Me Milk Project

30 April 2014

Agenda
A.
B.
C.
D.

Executive Summary
Product Information
Financial Simulations
Competitive Portfolio

Executive Summary
Recommendation: Not to pursue qualification of Me Milk project for the following reasons:

Me Milk Dairy Cream and Drink play in a small market. RTD Milk category and Yoghurt
combined market is P8.4B (P7.7B RTD Milk + P700MM Yogurt). However, flavored milk
is only estimated at P0.4B size
High procurement price of Me Milk will require a super premium selling price in trade,
making the products uncompetitive
SRP

P50.25

2.25

Me Milk Dairy Drink 200ml

P56.35

3.22

Me Milk Dairy Cream USP only on packaging and format but product benefits is lower than yoghurt drinks
and just parity to flavored milk drinks
Me Milk Dairy Drink Me too vs. other RTD Milk players

There are established brands in the categories where Me Milk will compete in

Me Milk Dairy Cream 90g

Currently Me Milk concept does not provide strong differentiation in a market

dominated by entrenched brands, to justify premium price

Per Gram/mL Index vs

Competition

Yogurt: Nestle
RTD Milk: Cowhead, Selecta. Nestle

Barrier to entry in A&P is big as Me Milk is a new brand in the Philippines.

Media Spend Yogurt: P935MM (rate card) YTD Oct 2013

Market Background And Me Milk Product Information

Product
Me Milk Dairy Cream
90g

Description

Me Milk Dairy Drink

200ml

Competition

Market Size

Cream similar to custard

First acid custard in the market
Contained in flexible pouch with
spout
First long life dairy ambient
product in pouch in the world
Shelf Life: 12 mos.
Variants: Strawberry & PineappleMango

Spoonable Yogurt
Nestle Yogurt, Nestle
Acti-V, Creamy Delight

Drinkable Yogurt
Nestle, Dutch Mill,
Alaska Yogurt

Acidified UHT milk similar to liquid

yogurt
Packed in TBA 200ml
Ambient stable
Shelf Life: 12 mos.
Variants: Strawberry, PineappleMango, Peach-Mango

RTD Yogurt Dutch Mill,

Alaska Yogurt, Nestle

RTD Milk:
P7.7B

RTD Flavored Milk (nonchoco) Cowhead,

Goody Gulp, Ri-Chee

Flavored Milk
(non-choco) only
5% of total RTD
Milk at P386MM

Yogurt:
P700MM
(estimates only)

Me Milk Dairy Cream

Financial Simulations

Scenario 1: At given COGS of 0,342/pack, retail price to breakeven on Year 2

is close to 3x vs. Yoghurt Drinks and 2x vs. Yoghurt
SCENARIO 1: Using Provided COGS, Needed A&P, Breakeven NIBT in Year 2
CM Computation
Per Case
Per pack
% to Rev
Y1
Volume (in cs)

24

SRP

1,206.00

50.25

LIST PRICE

1,148.40
123.04

Revenue, Net Vat

Returns & Allowances

1,025.36
20.51

42.72
0.85

Net Revenue

1,004.85

COGS at 0.34/pack

Y2

5 year FORECAST
Y3

Y4

Y5

12,000

13,200

14,600

16,000

17,600

47.85

13,780,800

15,158,880

16,766,640

18,374,400

20,211,840

5.13

1,476,514

1,624,166

1,796,426

1,968,686

2,165,554

100.0%
2.0%

12,304,286
246,086

13,534,714
270,694

14,970,214
299,404

16,405,714
328,114

18,046,286
360,926

41.87

98.0%

12,058,200

13,264,020

14,670,810

16,077,600

17,685,360

537.67

22.40

52.4%

6,452,097

7,097,307

7,850,051

8,602,796

9,463,076

Gross Profit

467.18

19.47

45.6%

5,606,103

6,166,713

6,820,759

7,474,804

8,222,284

Variable Operating Expenses

140.68

5.86

13.7%

1,688,148

1,856,963

2,053,913

2,250,864

2,475,950

Contribution Margin

326.50

13.60

31.8%

3,917,955

4,309,750

4,766,845

5,223,940

5,746,334

6,000,000

4,300,000

4,300,000

4,300,000

4,300,000

9,750

466,845

923,940

1,446,334

Vat

A&P
NET INCOME BEFORE TAX

(2,082,045)

ROI

-96.7%

NI Bef Tax ( Y1 to Y5)

Total Investment (A&P )
Statistic :
COGS at 0.342 / pack
Freight per case
Forex 1 : Php (04/28/14)
Duty / Incidental

764,824
23,200,000

8.21
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

Scenario 2: At given COGS of 0,342/pack, and Retail price of parity vs.

competition, Project has negative Y-o-Y
SCENARIO 2: Using provided COGS, Ideal Price, Lower A&P
CM Computation
Per Case
Per pack
% to Rev
Volume (in cs)

24

SRP

720.00

30.00

LIST PRICE

686.40

Y1

Y2

5 year FORECAST
Y3

Y4

Y5

28,800

31,600

34,800

38,200

42,000

28.60

19,768,320

21,690,240

23,886,720

26,220,480

28,828,800

73.54

3.06

2,118,034

2,323,954

2,559,291

2,809,337

3,088,800

Revenue, Net Vat

Returns & Allowances

612.86
12.26

25.54
0.51

100.0%
2.0%

17,650,286
353,006

19,366,286
387,326

21,327,429
426,549

23,411,143
468,223

25,740,000
514,800

Net Revenue

600.60

25.03

98.0%

17,297,280

18,978,960

20,900,880

22,942,920

25,225,200

COGS at 0.34/pack

537.67

22.40

87.7%

15,485,033

16,990,522

18,711,082

20,539,176

22,582,340

62.93

2.62

10.3%

1,812,247

1,988,438

2,189,798

2,403,744

2,642,860

84.08
(21.16)

3.50
(0.88)

13.7%
-3.5%

2,421,619
(609,372)

2,657,054
(668,617)

2,926,123
(736,325)

3,212,009
(808,265)

3,531,528
(888,668)

5,000,000

4,000,000

4,000,000

4,000,000

4,000,000

(5,609,372)

(4,668,617)

(4,736,325)

(4,808,265)

(4,888,668)

Vat

Gross Profit
Variable Operating Expenses
Contribution Margin
A&P
NET INCOME BEFORE TAX

ROI

-217.7%

NI Bef Tax ( Y1 to Y5)

Total Investment (A&P )
Statistic :
COGS at 0.342 / pack
Freight per case
Forex 1 : Php (04/28/14)
Duty / Incidental

(24,711,247)
21,000,000

8.21
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

Scenario 3: To breakeven on Year 2 and parity to other Yoghurts/+76% vs.

Yoghurt drinks, landed price of Me Milk Cream should be at 0,246/pack (-28%)
SCENARIO 3: Ideal Price, Ideal COGS, Good Enough A&P, Breakeven in Year 2
CM Computation
Per Case
Per pack
% to Rev
Y1
Volume (in cs)

24

SRP

720.00

30.00

LIST PRICE
Vat

686.40
73.54

28.60

Revenue, Net Vat

Returns & Allowances

612.86
12.26

25.54
0.51

Net Revenue

600.60

COGS at 0.246/pack
Gross Profit
Variable Operating Expenses
Contribution Margin

Y2

5 year FORECAST
Y3

Y4

28,800

31,600

34,800

38,200

42,000

19,768,320
2,118,034

21,690,240
2,323,954

23,886,720
2,559,291

26,220,480
2,809,337

28,828,800
3,088,800

100.0%
2.0%

17,650,286
353,006

19,366,286
387,326

21,327,429
426,549

23,411,143
468,223

25,740,000
514,800

25.03

98.0%

17,297,280

18,978,960

20,900,880

22,942,920

25,225,200

388.41

16.18

63.4%

11,186,211

12,273,760

13,516,672

14,837,267

16,313,225

212.19

8.84

34.6%

6,111,069

6,705,200

7,384,208

8,105,653

8,911,975

84.08

3.50

13.7%

2,421,619

2,657,054

2,926,123

3,212,009

3,531,528

128.11

5.34

20.9%

3,689,449

4,048,146

4,458,085

4,893,645

5,380,447

5,000,000

4,000,000

4,000,000

4,000,000

4,000,000

48,146

458,085

893,645

1,380,447

A&P
NET INCOME BEFORE TAX

3.06

(1,310,551)

ROI

-93.0%

NI Bef Tax ( Y1 to Y5)

Total Investment (A&P )
Statistic :
COGS at 0.246 / pack
Freight per case
Forex 1 : Php (04/28/14)
Duty / Incidental

Y5

1,469,771
21,000,000

5.90
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

Me Milk Dairy Cream - Competitive Portfolio

Nestle Yogurt
Nestle Acti-V
Creamy Delight Yogurt Creamy Delight Non-Fat Creamy Delight Thick & Creamy Creamy Delight YogiKids
Price
Index/g Price
Index/g Price
Index/g
Price
Index/g
Price
Index/g
Price
Index/g
Competition
31.00
1.00 28.00
1.00
14.00
1.00
23.00
1.00
20.00
1.00
18.00
1.00
MeMilk Dairy Cream Scenario 1
50.25
2.25 50.25
1.99
50.25
4.99
50.25
3.03
50.25
3.49
50.25
3.88
MeMilk Dairy Cream Scenario 2
30.00
1.34 30.00
1.19
30.00
2.98
30.00
1.81
30.00
2.08
30.00
2.31
Spoonable Yogurt

Me Milk Cream retail price of P50.25 will result to +125% on per gram more than the
market leader. Similarly, if we price parity to market leader, Me Milk Cream will still be
+34% more expensive on a per gram given pack size difference.
Alaska Yogurt
Dutch Mill
Nestle Yogurt Drink
Nestle Yogurt 0% Fat
Price
Index/ml Price
Index/ml Price
Index/ml
Price
Index/ml
Competition
15.75
1.00 17.00
1.00
32.00
1.00
33.00
1.00
MeMilk Dairy Cream Scenario 1
50.25
6.20 50.25
5.75
50.25
3.39
50.25
3.29
MeMilk Dairy Cream Scenario 2
30.00
3.70 30.00
3.43
30.00
2.02
30.00
1.96
Yogurt Drink

Me Milk Cream priced at P50.25 per pack will +475% more expensive than presumed
market leader in drinkable yogurt. Even when priced lower at P30.00, Me Milk Cream
will still be +243% premium than market leader.

Me Milk Dairy Drink

Financial Simulations

Scenario 1: At given COGS of 0,20/pack, retail price to breakeven on Year 2 is

3.3X vs. leading Yoghurt Drinks/RTD Milk
SCENARIO 1: Using Provided COGS, Needed A&P, Breakeven NIBT in Year 2
CM Computation
Per Case
Per pack
% to Rev
Y1
Volume (in cs)

24

SRP

1,352.40

56.35

LIST PRICE
Vat

1,287.60
137.96

53.65

Revenue, Net Vat

Returns & Allowances

1,149.64
22.99

47.90
0.96

Net Revenue

1,126.65

COGS at 0.20/pack

Y2

5 year FORECAST
Y3

Y4

Y5

6,000

6,600

7,200

8,000

8,800

7,725,600
827,743

8,498,160
910,517

9,270,720
993,291

10,300,800
1,103,657

11,330,880
1,214,023

100.0%
2.0%

6,897,857
137,957

7,587,643
151,753

8,277,429
165,549

9,197,143
183,943

10,116,857
202,337

46.94

98.0%

6,759,900

7,435,890

8,111,880

9,013,200

9,914,520

316.89

13.20

27.6%

1,901,325

2,091,457

2,281,590

2,535,100

2,788,610

Gross Profit

809.76

33.74

70.4%

4,858,575

5,344,433

5,830,290

6,478,100

7,125,910

Variable Operating Expenses

157.73

6.57

13.7%

946,386

1,041,025

1,135,663

1,261,848

1,388,033

Contribution Margin

652.03

27.17

56.7%

3,912,189

4,303,408

4,694,627

5,216,252

5,737,877

6,000,000

4,300,000

4,300,000

4,300,000

4,300,000

3,408

394,627

916,252

1,437,877

A&P
NET INCOME BEFORE TAX

5.75

(2,087,811)

ROI

-97.1%

NI Bef Tax ( Y1 to Y5)

Total Investment (A&P )
Statistic :
COGS at 0.200 / pack
Freight per case
Forex 1 : Php (04/28/14)
Duty / Incidental

664,354
23,200,000

4.80
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

Scenario 2: At given COGS of 0,20/pack, and Parity pricing vs. Yoghurt Drinks
of P17.00, CM is negative Y-o-Y
SCENARIO 2: Using provided COGS, Ideal Price, Lower A&P
CM Computation
Per Case
Per pack
% to Rev
Volume (in cs)

24

SRP

408.00

17.00

LIST PRICE
Vat

388.56
41.63

16.19

Revenue, Net Vat

Returns & Allowances

346.93
6.94

14.46
0.29

Net Revenue

339.99

COGS at 0.20/pack

Y1

Y2

5 year FORECAST
Y3

Y4

Y5

29,760

32,800

36,000

39,600

43,600

11,563,546
1,238,951

12,744,768
1,365,511

13,988,160
1,498,731

15,386,976
1,648,605

16,941,216
1,815,130

100.0%
2.0%

10,324,594
206,492

11,379,257
227,585

12,489,429
249,789

13,738,371
274,767

15,126,086
302,522

14.17

98.0%

10,118,102

11,151,672

12,239,640

13,463,604

14,823,564

316.89

13.20

91.3%

9,430,571

10,393,909

11,407,949

12,548,744

13,816,294

Gross Profit

23.10

0.96

6.7%

687,531

757,763

831,691

914,860

1,007,270

Variable Operating Expenses

47.60

1.98

13.7%

1,416,534

1,561,234

1,713,550

1,884,905

2,075,299

(24.50)

(1.02)

-7.1%

Contribution Margin
A&P
NET INCOME BEFORE TAX

1.73

(729,003)

(803,471)

(881,859)

(970,045)

5,000,000

4,000,000

4,000,000

4,000,000

4,000,000

(5,729,003)

(4,803,471)

(4,881,859)

(4,970,045)

(5,068,029)

ROI

-221.2%

NI Bef Tax ( Y1 to Y5)

Total Investment (A&P )
Statistic :
COGS at 0.200 / pack
Freight per case
Forex 1 : Php (04/28/14)
Duty / Incidental

(1,068,029)

(25,452,408)
21,000,000

4.80
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

Scenario 3: To breakeven on Year 2 and Parity price vs Yoghurt Drinks of

P17.00, cost of Me Milk UHT should be at 0,105/pack (-48%)
SCENARIO 3: Ideal Price, Ideal COGS, Good Enough A&P, Breakeven in Year 2
CM Computation
Per Case
Per pack
% to Rev
Y1
Volume (in cs)

24

SRP

408.00

17.00

LIST PRICE
Vat

388.56
41.63

16.19

Revenue, Net Vat

Returns & Allowances

346.93
6.94

14.46
0.29

Net Revenue

339.99

COGS at 0.105/pack
Gross Profit
Variable Operating Expenses
Contribution Margin

Y2

5 year FORECAST
Y3

Y4

29,760

32,800

36,000

39,600

43,600

11,563,546
1,238,951

12,744,768
1,365,511

13,988,160
1,498,731

15,386,976
1,648,605

16,941,216
1,815,130

100.0%
2.0%

10,324,594
206,492

11,379,257
227,585

12,489,429
249,789

13,738,371
274,767

15,126,086
302,522

14.17

98.0%

10,118,102

11,151,672

12,239,640

13,463,604

14,823,564

169.18

7.05

48.8%

5,034,728

5,549,028

6,090,396

6,699,436

7,376,147

170.81

7.12

49.2%

5,083,375

5,602,644

6,149,244

6,764,168

7,447,417

47.60

1.98

13.7%

1,416,534

1,561,234

1,713,550

1,884,905

2,075,299

123.21

5.13

35.5%

3,666,840

4,041,410

4,435,694

4,879,263

5,372,118

5,000,000

4,000,000

4,000,000

4,000,000

4,000,000

41,410

435,694

879,263

1,372,118

A&P
NET INCOME BEFORE TAX

1.73

(1,333,160)

ROI

-93.4%

NI Bef Tax ( Y1 to Y5)

Total Investment (A&P )
Statistic :
COGS at 0.105 / pack
Freight per case
Forex 1 : Php (04/28/14)
Duty / Incidental

Y5

1,395,326
21,000,000

2.52
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

8.16
0.09
61.70
5%

Me Milk Dairy Drink - Competitive Portfolio

Me Milk UHT is compared to different liquid milk segments Probiotics, Flavored Milk (non-choco)
and drinkable yogurt:
Probiotics
Competition
MeMilk Dairy Drink Scenario 1
MeMilk Dairy Drink Scenario 2

Flavored Milk
Competition
MeMilk Dairy Drink Scenario 1
MeMilk Dairy Drink Scenario 2

Yogurt Drink
Competition
MeMilk Dairy Drink Scenario 1
MeMilk Dairy Drink Scenario 2

Yakult
Bear Brand
Price
Index/ml Price
Index/ml
8.00
1.00
8.80
1.00
56.35
2.82 56.35
2.50
17.00
0.85 17.00
0.75

Goody Gulp
Ri-Chee
Cowhead
Price
Index/ml Price
Index/ml Price
Index/ml
19.95
1.00 16.25
1.00
74.50
1.00
56.35
2.54 56.35
4.33
56.35
3.78
17.00
0.77 17.00
1.31
17.00
1.14

Alaska Yogurt
Dutch Mill
Nestle Yogurt Drink
Nestle Yogurt 0% Fat
Price
Index/ml Price
Index/ml Price
Index/ml
Price
Index/ml
15.75
1.00 17.00
1.00
32.00
1.00
33.00
1.00
56.35
3.22 56.35
2.98
56.35
1.76
56.35
1.71
17.00
0.97 17.00
0.90
17.00
0.53
17.00
0.52

Me Milk UHT will only be competitive against the 3 milk segments above if
priced at P17.00 and with target cost of goods at 0.105