NESTLÉ Milkpak - Comprehensive Marketing Report

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Industry Analysis

The Livestock Sector contributes 9.4 per cent to GDP and 39 per cent towards agriculture. Dairy is one of the vital sub-sectors of Livestock Sector and holds tremendous growth and export potential. It forms an important component of Pakistan’s economy and supports around 5.5 million rural families. The dairy sector thrives on huge investment base of around one trillion rupees with major share coming from the poor and landless farmers maintaining small dairy herds of two to three animals. This vital sector of the economy, however, has not so far received any special attention it deserves.

MILK PRODUCTIVITY GLOBAL COMPARISON

Following is the comparison of the milk productivity of Pakistan with other countries.

PAKISTAN = 1,250** liters/year

WORLD AVERAGE = 5,000** liters/year

EUROPEAN UNION = 6,000** liters/year

U. S. A. = 9,500** liters/year

(**Milk in Liter per Animal/year)

WHAT DO WE NEED TO DO

In order to reduce this gap, the following strategies are needed to be adopted.

Improve breeding / genetics Improve feeding Management - veterinary care

PAKISTAN MILK POTENTIAL

There is a lot potential for milk market in Pakistan. The demand of milk has jumped due to more value addition in dairy sector. The following is the opportunity available in milk sector that has been targeted in next five years.

TARGET: INCREASE MILK PRODUCTION

BY 50% IN 5 YEARS

BENEFITS: MILK PRODUCTION INCREASE = 12.5 B

VALUE ADDITION OPPORTUNITIES IN DAIRY SECTOR OF PAKISTAN IN NATIONAL / GLOBAL PERSPECTIVE

Pakistan, with a mammoth population of 145.96 million, ranks poor on all health indicators with endemic malnutrition being the major root-cause. However, bestowed with great Livestock endowment which manages to provide about 1.01 million mt of beef, 0.66 million mt of mutton and 27.8 million mt of milk, there is immense potential for sustainable development of livestock sector for rational increase in both meat and milk. The milk is projected as a commodity, which is “food for life” by the Australian and in Pakistan too the reality is that milk and wheat constitutes the bulk of the diet of our rural population. In fact, for a majority of rural populace, these two are the only available and accessible food items for daily consumption.  Dairy sector in Pakistan plays a significant role in its national economy. It is estimated that every third household in the country supports a milch animal and the average herd size is about three (Punjab Lok Sujag, 2001). The annual milk production exceeded 27.8 million tons in year 2001-02 (Economic Survey 2003), making Pakistan the fifth largest milk producing country in the world. It has been estimated that about 60% of the calories are met from milk and its

products. Milk’s economic importance could be well understood considering that the value of milk procured annually in the country is alone more than the total annual value of wheat and cotton and twice than that of sugarcane and rice together. About 55 million landless/small land holding farmers are responsible for the bulk of milk produced in the country, However about 93% of these farmers have an average herd size of 4 milch animals and interestingly, milk remains to be the mainstay of their household income. However, despite having great value, the milk production is the least commercialized enterprise in the agricultural economy. Nevertheless, milk and milk products enjoy the status of single largest commodity of the agricultural sector having a worth of about 160 billion rupees per annum.  Comparing the production-utilization trends in major milk/milk product producing countries such as USA (125 million tons) India (74 million tons) Russia (71 million tons) Poland (33 million tons) New Zealand (12 million tons) Australia (10 million tons) it is obvious that in all these countries there is no shortage of milk (Food Outlook, 1998). However, out of total quantity 27.03 million tons of milk produced in Pakistan, only 22.01 million tons are available to the consumer. This necessitates the import of dried milk and milk products to meet the increasing demand of urban population, particularly in lean season of milk production at tune of Rs. 422.7 million per year. However, over the period of time, the import figures have been fluctuating for one or other reason particularly in the past decade.  The per capita availability of milk is 150.8 per annum in Pakistan (Table 1). It has been estimated that about 60% of the calories are met from milk and its products.  However looking at the production and utilization pattern, it has been reported by Athar and Khan 2001 that the bulk of milk is produced in rural areas whereas major consumption lies in urban sectors. The trend of urbanization will potentially increase the distance between buffalo/cow and consumers that will result further reduction in quality of raw milk in respect of nutritional as well as public health standards. Given the current profile of dairy sector in the country and the technological

advancements in this sector taking place in major milk and/dairy product producing countries there is a dire need for value added innovations in dairy

sector of Pakistan based on strategic planning, vigorous adaptive research and development with cohesive public-private partnership. This paper, while appreciating the existing industry’s increasing pressure on the manufacturing portfolio to reduce expenditure on process optimization and product developments, envisages looking into the resource management for increasing focus on milk, its products and byproducts as a commodity and the need to expand existing processes to new technologies given the situation analysis.

Revenue generated by this sector

Rupees in Million

Item 1999-2000 1980-81

Base Base

Milk 278178 257585

EXPORT POTENTIAL

The sector has opportunities in the exports and following are the figures produced by Federal Bureau of Statistics of Pakistan.

12.5 BILLION LITRES = 1.56 M TONS OF MILK

POWDER = $ 1.96 b (EXPORT POTENTIAL)

IMPORTING COUNTRIES IN THE REGION

1. SAUDI ARABIA $50 m 2. SRI LANKA $40 m3. UAE  $30 m4. INDONESIA $120 m5. OTHERS $60 m6. MALAYSIA  $60 m7. THAILAND  $50 m

Categories of Milk Suppliers

• Dodhia - Gowala Milk [fresh milk]

• UHT milk [Ultra high temperature treated milk]

• Pasteurized milk

• Reconstituted milk from milk powder

Consumption Shares

• Gowala Milk 84%

• Pasteurized milk 6%.

• UHT- 9%

• Reconstituted from powder - 1%.

Per Capita consumption

• Gowala - 0.31liter

• UHT - 0.2 liter

• Pasteurized milk - 0.13 liter

• Reconstituted milk - 0.001 liter

- Note –Error is due to slight adjustment and rounding off

- Source-Milk consumption survey of Lahore.

Percentage monthly expenditure

Item Urban Rural Total

Milk 16.85 15.81 16.14

On average, 16.14% of the total monthly expenditure is done on the consumption of milk in Pakistan.

The production of milk in Pakistan

Production Price per ton

Milk 25 billion liters PKR 15,000

MILK PROCUREMENT IN PAKISTAN

Following are estimates of daily milk procurement capacity by various companies (on 6% fat basis):

1. Nestle Milk Pak 1,200,000 Liters 2. CDL Foods 800,000 liters 3. Millac 95,000 liters 4. Halla 90,000 liters 5. Premier 70,000 liters 6. Military 50,000 liters 7. Prime  35,000 liters 8. Ravi  30,000 liters

Other factories under initiation include KNK, Noon Dairies, Nirala Dairy, etc.

The function of MPD is to ensure and streamline the regular supply of raw milk according to the defined quality standards and budget requirements within budgeted landed cost. Nestle Milkpak does not manage any dairy farm since it is out of the scope at present. However, milk is procured through two parallel systems:

1. Suppliers: A System in which an approved Sub-Contractor (Supplier) purchases raw milk on his own expenses/resources and delivers at Nestle Milkpak plant on agreed terms & conditions as per defined quality standards. 

2. Self-Collection: A system in which company purchases raw milk that meets Nestle Milkpak defined raw milk quality standards, through its staff members and delivers at PHE Center or factory.  It further comprises of Village Milk Collection (VMC), Progressive Farmer, Mini-Contractor (MC), and Hi-Lux Contractor (HC).

GAP IN PRODUCTION & DEMAND

Gross Production & total Production Gap was worth PKR 514 million in 2001-02

PKR 706 million worth of milk powder (25,000 tons) was imported

ACTIONS TO REDUCE THE GAP:

1. Increase milk output per animal

The shortfall is only 3.5 liters milk per animal

2. Improve Milk Collection & distribution channels

3. Increase milk processing

Milk powder value reduced by PKR 190 million due to Halla, Premier, CDL, & Millac

The salient features of Dairy sector in Pakistan are:

With 27.8 million tones per annum, Pakistan is 5th largest milk producing country in the world. The milk production system is based on a massive livestock resource base with buffalo as the leading milk producing animal.

Given the current livestock management system, the per unit animal milk production level is far below then the leading dairy products producing countries for a number of reasons.

Nestle Company History

1866 -1905

In the 1860s Henri Nestlé, a pharmacist, developed a food for babies who were unable to breastfeed. His first success was a premature infant who could not tolerate his mother's milk or any of the usual substitutes. People quickly recognized the value of the new product, after Nestlé's new formula saved the child's life, and soon, Farine Lactée Henri Nestlé was being sold in much of Europe.

1905-1918

In 1905 Nestlé merged with the Anglo-Swiss Condensed Milk Company. By the early 1900s, the company was operating factories in the United States, Britain, Germany and Spain. World War I created new demand for dairy products in the form of government contracts. By the end of the war, Nestlé's production had more than doubled.

1918 -1938

After the war Government contracts dried up and consumers switched back to fresh milk. However, Nestlé's management responded quickly, streamlining operations and reducing debt. The 1920s saw Nestlé's first expansion into new products, with chocolate the Company's second most important activity

1938 -1944

Nestlé felt the effects of World War II immediately. Profits dropped from $20 million in 1938 to $6 million in 1939. Factories were established in developing countries, particularly Latin America. Ironically, the war helped with the introduction of the Company's newest product, Nescafé, which was a staple drink of the US military. Nestlé's production and sales rose in the wartime economy.

1944 -1975

The end of World War II was the beginning of a dynamic phase for Nestlé. Growth accelerated and companies were acquired. In 1947 came the merger with Maggi seasonings and soups. Crosse & Blackwell followed in 1950, as did Findus (1963), Libby's (1971) and Stouffer's (1973). Diversification came with a shareholding in L'Oréal in 1974.

1975 -1981

Nestlé's growth in the developing world partially offset a slowdown in the Company's traditional markets. Nestlé made its second venture outside the food industry by acquiring Alcon Laboratories Inc..

1981 -1996

Nestlé divested a number of businesses1980 / 1984. In 1984, Nestlé's improved bottom line allowed the Company to launch a new round of acquisitions, the most important being American food giant Carnation.

The first half of the 1990s proved to be a favorable time for Nestlé: trade barriers crumbled and world economic markets developed into a series of more or less integrated trading areas. The opening of Central and Eastern Europe, as well as China, and a general trend towards liberalization of direct foreign investment was good news for a company with interests as far-flung and diverse as Nestlé. While progress since then has not been as encouraging, the overall trends remain positive.

Consolidation since 1996 has been demonstrated by the acquisition outright of the Italian mineral water concern San Pellegrino (1997), the acquisition of Spillers Petfoods of the UK (1998), and also with the decision to divest the Findus brand in order to concentrate on high added-value frozen food products (1999). Since then, Ralston Purina was acquired (2002) and the petcare business is now joint world leader and known as Nestlé

Purina PetCare. In the same year, the former Perrier Vittel water business was re-named Nestlé Waters, recognizing the fact that the dynamic bottled water business accounts for a growing share of Group sales.

Nestlé opened the 20th century by merging with the Anglo-Swiss Condensed Milk Company to broaden its product range and widen its geographical scope. In the new millennium, Nestlé is the undisputed leader in the food industry, with more than 470 factories around the world and sales of more than CHF 81 billion. In July 2000, Nestlé launched a Group-wide initiative called GLOBE (Global Business Excellence), aimed at harmonizing and simplifying business process architecture; enabling Nestlé to realize the advantages of a global leader while minimizing the drawbacks of size.

There have also been two major acquisitions in North America, both in 2002: in July, Nestlé announced that the U.S. ice cream business was to be merged into Dreyer's, and in August, a USD 2.6bn acquisition was announced of Chef America, Inc., a leading U.S.-based hand-held frozen food product business.

The Company's strategy will continue to be guided by several fundamental principles. Nestlé’s existing products will grow through innovation and renovation while maintaining a balance in geographic activities and product lines. Long-term potential will never be sacrificed for short-term performance. The Company's priority will be to bring the best and most relevant products to people, wherever they are, whatever their needs, throughout their lives.

Consumer Services

At Nestlé, it is committed to offering consumers high-quality food products that are safe, tasty and affordable. The Nestlé Seal of Guarantee is a symbol of this commitment.

The company also believes in maintaining regular contact with our consumers. This applies both to how the company presents its products and to how it addresses our consumers' questions and concerns. When Henri Nestlé prepared his first boxes of infant formula for sale, he put his address on the packages so people would know where to go if they had questions. Today, our Consumer Relationship Panel with the words "Talk to Nestlé" expresses the same commitment.

This is why the company has a worldwide Nestlé Consumer Services network devoted to caring for the consumers. Our people have expertise in a wide range of areas such as nutrition, food science, food safety and culinary expertise. They provide the prompt, efficient and high quality service that consumers expect from Nestlé.

In addition, the company teaches them talk with consumers and above all, to listen. Listening helps us to understand what people want. Nestlé uses the insights gained from relationships with consumers to drive product development.

At Nestlé, the company cares for consumers because our success depends on meeting their needs and expectations. Through listening and understanding, the company can make products that they will want to use all through their lives.

Quality

Everyday, millions of people all over the world show their confidence in us by choosing Nestlé products. This confidence is based on our quality image and a reputation for high standards that has been built up over many years.

Quality is the cornerstone of our success

Every product on the shelf, every service and every customer contact helps to shape this image. A Nestlé brand name on a product is a promise to the customer that it is safe to consume, that it complies with all regulations and that it meets high standards of quality. Customers expect us to keep this promise every time. Under no circumstances will the company compromise on the safety of a product and every effort must be made to avoid hazards to health. Likewise, compliance with all relevant laws and

regulations is a must and is not negotiable. People, equipment and instruments are made available to ensure safety and conformity of Nestlé products at all times. The effort is worth it. Companies with huge quality standards make fewer mistakes, waste less time and money and are more productive. They also make higher profits. Quality is our most successful product. It is the key to our success, today and tomorrow.

The customer comes first

The company wants to win and keep customers: distributors, supermarkets, hotels, shopkeepers and the final consumers. They have very different requirements. Trade customers expect excellent service, correct information and timely delivery. Consumers consider taste, appearance and price when they make their choice. Our task is to understand what customers want and respond to their expectations rapidly and effectively.

The company serves various groups of consumers and there is demand for products at different levels of perceived quality and price. All customers, however, expect value for their money – good quality at a reasonable price. When offering quality to customers the company also means environmental quality. Nestlé shares society’s concern for the environment and is committed to environmentally sound business practices throughout the world. Customers are central to our business and the company must always respect their needs and preferences.

Quality is a competitive advantage

The company lives in a competitive world and must never forget that our customers have a choice. If they are not satisfied with a Nestlé product, they will switch to another brand. Our goal, therefore, is to provide superior value in every product category and market sector in which compete.

The pursuit of highest quality at any price is no guarantee for success, nor is a single-minded cost-cutting approach. Lasting competitive advantage is gained from a balanced search for optimal value to customers, by simultaneous improvement of quality and reduction cost. Success can never be taken for granted. The company must watch and learn from our competitors. If they do something better, the company must improve its own performance. The company can achieve competitive advantage through Quality.

Quality is a joint effort

Operating companies are fully responsible for maintaining agreed quality standards. Not only Production units, but also Marketing, Purchasing, Distribution and Sales have a vital role to play in providing quality to customers. This implies a thorough knowledge of the products and services the company offer. Quality units at different levels of the organization provide specific support, promote

quality awareness, assume guardianship and audit the system. Quality departments monitor operations against agreed standards and must intervene in case of non-conformity. Quality policy and principles, the mandatory standards and the recommended tools for implementation are laid down in the Nestlé Quality System which is applicable throughout the group. Further directions are given through instructions, norms and guidelines, often specific to a product. Our business products, such as raw material producers, packaging suppliers, contract manufacturers and distributors are expected to share our concern for Quality. They too must set up an adequate quality system, so as to meet our requirements consistently. The quality efforts must be shared by every function and department in the company as well as our business partners.

Quality is made by people

Adequate equipment, procedures and systems are needed to make Quality; so are involved and dedicated people. Each and every Nestlé employee must do his best to provide quality products and services. Training and teamwork are crucial to the successful implementation of high quality standards. Continuous training ensures that everyone understands his tasks and has the necessary skills to carry them out. Teamwork allows us to achieve results that are greater than the sum of individual efforts. The company motivate employees by demonstrating management commitment to Quality, by setting challenging goals and by giving them responsibility and recognition. It is through employee involvement that goals and targets can be achieved in the shortest time. Quality must be a way of life for everyone in the company.

Quality is action

Quality is the result of deliberate action. It is the responsibility of senior managers to communicate the quality objectives and to provide the resources necessary for their implementation. It is then up to all employees to make Quality happen throughout the company. Progress is followed by listening to our customers and by measuring our performance. Shortcomings and mistakes must be analyzed and corrected. Problems must be anticipated and prevented before they occur. The company also must identify and take advantage of opportunities.

To stand still is to fall behind. So the company must strive for continuous improvement in every area. It is through many small improvements as well as through major breakthroughs that the company will achieve excellence. At Nestlé, Quality is our first priority. Let us practice it every day.

Product-Mix Width and Product-Line Length for Nestle

In the above table, we have mentioned the product-mix width in relation to the Nestle brands. While our major concern is regarding the Nestle Milkpak, so we have extended the production length of dairy products.

Segmentation

Many multinational firms offer different products or services because of the fact that different people want different mixes of benefits from the products they buy. Take Tetrapak milk products as an example people consider milk as healthy diet but they also want other things from their milk products, such as economy, freshness, hygienic, purity, easy availability and thickness. We all want some one of these benefits from our brands, but we may have different priorities for each benefit to some people purity is most important, to others economy matters a lot: still others want thickness. Thus there are groups-or segments of Tetrapak milk buyers, and each segment seek a combination of benefits.

As our brand is nestle milkpak so we have got some valuable information on its market segmentation, market targeting and its market positioning concepts. In this section we shall discuss market segmentation and market targeting of milkpak in more detail and we shall discuss its market positioning for competitive advantage in further section.

Demand pattern

Nestle Pakistan believes that demand pattern for tetrapak milk products is cluster demand. Cluster demand is a demand in which consumer’s needs and desires can be grouped into two or more identifiable clusters, each gives its own set of purchase criteria. Some tetrapak milk buyers want purity others want thickness and still other want economy and easy availability.

Possible basis of segmentation

There is no single way to segment a market. A marketer has to try different segmentation variables, alone and in combination, to find the best way to view the market structure. Nestle Pakistan establish different basis for segmentation such as demographics,

psychographics, behavioral segmentation, personal demographics and benefit segmentation. It is interesting to know that only in Karachi sale of milkpak is 50% of the total sales we can conclude that its usage rate is high in urban and more dense areas. Behavioral segmentation divides buyers into groups based on their knowledge attitude, usage or responses to a product. Buyers can be grouped according to occasions when they get their idea to buy, actually make their purchase or use the purchase item.

Nestle Milkpak a multipurpose brand, it means that you can use it in making tea, sweet dishes and drink it as healthy diet. In Pakistan, mostly it is used in making tea and tea is more often consumed at break fast and in evening time an important base in behavioral segmentation is attitude to wards product. Pakistani society is not so much educated on large scale. People have some time negative attitude towards Tetrapak. Such as infra red waves have been used in packaging material and some people have some doubts about its quality. Nestle Milkpak gives its special consideration toward this issue. The company is trying to change the people’s perception about its product through advertisement. In personal demographic segmentation the company gives importance to income and household size. They have offered different sizes of nestle Milkpak for different consumers belonging to different income levels. They give special importance to benefit segmentation. They promote the symbol of purity and try to highlight this in the advertisements. Nestle Pakistan uses multiple segmentation bases for example they use benefit segmentation to identify consumers seeking different benefits. They also use income level as a powerful base of segmentation and they also use geographic demographic segmentation.

Market targeting

After developing possible basis of segmentation, the company now has to evaluate the various segments and decide how many and which one to target. nestle Pakistan evaluate different segments on the basis of potential and growth of different segments.

Selecting market segments

After evaluating different segments the company must decide which and how many segments to serve. Nestle Pakistan adopts differentiated marketing strategy to cover the market for its brand i.e. Milkpak. For example for different income level consumers nestle Milkpak offers a variety of products. It also offers various sizes of product for different classes.

1000 ml and 1500ml - for upper middle class and lower upper class

500 ml and 250 ml - for middle class and lower middle class

250 ml - for small town area

Competitors analysis

Scope

We consider all Tetrapak milk products as competitors of nestle Milkpak

Limitation

Loose, skimmed, powder and plastic bottle milk are our limitations

Market share

Name Market share%Nestle milkpak 49Haleeb 40Nurpur 05Others(Halla and Sabeen) 06

Base of competition

Price is not a base of competition for nestle Milkpak because the prices of nestle and its competitors are almost same so base of competition is quality and purity.

Threat of new entrants

Some brands are introduced in the milk market such as Nurpur and Sabeen. These are seasonal brands so nestle Milkpak is not afraid of these seasonal brands because these brands try to capture those markets which are not effectively covered by nestle Milkpak. Prices of these brands are not much different from nestle Milkpak.

Major competitors

For nestle Milkpak, Haleeb is a major competitor it captures the 40% of the market share. Prices of Haleeb are same as to nestle Milkpak. Haleeb always promotes its thickness and nestle Milkpak always promotes its purity.

With in the same company it has some competition with nestle every day liquid.

Everyday is especially for tea. So, nestle is trying to position Everyday as a tea milk. That’s why; they are doing a massive advertisement for Everyday.

On regional bases (Multan) a scheme is going on with the name of

(CHAI MAZEDAR, INNAM SHANDAR)

The company is trying to change the image of nestle Milkpak as a special tea milk.

Following are the prices of the Tetrapak products with their package sizes.

Name size Price(rupees)Nestle Milkpak 250ml 10Nestle Milkpak 500ml 18Nestle Milkpak 1000ml 34Nestle Milkpak 1500ml 46Nestle Everyday 125ml 6Nestle Everyday 250ml 8Nestle Everyday 375ml 14Nestle Everyday 500ml 18Nestle Everyday 1000ml 34Nestle Nesvita 500ml 22Nestle Nesvita 1000ml 38Dairy queen (CDL) 250ml 8Dairy queen (CDL) 500ml 15Dairy queen (CDL) 1000ml 28Haleeb(CDL) 65ml 3Haleeb(CDL) 250ml 10Haleeb(CDL) 500ml 18Haleeb(CDL) 1000ml 34Haleeb(CDL) 1500ml 46

Sabeen 250ml 10Nurpur 250ml 10

Product

In 1981 this product was introduced in Pakistan with the name of Milkpak. Due to some reasons this could not get the equity which it is enjoying at this time. As the Milkpak was not getting the required market share so the company decided to rename the product and then in 2000 this was called the nestle Milkpak. It was the turning point of the product and it got the good brand image and the brand equity with one to two years. For using the corporate name of nestle as an integral part of the product the producers of nestle in Pakistan are paying the royalty to the parent company.

Nestle believes in purity and so is the nestle Milkpak. Well reputed Tetrapak milk providing the core benefits of milk as of nature and nestle doesn't believe in the augmentation as for as the milk composition is concerned. All augmentations are of the protection, well pasteurized and hygienic. Providing with the greater shelf life ranging from 4 to 6 months. Nestle Milkpak is as natural in its core benefits as milk given by nature. Packaging is from Tetrapak (pvt) ltd comprising of six layers of sheet protecting the milk from external germs.

As for as the product life cycle stage of the Milkpak is concerned it is in the growth stage and the growth rate is extremely high for the Tetrapak dairy products especially for the milk. Due to this extensive growth nestle is unable to keep balance in the supply and the demand of the product. This very product is going through the process of diffusion stage and the product is in the early majority adopters of consumers.

Positioning

Positioning is the process of developing an image of a product in consumer's mind and creating a space in the mind of the prospect for that very product that it is providing a combination of unique features desired by the target market. Nestle Milkpak is not targeting only one market segment but providing a range of products for nearly all segments.

Nestle Milkpak is positioned only on the one benefit that is the purity like the corporate image. Nestle Milkpak is also using the corporate image for the product. The positioning philosophy pursued is the corporate product positioning. In corporate product positioning the perception of the consumer is developed among the similar product line of the company instead of the competitors. For all types of products company uses the same name for their brand and this is very much helpful for the company to position its product easily and it is also helpful to the company to decrease their advertisement costs that would be utilized to position their product from zero level. As it has been discussed in the starting section of the product that nestle Milkpak was initiated with the name only Milkpak but it could not get the expected share from the market then nestle decided to position along with the corporate name and the corporate image.

Pricing

Basic price objective of nestle Milkpak was the profit based objective when it was started in 1981 but due some reasons it could not get the required benefits. Now a days as the market is growing at rapid speed and similarly the product is also growing. Due to extensive increase in the demand of the product it has been difficult for nestle to achieve the demand of the market nestle has been planning to increase its capacity so that it would be easy to satisfy the demand. In this very period the pricing objective is the sale based.

There have been different pricing strategies like the cost pricing, demand pricing, competition pricing and the combination pricing. Nestle Milkpak has been pursuing the competitive pricing strategy for its product. In competitive pricing the price of the product is determined considering the price of major competitors (HALEEB).

It is the policy of Nestle to undergo competitive pricing. Nestle has never been in the price leadership. They always want to be competitive in pricing. While in price implementation nestle is using the mark up strategy it give approximately 10% margin to the retailers and 3% to 4% to the distributors. The mark up given to the distributors vary from distributor to distributor as per the performance and the cash receipts from that very distributor. According to the segments characteristics nestle is providing a range of products accessible to all Tetrapak milk users.

• MNC and Surrogate[s] 0.1 to 1.5 million liters – subject to correction on seasonality basis and latest information

• Purchase Price 14 to 15 rupees for 6% fat content.

• Selling price PKR 30 per liter

• End price 50% of the purchase price

Promotion strategies

Under the promotional strategies, the company is going for sales promotion, advertisements & public relations.

Sales Promotion

Sales Promotion is usually short-term to convene the sales mark. From the last two and a half years, Nestle has not introduced any scheme regarding the price-offs. That is because what they are producing is being consumed as a whole in the market. Unless and until the capacity of the production is not increased, the promotion strategy would not be under consideration. The product is unable to meet its demand in the market. The promotional price-offs would commenced after 2 to 3 years.

The promotional strategy of Milkpak is seasonal as well as occasional. The consumption of milk is more in summer, and less in winter. The schemes like price-offs, Ek lakh ka dabba, , free gifts on return of empty bags are usually launched in winter in order to increase the consumption of

milk. These schemes are also launched on and off in summer in order to increase the market share of the company in the milk market.

These schemes are also introduced occasionally like in the month of Ramadan, the consumption decreases; the company gives price incentives to the consumers. The deficiency in the sales is also covered later on Eid events by confirming a price-off.

The company also introduces promotional strategies on the basis of area. Any area where the product observes decline in sales, a promotion scheme like incentive on returning

empty bags is instigated. These area wise schemes are not advertised on media, but a support of word of mouth strategy is taken by giving incentive to the retailers.

Milkpak Pakka Aitebar Campaign

The highlight of 2003 has been the “Milkpak Pakka Aitebar” campaign. Launched in may as an integrated marketing campaign through T.V, Outdoor, print and POS, the campaign was instrumental in increasing the sales and market share of Nestle Milkpak.

Further these promotional strategies are for all kind consumers, whether they are new triers, brand loyal, occasional buyers & brand switchers. These tactics are applied on a mass level without any discrimination.

Nestle Previlege Club

Nestle launched its Privilege Club with style. Essentially a loyalty program, the Privilege Club’s classy Privilege Card enables residential customers (subscribers to the home and office delivery service for over a year) to enjoy exclusive benefits at participating outlets and restaurants. Special materials such as the Privilege Club brochure, bottle collar, billboard, advert and display stands were developed to ignite hype and hail the Privileged lifestyle.

point of purchaseS (pops)

The Nestle Milkpak is given a notable placement on the shelves of different retail shops & departmental stores for its sales promotion. Usually the company goes for wide display in the stores where it potential for its product. Different eye-catching decorations are made inside the store and in the showcase for outside display. These arrangements are made with the assistance of the sales people of the company.

Nestle even gives its refrigerators to big stores where its products are placed under the corporate name. It is a strategy in order to encourage the storekeepers to give more and visible place to their products.

Advertisements

The message that the product reflects in its advertisements is the one that is usually narrated by the corporate itself. The message is based upon ‘Purity, Quality & Natural’.

Selection of media

There are number of Medias available for passing the product message. These are as follows;

1. Television 2. Outdoor (Billboards) 3. Magazines 4. Newspapers 5. Brochures 6. Internet

Television Advertisements

Usually the company goes for advertisement on television. It is because of the exposure of viewers to this media on a large scale. Further, eighty percent (80%) of the ads of Milkpak are publicized on STAR PLUS. This step is taken by the company after conducting a survey in which T.V. viewers rated the channels on the basis of time they are exposed or prefer to watch it.

Now-a-days there are two ads that are on air on the channels.

1. Qudrat he Meherbaan2. Hum khud ikattha karte hein

The first ad imitates the message of purity, naturalness, openness and sincerity. It communicates that it is the same milk taken from farm houses and then further processed to make worth drinking. It basically counters the hearsay that tetra pack milk is not natural.

The second ad is to give the message of quality and the trust that people have in the product of Nestle.

In order to gain the attention of the consumers, and to avoid the zapping, the company adopts an apparent policy of delivering a clear and obvious message that has the strong theme reflecting brand image. Attractive colors are used and visual ad is supported by a melodious song.

The frequency of ads of Milkpak is not as much as the ads of Everyday are shown. The reason is again the same that company feels that the demand is more than there product supplied in the market. The primetime for showing the ads is from 8:00 to 10:30 pm.

Advertisements on Billboards

The outdoor choice is obviously the billboards. The message on the billboards is very clear regarding the focus of the company on purity & quality. The billboard is made quite a large one on which the Milkpak is placed with a family. The size and the wordings on the billboard do

matter in order to gain the attention of the people while giving a clear information in less time. Further the placement of billboards is very critical and here the company goes for hot spots where concentration of population is more.

The other Medias are not given enough attention except for the magazines and papers where the people are given the reminder of their product. It is a kind of reinforcement that the consumers have made a correct decision for choosing Nestle Milkpak.

Impact on sales

The company believes that ads do have adequate impact on sales. In order to meet the company policy of maintaining and strengthening the corporate image, the ads are shown on television.

There is a long-term strategy in the books of Tetrapak Limited to disturb the loose milk market. They usually show documentary from time to time regarding the flaws in loose milk quality & distribution system. It is usually shown without any discrimination, i.e., without mentioning any milk company name in the documentary.

Public relations

In order to build healthy relations with the consumers, the company has established a consumer department to manage the complaints of the end-users. A legal department is also dealing with the legal issues and media war. If any news is published in a newspaper that harms the product image, a persuasive message is published in that newspaper to counter the rumor.

Sponsoring events

The company goes for sponsoring events in order to heighten the company and brand image. Mostly the company goes for financing such kind of events in which its product has got some room to build likeness. The education programs of children are mostly

carried out, gifts or charity programs for SOS children are also the most favored plans. The company also goes for sponsoring fashion shows in different cities.

Distribution

Nestle Milkpak goes for indirect channel of distribution. The hierarchy of the distribution channel is as follows.

The distribution strategy pursued by the Nestle Milkpak is intensive. It means that the product distribution is covering wide market.

There are regional headquarters of the company in all the big cities of the country. There is a distributor in each big city. In order to reach remote areas, a distributor engages a sub-distributor for a small area. The company is directly linked with the main distributor and the sub-distributor has no such direct contact with the company. The company provides the Milkpak inventory to the main distributor that is further dispatched to retailers and sub-distributors.

There is a regional manager of Nestle that employs Area Sales Manager for a specific area. Then comes the Territory Sales Officer (TSO). TSO is directly linked with the distributors to set and achieve targets.

The targets vary from area to area and are set on the basis of history of the area sales. As the sales targets depend upon the area history of sales; these are usually achievable. If these targets are facing some kind of setback, the promotional schemes based on areas are announced as discussed earlier.

Conclusion

Pakistan’s milk output, and milk consumption is one of the highest in the world. Pakistan’s milk output per animal & milk processing (2.5%) is the lowest in the world. The potential to reduce import of milk powder, export surplus milk products, and gain tremendous revenue is possible through proper livestock management, milk marketing and technical management of processing plants. The companies offering hygiene milk have potential in this industry. Nestle Milkpak has been successful in its marketing strategies in order develop a market of its consumers. The marketing mix of the product has been so far in the favor of the company in order to gain a healthy market share. Though there are some flaws in the product positioning which is discussed in the next section.

Suggestions & Recommendations

Problem

The problem that Nestle Milkpak is facing is an ambiguity in positioning of itself in the consumers’ mind. Usually what people feel is that Milkpak is a valuable tea maker milk. On the other hand, Nestle has its another brand, the Everyday. Everyday is basically promoted and highlighted as a tea whitener. So in this case, the promotional image becomes vague regarding Milkpak.

Remedy

In order to clear this ambiguity regarding positioning of Milkpak, this product should be highlighted in advertisements as a nutritious drink instead of generalizing the theme of the message.

There are many people who seek buying incentives on products. For example, any consumer not such loyal to Nestle Milkpak, may prefer Haleeb milk due to extra quantity, price-offs offered by the product.

Nestle may go for augmentation of the product by offering extra features apart from corporate image. The difference in the processing of milk should be highlighted to give advancement in its growth.

They should be providing distributors a healthy package, so that the expiry related compensation should be availed.

As the policies are on the national basis, it is more suitable to go for regional basis policies associated with promotion. At present they are offering regional schemes only on Nestle Everyday.

The advertisement of Milkpak at present is not being exposed on national media. Still many consumers can be conveyed through media.

The company should offer small pack sizes in order to compete with others competitors. The competitor like Haleeb is offering small pack of 65ml and Everyday offering 125ml. Milkpak should also target this segment.

At present, the company is sponsoring events on a small scale. It should go for financing regional events.

In order grow this Tetrapak milk share in milk industry, the issues regarding unhygienic conditions should be highlighted from to time as it was initiated by Tetrapak Limited in the past.