National Foods – A Success Story

‘A Pakistan’s Case Study’

Presented by:
Abrar Hasan
Chief Executive
March 2, 2007
Fact Sheet
 National Foods - Facts

 37 years of innovation
 Rs. 3 billion in sales
 300 product SKUs
 6 manufacturing units (Karachi, Bin Qasim,
Lahore)
 Central Warehousing (Lahore, Gujranwala,
Multan, Islamabad)
 Rs. 1 million to the economy everyday in
shape of taxes
 350 towns covered across Pakistan
 1500 employees
 Annualized Growth Rate of 23% for the last
35 years
 Our Footprint

30 countries around world 409 distributors

 Return on Capital Employed

45.00%

40.00%

35.00%
Percentage

30.00%

25.00%

20.00%

15.00%
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Period
 Earnings Per Share
18.00

16.00

14.00

12.00

10.00
Rupees

8.00

6.00

4.00

2.00

0.00
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Period
 Sales
NFL Sales History

2,500,000,000

2,000,000,000

1,500,000,000

Rupees
Gross Export Sales
Gross Local Sales
1,000,000,000

500,000,000

0
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Years
Product Categories

Plain Spices Pickles

Recipes
Jams
Ronaq

Ketchups Desserts

Salts Basmati Rice

Curry Pastes Sauces

Snacks Vinegars
Our History
 Philosophy

Founder’s Philosophy
Purpose
• National Foods must focus on customer’s needs and serve “National Foods must
them with quality products at affordable prices at their
doorsteps.
focus on Customer’s
• Our products must be pure and conform to international needs and serve them
standards.
• Our research must continuously produce new with Quality Products
adventurous products scientifically tested, hygienically
produced in safe and attractive packaging.
at affordable prices at
• We must create environment in our offices and factories their doorsteps.”
where talents are groomed and have opportunity to
advance in their careers.
• We must prove to be recognized as good corporate
citizens, support good causes-charity and bear fair share
of taxes.
• Reserves must be built, new factories created, sound
profits made and fair dividend paid to our stock holders
through building a reliable brand.
• National Foods Ltd. must get itself recognized as leader
in Pakistan and abroad.
• With the help of almighty God, the company can achieve
its targets in years to come.
 Core Values

 Passion
– We act with intense positive energy and
are not afraid of taking risks. We
challenge ourselves continuously and
have pride for what we do and are good
at it.
 Customer Focus
– We see the world through the eyes of our
customers. We do everything possible
that makes them happy.
 People Centric
– We put our people first. Treat them with
respect and actively contribute towards
their development.
 Teamwork
– Our roles are defined, not our
responsibilities. We believe in going the
extra mile to accomplish our goals. We
coach and support each other ensuring
everyone wins. We have a WE versus I
mindset.
 Leadership
– We are a part of the solution…never the
problem. We act like owners and have a
positive influence on others.
 Ethics
– We don’t run our business at the cost of
human or ethical values.
 Excellence in Execution
– We say…we do … we deliver. We talk
with our actions. We strive for nothing but
the best. Execution is the key to winning!
 Accountability
– We see, we act. We take full responsibility
for our actions and results. We don’t
blame others for our mistakes; we analyze
them and correct them.
 Humble Beginnings
Dinar Chambers

This is where it all began…

 Present Infrastructure

S.I.T.E Port Qasim

National Foods as it stands today…

 Milestones

Evolution

1970 1978 1982 1985 1986 1988 1989 1990

Plain Table Basic Ingredients Pickles Iodized Salt
Spices Salt Recipes Recipes Health Food
& Snacks

1993 1997 1998 1999 2000 2002 2005 2006

Vermicelli Ketchup Raj Masala Ronaq
Jams & Jellies Custards Squeezy
Chinese Range & Rivaaj

Moving towards House of Brands Strategy

 Brand Promise

Convenience

Purity Hygiene
 Challenges

 Brand Positioning
– Quality, Hygiene and Purity
 Commodity to Value Addition
– Concept of packaged commodities under the National Brand- “The
Big Idea”
 Trade Resistance
– Biggest Competition
– Lesser Margins as against loose
 Convincing consumers for convenience
– Price Gap
– Perceived Quality > Perceived Price
– Free From Impurities
– Commonly available, the distribution challenge
 Decades of Performance
• The Big Idea
• Changing consumer mindset
1970-80 • Competing with the ‘loose’
• The fight to survive

•The move towards value addition -’Salt &

Recipes’
1980-90 • Public Limited company
• International alliances

• UNICEF Alliance
• Diversification of product range
1990-00 • ISO Certification
• Separate SBU for Export- Raj Masala
• Move to professionalism

• JCR VIS
2000-07 • Launch of Ronaq and Squeezy
• Automation
• Port Qasim
 Success Through
Management Excellence
 Management Excellence

 Financial Planning
 Product Development
 Branding
 Marketing and Selling
 Operations
 FINANCIALS – The Focal Point

BRAND PRODUCT
INVESTMENTS DEVELOPMENT

FINANCIAL
OBJECTIVES

OPERATIONAL
INVESTMENTS
 FINANCIALS – The Center Point

 The whole business plan is designed around financial

parameters:

– Sustainable Growth Model – A practical approach to

achieving top-line growth and bottom-line results. It looks at
how much growth an entity can generate by maintaining the
same financial relationships as the year before.

– Growth Rate = Return on Equity (Base year) X Retention Ratio %

 Sustainable Growth Rate

45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
 FINANCIALS – The Center Point
 Maintaining Financial Discipline Is The Key ..which is achieved
through optimizing
– Equity Growth
• Minimum target is 30% per annum
– Cash flows
• Through sustainable growth model achieve self sufficiency
through own cash generation from operations
– Bottom Line
• Minimum EBIT KPI’s
….. and through minute analysis of
– CBM / CAM (Contribution Before / After Marketing Investment)
for each “Division”; “Region”; “Product Category”; and even
“SKU” & “Customer”
 FINANCIALS – The Center Point

 Balanced approach for all automation and expansion

projects maintaining sustainable debt / equity ratio
 Controlled utilization of available external financial
resources for working capital requirements
 Optimum return on investment (ROI) model
 Efficient financial planning
– Maximum utilization of export credits
– LIBOR based financing – with exchange risk hedging
– Online collection system
 Above average credit rating of A+ by JCR VIS
 FINANCIALS – The Center Point

 Better tax planning yet contributing over Rs.350 million / annum

to the government treasury
 Cost controlling through “responsibility accounting” …via
….Proper accounting of cost at various “cost centers” and their
timely reporting
Product Development
 Product Development

 R&D
– State-of-the-art facilities (HPLC, FTIR)
– All our products conform to US FDA,
CFIA, Canada, EU and AQIS standards
– Formal Procedures

 Global Sourcing and Alliances

– Certified Vendor Program
– UNICEF
– Oriental Merchants
– Cerebos Foods
Effective Supply Chain
Management

Manufacturer
Branding
Branding

• Moving gradually towards

House of Brands since 2000
• National
• Rivaaj
• Ronaq
• Raj
• Squeezy
 Branding

 Marketing and Selling

– Building the finest Selling and distribution network
• Retail coverage of more than 80,000 outlets
• Coverage of 350 towns across Pakistan
• Direct Reach up to 50 % of Pakistan
– Clear and focused marketing message
• More focus on functional benefits and fitting the
brand into consumer’s lifestyle
– Not afraid to experiment
• Rivaaj
– Innovation of ideas
• First company to introduce packaged spices
• Squeezy
• Iodized Salt
 Marketing Research
 Research Methods:
– CLT’s (Central Location Testing) and HUTs (Home Usage Testing)
– Culinary Experts and Consumers are on Product Development Panel
– Brand Health Trackers
• Brand awareness
• Advertisement Awareness
• Top of mind recall
– Consumer Panel
• Category Maps
• Market and segment penetration
• Shares
• Volume and tonnage consumption
– Pre & Post Launch Ad Testing
• AdWiser (Certified Software of AC Nielsen)
– Post Launch Evaluation
• Learn from Mistakes
 Brand Building Activities

 Brand building Activities

– 360 degree
communication
– TV advertising
– Brand Activation
– In Store Promotions
– Merchandising Drive
Operations
 Operations: Quality Assurance

ISO 9001 Certified

HACCP Good
Certified Manufacturing
Practices

Microbial Testing
Capability
 Operations: Human Resources

 People Philosophy
– Getting the right people
– Competitive pay systems
– Reward mechanism
– Empowerment
 Training and Development
– Internal Programs
– Cross functional exposure
– Skill Development
 Operations: Human Resources

 Performance Management
– Goals strategically aligned from
functional to individual level
– Regular quarterly reviews of
business KPI’s
– Celebrating success
 Organizational Development
– Benchmarking best practices
– Restructuring and realignment of
business processes
– Consultants to source know-how
Operations: IT Infrastructure
 Operations: Information System

BUSINESS
PERFORMANCE Dashboards, KPIs, Benchmark
& CONTROL

Data Business DSS

Mining Intelligence
ANALYSIS

STORAGE
DATA WAREHOUSE
XML

OPERATIONAL ERP CRM SCM SFA …

 Corporate Social Responsibility

Mission
‘The primary objective of our
social initiative is to improve
the quality of life in Pakistan
by eradicating illiteracy
throughout Pakistan’.

 Adult Literacy
 Women’s Education
 Nutrition Awareness
 Key Performance Indicators

 R&D  Financials
– No of New Product Introductions – EPS
– Product and Process Improvement – ROE
Index
– GP by Category
 Procurement
– Net Profit
– Out of Stock Index
– Material Sourcing Quality Index – Same Category Sales
Growth
 Supply Chain
– Cash flow Generation
– Warehouse Utilization
– Equity Growth
– Freight Monitoring Cost/Ton
 Key Performance Indicators

 Production  Marketing & Sales

– Tonnage per man- – Zonal Profitability
hour – Retail Audit
– Wastages – Brand Image Tracker
– Factory Operating – U&A Study
Expense / Ton
– Equipment Efficiency
– QA Operational
Compliance
 Corporate Governance

 Designing of internal operational and financial

polices
 Regular external audits by A.F.Fergusons (PWC)
 Independent compliance testing through outsourced
internal audit function to Ford Rhodes Sidat Hyder
(E&Y)
 Quarterly reporting to audit committee
 Key to Success

– Be Brand Oriented
• Think only in branded terms
– Only way to create value
– Invest in know how first then technology
– Technology would naturally become
indigenous
– Do things right the first time, you don’t get A
second chance
 Futurist Vision

– Emerging Scenario
• Free Trade
• Global Village
• Emphasis on Lifestyle enhancing products
• Convenience the major key
– Opportunities
• South East Asia (SAARC)
– Major Growth Segment
» Pakistan
» India
• Africa and CAS
– Next wave of growth
 Our Vision

‘To be a Rs. 50 billion food company

by the year 2020 in the
convenience food segment by
launching products and services in the
domestic and international markets
that enhance lifestyle and create value
for our customers through
management excellence
at all levels’.