final report b2 b_ blp team 5
TRANSCRIPT
www.organicindia.com
SMS: OI to 58888
Toll Free No.: 1800-180-5153
SWAST-IK PVT LTDSHUDH ORGANIC MILK
Purity at it’s very best….
TEAM DETAILS
SCHOOL OF INSPIRED LEADERSHIP
Course Title: B2B marketing
TERM 3
Year 2013
BLP Team Members: Team 5
Shailendra Tewari 055
Manvi Chopra 053
Silshi Oberoi 062
Debanjan Chakraborthy 063
Anuj Budhiraja 051
Harpreet Singh 039
Veda Prada Nataraj 028
Dipti Sethi 048
Contact Details
Company – Background
At the heart of ORGANIC INDIA is our commitment to promote holistic sustainable
development for all beings through organic agriculture. We are committed to service, sanctity
and integrity, and to operating an ethical and sustainable business that harms none and
benefits all. ORGANIC INDIA is a global leader in promoting organic products and in
supporting sustainable farming, wild crafting and village/tribal agricultural communities in
India.
We cultivate, collect, process, manufacture and market Certified, Castor Oil, Ayurvedic and
Medicinal Herbs, and many other and . Our products are of the highest quality and marketed
all over the world. We are continually developing and expanding our range of organic foods
and health products.
All ORGANIC INDIA facilities and processing centers have been awarded, and Kosher
certifications, and are , certified for organic production. We have designed and developed
our unique processing methods and advanced dehydration technologies to ensure maximum
retention of potency and nutritional values, so that we can remain true to our commitment to
offer the highest quality organic products available today.
Background
During the 1990's thousands of people from all over the world came to Lucknow, India to
meet , lovingly known as Papaji. Drawn to India in search of Truth and Self Realization,
people came flooding to Lucknow upon hearing of the simple teaching of Papaji: "Keep
Quiet. The Eternal Truth exists within you. Do not entertain a single thought and the Truth
will reveal itself to itself."
A number of people settled in Lucknow at that time, living and working independently. A
few people, including Prashanti de Jaeger, an Ayurvedic Practitioner and Chairman and
President of IITC ORGANIC INDIA Pvt. Ltd, began a small business of developing
Ayurvedic herbal formulations for the health and well being of the many people coming to
Lucknow. IITC ORGANIC INDIA Private Limited was renamed in the year 2006
as ORGANIC INDIA Private Limited.
Vision
To be a vehicle of consciousness in the global market by creating a holistic sustainable
business modality, which inspires, promotes and supports well-being and respect for all
beings and for Mother Nature
Values
Service to All
Total Integrity
Absolute Commitment to Quality
Respect and Devotion to Mother Nature
No Compromise on Being Who We Are
New product line
Organic Milk
Across the world, Milk is considered a completely nutritious food, and is especially
recommended for children, adolescents and pregnant and lactating women. We’ve grown up
believing that our day is incomplete without 2 glasses of milk daily.
So obviously, being faced with the media reports of ‘synthetic’ or spurious
milk, or of high chemical/ antibiotic levels even in trusted milk brands is very
discomforting. Today, organic milk is regarded as a healthier alternative to
conventional milk. According to the United States Department of
Agriculture, organic milk is defined as milk from cows that have been exclusively fed
organic feed, have not been treated with synthetic hormones, are not given certain
medications to treat sickness, and are held in pens with adequate space.
Organic milk has been found to be rich in omega 3, vitamins, CLA (conjugated linoleic acid -
a type of fat that may prove to be one of our most potent cancer fighters) and antioxidants.
Apart from the health benefits, Organic milk also addresses environmental concerns and
animal welfare issues.
Although some studies comparing organic and conventional milk, do suggest that there was
no significant difference in the total fat or protein content, Organic milk had 24% higher total
polyunsaturated fatty acids (PUFAs) than conventional milk.
The only fall out seems to be a price premium, but once you are convinced of the benefits of
organic milk, then that should not be a deterrent. Let’s try and make a healthy switch to safer
and healthier milk.
Scout around for a dairy near you supplying Organic milk, satisfy yourself of the standards,
and make an informed decision for the health of your family.
Our Mission
The mission of the Organic family farm Cooperative Regions of Organic Producer Pools is to
create and operate a marketing cooperative that promotes regional farm diversity and
economic stability by the means of organic agricultural methods and the sale of certified
organic products. The company’s mission stands for the health and wellbeing of the people,
animals, and the environment.
Organic Milk vs. Conventional Milk
Organic Milk: A Healthy Choice
Organic milk shines in comparison to regular milk when you consider what's left out --
artificial hormones in milk, for instance. Before the U.S. Department of Agriculture gives
its coveted label to milk, the USDA certifies that cows are not given the synthetic hormone
known as recombinant bovine growth hormone (rBGH, also known as BGH, recombinant
bovine somatotropin or rBST). Farmers often give rBGH to dairy cows to make them more
productive.
But rBGH also makes these cows more sickly, causing mastitis (inflammation of the udders,
often caused by infection). And it's not just cows that are getting sick: rBGH has also been
associated with an increased risk of breast cancer, colon cancer and prostate cancer in
humans. The additive has been banned in Canada, Japan, New Zealand, Australia and the
entire European Union -- many are calling for a U.S. ban on rBGH, too.
But hormones aren't the only problem with regular milk: the overuse of in milk is rampant
among dairy farmers, just like it is on most . These antibiotics are given routinely to cattle
(and many other livestock) and the drugs show up in the milk the cows produce. Pesticides,
too, are also present in the feed of dairy cattle, and these too can show up in milk. Organic
milk, however, has none of these ingredients, since their use is forbidden in USDA-certified
dairy cows, who can only eat certified organic feed.
Organic milk can actually save consumers more money than regular milk.
Organic Certification
Strategic fit
We ensure our new product line of organic milk to ORGANIC INDIA which is a global
leader in promoting organic products and in supporting sustainable farming, wild crafting and
village/tribal agricultural communities in India to be a complete strategic fit , for it supports
and promotes sustainable farming & organic product.
Conventional dairy farms tend to feed and manage the cows in an attempt to push them into
production levels beyond their natural capacity. These unnatural and intensive regimes cause
stress to the animals and cause health breakdowns.
On our organic dairy farms, we will ensure what will be found is as mentioned below:
No GMOs in feed
No case of BSE ever found in an organic born and raised dairy cow
No use of antibiotics unless cows are ill and other treatments are not achieving results
No use of artificial insecticides on pastures where organic cows graze
No use of artificial herbicides on pastures where organic cows graze
No use of artificial fungicides on pastures where organic cows graze
No use of solvents to produce organic cattle feed
No housing of organic dairy cows all year round
No housing of organic calves in single pens where they cannot see or touch other
cows.
We will be partnering with more than 600 organic family farmers from every region of the
country.
The farms that produce our milk share ownership in the company.
In these farms we will intend to get milk from cows which will be exclusively fed organic
feed, and will not be treated with synthetic hormones, antibiotics, pesticides and will not be
unnecessary given medications.
This can certainly help us in keeping million pounds of pesticides off the land through
organic practices.
All our organic dairy farms will be pasture-based, meaning a major portion of the cows’ diet
will be coming from certified organic pasture.
All of our farmers will be working in balance with nature' to produce organic milk to the best
in farming practice for animal welfare, whilst protecting the environment, in return for a fair
price for their milk in all possible means
Our overall objective is to ensure and create a supply of organic milk which meets and
exceeds customers' expectation for quality organic milk.
Our milk delivery group will prove to be an industry standard setter delivering the
requirements for quality milk production whilst also providing tangible benefits to the dairy
producers in all possible manners.
All dairy cows will be treated with due attention as well as care under the 'Five Freedoms',
however, organic farming practices demonstrate greater attention to detail.
Freedom from hunger and thirst ~ due to the limited range of food allowed greater
attention has to be put into creating a balanced diet.
Freedom from discomfort ~ all of the cows rest on natural materials when they need shelter
during the winter.
Freedom from pain, injury and distress ~ because organic farmers do not routinely use
antibiotics, disease prevention relies on first class stockmanship and a knowledge of their
individual cows behaviour (understanding when then cow has an off day!)
Freedom to express normal behaviour ~ by providing sufficient space, proper facilities
and the company of their own kind. All of our organic cows have to have 0.66 acre to graze
during the grass growing season, which is more than most non-organic cows. When housed
during the winter months, they have to have a minimum of 10.5 m2 per cow, which allows
them to socialise with their herd mates.
Freedom from fear and distress ~ with access to more natural grazing and space, our cows
are allowed to express more traditional behaviour such as forming closer natural associations
and loafing about.
How our Organic milk helps the environment?
Organic farming practices promote biodiversity (a mixture of species of plants and animals).
The skill of the farmer is to manage the balance of the required farmed crops and the diverse
species which could well be weeds. Diverse plant life will support more diverse animal life.
Great care is taken, whether it is through food production or farming, to:
maintain healthy soils
prevent pollution
be economic with resources
enhance the natural habitat for the benefit of wildlife
maintain the rich rural landscape
All of our farms are involved in the Organic Entry Level Scheme which maintains specific
natural features to the individual farm to give conservational and environmental advantages
such as, hedges, ancient woodlands, rivers, field margins, ponds, ditches & streams, beetle
banks and wildlife corridors.
Our farms regularly use various eminent organizations independent advice on environmental
as well as conservation issues.
Defining one unit of our Industrial Product:
We have decided to define one unit of out product as 100 liters.
3 C Analysis
Company
• As already discussed, our Company Organic India Group has a mission that stands for
the health and well being of the people, animals, and the environment, and we are
continuously working towards this mission since the past two decades
• At this stage, we are in position to go one step forward and to come into the business
of providing organic milk as it is the need of the hour and a lot of consumers are
becoming health and environment conscious. Subsequently, we will be starting a new
product line of organic product
• As discussed further in the SWOT analysis, we have few strengths like having
experience in industry, strong brand awareness, large customised stores and strong
network of suppliers
• But again as now we will be entering a new segments, we will be facing some
challenges like pricing and need to increase awareness
• There is an opportunity also as there will be less competition as this market is totally
unexplored
• But the challenge of competing with the conventional milk providers and the current
stage of bad Indian economy are threats to our company
Customer
• Initially, we will are targeting 4 customers- Amul, Cadbury, Nestle and Britannia.
• Amul will be our first customer which we are predicting would have a demand of
around 20,000 units per quarter. This has been taken as Amul is seriously considering
the prospect of entering into the organic milk business in India
• We are considering Cadbury to be our second customer as it will be a good match to
co-brand with due to their similarity in their philosophy of providing wholesome tasty
products. Cadbury is expected to have a demand of 15000 units of organic milk per
quarter.
• The third company would be Nestle and we are predicting that it would have a
demand of 10000 units.
• The fourth company would be Britannia with a demand of 8000 units.
• We will be operating in three segments- Milk, Cadbury and Biscuit. It is because apart
from milk only, organic consumers would like to have a full range of organic
products. In coming years, we will be coming up with different product lines in
organic food in different flavours, but as of now we will be concentrating on the
above three segments
Competition
• As of now, there is not much competition for us as such as our company will be
offering this product for the first time in the country
• But we will be definitely be facing very tough competition from the existing milk
suppliers
• As discussed in detail in External Analysis, the bargaining power of buyers and threat
of new entrants is low, but the threat of substitutes is very high
• So the main competition that we will be facing will be from the traditional milk
supplier companies which are into the business since years and it will be difficult to
get market share from these organisations. Even in countries like US and Canada,
only 3% of total milk sold is organic
• But again when we come into market, there will be a significant growth in market size
and the market size is expected to grow at 20% because there are very high number of
Health conscientious consumers (who have already made a choice to eat organic) and
Environmental conscientious consumers (who are mission/cause/issue driven )
• So to compete with the completion, what is required is that we need to explore this
untapped market and find the customer who will extend our reach to this market
Internal Environment Analysis
Strengths
Organic labels attract customers as they are nutritious for health.
o Organic milk has higher levels of Vitamin E, omega 3 essential fatty acids and
antioxidants which help in beating Infections.
o Cow’s farmed organic milk is 50% higher in Vitamin E than conventionally
produced milk.
o Higher levels of Omega 3 essential fatty acids provide protection from
coronary heart disease.
Experience in the Industry.
Our business is committed to sell high quality natural and organic products, satisfying
and delighting its customers, and caring about their communities as well as
environment.
Brand awareness/Equity is already high.
Large customized stores.
Strong network of suppliers.
Established customer base.
Presence of own farmer base/Strong sourcing.
Own processing and packaging unit.
One stop store for Certified Organic Tulsi Teas, Herbal Supplements, Psyllium,
Castor Oil, Ayurvedic and Medicinal Herbs, and many other organic foods, organic
spices and Organic milk etc.
Global leader in promoting organic products and in supporting sustainable farming,
wild crafting and village/tribal agricultural communities in India.
All facilities and processing centers have been awarded SQF, HACCP, GMP, ISO-
9001 and Kosher certifications, and are EU, Skal, ECO-Cert and USDA certified for
organic production.
Weaknesses
Not all customers are attracted with food quality and nutrition.
Many consumers have the misconception that Healthy foods are more expensive than
other foods.
Commitment to sell high quality natural and organic food leads to higher prices than
non organic foods.
Price – up to 40% higher.
Lack of awareness of benefits of Organic foods and there is a need to increase
awareness.
New in the market in this line.
Demand assessment is not proper as we are new in the market in this line.
Locations – only in the affluent areas.
During a time when the economy is in a downturn, our business may get affected. In
this case we will have to find a cost effective way to give a little something back to
customers that do buy on a regular basis and try to get new customers in the same
tactic.
External Analysis-
This analysis constitutes of looking at the organic food industry in terms of external forces
and powers that could impact our business model in terms of How this market is getting
driven by external forces. So, that we can anticipate those forces in advance and make some
strategies to mitigate these forces. These analyses will also give us some idea about the
environmental, political, competitive, technological and Economical, etc.
We have taken three frameworks to analyze this Organic milk segment-
1. Porter five forces
2. PEST
3. SWOT
Porter’s Five Forces-
PEST Analysis-
SWOT Analysis-
Growth rate of organic market globally and future forecasts
Some challenges-
Organic suppliers being smaller than conventional ones, wholesalers tend to
discontinue slow moving
Items - continuous disruptive supply.
No labelling laws exist in the country.
Influx of pseudo-organic and "organic claims" (and a lack of regulations from
government bodies)
Product (quality) development:
Lack of confidence in organic farming on the part of the farmer.
Supply is growing faster than the demand.
Research and Development process:
This project deals with R & D of the organic milk which offers consultant services to more
than 4000 organic and conventional dairy farms. The 2000 farms that are registered members
of the organization (for an annual fee Rs 42000) receive a twice-monthly technical bulletin
and have access to research and on-farm trial results as well as telephone consultations. The
advisory service covers a wide range of topics including herd management (feeding, health,
comfort, etc.), crops, soil management and production costs. Farm trials focus on cubicle
design and bedding surfaces, silage corn varieties (yield/production costs), palatable and
resistant grass mixtures, cow tracks, and farm equipment comparisons. A team of 18
consultants also offers workshops and training sessions on the same areas covered by the
advisory service. Another 6 people make up the applied research team.
This lab has a wide range of activities that include, among others, setting up research projects
in organic farming, offering advisory services for agricultural firms, and providing
information to consumers. Among many interesting topics: the project was initiated to help
farmers comply with one of the requirements of organic certification in India , i.e. a health
plan. This five-year plan requires that herd health and welfare be assessed and
recommendations drawn up. The project sets up discussion groups of four or five farmers
who then visit the farms of the group members to find solutions to two problems selected by
the host farmer. A mediator accompanies the group as a facilitator to ensure that the process
runs smoothly. These meetings were a great success with farmers and continued even after
the project ended.
Total Market Demand
Define the market:
Most of the large companies which can enter into a relation with our product are located in
Gujarat. So we will be operating from Gujarat. The market of organic milk will be a niche
one as there are very few companies would be using organic milk to differentiate their
product.
We will are targeting 4 customers initially and those are Amul, Cadbury, Nestle and
Britannia.
We are considering Amul as our first customer which we are predicting would have a
demand of around 20,000 units per quarter. This has been taken as Amul is seriously
considering the prospect of entering into the organic milk business in India.
We are considering Cadbury to be our second customer which would have a demand of
15000 units of organic milk per quarter.
The third company would be Nestle and we are predicting that it would have a demand of
10000 units.
The fourth company would be Britannia with a demand of 8000 units.
Divide the industry into its main components:
Milk Industry: The number of people who are becoming health conscious is growing day by day. So if any milk company can provide different forms of organic milk, the company will surely do well.
Cadbury Industry: As the awareness increases the other related industry which uses milk as raw-material will also switch to organic form of milk.
Biscuit Industry: They can explore the opportunity of offering products made of organic milk for niche customers.
Forecast the drivers of the demand in each segment:
The driver for demand as we could think applies for all the three industries described above.
They are:
1) People becoming health conscious
2) Government imposing regulations
Conduct sensitivity analysis
We have estimated a demand of 53,000 units in the first quarter.
That is around 59,000 litres per day.
Considering the fact that organic milk is increasing day by day and it already has a large
market, 59000 litres per day would be considered as a pessimistic approach. So there is no
need to do a sensitivity analysis in this case.
Segmentation- Target- Positioning
CURRENT POSITIONING OF ORGANIC PRODUCTS
Product positioning relates to forming a particular product image in the mind of the
consumer. In traditional marketing terms, positioning consists of highlighting some
characteristics of the product in order to differentiate it from its competitors and to
acquire competitive advantages in the competitive arena. Marketers tend to position with
logical, functional, symbolic, and experiential aspects of products, ignoring other
possibilities.
In the case of organic products, either current positioning is mainly based on some
attributes of the products, positive (healthy, better tasting) or negative (produced without
chemicals, GMO free, with no added artificial flavouring, preservatives, etc.). Further,
current positioning is usually pursued with a general symbolic reference to the need/goal
of maintaining health, which appears one of the most relevant values in our long-living,
aging Western society. Besides, the organic attribute appears as a further element of
differentiation in category management (you have the full-fat yogurt, the probiotic-added
yogurt, etc. and the organic yogurt), although all organic products have a common
positioning in the mind of consumers.
MEANS-END CHAINS AND PRODUCT POSITIONING
A means-end chain (MEC) is a knowledge structure that links consumer knowledge about
product attributes with his/her personal knowledge about consequences and values.
The means-end approach suggests that consumers think about product characteristics or
attributes in terms of personal consequences. These may be perceived as positive
(benefits) or negative (risks).
In other words, the means-end chain model gives the possibility to explicitly link
consumers’ needs and products characteristics, and reveals their goals/motivations in
purchasing a product.
In means-end chain theory consumers exert a behaviour (as an example: acquire a credit
card), as a mean, to reach an objective or an end (ex: not to pay cash). Besides, consumers
also see most product attributes as a mean to some end: at the conscious level, this may be
represented by some positive consequences, in a more abstract and subconscious level
their end is to attain values, which are “preferred end states of being and preferred modes
of behaviour”.
Positioning in a means-end framework will look at product attributes, consequences of
product use, and values attained by product use.
A VALUE-BASED APPROACH TO POSITIONING
In case of highly-symbolic products like organic products, which consumers perceive
mainly on the basis of “credence” attributes like the (organic) label, it is therefore of
paramount importance that the product is positioned in terms of terminal values. This
would favour a strong emotional involvement with the product, while in general food
products are associated with low consumer involvement. Most organic products are
always associated with the instrumental value Health, and – most importantly - with the
terminal value Well-being/Quality-of-life, which subsumes also all the hedonistic values
associated with personal gratification. We already mentioned that the positioning based
on health is quite mainstream in the organic market, while we think that the concept of a
well-being positioning strategy is still almost unexplored.
To make an example, we will use a product drawn from the conventional yogurt market.
It is the case of Actimel, from Danone. It was launched at the end of 1990s, and it is
neither a yogurt neither a soft drink (like Dan-up). It is a new category, a probiotic milk-
based nutraceutic. But the interesting thing is that Actimel consumers are not people with
health problems, but it is sold in the yogurt section of supermarkets to people who want to
take care of themselves and enjoy life. It is a product with a wellness concept. Actimel is
not only health but has a good flavor. Besides, it is relatively expensive and sold in small
packages.
Actimel is from a brand that with the Bio*Danone (now Activia: an ordinary yogurt but
with special probiotic addition that ensure bowel regularity) has been a controversial
competitor of organic products.
Nevertheless, the organic market should learn the lesson, and consider that a new
marketing concept is needed to (re)position the whole sector in the mind of the prospects.
The wellness/wellbeing concept could be a way forward. As our research has highlighted
it combines both the safety & quality issues in one word, and is less semantically
connected with the idea of disease. Wellness is a concept that combines fitness and
enjoyment; e.g. gyms know that staying fit is a hard task, therefore why not combining
this with massages, solariums, saunas, etc.?
Seemingly, organic (re)positioning could consider new users (e.g. the constant business
travelers, striving for the quality of life), new situations (e.g. open-air sport competitions),
new point of sale (e.g. automatic vending machines in airports or wellness centers). A
concept that eventually combines a gourmet/slow food diet, with an ecological and
healthy lifestyle.
We are segmenting the consumers within the natural and organic products industry into
committed, heavy, transitional and trial buyer groups. This segmentation is of particular
importance when one considers the relative concentration of sales by the committed and
heavy buyers of organic. We can determine which of the categories are more successful
in attracting the transitional and trial buyers of organic. Targeting sales into these driving
categories can guide both manufacturers and retailers to productive growth prospects.
For the transitional buyer set, organic options for produce, non-dairy and cold cereals are
most likely to attract consumers. Some of the least likely include packaged meats, cheese,
meat alternatives and refrigerated juices. This may be due to consumer perception of
these products as being inherently natural and therefore not worth the added expense of
organic premiums.
% of Segment Buying
Organic Categories TRANSITIONAL
Packaged Fresh Produce (branded) 59.1
Refrigerated Non Dairy Bev 21.2
Cold Cereals 19.5
Yogurt 16.2
Soup 12.9
Milk Half Half Cream 12.2
Bread Baked Goods Frozen, Non Frozen 11.2
Shelf Stable Fruits Vegetables 10.3
Cookies Snacks Bars 10.2
Chips Snacks 10.6
Source: SPINS Consumer Panel
Trial buyers are much less likely to purchase organic products, regardless of the category.
In fact, the only category where over 10% of the segment buys organic products is
packaged produce. All others fall below this level, with most reporting fewer than 5% of
the segment buying. Overall penetration rates across all of the buyer segments have been
on the rise for many of the organic categories. When the year-end June rates are
compared to the same period year ago, 37 of the categories attracted new buyers, 10
remained at year ago levels and 11 lost buyers. Organic milk, cookies and snack bars,
condiments, and refrigerated non-dairy posted some of the highest increases in
penetration rates.
Top 10 Organic Category Penetration Rates
Organic Categories Current Period Year Ago Period Point Chg
Packaged Fresh Produce
(branded)
33.0 32.3 0.7
Refrigerated Non Dairy Bev 10.3 9.2 1.1
Cold Cereals 10.2 10.5 (0.3)
Yogurt 9.1 9.2 (0.1)
Soup 8.0 7.1 0.9
Milk Half Half Cream 7.7 5.7 2.0
Bread Baked Goods Frozen,
Non Frozen
6.9 6.9 0.0
Shelf Stable Fruits
Vegetables
6.6 6.1 0.5
Cookies Snacks Bars 6.2 4.5 1.7
Chips Snacks 6.0 6.6 (0.6)
This information also shows that some of the most heavily penetrated categories are also
the ones most shopped by the transitional organic consumer. As retailers work to increase
customer traffic to these products, consumer familiarity with the products and a potential
willingness to purchase a broader product offering should provide opportunities for
incremental growth beyond the traditional “core” organic consumer.
IMC objectives
• Progressive/conditional form fields for initial and subsequent visit lead data collection
• Multi-user content management tools for creating, storing, merchandising,
distributing, sharing, and measuring interaction across all relevant content distribution
channels (website, blog, social networks, media dissemination networks, email
campaigns, etc.)
• Marketing database that syncs with sales CRM for bi-directional data transfer and
reporting
• Individual-level activity tracking (web visits, email actions, forwards/referrals, file
downloads, etc.)
• System-wide metrics and analytics so that measurement can span the full marketing
and sales lifecycle
• Low/no upfront costs — small and medium businesses test-then-invest
• No long term commitment — retention should be value-driven, not contractually
obligated
Outbound Tools
Inbound Tools
Marketing budget division
Effectiveness Control Plan
• Invest only 50% of the marketing funds initially for the marketing activities
• Based on the result obtained, invest 20% of the saved fund on the activity with highest
ROI
• Diversify the investment across all the profit making activities
Pricing Policy:
The price which we had taken into account is premium pricing as we will be the only player
in this space. The practice is intended to exploit the (not necessarily justifiable) tendency for
buyers to assume that expensive items enjoy an exceptional reputation, are more reliable or
desirable, or represent exceptional quality and distinction. We will be having a first mover
advantage in this segment and will enjoy having the major pie of market share in the nascent
stage. Conventional players in market have different prices for different products.
As we can see retail prices of Mother Diary 1 litre packs:
Full cream milk cost Rs 39
Toned milk cost Rs 30,
Token milk cost Rs 28
Double toned cost Rs 26
Skimmed milk cost Rs 22
The cost of obtaining the organic milk is on a higher side, so if we add the cost of obtaining
the organic milk into account and increase our mark-up on cost to make it a premium product
for the customers.
Fixed Cost- Rs 30
Mark up cost- Rs 10
Variable cost-Rs 5
Total: Rs 45 / Litre
We have put a price range of (Rs 42-45) it will depend on who is our customer and we will
give them a price on volumes. So mark up cost will vary depending on our customer. Our
total demand in the market place has been estimated at around 59,000 litres a day. So as and
when our demand increases we can cut down or cost by economies of scale. So if we increase
our demand by 20% so we can cut down our cost and reduce price by Rs 1-2 in future so that
it will attract more buying from our existing customers and attract new clients all together.
We don’t have any technology acquisition cost as we are new in this industry and the first
one to come out with this unique product. The major variable cost is being marketing cost
which we had already segregated in our financials.
Abstract
The organic food industry is growing at a rapid pace. Currently, India is listed as the 3 rd
largest exporter in the organic food segment. Today Global demand is outpacing supply due
to increased awareness of the hazardous impact of fertilizers, pesticides and chemicals which
are implanted to increase the yield that eventually adversely affect human health by
increasing risk of cancer, heart attacks. Indian market currently is in its nascent phase. To tap
this opportunity of people getting health conscious, we are planning to come up with a new
product in the form of organic milk that is pure, chemical free and highly beneficial.
Initially, we will be focusing on four major customers that are Amul, Mother dairy, Nestle
and Britannia. These four companies can use our product as raw materials for their products
that include cheese, curd, flavoured milk and Chocolates, etc. We also need to set up a test
lab to test the nutritional content of the organic milk. As per guidelines, certain tests will be
conducted as per the international agencies and government policies. At the same time, we
will hire some consultants who will help us in establishing the test labs and conducting the
training sessions for the farmers to make all the processes as per the standards given by
International agencies and WHO.
Once the customer as a commodity accepts the product, any company can come in and
replicate our model. As we are anticipating future, competition in the market we have
planned based on assumptions by focusing on innovation and diversifying our portfolio in
terms of increasing our product lines as per demand. We would also need to base our efforts
to educate customer and create awareness about the pros and cons of the organic food in
order to increase sales by changing mindsets. To achieve this we need to do aggressive
marketing mainly Outbound and Inbound marketing where we can go for Social media
marketing, Print media and OOH. As now, many people spent most of their time on social
media so it is very important that our presence on social media should be substantial to create
maximum impact. Social Media is cost effective and high on benefits.
We have a strong network of 25000 farmers; they will act as suppliers for us. Another
opportunity lies in a strong distribution channel of our parent company that we can leverage
in terms of achieving operational excellence. That will significantly reduce our cost part; we
can generate sustainable profits in long terms and help in achieving break even quickly. Once
we will achieve break even, we have another strategy in which we will focus on achieving
economies of scale quickly by penetrating deep inside the markets. Economies of scale also
help us in reducing the cost at later point in time, when competition will become stiff and that
will distinguish us with our competitors. As the people in India are price conscious, so in the
future price point will play a significant role in terms of affecting our top and bottom line. We
can play at a price point to differentiate us with competitors.
At an initial stage we will be providing seed capital to start the business. In the next stage, we
will be taking the help of banks and investment bankers.
Projected Sales Volume:
We are targeting the industrial players who have niche products in the diary segment in India.
Some of our major customers would be Amul, Cadbury and Nesle. We are expecting that the
awareness of the organic milk and milk products will increase in India.
Expected sales volume (per quarter): 1,23,810 units/ quater ( 12381000 litres) by 3rd year
Expected sales volume (per day): 1,03,175 litres.
This market is expected to rise at a rate of 8-10% yearly.
Amount of money that can be invested in the project:
The cost that we would incur in the first quarter is Rs. 16,10,10,000. So we can take this
amount as the cost that would be required to start the business.
The main money that we need to spend on is the R&D division of our company. The R&D
cost has been taken as 5% of the revenue that we would be generating. This is a product that
will be first in India and we need to do a lot of research before the product gets launched.
Also we need to spend a lot on educating the milkmen on the proper procedures that needs to
be followed to product organic milk. We would actually buy good quality jersey cows and
give provide the milkmen, after we enter a contract with them. We also need to spend on their
proper fodder. The milkmen needs to take care of the cows they have been provided.
The initial R&D is expected to cost around Rs. 7965000. Also for buying 2950 cows we
require a sum of Rs. 118000000.
The total variable cost to start the project will be around 33,737,000 and the projected
revenues from the first quarter are around 159,300,000. So we can see that the project has the
potential to reach the break even point from the first quarter itself.
The initial investment in the project will be around 124,650,000. But the entire investment
can be recovered in the 2nd Quarter itself if the profit is ploughed back in the system. So the
investment can be totally justified.
Appendix Material:
Bibliography:
References:
http://articles.economictimes.indiatimes.com/2012-09-14/news/33844446_1_largest-food-
brand-amul-gujarat-co-operative
http://www.confectionerynews.com/Manufacturers/Cadbury-to-take-organic-chocolate-
mainstream
http://www.thehindu.com/todays-paper/tp-features/tp-districtplus/article3409891.ece
http://www.business-standard.com/article/companies/tirumala-milk-to-set-up-organic-dairy-
farm-111121600067_1.html
http://www.free-press-release.com/news-business-opportunities-in-organic-milk-production-
state-level-workshop-1281073016.html
http://business.mapsofindia.com/top-brands-india/top-milk-brands-in-india.html
http://www.asiafoodjournal.com/article/sizing-up-china-and-india/6547
http://johnbuntingsjournal.com/wp-content/uploads/2011/09/09-16-2011-Organic.jpg
http://www.nytimes.com/2011/12/30/business/rising-production-costs-cause-organic-milk-
shortage.html?pagewanted=all&_r=1&
http://www.business-standard.com/article/companies/india-s-organic-foods-market-growing-
at-over-20-112082300157_1.html
http://www.ats-sea.agr.gc.ca/inter/5619-eng.htm
http://www.organicindia.com/organic-india-company-profile.php
http://www.free-press-release.com/news-business-opportunities-in-organic-milk-production-
state-level-workshop-1281073016.html