Habib Oil Complete Project

HABIB OIL MILLS

MARKETING PROJECT

HABIB OIL MILLS

NAZISH MUBASHAR. Prog. M.B.A. PAK-AIMS

ACKNOWLEDGEMENT

I thanks to Allah, the Almighty for his guidance and divine support that this report is finally complete as a result of continuous and persistent effort.

PREFACE

First of all I would like to thank our instructor Mr. Ahsan Umer for providing me the opportunity to look into various marketing strategies of Habib Oil Mills Pvt (Ltd). This project has given me a complete knowledge and practical experience, which will help me in future. I am also thankful to Mr. Ali Azfar, assistant sales manager of HOM for sharing his experience and knowledge regarding the marketing strategies of HOM. His help has enabled me to prepare this report. I hope that this report will provide you the required information regarding the marketing strategies of HOM.

ABOUT COMPANY

Habib Oil Mills (Pvt.) Ltd. "HOM" is the largest FMCG Company exclusively in the vegetable oil & fats sector in Pakistan. The company produces premium brand cooking oils and Hydrogenated cooking mediums, and markets the products through its own distribution network, which covers almost all commercially viable markets nationwide. The company has strong financial background and has sizable infrastructure managed by professional staff. It has proven track record in this business and has plans for targeted prosperous growth in future. The marketing policy of the company envisages development of brand loyalties among the customers and consumers through their continued involvement and participation in series of several promotional activities run by professional staffs and consultants. The monthly national cookery contest being the most popular marketing activity of the company which brings valuable prizes to the winning recipes every month started 10 years ago and has celebrated its 120th diamond jubilee contest in Feb. 1999.

MISSION STATEMENT

The company has five years look ahead strategic plan for progressive target achievement of manufacturing and marketing 89,000 tons of cooking oil and banaspati per annum by year 2003. Development of necessary infrastructures and staffing for the above targets including establishment of a new factory at port Qasim are completing scheduled milestones successfully.

HISTORY OF GROWTH Incorporated in 1954-55, Habib Oil Mills (Pvt.) Limited was initially established as an oil expelling unit. The present management took over the unit in 1978 when it was producing only 5000 metric tons of cooking oil annually. The new management carried over major expansion and modernization of the unit over the years, and converted it into an integrated unit for edible oil refining, cooking oil blending and production of hydrogenated cooking medium. The unit after subsequent expansion and modernization has now an installed production capacity of 58,000 metric tons of cooking oil and Banaspati per annum. The products enjoy vast popularity and brand loyalties, and stands first in terms of market share in this sector nationwide. The company has achieved a growth of 500% in a ten-year span, which is primarily attributed to its consistent quality care, and driving successes from application of needed market strategies.

FINANCIAL BACKGROUND AND BANKERS

The company has strong financial background and is considered liquid on all financial considerations throughout its performances. It is enjoying excellent relations with its Bankers and is having all needed credit limits and banking facilities at most competitive terms. The followings are the existing bankers of the company.

 Habib Bank Limited  United Bank Limited  Muslim Commercial Bank Limited  ABN AMRO Bank Limited  Askari Commercial Bank Limited  Union Bank Limited  Prime Commercial Bank Limited  Bank Al-Falah Limited

TABLE OF CONTENTS CURRENT MARKETING SITUATION:     

Marketing situation Product situation Competitive situation Distribution situation Microenvironment situation

SWOT analysis:    

Strengths. Weaknesses. Opportunities. Threats.

OBJECTS  Marketing Objects.  Financial Objects.

MARKETING STRATEGY: ACTION PROGRAMS:

CURRENT MARKETING SITUATION: Marketing situation: Habib oil/ghee is imported stuff that is why it cannot be calculated in terms of Rupees. Total market size of oil/ghee is 1.5 million tons annually. Total market size is not growing as it should be, but total market size /growing rate of Habib oil is 5% per year. The total market size of the Habib oil/ghee in previous years: Years

Growth rate

1998

35 thsd.tons

1999

40 thsd.tons

2000

50 thsd.tons

2001

53 thsd.tons

2002

58 thsd.tons

So the total sale is about 60 thsd. Tons per year. Habib oil is blended oil. The buyers of this product belong to upper-upper, upper, and middle classes. Who want good taste in their foods.

Consumption pattern of Habib oil/ghee in country: Area Punjab

Banaspati 60%

Oil 40%

Sindh/Balo.

40%

60%

NWFP

70%

30%

The reason of this consumption pattern which is different from one another is, literacy rate of sindh/balochistan is higher than other provinces, people belong to these area know which is better for health oil or ghee. But case is opposite in Punjab and NWFP. Fat consumption in NWFP is very high but it is fat from animal (mutton, beef).

COMPETITIVE SITUATION:

Major competitors of Habib oil mills are;

The main and strong competitor of HOM is Dalda. There is also an Indirect effect on competition apart from the people, who use to make Ghee at home or the people who uses Desi Ghee

Dalda

Uni-lever.

Tallo

Wazir ali industry.

Seasons

Wali oil mills.

Sufi

Hamza vegetable.

Kisan

Madina enterprises.

SWOT ANALYSIS Strengths and Weaknesses of Habib Oil Mills

There are certain strengths and weaknesses of HOM, which are discussed as under:

STRENGTHS ISO 9002 Certified:The company has a well-defined quality policy and has successfully obtained the ISO-9002 quality system certification in the year 1997. "HOM" is the first company to receive such certification in Pakistan in the vegetable oil & fats sector. Good Market Reputation. The company has good market repute, due its good and consistent quality products. The logo of the company is “Quality Products at Moderate Price”. Market Leader Another major strength of HOM is its market share. At the present time they are the market leaders in edible oil industry with avery good market share of 42%. Wide Product Range Another major strength of HOM is that, it is the only edible oil producing company, which has that much wide range of products in the market. Quality products. It is HOM’s policy to provide good quality products to customers at reasonable prices. It makes all efforts to involve every employee of the company in the achievement of this objective. Nation Wide Distribution. The company has 350 plus distributors all over Pakistan and a fleet of delivery vehicles consisting of Hino Trucks and Mazda Trucks to cover its entire supplies. The distribution staffing is designed to have a strong link between the senior sales staff and the end consumers. This staffing is further reinforced with CSF (customer sales force) to enhance the contact with the customers and the market. Professional Management. A team of Professional Managers with the following leadership practices performs the day to day administration of the company. Find opportunities

for constantly challenging and improving personal performance. Reward and celebrate significant and creative achievement.Develop and appoint high performing and high potential people to key positions.Communicate with all constituents openly, honestly, interactively, and on a timely basis.

WEAKNESSES Lack of Diversification The major weakness of the HOM is that it deals with only one kind product, which is edible oil so it cannot diversify from its present business to some other business. Less Production Capacity Another weakness of HOM is that they are not be able to fulfill the demand of the customers, the reason being that they don’t have more capacity for production.

THREATS. The Threat of Indirect Competition. There is a threat and a chance for the Indirect competition that may grow in future. For example that the companies already producing items can come in Ghee business. Dalda Ghee & Sundrop Oil. The main competitors are Dalda & Sundrop. There is main Threat is from this side. Due to Price factor and Quality standared these company are giving high task to Habib Oil Mills.

Unable to Meet Demand:Due to Overdemand the company is not in position to meet the consumer demand properly. That is a main weakness for the company.

Target Market of HOM HOM focuses on all types of market that is why they offer different packages for different markets. The company has introduced recently a new

product in the market named Handi (oil). The reason for introducing this product is cater the needs of the lower income group.

Basis for segmentation The bases of segmentation for HOM are: Geographic Segmentation HOM divides the country in to two major regions i.e. north and south. North region includes two provinces Punjab and N.W.F.P and south region includes Sindh and Balochistan. With the help of the segmentation they came to know the demand of the oil and ghee. They have more demand of Ghee in the northern region and oil in southern region. Income Groups The other basis of segmentation is income groups, for example they have introduced pet bottle for high-income group as well as Handi (oil) for lowincome group. They have also introduced different sizes of the products from one-liter pouch to ten liters tin pack. This product range carries the needs of all income groups.

Market Strategies As far as the market strategies are concerned HOM uses two types of strategies, such as Push and Pull Strategies. HOM uses the combination of these two strategies. Push strategy is concerned with the short-term period and it is usually less expensive and in this strategy the company emphasizes on customer, while the Pull Strategy is used for long term period and in this strategy company emphasizes on trade rather than customer. Market Share As HOM is the market leader in the oil industry, its market share is 42%. The market share for other companies is: Dalda 39%, Soya Supreme 12%, Tullo 10% and for others 7%.

DEVELOPING MARKET OBJECTIVES AND GOALS Objectives of Habib Oil Mills

The basic objectives of HOM is profitability, market share and to fulfill the needs of their customers. Although they have achieved the desired market share and profits but they are making efforts to fulfill the demands of the customers. Differentiation of company’s offering from others.There are some points to differentiate HOM from its competitors, which are discussed below: ISO 9002 HOM is the only one with an ISO 9002 certificate in the oil industry in Pakistan. Wide Range of Edible Oil Products HOM offers a wide range of edible oil products more than any other oil producing company. The variety of edible oil offered by HOM is: Habib Cooking Oil, Habib Banaspati, Habib Soybean Cooking Oil, Habib Corn Oil and Habib Canola Oil. Pioneer In Pet Bottle and Pouch Pack HOM is the first company to introduce oil products in pouch packs in and pet bottles. Own Warehouses Another differentiation of HOM from its competitors is that it has its own warehouses in all over the country. The warehouses are located in Karachi, Hyderabad, Sukkur, Multan, Lahore, Gujranwala, Islamabad, Faisalabad and Quetta. Company’s Stage In Life Cycle At the present time HOM is at the stage of Maturity. The reason is that the company’s sale is at its peak and the company is getting high profits and the other major reason is that the number of competitors is stable. The company was in the stage of growth in 1986, when it entered in the market. At that time there were growing number of competitors in the market. Boston Consulting Group Model. According to the BCG model the company falls in cash cows, because company is characterized by low growth and high market share and the business is generating large cash surpluses.

Strategic Tools

Game Theory Concept of HOM According to the Game Theory Concept HOM always have a check on its major competitor Dalda regarding its promotional and pricing strategies for example, when for the month of ramzan HOM reduced its prices by Rs.10, Dalda also responded and reduced its prices by Rs.15. Marketing Strategies Total Market Strategy To serve the market HOM follows Total Market Strategy and serves an entire spectrum of the market by selling different sizes of the product to different segments. The proof is that the company has five oil products in the market and every product has minimum three sizes. Early Entry Strategy HOM was the early entrants in the edible oil market. It entered in the market in1975; the other early entrants were GCP and Kohinoor. The first company to enter in this market was Dalda, which is to complete its 50 years of serving the market. Due to the first to enter in the market Dalda enjoyed high profits with a production of 150,000 tons and due to the entrance of other companies the production is now reduced to only 60,000 tons. Strong Commitment HOM is doing its business in a good manner and it has a very strong commitment with the market and its other business operations. If the company looses its commitment than it will also loose its market share that is why HOM gives trade discounts to its dealers and focuses on every step of the competitors. Market Dilution Strategy The company sometimes uses the pruning strategy when it is not getting the desired results from its products. In the past the company had used this strategy many times, once it was used for Nayab Banspati, which was not very successful product that is why it was eliminated in the market. The other products that were eliminated are American corn oil and Habib Punch pack. Product Strategies Positioning Strategies Multiple Brands

Company has one product in the market, which is related to edible oil, but in this segment company has multiple brands, which covers the complete market of edible oil. Design strategies Standardized products Company has standardized products but these products are available in different sizes for the convenience of its customers, such as 1 liter, 2.5liters, 5 liters, and 10 liters. New product strategies Product improvement strategies Company also follows this strategy and introduces improvement with the passage of time, such as different flavors, new grate taste and vitamin A, E & D. Product imitation strategy Company some times follow other companies and does not take initiative, such as HOM introduced corn oil after introducing this product by other companies. Value marketing strategy Quality strategy Company’s basic philosophy is to provide quality products to its customers and the evidence is the ISO 9002 certification. Customer service strategy Company never ignores its customer and always gives importance and value to them. Company has its own in house research department, which gathers information related to the customer’s preferences and sometimes the company also hires the services of other research firms such as, Aftab Associates. HOM also provides door-to-door service occasionally and use to give free samples.

Establishing the product’s price strategy Company always tries to maintain its product’s prices but sometimes gives discounts in response to the different moves of its competitors and also to

attract more customers. Most of the times company makes changes in terms of discounts and does not change its tag prices. In other words we can say that the company has a flexible pricing strategy. Product-Line Pricing Strategy HOM focuses on its customers while setting the prices of its product line. When company introduced its pouch pack in the market it followed the market penetration strategy and set low prices according to its target markets. On the other hand when the company introduced the Soya Bean Oil in pet bottles it followed market skimming strategy and set high price with high promotion according to the targeted customers. Distribution Strategy Single Channel Strategy For distribution purposes HOM uses single channel strategy. The process of distribution consists of different steps, such as factory to warehouse, warehouse to distributors, distributors to retailers, and finally the product reaches to the final consumer through retailers. So we can say the products of the HOM reach to its ultimate customers through single channel (retailer). At the present time there are nine distributors in Lahore, which covers 5000 shops. Distribution Rights As such there is no formal procedure for giving the distribution rights. What HOM require is a good reputation and strong financial position. HOM asks for an advance payment for the ordered goods from the distributors. Promotion strategies Way of promotion HOM actively participate in all the promotional activities. The annual cost of the promotion is Rs.50 million, right about it also arranges different cookery competeion in different women colleges for promotion purposes. HOM also arranges sports week in different women colleges.