GOOD MILK INDUSTRY

INTRODUCTION TO THE MILK INDUSTRY:

Pakistan is the Fifth largest producer of milk in the world with a total production of 28 billion liter of milk a year, whose value is more than that of the combined value of wheat and cotton, from a total herd size of 27 million mulch animals (buffaloes and cows). There is a consensus among the stakeholders and the development experts that Pakistans Dairy Sector has immense potential for growth. The same has not been realized due to various gaps. The vital missing link being lack of shared vision and strategy for the development and lack of effective collaboration among the stakeholders including support institutions and the government agencies to implement the agreed strategy. With the every passing day, dairy products are becoming costlier because live stock farming has not scientifically grown with the increase in population and also it did not match with the pace of urbanization. Recently, milk prices in Karachi increased without any reason. In a short time of two years, milk prices have gone up from Rs 20 per liter to Rs 25, showing a 25 percent increase. Moreover, meat prices have also risen to about 25 percent in the last six months. In such a situation, the only way to control prices is to develop the dairy industry on scientific lines, which will not only provide meat and milk in abundant quantities to the domestic consumers but extra quantities can also be exported. In spite of having a large population of LIVESTOCK, the country is spending some $40 million annually on the import of formula milk only, which is the highest amount spent by any country in the world on this particular commotion. Current situation of Pakistan milk industry:
Milk Economy current Overview 33.6 billion liters produced 27 billion liters available for human consumption 7.9 billion liters urban share 19.1 billion liters rural share 6.5 billion liters is household use 1 billion is processed 190 ltr/capita/yr consumed 90 ltr/capita/yr consumed as informal (Loose) milk 7ltr/cap/yr of formal sector (UHT) milk consumed Low Productivity = 1333 liters/animal/yr 15-19% wastage from spoiling National herd constitutes of 70% buffalo

Pakistan milk industry compare with other industries of world:

Milk Production per Animal Kg/Lactation Country Cattle Buffalo Bangladesh Bhutan India Nepal Pakistan Sri Lanka Australia* New Zealand* Source: 1) FAO, 2004 2) *Mr. Collin's Report Feb, 2005 207 257 987 415 1,195 627 4,926 3,947 407 400 1,450 850 1,909 496

Pest Analysis:

POLITICAL
It is one of the most important factors in any countrys economy; it plays a vital role in the development of industries. It should be sustainable so that industries grow and foreign investment level becomes high and new industries emerge and unemployment reduce and economy flourishes and the imports level decreases and exports level increases which increases the living standards. If it not so then the situation would be against. Basically Pakistan is an agriculture industry so government of Pakistan encourages this industry. A proper strategy is made to run this sector efficiently in Pakistan then this strategy is presented to the Prime Minister of Pakistan The Prime Minister of Pakistan has approved the strategy and proposed initiatives including establishment of a fully functional industry for the better management of the sector. So now a days milk industry is the fast growing industry In Pakistan. The tax, the tariff and the trade Policy In milk industry: A rational tax and tariff policy can either develop a sector or alternatively assist its destruction. There is a need to change the tax and tariff regime of Pakistan for an efficient and investor friendly dairy sector. Clearly an unfair tax regime that discriminates between the organized and un-organized sector is a huge obstacle to re-investment by major companies. Also in light of the industry restructuring that is taking place and the changes happening due to the multilateral and regional trading system, a complete tariff rationalization of existing policies is needed

Economic
In past every government focused most and most on agriculture and textile sector. The Pakistan dairy industry faces multiple challenges improving the lot of smallholder farmers through enhanced profitability and rural infrastructure, significantly improving quality through the supply chain and to the final consumer, and potentially facing increased competition from international suppliers of dairy products. Hence, there is an imperative need to re-engineer Pakistans dairy industry; both at farm and processor level. This paper seeks to investigate the tools that could bring about such change. We believe achieving the strategic change outlined in this paper for the dairy industry may prove challenging for at least some sectors. Major effort is required to achieve the scale and cost competitiveness necessary to continue to successfully compete in a globalising and demanding world, while at the same time the interests of the millions of smallholder farmers must be catered for, and a more prosperous future made available to them. It is important conditions are in place to ensure decisions about scale, the number and product portfolio of processing plants are made in a rational manner; this is needed to maintain price competitiveness and

market growth. Small niche players will also have substantial growth opportunity in the Pakistani dairy market and their growth will be an added asset. In the absence, at present, of a cold chain; presentation and packaging methodologies will be explored for longer shelf life of products. Lastly, investing in dairy infrastructure and the dairy workforce e in rural and urban areas cannot be overemphasized. Without doubt such developments will revolutionize rural Pakistan and improve the quality of life of millions of farmers. An improved dairy infrastructure less dependent on the middlemen will support the farmer to connect directly to processors and the consumer. With this backdrop we seek to investigate the current state of affairs of Pakistans dairy sector.

Contribution to GDP:

With an estimated 33 Billion Liters of annual milk production from 50 million animals managed by approximately 8 million farming households, according to latest statistics. Pakistan is the 5th largest milk producing country in the world. It has a livestock and agriculture sector contributing over 10% to the GDP, and a milk economy that in value terms is 27.7% of the total agriculture sector. It is an untapped market, expected to grow an additional 3 billion liters in the next few years at a growth rate faster than most sectors. Undeniably, a sector with such credentials can bring about not just a radical change but also a dairy revolution in the country. The annual milk production of 33.6 billion liters in Pakistan is shared between a 71.1% share for the rural economy and a much smaller urban share of 29%. Only 3% of the total production of milk is processed and marketed through formal channels. For the other 97%, a multi-layered distribution system of middlemen has evolved to supply milk. The contribution of the formal sector processed milk to real GDP in Pakistan is 0.43% in 2004-05. Despite only a small percentage (3%) of milk being processed, the (UHT) market is growing at a steady rate of 20% a year. Presently 97% of raw milk produced in the rural economy is not linked to the market mechanism because of a number of reasons (defined ahead in this paper). Due to this reason, the dairy sector in the rural economy is not making a significant impact in the National economy in accordance with its potential and also with the quantity of milk, which is available. The White Revolution is targeted to achieve an annual production of 40 billion liters of milk by 2015; it aims to create an additional 3 million jobs in the formal economy and provide an estimated 350 million rupees per day in cash flow to farmers in the sector.

SOCIAL:

In Pakistan agriculture sector contributes more than 20 percent of the GDP and employs more than 40 percent of the total workforce. Pakistan has larger base of dairy sector allied with the agriculture. Dairy sector generates employment and business opportunities, particularly in the rural and per urban areas. A number of people in urban areas are also involved in dairy based business. The public sector departments hold primary responsibility to guide the farmers and play significant role in dairy sector development. Studies (2006) reveal that the milk production is labor intensive. They pointed out that there are a large number of biological, technical and socio-economic constraints like shortage of feed, high mortality rate, poor genetic potentials, high input cost, scarcity of resources and inadequate marketing system. Demand of the raw and Unprocessed milk in Lahore is higher than its supply. This leads to a lot of malpractices in the supply of milk making it equal to its demand. Furthermore, it does not seem commercially viable unless huge planning and dairy development efforts are made by the concerned department of the Government of Punjab. It also identifies several factors like lack of dairy related education and training, lack of marketing and supply chain in dairy industry. Furthermore, the proportion of small milk producers is quite high in Pakistan which hinders the economies of scale and profitability in the dairy industry. It calls for effective decision making in the operations of dairy industry from planning department, key stakeholders, and policy makers. These measures may include extensive training in the area of marketing, management, supply chain, and credit schemes for small farmers.

Technology:
Pakistan milk industry is lacking in technology. Farmers and milkman still using very old techniques to preserve milk and these techniques are also very unhygienic. So there is intense need for mechanize farms and modernize milk distribution systems There is a need to improve the supply chain from farmer to consumer in Pakistan. There is very limited data available on the routes to market or the distribution channels employed in Pakistan. Most of the milk produced in the farms is consumed at the household level. The surplus is marketed at the local markets in form of liquid milk or purchased by milk collectors and transported to urban areas through different distribution channels. The milk supply and marketing chain involves different players such as milk collectors (dodhis), traditional cream manufacturers and "Khoya" (milk concentrate for local sweets) makers and retailers. (The traditional cream and khoya is often very unhygienic and is made in dirty work conditions hence is a danger to human health). Dodhis or milk collectors play an important role in collection and the marketing chain of the dairy sector of Pakistan. Processed milk industry:

The processors remain a key driver of the dairy industry with constant reinvestments and diversification of product portfolio. The processors have a small share of 3-4% of the total produced milk, whereas they invest the most and pay the highest taxes. The eight major dairies of the country include Nestl, Nirala, Halla, Noon, Milac, Dairy Bell, Dairy Crest and Premier, while other smaller ones have also emerged. Nestle is the biggest processing industry of the sector, collecting over 1000 tons of milk daily. This company intends to invest an additional US$ 480 million over a period of five years. Similarly Haleeb, Noon Dairy, HALLA (Idare-eKisan), Dairy Crest, Nirala Dairy and Premier Dairies arecontinuously investing to upgrade their plants Smaller processors manufacturing traditional sweets (Nirala) or organic product lines can create success stories both in domestic and possible export markets. We feel much attention and focus is given to the large plants, while niche players should also be encouraged. A technology-led and innovative product mix approach can create a high margin niche in dairy plants.

Due to the lack of a cold chain and refrigeration systems in Pakistan, pasteurized milk has had substantial market failure. On the other hand UHT and powdered milk with longer shelf life have proved to be good alternatives to expensive cold chains. A successful example of pasteurized milk is India, the reason being a well designed and effective cold chain. It is interesting to note that some of the deepest rural areas of India are connected to the consumer through railway based cool tanks. In China, in most urban centers UHT is preferred, but in more outlying areas milk powder may be consumed for convenience. The adoption of UHT technology and new packaging technologies in China has enabled the transport of milk from northern provinces to the population centers. Companies like Yili and Mengniu (based in Inner Mongolia) were able to rapidly enter markets on the coast and in the south. In Pakistan, UHT and powdered milk is likely to be the only means of providing an alternative to loose milk, especially in NWFP and Baluchistan.

Porter Analysis:

Entery barriers:
Anyone who have small piece of land and has power to purchase a buffalo can start this business. No barrier levied by the government. There is no scientific tools and methods is used to produce a milk ,what u need is only a buffalo :P Cost of entering in this business is quite low relative to other businesses.

Competitor rivalry:
Large number of competitors are playing in the industry. There is a huge quality difference between the milk which we get from milk man and the UHT processed milk. And cost is also varied according to the qualities of milk available I the market. Price conscious customer is like to purchase milk from milk man.

Supplier Power:
Large number of suppliers Different suppliers provide different services to their customer e.g milk man provide low quality milk at price and provided milk service at customers doors. Whereas other companies like nestle, olpers, good milk etc provide high quality milk at high prices to the customers.

Threat of substitution: Powdered milk are also available in the market.

Many substitute are also available I the market like tea whiteners like Tarang. And their prices are low then Milk.

Buyer Power:
Large number of customers Large numbers of price sensitive customers. Substitute are abundantly available in the market Customer can easily switch to other substitutes if they find it better than their current product which they are using.

COMPETITIVE ANALYSIS: Major Milk Companies

1. NESTLE
Nestle is a market leader in milk industry. Nestl has been serving Pakistani consumers since 1988, when our parent company, the Switzerland-based Nestl SA, first acquired a share in Milkpak Ltd. Today they are fully integrated in Pakistani life, and are recognized as producers of safe, nutritious and tasty food, and leaders in developing and uplifting the communities in which they operate. They at Nestl Pakistan ensure that their products are made available to consumers wherever in the country they might be. Convenience is at the heart of the Nestl philosophy, and their aim is to bring products to people's doorsteps. They offer 2 types of dairy products. But we focus only on milk products which are their ambient dairy products, specifically nestle milk pack and nesvita.

Ambient Dairy Ambient Dairy a. NESTL MILKPAK b. NESVITA c. NIDO d. EVERYDAY e. MILKPAK CREAM f. NESTL CREATIONS Chilled Dairy
a) b) c) d)

NESTL DAHI NESTL RAITA NESTL FRUIT YOGURT NESTL RIWAYATI MAZAA

Nestl MILKPAK UHT Milk Nestl MILKPAK, with a heritage of nearly three decades, holds strong brand equity with its consumers and enjoys market leadership in the UHT category. By virtue of being the only Iron Fortified All purpose milk in the category, MILKPAK is instrumental in helping alleviate iron deficiency in Pakistan and hence, is now being perceived as a superior brand standing out amongst its competition. Today MILKPAK is every home makers partner in helping her strengthen her home.

Nestl Nesvita ProBones With growing interest and increasing trends towards healthierclifestyles, adult health and wellness solutions are gaining significance in the dairy category. Nestl NESVITA has grown this category and is the only brand to educate consumers on the importance of daily calcium intake. Nestl NESVITA Pro-Bones aims to give young urban females the health and inner strength they need to achieve a better tomorrow for themselves.

OLPERS:
This is the product of Engro foods. They are the competitors of nestle in the market. Engro is one of Pakistans most progressive, growth oriented organizations, yet we never forget where we came from. Our history is a part of who we are today. Their diverse range of companies represent our rich legacy of innovation and growth. This is the second larges produces of milk in the market.

GOOD MILK:
Good milk is the third largest player in dairy industry. They produce 3 kind of milk Good milk Good slim milk Ola la flavored milk

Shakarganj Food Products has developed an elaborate system of collecting milk directly from the farmers on a daily basis, ensuring freshness of the product. The fresh milk thus collected is processed using state of the art UHT (ultra high temperature) technology and aseptically packed in Tetra Pak filling machines. This process ensures zero microbial activation, while preserving maximum flavor, taste, and nutritional value without the use of any preservatives. Their operational dairy plant located at Jaranwala, near Faisalabad, was acquired in 2006. Nearly 80 percent of the total raw milk is supplied from this part of the country. The plant packing capacity at the time of acquisition was 75,000 litres per day of UHT liquid milk and 5 metric tonnes per day of powder milk.

HALEEB:
Haleeb Foods Ltd. was incorporated on July 1st, 1984 with a capital of Rs. 46 Million under the name of Chaudhry Dairies Limited which was renamed as CDL Foods Limited and now it is known to be as Haleeb Foods Limited. At that time it had the capacity of producing 80,000 / liters of milk per day having total area of 32 acres. Initially 150 people were employed at the plant. The production process started with UHT liquid milk. The liquid

milk was the first product launched in the market, it started its operation in 1985 at that time 20 other dairy plants were also coming in, and all those including MILKPAK were using obsolete technology that was used in EUROPE. Haleeb Plant was the only plant based on the latest technology and the basic idea behind that were particularly dairy foods products. Haleeb is one brand that is toady known everywhere. Haleeb is the 3rd bid palyer in the milk industry. Haleed is a follower. HFL is now one of the fastest growing packaged food companies in Pakistan with an annual turnover of Rs. 9.2 Billion (F2006). It is a private limited company. It started commercial production in July 1987. Due to consistently superior performance, it has achieved undisputed leadership in the liquid packaged milk category with a market share of over 52%. HFL has a very strong brand portfolio consisting of dairy as well as non-dairy products. Haleeb Foods has segmented its product portfolio in 3 leading brands including Haleeb, Candia and Tropico. Haleeb is the flagship brand of the company. Haleeb UHT Milk is available in 5 Skus of Tetrapak packaging. Due to its strong positioning of the thickest milk for best tea, it has the highest top of mind awareness and penetration in the dairy industry of Pakistan. In order to increase consumer and trade penetration of the brand, it is also available in Tetra Fino Packaging under the brand extension of Haleeb Dairy Queen.

PREMA MILK:
Prema is a product of At-Tahur. They are the niche in the market. At-Tahur is committed to supply with premium quality dairy products. Prema is made from 100% pure Australian Cow's milk sourced from our own state-of-the-art dairy farms. Prema Milk is obtained from pure breed cattle on one of the most modern farms in Pakistan, in a hygienic and healthy environment under the constant surveillance and monitoring of our farm managers, health and hygiene experts and the most stringent quality control systems.

STRTEGIES:
NESTLE STRETGY:
The Nestl global vision is to be the leading health, wellness, and nutrition company in the world. Nestl Pakistan subscribes fully to this vision. In particular, they envision to: Lead a dynamic motivated and professional workforce proud of its heritage and bullish about the future.Meet the nutritional needs of consumers of all age groups from infancy

to old age, from nutrition to pleasure, through an innovative portfolio of branded food and beverage products of the highest quality. Deliver shareholder value through profitable long-term growth, while continuing to play a significant and responsible role in the social, economic and environmental sectors of the country. Fully integrated systems (Nestl Pakistan, suppliers, customers) ensure efficient business processes. Non-strategic activities and products are outsourced or discontinued. They have profitable and diversified high quality food and beverage product portfolio, delivering 60:40+ advantage to consumers, available across all sales channels. They said, OUR brands are the preferred choice in their categories. Consumer insight drives all aspects of our marketing and communication efforts. Our communications to the consumer are relevant, cutting-edge, and adhere to the highest standards of responsible communication. Our company is seen as the No. 1 career destination for talented, motivated and ambitious professionals. Our result-oriented organizational structure ensures effective communication and empowered self-management. Our milk collection and agri services will continue to play the primary role in development of the dairy sector in rural Pakistan. Our proactive innovation and renovation culture is the key to our success in the marketplace.

OLPERS STRATEGY:
Their strategy mainly focuses on: Leadership Innovation Diversity and International focus Quality and continuous Improvement Candid and open communications Individual growth and development Enthusiastic pursuit of profit Ethics and integrity Safety, Health and Environment

GOOD MILK STRATEGY:

Shakarganj Food Products Limited strives to be among the leading companies in the food industry and is committed to manufacturing and selling consistent, high quality world class products.

Their growth and expansion strategy: Juice Division 2008 Daily Citrus Juice Concentrate capacity is being increased manifold. Storage capacity will be doubled. 2009 New Citrus Greenfield project is under the planning process. The setting up of a second Mango pulping unit is being planned. The company plans to further branch out in the food business. Dairy Division 2008 2009 Plant processing and packing capacity will be increased to 300,000 plus litres per day of UHT. Build new storage facility for UHT products exceeding 1 million litres. Establish a new dairy production facility. New powder milk plant will be installed. More milk procurement centers will be set up. The existing production and laboratory facilities will be further expanded.

Future Products Various value added food products, including dairy and fruit products, are in different stages of development. New products are planned for launch, starting from 2008.

HALEEB MILK STRETEGY:

Build branded food business to improve quality of life by offering tasty, sage, hygienically processed, affordable, highly nutritional food products through environment friendly processes to our customers while maximizing stake holders' value. Meet the requirement of all relevant legislation and regulation related to consumer satisfaction & safety, environment and other applicable laws etc.

To prevent pollution through controlling levels of harmful emission, effluents and other wastes. Contribute to safe and healthy environment for our country. Promote mutual trust with customers, suppliers, employees, shareholders and community. Provide all the necessary resources for the continual improvement in quality, safety of our products, processes and environment.

PREMA STRATEGY:
Prema is a 100% pure milk without any additive and preservative.