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Engro foods distribution channel


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Its a engro foods Marketing channel report.

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Engro foods distribution channel

  1. 1. 1 | P a g e Marketing Channel project Organization: Engro Foods Ltd. Brand: Olper’s Milk Marketing Channel project submitted in partial fulfillment of the requirement for the degree of MASTERS IN BUSINESS ADMINISTRATION (Professional) 3rd Semester By Fezan Akhtar MBAP-F13-19 Faisal Saeed MBAP-F13-07 Hina Shaheen MBAP-F13-10 Faiza Manzoor MBAP-F13-15 Uzma Latif MBAP-F13-06 Asia Yasmeen MBAP-F13-25 Faculty Of Management Studies THE SUPERIOR UNIVERSITY LAHORE Campus, Okara, Pakistan Date of Submission, 24-1-2015
  2. 2. 2 | P a g e ACKNOWLEDGEMENT First of all we are thankful to almighty Allah for giving us the strength, courage, tolerance and wisdom to bring this report to completion. The constant support of our family, friends and acquaintances has also been a big help. My teacher “Mr. Inam Gilani” was always there to help us and give us constant guidance and assistance and make us follow the right path and give us the right lead and boost up whenever needed. At Engro Foods Limited, we would like to mention the names of 1. Mr. Usman Faique Ali khan (National sale & Logistics Manager Dairy) 2. Mr. Mian Ahmad (Supply Chain Manager) 3. Umair Majeed (H.R Manager) Who told us what to do and how to do it, without their guidance this report would not have been possible. All the staff at EFL was very welcoming and helpful in nature.
  3. 3. 3 | P a g e Table of Contents Executive Summary…………………………………………………….……….04 History of Engro………………………………………………….……………..05 Vision/Mission………………………………………………………………..….05 Introduction Engro Foods Ltd.……………………….…………………….…..06 Brands & Our Affiliates…………………..……………………………….…….06 Engro Foods, values, Vision, mission………………………………….………07 Introduction of Olper’s milk & Brands…………………...……...……….……08 Current state of Olper’s milk Channel…..……………………………………..09 Channel of Olper’s Milk…. ………………………………………………….…10 Segmentation, Targeting, Positioning,.……………….………………….……..11 Packaging…………………………………………………………………….….12 Warehousing……………...……………………………………………………..13 Gap Analysis of Olper’s Milk…………………………………………….14-15-16 Power and Conflicts ………………………………………………….………17-18 Suggestion and Recommendations…...…………………………………………..19 Conclusion ……………………………………………………………………….20 References………………………………………………………………………...21
  4. 4. 4 | P a g e Executive Summary The report is an attempt to highlight the contribution of Engro foods Limited in FMCG sector of Pakistan. This report also highlights the current position of Olper’s milk in Pakistan market, identified the current state of distribution channels used by the Olper’s milk in Pakistan. We went through various reports about Olper’s milk in order to analyze the current state of channels used by Olper’s milk. This report analyzes Olper’s milk marketing channels by identifying the structure, Types, intensity of the concerned channel. Olper’s milk provides easy product availability to its product users by using a channel flow, or by its channel members described in the report. The report also contains demand for service outputs, segmentation, or Gap analysis in order to describe the current state of channels used by Olper’s milk. The report also chalks out some valuable suggestions for the betterment of Olper’s milk. The report concludes that Olper’s milk has a very bright future ahead provided that if focused on customers demand by product research, used advanced technology, going for value addition, minimizing costs factor, going for forward and backward linkages.
  5. 5. 5 | P a g e History of Engro: Engro Chemical Pakistan Limited is the second largest producer of Urea fertilizer in Pakistan. The company was incorporated in 1965 and was formerly Exxon Chemical Pakistan Limited until 1991, when Exxon decided to divest their fertilizer business on a global basis and sold off its equity of 75% shares in existent company. The Employees of Engro, in partnership with leading international and local financial institutions bought out Exxon’s equity and the company was renamed as Engro Chemical Pakistan Limited. Engro is a public limited company listed on the Stock Exchanges of Karachi, Lahore and Islamabad. The principal activity of the Company is manufacturing, purchasing and marketing of fertilizers. The Company is also involved in the production and marketing of seeds and has invested in joint ventures engaged in chemical related activities. As part of its diversification strategy, controlling interest was acquired in a company offering industrial solutions in automation and control. A new milk plant has been established at Sukkur the milk is branded as Olpers. Mission Statement: Engro is progressing day by day because they have a vision and mission the keeps the motivated and keeps them going. Their mission as they describe as: “Our mission is two fold, to help farmers maximize their farm produce by providing quality plant nutrients and technical services upon which they can depend. To create wealth by building new businesses based on company and country strengths in petrochemicals, information technology, infrastructure, food and other agriculture sectors.” And further describing the adoption fashion they say,” In pursuing the mission we shall at all times be guided in our conduct and decision making by our core values.” Vision Statement: Engro’s vision is “To be the premier Pakistani enterprise with a global reach, passionately pursuing value creation for all stakeholders”.
  6. 6. 6 | P a g e Engro Food Ltd. Pakistan Engro Foods Limited is subsidiary of Engro Chemical Pakistan Ltd. which is one of the most reputed enterprises in Pakistan with more than 40 years of diversified business operations in the areas of fertilizer and chemicals. Engro Foods started its business operations in March 2006 and with the successful launch of Olpers Milk, Tarang, Olwell, and Olpers cream, it has established itself as a major player in the foods business. Engro Foods has already set up two processing plants at Sukkur and Sahiwal. With the ever expanding milk collection network and processing facilities, the Supply Chain has geared us for the growing sales of our products We believe that our recent successes will take us to our goal: To be one of the biggest players in the food business. Our aim is to dominate the food business, and to achieve this we will settle for nothing less than the cream! Brands Our Affiliates.
  7. 7. 7 | P a g e Our Values. Integrity We have an open disclosure policy and transparent processes. All our business activities / transactions are carried out honestly and with fairness. Our People Have passionate people with intelligent and firm approach towards business. To facilitate these people we give those challenging opportunities, training, fun loving environment, necessary resources and facilities. We publicly recognize our talent. Innovation Innovation is the way of life at EFL. It is valued, encouraged and rewarded in all aspects of our operations. Consumer Centric Consumer is the reason for our existence as a business. Vision Aims at transforming the company within the next five years into first a national food industry giant, then into a regional force and finally into a global player. Mission Build Branded food business to improve quality of life by offering tasty, affordable and highly nutritional products to our consumers while maximizing stake holders' value.
  8. 8. 8 | P a g e Product: Olper’s Engro Foods was established in 2005, and it is subsidiary company of Engro Corporation. Engro Foods launched its first product with brand name “OLPERS”. At that time other competitive products was widely available in market such as “Nestle and Haleeb”. In next coming months and years “OLPERS” gained preference in the market over established brands after launched due to its healthy features and properties of its product. Olper’s milk is EFL’s standardized and homogenized pure UHT (Ultra heat treated) milk with 3.5 % fat and 8.9 % solid non-fats. It is EFL’s premier brand, and the choice of quality-conscious consumers who only go for the best. It is available in easy-to-open, 6-layered Tetra Pak Brick Aseptic red packaging and comes with a 3 months shelf life. Available in 4 SKUs of 200 ml, 500ml, 1000 ml and 1500 ml value packs, today Olper's combines nutrition, value and taste to deliver an unforgettable consumer experience to every individual within every house-hold where the day begins with Olper's. After the success of “OLPERS” ,EFL (Engro Foods Limited) launched. Olper’s Brands:
  9. 9. 9 | P a g e Current State of Channel Channel Intensity for Olper’s Milk: EFL’s having an intensive distribution network for its product Olper’s in the Market. This product is available in all areas across Pakistan. In terms of distribution, having kicked off simultaneously in 20 cities across Pakistan, the launch has been ambitious and currently Olper’s is available in 80 cities across Pakistan. It reflects company’s intention to become a big player in the industry, both on a national and international level.EFL has its own distribution networks all across the Pakistan. EFL’s has divided Pakistan into five regions for milk distribution namely:  Karachi  Lahore  Islamabad  Peshawar  Multan Olper’s having its 350 Distributors all across Pakistan. They distribute the products to retailers who are engaged to provide products to ultimate end users. Olper’s Milk Industrial Marketing Channel Marketing Channels: Marketing means to get, retain and grow customer’s values Types of channels:  Services  Distribution  Communication ENGRO FOODS have distribution channels for supply goods to customers and this distribution channel is consist of wholesalers and retailers for the supply of OLPER’S milk. Level of channels: Olper’s milk has two level industrial channel.  Upstream(manufacturer)  Downstream(retailer) Engro foods use two level of channels for the supply of Olper’s milk to the customers which has manufacture and retailers manufacturer produce milk in form of milk pack and handover to the
  10. 10. 10 | P a g e distributors and distributors supply this product to retailer and then customers purchase this product from retailer. Channel Members of Olper’s Milk: EFL consist of following channel Members which provide its product Olper’s to the end user. It consists of manufacturer, Distributor, Retailer and customer. Manufacturer: Manufacturers are the producers of the products. Olper’s having 2 manufacturing plants across the Pakistan, working in Sahiwal and Sukkur. These plants are engaged in the working of taking orders, purchasing raw materials, produced finished goods, fulfilling orders and selling finished goods. If all the process of manufacturing goods have been completed the goods are supplied to distributors who supplied goods to retailers and then will be available to final consumers. Distributors: Olper’s having its own distributors all across the Pakistan. Their numbers are 350.They are engaged in the working of distributed products to retailers. Distributors share a fixed amount of commission from the company for distributing goods. In case of, Olper’s the fixed commission which a distributor received from the company is 4% of the total goods distributes. In case, if there is any risk occur from the goods distributed the cost is shared by the all channel members and also company. In case, of Olper’s distributors are the wholesalers of the company. Retailers: Retailers are the persons who received the products from distributors and than supplied to the end consumers. Olper’s having its distributors across the Pakistan which distributes all its products to retailers. Profit and risk also shared by the retailer as same as the distributors share. Through the hands of retailers goods are supplied to final consumers.
  11. 11. 11 | P a g e Customers: Customers are the end users of the products of the company. They received final products from retailers of their particular areas and so on. Olper’s provide a spatial convenience of products availability to its consumers on time. Company prepares its products according to desire of the consumers in order to get a competitive edge in the market. So, in order to succeed it will be necessary that products are made according to desire of the consumers, especially focus on consumers’ feedback. Segmenting and targeting the market for Olper’s: The milk sector shows a market that has homogeneous preferences that is the consumers have similar preferences. They want milk to be white, carefully processed, and good for health and bones. Keeping these things in mind Olper’s market has been segmented. The marketers at Olper’s have had a number of options available to them when segmenting the market for their products. So far the company has introduced three new products, Olper’s milk, and Olwell diet Milk, and Olper’s cream. Demographic Segmentation: Olper’s products are not bounded to any particular age, Gender or lifecycle stage. The brand is meant for all the users in higher, upper and middle class families. Psychographic Segmentation: On the basis of psychographics, factors such as personality traits, lifestyles and values, the marketers at Olper’s have segmented the market more towards achievers who are goal oriented and focused on their careers, and experiences those who are seeking variety in the milk sector. Behavioral Segmentation: Olper’s products have been segmented on the basis of benefits that consumer’s seeks. In case people, look for a brand that can be used for all purposes from drinking to tea whiteners as well to feed the animals. For this purpose marketer needs loyalty in their products through ads. Positioning the Brand: The marketers at Olper’s have decided to create its own unique image and then strengthen the position in consumers mind.  A unique packing of Olper’s milk (Red color) is attractive than any other products.  A unique tagline for those who lives life to the fullest.”Jo dil khol k jeety hain unheen k liay hay Olper’s”
  12. 12. 12 | P a g e Packaging: EFL is dependent upon Tetra Pak for the packaging of its entire dairy products. Tetra Pak is the only option available to Olper’s for packaging because it is having monopoly in the packaging sector in Pakistan As far as milk is concerned packaging is very important. It is perishable item which requires special packaging to preserve it for few months. To meet this objective Olper’s delivers fresh milk to its customer via using tetra Pak, without sacrificing in health measures. Engro Foods have following objectives in mind regarding packaging of Olper’s:  Result in the lowest possible weight and volume of packages whilst still maintaining pack integrity.  Take into account new packaging materials and processes that reduce the impact on the environment of unnecessary transportation.  Avoid the use of substances that can adversely impact the environment during packaging production and disposal.  Decrease packaging waste at all stages in the supply chain, including package manufacturing, utilization and disposal.  Increase the use of recycled materials wherever possible, and increase the recyclables and compatibility of packages with existing waste management schemes.  Packaging materials are Stored in a dry place away from manufacturing areas and it is used in a clean and sanitary manner which is non toxic  Packaging is carried out in away that avoid contamination of processed products. And also protects the product against contamination until the product reaches the consumer.
  13. 13. 13 | P a g e Warehousing  The company has three warehouses out of which two are located within the production plant i.e. in Sukkur & Sahiwal and the other being the central warehouse located in Rawalpindi.  Sukkur warehouse having a capacity of 1.6 million liters with a daily average dispatch of 350,000 liters & a pallet capacity of 2000.  Sahiwal warehouse having a capacity of 4 million liters with a daily average dispatch of 400,000 liters & having a pallet capacity of 5000.  They are having a cross dock warehousing system at Mairpur and it is being operated by transporter himself.  Using pallets to stock the cartons.  Each pallet has a capacity of 800 liters.  Fork lifters are used to stock the pallets to the desired dock  The temperature of the warehouse should be maintained at 25-28 degrees in order to keep milk in its fresh condition.  Because of its perishable nature they are using the FIFO inventory system.  There is a climate control system in there warehouses as the temperature of Sukkur & Sahiwal shoots up to 45 degrees in summers.  They are maintaining 6-7 days safety stock.  Once the packaging is done the milk is stored in equibator for three more days in a warehouse before loading it on the truck to make sure that the quality of the milk is up to the standard
  14. 14. 14 | P a g e GAP ANALYSIS OF ENGRO FOODS Engro food is not zero based organization and gap analyses of this organization are discuss here Two types of gap are given below  Demand side gap  Supply side gap Demand Side Gap Analysis:  BulkBreaking:  It’s available in small quantity which customers need or desired.  Available in each small pack In case of Olper’s there will be bulk breaking because if customers needs milk in small packs the company provides them, so SOS=SOD  Spatial Convenience:  It reducing the customer transportation cost and search cost of this product.  Easily available at different stores and shopping centers. The company provides spatial convenience of its products Olpers to its customers from where they ordered? This product is available at any place where the customers required on time. SOS=SOD  Assortment variety: VARIETY:  It is available for every class of people  Different product line are available like;  Olpers milk  Olpers cream  Olpers flavoured milk  Olwell
  15. 15. 15 | P a g e  Assortment:  Different categories of this product are available.  Depth of this brand is also available Company provides products variety to its customers at any place or anytime. So SOS=SOD  Customer service:  Sales and profit is high.  Customer can easily purchase but Customers claims are not done on time so, customer services are not good. SOS<SOD  Information Provision:  Product attribute is available.  Usage capabilities also available. Company provides information to its customers if required also provides purchase service, SOS=SOD Supply Side Gap Analysis:  Physical Possession: In case of Olper’s storage delivery cost is bear by the company at 50% of the total cost. Products are stored in warehouses as well as supplied to Distributors, or retailers which compensate rest of the cost of products.  Ownership: Company supplied its products to distributors which provide them to final consumers. So, all channel members faces inventory carrying cost until product is given to consumers. To reduce this factor this is necessary that product is supplied to end consumer on time and company also manufactured products on time.  Promotion: Company while selling its product Olper’s in market bearing personal selling expenses through company’s promoters. The total cost on products selling is collected from channel members also. Company also faces the expense on advertising, public relations cost through its channel members.
  16. 16. 16 | P a g e  Negotiation: In case of Olper’s, time and legal cost is bear by the company or its channel members at 50% of the total costs of the products. This type of cost is bear if there is any conflict arises or case filed in courts. So, to reduce this cost it will be necessary that products delivery is made on time by the channel members of the company.  Financing: In case of Olper’s if a company selling its product to consumers received a payment from their side by its channel members. The company produced products on time and through distributors it will be reached to end consumers. After receiving the products payment is made by the consumers. So, there is no difficulty in making payment from customer’s side.  Risking: If there is any risk involved while delivering Olper’s product to final customers by the Distributors of the company cost of this risk is bear by the company’s distributors or retailers also by the company. Company if reduces its risk factor, made its product availability in a safe mode.  Ordering: In case of Olper’s the company followed Build-to-Order strategy. Company manufactured its products while customers’ ordered. This order is fulfilled on time and the delivery of products is done by the channel members of the company to final customers. In case, any default occur ordering cost is bear by the all channel members or also by the company.  Payment: In case of Olper’s products availability to final consumers is made on time and the customers made payments after receiving their desired products. If there is any situation arises where there will be bad debts, no collection of money from customers’ side, the cost is bear by all the channel members and also by the company. Producers Physical Ownership Promotion Negotiation Financing Risking Ordering Payment Wholesalers Physical Ownership Promotion Negotiation Financing Risking Ordering Payment Retailers Physical Ownership Promotion Negotiation Financing Risking Ordering Payment Consumers Industrial and Household
  17. 17. 17 | P a g e Ways to Reduce Supply Side Gap:  Reduce energy cost  Purchasing raw material at minimum cost  Efficient use of machinery  Reduce channel members  Reduce logistic cost  Purchase raw material at minimum cost Power and Conflict Characteristics Channel Conflict: Channel conflict is a state of opposition, or discord among the organizations comprising a Marketing channel. In individual, personal relationships, conflict is almost invariably viewed as something to avoid, a sign of trouble. Channel conflict is a behavior by a channel member that is in opposition to its channels counterpart. It is opponent centered and direct, in which the goal or object sought is controlled by the counterpart. Channel conflicts occur when one member of a channel views its upstream or downstream partner is an adversary, as on opponent. The key is that interdependent parties at different levels of the same channel (upstream and downstream) attempt to block each other. Major Sources of Conflicts in Marketing Channel: Domain Conflicts: This type of conflicts occurs if one of the channel members believes that the other channel member cannot pay its attention to his work, or not fulfilled his responsibility. In case, of Olper’s there is no domain conflicts arises between the channel members because each member is paying proper attention towards their work. This is the reason towards the success of EFL’s. Perceptions conflicts: Most of conflict occurs because of difference of perceptions of all the channel members at the same time actions are the different to the same situations.
  18. 18. 18 | P a g e Goals Conflicts: Each channel sets a goals which is difference from other channel members which creates a big conflicts among them they are necessary to set same goals. Channel powers:  Ability to control other channel members.  Necessary to implement to channel design.  Optimize use of channel for the benefit of all channel members.  Take action.  Exercise channel power. How to overcome channel conflicts: In case, any conflict arises between the channel members of Olper’s they have to reduce their conflicts in following ways:  Information-Intensive Mechanism is designed to head off conflicts by sharing information.  Co-optation is a mechanism designed to bring together representatives of channel members.  Compensating for lower volumes by higher commission rate, and vice versa.  A good relationship is developed between all the channel members.
  19. 19. 19 | P a g e Suggestionand Recommendation:  The shopkeeper complains that EFL is not providing replacement for the expired products, EFL should provide proper replacement to the shopkeeper to enhance the image of the company, and create better working relations with such an important stakeholders.  The activities like customer satisfaction day should be performed on regular basis so the company should know the feedback and satisfaction level of customers regarding the pro duct and the image of the company.  To build a regional ware house in Karachi that fulfills there supply side gap & to reduce upward logistics cost.  Should focus on the high chain distribution channel.  Olper’s milk should be available also in powders form.  If there channel zero base channels then there cost will be reduced and profit will be maximize.  They should adopted the decentralization in information system so that employees also take part in decision making.
  20. 20. 20 | P a g e Conclusion: Olper’s stand committed to sustainable business growth and ensure the safety of their people, assets and community in which they operate. They repute as a local giant actively involved with community welfare in remote areas has also been a positive add on for Engro Foods. Their direction for the brand (Olper’s) is considered one of the fastest growing FMCG brands in Pakistan. So, they acknowledge consumers for improving their product. Engro Food is a quality conscious company and customer focus company. Customer is its first priority. Engro launched only that product that appeal customers and satisfy customers’ needs and wants. An Engro food is also customer health conscious company. And their product fulfills also necessary vitamins. There is a need for development of good relationship and communication between all the channel members of Olper’s. The company’s success depends on its product development which will happen totally by the good commitment with all the channel members. The product supply is on time to customer so, there will be a good feedback from customer’s side and company will be succeeded.
  21. 21. 21 | P a g e References:      Book References:  Marketing Channel by Anne Coughlan