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AGRI BUSINESS – ENTRY STRATEGY FOR DAIRY BUSINESS
METHODOLOGY
SECONDARY RESEARCHNDDB, NABARD, PWC Reports, EBSCO,EMERALD
1
ANALYSIS & RECOMMENDATIONSBUILDING SUPPLY CHAIN, DISTRIBUTION, PRODUCT PORTFOLIO
4
QUESTIONNAIRE2 BRAND PERCEPTION, CONSUMPTION PATTERNS
PRIMARY RESEARCH 3IN-DEPTH INTERVIEWSQUESTIONNAIRESSITE VISITS:MR. SANJAY MISHRA, DIRECTOR, PARAG INDUSTRIESMR. ATUL AMIN, VP, SAMARPAN FABRICATORS PVT. LTDMR. AMIT THAKUR, MANAGER, AMUL DAIRYGOWARDHAN DAIRY, MANCHARAMUL PLANT, MANCHARKATRAJ MILK, PUNE
DAIRY SECTOR OVERVIEW
India's dairy sector expected to
be worth US$100 bn by 2015
Estimated shortage of 40 million tonnes of
milk by 2020
Unorganized sector accounts for nearly
85%
IMPEDIMENTS TO GROWTH• Poor sanitary standards, inconsistent quality of processed milk / milk products• Perishability of milk • Lower milk yield of Milch animals • Logistics of procurement • Problematic distribution
Susceptible to high Adulteration
Price elasticity of demand for milk:
• Rural Areas -2.9• Urban Areas -2.7
Income elasticity of demand for milk:
• Rural Areas 1.36• Urban Areas 1.07
1950-51
1973-74
1984-85
1994-95
2004-05
2005-06
2006-07
2007-08
2008-2009
2009-10
2009-11
0
20
40
60
80
100
120
140
0
50
100
150
200
250
300
INDIA'S MILK PRODUCTION AND PER CAPITA MILK AVAILABILTY
Milk Production(Million Tonnes)Per Capita Milk Availability(Grams/Day)
1990-91 2011-12
Milk production growing at a CAGR of 4.7%Consumer demand growing at CAGR of 7%
OPPORTUNITIES• Large domestic Captive Market• Value addition: phenomenal scope for innovations• Estimated shortage of 40 million tonne of milk by 2020 **(Source: NDDB) 2011 • Integration with other Mahindra services
TRENDS FACTORS
DAIRY INPUTS
MILK
MILK PRODUCTIONMILK COLLECTION,
STORAGE AND TRANSPORT
MARKETING & DISTRIBUTION CONSUMER
MONEY
Analyzing Indian Organized Dairy Sector Supply Chain, we define the Key Success Factors at every
Step.
DAIRY ORGANIZED SECTOR SUPPLY CHAIN
REVENUE
DAIRY EXTENSION SERVICES IN INDIA – A PLETHORA OF OPPORTUNITIES
DAIRY EXTENSION SERVICES IN INDIA
MARKET SIZE – $ 54 Million GAPS IDENTIFIED-• Strong need for Door Step Dairy Extension at Affordable Price • Local Network and Know How will be critical
ISSUES• Unregulated market• Lack of Infrastructure
• Season Specific and Volatile Prices• Lack of Awareness
• Lack of Regulation• Dearth of Animal Heath Workers
OPPORTUNITIES • Door to Door Health Services• Absence of Private Players
• Import High Quality Semen• Information System to track
calves
• Huge Latent Demand• UMMB and BPF – New Concepts
in Feeding
COMPETITIVE LANDSCAPE
• Drug Market is Competitive• Healthcare is Govt. Controlled
• Govt. Run Dairy Farms• NGO’s and Co-operatives
• Co-operatives provide feed• Unattractive for Private Players
CATTLE BREEDING HEALTHCARE MANAGEMENT CATTLE FEED
RECOMMENDATION – ENTRY INTO DAIRY EXTENSION SERVICES TO DEVELOP DAIRY PRESENCE
Mahindra SamriddhiHEALTH CARE MANAGEMENT
CATTLE FEED
BREEDINGSECOND HAND EQUIPMENT• Provide Bovine Semen to Local
farmers to lead to production• Provide In-House Breeding
Center Facilities• Use Samriddhi as a platform to
enable imports of bovine semen for farm use
• Each Samriddhi Center to have one trained animal worker and on call veterinary doctor
• To provide On-Door cattle health services to farmers
• Record management for all cattle through centralized database
• Cattle feed provided by co-operatives perceived to be lower quality
• UMMB licks and Protein Bypass Protein Feed still in nascent stages of adoption
• Right pricing, awareness and availability are KSF’s
• Price differential between New & Second hand equipment can be as high as 50-60% for end user
• Primarily as a support service to ‘Milk Agents’
Launch “Shweta Sagar” – a Dairy Extension initiative across the 155 Samriddhi Centers
Build Awareness amongst Farmers by adopting few model villages and informational campaign
Provide low cost Cattle Feed and Breeding Services at Samriddhi Centers
Healthcare management initiatives to be focused on convenience. Provide on door services with data management.
Primary Aim is to build a comprehensive relationship with farmers over next 2 years
“Shweta Sagar”
KEY SUCCESS FACTORS
• Acquiring High Quality Bovine Semen from International Markets
• Developing Expertise & Research Capabilities in Cattle Breeding & Health Care initiatives
• Acquisition or Production of High Quality Cattle Feed
• Managing Information for “Shweta Sagar” Initiative
• Acquisition of Second Hand Dairy Equipment from Local and International Players
Milk adulteration and irregular supply source are the 2
major problem facing Indian dairy industry
Mr. Sanjay Misra, Director Parag Industries
DAIRY FARMING – a sustainable competitive advantage
MAHINDRA OWNED LARGE DAIRY FARMS
BENEFITS
• Ensure pure quality• Milk supply consistency• Cater to growing demand of organic milk• Shorter time to reach scale• Attached processing unit to produce dairy products *at a large scale• Offers high rate of return : 20-30% (Source: NABARAD)
• Area 20-25 acre• 500-2000 cows• Near to market0NCR, Mumbai, Hyderabad *etc.
SMALL DAIRY FARMS
• Area 100-500 acres • 5000 – 10000 cows • Located near milk-shed *areas of milk processing *plants
LARGE DAIRY FARMS
Due to serious quality concerns in milk
supply it is important to have control over
milk production
Mr. Amit Thakur, Manager Amul Dairy
Finances - Dairy Farming for 5k & 10 Cows
SMALL DAIRY FARM
S
LARGE DAIRY FARM
S
PRODUCTION & DISTRIBUTION
PACKAGED MILK
BUTTER
CURD
COTTAGE CHEESE (PANEER)
UHT MILK
TETRA PACK MILK
FLAVORED & FORTIFIED MILK
NUTROS MILK (FOR BABIES)
CHEESE
INDIAN SWEETS (PEDAS, SRIKHAND, ETC.)
GHEE
DISTRIBUTION CHANNELS
School Canteens
Super Marts
Mom & Me
Milk Parlors
DISTRIBUTION CHANNELS
Near by cities
Retail shops
Milk Parlors
Home Delivery
Focus on Specialty Products Use of imported Technological equipment
R&D - increasing shelf life of milk
Production and Infrastructure development Production Cost reduction State of art UHT & aseptic packaging capability
KEY SUCCESS FACTORS
Deliver fresh milk to near by markets, mostly metros
Strong relationships with farmers Encouraging Social Entrepreneurs Production and Infrastructure development
KEY SUCCESS FACTORS
MILK SOURCING
2-5 CATTLE
10+ CATTLE 50+ CATTLE
COOPERATIVES
CHILLING & BULK COOLING
AUTOMATIC MILK COLLECTION CENTERS
SHG
10,000 Lt CAPACITY
1,00,000 Lt CAPACITY
DISRUPTION: Eliminating Middle Man by SHG to provide more
value to the farmers for their milk
MILK PROCESSING UNITSr. No.
PARTICULARS 1,00,000 Litres 10,000 Litres
1 Land requirement 20 acres 2 acres
2 Milk handling capacity 1,00,000 litres/day 10,000 litres/day
5 Cost of the project Rs. 9,72,62,050 Rs. 1,11,66,700
6 Bank loan Rs. 7,29,46,538 Rs. 83,75,025
7 Margin money Rs. 2,43,15,513 Rs. 27,91,675
FINANCIALS
DSCR 131.16 76.96
N P V Rs. 8,27,45,379 Rs. 56,70,163
I R R 57.23% 40.03%
BCR 1.295 1.287
AUTOMATIC MILK COLLECTIN UNIT– 10,000 Ltr.
S.No. PARTICULARS AMOUNT
1 Investment cost a Cost of Unit (Rs.) 1,27,000b Margin Money @ 25% 31,750c Bank loan (Rs.) 95,250
FINANCIALSBCR @ 15% DF 1.463IRR 34.83%NPV Rs. 55,727Average DSCR 1.645
DAIRY FARMING ECONOMICS10 CATTLE 1000 CATTLE
PROJECT COST
Capital cost 3,55,500 18,52,90,000 Recurring cost 1,37,600 7,88,00,000 Total cost 4,93,100 26,40,90,000 Margin (15%) 73,965 3,96,13,500 Bank Loan 4,19,135 22,44,76,500
FINANCIALSNPV 65715 4,93,07,306 B.C. Ratio 1.07 1.11I.R.R. (%) 28.59% 32.29%Average DSCR 1.425 1.203
PROJECT COST FOR BULK COOLING UNITS.No. PARTICULARS 2000 LITRES 5000 LITRES
1 Cost of Bulk Milk Cooler 6,80,000 18,00,000 2 Installation & Commissioning 20,000 30,000 3 Total cost 7,00,000 18,30,000 4 Margin Money (25%) 1,75,000 4,57,500 5 Bank loan (75%) 5,25,000 13,72,500
FINANCIALS 2000 Lt. CAPACITY 5000 Lt. CAPACITYBCR 1.197 1.35IRR 32.95% 43.56%NPV Rs. 3,35,845 Rs. 17,37,085Average DSCR 1.672 1.865
10,000 Lt Capacity
1,00,000 Lt Capacity
CHILLING & BULK COOLING
AUTOMATIC MILK COLLECTION CENTERS
ECONOMICS
10+ CATTLECOOPERATIVE
S
NPV & IRR - good growth.DSCR & BC Ratios - less
risk.
NPV & IRR - good growth.DSCR & BC Ratios - less
risk.
Automatic Milk Collection Stations
Bulk Milk Cooling Units (BMCUs)
Milk Processing for - 1lac & 10K Litres
CUSTOMER SEGMENTATION
GLOBAL STRIVER ASPIRER DEPRIVED
AVG. HOUSEHOLD INCOME(IN LAKHS/YEAR)
10L+ 5L-10L 2L-5L <2L
MAJOR INFLUENCERS GYM TRAINERS, DIETICIANS,
CONTRACTOR, PAINTER, FRIENDS AND FAMILY
NEIGHBORS, LOCAL VENDOR, LOCAL DAIRY MILKMAN, NEIGHBORS
IMPORTANT BUYING FACTORS
HEALTH, PREMIUM QUALITY, HYGIENE, PACKAGING HEALTH, QUALITY, HYGIENE HYGIENE, COMFORT, BRAND PRICE
PRODUCTS USEDYOGURTS, REDUCED SALT
BUTTER, CHEESE SPREADS,PROBIOTIC MILK PRODUCTS, PREMIUM COTTAGE CHEESE
PACKAGED MILK, FLAVORED MILK, CHEESE SLICES /
SPREAD, PROCESSED CHEESE, PACKED COTTAGE CHEESE
MILK FROM BOOTH OR MILKMAN, PACKED MILK,
BUTTER/GHEE, CURD
MILK FROM BOOTH OR MILKMAN, HOMEMADE
CURD/GHEE
BENEFIT SOUGHT LOW FAT, PREMIUMNESS, STATUS NUTRITION NUTRITION, VALUE FOR
MONEYMORE CREAM, MORE
HEALTH
PURCHASE FROM DELIVERED TO HOME, SERVANTS FAMILY SELF, MILKMAN MILKMAN DELIVERS IT
PRODUCT PORTFOLIO
MAHINDRA FARM FRESH MILKSTRAIGHT FROM THE FARM. TO YOUR DOORSTEP.PURE.RICH.CREAMY
*From Mahindra’s Dairy Farm*Untouched by human hand*100% Pure, 100% Fresh*Delivered at your doorstep
A Range of Premium Cheese Products
INSIGHT: Premium Dairy Products segment is largely Untapped WHAT: Establish Mahindra as the leader in this segment WHY: Build Brand Equity. Build Trust. Establish Brand HOW: INTRODUCING FARM FRESH – a premium range of dairy products HEALTH. DELIVERED AT YOUR DOORSTEP.
1
Money is not an issue where the health of my family is concerned.
Give me quality and I’m a customer for life
There is no such thing as FRESH milk.
What we get is the price we pay for convenience
2
YOGURT WITH ADD-ONS – GRANOLA, FRUIT MIXES FLAVORED MILK / LASSI - FORTIFIED WITH NUTRIENTS
WHO: Female Students, Working Professionals WHAT: A complete range of Dairy Products for the Health Conscious Ideal for snacks, Alternative to ColasWHERE: Educational Institutions, Corporate Offices, Gyms WHY: Brand Mahindra is non-existent in the consideration set of Buyers Success in this segment - Trickle down effect Purchase influencers at home
I rarely get enough time to have lunch. Yogurt saves the day more often than not.
Small snacks are more
suited to my routine,
soft drinks I’m trying to
quit though
BABY FOODS – LEVERAGING
“Baby food gets spoiled easily, I travel
a lot and availability is a constant issue”
3
WHY?• One of the fastest growing segments• Unique match with Retail Format• Synergy with business unit• Leverages the mom&me brand
WHAT?• Tetra packs ensure Freshness• Longer shelf life, Quality control• Dairy Products in Mom&Me Retail
+
Acquisition of Dairy Inputs and Equipment from Local & International Markets
Developing Local know How & Strong Relationship with Farmers and Rural Entrepreneurs
Developing Research and Development Capabilities across Dairy Value Chain
Optimizing Supply Chain effectively to increase customer value as well as reduce costs
Identification of Customer Preferences across the value chain to create value added products
CRITICAL COMPETENCIES STRATEGIC RELATIONSHIPS
Mahindra Samriddhi
Indian Dairy Players
Dairy Association e.g. NDRI, NDDB
International Dairy Players
Mahindra Automotive
Mahindra Finance
NGO’s
ORGANIC STRATEGIES• Launch of Shweta Sagar – Dairy Extension Services
through Samriddhi• Dairy Farming through Small
Farms – “Self Help Groups” encouraged by Mahindra
Finance• Partnership with existing
research Insitutions
INORGANIC STRATEGIES
• Acquisition of Small Indian Dairy Cooperatives across
India eg. Sterling Agro Industries
• Joint Ventures with Large International Dairy Players like
Fonterra of Newzeland
KEY COMPETENCIES TO BE ACQUIRED ACROSS THE DAIRY VALUE CHAIN
ROADMAP TO SUCCESS0-2 YEARS 2-4 YEARS 4-5 YEARS
• Partnerships with multinationals (e.g. Fonterra , Falio)• Acquisition of dairy firms like Sterling Agro Industries which is looking for buyers• Build key partnerships across supply and distribution chain
• Research and Development to increase the milk life period
•
• Strategic takeovers for a country wide reach
• Number of Processing Plants – 1•Chilling and collection units required (2000 capacity) - 25•Chilling and collection units required (5000 capacity) - 10•Processing - 10,000•Total Milk Processed by Mahindra per day – 99,000 ltr.•Market Share in litters/day – 4.95%
• ‘Shweta Sagar’ movement to encourage milk production in villages
• Establish another high tech dairy farm
• Number of Processing Plants – 4•Chilling and collection units required (2000 capacity) - 40•Chilling and collection units required (5000 capacity) - 13•Processing - 10,000•Total Milk Processed by Mahindra per day – 4,71,769 ltr.•Market Share in litters/day – 20.38%
• Number of Processing Plants – 3•Chilling and collection units required (2000 capacity) - 35•Chilling and collection units required (5000 capacity) - 13•Processing - 10,000•Total Milk Processed by Mahindra per day – 3,59,000 ltr.•Market Share in litters/day – 16.32%
CASH FLOWS
1 2 3 4 5 6 7
Self Owned Big Plants
-78871257.0666667 -33589224.4333333 19322606.35 73159248.0333334 206909247.583333 217680222.083333 220821398.433333
Small Private Plants
18067500 27823950 39351015 62524390.5 76953096 96191370 96191370
Net Cash Flows -60803757.0666667 -5765274.43333333 58673621.35 135683638.533333 283862343.583333 313871592.083333 317012768.433333
-75,000,000
-25,000,000
25,000,000
75,000,000
125,000,000
175,000,000
225,000,000
275,000,000
325,000,000
Cash Flows
Rupe
es
Final Growth Projections & Cash Flows
SAMRIDDHI – BRINGING THE NEXT WHITE REVOLUTION
Social Entrepreneurship
“ Shweta Sagar “ An Initiative for
Productivity
Efficiency Across Value Chain
Mahindra RISE
Integration with Existing Business
MAHINDRA DAIRY BUSINESS
Relationship Building
Localized FocusDairy Extension Services
Equipments
Fresh Milk
“ Delivering Farm Tech Prosperity”
VISION
“ Self Help Group“ Enabling Rural
Prosperity
“ Farm Fresh & Nutros“ Bringing Freshness to every
Door
Health Care Services
Convenience
Health & Wellness
Reduced Cost Liability
Distribution Services
EXECUTIVE SUMMARY – BRINGING IT ALL TOGETHER
THANK YOU…