7th Floor, Embassy Icon, March 22, 2009

No 3 Infantry Road
Bangalore – 560 001

Subject: Setting up the India dairy business

It was our pleasure to meet with you earlier and discuss your
plans to enter the dairy market in India. We have tried to highlight
our understanding of your situation and a perspective on the
current market. Additionally, we have provided one case study on
a project we conducted with a dairy player entering an emerging
market, and one page project descriptions for some of the dairy
and market entry strategy related work.

Our understanding:

Elbit India aims to establish a long term successful dairy business

in India in the medium term and then expand into other areas of
agriculture in the long term.
To achieve its aims, Elbit has confirmed a few important
parameters:
1. Elbit has acquired / leased land in Tamil Nadu and Gujarat to Booz & Company
set up integrated dairy farms 401/ 402, Dalamal Towers
2. Elbit aims to produce high quality milk from imported Nariman Point
Holstein cows and processed milk products using cutting Mumbai - 400 021
India
edge technology
Tel: +91-22-2287 2001
Fax: +91-22-2287 2002
Elbit is seeking professional advice in order to decide its overall
market entry and growth strategy. Key questions that Elbit seeks
help to answer include:
1. What are the Consumer groups Elbit needs to target?
2. What Products should Elbit aim to have in its Portfolio?
3. What Geographies to focus on? Regional vs Pan-India?
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4. How to implement the chosen strategy including decisions

on Distribution cold chain set-up, Pricing, Retail vs
Wholesale etc?

Booz & Company perspective:

Products: India’s Rs. 2,227 B dairy market is fragmented and split

broadly into Milk and Processed products – two different types of
businesses:
1. Milk – Dominated by co-operatives and “dhoodwalas”.
Fragmented market with several middle men. Most of the
market is for fresh milk. The majority of the value chain
profit in milk is captured by the processors and
distributors (70%) vs producers (20%) – hence the
domination of cooperatives that own processing and
distribution on behalf of milk producers. Availability and
price are key purchase drivers for consumers.
2. Processed products – Private companies and
multinationals dominated. Smaller market, but rapid
growth forecasted. More brand differentiation seen.
Consumers tend to be towards the middle to upper class,
hence with more discretionary spend.

Our outside in perspective would be that Elbit focuses on areas

where brand differentiation on quality is possible and where
customers are willing to pay additionally for it. This requires an in
depth understanding of the consumer.

Consumer: The middle class consumer group in India is set to

increase exponentially over the next few years. This class of
consumers are becoming more health and quality conscious.
Spend on other indicative products and services has increased –
e.g. health care services spend, vitamins sales, organic food sales
growth, all of which implies that consumers are willing to pay for
higher quality.

Geography: Pan-India presence requires a large distribution and

cold chain network and setting one up can be challenging. This
also requires links with a massive retail network and ability to
command shelf space in retailers or partnerships with wholesalers.
The target geography should be at the intersection of where
Elbit’s target customer profile resides and where Elbit can
operationally deliver high quality products.

Once these fundamental choices across Product, Consumer and

Geography are made, these have to be sense checked against the
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practicalities of implementation, including Distribution, Pricing,

Sales channels etc.
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Booz & Co’s Suggested Approach:

Booz & Co suggests a 6 step approach to help Elbit “go to

market”.

The first step involves conducting an assessment of the Indian

dairy market and the opportunity it provides. This includes study
of the demand and supply conditions, competitor assessment, and
industry structure evaluation. Our understanding is that Elbit has
completed / in the process of completing this step and has
decided to make the initial investments in setting up production
facilities.

Our approach is to quickly narrow down on the two or three really

important choices that need to be made, for example – 1) middle C
Completed by Elbit
class urban consumer vs all age groups 2) milk vs processed
products 3) retail vs whole sale distribution and then go through a
low risk, launch and learn pilot methodology. Once proven,
production can be scaled up, while attention is shifted to the next
pilot. Last – operational, organizational and financial aspects need
to be set in place to ensure ongoing implementation and
sustenance of the “launch, learn, scale up” model.

Market
**********

Assessment
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Booz & Company Experience:

Booz & Co specializes in rigorous yet practical analysis of

complex situations, to develop rapid and implementable solutions,
working with the client. We can support Elbit through all the
stages of developing the business build plan, piloting of elements
of the plan and then full scale execution (on an as required basis).

Our team has experience in helping launch new products and

brands across various geographies in consumer goods industries.
We know the India environment and have team members who are
intimately familiar with Tamil Nadu, the potential launch site for
Elbit. We have attached one detailed case study and a wider set of
our experiences relevant to your request.

We look forward to further discussing our views in person with

you.

Sincerely,

Vikram Ramakrishnan Abhishek Malhotra

Principal Principal