Submitted To:

Konstantinos Samiotis

Submitted By:
ABRAR AKRAM
H00029875

M.Sc. PROJECT MANAGEMENT

Online Programmes
University of Liverpool

Introduction to Industry and SBU

Food and Beverage Industry:
Food and beverages (F&B) industry process raw food materials, their packaging and
distribution. F&B industry includes fresh, prepared and packaged foods among
alcoholic and non-alcoholic beverages, all the products sale by any company except
pharmaceutical products comes under this industry. F&B is a fragmented industry
where production is share among different producers however, any single company
cannot control the market direction or products price due to small share in the market
(Global Edge, 2013).
F&B industry has been developed after the invention of canning by Nicholos Appert
and pasteurization by Louis Pasteur as these changed the way food processed and
stored safely for long time. F&B has major evaluation after world war II due to food
shortage cause during war which bring many innovations in the industry. Now, F&B
is one of the major industry in everyday life and provide regional and international
food products to consumers.
Almarai Company:
Almarai is one of the major F&B company in Saudi Arabia with world's largest dairy
products unit. Almarai was established in 1977 as a dairy product company and now
serving its customers with a range of products in dairy, yogurt, bakeries, juices,
poultry and infant nutrition. At the end of year 2011 almarai annual report shows a
great potential in the company with a total sale of SAR 7,951 million.

Almarais Mission:
To provide quality and nutritious food & beverages that enrich our consumers lives
every day.
Almarais Vision:
To be the consumers preferred choice by leading in chosen markets with superior
food & beverage products.
Almarai Organizational Structure:
Almarai is known by its slogan Quality you can trust and serve its customers
through four major units listed below.
Almarai Dairy: Also widely known as Almari Dairy provide customers with wide
selection of bottled milk, laban, flavoured milk, yogurt, cheese, cream and fresh
juices.
Lusine: provide customers with baked foods including breads, pastries and biscuits.
7Days: provide customers with a range of puffs and croissants.
Alyoum: provide customers with packed whole chicken and selective portion packs.
Infant Nutrition: infant nutrition is relatively new business unit for Almarai
established in 2010 to provide customers with infant formulas. Infant formulas are
processed food items to feed children under 12 month age. Currently infant nutrition
SBU is producing three products of raw milk (powdered milk) listed below and a new
project is planned to produce cereals for infants.

Product A: Enfamil A+ Stage 1: age 0 to 6 months

Product B: Enfamil A+ Stage 2: age 6 to 12 months

Product C: Enfamil A+ Stage 3: age 1 to 3 years

Currently product A is most successful product for Infant Nutrition as this target the
customers for age 0 to 6 months who cannot be fed any other food however, there is
high competition for this market share and other companies are trying to bring
improved formulas. Product C sale is very low as these targets the customers age
between 1 to 3 years and these are also fed other foods. A new product D (cereal for
toddlers) is planned to be produced to get market share for customers age ranging
between 6 months to 3 years as this provide start of solid food for infants. This
product success could also bring new opportunities for SBU to start new product line
by introducing cereals of different tastes and foods like rice cereals, fruit cereals etc.
This new product is also expected to get big market share according to initial
customers feedback.
Mission of SBU Infant Nutrition:
Infant Nutrition understand that babies deserve best of everything that could be
provided and serve. We want to serve our customers by providing essential first
nutrition to newborns to daily diet for a toddler.
Strategies for SBU Infant Nutrition:
1. Serve customers by providing a wide range of infant and toddlers nutrition
products to increase market share.
2. Continuously improve products through research and innovation to guarantee
healthier start of infant life.

Project Portfolio Management

Project Portfolio for Infant Nutrition SBU:
Achievement of business strategy for Infant Nutrition requires innovation and new
projects to increase product range with the continuous research to improve existing
products. There is need to manage existing products and new projects effectively
within available budget and staff. Portfolio management helps to manage projects
collectively as a group to achieve business strategy (PMBOK, 2008). Therefore, it is
recommended to apply portfolio management in Infant Nutrition SBU to successfully
manage the ongoing project and achieve business strategy.
Portfolio Selection Criteria:
Resources are always limited to carry out projects so there is need to select most
beneficial projects by evaluation and ranking of projects. All companies need to
define a portfolio selection criteria according to their own culture (Kerzner, 2010)
therefore a modified selection criteria for Infant Nutrition is proposed which will be
consists upon two major phases of evaluation and selection as described in below
steps.
1. Evaluation of Project
a. Do we need to do this project? (Rothman, 2009)

Yes/No

b. Strategic alignment of project with SBU Strategy?

Yes/No

c. Risk assessment of projects

High/Low Risk

d. Shareholders Value

NPV Calculation

2. Selection of Projects
a. Rank projects by scoring model

b. Select project according to available budget

Benefits of PPM for SBU:
Infant nutrition SBU has defined annual resources (24 M) which are good for
carrying out existing projects, however it is required to initiate new projects to meet
business strategy which cannot be completed within allocated budget. This requires
evaluating all ongoing and proposed projects against defined criteria to know which
projects are aligned with the strategy and maximize the business value. A standard
portfolio management process will also help to effectively execute the projects.
Evaluation of Existing and Proposed Projects:
Infant Nutrition SBU has currently three ongoing projects (projects A, B & C) and one
proposed project (project D). All these projects are evaluated against the above
defined portfolio evaluation process and results are shown in Table 1. Evaluation
results are based upon that project A and B are well established products of SBU
whereas Project C has a risk of potential failure as this doesnt shows good customer
response from start. New proposed project D has potential to increase market share
of SBU and initial customer surveys shows that this will be successful project for
SBU. All the four projects evaluated shows positive NPV (net present value) which
shows that all projects could contribute positively to the business value.

Table 1: Evaluation of Existing and Proposed Projects

Evaluation Criteria

Project A

Project B

Project C

Do We Need to Do This Project? (Yes/No)

Yes

Yes

Yes

Yes

Strategic alignment of project with SBU Strategy?

Yes

Yes

Yes

Yes

(Score Maximum 100)

Score (90) Score (50) Score (30) Score (70)

Risk assessment of projects High/Low Risk

Low

(Score Maximum 100)

Score (90) Score (80) Score (30) Score (70)

Shareholders Value (NPV)*

7.53

Low

3.90

High

3.17

Project D

Low

10.42

Score (75) Score (39) Score (32) Score (104)

Total Score

255

*NPV Calculations are provided in Appendix-A

169

92

244

Selection of Projects:
Projects are ranked according to the evaluation criteria and scoring they achieve
against during evaluation. Projects final selection depends upon the available
budget, as the second quarter of year is starting and SBU has only 18 M available
for its operation. Ranking of four projects and required budget to complete the
project is shown in Table 2.
Table 2: Ranking and Required Budget for Existing and Proposed Projects
Project Name Rank of Project Required Budget
Project A

2.0 M

Project B

5.0 M

Project C

7.0 M

Project D

5.5 M

All four projects require 19.5 M which is more than the available budget which
means that all four projects cannot be carried out in 2 nd quarter. Project C is not
started yet and has low business value as compare to project D therefore it is
recommended to start project D and second quarter and put project C at hold.
Portfolio evaluation process should be applied at the end of 2 nd quarter to evaluate
new conditions for all projects in list and new portfolio should be decided according
to available budget with best suitable projects. New project D will have positive
impact at business value with less investment required. An updated cash flow plan is
shown in Table 3

Table 3: Cash Flow Plan with Updated Portfolio

Project
Funding Available for Q
Project A
Project B
Project D
Sunk Cost in Other Completed
Projects
Total Committed Funding

Delivery

1Q
6.0
M
2.0
30-Jun M
1.0
30-Sep M

31-Dec 3.0
30-Mar M
6.0
M

2Q
6.0
M
2.0
M
2.5
M
1.0
M

3Q
6.0
M

4Q
6.0
M

Total
24.0
M

2.5
M
2.5
M

4.0M

2.0
M

6.0M

5.0
M

5.0
M

2.0
M

5.5M
3.0M
18.0
M

Implementation of New Portfolio Process:

Implementation of new portfolio process will require to change previous practices in
the organization and may be resisted therefore, effective implementation of this
process require to take care of following points.
New portfolio process should be implemented with strong executive support.
Portfolio process need to repeat after each quarter which requires information about
current status of existing projects so new reporting format should be implemented.

Structural Plan for Project D

New Cereals Project D:
Project D will consists of development of new product of cereal food for toddlers
which target customers ranging from age 6 months to 2 years. Infant nutrition SBU is
lagging in market share of potential customers as existing products (powdered milk)
for these customers are not succeeded initially. It is expected that new cereal which
will be the new line of product stepping towards solid food will be a great success for
SBU.
Aims and Objective of Project:
New cereal product is aim to accomplish mission of SBU by providing daily diet for
toddlers which is still not produced by the company. New product will also provide
healthy food option for customers according to business strategy of SBU. This
product will also increase market share of the organization by increasing business
value. A successful project D will also give opportunity to introduce other cereal
products of different tastes in future which will strengthen the position of organization
in market.
Project Duration and Timetable:
Project D is expected to be completed in three quarters starting from 1 st April. Final
delivery of project is expected at 31st December. This will provide a chance for
company to advertise the product as a gift to customers at the start of new year.

10

References:
Almarai (2012), Almarai Company Annual Report 2011, Almarai Company, [Online].
Available at: http://almarai.com/wp-content/uploads/2012/12/2011_annual_en.pdf,
Viewed: April 16, 2014.
Global Edge (2013), Food and Beverage: Introduction, Michigan State University,
[Online]

Available

at:

http://globaledge.msu.edu/industries/food-and-beverage,

Viewed: April 16, 2014.

Kerzner, H. (2010) Project management best practices: achieving global excellence.
2nd ed. Hoboken, NJ: John Wiley.
Project Management Institute, (2008). A guide to Project Management Body of
Knowledge. 4th Edition (Newtown Square, PA: Project Management Institute).
Rothman, J. (2009) Manage your project portfolio: increase your capacity and finish
more projects. Raleigh, NC: The Pragmatic Bookshelf.

11

Appendix-A
NPV Calculations for Project A
Cash
Year
Flow Item 1

Year
2

Year
3

Year
4

Years Capital
515 Investments

EBIT
4.10 2.25 4.65 8.50
Taxes
1.23 0.68 1.40 2.55
Net
Income
2.87 1.58 3.26 5.95
PV
2.59 1.28 2.38 3.92
NPV
7.53
Tax Rate 30% and Discount Rate 11%

10.27
3.08
6.9
7.19
4.27

NPV Calculations for Project B

Cash
Year
Flow Item 1

Year
2

Year
3

Year
4

Years Capital
515 Investments

EBIT
1.10 1.50 3.36 4.50
Taxes
0.33 0.45 1.01 1.35
Net
Income
0.77 1.05 2.35 3.15
PV
0.69 0.85 1.72 2.08
NPV
3.90
Tax Rate 30% and Discount Rate 11%

6.40
1.92
4.1
4.48
2.66

NPV Calculations for Project C

Cash
Year
Flow Item 1

Year
2

Year
3

Year
4

Years Capital
515 Investments

EBIT
1.70 1.80 2.30 4.30
Taxes
0.51 0.54 0.69 1.29
Net
Income
1.19 1.26 1.61 3.01
PV
1.07 1.02 1.18 1.98
NPV
3.17
Tax Rate 30% and Discount Rate 11%

12

6.30
1.89
4.7
4.41
2.62

NPV Calculations for Project D

Cash
Year
Flow Item 1

Year
2

Year
3

Year
4

Years Capital
515 Investments

EBIT
5.10 2.10 6.00 12.00
Taxes
1.53 0.63 1.80
3.60
Net
Income
3.57 1.47 4.20
8.40
PV
3.22 1.19 3.07
5.53
NPV
10.42
Tax Rate 30% and Discount Rate 11%

13

13.50
4.05
8.2
9.45
5.61