Position and Analysis

The analysis on customers perception about Olfrute indicated that the biggest problem within the product was its advertising. However, analysis of the competitive landscape is necessary to understand, what external factors were at play. When asked about the fruit

juice brand preferred by customers,

88% of respondents chose Nestle fruita vitals, while only 4% chose Olfrute. Shezan still seems to have a 6% share, which is higher than Olfrute. This clearly indicates, that in isolation, Olfrute may be an average product for customers, but against Nestle fruita

Vitals, Olfrute hasnt been able to

develop a decent standing. When asked about the primary reason behind their preference for a certain brand of fruit juice, 54% of the respondents chose taste, while 32% chose brand loyalty. This clearly indicated that in isolation, the taste of

Olfrute may be the best component of

its marketing mix, and packaging and branding may be the second best one, but in comparison with Nestle Fruita Vitals, these components of Olfrute do not match customer standards.

Analysis of Advertising Campaigns

Apart from taste, the biggest problem in the marketing mix of Olfrute seems to be advertising. Nestle Fruita Vitals has a long established brand loyalty, to tackle which; Olfrute should have sent a very strong branding message to its customers through advertisements. However, the above bar charts seem to confirm the earlier analysis on Olfrutes advertising. When asked about the most appealing and popular advertisement campaign of Olfrute, 74% of respondents said that they do not remember the advertisement campaigns of Olfrute. This explains the lower mean ratings given to Olfrutes advertisements. Olfrute had been repositioned in 2012, with the new ad campaign called Taazgi Jaga Re, and with new packaging and flavors. However, when asked the customers about the effect of Olfrutes repositioning on their perception of the product, 52% of the respondents said that they do not know about the repositioning, while 34% said that the repositioning did not have any effect on their perception about Olfrute. This shows that the advertisement campaigns of Olfrute are not able to send such a strong message to customers, which can initiate higher demand for the product.

Customer Recommendation

The quantitative and graphical analysis above clearly indicates that advertising is the most serious pitfall in the marketing mix of Olfrute. As a recommendation for the brand, customers were asked the changes that Engro foods should bring about in Olfrute in order to make it more competitive. The responses again confirmed earlier analyses, where 40 % of respondents wanted Engro Foods to change Olfrute advertising campaign, 26% wanted more fruit content in the juice, while 22% wanted that the complete branding of the product should change. The price and packaging did not require a significant change by the customers.

Future Outlook
Engro Foods, which consists of Dairy and Juices and Ice Cream category, continues to maintain a positive outlook for its products due to increasing growth in urbanization, youthful population and a rise in middle class. The dairy and juices category showed a record increase of 24% in 2012 and the UHT segment grew by 44%, with much of the growth attributed to Tarang and Omung Lassi, with Tarang having 63% market share. The positive growth in the Dairy and Juice category is mostly attributed to Tarang, which remains the leader in this category and dominates most of the profits earned. According to the Annual Report 2012, Engro Corp remains optimistic of Olfrute Juices in the Dairy and Juices category and the Brand Manager of Olfrute reported an increase of 400% after the brand was repositioned in 2011. Despite the positive outlook proposed by the brand manager at Olfrute, it is evident from Olfrute past performance that it would soon be discontinued. According to the survey by customers _% believed that it did not reach up to their standards in terms of taste and _% believed that the advertising was not effective. As the brand manager puts it, we didnt know what we were getting ourselves into when we decided to enter the Juice and Nectars category in 2010. Little did we know that we had entered into a long and expensive war with the competitor Fruita Vitals and the competition hasnt been easy so far. Fruita Vitals has invested heavily in advertising this year after facing a tough time from Engro. The tough time again, was not given by Olfrute but by Tarang and Omung Lassi. It seems as if the competitors too are not seeing Olfrute as a potential threat which is not a good sign. Although the statement by Engro Foods sounds promising market sentiments are completely different and customers are not impressed by Olfrute so far.

Recommendations
The company planned to spend PKR 3337 million in 2011 to increase the capacity of its plants. Capital expenditure included new Milk Collections Centers (MCC), new Pre-Processing Machines and no expansion in the juices category was evident as of 2011. Engro is up against a huge competitor Nestle which has a leadership in the JNSD category. If Engro wants to increase its market share from a mere 1% it needs to invest heavily in terms of Capital Expenditure and Advertising. According to Atif Sultan the company plans to invest on advertising expenditure in the near future as part of their revised strategy for Olfrute. Engro would not only have to invest in advertising the existing product; it would have to build the brand equity of Olfrute from scratch. The business model at Engro Foods is based on its dairy products and all machinery used by the company is built on the dairy model. Moreover the Juice, Nectar and Still Drink (JNSD) category have been combined into one Dairy and Juices category which often sidelines Olfrute. Juices and dairy are two different segments and it is high time that the company starts treating them differently or its dairy products would continue to be in the limelight and Olfrute would continue to underperform in the market. According to the survey customers believed that Olfrute has an unpleasant bad smell and the taste is no different from other juices. Engro should resolve the issue of unpleasant smell and come up with different flavored juices to differentiate its product from competitors. The packaging is not very impressive when compared to the premium packaging of Nestle. The JNSD category is for premium juices and Olfrute does not reflect the packaging of a premium juice There are several distribution issues with Olfrute and it is often unavailable in the market. The product should be easily accessible to customers or the mere market share of 1% would diminish as well. One option residing with the company is to discontinue Olfrute altogether. This recommendation was quite evident when the Brand Manager of Olfrute was interviewed; he mentioned how Engro had gotten into a long and expensive war with Nestle Fruita Vitals. In the past commentators believed that Olfrute has managed to surpass Shezan and Fresher but these competitors cannot be underestimated. Shezan has maintained its brand on the basis of quality and taste and with the recent repacking of its juice it would not be long before Shezan becomes #2.