Ctrl Consulting
Your Strategic Path to new endeavors
Presenting to: Vivek Nirmal, Joint managing Director of Prabhat
Montreal, January 5, 2016
Ctrl ConsultingDriving Question
1/5/2017 Ctrl Consulting 2
Which strategic path to follow for your prospective growth?
Rising milk procurement prices
Profitability of your business model
Declining working capital situation with increasing receivables
Ctrl ConsultingSolution Preview
1/5/2017 Ctrl Consulting 3
80:20 Sales mix for customers in Tier 1 cities 1
Leverage large-scale customersPenetrate the South-Indian marketContract suppliers
2
Increase revenues of 32 percent in 5 years3
Recommended Strategy
Implementation Actions
Targeted Outcome
Ctrl ConsultingAgenda
• Analysis of Status Quo
• Strategy Development
• Recommended Implementation Actions
• Future Outlook
• Conclusion
1/5/2017 Ctrl Consulting 4
Ctrl ConsultingPrabhat Dairy at a Glance
1/5/2017 Ctrl Consulting 5
Products
• Milk products 28%• Polypack milk
• Value-added milk 1%• “Milk magic”• Flavoured milk
• Value-added milk products 71%
• Cheese• Milk powder• Clarified butter
Business Model based on buying raw milk and sell milk product
Channels
• Retailer• Distributers• Direct contracts
Customer
• B2B 70% revenues• Food service • Mondelez• Abbot• Perfetti Van Melle• Fast food chains• MNCs• Local player
• B2C 30% revenues• Organized • Unorganized
Ctrl ConsultingPrabhat’s Way to the Current Situation
1/5/2017 Ctrl Consulting 6
Strategy
• Selling value-added dairy products through retail channels
• Goal: 50:50 ratio of B2B and B2C
• Two-pronged distribution strategy
Outcome
• Rising revenues• Rising costs• Decreasing profit• Low utilizing rate:
• 50% polypack milk• 96% milk powder• 71% condensed milk• 20% value-added
products• Increasing working capital
Actions
• IPO in 2015• Pilot projects or B2C
market• Increase of capacities• Pricing strategy
Decreasing profits due to going into the retail market
Ctrl ConsultingThe B2C Diary Market Structure
1/5/2017 Ctrl Consulting 7
Downstream
• 50% self-consumption• Milk contractors• Diary farms
• Very small
Highly fragmented
Upstream
• Unorganized• Street vendors• Kirana stores
• Organized• Supermarkets• Cash’n’Carry
• 12-14 mil. Retailers
Highly fragmented
Competitors
• MNCs• Local companies• Cooperatives
• GCMMF• Own kiosks• Quasi-governmental
Highly competitive
6%
Ctrl ConsultingLiquid Milk as the Bread and Butter Business in B2C
1/5/2017 Ctrl Consulting 8
Customer Facts
• Milk is traditionally included in the meals
• Higher consumption in the northern of India
• Higher consumption in urban areas (Rs. 187 vs Rs. 116)
• Move to cities• Increasing income and
wealth
Customer Demands
• Creamier milk• Liquid milk 80%• More healthy food
Liquid milk is not your core-competencies
Ctrl ConsultingPossibilities in the B2B Market
• Tourism• Northern India• Faster growth potential due to higher volumes• Less partners to maintain with
1/5/2017 Ctrl Consulting 9
Better potential in B2B market
Ctrl ConsultingChallenges ahead
• Inventory days increase from 17 to 23 days
• Institutional customers demand a longer payment period which increased the receivables from 35 to 76 days
• Both had an adverse effect on the working capital
0
50
100
150
200
250
300
2015 2016
Working capital (in ten million rupees)
1/5/2017 Ctrl Consulting 10
Ctrl Consulting
Revenues are Increasing whileProfits are Declining due to higher expenses for B2C market
1/5/2017 Ctrl Consulting 11
0
0.5
1
1.5
2
2.5
3
0
200
400
600
800
1000
1200
1400
2015 2016
In ten million rupees
Revenues Profit Margin
In %
0
200
400
600
800
1000
1200
1400
In ten million rupees
B2B70%
B2C30%
Profits need to be improved in order to satisfy shareholders.
Ctrl ConsultingIPO in 2015 increased equity
235.41
523.41
238.53
146.23
0
100
200
300
400
500
600
700
800
2015 2016
In ten million rupees
Equity Debt
1/5/2017 Ctrl Consulting 12
For further investment, long-term capital could be raised.
Ctrl ConsultingAgenda
• Analysis of Status Quo
• Strategy Development
• Recommended Implementation Actions
• Future Outlook
• Conclusion
1/5/2017 Ctrl Consulting 13
Ctrl ConsultingPrabhat Dairys’ Goal
1/5/2017 Ctrl Consulting 14
Is the 50:50 B2B and B2C Sales Mix a feasible goal?
Ctrl ConsultingB2B
1/5/2017 Ctrl Consulting 15
• Business to business• Focus on food service segment, restaurants, hotel chains and caterersDefinition:
Advantages
• Won various supplier awards• Focus on value-added diary products• Strong distribution channels• Dedicated facilities or industrial customers• ISO certification• Presence in only 10 o 36 discrete units
Disadvantages
• Customer demand a longer payment period increasing working capital
Ctrl ConsultingB2C
1/5/2017 Ctrl Consulting 16
• Business to customer• Sell products to small stores (Kirana)Definition:
Advantages
• Market growth• Lower pricing strategy than competitors
Disadvantages
• Unorganized retail sector• Complex distribution channels as significant
cost driver• Issue of branding
not your core competence• Products have smaller retail footprint• Fierce competition
Ctrl ConsultingB2B vs. B2C
1/5/2017 Ctrl Consulting 17
Prabhat Dairy
Customer
1000 unitsPrabhat Dairy
1-2 units1-2 units
1-2 units
1-2 units
Ctrl ConsultingCritical Success Factors
1/5/2017 Ctrl Consulting 18
Criteria B2B B2C
Production facilities
Associated Costs
Distribution channels
Growth potential
Ctrl ConsultingCritical Success Factors
1/5/2017 Ctrl Consulting 19
Criteria B2B B2C
Production facilities
Associated Costs
Distribution channels
Growth potential
Sales Mix of 80:20
Ctrl ConsultingStrategy for your B2C market
1/5/2017 Ctrl Consulting 20
Tier 1
• Large populations• Low distribution costs• Lower pricing strategy than
competitors• Fierce competition
Tier 2&3
• Avoiding competition with big players• First-mover advantage
Ctrl ConsultingCritical Success Factors
1/5/2017 Ctrl Consulting 21
Criteria Tier 1 Tier 2 & 3
Distribution Channels
Associated Costs
Competition
Growth potential
Ctrl ConsultingCritical Success Factors
1/5/2017 Ctrl Consulting 22
Criteria Tier 1 Tier 2 & 3
Distribution Channels
Associated Costs
Competition
Growth potential
Ctrl ConsultingContingency Plan & Mitigation
1/5/2017 Ctrl Consulting 23
1. Changing price payment structure of cooperatives
Supply contracts with farmerOffer variety of support
2. Increasing competitors in B2B marketOffer better conditions for best
customersLong-term contracts with B2B
customers
Probability
Impact1
2
Ctrl ConsultingContingency Plan & Mitigation
1/5/2017 Ctrl Consulting 24
1. Changing price payment structure of cooperatives
Supply contracts with farmerOffer variety of support
2. Increasing competitors in B2B marketOffer better conditions for best
customersLong-term contracts with B2B
customers
Probability
Impact1
2
Ctrl ConsultingAgenda
• Analysis of Status Quo
• Strategy Development
• Recommended Implementation Actions
• Future Outlook
• Conclusion
1/5/2017 Ctrl Consulting 25
Ctrl ConsultingCapacity for your successful future operations• Increase Utilization of machinery for a better fix-cost distribution
1/5/2017 Ctrl Consulting 26
Utilization(before)
• 50% Polypack milk
• 96% milk powder
• 71% condensed milk
• 20% various value-add products
Counter measures
• Increase capacity for milk powder Market (high demand)
• Penetration ensures better utilization for milk and value add products
Utilization rate (after)
• 75% Polypack milk
• 96% milk powder (+ new facility)
• 90% condensed milk
• 85% various value-add products
Focus on customer who order large amounts of your products
Ctrl ConsultingFocus on customers who procure in bulk-orders
1/5/2017 Ctrl Consulting 27
Food Retail
Unorganized Sector
Organized Sector
Kirana stores
Supermarkets
Hypermarkets
Cash ‘N Carry
Gourmet Stores
A focus on large scale customers ensures better planning for operations and decrease in working capital
Key Facts
• Bulk-orders ensure better planning in your operations
• Improved planning ensures better inventory management
• Decrease in Working Capital
Ctrl ConsultingSales Strategy for your B2B and B2C Market
1/5/2017 Ctrl Consulting 28
Key Facts
• You are currently operating in 10 of 26 states in India (West and East)
• Expand your business to South India
• Focus on B2B and Chain Retail stores
• Make use of your 250 sales people
Maharashatra
ChennaiPanaji (Goa)HotelsResortsRestaurants Bangalore
HotelsResortsRestaurantsChain Retail Stores
Deploy your sales people into different sales regions
250 sales people80 Bangalore and Chennai40 Panaji130 for other current region
Ctrl ConsultingContract farmers to ensure stable prices• Long-relationship contracts
• Ensure a win for both sides
• Individual support for farmers (if applicable)
1/5/2017 Ctrl Consulting 29
Tackle price fluctuation by long-term contract with farmers
Ctrl ConsultingImplementation Roadmap
1/5/2017 Ctrl Consulting 30
Supply Chain Improvement Contract suppliersCut-down on stores
Operations ImprovementFind potential facilityFind potential machineryPurchase new facility
Implement Sales StrategyDeploy Sales peopleFind potential targets
Jan 2017 Feb 2017 Mar 2017 Apr 2017 Costs (Rupees)
14.79 billion*
*(5% of fixed assets)
1 billion
2 billion
Ctrl ConsultingAgenda
• Analysis of Status Quo
• Strategy Development
• Recommended Implementation Actions
• Future Outlook
• Conclusion
1/5/2017 Ctrl Consulting 31
Ctrl ConsultingFuture Outlook
Recently Plan
Decrease inventory 23 15
Decrease receivables 76 35
Turn around fixed-to-current assets relationship
44:56 60:40
1/5/2017 Ctrl Consulting 32
Ctrl ConsultingAssumptions
• Growth in revenues• 2017 & 2018: 5%• 2019 & 2020: 7%• 2021: 10%
1/5/2017 Ctrl Consulting 33
Ctrl ConsultingFuture Outlook
1/5/2017 Ctrl Consulting 34
0
50
100
150
200
250
300
0
200
400
600
800
1000
1200
1400
1600
1800
2017 2018 2019 2020 2021
(in ten million rupees)
Revenues Profit after tax
Ctrl ConsultingFuture Outlook
0
2
4
6
8
10
12
14
16
18
2017 2018 2019 2020 2021
Profit margin (in %)
Profit margin
1/5/2017 Ctrl Consulting 35
Ctrl ConsultingAgenda
• Analysis of Status Quo
• Strategy Development
• Recommended Implementation Actions
• Future Outlook
• Conclusion
1/5/2017 Ctrl Consulting 36
Ctrl ConsultingConclusion
1/5/2017 Ctrl Consulting 37
Which strategic path to follow for your prospective growth?
Rising milk procurement prices
Profitability of your business model
Declining working capital situation with increasing receivables
80:20 sales mix
Supply Tier 1 cities
Focus on large scale customers
Penetrate market to South-India
Contract suppliers
Top Related