industry report of bangladesh food and beverage industry
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North South university
Strategy and Structure of the Food and Beverage Industry
Course: Mgt 489 section: 6
Shahedul Alam (Shl)
10/7/2015
Done By: Group 4Fahima Ayesha Choudhury 1210030030Zareen Tasnim Lazima 1210828030Ashik Mahmood Andalib 1110448030Mohammad Atikul Haque 1110244030Saiful Alam Sunny 1110507030Hamida Kaus Prianka 1110517030
Executive SummaryFood and beverage industry is one of the fastest growing industries around the world as food is
humans’ most basic necessity. Though this industry is growing on a moderate level in US, it is
the largest industry in Europe. There is high competition in this industry. Though most
companies in this sector are SMEs, a few large companies are contributing by doing merger and
acquisition, vertical integration and expending into overseas market to increase their
sustainability and efficiency. The large companies in this sector are- Nestlé, Kraft Foods,
Unilever and Cargill. Alongside US and EU, emerging economy for food and beverage industry is
China and India. They mainly provide the raw materials for this industry. Any Economic
downfall may highly affect all other industry but food and beverage as it provides necessity
product which people need to use even in heavy economic downfall. Being one of the fastest
growing industries, this sector faces some issues such as technological development. Due to
increasing completion the R&D of this industry should be well maintained which can be
challenging to bring out new technologies to make the products sustainable and efficient.
Manufacturers are expending their market to developing countries such as China and Indian
because of relaxed rules, large population, higher living standard and higher growth potentials.
Food and beverage industry in Bangladesh is a potential sector and growing rapidly since 2000.
This industry alone makes up 22% of the total manufacturing production in the country and
around 2.45% of the country’s total labor force. Bangladesh being an agricultural country with
large population can contribute largely in the food and beverage industry. Bangladesh is also
impacting global market by exporting food and beverage to 90 different countries in the world.
But many issues in Bangladesh are holding back this industry, such as unstable political
situation, high barrier to entry, corruption in the controlling quality and lack of technological
development. In the context of Bangladesh, food and beverage industry is one booming
industry to invest in. With the emergence of super shops concept and new technologies now
many large companies are investing in this sector and exploring its potential. Thus this
economic crisis immune industry has become one of the stable and sustainable industries in
Bangladesh.
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Table of Content
Introduction…………………………………………………………………………………….4
Global Industry Structure………………………………………………………………………5
Global Industry Issues…………………………………………………………………………8
Bangladesh in Global Context
Analysis and Conclusion
References
Research Method
Formal thank you letter……………………………………………………………………….18
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IntroductionFood and beverage industry includes harvesting, packaging, distributing, processing of
consumer products over different regions. The industry is growing at a moderate level in United
States because of which the companies are restructuring and realigning their activities to
reduce cost, increase volume and improve profits. Furthermore, large companies are merging
different companies varying in size to gain higher market share and widen the product line they
hold. On the other hand the non-soft drink companies are seeing growth whereas the soft drink
industry is not seeing as much. Due to the high competition companies are expanding into
overseas market to grab more market share therefore increasing competition in different
regions of the world (TB Woods Incorporated Headquarters, n.d.). In the EU food and beverage
industry is the largest industry there, with an estimated production value of 720 billion euros,
this industry accounts for 13% of the total value of manufacturing. The industry employs more
than 4.4 million people and transforms 70% of the agricultural raw materials produced in EU. In
EU the industry is highly fragmented with 99.1% of the total industry run by SMEs employing
2.7 million people. The industry is made up of many subsectors and uses different production
process and packaging techniques. Since it is dependent on various different techniques it is
highly dependent on the R&D sector since it helps improve the product and process to make
the companies more efficient. Although the industry is highly concentrated with SMEs , there
are a few large multinational producer who have a significant impact on the international
market. These companies also participate in vertical integration to help increase the range of
products they can supply and increase their market. The large companies concentrate on the
global market and the SMEs focus on meeting the local demands and specialize in different
subsectors (European Commission, 2005). In terms of Bangladeshi market the industry is
growing at a fast rate with many small companies fighting for a position in the food and
beverage sector however, the market is mostly controlled by large corporation who enjoy
economies of scales and supply a wide variety of products to the consumers. The top
contenders in the industry are Transcom Beverage ltd, Akij Food and Beverage and Partex
Beverage ltd (Businesshabit.com, 2014).
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Global Industry Structure The global food and beverage sector is valued $5.7 trillion USD in 2008. The industry is the
major contributor for growth in many economies and has been historically experiencing a
consistent growth. It has been estimated that the industry will grow at 3.5% and by the year
2014 the industry will be valued at $7 trillion USD. In terms of structure the industry is highly
fragmented with the key player- Nestlé, Kraft Foods, Unilever and Cargill who hold less than 5%
of the total value (IMAP, 2010).
As discussed before Europe holds the largest market share when it comes to food and beverage
items, it generates revenue of $1.4 trillion in the year 2007 while employing 4 million people.
The next key playing country is USA which has a contribution of $1 trillion USD. Although these
countries are the key players however, emerging economies such as India and China are also
contributing in the industry. The emerging economies provide raw materials to the food and
beverage industry thus having substantial impact of the production of food and beverage. The
food and beverage industry in India is valued to be $182 billion in 2007-2008 and the food
processing sector to be valued at $72 billion in 2008. In China is industry is growing at 13.6%
where the industry value was $50 billion in 2008. Below are some of the key players:
Company
name
Key brands Market
covered
Geographic coverage Revenue Operating
profit
Nestlé Nescafe,
Maggi, Milo,
Kitkat, Gloria,
Nestlé, Power
Bar
Products are sold
in 120 countries
across the world
Americas: 30.15%;
Europe: 25.62%; Asia,
Oceania, and Africa:
15.59%; Rest of the
world: 32.45%.
$101.8
billion
USD
$13.8
billion USD
ARCHER-
DANIELS
MIDLAND
Monarch,
Novatol,
Bionature, etc
US, Caribbean,
Canada, Europe,
Middle east
US: 51.27%, Germany:
10.74%, Other Foreign:
37.99%
$69.2
billion
USD
$2.7 billion
USD
UNILEVER
NV
Lipton, Knorr Mainly Europe
and Asia
Asia & Africa: 35.71%,
Americas: 32.57%,
$59.6 $8.5 billion
5
Europe: 31.72% billion
USD
USD
KRAFT
FOODS INC
Easy Cheese,
Pepito, Toasted
Chips,
Toblerone,
Twist, Splendid
North America,
Europe, and Asia
US: 50.80%, Europe:
31.13%, Other: 18.07%
$42.2
billion
USD
$4.9 billion
USD
Source: (IMAP, 2010)
The industry went through it downs due to the problems such as increased food prices,
decreasing in consumer spending, increased transportation cost. Although such adversities
have affected many industries highly however, the food and beverage industry is relatively not
as affected. The reason behind this could be the fact that food is a basic necessity of the people
and regardless of how bad the economy is performing people need to use these products.
According to the figure beside the Dow
Jones food and beverage index has been
performing better than the S&P 500
index, which proves the point that
although other industries have suffered
greatly due to the slowdown in the
economy however, the food and
beverage industry has performed
relatively better.
Source: (IMAP, 2010)
Mergers and acquisitions are very popular in this industry due to the level of competition. As
discussed earlier many companies merge and go into acquisition to help increase the overall
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market share and increase the number of product under their product line. The summary of
transaction in the food and beverage industry based on sector and country is given below.
Summary of transaction in the food and beverage industry in 2009
Source: (IMAP, 2010)
As it can be seen the paged food and meats are industries that hold the highest number of
mergers and acquisitions furthermore their value is also the highest. Since that is the case it can
be deduced that the packaged food and meats industry is facing through fierce competition and
to survive the condition many companies have opted for mergers and acquisition.
In terms of opportunities in various
regions of the world the figure shows
that China shows the highest promise
followed by India.
Source: (Linklaters, 2013)
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Global Industry IssuesThe food and beverage industry is overall growing due to the growth in population however
there are some global industry issues that all the companies are facing, below are some of the
issues:
1.1 Technological Development
Majority of the players in the industry believe that although there is big movements in the
industry towards sustainability and resource efficiency however, most companies still focus on
improving the quality and creating new products. Due to the type of focus most manufacturers
do not prioritize health and wellness issues therefore not focusing on the development on such
technologies. The trend shows that the core of the development in technology still is profit
focused and companies want to mainly improve efficiency rather than focus on sustainability.
According to the same survey the companies are more focused on product innovation rather
than greener technologies, although that is the case however many companies are actually
moving towards that direction. The food and beverage industry is highly dependent on the
technological advancement due to the need to mass production therefore more development is
made to help produce at a large scale at a lower cost (Leatherheadfood.com, 2012).
1.2 Government and Regulatory Issues
Food safety regulations apply to each stage of food and beverage production, from processing
and manufacture to distribution. The laws mostly focus on the safety of the products that are
being produced and quality of distribution around the industry. The industry is also subject to
laws which bound the companies to properly label the products and maintain minimum food
safety standards. Laws such as the Nutrition Labeling and Education Act of 1990 (NLEA) and the
Food Safety Modernization Act of 2010 (FSMA) work towards making the industry more safe for
the consumers. In USA there are many agencies that control the quality of production for the
food and beverage industry for example Food and Drug Administration (FDA) Federal Trade
Commission (FTC) are some of the agencies that work for the government to help maintain the
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basic regulation in the industry. Alongside these agencies there are many other local agencies
which help in the regulation of SMEs thus helping the government regulate the industry
properly (Hg.org, 2015). Similar to the FDA Bangladesh has a regulatory body called BSTI which
oversees and regulates all the food and beverage industry’s products thus keeping the products
safe for the consumers.
1.3 Strategic reaction to competitive pressure
The food and beverage industry is constantly under pressure due to the increased competition
from both local and international competitors, in order to survive the constant pressure the
companies could follow the following strategies:
Deliver products with more nutritional value and fewer allergens: Since more consumers
are being interested in eating healthy the added factor will help bring competitive
advantage. Many companies have already started acting on this by producing whole
grain products to attract the consumers (Infor, 2012).
Continually drive down costs: As discussed before the only way food and beverage
companies can survive properly is through cost cutting and increasing efficiency. This
can be done by utilizing various technologies that are currently available. Many
companies utilize these technologies and make the production system completely
automated to help reduce labor costs greatly thus gain competitive advantage against
the competitors (Infor, 2012).
Minimize environmental impact: large companies are currently focusing on this because
they have figured that by reducing the impact on the environment not only do they gain
competitive advantage in the eyes of the consumers they can also reduce costs by
reducing the waste. (Infor, 2012)
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1.4 New Market
As discussed before the food and beverage market is growing however, the competition is also
growing thus forcing many companies to go into new markets to sustain. Due to the large
economic growth in the emerging economies many food and beverage companies are targeting
these countries. Furthermore, the rules and regulations in these countries are also a lot more
relaxed compared to the countries these companies originate from. Due to the relaxed rules
the companies can be more flexible hence attracting them to those countries. Global food
manufacturer respondents consider China, India and Brazil to offer the largest growth potential
among emerging markets in 2013-2014. According to a survey US, Singapore, Taiwan and Hong
Kong and South Korea offer the highest growth potential among developed countries in 2013-
2014. The companies are under constant pressure due to decreasing margins and consumer
price sensitivity, these problems can be overcome through going into economies such as China,
India and Russia. Furthermore countries such as China and India have world’s largest population
thus making them very lucrative markets to enter. There are many consumers who are now
able to purchase the products due to increased standard of living hence many manufacturer are
targeting such companies (Prnewswire.com, 2013).
Bangladesh in Global ContextBangladesh possesses a very large and rapidly growing food and beverages industry which
stands as a major potential sector of the economy in terms of employment, and value addition.
In fact, the food and beverages industry of Bangladesh makes up about 22% of the total
manufacturing production in the country, and employs around 20% of the industrial
manufacturing labor force, and around 2.45% of the country’s total labor force. It is a 4.5 billion
dollar industry which has around approximately 700 food manufacturing and processing
businesses. The major sub-sectors in the food industry consist of rice, wheat, fruits and
vegetables, tea, sugar, dairy, and edible oils. Being a country with one of the largest populations
in the world, and with the population base growing ever more rapidly, the demand for food and
beverages is always rising. Moreover, due to factors such as the growth in the economy and
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rising incomes, demand is being shifted away from traditional foods and more towards high
value foods. (Kundu, 2015). The food and beverages industry was initially very small and
limited to a few domestic and family businesses which emphasized on basic agricultural
commodities. The industry did not gain significance in terms of operation until the 1980s. Since
the early 2000s the food processing industry of Bangladesh grew at a rate of 7.7% annually and
the range of variety of food products in Bangladesh increased drastically since the last decade
due to the entrance of a number of both domestic and international food companies into the
industry. (Md. Khairul Akter, 2015)
Moreover, the geographical agrarian setting Bangladesh is situated on, and its strategic
location, is very beneficial to the agricultural production. (Md. Khairul Akter, 2015) Agriculture
contributes greatly to the food industry of Bangladesh. As of the 2012 – 2015 Bangladesh’s
export policy, the agro sector remains one of the top most priorities. Out of the total Gross
Domestic Product, 32% of it is made up by the agro foods and beverages industry. (Md. Khairul
Akter, 2015)
However, even with all this crop produced, constraints such as population pressures continue
to make it hard for farmers to meet demand and therefore lead to food deficits and losses. For
instance, the Bangladesh Sugar and Food Industries Corporation BSFIC has recently incurred a
loss of TK 5.3billion last year alone. These food deficit gaps are met and matched by commercial
imports from other countries.
The Bangladeshi food and beverages industry plays an important role in both the domestic and
the global market. The impact globally can be noticed through the increased exports of agro
foods from Bangladesh to countries around the world. Although the agricultural sector of the
food industry is falling, the country has great prospect if and when viewed as an industry which
exports food. Moreover, when it comes to labor intensive agricultural manufacturing and
processing and production of horticultural goods, Bangladesh has a comparative advantage
over other countries. The Bangladesh Agro-Processors Association has been focusing on
manufacturing, processing, and exporting approximately 90 different products to around 70
different countries. Moreover, the country is aiming to increase its GDP through the food and
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beverages industry by exporting certain agro foods. For instance, the fertility of Bangladesh is
suitable for growing maize and corn which is in turn is exported to maize/corn consuming
countries such as Egypt and Nigeria (Agro processed‐ industry in Bangladesh, n.d.).
The figure below shows the market share of various industries in Bangladesh in 2001-2002.
Since the Bangladesh food and beverage industry is growing fast it can be assumed that the
market has expanded however, the overall structure to some extent has remained same.
Source: (MINISTRY OF FOREIGN AFFAIRS OF DENMARK, 2009)
Below the key player in the Bangladesh food and beverage industry is discussed
Company ProductsTranscom Beverage Limited Pepsi range of beverages-Pepsi, 7up, Mirinda
Orange, Mirinda Lemon, Slice and Soda.Global Beverage Co. Shark Energy Drinks, Zam Zam Cola, Appy FizzGlobe Soft Drink Ltd. & AST Beverage Ltd. Royal Tiger, Uro Cola, Uro Orange, Uro Lemon,
Fizz UpPran Beverage Maxx Cola, Cloudy Lemon, Clear Lime. Power
DrinkPartex Beverage RC Cola, RC Orange, Upper 10, RC Lemon,
MUM Mineral Water, Danish Condensed MilkAkij food and beverage Mojo, Lemu, Clemon, Speed, Frutik Source: (Bangladeshtrades.com, n.d.)
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Strategic issues in Bangladesh Bangladesh frequently faces political crisis which hinders the daily business activities thus
affecting the industries adversely. The food and beverage industry faces problems in delivering
the products on time thus lose sales. Furthermore since all these products have strict expire
date many products are not sold before date due to the low sales during political crisis. This
overall creates a disadvantage for the food and beverage company in Bangladesh
The barriers to entry while entering this industry is relatively high due to the large initial
investment required. Most of the companies have fully automated production system therefore
making it difficult for new entrants to produce at the same scale as the major competitors and
sustain in the market. Furthermore, the major competitors have already gained large market
share and brand loyalty which makes it harder for new companies to enter the market and sell
their products.
Although this factor has helped the food and beverage industry however, it has also affected
the industry adversely. The regulatory body for controlling the quality of the product sold in the
food and beverage industry is not as efficient therefore hampering the controlling activities for
the corporation. On the other hand the officers in the regulatory body are rather corrupt thus
making it easier for many companies to bribe them and get unsafe products into the market.
This means more products are in the market however, the consumers lose confidence in the
products since they believe that the quality is not maintained. Due to the heavy level of
corruption many companies face difficulty in getting safe products out into the market without
having to bribe the officers, thus creating an issue for the industry.
Analysis and ConclusionFood and beverage industry is the source of growth for many countries, an example of such a
continent would be Europe. The same strategy could be used by Bangladesh to stimulate
growth in the economy. Since there is a large industry dedicated to the agricultural sector in
Bangladesh, it would be rather easy to move into food and beverage industry for many
corporations. The raw materials are available and cheap therefore making it a lucrative industry
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to enter. There is a large dairy, fruits and vegetable and fisheries industry in Bangladesh and not
many companies are there to take the market. As discussed before there is a growing demand
for fruits and vegetable products therefore corporation could fixate on that industry. Abroad
many companies make profitable business out of producing packaged fruits and vegetable,
Bangladesh could go into a similar movement and expand the horizon of food and beverage
industry.
The food and beverage industry in Bangladesh is a lucrative market since the competition is not
as fierce as it is in the global market due to the lack of competitors. Furthermore, the range of
products produced in Bangladesh is also less therefore creating a gap in the industry. There are
many small companies producing variety of products however, due to lack of technological
development the companies are not being able to be the most efficient. If more research and
development could be done to improve the efficiency of producers in Bangladesh the market
would become more competitive thus forcing corporations to become even more efficient.
Previously there were not many super shops in Bangladesh therefore most food and beverage
items were brought from local vendor, now due to development in the super shop industry
many super shops invest in making their own label which attracts the consumers more. The
trend of generic food and beverage items has reduced greatly due to the influence of the super
shops and is thought to change more in the future years. Furthermore, these super shops also
have similar products from different food and beverage companies alongside their products
which is allowing the consumers to compare and choose what they like best thus inevitably
increasing competition.
In the beginning most food and beverage items were imported from various countries;
products such as Ketchup, dairy items, bakery items and fruits and vegetables were not as
widely produced in Bangladesh. Due to recent development many local companies such as Pran
and BD Food are producing the same standard items in the local market at a much cheaper
cost. This is lead to a new movement in the food and beverage industry which is to bring
positive changes in the Bangladesh economy. Furthermore due to recent R&D many new types
of fruits and vegetables are being produced in Bangladesh for example strawberry and dragon
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fruit are now widely available. If similar type of research is done more variety of products can
be produced in the country thus reducing the need to import the products.
In conclusion the food and beverage industry seems to be an a highly profitable and stable
industry. Although it is dominated by few multinational there is scope for development by the
SMEs. Food is a basic necessity of every human being hence making it an inelastic product for
all consumers therefore it is clear that this industry is not bound to become extinct rather grow.
Also as discussed earlier the food and beverage industry is immune to the economic crisis thus
making it a rather interesting industry to work with. The government and the local authority
has been trying to protect the SMEs for a very long time, this is to initiate healthy competition
as well as create scope for development. In Europe the SME food and beverage industry is
highly protected by the government and often given subsidies to help them sustain. A similar
approach could be taken by the Bangladeshi government to stimulate the growth in the food
and beverage industry. Overall the industry seems to be booming not only because it is an
inelastic product but also because of the growing population therefore more investment should
be done in this industry by more corporations in Bangladesh. Since the population is growing
the opportunity seems to be the best one to grab in Bangladeshi context.
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References
Agro‐processed industry in Bangladesh. (n.d.). 1st ed. [ebook] Dhaka. Available at: http://www.hortex.org/Employment%20and%20GDP_Agro-processed_171113.pdf [Accessed 10 Jul. 2015].
Bangladeshtrades.com, (n.d.). Bangladesh Beverage Industry | Bangladesh beverage company list. [online] Available at: http://www.bangladeshtrades.com/bd-company-list/bangladesh-beverage-company-list.html [Accessed 9 Jul. 2015].
Businesshabit.com, (2014). Top 10 beverage companies in Bangladesh. [online] Available at: http://www.businesshabit.com/2014/12/top-10-beverage-company-in-bangladesh.html [Accessed 9 Jul. 2015].
European Commission, (2005). ICT and electronic business in the Food and Beverage industry. [online] Available at: http://ec.europa.eu/enterprise/archives/e-business-watch/studies/sectors/food/documents/Food_2005_I.pdf [Accessed 9 Jul. 2015].
Hg.org, (2015). Food and Beverages Law - HG.org. [online] Available at: http://www.hg.org/food-and-beverages-law.html [Accessed 9 Jul. 2015].
IMAP, (2010). Food and Beverage Industry Global Report — 2010. [online] Available at: http://www.imap.com/imap/media/resources/IMAP_Food__Beverage_Report_WEB_AD6498A02CAF4.pdf [Accessed 9 Jul. 2015].
Infor, (2012). White Paper How food & beverage companies gain competitive advantage. [online] New York. Available at: http://www.infor.com/content/whitepapers/howfoodandbevgainadvantage.pdf/ [Accessed 9 Jul. 2015].
Kundu, S. (2015). Wheel :: Business Magazine. [online] Wheel.com.bd. Available at: http://www.wheel.com.bd/cover_story.php?id=26 [Accessed 10 Jul. 2015].
Leatherheadfood.com, (2012). Emerging technology in the food and beverage industry | Leatherhead. [online] Available at: https://www.leatherheadfood.com/emerging-technology-in-the-food-and-beverage-industry [Accessed 9 Jul. 2015].
Linklaters, (2013). Food and beverage. The Linklaters Emerging Opportunity Index. London.
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Md. Khairul Akter, M. (2015). Sector profile and strategic planning for the agro-base food industry of Bangladesh. [online] Bangladesh Textile Today. Available at: http://www.textiletoday.com.bd/newsite/sector-profile-and-strategic-planning-for-the-agro-base-food-industry-of-bangladesh/ [Accessed 10 Jul. 2015].
MINISTRY OF FOREIGN AFFAIRS OF DENMARK, (2009). FOOD PROCESSING IN BANGLADESH.
Prnewswire.com, (2013). Global Food and Beverage Survey 2013-2014 - Market Trends, Buyer Spend and Procurement Strategies in the Global Food and Beverage Industry. [online] Available at: http://www.prnewswire.com/news-releases/global-food-and-beverage-survey-2013-2014---market-trends-buyer-spend-and-procurement-strategies-in-the-global-food-and-beverage-industry-218839341.html [Accessed 9 Jul. 2015].
TB Woods Incorporated Headquarters, (n.d.). An Introduction to Food and Beverage Industry. Pennsylvania, p.1.
Research MethodThe report “Strategy and Structure of the Food and Beverage Industry” is based on both
secondary research and primary research. The information was collected from various online
resources in different journals and articles. The primary data was collected through an interview
session with an employee from Partex Star Group. He helped us give more insight about the
local market and help give us suggestion. The referencing format for the whole document was
Harvard referencing style.
Limitation of this research is that there was a lack of data in the local market and most data was
outdated. Therefore, most of the information connecting to the recent years is based on the
estimations provided in the secondary sources.
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Formal Thank You letter02-07-15
Dear,
Mr. Kazi Abul Hassan
Thank you for meeting with us last Thrusday morning for discussing the topic regarding food
and beverage industry. It was both enjoyable and informative. Your insightful presentation
contained several innovative ideas that we are now considering for our report writing.
To make a dynamic report it was very important for us to gather the latest and specific
information regarding the food and beverage industry. We got some information from the
secondary sources, but it was not the most fruitful one. Finally, it was our pleasure to meet you.
We have learned a lot regarding the food and beverage industry such as the present market
scenario, how they adapt themselves to the customer’s need, want and demand, their limitations
and most importantly their impact on global and domestic economic trend. Apart from this, we
have also learned some practical knowledge which will be very much useful in our near future.
Once again, thank you for taking the time to meet with us. We hope that you feel as good about
our interview as we do. We look forward to hearing from you, and We hope to be working with
you and your co-operation soon.
Sincerely,
On behalf of managers group
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