Microsoft Word - Possibilities for Arla in Pakistan.
Transcript of Microsoft Word - Possibilities for Arla in Pakistan.
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Tietgen business college Sep 2007
Marketing management
Dissertation (MARKETING)
Exploring the possibilities for Arla in Pakistan
FROM: Muhammad haroon zafar
me24523
ADVISOR: Michael tommerup
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Table of contents
1. EXECUTIVE SUMMARY 5
1.2 INTRODUCTION 7
1.3 STATEMENT OF PURPOSE 9
1.4 METHODOLOGY 10
1.5 DELIMITATION 11
1.6 AIM OF THE PROJECT 11
2 INTERNAL ANALYSES 11
2.1 ARLA MISSION 11 2.2 COMPANY PERSPECTIVES 12 2.3 COMPETITIVE STRATEGY OF ARLA 13 2.3.1 HOME MARKET 13 2.3.2 GLOBAL MARKET 14 2.4 POSSIBLE STRATEGIES 15 2.5 SUB CONCLUSION 15
3. EXTERNAL ANALYSIS 16
3.1 PAKISTANI MARKET 16 3.2 IMPORTANT FACTS ABOUT PAKISTAN 16 3.3 DEFINITION OF OVERALL MARKET. 18 3.4 CHARACTERISTICS OF MILK PRODUCTION SYSTEMS IN PAKISTAN 19 3.5 RURAL MILK PRODUCTION SYSTEMS: 20 3.6 INDUSTRY ANALYSIS (SIZE AND ITS GROWTH) 21 3.6.1 ATTRIBUTES OF MILK INDUSTRY 21 3.7 MILK PROCESSING INDUSTRY IN PAKISTAN 23
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4. BUSINESS MARKET (THE POTENTIAL OF PROCESSED MILK AND ITS LOGISTICS IN PAKISTAN) 24
4.1 SIZE AND POTENTIAL OF THE MARKET 24 4.2 DAIRY FARM STRUCTURE 25 4.3 MILK SUPPLY CHAIN (MARKETING CHANNELS FOR DAIRY PRODUCTS IN PAKISTAN) 25 4.4 CHANNELS OF MILK FLOW IN PAKISTAN 26
5. MACRO ENVIRONMENT 27
5.1 ENTRY BARRIERS: 27 5.2 PEST ANALYSIS 27 5.2.1 POLITICAL FACTOR 27 5.2.2 ECONOMIC FACTOR 28 ABUNDANT LAND AND NATURAL RESOURCES 28 5.2.3 SOCIAL AND CULTURAL FACTOR 29 5.2.4 TECHNOLOGICAL FACTORS 29
6. THE DEMAND 30
6.1 EXPENDITURE ON MILK BY PAKISTANI CONSUMER 30 6.2 FUTURE DEMAND FOR MILK AND DAIRY PRODUCTS 31 6.3 MARKET STRUCTURE (SEGMENTATION) 32 6.4 CONSUMPTION HABITS 33 6.5 BUYING BEHAVIOUR 33 6.5.1 CUSTOMER’S CHARACTERISTICS 33
7. COMPETITION 34
7.1 FORM OF COMPETITION IN PAKISTAN 34 7.2 IDENTIFICATION OF KEY COMPETITORS TO ARLA IN PAKISTAN 35 7.3 NESTLE MILKPAK 35 7.3.2 HALEEB DAIRIES 37
8. DAIRY PRODUCTS DISTRIBUTION SYSTEM IN PAKISTAN. 39
9. SWOT. 40
9.1 CONCLUSION: 40
10. MARKETING PROGRAM 42
10.1 COMPANY OBJECTIVES: 42
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10.2 MARKETING OBJECTIVES OF ARLA IN PAKISTAN 42 10.2.1 MAIN OBJECTIVE 43 10.3 CORE STRATEGY 43 10.4 GENERIC STRATEGY 43
11. MARKETING MIX STRATEGIES 44
11.1 PRODUCT STRATEGY 44 11.2 PRICE STRATEGY 44 11.3 PLACE/DISTRIBUTION STRATEGY 45 11.4 PROMOTIONAL STRATEGY 45 11.4.1 PROMOTIONAL BUDGET 46 11.4.2 PROMOTIONAL MIX STRATEGY 46
12. ACTION PLAN 47
12.1 PRODUCT ASSORTMENT 47 12.2 PRICE STRUCTURE 47 12.3 DISTRIBUTION CHANNEL SELECTION 48
13. SALES CYCLE 48
13.1 QUARTERLY SALES CYCLE PLAN (PAK RS. MILLION) 49 13.2 TIME TABLE FOR SCHEDULED MARKETING ACTIVITIES: 50
14. PREREQUISITES FOR PLAN: 51
15. FOLLOW UP: 51
16. OVERALL CONCLUSION 52
APPENDIXES 54
BIBLIOGRAPHY 55
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1. Executive Summary
Arla foods is second largest dairy company in the Europe with the business in many
other countries in the world. Company is specialized in its field and now wants to enter in
Pakistan. After a internal analysis of Arla, company move towards Pakistani market.
Pakistan is a developing country with population of 164 million inhabitants. Country
recognize as agricultural country and most of the population is engaged with agriculture
and livestock industry.
Pakistani market defines that a country which has potential to produce massive amount of
milk and ranked as a 5th in the world and has contribution of 6% of overall milk
production in the world still have the system of traditionally milk men distributions with
non processed milk full with unhygienic products. Arla is plan to move into a developing
country with aiming to modernize Pakistani formal milk processing system.
Pakistani market analysis shows that Pakistan is a high milk producing country but lake
of facilities and less investment in the dairy sector destroying large amount of milk.
Country’s dairy sector is still performing the old age distribution of milk. Only 2 % of
total milk production of the country comes through to formal processing channels and left
98 % still drives from informal sector(distribution by Milkman). Although this level of
milk production is more than adequate on a per capita basis for today population, lack of
processing and poor distribution system in a long hot weather (milk has a shelf life of
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only four hours under moderate temperatures) keeps it away from reaching consumers in
areas that are either deficient in milk production, particularly the urban centers, or those
that are difficult to access.
Pakistani dairy Industry analysis gives a quick outlook of current stage of Pakistani dairy
industry. Why Pakistan is away from the modernize processing system in the country?
This question we analyzed in entry barriers to Pakistani market for a foreign investor.
Political environment, brand identification, huge investment and Administers delays are
major barrier in the way of development of this sector.
To measure the market potential PEST model analyzed the Pakistani market for Arla.
Politically Pakistan has some long standing conflict with India on Kashmir region and
Afghanistan also a political issue for investor in the region, but multinational companies
still interested to investment in Pakistan like Nestle established world largest milk
processing plant in Pakistan due to potential of the market and potential in the dairy
industry in Pakistan.
SWOT analysis gives the idea about potential strength ,weaknesses , opportunities and
threats. In Pakistani market Arla has some weakness like cartoon controversy that may
effect their business but people are looking forward so it may be less threat to Arla. But
opportunities are bigger then threats and weaknesses, like increasing number of middle
class in the country and 98% vacant formal milk processing market are very big
opportunity for Arla to establish its business and apply its specialities in product
development according to situation and hi tech production facilities. Entrance of Arla will
give tough time to Nestle in future who is enjoying a monopolistic atmosphere in
Pakistan.
Further marketing mix activity gives a view of Pakistani market in context with products,
price, place and promotion .Pakistani dairy farming industry offering very nominal prices
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of milk even lower then Bangladesh where prices are slightly higher for raw milk and
Arla is already present in Bangladesh. Business market environment described for
potential and the size of the market. Entry mode selection is one of the important issue of
the report. If Arla goes to Pakistan what may be the possible entry modes for Arla to
enter in this potential market. A joint venture is suitable for Arla with a local company or
the direct investment entry mode is best for Arla to enter in Pakistan.
Competition situation in the market shows that there is only 2 active players are present
in the market, Nestle a Swiss multinational and Haleeb a local manufacturer. Nestle
getting most of the share of this market because of effective product development,
distribution channel and huge investment in the market. Haleeb a local company has good
reputation because of its products and effective marketing strategies in the market.
Arla now present in Pakistan so what may be the marketing program for Arla in that
market. Objectives for Arla in Pakistan is to create its brand presence in the market
through quality products launch in Pakistan and can create good positioning in the mind
of local consumers by offering their products at very reasonable price.Arla should launch
a strong media campaign in Pakistan through TV and print media. This will create the
image of the company as well as awareness about the products in the mind of potential
customers to Arla.
1.2 Introduction
Arla foods is 2nd largest dairy company 1in Europe and has operation throughout the
world with 26 sales offices around the world with 10 production plants in different
countries . Arla Foods Established in the spring of 2000 through the merger between the
Danish MD Foods and the Swedish Arla, Arla Foods is a co-operative owned by approx.
7,200 Swedish and 8,300 Danish milk producers. In the financial year 2004/05 the group ,
received around 8.4 billion kilograms of milk per year and a turn over of DKK 38 billion.
1 http://en.wikipedia.org/wiki/Arla_Foods
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At its plants in Denmark, Sweden and the United Kingdom, Arla develops
approximately 200 new products annually. The company prides itself on providing the
freshest milk products on the market through a concept called the “Arla Express,” which
delivers milk from the cow to the grocery store shelf within 12 hours.
The company controls 95 percent and 65 percent2 of the dairy production markets in
Denmark and Sweden, respectively. Yet these countries represent only half of Arla
Food’s Dkk 38 billion ($4.66 billion) in annual sales. The United Kingdom is the
company's third-largest market, accounting for 16.8 percent of sales; Germany and the
rest of Europe add 18 percent of sales; while the company is also active in the Middle
East and Asia, which together provide more than 11.5 percent of sales. Fresh milk
products are the company's largest product segment, with more than 40 percent of sales.
Cheese, including the international brand success Rosenborg, provides 28 percent of sales.
Arla Foods is also one of the world's leading suppliers of powdered milk products, which
add 15 percent of sales, and a strong player in the butter market, particularly under its
100-year-old Lurpak brand. Butter and spreadables generate 11 percent of sales.
2 http://www.arlafoodsuk.com/appl/GB/gb060AFU/gb060d01.NSF?OpenDatabase
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1.3 Statement of purpose
Arla Foods Group is 2nd largest dairy company in the Europe. Arla Foods products can
be found across the dairy category in many international markets. Since I believe that
Arla is not present in the Pakistani market I would find it very interesting to prepare an
evaluation of Arla's potential in Pakistani market. Base on my analysis I would then be
able to present a proposal for a possible introduction into Pakistan.
The following issues will be analyzed in the report.
• Situation of Pakistani milk market (Past,Present,Future)
• Size of Pakistani market and its growth.
• The Potential of processed milk and its logistics in Pakistan.
• Major competitors to Arla in Pakistan? Their strategies, market share, growth rate.
• Who are customers to Arla? Their specific preferences.(Buying behaviour)
• What product assortment would be relevant to introduce in Pakistan.
• What should be the suitable entry mode for Arla to enter Pakistani market?
• What may be the suitable distribution channels for Arla in Pakistan?
• Factors which will influence the sales potential of Arla’s products.
• What will be marketing mix strategies for Arla in Pakistan?(pricing and
packaging)
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1.4 Methodology
Information needed Source of information Method
• Pakistani milk market.
• Potential of the market
• Size of the market.
• Competitors
• Logistic system for processed and non processed milk.
• Products suitable to be lunched in Pakistani market.
• Buying behaviour of potential customers.
• Selection of suitable promotional media.
• Company’s financial situation.
• Internet
• Dairy development Board of Pakistan.
• Visiting different shops and supermarkets.
• Business Journals and news papers and different books.
• Relevant Models and study from Text book to be used in reports and in the analysis.
• Desk research that will include
the company’s website, journals
and books.
• I will also contact the Dairy
development board of Pakistan.
• Field research will also be
performed (if required) to find
out the information about the
competitors and customer’s
buying behavior.
• The field research will include visits to the shops and superstores.
• If necessary, the questionnaire will also be prepared to find out the information about the consumer’s buying behavior
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1.5 Delimitation
My focus will be on the Potential of processed milk and its logistics in Pakistan and more
specifically the areas mentioned in the statement of purpose. This report will not analyze
the whole system to establish a factory in Pakistan and the finances required for Arla to
this project. My all research based on secondary research because there is no official data
available on the dairy market on internet or by physical appearance and other figures are
totally depends on internet based research. The internal analysis will be based from the
company’s website because company does not provide any information and no answers
to the emails. So there is no contact with company.
1.6 Aim of the project
Arla wants to enter Pakistani market. For the purpose I will analyze the Arla’s internal
situation ,its mission and the current position at home. Then the report will find the
opportunities for Arla in Pakistan by making external analyze.
2 Internal analyses
2.1 Arla mission
Arla offer modern consumers milk-based food products that create
inspiration, confidence and well-being"
Arla Foods’ primary objective is to meet consumers’ wishes and requirements. Its
mission underlines the company’s focus on the consumer. “Modern consumers” covers
consumers of all ages who look for inspiration, variety and innovation.
Arla has a good corporate mission contain some important points. They shows that who
are the target group and which customer whishes or needs should company meet and how
can they satisfy this, Arla Foods is committed to providing consumers with inspiration by
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offering a multitude of ways of utilizing its products. Arla wants "to be the leading Dairy
Company in Europe through considerable value creation and active market leadership"
Through its vision, Arla Foods wishes to demonstrate that its activities are designed to
create value for both the company and its owners.
2.2 Company Perspectives
Arla Foods' objective is to be the consumers' and customers' preferred dairy. In Northern
Europe--with a wide range of dairy products. In Southern Europe--with selected ranges of
cheese and butter. Outside Europe--with a product range adapted to the individual
markets. Moreover, Arla Foods intends to maintain and develop its position as an
innovative global supplier of added value, milk-based ingredients for leading food
producers throughout the world. With Northern Europe as its natural domestic market,
Arla Foods is dedicated to providing consumers with a broad range of high-class dairy
products. From a solid base in Denmark and Sweden, where the Group has its roots, Arla
Foods aims at maintaining close links with customers in all key export markets through a
network of sales companies. In addition, through Arla Foods Ingredients, the Group is
one of the world's leading global suppliers of added-value, milk-based ingredients to
selected sectors of the food industry. Arla Food’s nearly 15,000 dairy farmer owners have
helped make it one of the world's leading dairy products manufacturers and the leading
dairy group in Europe.
Like other successful manufacturers, Arla Foods continues to face price pressure from
global markets, forcing constant reduction of production costs. Time-to-market and time-
to-volume remain critical factors in meeting customer demands for increased complexity
in product mix and timely supply.
Also like other manufacturers, Arla realizes that sustaining profitability and success in
the marketplace is no longer just about controlling costs—it’s about speed. Arla Foods
needs the ability to respond rapidly and cost-effectively to demand and supply variations,
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and at the same time understand how actual performance and current operational
activities align with business objectives. But more than just reacting to changing market
conditions or operational losses after the fact, Arla Foods needs the ability to exploit new
opportunities for making profits before they vanish.
2.3 Competitive strategy of Arla
If we analyze the Arla foods, we see that they are present two types of market domestic
market which consist of Denmark ,Sweden and UK and other is Global market with 23
other countries.
2.3.1 Home market
Arla is market leader at home(Denmark, Sweden, UK). They are gaining approximately
73 % of market share3 from home . They are producing high quality products with
product innovation and price making process. Fresh products are produced at five plants
in Denmark and eight in Sweden. Consumer Nordic also has global responsibility for
fresh products, including production, marketing and innovation. Consumer Nordic
employs a workforce of 4,500 and has an annual turnover of DKK 16.2 billion.
In Arla Foods’ third domestic market, the UK, Arla Foods UK plc, in which Arla Foods
has a 51% stake, primarily produces fresh milk and cream products at 12 plants. Overall,
Arla Foods UK plc has 35%4 of the British market for fresh milk, each day supplying
2,200 British supermarkets nationwide under the multiples’ own label, a particularly
competitive area. Nevertheless, Arla Foods UK plc has succeeded in marketing its own
milk brand, Cravendale, with considerable success. Cravendale milk undergoes a unique
filtration process, which results in a fresher, creamier tasting milk that lasts longer than
conventional fresh milk.
3 http://en.wikipedia.org/wiki/Arla_Foods 4 http://en.wikipedia.org/wiki/Arla_Foods
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In the 2004/05 financial year, Arla Foods UK plc received 2.2 billion kg milk. 70% of the
milk is purchased from Arla Foods Milk Partnership whose 1,600 members are exclusive
suppliers to the company. The rest is bought in the open market. Consumer UK has a
turnover of DKK 15 billion and employs a workforce of 6,300. Arla Foods UK plc
operates 12 dairies in the UK.
2.3.2 Global market
Arla International is responsible for all exports of butter and cheese to markets other than
the three domestic markets of Denmark, Sweden and the UK. This provides a platform
for the globalization of Arla Foods’ products and brands and, where possible, for creating
a uniform range. Spearheaded by the umbrella brand, the red Arla Master Brand, Arla
intends to strengthen its marketing in European markets. Exports to other EU countries
primarily consist of firm cheese, cream cheese, including the Buko brand and
mozzarella/shredded cheese. In several European markets, Arla Foods also has a
substantial market share of feta sales through the Apetina brand. Other EU countries
account for 31% of Arla Foods’ cheese sales, with Germany as the largest market by far.
The United States and Canada are also important markets for exports of, particularly,
cheese, and Lurpak butter. Arla Foods recently established local production in the US and
Canada through the acquisition of the Canadian cheese importer and producer, National
Cheese Company (2004) and the White Clover Dairy in Wisconsin in the US (2006).
In addition, the Russian and Eastern European markets are showing significant growth. In
early 2006, Poland was made the centre for sales to East European markets.
Consumer International has global responsibility for the production of butter and cheese.
Arla Foods produces/packs approximately 330,000 tons of cheese at 16 plants in
Denmark, three in Sweden and one in Poland. Around 185,000 tons of butter and blends
are produced/packed at two plants in Denmark and one in Sweden. Outside the three
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domestic markets, Arla Foods is represented in 23 countries. Consumer International
employs a workforce of 5,900 and has an annual turnover of DKK 8.1 billion.
2.4 Possible strategies
Expansion of the whole market : they have to gain new markets and to gain new
customers by entering into potential new markets like Pakistan.
Protection of current market: Arla doing well at the moment and they have to anticipate
the offence with new products.
International markets: Arla food is the second largest dairy company in Europe. In this
regard we can say Arla is market challenger. If we analyze the world’s top 20 dairy
companies, the challenger companies try to enlarge its market share. This policy depends
on how big the lag from the market leader is.
They have to attack: for instance they to develop new products which is lacking in the
portfolio of market leader.
2.5 Sub Conclusion
Arla has a special completion situation, as we see they focus on two different markets. In
home market the company has to protect its market position and in the export market they
have to attack the market leader by entering into new markets like Pakistan where world
No.1 food company Nestle already present .
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3. External analysis
3.1 Pakistani market
Arla wants to enter Pakistani market for the reason we will make extensive market
research for Arla finding the possibilities for Arla in this regard we will follow some
models, analyses Arla’s marketing program and at the end a SWOT analysis for overall
conclusion to find the potential of the market.
3.2 Important Facts about Pakistan5
5 https://www.cia.gov/library/publications/the-world-factbook/print/pk.html
Area 803,940 Sq Km.
Land 778,720 Sq Km. water 25220 Sq Km.
Population 164.75 Millions (estimated in July 2007)
Independence day 14th August 1947 (UK)
Capital Islamabad.
Other big cities Karachi , Lahore, Faisalabad, Peshawar , Quetta.
Currency Pakistani rupee (1 Rs= 100 Paisa)
Exchange rate 1 USD = 60 rupees
Business Hours Monday- Saturday, 08:00 to 17:00
Language Urdu and English ( as official language )
Ports and harbors Krachi , Gawadar
Climate Mostly hot , dry desert , temperate in north west,
Arctic in north west.
Literacy rate 49.9% (Male 63 % , female 36 %)
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For the location where is Pakistan situated is in the globe, a map is putted in the appendix1. The following table shows some of the important economic indicators of Pakistani
economy.
Table 6
The economy of Pakistan is 25th (7) largest economy in the world as measured by
Purchasing Power Parity(PPP). With the world 6th (8) largest population ,Pakistan is
developing highly skilled labor force with business friendly policies. Economic growth is
6 https://www.cia.gov/library/publications/the-world-factbook/print/pk.html (7-8-9) http://en.wikipedia.org/wiki/Economy_of_Pakistan
Ethnicity/ Race Punjabi, Pathan, Balouchi, Sindhi
Key economic Indicator Year
Real GDP growth (USD billion)
Industrial production growth
Unemployment rate (average)
Consumer price inflation (average; national
measure)
Exports of goods f.o.b. (USD billion)
Imports of goods f.o.b. (USD billion)
Exchange rate Pak Rs.= USD (average)
2006
437.5
6 %
6.5 %
7.9 %
19.24
26.79
60.35
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6-7 % and strong foreign investment is the main issues of the Pakistani economy.
Pakistani GDP is $475.5 Billion9 in year 2007
3.3 Definition of Overall Market.
Pakistan is a developing country with the population of 164 million people. Pakistan is
the 5th biggest10 milk producer of the world. Its massive herd of 47 million 11cows and
buffaloes produced 30 billion liters of milk in year 2002 which amount to 6 % of total
world milk production. Significance of livestock industry can’t be denied due to its
mentionable share in Pakistan national economy. This sector accounts for 49.41% of
agricultural GDP and 11.8% of total GDP. More than 34 million rural population is
engaged in this sector for their livelihood. In livestock industry, dairy sector has a
significant role by producing more than 30 billion liters milk per year. Although this level
of milk production is more than adequate on a per capita basis for today population, lack
of processing and poor distribution system in a long hot weather (milk has a shelf life of
only four hours under moderate temperatures) keeps it from reaching consumers in areas
that are either deficient in milk production, particularly the urban centers, or those that
are difficult to access.
Pakistan has tremendous potential to increase its milk production and a huge surplus for
export of Milk and milk products by providing processing and packing facility which is
lacking in Pakistani dairy industry. It need huge investment. It is a good news that foreign
investors have shown interest in tapping Pakistan rich potential by establishing ultra
modern dairy industry and to provide world class product to the Pakistanis.
Livestock is the largest amongst the various agricultural sectors and milk claims the
largest portion of it, accounting for 51 percent of the livestock sector. There is a
consensus among the stakeholders and development experts that Pakistan’s dairy sector
10 http://en.wikipedia.org/wiki/Economy_of_Pakistan
11 www.loksujag.org
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has immense potential for growth. In the past however, the same has not been realized
due to various gaps such as the absence of a shared vision and strategy for the
development and the requisite initiative to drive it. This was further compounded by lack
of effective collaboration among the stakeholders including support institutions and
government agencies. However, it is quite a positive sign that the present government is
now endeavoring to realize the real potential of the dairy sector and a multi-pronged
strategy has been evolved for its uplift.
Source: Fao.org
A complete market situations of Pakistan and worldwide in figures are explained in
appendix-2.
3.4 Characteristics of Milk Production Systems in Pakistan
The milk production system currently prevailing in Pakistan can be characterized by their
location, herd size, feeding practices and marketing opportunities. Production systems
based on rural and urban areas offer great potential for rapid growth in indigenous
milk production from their current lower milk yields by improving upon animal
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management and feeding practices in the short-run and by bringing about a marked
improvement in the animal stocks in the long-run.
3.5 Rural Milk Production Systems:
From 1996 to 2002 Pakistani milk production increased by 17 %. In rural areas of
Pakistan, both subsistence and market oriented milk production systems are rampant. A
common age-old practice for rural families was to keep milching animals to meet
family’s needs of milk and milk products whereby excess milk was converted in to
butter or ghee for home consumption. At that time there was very little demand, if any,
for commercial milk production within the village. However, with urbanization a vast
market for milk and ghee gradually developed in most parts of Pakistan, which
encouraged commercial milk production by subsistence as well as market oriented
dairying household.
The subsistence dairying households in Pakistan keep buffaloes and cows in smaller herd
sizes while market oriented households keep larger herd sizes for commercial milk
production. Up to 43% of the dairying households in Pakistan still operate under
conditions of subsistence by maintaining herd sizes of one to two while another 27 to
28% of the households operate under conditions of near subsistence where the herd sizes
range from three to four animals . The rest of the dairying households appear to be
maintaining larger herd sizes of cattle and buffaloes located in rural and urban areas that
operate essentially for commercial supply of milk12.
The subsistence or near subsistence dairying households mostly consist of small farmers,
tenants or landless laborers. These dairying households have very high stakes in dairy
production because dairy income supplements their other income from farming or
agricultural labor. Therefore, smallholder dairying is seen as a tool of raising effective
12 http://www.fao.org/ag/AGAinfo/projects/en/pplpi/docarc/wp3.pdf
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incomes of these impoverished rural households. Interventions in dairy economy aimed at
benefiting these impoverished classes involve high returns from a policy standpoint.
Because buffalo milk is richer in composition as compared with cow milk, consumers
and dairy milk plants prefer it.
About 66% of the milk available for human consumption
is buffalo milk, 31.4% is cow milk and about 2.4% is goat and sheep milk [Government
of Pakistan (2001)]. Due to higher demand for buffalo milk it sells at a higher price than
the cow milk.
Higher butter fat content in buffalo milk makes it attractive to milk
processing units, which are located in irrigated areas of Punjab where milk production
largely depends on buffaloes.
Poor management and feeding of animals is one of the key characteristics responsible for
lower milk yields in Pakistan. Artificial insemination can be extremely useful for
breeding of cattle and buffaloes, but the farmers in Pakistan are still not inclined to accept
this method for various reasons. The fact is that only 4% to 4.5% of dairying households
in Pakistan use artificial insemination.
3.6 Industry Analysis (size and its growth)
3.6.1 Attributes of milk industry
70 % of the milk produced in Pakistan comes from Buffaloes while the rest from cows
and other cattle. There are three generic types of milk available in market, UHT,
Pasteurized and raw unprocessed milk. The last type is dominant in the market.
Milk quality is most import in all above types. The raw unprocessed milk covers large
segment of the market distributed by milkman who rides on a motorbike and distributes
milk to consumer with a lot of adulterations.
UHT and Pasteurized milk pose their own quality issues. But quality wise UHT milk is
more than good from unprocessed milk because of it has a long shelf life and without
mixing of water or other contamination. It is available mostly in Tetra Pack and priced
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relatively higher than unprocessed milk or Pasteurized milk. Pasteurized milk on the
other hand has extremely short self life. It is available in “poly Pack” or plastic pouches.
One of the most important attribute of the milk industry in Pakistan is the situation of the
UHT milk market. UHT milk is the dominant milk product for upscale consumers. The
high price of UHT milk however creates an artificial ceiling for its wider dispersal.
In the dairy industry currently 17 units are working in the country13, among them 3 are
multinational and other are working as local investors. A table is present as Appendix-3
for the companies name with their total output.
From the above table it is clear from the data presented that production of milk in
Pakistan increasing on good percentage every year but lake of storage system and lack of
processing facilities in the country only 2 % people are able to find processed form of
milk in the country. However the processed milk consumption growing at the rate of
13 http://www.pakissan.com/english/issues/how.pollution.shtml
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20%14 every year. Pasteurized and UHT milk in tetra pack are very Popular products at
the moment in Pakistan.
3.7 Milk processing industry in Pakistan
With in the processed milk supply chain, in Pakistan milk processing units are of 2 types:
UHT and Pasteurized. In Pakistan 17 units are currently working and they are producing
UHT milk approximately more than a million litters a day and most dominating share of
this capacity are produced through Nestle MilkPak with almost half of that capacity.
UHT processing however the second generation of milk processing is attempted in the
country. The first milk processing plants in the country were established in the early
1960s and by mid 1970s milk Pasteurization and sterilization plants were set up, with one
exception all of them were closed due to lower consumer acceptance very short shelf life
of the products they presented in the market and most important lack of trained man
power.
Future projection of UHT milk in Pakistan a detailed picture can be seen in appendix-4
14 PISDA-USAID- 2006
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4. Business market (The Potential of processed milk and its logistics in Pakistan)
With an estimate of 160 million people Pakistan ranked as world’s 9th biggest
market15.Measured by purchasing power, Pakistan has growing number of middle class
with the estimate of 30 million16 people . This middle class has estimate earning about
10,000$ a year. In addition Pakistan has growing number of upper class relatively high
per capita income.
4.1 Size and potential of the market
Pakistan is 6th largest populated nation in the world with 164 million inhabitants17. The
rate of this increase also one of the highest in the world with 2.1 %annually. A
developing country but increasing number of middle class making the attraction for
foreign investors in Pakistan. With increase of the income changing the life style and
eating habits of the people.
Asia is the largest dairy consuming Market in the world. It is also the largest importing
region with over one half of global imports of dairy products (milk equivalent basis).
Imports are continuing to grow as demand, driven largely by rapid income growth and
urbanization is exceeding supply. At the same time, the Asian region is also expected to
become the world’s largest production region in 2006, illustrating that supply growth, at
over 5 percent per year, is also dynamic. Of course the situation varies significantly
across the region. The demand for liquid milk and dairy products in Pakistan will
definitely continue to increase, the most important reason being growth of the human
population. Other variables influencing demand are the growth of personal incomes and
the evolution of prices.
15 Pakistani retail food sector report by US. embassy Islamabad. 16 http://en.wikipedia.org/wiki/Economy_of_Pakistan 17 http://en.wikipedia.org/wiki/Economy_of_Pakistan
25
Milk consumption in Pakistan has been traditionally very high in the past . Oldest
accounts of Pakistan’s local life style documented as high milk consumption as 1.25 liters
per person daily which indicates high usage of milk products in daily life18 . There were
many pastoral tribes that had milk as their staple food. Per capita milk supply in Pakistan
is 440 ml daily or 160.3 kg per year. This is almost four times the milk Consumption
average of Asia or all developing countries put together. The country’s share in world
milk production (5 percent) is double its share in global population. Milk is a very
important food item in Pakistan as wheat and milk provide two third of the daily calories
to majority population here.
4.2 Dairy farm structure
Over 70 % of farms have less than 2 hectors and keep and average of 1-3 dairy animals
per farm.19
4.3 Milk supply chain (Marketing channels for dairy products in Pakistan)
The journey of milk from the dairy farmer to the consumer in Pakistan can take one of
three general routes. The most common is through “Gawalla” or milkman who delivers
the milk to the consumer. Milkman in Pakistan delivers raw or unprocessed milk that is
often adulterated. The second means of milk reaching the consumer is through retail
outlets who sells the open milk to the consumer. Both these means of delivery are the
informal milk sector of the country. In the formal sector, milk is processed through one of
two methods: UHT (Ultra heat treatment) or Pasteurization.
18 www.loksujag.org 19 ifcn report 2003-www.ifcn.com
26
4.4 Channels of milk flow in Pakistan
Source: strategy development in milk production and distribution (SMEDA report 2000)20
Milkman supply 90% of the milk market, while retail outlets have a 8 % share in the
market .2% of the market is taken by processed milk( UHT+ Pasteurized).
20 http://www.regoverningmarkets.org/en/filemanager/active?fid=9
27
5. Macro environment
5.1 Entry barriers:
Entry barriers are always the element every company has to learn before entering a
market. Arla is already present in the several countries of middle east and Asia .
Specially Bangladesh which has same economic and geographical and political
conditions as Pakistan for several years and their business in Bangladesh seems very
satisfied. The launch of Arla food is planning in order to push the Pakistanis to use
Arla’s healthy products. The main factors which Arla can face in Pakistan can be
analyse through PSET analysis.
5.2 PEST analysis
The pest model is use full tool for understanding the market and its potential, market
growth or decline and give direction to a business. Now Arla planning to move Pakistani
market, before this we will make a PEST analysis to evaluate the potential of Pakistani
market and factors that Arla can face in Pakistan.
5.2.1 Political factor
Marketing decision can be effected by development in the political and legal
environment. It is very impotent for Arla to know the legal and political factors of the
market.
Pakistan has long standing of conflict with India and the situation in the neighboring
Afghanistan also should be keep in mind. The political situation in the subcontinent has
some question mark for Arla after September 11. There is high bureaucracy in the
system of the administration of Pakistani government. The company must be aware of
some laws and regulation before entering the Pakistani market. Despite of all at the
moment many companies investing huge investment in Pakistan, as Nestle has made an
28
investment of US $ 70 million for the establishment of Asia’s largest milk processing
plant21 with a processing capacity of 2 million liters of milk per day.
5.2.2 Economic factor
Pakistan has the most liberal investment policy in the South Asia region. New incentives
and further liberalization measures include to invest in Pakistan. Its good eye view for
Arla before going to this market to look at Pakistan’s economic potential and the facilities
and economic benefits government offering to foreign investors. Remittance of royalty,
technology and franchise fee allowed to projects in social, service, infrastructure,
agriculture and international chains food franchise,
Abundant Land and Natural Resources
• Pakistan has plentiful natural resources to cover the demand of the market.
Strong Human Resources
• Cheaper labor force available.
• English speaking work force.
• Cost-effective managers and technical workers.
Large and Growing Domestic Market
• 164 million consumers with growing incomes.
• A growing middle-class moving to sophisticated consumption habits.
21
http://www.nestle.com/MediaCenter/PressReleases/AllPressReleases/MilkFactoryPaskistan.htm?Tab=2007
29
Well-Established Infrastructure and Legal Systems
• Comprehensive road, rail and sea links.
• Good quality telecommunications and IT services.
• Modern company law.
• Long-standing corporate culture.
Strategic Location as a Regional Hub
• Principal gateway to the Central Asia Republics.
• Strong and long-standing links with the Middle East and South Asia.
• Comprehensive duty-free facilities for investors.
5.2.3 Social and cultural factor
Different areas have different histories that make the culture. The Arla has to be aware of
the different cultural factor when they go into new market and operate in them. As we
know Arla already present in many countries in the world ,so since the
internationalization of Arla the company has experienced different problems like the
different way that different cultures act, work etc. so there will be no problem for Arla
because as regarding to this factor because Arla is already present in Bangladesh and in
middle east which has same cultural and religious values.
5.2.4 Technological factors
Pakistan got independence from UK. In 1947 and it was a country without resources. But
at the moment it has made great achievements in many field but it is still a developing
country and still long way to go. Many field still waiting attention and among them also
dairy sector.
30
6. The Demand
Pakistan is country where milk consumption high from the old time. This may be because
of hot weather and in summer people use yogurt and drink of yogurt (LASI) on very
regular bases and it is believe that the milk and yogurt give them energy in hot weather.
Data from 1982-2001 shows that Pakistan ranked third to Ireland and Sweden in the per
capita consumption of milk22 and milk products. About 30 % of small farmers produced
milk for selling and per capita milk production increasing with an average of 6 % per
year basis. 17 milk processing plants are working at the moment with the capacity of
processing more than a million litters per day to fulfill the demand of the market. And
recently Nestle installed a new plant in Pakistan which is ranked as world’s biggest
plant23 and this is because of attractiveness of this market and to fulfill the demand of the
market.
Milk retail price fluctuated only marginally during 1982-2002(RS.3.59 - 4.07/litter)24,
while nominal price showed large change in the same period(RS. 3.77- 18.23/ litter). The
high increased of price was due to inflation. The income to price ratio of milk has been
consistently improving, leading to improvement in the purchasing power of the
consumers and hence increasing the demand of milk and its product.
6.1 Expenditure on milk by Pakistani consumer
Official figures show that expenditure on milk and milk products by all in Pakistan is
the highest among all major food items 22 % for urban families and 26.2 % for rural.
22 http://www.cababstractsplus.org/google/abstract.asp?AcNo=20053149686 23http://www.nestle.com/MediaCenter/PressReleases/AllPressReleases/MilkFactoryPaskistan.htm?Tab=2007 24 http://www.cababstractsplus.org/google/abstract.asp?AcNo=20053149686
31
Monthly share of expenditure of consumption of food items
Source : household integrated economic survey of Pakistan,(2001-2)25
from the above figure we can see Pakistanis spending biggest part of their expenditure
among food items on milk and its products which indicate the demand of the milk and its
products in Pakistani market.
6.2 Future demand for milk and dairy products
Pakistan seems an emerging market for branded and packed dairy products especially in
the urban areas, where branded and packed milk, yogurt and butter are rapidly capturing
the market and indicators shows that good development in the processed form of dairy
products in recent years. In fact the adulteration, germs, decade old style of improper
handling of dairy products particularly loose milk and yogurt by milkmen and
shopkeepers are forcing a large number of consumers in the country to say goodbye to
the traditional milkman.
Consumer preferences are changing in favour of packed and processed form of dairy
products because in this way they ensure better hygiene and good value of money.
Various kinds of health related fears and health hazards related to loose dairy items are
steadily changing the mind of consumer. Seeing this changing and an enormous untapped
25 http://www.regoverningmarkets.org/en/filemanager/active?fid=93
32
potential of growth in processed and packed dairy products in the country in future ,
several local and multinational companies have introduced their various products in the
market in the recent past.
The demand for liquid milk and dairy products in Pakistan will definitely continues to
increase, and the most important reason for this growth is increase of population and
other strong reasons are growing number of middle class people and growth in income of
the people.
Predicted results for demand26 in milk and dairy products are in the following table.
¨
6.3 Market Structure (segmentation)
Milk is a very important food item in Pakistan as wheat and milk provide two third of the
daily calories to majority of population here, so biggest segment of Pakistani dairy is
household use ,second is hotels and restaurant who uses large quantity of milk and its
products and third segment is sweetshops and bakeries who use dairy products to prepare
traditional sweets.
26 http://www.ilri.org/InfoServ/Webpub/Fulldocs/South_South/ch09.htm#P38_2944
33
6.4 Consumption habits
What are local taste?
Pakistan is a country with mostly sunny weather whole year and in summer they have
temperature from 40-50 degree Celsius in most part of the country so people have hobbit
in their daily life to use yogurt and milk product because it is believe that to avoid this
hotness they use ’Lasi ’(a yogurt drink). And they usually eat butter and ghee from dairy
products in their daily life. Pakistan is a country with high consumption of milk so mostly
people drink milk during the day for health reasons. One very interesting fact about
Pakistan is that it is world third27 largest tea consuming country in the world and 99%
Pakistanis use tea with milk. Many companies has introduced many kinds of milk use
with tea in Pakistani market to capture this segment.
Their preferences?
Mostly people in Pakistan prefer fresh milk but because of adulteration and hygienic
conditions people can be mold towards processed dairy products as people now prefer to
use butter and ghee and many dairy products with a brand name .
6.5 Buying behaviour
6.5.1 Customer’s characteristics
In Pakistan customers can be divided in to three major categories
• High income
• Middle class
• Low income
27 http://www.fao.org/docrep/meeting/009/j5278e.htm
34
High income group can pay every thing for quality. Middle class in Pakistan is the major
target group for various companies and also the target group for Arla. With creating
awareness to use hygienic dairy products and promotion by current market players
peoples buying behaviour and trends are changing as we see the demand for processed
form of dairy products. However this trend will not change much quickly for drinking
milk but trends in other products like butter, ghee and yogurt are changing quickly
because of variety of the products are available in this category.
7. Competition
Some business thinks it is best to get on with their own plans and ignore the competition,
many business are happy simply to track the competition, copying their moves and
reacting to changes. Competitor analysis has important role before going a foreign
market. In Arla case we will see the key competitors that may face Arla in Pakistan and
will analyze the marketing positions and their strategies.
7.1 Form of competition in Pakistan
As we have learned that in Pakistan processed dairy business are on the bottom level
(only 2 % market in the hands of processed milk manufacturer). People still have no more
chances to buy processed milk products from the market and they are buying unhygienic
milk and products for their use. Informal marketing channels (milk man or local retailer)
has strong hold on the market but now people are getting more conscious about the health
related issues and the market of the processed milk will increase on very high scale in
near future .If we see the current market player only one player is so active in Pakistani
market that is Nestle and this company enjoying a monopolistic market atmosphere. They
are investing huge investment and recently they developed their new plant in Pakistan
which is ranked as largest plant in the world has the capacity of processing 2 million
litters of milk per day.
35
Some local small players are also getting the attention of the customers. In the following
we will discuss the important competitors in the market that Arla can face in future.
7.2 Identification of key competitors to Arla in Pakistan
Arla is second largest dairy company in Europe yet getting small share in the profit form
the market outside Europe that is only 27% of their total income. There are 17 companies
are working in Pakistan (see appendix-3). Nestle MilkPak is the major and market leader
in Pakistan, Haleeb milk is second biggest company , Noon dairies and many other small
marketing player are present in Pakistan.
7.3 Nestle MilkPak
The joint venture between MilkPak Ltd. And Nestle S.A. came about in 1988 and the
company was renamed as Nestle MilkPak Ltd. Prior to that, MilkPak Ltd., produced
UHT milk, butter, cream, ghee and fruit drinks at. 21 branded product lines were added
during 1990 to 1998. Nestle MilkPak operates the largest and an extremely efficient milk
collection system in the country, which enables it to collect the highest quality milk for
production of UHT and powder milks as well as other milk based products. The company
voluntarily provides extension services of farmers in the area of animal husbandry and
livestock breed improvement.
Nestle MilkPak entered the export market in 1993 with exports of Rs.3.2 million28 to
Afghanistan. Growing steadily over the years, its exports stood at Rs.321 million by June,
1998. Currently, it's overseas markets include the UAE, UK, USA, Sri Lanka, Malaysia,
Bangladesh, Afghanistan and Central Asian States.
In the year 2002 total sales for the year reached. 9.2 billion Pakistani rupees , showing a
value growth of 14.5% over last year. Net profit for this year stood at 651 million, an
28 http://www.nestle.com/MediaCenter/PressReleases/AllPressReleases/MilkFactoryPaskistan.htm?Tab=2007
36
increase of 57.2%, which translates into a net profit margin of 7.1 % as against 5.1% in
2001.
Analysis and evaluation of competitors’ strengths, weaknesses
1. Nestle MilkPak.
Strengths
• International brand
• Strong brand image in Pakistan
• Quality products
• Wide range of products offered in Pakistan
• Products contents according to local taste
Weaknesses
• Not having its own dairy farming system in the country
• High priced products
Strategies (marketing mix)
Products
Nestle offering wide range of products in Pakistan .they are operating very well
established product development department in the country. They are not only engage in
the dairy products but also other products like baby foods and fruit juices.
37
Prices
Prices of the products are quite high in Pakistan, so many products are out of range from
the middle class and lower class.
Places
They have such nice and wide distribution channel in the country, even they are operating
Afghanistan and treat it as a local market. Products are easily available on every stores
and in super markets.
Promotion
Nestle promotes its products by itself in Pakistan. The promotion is done by the
marketing division in the headquarter in Lahore. most effective promotion they make on
TV and furthermore they have different brochures and leaflets.
7.3.2 Haleeb dairies
Second biggest company in the country, having good repute in the market and getting
increase its profit share in the market, giving hard time to Nestle in the local level.
Haleeb Foods was established in 1986 and its first product was Haleeb milk. Since then,
it has continued to provide quality products to its consumers with product and packaging
innovations.
All this and more makes Haleeb Foods Pakistan’s fastest growing packaged food
company. As of fiscal 2005, its annual turnover is Rs. 7.2 billion29. Apart from its
extensive nationwide distribution networks, Haleeb Foods is also present in several
export markets including South Korea, Bangladesh, Afghanistan and the Central Asian
states.
29 http://www.haleebfoods.com/haleeb/
38
Analysis and evaluation of competitors’ strengths, weaknesses
Haleeb dairies
Strengths
• Local brand
• Strong brand image in Pakistan
• Quality products
• Products contents according to local taste
Weaknesses
• Not having its own dairy farming system in the country.
• High priced products.
• Narrow range of products offered than Nestle.
Strategies (marketing mix)
Products
Building an excellent reputation over the years, Haleeb Foods continues to be at the
forefront of product and packaging innovation. They have achieved market leadership in
several food categories with a very strong portfolio, consisting of leading national and
international brands.
Prices
Haleeb’s Prices of the products are quite reasonable in Pakistan, so many products are
with in the reach of middle class in Pakistan.
39
Places
Haleeb have good and wide distribution channel in the country. Their products are
easily available country wide even apart from its extensive nationwide distribution
networks, Haleeb Foods is also serving several export markets including South Korea,
Bangladesh, Afghanistan and the Central Asian states.
Promotion
Haleeb promotes its products by itself in Pakistan. The promotion is done by the
marketing division in the headquarter in Lahore. most effective promotion they make on
TV and furthermore they have different brochures and leaflets.
8. Dairy products distribution system in Pakistan.
Pakistani dairy food market is dominated by only 2 companies (Haleeb and Nestle)and
they have established a strong distributional channel in the market. Arla can adopt simple
distribution channels that may be
Three types of distribution channel for Arla are possible
Manufacturer –wholesaler _retailer -customers
Manufactures – retailers - consumers
Manufactures – supermarkets – consumers
40
9. SWOT.
Strength Weaknesses
Products :
• Wide range of products with strong
product development department.
• Strong brand image in the Europe.
• Standardized and customized
products for many related
businesses.
Marketing :
• Present all over the globe in 26
countries including many muslim
countries.
• Very strong financial position.
Technology :
• They have latest technology in all
production and product
development steps.
Production :
• Flexibility in their production line to
produce customers needs.
Products:
• Offering small product line in other
countries
• Products are little bit expensive in
export markets.
Marketing:
• Cartoon controversy made some bad
image in some muslim countries.
• Difficult to persuade 98 % informal
market.
• Reliant on milk suppliers
Opportunities Threats
Market demand:
• 98% vacant formal market.
• Excessive amount of availability
of raw milk.
• Increased demand for processed
Market demand:
• Pakistani customers have their
own taste and preferences.
Competition :
• Strong competition in Pakistan
41
dairy products.
• High growth business
opportunities in Pakistan.
• Variety of distributional
channels are available.
• Gateway to Afghanistan and
central Asian countries
• Variety of target market e.g.
retail chains, hotels
• Low production cost in Pakistan.
because of presence of Nestle in
Pakistan.
• Governmental policies
• Political instability in Pakistan
9.1 Conclusion:
Arla is present in many countries in the world so if Arla goes to Pakistan, it can face
good competition with Nestle and Haleeb dairies but 98% vacant market for processed
dairy products are big opportunity for Arla to enter in Pakistan. But some governmental
polices and cartoon protest is still in the minds of Pakistani people can be threats for Arla.
The company can enter in to Pakistani market with several distributional channels like
wholesalers, agents retailers etc.
42
10. Marketing Program
10.1 Company objectives:
After analyzing the market demand, company’s strength and weaknesses and other macro
economic factors it is essential to set the objectives for the company. The objectives
should be SMART i.e. Specific, Measurable, Achievable, Realistic, and Timely.
10.2 Marketing objectives of Arla in Pakistan
Arla foods has a well developed world wide network, which makes approximately
27 %30of their turn over. Arla foods present in 26 countries in the world ,starting in
Europe and finishing in such as exotic countries as Qatar or Bangladesh. We have seen
that Pakistan is a country where only 2 % of dairy business are formal (processed milk
products), 98 % market still waiting for quality products and only 2 main player of the
market (Nestle and Haleeb) are capturing the maximum share of the market. Pakistan is
big country with 160million peoples population and most of the population are still
forced to consume the open unhygienic milk and other products. There is too few market
players serving this nation which has good progress towards economic development now
a days with latest economic reforms.
The parent company which is located in Sweden-Denmark dairy cluster will provide Arla
Pakistan a specific advantage over its Pakistani competitors. Through the access to the
parent company, the sophisticated inputs and technology, specialized information and
reputation developed from the cluster location may transfer to the subsidiary in the
Pakistan . The farming and food industries in Sweden and Denmark may greatly enhance
the reputation of Arla in the Pakistan. These advantages have been shaped by a large
group of Nordic organizations and for decades, so it is difficult to be imitate by Pakistani
competitors.
30 http://www.arlafoods.com/APPL/HJ/HJ202COM/HJ202D01.NSF?Open
43
Pakistani milk food market is not yet saturated and has a great potential. Keep in view
the situation is suggested if Arla make proper sales and promotional arrangements it can
achieve great Share of the existing market as well due to its quality products can make
reasonable growth in the market.
10.2.1 Main objective
The objective is to create awareness about the Arla’s products among the Pakistani
people and purchasing agents, wholesalers and big super markets and then create a good
business base for the company. The objectives are also to highlight the feature and
benefits of the company’s products, flexibility in production, prices and packing
awareness.
10.3 Core strategy
Arla can start with few products to emphasis on the short product line to attract the new
market by establishing brand image in the minds of people. They can introduce their
other products after establishing the market and making the brand image in the mind of
Pakistani people. To get maximum attention in the mind a burst marketing campaign and
same quality as they are offering at home with low prices can be a good starting strategy
for Arla.
10.4 Generic strategy
Arla can achieve competitive advantages essentially by differentiating their products and
services from those of competitors and through low costs. Arla can target their products
by a broad target, thereby covering most of the marketplace, or they can focus on a
narrow target in the market. There are three generic strategies that a Arla can undertake
to attain competitive advantage: cost leadership, differentiation, and focus. Arla can
maximize performance by striving to be the cost leader in Pakistan , by differentiating its
products or services from those of other companies, and by focusing on a narrow target in
the market.
44
11. Marketing Mix strategies
When entering a market, the company must consider the present marketing mix.
11.1 Product strategy
Arla should launch same quality of the products as they are offering to the home
consumer at home market . As mention before ,that they can start with few products to
get the attention of Pakistanis, after positioning the product concept they can launch full
product line in Pakistan. Meeting the needs and taste of the Pakistani consumer include
quality, appearance ,packing, service and brand they can easily get the maximum share of
the market. As we know Arla is second biggest dairy company in the Europe has
excellent products development facilities and Arla can develop the products according to
this market’s taste, habits, liking, preferences of the people.
Packing should follow the Pakistani rules, the government has some specific rules for
food item’s packing. Because of hot weather, other dairy processing units are mostly
using Tetra packs for their milk products. Bottles are also available media for packing of
dairy products. The company should follow the rules about labelling of the products like
expire dates , information in local language on the pack , storing temperature etc.
11.2 Price strategy
Price is a very important issue to enter in Pakistan, because making a decision to enter
this market, Arla should take into account the profit margins and suitable pricing
response of competitors. The company should keep the prices of its products competitive.
At initial stage of the company launch in Pakistan, company can give some extra
discounts or other incentives to consumer or to retailers and wholesalers to attract the
market.
45
11.3 Place/distribution strategy
This factor is very essential for Arla because it is associated with decisions of channels of
distribution that works as the ways of getting the product to the target customers. As we
know its big market of 164 million people for Arla, so at initially they can hire the
services of a commission agent because this will help to make know how about the
market and to sell the products to many small retailers in Pakistan.
The company should also adopt direct selling strategy to big retail chains in a big
geographical location like Pakistan. Direct selling will also reduce the cost of distribution.
Other possible distribution channels can be big hotel chains, sweets and bakery chains,
ice cream producer companies to sell the products.
11.4 Promotional strategy
Arla should launch a strong media campaign in Pakistan through TV and print media.
This will create the image of the company as well as awareness about the products. To
make sure that they send out the message properly they have to have a good and strong
communication plan. This includes identifying their product, target group, competitors
and the message they want to send. And then this message must be transformed into an
advertising that shows their message and the value they can add to the customer. The
advertising must be based on both rational and emotional feelings. The rational part could
show all the facts, and the emotional part could show all the benefits.
Strategy: As the target group of the company’s products are big hotel chains and retail
chains selling dairy products i.e. B2B market, therefore the company should adopt ‘Push’
promotional strategy. The push promotional strategy will help the company to create
awareness and knowledge among the target group about its products and ultimately the
customer will buy the products.
46
11.4.1 Promotional budget
The company should allocate enough budget to create awareness of the Arla’s products
on promotional activities in Pakistan.
11.4.2 Promotional mix strategy
Advertising is a good promotional strategy to create awareness among the target group.
The company should advertise about its capabilities, its product assortment, price and
quality aspects. News papers, business journals, magazines and directories are good
advertising tools.
Electronic media
Pakistan is a country which has several popular TV channels among the people, so Arla
can make an electronic marketing campaign to introduce Arla in Pakistan.
Sales promotion
The company should also print some informative broachers about the products, and can
distribute among the general people and big buyers. Discounts and rebate are also one of
the effective tools to get the short term business quickly.
47
12. Action Plan
Arla will fix a short term, action plan in Pakistan for 12 months that will indicate specific
marketing decisions. The marketing plan will be divided into 4 sales cycles during the
year.
12.1 Product assortment
Arla can introduce some of its products initially in the first year time.
Main product line to introduce in Pakistan
Milk Yogurt drink (Lasi)
Skimmed milk Butter
Milk for tea Cheese
Yogurt (flavored, simple) Ghee
They can further
12.2 Price structure
The price structure of dairy products varies according to the product. A general guideline
of the pricing structure for Arla’s products in Pakistan.
Price calculation and profit margin for one litter processed Milk for Arla in
Pakistani Rupees.
Variable cost of Raw milk 1631 RS.
Fixed cost (100-200 %) 16 Rs.
Total cost (full cost) processed mil 32 Rs.
Mark up (10%) 03.2 Rs.
Price (total cost +markup) 35.2 Rs.
VAT (15 %) 05.2 Rs
Selling price to the consumer 40.4 Rs.
31 Price from= http://www.pide.org.pk/pdf/PDR/2004/Abid%20A.%20Burki.pdf
48
12.3 Distribution channel selection
Pakistani dairy food market is dominated by only 2 companies (Haleeb and Nestle)and
they have established a strong distributional channel in the market. Arla can adopt simple
distribution channels that may be
Three types of distribution channel for Arla are possible:
Manufacturer --------wholesaler ---------retailer -------customers
Manufactures-------- – retailers------- - consumers
Manufactures------- – supermarkets – ---consumers
13. Sales cycle
The sales cycle of Arla divided into 4 sales cycles during the year i.e. 4 quarters in one
year from Jan 2008-Dec2008)
Q1= 15% Q2= 25% Q3= 30% Q4= 30%
49
13.1 Quarterly sales cycle plan (Pak RS. Million)
Q1 (15%) Q2 (25%)
Product
Jan
4%
Feb
5%
Mar
6%
Target
Q1
Apr
7%
May
8%
Jun
10%
Target
Q2
Milk 0.60 0.75 0.90 2.25 1.05 1.20 1.5 3.75
Yogurt 0.32 0.40 0.48 1.20 0.56 0.64 0.80 2.00
Butter 0.08 0.10 0.12 0.30 0.14 0.16 0.20 0.50
cheese 0.04 0.05 0.06 0.15 0.07 0.08 0.10 0.25
Target/ month 1.04 1.30 1.56 3.90 1.82 2.08 2.60 6.50
Q3 (30%) Q4 (30%)
Product
Jul
10%
Aug
10%
Sep
10%
Target
Q3
Oct
10%
Nov
10%
Dec
10%
Target
Q4
Milk 1.50 1.50 1.50 4.50 1.50 1.50 1.50 4.50
Yogurt 0.80 0.80 0.80 2.40 0.80 0.80 0.80 2.40
Butter 0.20 0.20 0.20 0.60 0.20 0.20 0.20 0.60
cheese 0.10 0.10 0.10 0.30 0.10 0.10 0.10 0.30
Target/month 2.60 2.60 2.60 7.80 2.60 2.60 2.60 7.80
50
13.2 Time Table for Scheduled Marketing Activities:
Month Activity Planned Budget
million
(Rs.)
Jan • Sales presentations by the marketing manager to the
potential customers to highlight company’s products
and image.
• Ads in the Pakistani business magazines.
• Brochures about company’s products, product samples.
2
Feb • Participation in the Karachi dairy trade Fair .
• Meetings with the target customers and follow up
.5
Mar. • Ads in the Pakistani business magazines
• Business letters. Direct mailing. Tele phone calls
2
Apr. • Sales presentations. Samples and brochures 2
May • Ads in business and fashion magazines.
• Direct mailing and phone calls
1
Jun • Sales presentations.
• Samples and brochures
2
Jul • Follow up of the presentations and ask for business
• Ads in business magazines
1
Aug • meetings with the target group.
• Samples and brochures.
4
Sep • Follow up after the trade fair.
• Telephone calls and direct mailing.
.1
Oct • Business letters and Ads in the magazines 2
Nov • Participation in Lahore International dairy industry
Fair and meetings with the target group.
.4
Dec • Follow up after the fair and sample and brochures .5
51
14. Prerequisites for Plan:
• Marketing manger should have solid knowledge of company’s products and
capabilities, and the competition before organizing a sales presentation to the target
group.
• Ability to highlight those features and benefits of the products that satisfy the target
group’s need.
• Arla has to make good planning before the trade fairs.
• Awareness about the business culture of Pakistani buyers and negotiation techniques.
• Well planned sales presentations and well designed promotional material e.g.
advertisements.
15. Follow up:
Strong follow up is the key to success of the marketing plan and to get the required
business from the Pakistani markets. Key follow-up activities are,
• Review of the performance of the marketing people at the end of each month.
• Sales meetings at the end of each quarter to discuss the achievement of sales target.
• Discussion about the implementation of promotional activities
• Adjustments in the sales target according to the achievement.
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16. Overall conclusion
According to our conclusion Arla is currently a very strong company which is moving
forward in most of its business areas and growing to an bigger size. Its structure of
cooperative ownership has proved to be a great strength of the company. The key
competence of Arla are its high quality products and their ability to meet customers needs
and taste and has been able to maintaining high quality standard for its suppliers. In case
of Arla foods the technological development means innovation in dairy field. On the
world market there is still a huge opportunities for Arla. The group can make the use of
its advance production method and excessive experience with in the field of dairy
production, both to move into new markets and also to create new products which they
could add to their already very extensive portfolio.
In this connection now Arla wants to enter in Pakistani market and we made some
analysis in this regard to explore the possibilities for Arla in Pakistan. Pakistan is a
country which has adequate milk resources in the country and ranked as 5th largest
country in the world but lake of processing facilities and latest technologies in the
industry, there is a huge gap between processed milk productions and non processed milk
sales in the country which is 2 % and 98 % respectively. People are still purchasing milk
from centuries old tradition from milk man and this milk are full of unhygienic products.
Now if Arla goes to Pakistani market there is a lot of opportunities for Arla to stay in this
potential market. Governmental policies are in favour of investors and the growing
number of middle class are the real target group for Arla in Pakistan. Cheap labour rates
and skilled labour force are making the business in favour of Arla. Arla already present in
many Muslim countries make sense to enter Pakistani market but with some threats
regarding cartoon controversy. Nestle MilkPak and Haleeb are the big players in the
market can give tough time to Arla in Pakistani market.
53
Demand for processed dairy products will remain high due to lake of formal dairy
business in Pakistan. The strong market potential can be found in the growing
middleclass. In general Arla’s high quality products hold great appeal to Pakistani
consumer and they maybe the best seller in Pakistani market too as they are doing well
at home. As a result there is strong possibilities are present for Arla in Pakistan.
54
Appendixes
Appendix-1 Pakistani map
55
Appendix-2 Pakistani milk market
source:www. fao.org
56
Appendix-3
Processor capacity of various milk processing companies
Processors Capacity Capacity utilization Monthly average (million litres) Flush Lean
Nestle 1.3 1.3 0.78 1.04 HFL 0.9 0.9 0.54 0.72 Millac 0.3 0.3 0.18 0.24 Vita 0.05 0.03 0.018 0.024 Halla 0.15 0.15 0.09 0.12 Prime 0.1 0.1 0.06 0.08 Nurpur 0.15 0.15 0.09 0.12 Nirala 1 0.1 0.06 0.08 Dairy Crest 0.15 0.15 0.09 0.12 *Engro 0.35 0 0 0 K & K .04 0 0 0 Butt Dairies 0.04 0.06 0.036 0.048 Munno Dairies 0.06 0.02 0.012 0.016 Khi Dairies 0.1 0 0 0 Military Dairy Farms 0.18 0.18 0.105 0.144 Total 5.21 3.44 2.064 2.752
*planned Source: SWOG estimates
57
Appendix-4
58
Appendix-4
59
Bibliography
References used while making the reports and their links:
http://en.wikipedia.org/wiki/Arla_Foods1
http://www.arlafoodsuk.com/appl/GB/gb060AFU/gb060d01.NSF?OpenDatabase1
https://www.cia.gov/library/publications/the-world-factbook/print/pk.html1
http://en.wikipedia.org/wiki/Economy_of_Pakistan
http://www.loksujag.org http://www.fao.org/ag/AGAinfo/projects/en/pplpi/docarc/wp3.pdf
http://www.pakissan.com/english/issues/how.pollution.shtml http://www.regoverningmarkets.org/en/filemanager/active?fid=9
http://www.nestle.com/MediaCenter/PressReleases/AllPressReleases/MilkFactoryPaskistan.htm?Tab=2007
http://www.cababstractsplus.org/google/abstract.asp?AcNo=20053149686
http://www.ilri.org/InfoServ/Webpub/Fulldocs/South_South/ch09.htm#P38_2944
http://www.haleebfoods.com/haleeb/
http://www.pide.org.pk/pdf/PDR/2004/Abid%20A.%20Burki.pdf
http://www.arlafoods.com/APPL/HJ/HJ202COM/HJ202D01.NSF?Open
Books and literature used.
• Marketing Management 12th edition-Philip Kotler and Michael Keller.
• Blackboard Course Material.
• Brochures from Arla.
• Global Marketing Second Addition svend Hollensen.
• Principles and Practice of Marketing, 4th Edition, by David Jobber.
• Cross – Cultural Business Behavior, by Richard R. Gesteland. ISBN 87-630-0093-8.
• Essentials of Economics, 3rd Edition by John Sloman.