11TH – 13TH MARCH, 2011

MANTHAN: CASE STUDY COMPETITION

Introduction
As the second largest producer of milk product with 70 million tonnes, India stands next only to United States.
The milk production is more than 70.1 million metric tonnes and 10.5 million litres per day .The average
procurement per day is 14.65 million litres per day and during lean period 12.26 million litres per day. The per
capita availability has also been increased from 132 grams to 204 grams per day. India has more than 75,000
dairy cooperatives which are spread all over the country. Marketing was capable of supplying hygiene and fair
priced milk to more than 300 million consumers in more than 550 cities and towns. By the end of 2000, the
annual demand for packaged milk in India dramatically increased. This was partially due to per capita income of
middle income group segment. The markets are diversified beyond metros which enabled the companies in
economics in transportation and refrigeration costs. Only 12% of milk supplied to market is packaged and
branded which is valued at Rs. 8000 crores. This shows there is a demand supply gap in the packaged/branded
milk segment. The transformation from co-operative movement based competition to corporate competition has
begun.

A market study revealed there is a potential market of Rs. 36,000 crores for packaged milk. A market which was
dominated by neighbourhood ‘doodhwala’, is going to be taken over by big players like GOPAL DAIRY, Nature’s,
Puree and Vijaya diary. These players have varieties of milk products in their portfolio and are going to introduce
new products like tetra pack, Ultra Heat Treated/ Ultra High Temperature (UHT milk - produced by exposing the
milk to 137 degree temperature for four seconds and instantly cooling it ) which can stay for more than six
months. Also it is available in different composition of fat, the customer has choices. But, companies need to
convince the customers that the UHT milk is good for health and can be consumed without boiling. As, Indian
customers have an attitude for freshness of milk, UHT milk – can be consumed after couple of months – may not
appeal to their tastes and preferences.

Market competition
GOPAL DAIRY the dominant player sells UHT milk, pouch milk, powdered milk, Gopal Srikhanand, other than
ghee , spreads ,butter and other products. As a part of their marketing strategy now it has introduced tetra pack
milk brand Freshh with a price tag of Rs.24 and looking for 100 crores. Gopal dairy is investing Rs. 30 crores in two
factories in Andhra and Maharashtra. It expects its market share to grow from 40% to 60%. After its initial
unsuccessful experience Gopal dairy has relaunched its UHT milk Freshh. Gopal dairy sell UHT milk, which is
priced lower than the competitors.

Puree, a multinational gaint has introduced tetra pack UHT milk with the brand name PURE MILK, other than its
powdered milk and other products. Puree, the MNC whose experience curve has derived competitive advantage
in selling milk products around the globe is expecting a business of 150 crore. It has expanded its existing
capacities to compete in this segment. After introducing its UHT milk Puree has added new variant of UHT called
slim milk. Initiatives were taken to strengthen supply chain by offering home delivery in Mumbai and Delhi.

Prakriti 2011, Agricultural and Food Engineering Department

Indian Institute of Technology, Kharagpur, West Bengal - 721302
 11TH – 13TH MARCH, 2011

Vijaya is now connecting on tetra pack UHT milk, along with differentiation strategy of introducing packaged milk
with three different levels of fat, namely 5, 4.5 and 3%. A litre of low fat milk which is recently introduced is sold
for a price tag of Rs. 19.

Nature’s, another powerful name in this segment of business sells MILKMAN brand of milk powder, and is
promoting its sweetened milk has also has plans to introduce tetra pack UHT milk other than its cheese slices,
cheese spread and other products.

Analysis
If we analyse this industry as per Michael E Porter’s five forces competition model (ref.
http://en.wikipedia.org/wiki/Porter_five_forces_analysis) we will be able to assess the impact of competitive
forces on the above mentioned major players of tetra pack UHT milk.

1. New entrants: The new entrant will end up facing an entry barrier in terms of increased cost of procuring milk,
diseconomies of scale in processing of milk, Research and development, cost disadvantage, Experience curve
of existing players, excess cost in terms of setting of marketing , service and distribution networks.

2. Competitors: Inter-rivalry of existing players result in price wars, advertising wars, promotion wars between
these players result in introduction of quality packaged milk at competitive rates and while the customer can
reap the benefit of such interaction the firms will not be able to make substantial profits.

3. Substitutes: Doodhvalla’s milk and pouch milk sold by independent and cooperative dairies will act as
substitute for packaged milk. A city like Ahmedabad alone has more than 20 brands of milk. Mumbai has 12
brands of milk sold, and in every states 6 to 12 brands of pouch milk is sold.

4. Suppliers: Suppliers being indigenous Milkmen if they get attracted towards operative milk movements like
GOPAL DAIRY they may act as potential threat to these firms, they may have to incur increased cost on
procuring of milk, bargaining power of indigenous milk wallah will act as competitive force.

5. Buyers: Buyers being households and institutions, which opt for quality milk necessarily upper middle class , if
this class perceives that the quality of pouch milk is almost similar to the packaged milk or UHT milk they may
shift to their milk pouch or to good old dhoodhwala.

The competitive strength of these players being the customer perception of packaged milk, like a study revealed
that the customer perceives packaged milk as hygienic, better packaged, affordable sizes, perceived power of
branding with discounts. And according to General Manager marketing of GOPAL DAIRY, “Customers are
appreciating the consistent quality and hygienic conditions that comes with the tetra packed milk.” Most
customers realize that the milk bought from unorganised sector is often adulterated.

All-day access provides greater choice and consistent quality for consumers because it is ‘properly packed’. Also
companies have innovative new opportunities for milk-based products such as quick-settling milk for yogurt, UHT
milk based bed teas, large packs for offices, etc. The total expenditure of both rural and urban population on milk
and milk products has increased.

Prakriti 2011, Agricultural and Food Engineering Department

Indian Institute of Technology, Kharagpur, West Bengal - 721302
 11TH – 13TH MARCH, 2011

The strategies adopted by these companies involve in operating with difference price points, different segments,
quality packaging, aggressive advertising, and new product introductions with an intention to provide value
added milk to the customer. GOPAL DAIRY is even planning to introduce milk in cans, which is a novel idea by
itself. Tetra pack UHT milk necessarily increases the life cycle of milk from one week to six months.

An average Indian household now purchases an average of 2.5 variety of milk, is unaware of freshness issues for
packaged milk. Most of the time freshness and hygiene are ignored when the distribution network is weak or due
to non-availability of milk. When compared to other forms of milk, UHT is costly, this may not attract a price-
sensitive customers. WTO restrictions seem to threaten the quantity of exports of milk and milk products because
the quality is not up to norms of authorities.

Problem Statement
With a tremendous opportunity in the sector, a new multinational food sector company, ‘Foodicious’, wants to
invest Rs. 200 crore in dairy industry in India. Foodicious plans to setup new milk processing plants in India to
cater needs of both rural as well as urban customers.

With the data and information in the case suggest the following for ‘Foodicious’:

1. Perform a SWOT analysis (ref. http://en.wikipedia.org/wiki/SWOT_analysis) presenting the strengths,

weaknesses, opportunities and threats for ‘Foodicious’ when they enter the Indian market.

2. Suggest the factory location for ‘Foodicious’, on the basis of Michael E Porter’s five forces competition
model (http://en.wikipedia.org/wiki/Porter_five_forces_analysis) and SWOT analysis.

3. As per the information given on the dairy products given in the case, suggest the product line for
‘Foodicious’ to cater to the Indian market, both rural and urban.

4. Justify whether or not ‘Foodicious’ should emphasize more on UHT milk.

NOTE:

 Submit the first round abstract (in .doc or .pdf format) to submissions@prkt.in
 Word limit for abstract submission is approximately 750 words.
 For any queries regarding the event contact:
Harshan Agrawal
harshan@prkt.in
+91-9933311503

Prakriti 2011, Agricultural and Food Engineering Department

Indian Institute of Technology, Kharagpur, West Bengal - 721302
 11TH – 13TH MARCH, 2011

APPENDIX
Estimates of Milk Production - State wise (x1000 tonnes)

State 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

All India 86159 88082 92484 97066 100869 104840 108463
Andhra Pradesh 6584 6959 7257 7624 7939 8925 9570
Arunachal Pradesh 46 46 48 48 49 50 24
Assam 705 727 739 747 751 752 753
Bihar ** 2869 3180 4743 5060 5450 5783 5934
Goa 46 48 57 56 57 58 59
Gujarat 6089 6421 6745 6960 7533 7911 8386
Haryana 5124 5221 5222 5299 5367 5442 5745
Himachal Pradesh 773 786 870 869 872 874 884
J&K 1389 1414 1422 1400 1400 1498 1498
Karnataka 4539 3857 3917 4022 4124 4244 4538
Kerala 2419 2111 2025 2063 2119 2253 2441
Madhya Pradesh 5343 5388 5506 6283 6375 6572 6855
Maharashtra 6238 6379 6567 6769 6978 7210 7455
Manipur 69 71 75 77 77 78 78
Meghalaya 68 69 71 73 75 77 77
Mizoram 15 15 16 15 16 17 17
Nagaland 58 63 69 74 67 45 53
Orissa 941 997 1283 1342 1431 1625 1672
Punjab 8173 8391 8554 8909 9168 9282 9387
Rajasthan 7789 8054 8310 8713 9375 9536 9491
Sikkim 45 48 46 48 49 49 49
Tamil Nadu 4622 4752 4784 5474 5560 5586 5673
Tripura 79 84 86 87 89 91 96
Uttar Pradesh 15288 15943 16512 17356 18095 18861 19537
West Bengal 3600 3686 3790 3891 3982 4087 4176
A&N Islands 26 25 24 20 23 24 26
Chandigarh 43 44 43 46 46 47 47
D&N Haveli 8 8 4 5 5 5 4
Daman & Diu 1 1 1 1 1 1 1
Delhi 296 299 303 310 289 282 285
Lakshadweep 2 1 1 2 2 2 2
Pondicherry 37 40 41 43 45 46 46
Chhattisgarh 804 812 831 839 849 866 908
Uttaranchal 1079 1188 1195 1206 1213 1221 1230
Jharkhand 952 954 1330 1335 1401 1442 1466
Source: Department of Animal Husbandry, Dairying & Fisheries, Ministry of Agriculture, GoI

Prakriti 2011, Agricultural and Food Engineering Department

Indian Institute of Technology, Kharagpur, West Bengal - 721302