Dairy Industry Of Pakistan Marketing Essay

5079 words (20 pages) Essay

1st Jan 1970 Marketing Reference this

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The dairy industry of Pakistan is a very competitive industry and has huge potential. Unfortunately, dairy processors in Pakistan still have miles to cover before they can exploit full benefits of this industry. The milk production of the country has not been up to the mark and as a result the demand for dairy products outweighs the supply. Traditionally, people living in urban areas preferred to consume fresh milk delivered to their homes by Gawallas. However with the passage of time, as people became more and more health conscious there was a shift towards the consumption of UHT milk and its demand has been increasing ever since. In the UHT milk segment, firms like Nestle Pakistan Limited and Engro Foods Limited have emerged as leading market players. These firms with their bundle of financial resources have made huge investments in getting state of the art technology, manpower and strengthening their promotion efforts. Despite the fact that local dairy processing industries have been able to match the quality standards of Nestle and Engro to a greater extent, these firms lack in their marketing efforts. Noon Pakistan Limited is one such firm which is being effected due to poor marketing efforts and has not been able to reap the benefits of the industry in which it operates.

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Noon Pakistan Limited is a venture of the Noon Family and has been marketing its products under the brand name of Nurpur. The firm enjoys market leadership in the category of butter. Initially when the firm launched its UHT milk the market response was good. However with the passage of time, the brand performance of Nurpur UHT milk has deteriorated due to mismanagement of marketing efforts. While management claims that they are able to sell whatever they produce, the market survey results prove that the prevailing performance of the brand has not been up to the mark. The firm relies on the selling concept which is a short term approach and little emphasis is being given to the concept of brand building. It is the need of the hour that Noon Pakistan Limited adopts a long term strategic approach if it wants to secure its position in the market for years to come.

To study the issue being faced by Noon Pakistan Limited, a rigorous Literature review was conducted followed by interviews with employees of the firm, retailers and consumer surveys. Financial analysis and comparison with Nestle and Engro was done. Even though Noon Pakistan Limited does not match the financial strength of its competitors, there are many ways in which the firm can improve its position in the market.

The first step in building strong brands is to ensure that the brand has a high salience. The brand should have top of the mind recall and recognition. Unfortunately the survey results analyzed using SPSS software proved that Nurpur milk is not the first brand which comes to the mind when a consumer wants to purchase UHT milk. Majority of the respondents could not even recall any advertisements of Nurpur milk. A major proportion of the respondents also highlighted the fact that Nurpur milk was occasionally short in the market. The results of the retailer interviews also prove that Noon Pakistan Limited has to improve its trade promotion schemes as majority of the retailers were not satisfied with current distribution practices of the company. The retailers highlighted the fact that the company should improve its promotion activities so that consumers start demanding Nurpur milk.

Due to weak financial resources, Noon Pakistan Limited should utilize alternative strategies to maintain its position in the market. The firm needs to invest in consumer promotion activities like in store sampling and taste trials. The firm also needs to focus on its BTL activities in order to strengthen the perceptual positioning of the brand in consumer mind. The firm needs to revise its payment policies with retailers and start providing goods on a credit basis to those retailers who have a good reputation in the market. In short, Noon Pakistan Limited should revise its current practices and operations. The firm should let go its old concept of selling and instead focus on building the equity of its brands if it wants to strengthen its position in the market for the future.

2.INTRODUCTION

The Noon Group

The Noon Group of Companies is being managed by the Noon family. The group has qualified and experienced professionals. The Noon Group of Pakistan strives to improve its profitability and safeguard its stakeholders interest while maintaining highest quality standards and serving the community (About Us: Nurpur Foods, 2012).

The Noon Group of Companies has various business ventures and Noon Pakistan Limited is one such profitable venture of the Group. Apart from Noon Pakistan Limited a brief description of the other business ventures are as follows:-

1. Noon Sugar Mills Limited

This venture was incorporated in 1964 and manufactures white sugar. Initial crushing capacity was 1500 MT of sugarcane which has been increased to 4000 MT over the passage of time. In 1986 an alcohol distillery was setup to manufacture industrial alcohol. The total number of people employed is 683 and currently efforts are underway to increase the crushing capacity to 8000 MT/day (About Us: Nurpur Foods, 2012).

2. Pioneer Cement Limited

Pioneer Cement Limited was incorporated in 1985 with a total investment of Rs.2660 million and production capacity of 630000 tons per annum. The plant is situated in Chenki, Khushab. The project was financed by a consortium of foreign lenders led by the Asian Development Bank. Efforts are underway for another line having a capacity of 6000 MT/day (About Us: Nurpur Foods, 2012).

3. Noon International Private Limited

Noon International Private Limited is a trading company which was established in 1972. The company employs 43 people including a team of 15 professional sales engineers. This firm represents various international companies of repute in Pakistan and markets their equipment in the fields of textile, power generation, sugar, fertilizer, chemical, steel, cement, food and milling (About Us: Nurpur Foods, 2012).

4. Textile Technics Private Limited

Incorporated in 2004 with a total investment of Rs 100 million, Textile Technics is a joint venture between M/S Blue Reed of Spain and Noon International Private Limited. The project has a production capacity of 22000 meters of reed per annum (About Us: Nurpur Foods, 2012).

5. Textile Services

Textile Services was established in 1994 and provides services to over 200 customers of Sulzer Textile Projectile Weaving Machines. The company employs 32 people and provides training, technical service and spare parts for clients (About Us: Nurpur Foods, 2012).

Noon Pakistan Limited

Incorporated in 1966 with a total investment of 553 million, Noon Pakistan Limited produces various products namely Butter, Cheese, UHT milk, HCLF, Pasteurized milk, Flavored milk, Juices, Water, Desi ghee, Honey and Jam. Installed capacity of the plant is 72000 Liters/2 shifts and there are 700 employees. Noon Pakistan Limited has been marketing its products under the brand name of Nurpur. The plant is located in Bhalwal, Sargodha while the head office is situated in Lahore (About Us: Nurpur Foods, 2012).

The company has not only built a strong reputation over the past years but has also been able to offer a strong product portfolio to its consumers. Noon Pakistan Limited believes in optimum utilization of resources in order to secure the interests of major stakeholders and fulfilling its obligation as a responsible corporate citizen by serving the community. The company also utilizes rigorous quality control procedures at all stages to ensure supply of quality products to consumers. This has allowed the firm to increase its turnover from Rs 311.7 million in 2004 to Rs 2436.41 million in 2011 (Company Profile: Nurpur Foods, 2012).

The year 2011 was a challenging year for Noon Pakistan Limited. Energy Crisis, security situation coupled with devastating floods had exerted significant pressure on the economy and cost of living. Higher inflationary trends continued impacting their key products particularly related to fresh milk when shortages led to a cost increase of 16% compared to last year. Additionally, higher growth of their products led to severe filling capacity constraints and the market demand could not be met fully. Despite all these challenges, the management made serious efforts to achieve performance objectives by effective product mix, controlling fixed costs and locating new cheaper sources of raw material. Economic trends, prolonged gas and electricity outages, severe competition in selling brands and procurement of raw milk are not expected to ease out during the coming months. Due to reduced buying power, trend in the market is changing fast as consumers are looking for cheaper products in small packages. Therefore the management at Noon Pakistan Limited has made plans to reassess the market requirements and also further improve their production efficiency (Noon Pakistan Limited, 2011).

Vision

The vision statement of Noon Pakistan Limited is as follows:-

“Our vision at Nurpur is to be a transformative force in our community and world at large and to serve as a model of a sustainable business alternative that nurtures social and economic well being in an environmentally sensitive manner” (Our Vision: Nurpur Foods, 2012).

Mission

The mission statement of Noon Pakistan Limited is as follows:-

”Nurpur is committed to supplying the consumer and customer with the finest, high quality products and to be a leading industry in healthy and nutritious products. Nurpur supports these goals with a corporate philosophy of adhering to the highest ethical conduct in all its business dealings, treatment of its employees, and social and environmental policies” (Our Mission: Nurpur Foods, 2012).

Core Values

At Noon Pakistan Limited, consumers are at the forefront of everything they do. The core values of the company include the generation of Ideas that can be constantly challenged to develop next generation solutions, to conduct business openly and fairly while competing fiercely at the same time, to encourage teamwork with individual flairs, to set tough goals that can be challenged and beaten, to value preservation of the environment and ensure sustainability of organic agriculture, to value mutually supportive relationships among members of local and global communities (Core Values: Nurpur Foods, 2012).

Awards and Certifications

Noon Pakistan Limited has won many prestigious awards and certifications which are “First dairy company in Pakistan to be certified under ISO 22000:2005, Brand of the year award (2006-07) in the category of Butter, Brand of the year award (2007-08) in category of Butter, Cheese and flavored milk and Brand of the year award (2008-09) in the category of Butter (Certifications: Nurpur Foods, 2012).

Three years production snapshot

PRODUCTION

UNITS

2011

2010

2009

UHT Milk/Tea whitener

Liters

30,940,079

20,385,290

16,246,333

UHT Flavored milk

Liters

4,668,071

4,075,407

2,498,299

UHT Cream

Liters

71,381

461,722

345,580

Butter

Kilograms

986,335

1,011,925

862,622

Milk powder

Kilograms

927,943

1,160,508

930,894

Cheese

Kilograms

203,146

206,508

194,020

Ghee

Kilograms

34,371

52,190

31,331

Pasteurized Milk

Liters

4,911,778

2,663,294

1,806,733

Loose cream

Liters

3,490

Jams and honey

Kilograms

34,032

42,812

23,735

Juices

Liters

4,421,399

10,341,160

10,402,443

Adapted from the Annual Report (Noon Pakistan Limited, 2011).

The production snapshot over the years shows that the production of UHT milk/Tea whitener, UHT flavored milk and Pasteurized milk has increased from 2009-11 while the production of UHT cream, Butter, Milk Powder, Cheese, Ghee, Jams and Juices has decreased from 2009-11. Loose cream was discontinued in the year 2011. The focus of the firm remains on strengthening its position in the UHT milk segment.

The Purchase Department

To study the operations of the Purchase Department, two interviews were conducted with the Purchase Manager. The findings of the interviews have been utilized to describe the function of the Purchase Department.

The purchase department is responsible for purchasing all materials required by the head office and plant other then milk which is purchased at the milk collection centre in Bhalwal. Materials which are purchased by the department range from ordinary items like office and plant stationary to complex materials like Flavors, Spare parts for plant equipment and transportation vehicles, Chemicals, Fuel and everything related to the manufacturing process, Logistics and day to day operations. Demand for requisition comes from the factory and approval has to be given by the Managing Director. The purchase department currently has 4-5 employees. The purchase department stays in coordination with the plant and suppliers through phone and email and as such no software is currently being used by the department. The department uses a manual system of keeping records and storing files. The purchase department always keeps 3 copies of requisitions and delivery challans. One copy is sent to the plant, one copy is maintained with the purchase department and one copy is kept by the Purchase Manager. The major suppliers of Noon Pakistan Limited are SMC, Sitara Chemicals , Jason Foods and Danisco. Everyone is involved in the purchase process including the General Manager, Purchase Manager and people from the plant. Payments to suppliers are made either on cash or credit through the head office. Credit terms depend on contacts and relations with suppliers and can range from 15 days up to a month. According to the Purchase Manager, Noon Pakistan Limited believes in maintaining healthy relations with Suppliers and this is one of the key strengths of the department. The primary reason given for this was that Juices and Milk factories in Pakistan have no second option since suppliers are limited and few. They have to purchase materials from the specified suppliers and bargaining power of suppliers is high in this regard. However if relations are good with suppliers not only do suppliers cooperate but may also be lenient in terms of credit. In this regard price does not play a major issue but a greater issue is that of availability of materials from suppliers. The Purchase Manager also stated that in case of materials needed from local suppliers, the purchase department is given no time and purchase has to be made immediately. However when imported materials are required from foreign suppliers, the Purchase department is informed in advance as shipping takes time. There is no fixed pattern of purchases made throughout the year and it all depends on plant and market requirements. The quality of materials purchased is checked at the plant and if there are defects the merchandise is returned to the supplier. The Purchase Manager also stated that there is no HR department as such and the performance of the purchase department is monitored from the plant and by the Managing Director (Ashraf, 2012).

DELIVERY CHALLAN

Noon Pakistan Limited

1st Floor, Mustafa Centre, 45 F, Main Market, Gulberg Lahore Pakistan

No._______ Date:_________

To,

Manager, Noon Pakistan Limited, Bhalwal

The following goods have been dispatched to you by Truck No_____________

SR#

Description

Qty.

Amount

Supplier

Remarks

Kindly Sign and Return Duplicate

____________________ _________________

Malik Mohammed Ashraf Bhalwal Store

Source: Company Internal Documents

NOON PAKISTAN LIMITED, BHALWAL

DEMAND OF STORE TO BE PURCHASED DEMAND NO______

DATE____________

SR#

Item Code

Nomenclature

Specification

Name

A/U

Qty

Required

Stock in Hand

Last

Purchase

Date

Rate/Unit

Amount

Remarks

____________ _______________

Store Manager General Manager

Source: Company Internal Documents

The Marketing Department

To study the operations of the Marketing Department of the firm, two interviews were conducted with the Marketing Manager.

Marketing research activities are outsourced. The Marketing Department purchases monthly reports from different marketing research agencies like AC Nielson and Tetra Pak. In this way the marketing department stays in touch with the latest trends and competitor activities. The Marketing department comprises of one marketing manager and a brand manager. The Marketing Manager reports to the General Manager of Marketing and Sales while activities of the brand manager are monitored by the marketing manager. The brand manager is responsible for dealing with various agencies as all marketing research data and ATL as well as BTL activities are outsourced. Some of the agencies with which the marketing department works are SABB Marketing, Time and Space, Orient, HRK Communications, Aura Communications, TOPAZ Communications and ADZ Communications. These agencies prepare designs of print ads and commercials. The brand manager discusses the various designs with the Marketing Manager and after making necessary amendments and recommendations approval is given to Marketing agencies. The Marketing Department does its planning in the beginning of the year in coordination with the Sales Department. A monthly, yearly and 5 year plan is made. The Marketing Department is consulted in all strategic decisions made at the corporate level. There is no fixed method for determining the budget allocated to the Marketing Department and it all depends on various factors like last year’s profitability and market performance of various brands available in the market. In 2012, three new brands by the name of Yogo Yogo, Dairy Rozana and Jalwa have been launched. The Marketing Strategy of Noon Pakistan Limited is Differentiation strategy. However the strategy to be adopted for each brand depends on the market performance and competitor activities. Since UHT milk is difficult to differentiate, the current strategy being adopted is to position it as a milk which is enriched with vitamins needed for healthy growth and development. The target market of UHT milk is Housewives and working females as well as males. Different SKU’s are being used to target different Socio Economic Classes like the 1000ml pack is targeted for SEC-A while the 200ml and 250ml packs are targeted towards low income households. The main competitor brands of Nurpur Milk are Olpers, Milk Pak, Good Milk and Haleeb. The marketing department does not go for an offensive strategy because Nestle and Engro are huge giants with bundle of resources. Noon Pakistan Limited can be classified as an “Analyzer” because it is operating both in a stable and dynamic market. Another reason for not adopting an offensive strategy is that volumes are low. Importance is not given to gain shelf space because production volumes are so low and everything sells out due to high demand of UHT milk. Recently a new brand by the name of Dairy Rozana has been launched as a flanker brand to compete with the Dairy Omung of Engro. The main weakness of the Marketing Department is that very little attention is being paid towards building brand equity. The department is focusing on increasing sales which is a short term approach rather than focusing on building their brands (Khan, 2012).

Organizational Chart of the Marketing Department

Source: Internal Company Documents

The Brand Manager is responsible for dealing with various Marketing Agencies and reports to the Marketing Manager. The Marketing Manager reports to the General Manager of Sales and Marketing (Khan, 2012).

The Sales Department

Two interviews were conducted with the Sales Analyst of the firm to get insights regarding the operations of the Sales Department.

The organizational structure of the Sales Department comprises of the General Manager of Sales and Marketing, National Sales Manager, Regional Sales Manager, Area Sales Manager, Field Managers and Sales Officers. The job description of the Field Manager and Sales Officer is the same but position of Field Manager is superior because those Sales Officers whose performance is consistently outstanding are made Field Managers. Territories have been assigned according to location and comprises of Central Zone, Southern Punjab zone and Northern zone which includes RWL/AJK, Hazara belt and Pakhtoon.K belt. Distribution is limited in Quetta and Multan because of heavy freight expenses. The process of forecasting yearly sales is that last year’s closing sales are doubled and the amount is set as the Sales Target for the next year. Sales Quotas are assigned to Salesmen depending on the Area and potential of salesman. Other factors which are taken into account while assigning quotas are the seasonality issue because milk production and its demand fluctuates throughout the year. There are more than 280 distributors all over the country and each Sales Officer has to monitor and look after three to four distributors. The Sales department also relies on individual projections from the Sales Team when deciding upon monthly and quarterly targets. If a salesman is unable to achieve his target in the specified time, he has to achieve both, the remaining target as well as the target allocated in the next period. If targets are continuously not being achieved the Salesman is fired. The salesmen who achieve targets are awarded with bonuses and cash rewards. In order to motivate the sales team, a sales competition is held and winner of Sales Man of the Year is rewarded. Besides having a Sales competition, vacation trips are also planned to motivate the Sales Team. If targets set in the year 2012 are met, the entire Sales Team will go on a vacation to Dubai on the company’s expenses. Noon Pakistan Limited has also started exporting its products to countries like England, Kenya and Afghanistan. The documentation process to export products involves the Performa Invoice, E-Form Attestation, Commercial Invoice, Packing List, Certificate of Origin and Analysis Report (Butt, 2012).

Organizational Chart of Sales Department

Source: Company Internal Documents

Product Portfolio and Price List

Product Packing

Unit/Ctn

Retailer Margin

Trade Price

Consumer Price

1.UHT Milk

Ctns

Units

Ctns

Units

1000ml

12

6.09%

1018

84.83

1080

90

200ml

24

4.35%

391

16.29

408

17

250ml

27

5.97%

586

21.7

621

23

2.Chai mix

Ctns

Units

Ctns

Units

250ml

27

6.38%

533

19.74

567

21

200ml

24

5.97%

385

16.04

408

17

3.Butter

KGs

Units

KGs

Units

200gm

30

8.00%

463

92.6

500

100

100gm

60

12.70%

488

48.8

550

55

50gm

120

13.20%

530

26.5

600

30

20gm

300

13.20%

530

10.6

600

12

10gm

600

13.20%

530

5.3

600

6

1Kg white

20

11.80%

8500

425

9500

475

4.Cheese

Ctns

Units

Ctns

Units

200gm cottage

42

9.10%

6930

165

7560

180

200gm slice

36

16.10%

5580

155

6480

180

225gm chedder

40

14.90%

5920

148

6800

170

225gm spicy

40

14.90%

5920

148

6800

170

225gm mozarella

40

14.60%

6980

174.5

8000

200

450gm chedder

20

13.40%

6880

344

7800

390

450gm mozarella

20

13.60%

8800

440

10000

500

1.8Kg mozarella

4

13.10%

5128

1282

5800

1450

1Kg slice

8

13.60%

5072

634

5760

720

1Kg slice (KFC)

8

13.60%

5072

634

5760

720

2Kg Chedder

4

12.10%

3924

981

4400

1100

5.Cream

P/Tray

Units

P/Tray

Units

250ml

27

4.20%

1200

44.44

1250

46.3

6.Pasteurized milk

P/Tray

Liters

P/Tray

Liters

1000ml

10

11.70%

600

60

670

67

500ml

20

13.30%

600

30

680

34

7.Flavored milk

Ctns

Units

Ctns

Units

250ml

12

13.30%

233

19.42

264

22

200ml

12

12.10%

214

17.83

240

20

8.Pure juices

Ctns

Units

Ctns

Units

Apple 1000ml

12

6.10%

792

66

840

70

Guava 1000ml

12

6.10%

792

66

840

70

Orange 1000ml

12

7.10%

840

70

900

75

Pineapple 1000ml

12

6.10%

792

66

840

70

Mango 1000ml

12

6.10%

792

66

840

70

Apple 200ml

24

11.80%

322

13.42

360

15

Orange 200ml

24

11.80%

322

13.42

360

15

Mango 200ml

24

15.40%

312

13

360

15

9.Yogo yogo

Ctns

Units

Ctns

Units

200ml

12

8.70%

276

23

300

25

10.Desi Ghee

Ctns

Units

Ctns

Units

1Kg

6

7.50%

2232

372

2400

400

11.Jams

1.5Kg

Units

1.5Kg

Units

Strawberry 15gm

600

14.30%

385

3.85

440

4.4

Apple 15gm

600

14.30%

385

3.85

440

4.4

Marmalade 15gm

600

14.30%

385

3.85

440

4.4

Honey 15gm

600

14.30%

385

3.85

440

4.4

12.Dairy Rozana

1.5Kg

Units

1.5Kg

Units

1000ml

12

6.12%

735

61.25

780

65

250ml

27

6.11%

458

16.96

486

18

13.JALWA

Ctns

Units

Ctns

Units

250ml

27

6.21%

483

17.89

513

19

200ml

24

5.88%

340

14.17

360

15

Source: Company Internal Documents

Marketing Mix of Nurpur UHT milk

Nurpur UHT milk has been positioned as a milk which is enriched with vitamins needed for healthy growth and development (Khan, 2012). The milk is packed in Tetra Aseptic Packaging which allows long lasting storage and shelf space. Currently three SKU’s are available in the market which are 200ml, 250ml and 1000ml. Initially the pricing policy adopted for Nurpur milk was market penetration pricing, which means prices were low compared to competing brands. Recently the pricing policy has been changed and now the pricing policy is competitive pricing policy as shown :-

Product Packing

Unit/Ctn

Retailer Margin

Trade Price

Consumer Price

1.UHT MILK

Ctns

Units

Ctns

Units

1000ml

12

6.09%

1018

84.83

1080

90

200ml

24

4.35%

391

16.29

408

17

250ml

27

5.97%

586

21.7

621

23

Source: Company Internal Documents

Due to low volumes produced the company has adopted the policy of selective distribution. The company offers various discounts to retailers to push their products into the market (Khan, 2012). The indirect distribution channel being used is shown below:-

Source: Company Internal Documents

Due to limited marketing budgets, the marketing department has to promote most of the products through Below The Line(BTL) activitie

The dairy industry of Pakistan is a very competitive industry and has huge potential. Unfortunately, dairy processors in Pakistan still have miles to cover before they can exploit full benefits of this industry. The milk production of the country has not been up to the mark and as a result the demand for dairy products outweighs the supply. Traditionally, people living in urban areas preferred to consume fresh milk delivered to their homes by Gawallas. However with the passage of time, as people became more and more health conscious there was a shift towards the consumption of UHT milk and its demand has been increasing ever since. In the UHT milk segment, firms like Nestle Pakistan Limited and Engro Foods Limited have emerged as leading market players. These firms with their bundle of financial resources have made huge investments in getting state of the art technology, manpower and strengthening their promotion efforts. Despite the fact that local dairy processing industries have been able to match the quality standards of Nestle and Engro to a greater extent, these firms lack in their marketing efforts. Noon Pakistan Limited is one such firm which is being effected due to poor marketing efforts and has not been able to reap the benefits of the industry in which it operates.

Noon Pakistan Limited is a venture of the Noon Family and has been marketing its products under the brand name of Nurpur. The firm enjoys market leadership in the category of butter. Initially when the firm launched its UHT milk the market response was good. However with the passage of time, the brand performance of Nurpur UHT milk has deteriorated due to mismanagement of marketing efforts. While management claims that they are able to sell whatever they produce, the market survey results prove that the prevailing performance of the brand has not been up to the mark. The firm relies on the selling concept which is a short term approach and little emphasis is being given to the concept of brand building. It is the need of the hour that Noon Pakistan Limited adopts a long term strategic approach if it wants to secure its position in the market for years to come.

To study the issue being faced by Noon Pakistan Limited, a rigorous Literature review was conducted followed by interviews with employees of the firm, retailers and consumer surveys. Financial analysis and comparison with Nestle and Engro was done. Even though Noon Pakistan Limited does not match the financial strength of its competitors, there are many ways in which the firm can improve its position in the market.

The first step in building strong brands is to ensure that the brand has a high salience. The brand should have top of the mind recall and recognition. Unfortunately the survey results analyzed using SPSS software proved that Nurpur milk is not the first brand which comes to the mind when a consumer wants to purchase UHT milk. Majority of the respondents could not even recall any advertisements of Nurpur milk. A major proportion of the respondents also highlighted the fact that Nurpur milk was occasionally short in the market. The results of the retailer interviews also prove that Noon Pakistan Limited has to improve its trade promotion schemes as majority of the retailers were not satisfied with current distribution practices of the company. The retailers highlighted the fact that the company should improve its promotion activities so that consumers start demanding Nurpur milk.

Due to weak financial resources, Noon Pakistan Limited should utilize alternative strategies to maintain its position in the market. The firm needs to invest in consumer promotion activities like in store sampling and taste trials. The firm also needs to focus on its BTL activities in order to strengthen the perceptual positioning of the brand in consumer mind. The firm needs to revise its payment policies with retailers and start providing goods on a credit basis to those retailers who have a good reputation in the market. In short, Noon Pakistan Limited should revise its current practices and operations. The firm should let go its old concept of selling and instead focus on building the equity of its brands if it wants to strengthen its position in the market for the future.

2.INTRODUCTION

The Noon Group

The Noon Group of Companies is being managed by the Noon family. The group has qualified and experienced professionals. The Noon Group of Pakistan strives to improve its profitability and safeguard its stakeholders interest while maintaining highest quality standards and serving the community (About Us: Nurpur Foods, 2012).

The Noon Group of Companies has various business ventures and Noon Pakistan Limited is one such profitable venture of the Group. Apart from Noon Pakistan Limited a brief description of the other business ventures are as follows:-

1. Noon Sugar Mills Limited

This venture was incorporated in 1964 and manufactures white sugar. Initial crushing capacity was 1500 MT of sugarcane which has been increased to 4000 MT over the passage of time. In 1986 an alcohol distillery was setup to manufacture industrial alcohol. The total number of people employed is 683 and currently efforts are underway to increase the crushing capacity to 8000 MT/day (About Us: Nurpur Foods, 2012).

2. Pioneer Cement Limited

Pioneer Cement Limited was incorporated in 1985 with a total investment of Rs.2660 million and production capacity of 630000 tons per annum. The plant is situated in Chenki, Khushab. The project was financed by a consortium of foreign lenders led by the Asian Development Bank. Efforts are underway for another line having a capacity of 6000 MT/day (About Us: Nurpur Foods, 2012).

3. Noon International Private Limited

Noon International Private Limited is a trading company which was established in 1972. The company employs 43 people including a team of 15 professional sales engineers. This firm represents various international companies of repute in Pakistan and markets their equipment in the fields of textile, power generation, sugar, fertilizer, chemical, steel, cement, food and milling (About Us: Nurpur Foods, 2012).

4. Textile Technics Private Limited

Incorporated in 2004 with a total investment of Rs 100 million, Textile Technics is a joint venture between M/S Blue Reed of Spain and Noon International Private Limited. The project has a production capacity of 22000 meters of reed per annum (About Us: Nurpur Foods, 2012).

5. Textile Services

Textile Services was established in 1994 and provides services to over 200 customers of Sulzer Textile Projectile Weaving Machines. The company employs 32 people and provides training, technical service and spare parts for clients (About Us: Nurpur Foods, 2012).

Noon Pakistan Limited

Incorporated in 1966 with a total investment of 553 million, Noon Pakistan Limited produces various products namely Butter, Cheese, UHT milk, HCLF, Pasteurized milk, Flavored milk, Juices, Water, Desi ghee, Honey and Jam. Installed capacity of the plant is 72000 Liters/2 shifts and there are 700 employees. Noon Pakistan Limited has been marketing its products under the brand name of Nurpur. The plant is located in Bhalwal, Sargodha while the head office is situated in Lahore (About Us: Nurpur Foods, 2012).

The company has not only built a strong reputation over the past years but has also been able to offer a strong product portfolio to its consumers. Noon Pakistan Limited believes in optimum utilization of resources in order to secure the interests of major stakeholders and fulfilling its obligation as a responsible corporate citizen by serving the community. The company also utilizes rigorous quality control procedures at all stages to ensure supply of quality products to consumers. This has allowed the firm to increase its turnover from Rs 311.7 million in 2004 to Rs 2436.41 million in 2011 (Company Profile: Nurpur Foods, 2012).

The year 2011 was a challenging year for Noon Pakistan Limited. Energy Crisis, security situation coupled with devastating floods had exerted significant pressure on the economy and cost of living. Higher inflationary trends continued impacting their key products particularly related to fresh milk when shortages led to a cost increase of 16% compared to last year. Additionally, higher growth of their products led to severe filling capacity constraints and the market demand could not be met fully. Despite all these challenges, the management made serious efforts to achieve performance objectives by effective product mix, controlling fixed costs and locating new cheaper sources of raw material. Economic trends, prolonged gas and electricity outages, severe competition in selling brands and procurement of raw milk are not expected to ease out during the coming months. Due to reduced buying power, trend in the market is changing fast as consumers are looking for cheaper products in small packages. Therefore the management at Noon Pakistan Limited has made plans to reassess the market requirements and also further improve their production efficiency (Noon Pakistan Limited, 2011).

Vision

The vision statement of Noon Pakistan Limited is as follows:-

“Our vision at Nurpur is to be a transformative force in our community and world at large and to serve as a model of a sustainable business alternative that nurtures social and economic well being in an environmentally sensitive manner” (Our Vision: Nurpur Foods, 2012).

Mission

The mission statement of Noon Pakistan Limited is as follows:-

”Nurpur is committed to supplying the consumer and customer with the finest, high quality products and to be a leading industry in healthy and nutritious products. Nurpur supports these goals with a corporate philosophy of adhering to the highest ethical conduct in all its business dealings, treatment of its employees, and social and environmental policies” (Our Mission: Nurpur Foods, 2012).

Core Values

At Noon Pakistan Limited, consumers are at the forefront of everything they do. The core values of the company include the generation of Ideas that can be constantly challenged to develop next generation solutions, to conduct business openly and fairly while competing fiercely at the same time, to encourage teamwork with individual flairs, to set tough goals that can be challenged and beaten, to value preservation of the environment and ensure sustainability of organic agriculture, to value mutually supportive relationships among members of local and global communities (Core Values: Nurpur Foods, 2012).

Awards and Certifications

Noon Pakistan Limited has won many prestigious awards and certifications which are “First dairy company in Pakistan to be certified under ISO 22000:2005, Brand of the year award (2006-07) in the category of Butter, Brand of the year award (2007-08) in category of Butter, Cheese and flavored milk and Brand of the year award (2008-09) in the category of Butter (Certifications: Nurpur Foods, 2012).

Three years production snapshot

PRODUCTION

UNITS

2011

2010

2009

UHT Milk/Tea whitener

Liters

30,940,079

20,385,290

16,246,333

UHT Flavored milk

Liters

4,668,071

4,075,407

2,498,299

UHT Cream

Liters

71,381

461,722

345,580

Butter

Kilograms

986,335

1,011,925

862,622

Milk powder

Kilograms

927,943

1,160,508

930,894

Cheese

Kilograms

203,146

206,508

194,020

Ghee

Kilograms

34,371

52,190

31,331

Pasteurized Milk

Liters

4,911,778

2,663,294

1,806,733

Loose cream

Liters

3,490

Jams and honey

Kilograms

34,032

42,812

23,735

Juices

Liters

4,421,399

10,341,160

10,402,443

Adapted from the Annual Report (Noon Pakistan Limited, 2011).

The production snapshot over the years shows that the production of UHT milk/Tea whitener, UHT flavored milk and Pasteurized milk has increased from 2009-11 while the production of UHT cream, Butter, Milk Powder, Cheese, Ghee, Jams and Juices has decreased from 2009-11. Loose cream was discontinued in the year 2011. The focus of the firm remains on strengthening its position in the UHT milk segment.

The Purchase Department

To study the operations of the Purchase Department, two interviews were conducted with the Purchase Manager. The findings of the interviews have been utilized to describe the function of the Purchase Department.

The purchase department is responsible for purchasing all materials required by the head office and plant other then milk which is purchased at the milk collection centre in Bhalwal. Materials which are purchased by the department range from ordinary items like office and plant stationary to complex materials like Flavors, Spare parts for plant equipment and transportation vehicles, Chemicals, Fuel and everything related to the manufacturing process, Logistics and day to day operations. Demand for requisition comes from the factory and approval has to be given by the Managing Director. The purchase department currently has 4-5 employees. The purchase department stays in coordination with the plant and suppliers through phone and email and as such no software is currently being used by the department. The department uses a manual system of keeping records and storing files. The purchase department always keeps 3 copies of requisitions and delivery challans. One copy is sent to the plant, one copy is maintained with the purchase department and one copy is kept by the Purchase Manager. The major suppliers of Noon Pakistan Limited are SMC, Sitara Chemicals , Jason Foods and Danisco. Everyone is involved in the purchase process including the General Manager, Purchase Manager and people from the plant. Payments to suppliers are made either on cash or credit through the head office. Credit terms depend on contacts and relations with suppliers and can range from 15 days up to a month. According to the Purchase Manager, Noon Pakistan Limited believes in maintaining healthy relations with Suppliers and this is one of the key strengths of the department. The primary reason given for this was that Juices and Milk factories in Pakistan have no second option since suppliers are limited and few. They have to purchase materials from the specified suppliers and bargaining power of suppliers is high in this regard. However if relations are good with suppliers not only do suppliers cooperate but may also be lenient in terms of credit. In this regard price does not play a major issue but a greater issue is that of availability of materials from suppliers. The Purchase Manager also stated that in case of materials needed from local suppliers, the purchase department is given no time and purchase has to be made immediately. However when imported materials are required from foreign suppliers, the Purchase department is informed in advance as shipping takes time. There is no fixed pattern of purchases made throughout the year and it all depends on plant and market requirements. The quality of materials purchased is checked at the plant and if there are defects the merchandise is returned to the supplier. The Purchase Manager also stated that there is no HR department as such and the performance of the purchase department is monitored from the plant and by the Managing Director (Ashraf, 2012).

DELIVERY CHALLAN

Noon Pakistan Limited

1st Floor, Mustafa Centre, 45 F, Main Market, Gulberg Lahore Pakistan

No._______ Date:_________

To,

Manager, Noon Pakistan Limited, Bhalwal

The following goods have been dispatched to you by Truck No_____________

SR#

Description

Qty.

Amount

Supplier

Remarks

Kindly Sign and Return Duplicate

____________________ _________________

Malik Mohammed Ashraf Bhalwal Store

Source: Company Internal Documents

NOON PAKISTAN LIMITED, BHALWAL

DEMAND OF STORE TO BE PURCHASED DEMAND NO______

DATE____________

SR#

Item Code

Nomenclature

Specification

Name

A/U

Qty

Required

Stock in Hand

Last

Purchase

Date

Rate/Unit

Amount

Remarks

____________ _______________

Store Manager General Manager

Source: Company Internal Documents

The Marketing Department

To study the operations of the Marketing Department of the firm, two interviews were conducted with the Marketing Manager.

Marketing research activities are outsourced. The Marketing Department purchases monthly reports from different marketing research agencies like AC Nielson and Tetra Pak. In this way the marketing department stays in touch with the latest trends and competitor activities. The Marketing department comprises of one marketing manager and a brand manager. The Marketing Manager reports to the General Manager of Marketing and Sales while activities of the brand manager are monitored by the marketing manager. The brand manager is responsible for dealing with various agencies as all marketing research data and ATL as well as BTL activities are outsourced. Some of the agencies with which the marketing department works are SABB Marketing, Time and Space, Orient, HRK Communications, Aura Communications, TOPAZ Communications and ADZ Communications. These agencies prepare designs of print ads and commercials. The brand manager discusses the various designs with the Marketing Manager and after making necessary amendments and recommendations approval is given to Marketing agencies. The Marketing Department does its planning in the beginning of the year in coordination with the Sales Department. A monthly, yearly and 5 year plan is made. The Marketing Department is consulted in all strategic decisions made at the corporate level. There is no fixed method for determining the budget allocated to the Marketing Department and it all depends on various factors like last year’s profitability and market performance of various brands available in the market. In 2012, three new brands by the name of Yogo Yogo, Dairy Rozana and Jalwa have been launched. The Marketing Strategy of Noon Pakistan Limited is Differentiation strategy. However the strategy to be adopted for each brand depends on the market performance and competitor activities. Since UHT milk is difficult to differentiate, the current strategy being adopted is to position it as a milk which is enriched with vitamins needed for healthy growth and development. The target market of UHT milk is Housewives and working females as well as males. Different SKU’s are being used to target different Socio Economic Classes like the 1000ml pack is targeted for SEC-A while the 200ml and 250ml packs are targeted towards low income households. The main competitor brands of Nurpur Milk are Olpers, Milk Pak, Good Milk and Haleeb. The marketing department does not go for an offensive strategy because Nestle and Engro are huge giants with bundle of resources. Noon Pakistan Limited can be classified as an “Analyzer” because it is operating both in a stable and dynamic market. Another reason for not adopting an offensive strategy is that volumes are low. Importance is not given to gain shelf space because production volumes are so low and everything sells out due to high demand of UHT milk. Recently a new brand by the name of Dairy Rozana has been launched as a flanker brand to compete with the Dairy Omung of Engro. The main weakness of the Marketing Department is that very little attention is being paid towards building brand equity. The department is focusing on increasing sales which is a short term approach rather than focusing on building their brands (Khan, 2012).

Organizational Chart of the Marketing Department

Source: Internal Company Documents

The Brand Manager is responsible for dealing with various Marketing Agencies and reports to the Marketing Manager. The Marketing Manager reports to the General Manager of Sales and Marketing (Khan, 2012).

The Sales Department

Two interviews were conducted with the Sales Analyst of the firm to get insights regarding the operations of the Sales Department.

The organizational structure of the Sales Department comprises of the General Manager of Sales and Marketing, National Sales Manager, Regional Sales Manager, Area Sales Manager, Field Managers and Sales Officers. The job description of the Field Manager and Sales Officer is the same but position of Field Manager is superior because those Sales Officers whose performance is consistently outstanding are made Field Managers. Territories have been assigned according to location and comprises of Central Zone, Southern Punjab zone and Northern zone which includes RWL/AJK, Hazara belt and Pakhtoon.K belt. Distribution is limited in Quetta and Multan because of heavy freight expenses. The process of forecasting yearly sales is that last year’s closing sales are doubled and the amount is set as the Sales Target for the next year. Sales Quotas are assigned to Salesmen depending on the Area and potential of salesman. Other factors which are taken into account while assigning quotas are the seasonality issue because milk production and its demand fluctuates throughout the year. There are more than 280 distributors all over the country and each Sales Officer has to monitor and look after three to four distributors. The Sales department also relies on individual projections from the Sales Team when deciding upon monthly and quarterly targets. If a salesman is unable to achieve his target in the specified time, he has to achieve both, the remaining target as well as the target allocated in the next period. If targets are continuously not being achieved the Salesman is fired. The salesmen who achieve targets are awarded with bonuses and cash rewards. In order to motivate the sales team, a sales competition is held and winner of Sales Man of the Year is rewarded. Besides having a Sales competition, vacation trips are also planned to motivate the Sales Team. If targets set in the year 2012 are met, the entire Sales Team will go on a vacation to Dubai on the company’s expenses. Noon Pakistan Limited has also started exporting its products to countries like England, Kenya and Afghanistan. The documentation process to export products involves the Performa Invoice, E-Form Attestation, Commercial Invoice, Packing List, Certificate of Origin and Analysis Report (Butt, 2012).

Organizational Chart of Sales Department

Source: Company Internal Documents

Product Portfolio and Price List

Product Packing

Unit/Ctn

Retailer Margin

Trade Price

Consumer Price

1.UHT Milk

Ctns

Units

Ctns

Units

1000ml

12

6.09%

1018

84.83

1080

90

200ml

24

4.35%

391

16.29

408

17

250ml

27

5.97%

586

21.7

621

23

2.Chai mix

Ctns

Units

Ctns

Units

250ml

27

6.38%

533

19.74

567

21

200ml

24

5.97%

385

16.04

408

17

3.Butter

KGs

Units

KGs

Units

200gm

30

8.00%

463

92.6

500

100

100gm

60

12.70%

488

48.8

550

55

50gm

120

13.20%

530

26.5

600

30

20gm

300

13.20%

530

10.6

600

12

10gm

600

13.20%

530

5.3

600

6

1Kg white

20

11.80%

8500

425

9500

475

4.Cheese

Ctns

Units

Ctns

Units

200gm cottage

42

9.10%

6930

165

7560

180

200gm slice

36

16.10%

5580

155

6480

180

225gm chedder

40

14.90%

5920

148

6800

170

225gm spicy

40

14.90%

5920

148

6800

170

225gm mozarella

40

14.60%

6980

174.5

8000

200

450gm chedder

20

13.40%

6880

344

7800

390

450gm mozarella

20

13.60%

8800

440

10000

500

1.8Kg mozarella

4

13.10%

5128

1282

5800

1450

1Kg slice

8

13.60%

5072

634

5760

720

1Kg slice (KFC)

8

13.60%

5072

634

5760

720

2Kg Chedder

4

12.10%

3924

981

4400

1100

5.Cream

P/Tray

Units

P/Tray

Units

250ml

27

4.20%

1200

44.44

1250

46.3

6.Pasteurized milk

P/Tray

Liters

P/Tray

Liters

1000ml

10

11.70%

600

60

670

67

500ml

20

13.30%

600

30

680

34

7.Flavored milk

Ctns

Units

Ctns

Units

250ml

12

13.30%

233

19.42

264

22

200ml

12

12.10%

214

17.83

240

20

8.Pure juices

Ctns

Units

Ctns

Units

Apple 1000ml

12

6.10%

792

66

840

70

Guava 1000ml

12

6.10%

792

66

840

70

Orange 1000ml

12

7.10%

840

70

900

75

Pineapple 1000ml

12

6.10%

792

66

840

70

Mango 1000ml

12

6.10%

792

66

840

70

Apple 200ml

24

11.80%

322

13.42

360

15

Orange 200ml

24

11.80%

322

13.42

360

15

Mango 200ml

24

15.40%

312

13

360

15

9.Yogo yogo

Ctns

Units

Ctns

Units

200ml

12

8.70%

276

23

300

25

10.Desi Ghee

Ctns

Units

Ctns

Units

1Kg

6

7.50%

2232

372

2400

400

11.Jams

1.5Kg

Units

1.5Kg

Units

Strawberry 15gm

600

14.30%

385

3.85

440

4.4

Apple 15gm

600

14.30%

385

3.85

440

4.4

Marmalade 15gm

600

14.30%

385

3.85

440

4.4

Honey 15gm

600

14.30%

385

3.85

440

4.4

12.Dairy Rozana

1.5Kg

Units

1.5Kg

Units

1000ml

12

6.12%

735

61.25

780

65

250ml

27

6.11%

458

16.96

486

18

13.JALWA

Ctns

Units

Ctns

Units

250ml

27

6.21%

483

17.89

513

19

200ml

24

5.88%

340

14.17

360

15

Source: Company Internal Documents

Marketing Mix of Nurpur UHT milk

Nurpur UHT milk has been positioned as a milk which is enriched with vitamins needed for healthy growth and development (Khan, 2012). The milk is packed in Tetra Aseptic Packaging which allows long lasting storage and shelf space. Currently three SKU’s are available in the market which are 200ml, 250ml and 1000ml. Initially the pricing policy adopted for Nurpur milk was market penetration pricing, which means prices were low compared to competing brands. Recently the pricing policy has been changed and now the pricing policy is competitive pricing policy as shown :-

Product Packing

Unit/Ctn

Retailer Margin

Trade Price

Consumer Price

1.UHT MILK

Ctns

Units

Ctns

Units

1000ml

12

6.09%

1018

84.83

1080

90

200ml

24

4.35%

391

16.29

408

17

250ml

27

5.97%

586

21.7

621

23

Source: Company Internal Documents

Due to low volumes produced the company has adopted the policy of selective distribution. The company offers various discounts to retailers to push their products into the market (Khan, 2012). The indirect distribution channel being used is shown below:-

Source: Company Internal Documents

Due to limited marketing budgets, the marketing department has to promote most of the products through Below The Line(BTL) activitie

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