Marketing Report On Fruit Juices - -murree Brewery

Marketing Report Submitted By:

Muhammad Humayun Maqbool MBA 20 ( C ) – 3850 SUBMITTED TO

PROF. DANISHMAND

FACULTY OF MANAGEMENT SCIENCES DEPARTMENT OF BUSINESS ADMINISTRATION INTERNATIONAL ISLAMIC UNIVERSITY H-10 ISLAMABAD

SUBJECT OF THE PROJECT To analyze and compare the marketing strategies of different concerns of same industry

INDUSTRY

Foods and Breweries

PROJECT PROFILE Opportunity Rationale The fruit juice industry coupled with beverage industry is considered to be one of the largest industrial sectors in Pakistan. It is to growing at a robust rate of 27%1. Modernization of this industry, in consonance with the change in urban life style, massive shift of rural population to the urban areas, growth in population, etc., predict a growing potential for instant solutions in fruit juice segment of the beverage industry. Traditionally in Pakistan and generally all over the world people prefer to use natural drinks rather then carbonated soft drinks and this perception is gaining more currency day by day which also adds to the advantage of the fruit juice industry. Common people especially young generation is inclined to have ready to consume drinks; in addition hotels, hospitals are also expanding day by day where juices could be marketed successfully. Moreover the global trend of preferring fresh fruits and juices also marks possibilities of growth in this sector. Furthermore, the growing exports volume and withdrawal of CED (customs and excise duty) on fruit juices (produced locally) could further supplement significant growth in the fruit juice industry.

Project Brief Fruit juices are produced and consumed for their refreshing character and nutritional qualities being rich in vitamins and minerals and having regulatory functions to the body systems; such as augmenting of alkaline reserve of the blood and proper functioning of blood vessels, including capillary, permeability and fragility as a result of contained falconoid. Juices also increase body retention of calcium, magnesium, nitrogen and are also good sources of quick

energy. These qualities need to be maximized in technologies used to process fruit juices. Juice is generally defined as liquid extracted from the fruit, although many fruit juices are the results of expressing the liquid from the whole or cut fruit. There are some fruits where the distinction is not so apparent, e.g. fruits like mango, apple and banana when squeezed yields little or no juice; rather flesh is obtained which when comminutes will result in a dense puree and directly cannot be consumed as drink. Whereas in case of lemon, expressed fluid cannot be called juice, it is too sour to consume and can only be used as juice when diluted with sugar and water. For commercial purposes, procedure involved in juice manufacturing varies from fruit to fruit.

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 Murree Brewery company Limited

Introduction of the Murree Brewery Company Limited The Murree Brewery Company Limited was incorporated under the repealed Indian Companies Act ( Now Companies Ordinance 1984) in February 1861 as a public limited company in Pakistan. The shares of the company are listed on the Karachi, Lahore and Islamabad Stock Exchanges. The registered office of the company is located in Rawalpindi. The company is principally engaged in the manufacturing of alcoholic beer, non alcoholic beer, Pakistan Made Foreign Liquor (PMFL), juices in Tetra packs in Rawalpindi and food products, juices glass bottles and jars in Hattar.

The Company is now operating three divisions to carry out its principal activities namely Liquor Division, Tops Division and Glass Division.

History Consequent to the British annexation of the Punjab in 1849 from Sikh rule, and more so after 1857 when the British Crown formally extended its sovereignty over India, a structured administration commenced in the Punjab. To meet the beer requirements of British personnel (mainly army), the Murree Brewery was established in 1860 and incorporated a year later at Ghora Galli, located in the Pir Punjal range of the Western Himalayas at an elevation of 6000' above sea level, near the resort town of Murree. Between 1885 & 1890 the Company established Breweries in Rawalpindi & Quetta & acquired an interest in the Oticumand (South India) & Norailiya (Ceylon) breweries. A distillery was also established in the above period in Rawalpindi next to the Brewery. The Murree Brewery at Ghora Galli was therefore among the first modern beer breweries established in Asia. Murree Beer proved to be very popular among the British troopers who were largely barracked in the 'Galis' of these hills. A division of the Company was established in 1969. It processes fruits and markets fruit juices and allied food products. Two manufacturing units are located in Rawalpindi and Hattar (NWFP) respectively. A Tetra Pak packaging facility was added in 2001. The Hattar plant was installed in 1992. The plant is based on a Recuperative Melter and two Emhart I.S. container manufacturing machines and has the latest quality control equipment for online inspection of containers.

The Murree Brewery is one of the oldest public companies of the sub-continent. Its shares were traded on the Calcutta Stock Exchange as early as 1902, and is now the oldest continuing industrial enterprise of Pakistan. In 1997-1998 and 1998-1999, we were judged among the top 25 performing public companies by the Karachi Stock Exchange.

VISION STATEMENT Our office is in the Market

MISSION STATEMENT We the people of Murree Brewery Co. make personal commitment to first understand our customers requirement then to meet and exceed their expectations, by performing the correct tasks on time and every time through with CARE

Continuous Improvement Alignment of our missions and goals Responsibility and respect of our jobs and each other Educate one another

MOTTO We respect our past. We are the industry leaders in present and accept the challenge of the future.

(A division of the company, established in 1969) Tops Food and Beverages a division of the Company was established in 1969. It processes fruits and markets fruit juices and allied food products. Two manufacturing units are located in Rawalpindi and Hattar (NWFP) respectively. A Tetra Pak packaging facility was added in 2001. The Hattar plant was installed in 1992

Product Include: • • • •

Fruit Juices (Mango, Orange, Lychee etc.) Fruit squashes(Mango, Orange, lemon & Diet) Conserves( Apple & Strawberry Jam, Orange Marmalade) Vinegar ( Malted & Plain)

HIERARCHY

FINANCIAL OVERVIEW OF THE COMPANY

Turnover of the company for the last year is at Rs 2541 million shows an increase of 13.38% from the previous at Rs 2241 million. Profit after taxation of Rs 196 million is 4.25% higher than the last year.

Change in Profitability of the Company •

Tops Division

The turnover of this department reflects an increase of Rs. 180 million (16.8%) over the previous year. The following table shows the change in profitability and sales 2008 Liquor Division

%

2007 Liquor division

%

Sales exclusives of taxes

531

557

Cost of Sales

460

86.62

485

87.07

Gross Profit

71

13.37

72

12.93

Operating Profit

6

1.12

8

1.44

The profit and loss account of the tops division for the year 2007 and 2008 shows the best picture of the profitability of the company’s Tops Division.

OPERATIONAL PERFORMANCE 400

Rupees in millions

350 300 250 Gross Profit N.P after Tax

200 150 100 50 0 FY 05

FY 06

FY07

FY08

Equity Table 1200

Rupees in Millions

1000 800 600 Equity 400 200 0 FY 03

FY 04

FY 05

FY 06

FY FY09 07

MURREE BREWERY COMPANY LIMITED

Profit and loss account for the year ended 30 June 2008 Tops Division

SALES Third Party Sales-net Inter Divisional Sales Duties and taxes COST OF SALES Third Party Inter Divisional

2008 Rs in 000 633,599 ----633,599 102,114 531,485 319,864 140,717

2007 Rs in 000 652,432 ----652,432 94,987 557,445 330,298 155,537

(460,581)

(485,835)

Gross Profit/Loss

70,904

71,610

Other Costs

64,639

63,993

Net Profit before Taxation

6,265

7,617

Note* from the above profit and loss account it is clearly shown that the company has a positive change in the turnover of its tops division but the duties and taxes are

also change in a high rates. The cost of sales is low than the previous year. But the net profit of the company has gone down. That is the negative change in the profit. But if the overall income statement is compare then the net profit of the company (including all its three departments/divisions) it has a positive change. i.e; In 2007 In 2008

Net profit is Net profit is

259898 million rupees 296616 million rupees

EARNING PER SHARE OF THE COMPANY

Earning per share for the current year is Rs. 16.42 against Rs. 15.73 last year.

DIVIDEND

The Board has recommended Cash Dividend @ 50% and Bonus Shares @10%.

FUTURE OUTLOOK OF THE COMPANY The management is conscious of the fierce competition in the industry, but confident that the company will retain its market share and is optimistic in achieving budgeted goals for the current year. The company is continuing its policy of balancing and modernization by reviewing production procedures replacing old machines and controlling costs.

Murree Brewery 5 years at a Glance RUPEES IN MILLIONS Sr. No 1 2 3 4 5 6 7 8 9 10 11 12

Particulars

2008

2007

2006

2005

2004

PAID UP CAPITAL RESERVES AND SURPLUS FIXED ASSETS LESS DEPRECIATION SALES WITH TAXES COST OF SALES WITH TAXES GROSS PROFIT PROFIT BEFORE TAX CASH DIVIDEND % STOCK DIVIDEND % RETURN ON EQUITY % BREAK UP VALUE OF SHARE OF RS. 10 EACH EARNINGS PER SHARE (EPS)

119.2 889.2 2906

108.4 746.5 743.8

98.58 610.3 773.6

89.62 508.30 636.14

71.70 396.59 567.81

2541.2 2034.5 506.7 296.6 50 10 21 84.54

2241.4 1829.3 412 259.8 50 10 24 78.84

1678.5 1373.5 305.4 214 50 10 22.66 65.34

1142.73 895.23 247.50 169.32 50 10 21.89 60 .65

910.3 718.72 191.91 121.60 35 25 198 0 65.32

16.42

15.73

13.65

12.12

9.84

Advertisement /Promotional Activities and Demand Creation

The marketing and promotional activities of fruit juice and related commodity groups are crucial in increasing the demand for fruit juices. These activities include, but are not limited to, promotion, advertising, new product development, and packaging innovations. Marketers adopt their strategies in accordance with specified consumer wants and needs. They also create product image and influence consumer purchases. Often, consumer demands for processed food like juices are difficult to categorize. Consumers tend to purchase products and services that cover a broad spectrum of price and value combinations. Servicing the educated, nutritionally aware consumer who dwell in the localities i.e. E-8, F Sectors of Islamabad, Blue Area etc. and same type of Consumer category in Lahore and other metro cities is a complex role which marketers strive to master. In these types of areas people use to have a pure fruit juice at least once a day, with an imported or prime local fruit juice. Similarly this market could be catered through intensive marketing and promotion campaign on television or other sophisticated media. New product developments in conjunction with technological advancements have Improved the marketing of fruit juices like many other food items. Relatively recent innovations appearing on supermarket shelves are single serving aseptically packaged fruit juices, fruit roll-ups and fruit juice blends. Marketing infrastructure, which includes refrigerated transportation facilities and the composition of retail and wholesale markets, is correlated to the consumer demand for high quality produce. Equipment that transports from the field to the supermarket, field wrapping machines, improved cooling techniques, and temperature controlled distribution centers have been developed to ensure the delivery of quality produce to retail outlets. It is also important to ensure that the product has a meaningful point of difference i.e. sophisticated and healthy attractive packaging, less use of preservatives and clearly mentioning of purity of the juice etc. Most new products fail in the market because they are "me-too" products with no unique benefit (or attraction) for the consumer. Generally for the fruit juice business advertising budget is around 5% of the Total Revenue but for a small or medium scale unit, it may vary (on the higher side). Billboards, Television, Radio, F.M Channels, and Newspapers are the conventional mediums, which have been powerfully used for the promotion of fruit juice products.

Different Accounting Policies of Company:

1-Taxation policy of the Company

Income tax on the profit or loss for the year comprises current and deferred taxation. Current and deferred tax in recognized in profit and loss account except to the extent that it relates to items recognized directly in equity in which case it is recognized in equity.

Current Taxation policy:

Taxation charged in the financial statements is based on taxable income at the current rates of taxation after taking into account tax rebates and tax credits, if any.

Deferred:

Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax is calculated at the rates that are expected to apply to the period when the temporary differences are expected to reverse, based on tax rates that have been enacted at the balance sheet date. Deferred tax liabilities are recognized for all taxable temporary difference and deferred tax assets are recognized to the extent that it is probable that sufficient taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilized. At each balance sheet dates, the Company re-assesses unrecognized deferred tax assets and the carrying amount of deferred tax assets. The company recognizes the previously unrecognized deferred asset to the extent that it becomes probable that future taxable profits will allow the deferred tax asset to be recovered the company conversely reduces the carrying amount of deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to the benefit of part or all of the deferred tax asset to be utilized.

2-Staff retirement benefits

The company operates the following retirement benefit schemes for its employees: a) Defined contribution plan: The company operates a Provident Fund Trust for which the company and the employees contribute equally @ 8.33% of the basic salaries of employees. The Company’s contribution is charged to profit and loss account. b) Defined benefit plans The company operates pension and gratuity plans for its eligible staff. The pension plan is funded while the gratuity plan is unfunded. The liabilities under the plans are determined on the basis of actuarial valuations carried out by using the projected unit credit method. The company has a policy of carrying out actuarial valuation after every two years. Latest valuations were conducted as of 30 June 2007. Significant actuarial assumptions are as follows: • Discount Rate 10% • Increase in Salary 10% • Mortality Rate EFU 61-66 morality rate

MARKETING STRATEGIES OF THE COMPNAY: MARKETING STRATEGY OF THE COMPNAY IS BASED ON THE FOLLOWING POINTS……………… FIRST COME INTO KNOW ABOUT THE WHO ARE OUR CUSTOMERS AND WHAT ARE THEIR REQUIREMENTS • • • • • • • • • • • •

What do we really know about their needs, preferences, behavior and their life styles? What can we offer them... at a price... that other companies do not? How do we perform in comparison to our competitors? How are we currently performing for our customers? Where are the gaps, the weak points, the fudges, and the point of excellence... the USPs (Unique Selling points)? How are we different? Why are we different? How can we better delight? How do we change? What do we change? How clever are we with our market intelligence? How well is our market research working?

Consider groups who share a similar need and who will respond in a similar way. • • • • •

Design a Marketing Strategy To achieve specific marketing objectives, based (e.g.) on the Marketing mix. Set Tactical Plans, Budgets, Programs Assign individual responsibilities to achieve the objectives. Monitor Progress

PRODUCT STRATEGY Murree brewery is aimed to have a good quality of products and it is providing different types of liquids to upper class, middle class and low class people. The company believes that whatever we provide to the customers should be the best for them. They should get the maximum satisfaction in this product. Murree Brewery has launched a new product Big Apple which is now being used at a large scale in the whole country. The company provides Beers to the upper class that has the authority to do so. They have energy drinks and soft drinks.

PRICING STRATEGY Company has 15 different types of juices, which come into jars, bottles and packs. The have to maintain a price which is affordable to the customers and which is profitable to them, it appears that they have position their product pricing in such a way that their main focus is middle and upper middle class. However, they have some selected range for upper class as well. Productwise price list enclosed in appendix for reference.

PROMOTION S TRATEGY They believe that print media and out door activity help them to reach to their target customer. Due to satellite transmission and having multichannels, it does not pay one unless you have very huge budget to spend on this media. On promotion, their spending is more on putting banners on the roads, on bridges and sometimes on the newspapers. Since it pays them and there is direct relationship between sales and consumer.

DISTRIBUTION STRATEGY Tops has nationwide users so they have to arrange dealers in the every city. They have their branch offices in Karachi, Lahore, Islamabad, Faisalabad and all the major cities of Pakistan so that one can get easy delivery of their product easily in every city or village of country. provide quick and timely delivery to their dealers: they have got big warehouses located in almost all

big cities and towns. Whenever they get order from the dealer they try to provide supplies to their dealer from closest warehouse. They believe that, timely delivery of their product to the dealer, is one of an important element in their success in Pakistan.

PRODUCT LIFE CYCLE It is one of their missions to provide quality product to their customers. Therefore, they ensure that every product, which is delivered from their factory, must go through rigorous quality check. So that only perfect product, free from any defect is delivered to their customers

“So, when it is delivered to the customer, it must meet customer's expectations”