Marketing Management Term Report - Nfl Case Study - By Asad Mehmood

HAMDARD INSTITUTE OF MANAGEMENT SCIENCES CITY CAMPUS, KARACHI. Marketing Management Term Report

National Foods Limited (A Growth Oriented Company)

Submitted to:

Mr. Ejaz Wassey

Submitted by:

Syed Asad Mehmmod MEN-2200475 Abdul Rasheed MEN-2200475

Strategic Planning in National Foods Limited (A Real Life Case) 1) 2) 3)

4)

Company Information … a) Background … b) Decade-wise History … Organization Structure … a) Functional Organization Chart … b) Strategic Business Units … Strategic Planning Process Followed … a) Vision … b) Mission … c) Objectives … d) SWOT Analysis … 1) External Environment (Opportunities and Threats) … 2) Internal Environment (Strength and Weakness) … e) Strategies … 1) Geographical Market Expansion Strategy … 2) Market Penetration Strategy … f) Implementation … 1) Geographical Market Expansion Strategy – Implementation 2) Market Penetration Strategy – Implementation … g) Feedback and Monitoring Mechanism. … Appendixes Kitchen Food Division Product Portfolio … Family Food Division Product Portfolio … NFL Top Line performance Indicators Sales Volume Comparison for the year 2005 & 2006 Sales Growth Comparison for the year 2005 & 2006 Gross Sales (Local & Export) Comparison for the year 2005 & 2006

1 1 1 2 2 2 4 4 4 4 5 5 5 5 6 6 6 6 7 8 A B … … …

C D E

1

1)

Company Information a)

Background

National Foods began its journey in 1970 as a spice company, with revolutionary products that popularized the concept of having clean, healthy food. National Foods’ initiatives were, to make food that is hygienic, reduce time spent in the kitchen by women, foster health, and contribute towards personal attractiveness, so that people who use NFL products would be able to experience a more rewarding life style. Until 1970, the spice industry although flourishing locally was not structured, and spices were unbranded, loosely sold. It all started with the idea of introducing branded, packaged spices: a revolution in the Pakistani food market. Red Chili, Turmeric and other spices were introduced in a clean, attractively packed form to the consumers, and despite the predominance of loose spices, people quickly converted to NFL products. Even if the notion of only women doing the housework – have become outdated, in this age of rapidly changing lifestyles, fuelled by the rampant development of technology; consumers are compelled to alter their eating habits. National Foods responds to this challenge of developing innovative foods products based on convenience and quick preparation in line with modern lifestyles and yet retains traditional values through its diverse collection of food products.

b)

Decade-wise History

First Decade: The company began its life in a rented warehouse in Dinar Chamber with initial sales of only Rs: 16,487/= in its first year. NFL origins were humble but NFL vision and aims were always high, witnessed by the purchase of a new spice mill and packaging plant in 1978 as a step towards being a progressive company. Second Decade: In 1981, the company launched its Salt products with proved a lucrative venture for the company. In 1986, the new factory complex was constructed, where most of NFL manufacturing facilities still reside. In 1988, NFL became the certified vendor of McCormick, USA, as part of their Supplier Certification Program. The certification was awarded base on excellent production and quality credentials. In the same year, NFL becomes a public listed company on the Stock Exchange. Third Decade:In 1991, NFL diversified its products portfolio with the launch of the Pickle range. In 1992, as an effort towards contribution for social welfare and responsibility, NFL joined hands with UNICEF, in order to propagate the use of iodized salt, to fight diseases like goiters. In 1997, NFL added to more categories to its product portfolio, i.e. Ketchups and Jams. In 1998, NFL becomes an ISO Certified Company. New Millennium: In 2000, mainstream products were launched in Australia to offer ethnic food to non-Asian consumers. In 2004, the NFL was assigned a credit rating of A+ by JCRVIS. In 2006, new recipe brand by the name RONAQ launched across the country.

2

2)

Organization Structure a)

Functional Organization Chart Board of Directors

Company Secretary (Chief Executive) General Manager Human Resources

Sales & Marketing Managers

Business Unit Managers

Manager Logistics

Finance Head

Head of Research & Development

Manager Quality Control

Manager Material Management

b) Strategic Business Unit At NFL the two Strategic Business Units are define in terms of products. These SBU although does covered three major characteristics of SBU i.e. 123-

The planning process is separate from rest of the company. Each SBU has its own set of competitors. Each SBU has its own Management who is to some extant responsible for strategic planning execution and monitors the factors effecting profit.

The SBUs of NFL are not fully decentralized, in fact they are only involve in planning and implementation of Manufacturing, Marketing and Sales Promotion activities of their portfolio of products, at NFL they consider the SBUs as a divisions, in fact each SBU has its own Business Unit Manager and Sales and Marketing Manager, both enjoying same level in organization hierarchy. Business Unit Managers are responsible to look after production facility management and relating affairs where as Sales and Marketing Managers have the responsibility to manage marketing activities of respective SBU. The other functions like Human Resources, Finance, R&D, Logistic, Material Management and Quality Control are managed in centralized way.

3 The two Strategic Business Units are: 1. Kitchen Foods Division 2. Family Foods Division Introduction of each SBU is as under: 1-

Kitchen Foods Division Kitchen Foods Division (KFD) in NFL led by Mr. Zaheer Ahmed (Sales and Marketing Manager – KFD) is involve in NFL Salt, Spices, ingredients, ready to curry pastes etc, Sales and Marketing activities. For complete range of product portfolio of KFD please sea (Annexure “A”) KFD, has combination of products line, according to BSC tool some of which are really Stars, some are straightforward questions marks. Stars: Questions Marks:

Salt Products Recipe Masala and Spices & Ingredients Products

KFD brands have to face toughest competition, in Receipt Masala and Spices and Ingredients Market with the Market leading Brand SHAAN. KFD’s some brands are still in growth stage like Raj and Rivaj Masalas Products. NFL has the plan to make huge investment in market/product development of recipe masala paste products in order to gain significant share in market pie. NFL Management has very different expectations of growth rate and return level from KFD then FFD, because KFD’s most products are in growing stages, where as FFD almost all products are in their maturity stage. As well as the growth potential of both SBUs portfolio of products are much different from each other. Despite the fact that some brands of NFL facing toughest competition, there is only build, hold and harvest strategies in minds of Management. They have planned to invest heavily, in convenience-packaged food segment; which is mostly focused on the product line of KFD, in order to claim a significant market share by the year 2020. 2-

Family Foods Division Family Foods Division (FFD) in NFL led by Mr. S. Ahmed Iqbal (Sales and Marketing Manager – FFD) is involve in NFL Ketchup, Pickles, Jam and Jelly’s, Chinese, Snacks and Custer Sales and Marketing activities. For complete range of product portfolio of FFD please sea (Annexure “B”) FFD, is responsible to look after the portfolio of mostly star products of NFL, according to BSC tool these products are real Stars in their respective market i.e. Snacks (Chat Masala etc), Ketchup and Pickle products. Being a leader in these markets NFL striving hard to push competition further away from the competitors,

4 NFL has planned to put huge investment in market penetration through product improvement. Some of FFD portfolio products are question marks for NFL, i.e Jam and Jelly products in that market NFL has to face MITCHELLS. To revamp its share NFL has investing brand image improvement through Sales Promotion activities and advertisement.

3)

Strategic Process a)

Vision

In the year 2005, NFL has revised its vision and given a clear and brief theme to its peoples for coming 15 years. “To be a Rs: 50 Billion Food company by the year 2020 in the convenience food segment by launching products and services in the domestic and international markets to enhance lifestyle and create value for consumers through management excellence at all levels” That mission statement also propagates and promotes as ‘Vision 20/20’ by the NFL management. NFL vision 20/20 will act as guiding light until the year 2020. b)

Mission • • • • • •

c)

To deliver consistent quality to consumer using pure ingredients, authentic recipes and the best available technology. Dedicated to continues improvement thought active alliance with international companies by expanding technological and product horizons. To main close and direct contact with consumer through consumer insights and dedicated services. To provide external and internal customer service by excelling in functional management. To promote professionalism at all levels through education, training and development of human resources. To deliver a fair return to valued investors and shareholders, annually, in line with industry names and economic conditions.

Objectives It has been 36 years since NFL was formed. Today it is well established corporate entity, in fact a household name. NFL objectives are still very clear towards growth. NFL products are sold not only in domestic markets but also in far-flung corners of the globe. Despite these successes, NFL has not reached the end of its growth path. There are still many horizons to conquer, and NFL will continue its progress, continuously offering quality to consumers. NFL strongly believes that success means acting with ‘the highest standards of corporate behavior towards our employees, consumers and the societies and world in which we life’.

5 The company’s focal point remains on customer’s needs through product development in line with the changing market trends.

d)

SWOT Analysis External Environment Analysis Opportunities: o Strong local and international brand recognition. o Availability strong vertical integration (Suppliers, Distributors etc). o Positive macro economical outlook of country. o Increase consumers inclined towards quality and branded products. Threats: o Inflationary pressure on the cost of agro based raw materials. o Economic complications caused by high oil price. o Growing global and regional competition. o Trade and fiscal consequences of 10/8 earth quack. Internal Environment Analysis Strengths: o Availability of effective and efficient distribution network. o Availability of services of professional, organized and high value individuals. o Availability of state of the art food processing, material management technology. Weakness: o High employees’ turnover. o Huge amount of money trapped in trade debt (Receivable turnover days for the year 2005-06 are 17.56). o High Inventory turnover ratio suggests company has to hold stock of inventory excessively (i.e. 103.50 days) o Potential credit and liquidity risk, signifies with very low current and quick ratios for the year 2005-06 (1 : 1.16) and (1:0.43) respectively.

c)

Strategies In the quest to grow, NFL has emphasizing on backward, forward, and horizontal integration. NFL has formulated its strategies according to its share in particular product segment, in some segment NFL enjoying the status of leaders, where NFL pursing to retain its status, and in some segments NFL has to play the rule of challenger i.e. Spices, Jam and Jelly segments. Nevertheless, strategically NFL focus is to target the convenience packaged food segment in order to claim a significant market share by the year 2020, that make the fact evidently clear that NFL focusing on intensive growth strategy backed by their reliable knowledge of opportunities for improving its existing business.

6 The two core strategies of NFL to achieve its ‘Vision 20/20’ are as follows. 1. 2.

Geographical Expansion Strategy Market Penetration Strategy

1.

Geographical Expansion Strategy Besides strengthening the existing markets, NFL striveing to develop new but emerging markets to grow business at a faster pace. NFL Product are distributed in over 35 countries around the globe, with a well-diversified and experienced portfolio of distributors. NFL is making inroads into new markets. It shows the NFL focus on forward integration and incentive growth.

2.

Market Penetration Strategy While trying to expand total market size, the dominant firm like NFL continuously defends its current business. The most constructive response of competitor’s offence is continuous innovation. NFL led the industry in developing new products and consumer services, distribution effectiveness and cost cutting measures. It keeps increasing its competitive strength and value to consumers. The local and existing markets are to be supported with continuous product improvement and innovation, Effective Sales Promotion and Investing in Technological and infrastructural development so that the appropriate category growth is achieved. Last year NFL added more than 20 products to its portfolio. The new continental recipes include Vegetarian, BBQ, Curry, Fish and Briyani ranges. There is an immense untapped potential in terms of coverage, product offering, packaging and meal solutions, which NFL are striving to cover.

d)

Implementation 1.

Geographical Expansion Strategy- Implementation

Accordingly NFL is in the process of getting listed with almost all the leading players of this sector. NFL has a very clear vision for global market development. In the first stage NFL has successfully appointed strong distribution partners in the Gulf region; Dubai, Kuwait and Saudi Arabia. Exhibitions have proved to be most effective and economical tool for this very purpose. NFL successfully participated in the following global exhibition in the year 2005-06. ANUGHA 2005 Germany, AAHAR 2006, India. IFE 2005, India.

FHC 2006, China. IITF 2006, India. 7 2.

Market Penetration Strategy – Implementation .

A crucial step linked with this strategy was the launch of RONAQ. The purpose was to cater to a special segment of consumers who prefer to dine out and seek the distinct ‘restaurant’ taste. Initially NFL introduced six new variants and after witnessing their phenomenal success, NFL’s R&D team developed three more irresistible additions that were launched recently. The future of recipe category holds many surprises and investment opportunities. NFL has faith in its brands portfolio to be the leading contributors to NFLs’ 20/20 Vision. NFL has planned to revamp its ketchup category with the launch of an innovative upsidedown squeezable bottle with sub brand name ‘squeezy’ and a major re-launch of its entire range. NFL proudly asserts that it is the first amongst all Pakistani companies to come up with an upside-down squeezable bottle in the Ketchup category. The composition of marketing spending has objectively been changed with increased emphasis on brand building and customer demand pull strategy. Accordingly, NFL’s total marketing and promotional spending increased from Rs: 133.2 million in 2004-05 to Rs: 179.3 million in 2005-06. In Pakistan, the number of modern trade outlets, also called key accounts, are increasing in number and have a great influence on consumer lifestyle. In 2005-06, NFL started focusing on these self-service super stores by establishing dedicated field force, giving special POS, and launching store specific consumer promotion. The Eid-ul-Azha campaign on sachets has greatly facilitated the growth in household penetration, as it has been widely accepted by the consumers. NFL being a leading spice and food company organized various sales promotion activities. NFLs’ aim is to provide the highest possible quality of products to its consumer to help them in their quest for a healthy and productive life. Nutrition Month (March-April): NFL as a leading spices and food co., not only cares for its consumers health through its products but also strives to promote a healthy life style for consumers. The month of March is celebrated as Nutrition Month Worldwide. NFL conducted various seminars on “Nutrition through Life Cycle” all over the country. Exhibitions: NFL has participated in various exhibitions through out the country, and offered and promoted the core essence of its product line. Funkids Club: NFL is maintaining renowned Funkid Club, through its website and activities by engaging the younger lot in exciting, nutritious and health based activities. College Programs: NFL conducts cooking demonstrations throughout the country at various educational institutions that includes school, colleges, and universities. Not only

demonstrations but also competitions are conducted where participants are awarded and given prizes for their efforts and talent. 8 Recipe Contest in Food Magazines: NFL regularly conducts recipe contest in food magazines where the winners are awarded with great prizes. Cooking Classes: Continuing with teaching women to cook delicious meals for their families, NFL conducted cooking classes at different locations including technical training centers, schools, colleges, hotels, clubs and other places. The composition of marketing spending has objectively been changed with increased emphasis on brand building and consumer demand pull strategy. Accordingly, company’s total marketing and promotional spending increased from Rs: 133.20 millions in 2004-05 to Rs: 179.3 million in 2005-06, an increase of 34.6%. On the contrary, the trade offers and rebates came down from 92.7 million in 2004-05 to 67.2 million in the year 2005-06. In the year 2005-06, the total capital expenditure, including investments in Port Qasim Project is the highest recorded in the history of the company. Theses investments are part of the long-term infrastructure development plan require supporting company’s future growth. Port Qasim project is designed to bring innovation in processing food products and material movement with state of the art technology. The 1st Phase of the PQ Project is now operational and is going through a series of trial productions at the moment. On completion of the PQ project NFP expect not only to achieve saving in production cost but also to reduce extra operational cost incurred due to the existing set up of operations being handled at multiple locations. NFL has also invested in automation of production processes, they also developing a mechanism to ensure that their vision and values are cascaded down to every individual of the organization. They have planned to create and organization culture that truly sizzles and is uniquely National Foods.

e)

Feedback and Monitoring Mechanism. Although, in the year 2005-06 has not been able to touch turnover landmark of Rs: 2.5 billion (Annexure “E”), but in the year NFL registered a satisfactory volume growth of around 13.10% from 34622 Metric Tones in 2004-05 to 37135 Metric Tones 2005-06 (Annexure “C”), whereas a highest ever growth of around 19% is gained in term of value. Please sea (Annexure “D”). That good feedback has mainly possible through restructuring the company’s product mix portfolio and optimization of operations across the board. This has been possible through operational efficiencies, which have been achieved by investing in various R&D projects and technological improvement. NFL cost saving programs are delivering well and have been successful in containing the impact of increasing input cost. NFL management recognizes that in order to continue and to achieve visionary target of 50 billion turnovers in the year 2020, they need a disciplined and focused approach. An

approach that focuses on results as well as mindset they are instilling those systems and executing those strategies that will make success an on-going process. 9 NFL, R&D peoples are involved in the process of tracking result and monitor new developments. They are continuously formulating and revising tactical and some time strategic plans according to the situations of volatile global market, that are driven by the technology, and keep changing in amazing and unpredictable way. NFL has facing distributional problems in Middle East and Gulf region, NFL has adopted a flexible approach and reevaluated the whole process in order to have effective and efficient strategic partners. NFL successfully able to finalize certain agreements in the region and hopefully the related benefits will be accounted for in the years to come. On the other hand, for domestic market they have adopted fairly stable strategies due to its calm nature; on the other hand they are continuously trying to restore competitiveness and promoting industry base approach by refocusing and simplifying the organization. NFL divisions (SBUs) are keep changing their tactical strategies according to potential geographical areas by strengthening and motivating the sales force, wherever needed. The other steps taken by the NFL in response of local market changes are product price rationalization, focused growth in high margin products, discontinuance of low margin products and SKUs and rationalization in distribution cost. From the point of Human Resources, NFL is developing a mechanism to ensure that their vision and values are cascaded down to every individual of organization. Having tackled the soft side of business, they have set very clear goals and KPIs (Key Performance Indicators) for their team. They will integrate into a Balance Scorecard which will measure NFL key business drivers and generate a tremendous focus towards being a results-driven organization. ……oOoOo(((THE END)))oOoOo……