XYZ Frozen Food Company – Improving Strategy Litmus’10 Sync Quest – Case Study Competition Team – FreshFreeze Institute – IIFT Delhi Anuj Bansal Vini Soni
XYZ Frozen Foods XYZ Segments Domestic Institutional Export • Domestic Retail Market • Hotels & fast food Chains • Big supermarkets in US & Europe Revenue Turnover Total Market in cr Rs Growth Market cr Growth RsDomestic 70 25% 800 35%Institutional 25 30% 700 35%Export 5 10% 500 40%
Fresh Freeze - IssuesDomestic Institutional Export Others Absence Of Limited product Lower plantChicken & peas in Portfolio efficiencies portfolioPlant located far Limited Business Limited Brand from markets Develoopment Lack of Export Recognization Certification to UK the biggest export market Low manpower Logistics Cost Limited Product skills in some high Development segments Financial losses Limited Quality Issues due to poor Distribution margins
Fresh Freeze – SWOT Analysis Strengths Weakness •Strong Market share in •Limited product portfolio Indian bread segment •Plant location inappropriate •Strong brand perception in •Limited Product East India development •Skilled manpower in Bread •Quality issues Segment Opportunities Threats •Market growth high in all •Domestic competition is segments growing at a much faster •Technological advancement rate as Rapid Buy •Stiff competition by •Website will improve the international players communication between •Competitors operating on company and the low costs distributors and the institutional buyers
XYZ Focus• Focus is on holding of the current Size market shares in all the markets Domestic Share 2009- XYZ share 2010 along with the % of market XYZ not catering on account of the products Green pees and Chicken 40% 320 0% share(un-served) and export license unavailability. 480 14.6%• Institutional and the Export markets Served share of market can not be neglected as 40% and Institutional 70% of market is un-served. 40% 280 0% Chicken Share un-served• Also 40% of domestic retail market is un-served. 420 6.0% Served share of market• Chicken important segment left un- Exports catered(Refer to Exhibit 1 ) 70% 350 0% UK un-served 150 3.3% Served share of market The strategy is to get the XYZ into un-served markets and capture the market share to grow XYZ and increasing its revenue along with the profits.
Roadmap: Way Forward Distribution• 2010-11 Revamp • 2012-13 Advertisemen • 2014-15 Website start t increased & functioning Rapid Buy Continuous growth Set up a Export License Purchase and market to UK acquired analysis to increase plant in Stabilization the stronghold on North-West of system the market with region improving the • 2011-12 • 2013-14 product development.
Assumptions• The new factory setup started working immediately.• The new factory has the infrastructure for the Chicken and Green pees. Also the setup has all the latest technology for the frozen food segment.• The factory setup is in the north-west region of India so as to lower the logistics cost.• The skilled labor is easily available as the region is hub for the frozen food segment companies.
New Factory Setup: Reasons New factory set up is required in order to competeOld Setup Problems New Setup• Green Pees and • 40% of domestic • Latest with the other chicken facilities not available. retail and institutional infrastructure with all market players• Infrastructure not market unserved. backhand and keeping the available for • Market share support. product decreasing yoy • Easy & Cheaper company afloat. development and on account of distribution and Quality issues. stiff competition. procurement on• Location away • Higher logistics account of from the frozen cost decreasing nearness to the food market. margins. markets. • Better Plant efficiency
Distribution – XYZ VS Competitors Distribution systemXYZ Competitors requires a revamp in order to have more market penetration and better approach to all the markets.
New Distribution Strategy Domestic and Export InstitutionalCompany•New facilities facilitate production of the Company ethnic indian food along with chicken and pees to capture the new markets. • Taking the direct orders from the institutional buyers. Distributors •Giving the distributors the higher margins to push the products. Institutional Buyers • They give their demand to the company directly Retailers and will get the direct •The retail chains are collaborated where supplies to increase the there are some warehouses are present margins and the cost otherwise supplied through the effectiveness. distributors. The new distribution network will be set up in the first year time so that the benefits can be reaped from the second year i.e. 2011-12 onwards.
Exports License: Buy or Not Buy the license inBuy Not Buy second year when the new plant and the distribution system gets stabilized.
Assumptions: New Business Model• XYZ share in the products earlier absent will grow subsequently to get the share equal to the share in already present products in first three years, on account of the goodwill and the high quality products.• Employee cost decreases on account of the new sight with available skilled labor to 5% in the sec year and to 4% industry standard by third year. The employee cost is kept higher then the industry standards to attract better skilled labor.• Revenue grows by the 25% first year then reaching the industry growth rate on account of new facilities and the new distribution system in the sec and third year .• Revenue growth increase by 5% extra then the industry growth rate in the last two years on account of the extra spending on the adv and the installation of the ‘RapidBuy’ system and online ordering from the institutional buyers and distributors.
New Business Model: Way to get Funds Own Investment Bank Loan 90 90 80 80 70 70 60 60 EBIDTA EBIDTA 50 50 40 40 30 30 20 20 10 10 0 0 -10 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 -11 -12 -13 -14 -15 -16 -11 -12 -13 -14 -15 -16 EBIDTA without UK EBIDTA without UK 1.39 5.1 12.19 25.8 37.97 74.24 -1.61 5.1 15.19 30.8 46.97 74.24 License License EBIDTA with UK EBIDTA with UK 0 3.2 11.5 24.93 37.52 80.84 0 2.7 15 31.43 49.02 80.84 License License The money is taken out by the family The money is taken on loan from the bank members itself and then repaid in terms of for the New Factory setup and Export equal installments every year.(for New license. The money for the RapidBuy comes Factory setup, Export license and from the increased Adv spending. RapidBuy). The loan is repaid at 10% interest with 10%, 20%, 30% and 40% of loan in the 1,2,3Refer to Exhibit 2 (calculation excel sheet for further details) and 4 years resp.
New Business Model: Highlights• The money to be invested will come internally from the XYZ firm or will be loaned from the bank.• The EBIDTA is high in case of internal investment on account of non payment of the interest but the opportunity cost will be forgone. So the decision will be taken on account of opportunity cost and the interest rate.• The company become profitable in the second year.• The company crosses 500 cr mark in the fourth year itself and continues to grow at good pace. Refer to Exhibit2(calculation excel sheet for further details)
Rapid BuyPros• Real Time Customer Interaction & Customization• Improved Distribution with all databases of orders & deliveries• Possibility of tracking items during transit• Cuts Costs & minimizes errors in ordering• Provides a comprehensive record of each transaction also reduces paperwork• Better efficiency & Time management• Provides purchase and fulfillment data which can be analyzed for spend patterns and supplier performance• Easy to use & implement, Flexibility and Reliability Cons • Presently a financial constraint for XYZ • High Maintenance Required • Bad review ( Glitches leading to customer dissatisfaction)
Increasing AwarenessA Consumer Website• Offering product information, nutritional information and preparation techniques for XYZ company.• Doing surveys with the distributors, consumers and buyers for the latest updates.• Tools to find nearby distributor• Tool providing automated reporting of commodity allotment credits • Eg When a fast food chain buys a contract , if they are member they can get number of credits on the buy. They will get rebates on reaching a particular amount and also can check their balance onlineNewly Designed Packaging• Developed with a combination of appealing graphics and high product visibility to inspire consumer confidenceIntegrated marketing –• Mass market approach which would target a closely tracked response comment.• Targeting customers based on industry segment by sending information and offers on products that suited to their classificationIncreasing customer contact frequency and directness• Multiple monthly email campaigns, including regular product updates and an information-heavy quarterly newsletterSurveys• Getting food preferences.• Getting the preferences of the consumers what features they want, so that the changes can be made as per their likings.(Refer Exhibit 1)
Exhibit 1• You can view the published form here:Survey Form• Survey Results Summary