establishing haldiram in china/ hongkong


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establishing haldiram in china/ hongkong

  2. 2. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS CS – 1 Project Details  Basic premises:  Country of interest: People‟s Republic of China  Place of interest: Hong Kong (Special Administrative Region of PRC)  Period of interest: 2013- 2014  Industry: Fast food- Vegetarian Snacks and RTE (Ready To Eat)  Company: Haldiram Snacks Private Limited  Modus Operandi: Restaurant and exclusive retail 2
  3. 3. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Haldiram‟s – Mission, Vision & Goal 3
  4. 4. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Haldiram‟s – Brief History  Started as a one man shop in 1937 by Gangabisanji alias Haldiram Agarwal in Bikaner, Rajasthan.  Set up a shop in Delhi in 1982. By next decade became a Food Company synonymous with taste, hygiene and innovation.  Controls a domestic market share of about 30% in Namkeen sector.  Started exports in 2001. USA was the first market Haldiram‟s started exporting, mostly due to the large Indian population present there.  Today Haldiram's is a 4 Million dollar brand that is present across USA, UK, Middle East. Present in supermarkets the world over (eg. Tesco, Somerfield's, Spinney's and Carrefour. Haldiram’s today has become a way of life for Indians no matter which country they live in. 4
  5. 5. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Haldiram‟s – Awards & Certifications  Awards:  Haldiram‟s bagged the prestigious ‘INTERNATIONAL AWARD FOR FOOD & BEVERAGES’ awarded by Trade Leaders Club in Barcelona, Spain in 1994.  The Group has also to its credit ‘KASHALKAR MEMORAIL AWARD’ presented by All India Food Preservers Association (Regd.) in 1996 at its Golden Jubilee Celebration for manufacturing the best quality food products.  APEDA EXPORT AWARD 2001-2002’, awarded by Agricultural & Processed Food Products Export Development Authority for the outstanding contribution to the promotion of Agricultural & Processed Food Products during the year 2001-2002.  MERA DELHI AWARD – 2004’ for the exemplary contribution in the field of export  Quality certifications:  ISO 9002  HACCP 5
  6. 6. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Haldiram‟s - Journey 1937 • Shop in Bikaner 1982 • 1st Shop in Delhi 1991 • Split into three units • Haldiram‟s (Delhi) • Haldiram‟s Prabhuji (Kolkatta) • Haldiram‟s Nagpur (Nagpur) 1997 • Largest manufacturing plant for Namkeen‟s in Nagpur 2001 • Started Exports under Haldiram‟s International. • Presence in USA, Canada, Middle East, Africa, Afghanistan, Australia, New Zealand, Malaysia. • Today exports stand at $6 Million • Expected growth of 40% over the next 5 years. • Plans of Expansion in Algeria, Jordan, Yem en, Taiwan, Columbi a, Cyprus, Ukraine, Li bya, Sweden, Finlan d, and China. 6
  7. 7. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Haldiram‟s - Competencies  The Core competency of the company lies in  Food Taste – Traditional Indian authentic taste.  Food Quality – Best quality raw material and latest industry practices to create the taste while maintaining hygiene and contemporary packaging with increased shelf life & freshness.  Innovative – Branding of “Namkeens”, adaptability to ever changing trends, inventing and re-inventing themselves to maintain a competitive edge. 7
  8. 8. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Haldiram‟s – China Plan Entry Into China New Market – Old Product 2014 - 2018 – Exclusive retail store and restaurant. Branding as Traditional Indian Restaurant catering to the world. 2019 – Haldiram‟s brand establishment. Overcoming the breakeven point and maintaining profit margin of minimum 20%. 2020 - Chain of Retail stores and restaurants throughout China. 8 We start our analysis with the basic foundation work…..
  9. 9. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS China - Snacks market classification ► Traditionally the snacks industry was divided into chips and crisps, flavoured nuts, extruded snacks, ethnic snacks & popcorn ► Currently China‟s snack food industry technically involves seven sub-sectors : ► Biscuits and other baked foods ► Canned vegetables and fruits ► Candy and chocolate ► Cakes and bread ► Roasted seeds and nuts ► Preserved fruit ► Canned meat and poultry 9
  10. 10. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS PESTLE Analysis • Govt. efforts to raise quality and safety standards • Edible produce and processed goods are strictly controlled and regulated • Evolution of organic agriculture practices in China • Tight health regulations and other forms of lease versus licensed hawker restrictions Political • Consistently high GDP growth rate • Huge investment in domestic infrastructure and social welfare • Sales of branded food products is expected to grow from US $150 billion to US $650 billion by 2017 • The growth is anticipated to be in traditional areas such as baked foods, soft drinks, fast food etc. • In 2011, Hong Kong was ranked second in the “Ease of Doing Business Index” behind Singapore. Economic • Higher Urban disposable incomes and living standards • On average, 36% of household income is spent on food, but this can range from 47%, for the lowest income group, to 28% for the highest • Chinese consumers are highly focused on value • High growth expected in packaged food sales in recent future. • China„s rapid economic growth • Country„s changing consumption patterns, diets appear to be shifting to include more poultry, eggs, dairy products, fruits, vegetables, fish, and fats and oils • Consumers are demanding a wider variety of food products • Food retailing is moving from to modern ―hypermarkets‖, convenience stores and fast-food restaurants • Diet patterns indicate that snack time fits anywhere in between meals • Resident Indian community is quite large (20,444 as per 2006 census) Socio-cultural 10
  11. 11. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS PESTLE Analysis • Main legal aspects of business are: • Minimum capital requirements are stricter • Registration • The Ministry of Commerce deals with large projects • Provincial or local authorities handle projects with an investment less than $30 million. • Taxation • The rate of VAT is around 13% - 17%. • The general rate of national income tax is 30% plus local tax of 3%. Legal • China„s organic sector has seen rapid growth over the last decade • The market for Organic products is growing with consumer interest and demand. • Use of high technology in food storage, heating and production. • Large scale automation & consolidation of processing technology Technological • China has established three certification categories for eco-labelled food products: Green Food, Hazard-Free Food and Organic • China has developed 28,600 kinds of hazard-free agricultural products and set up 24,600 hazard-free production bases to date • Most stringent organic standards in the world • Consumers are concerned about environmental problems. • Chinese consumers are among the least likely to eat imported foods • China implemented a ban on plastic shopping bags in June 2008. • Growing demand of Organic food products Environmental 11
  12. 12. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Porter‟s 5 forces analysis Competitive rivalry within industry Threat of substitute products Bargaining power of the suppliers Threat of new entrants Bargaining power of consumers • High profitability levels: As per National Bureau of Statistics, China‟s fast food industry has already become the biggest and most attractive profit zone with a high profit rate • Low capital requirement: Compared with other industries, the fast food industry in china requires less capital, the majority of which is allocated to food materials and rentals • Low barriers to entry: Given that there are very few food patents, the barrier to entry is relatively low. There are no secret formulae or special cooking methods that would prevent entry • Minimum retaliation by incumbents: Although there are a few major players in the industry who enjoy large market share, nobody is able to play a monopolist to create large scaled attacks to new entrants High threat of new entrants • Medium perceived levels of product differentiation among different categories • Low switching cost: As most customers only search for fullness and taste through fast food, their switching cost could be very low when turning to a substitute • High buyer propensity to substitutes: Fast food consumers tend to be less loyal and change their choices frequently, which lead to a high propensity to substitutes. Medium threat of substitutes 12
  13. 13. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Porter‟s 5 forces analysis Competitive rivalry within industry Threat of substitute products Bargaining power of the suppliers Threat of new entrants Bargaining power of consumers • Many more buyers than sellers: The switching cost of buyers is very low thus making them very powerful. • Buyers are price sensitive: Since consumers have low brand loyalty and diverse choices, they would allocate more importance on price and tend to become sensitive to price fluctuations • High availability of substitutes: Most fast food brands have a large number of outlets, especially within popular districts, making different substitutes easily available. High bargaining power of consumers • Low degree of differentiation of inputs: As the inputs generally would be raw materials, the degree of differentiation can be very low • Supplier switching cost would be very low: As the number of suppliers is very high, the switching costs are low. Weak bargaining power of suppliers 13
  14. 14. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Porter‟s 5 forces analysis Competitive rivalry within industry Threat of substitute products Bargaining power of the suppliers Threat of new entrants Bargaining power of consumers • Large number of players: Competitors vary from large foreign and domestic multi- store food chains and snacks brands to single shops and roadside vendors thus making the competition very tough. • Medium diversity of rivals: Diversities with cuisine, operation pattern and business models are medium among rivals due to intense competition. Great intensity of competitive rivalry 14
  15. 15. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Competitor analysis  With regard to keen competition in fast food chain industry in China, we would like to analyze the competitive situation and relative advantages of “Haldiram‟s” by comparing with the established RTEs and restaurants. McDonalds KFC Burger King Subway Market share 18.1 % 44 % 0.2 % 0.2 % Branches More than 900 More than 2000 More than 12 More than 140 Food variety Hamburgers, chicken, french fries, soft drinks, coffee, milk shakes, salads, breakfast Fried chicken, grilled chicken, desserts, salads, big box meals, breakfast Burgers, fries, chicken, fish, salads, breakfast Large sandwich, salads, soups Positioning Be the customer‟s favourite place and way to eat To sell food in a fast and friendly environment that appeals to proud, conscious and health minded customers To prepare and sell quick service food to fulfil guest‟s needs more accurately, quickly, courteously and in cleaner environment Offer quality product that is made specific to individual customer‟s tastes. Target customers Family with kids without a lot of money Family with kids without a lot of money Young customers aged from 18 to 34 willing to spend more on higher quality product Mass public Foreign competitors- Fast food/ QSR/ RTE 15
  16. 16. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Competitor analysis Café de coral Fairwood Maxim’s MX Branto Market share 21 Data is not available Data is not available Negligible Branches 150 94 760 1 Food variety Chinese and western cuisines ranging from rice plates to sandwiches Chinese, Japanese and western cuisines ~ divided into breakfast, lunch, afternoon tea and dinner Chinese, Japanese, western, Vietnamese and Thai food, cakes, coffee, shakes Sandwiches, indianised chinese, south indian, pizzas and north indian. Positioning Quality product to customers at affordable prices Eat posh at Fairwood Bringing to customers a new menu, interior and dining environment in the fast food industry Indian pure vegetarian cuisines Target customers Customers that seek go od food, fun dining exper ience at affordable price s Customers aged 24- 35 who want to eat posh and have fun Specifics are not available Indian customers and curious foreigners and chinese Domestic competitors- Fast food/ QSR/ RTE 16
  17. 17. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Substitute analysis Mars Nestle PepsiCo (Frito Lays) Mamee Want want Market share 43 (chocolate) 7 (chocolate) 3.2 4.3 10 Portfolio Mostly into sweets and chocolates Mostly into sweets and chocolates Chips, wafers, popcorn, nuts Chips, wafers, popcorn, nuts Rice crackers Positioning Most chocolatey premium chocolate that gives a feel of “me time” Highlights the value of the products and the greater benefits it brings to consumers, stressing its superiority over other similar goods Creating high-end snacks as well as those that appeal to what it diplomatically calls “value” customers Providing nutritious food products of superior value and taste and offer a trendy innovative yet sensational eating experience Become china‟s and world‟s number 1 nutritional and healthy choice Target customers Customers aged 13- 40 Young and middle aged customers Young and middle aged customers Young and middle aged customers Young and middle aged customers Foreign and Domestic competitors- Snacks & sweets 17
  18. 18. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Haldiram‟s – SWOT Analysis • Brand Awareness among Indians • Variety • Quality and hygiene • Traditional Indian Taste • Efficient packing • Less advertising and promotion • Involved only in Indian snacks and flavours (packaged) • Outlets and restaurants are limited. • Not in services segment - online order / home delivery • Increase its reach – more outlets • Aggressive advertisement and promotion • Introduce organic products - health conscious segment • Home Delivery and online order for restaurant • International competitors – well organised • Local Players (unorganised) • Changing customer trends (health consciousness) • Inclination of Chinese towards Chinese & Japanese cuisine 18
  19. 19. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Strategies based on the Analysis done  Position Haldiram‟s as “high quality, healthy and hygienic” brand  RTE packaging to be done as per current government guidelines and consumer pro-environment expectation  Focus on organic raw materials  Enter PRC through Hong Kong based fast food restaurant & packaged food (RTE)  Promote as “value for money” by being healthy and tasty vegetarian snack  Promote brand as ethnic Indian specialties 19
  20. 20. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Strategy Selection •Lower Cost •Lower adaptation •Lower Cost •Higher adaptation •Higher Cost •Lower adaptation •Higher Cost •Higher adaptation Trans National Global Inter national Multi domestic Exporting Licensing Joint Venture Franchising Wholly owned subsidiary TypeofCorporateStrategy ModeofEntry
  21. 21. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Strategy Formulation – New Market  Project – Establish Haldiram‟s in the vegetarian snacks & meal market of China  What  Exclusive retail shop cum restaurant  Where  Hong Kong. It is one of the most densely populated cities with people from different ethnicities, esp. Indians  Why  China – most populous country in the world, 2nd in GDP. Snack food industry in china is RMB 3.5 Billion.  Culture of China – Outings in family of 6. Restaurant to serve Indian food tastes.  Increase in Urban Culture – Snacks on the go. 21
  22. 22. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Strategy Formulation – New Market  How  Packaged snacks to be imported from Indian Factory.  Raw material sourcing (Restaurant)  Establish contracts with whole sellers in market. Use Guanxi.  Build business ties with big local supplier companies for local and India import opportunities.  Use of local ingredients  Employees  Recruits from local area for reception, waiting and serving – avoid language barrier  Indian waiter especially for Indian customers.  Cooks from India to prepare authentic Indian food from the menu. 22
  23. 23. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Strategy Formulation – New Market  Traditional store design & Innovative Menu  Store to be made as per traditional Indian style  Additional decoration with respect to occasion - Chinese and Indian festivities  Restaurant menu to include primarily Indian food apart from Continental dishes  Special Offers during festivals  Drive through and 24 hour service  Starting of 24hr service to cater city‟s busy nightlife  Drive through for on the go customers.  Infusion of Tradition  Reception and waiters to be dressed in Traditional Indian attire except for Chinese festival occasions.  Special packaging for snacks during Indian and Chinese festivities 23
  24. 24. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Strategy Formulation – New Market  Target Customers  Indian Diaspora  Chinese looking to try traditional Indian food  Packaged snacks for busy working class  Foreign tourists, Business professionals, & international students (IIM Shillong PGPEx )  Share Experience  Collect feedback from customers on the way out  Analyse issues and improve customer experience  Adapting Marketing V3.0 24 Marketing V3.0 Involve Engage Relationship Making world a better place
  25. 25. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS China - Legal Aspects of Business (LAB)  Setting up WFOE: Essentially a Pvt. Ltd. company incorporated in Hong Kong  Shareholding: 100% shareholding by a foreign company is allowed.  Share Capital: There is no minimum or maximum requirement for share capital. The general norm is to have a authorized share capital of HKD 10,000 represented by 10,000 ordinary shares of HKD 1.00 each and the issued/paid-up capital is usually 1 share of HKD 1.00  REGISTRATION  Foreign investors must retain a PRC entity that is authorized or permitted by relevant authorities to act as a sponsor. The sponsor will submit all the documents to the examination and approval authorities on behalf of the foreign investor.  TAXATION  Hong Kong has a flat corporate tax rate of 16.5% on assessable profits. Usually,ittakesabout4-7workingdaysto incorporateacompanyinHongKong 25
  26. 26. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Investment Overview 26 Total Annual Variable cost = INR 270 Lakhs Annual Wages INR 100 Lakhs Raw Material INR 50 Lakhs Rent INR 120 Lakhs One Time Fixed Cost INR 250 Lakhs Total Investment in 5 years INR 1600 Lakhs
  27. 27. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Revenue Generation 150 200 270 400 580 82 109 165 219 333 0 100 200 300 400 500 600 700 2014-15 2015-16 2016-17 2017-18 2018-19 Revenue (INR Lakhs) Avg daily customers Revenue Avg daily customers 27 Assumption: Average customer spending per visit INR 500 Breakeven target (INR 1600 Lakhs)to be achieved by 2018 -19
  28. 28. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Milestones  2015 - 2019  Brand Building as a synonym for Quality & Hygiene  Brand placement in Middle Class segment  Advertisements to promote the brand values of Quality, Hygiene and Freshness  Involve regular women in advertisements – Target home makers  Capture a market share of 2 - 5 %  Vision 2020  Setting up restaurants in Shanghai, Beijing, Macau and Qingdao  Increasing market share to 8 - 10 % 28
  29. 29. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Import Plan  Product: Tomato based derivatives from China  Objective : To strengthen the Ready to Eat segment of the business in India  Current interest exists in various Indian curries in frozen food segment  Tomatoes are a main source of cooking in Indian cuisine  To keep a stringent check on raw material sourcing to ensure highest quality  Import of tomato products is an imperative to the diversification strategy of Haldiram 29
  30. 30. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS The need for import Reason for Imports  Not enough suppliers available in India  Product range available in India is not diverse  Erratic supply  Huge variation in tomato prices leads to variation of cost of the raw materials  Tomatoes from China have a different taste and more suitable for our product 30
  31. 31. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS China as import Partner : Why?  China‟s Urumqi, the capital of Xinjiang is a hub of tomato farming and processing units Xinjiang is mostly famed for its ripe, red tomatoes. Xinjiang's tomato industry began in 1978 and has 49,12,00,000 in farmland. Its related enterprises have the capacity to process 3.8 million tons of tomatoes annually. Xinjiang's tomato exports are mainly in form of tomato paste. China‟s tomato is of a different kind than that of India. It has more pulp and less water content. This Results in higher output. 31
  32. 32. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS China as import Partner : Why?  Attractive Pricing - Lesser Freight charges. China‟s Government incentives to it‟s exporters make price and freight competitive.  Less development time  Diverse range available  No seasonal variations Italy and Spain, Why not taken into consideration  Italians love their tomato. Italy and Spain don‟t export in bulk. They cater more to the retail segment  Local consumption is high  Price is not attractive 32
  33. 33. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Import process : How to do it? Other options considered  Asian countries like Thailand, Malaysia, Vietnam and Turkey. How to select vendor  Size of operations  Manufacturing capabilities  Exposure to overseas markets  Reliability  Product range  Logistics support  Ease of operations  Price 33
  34. 34. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Import process : How to do it? Certifications required  HACCP – Hazard analysis, Critical control point  ISO 9001 As a HACCP certified organization, we ought to chose a vendor with the same certifications. Backup Plan  Maintain at least 2-3 good suppliers Legal obligation  Process should be in line with Indian laws of FERA hence no trade with countries like Somalia 34
  35. 35. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Final Selection of suppliers Based on the above analysis, various Chinese vendors were considered for imports.  COFCO Xinjiang Tunhe Co Ltd  Xinjiang Chalkis Tomato Co Ltd  Xinjiang Xinjian Tomato Products Co Ltd Product range  Aseptic paste  Tinned paste  Diced tomatoes  Whole peeled tomatoes  Sun dried tomatoes  Tomato powder  Tomato fiber - thickening agent  Tomato lycopene extract products 35
  36. 36. HALDIRAM‟S IN CHINA – A STRATEGIC ANALYSIS Leverage from the vendors Xinjiang Chalkis Tomato Co Ltd was considered the final partner with others as the backup source  Tinned paste – The base ingredients for all gravies  Diced tomatoes – one of the ingredient/additive of the Indian cuisine  Tomato powder – for entry into soups and instant Sauce Mix segments  Tomato fiber - thickening agent to assist as gravy viscosity enhancer  Tomato lycopene extract products – Natural food color and helps maintain nutritional value of the final product 36
  37. 37. 37 So, Are you ready to place your order!  THANK YOU