Haleeb Foods Company Analysis

Haleeb Foods Company Analysis Haleeb foods limited, formerly known as Chaudhry dairies was formed in 1985. It is one of the fastest growing companies since its inception. The core product of the company has always been packaged milk but it currently operates in several other food product categories. It has continued to provide high quality products to its customers and is one of the first companies In Pakistan to use tetra packs innovative packaging technology. It is principally engaged in processing and sale of toned milk, milk powder, allied dairy products and fruit juices. (Haleeb Foods Intern Report, 2012) It was founded back in 1985 with a total capacity of 80000 liters per day and has two production plants. The main production facility is at Bhai Pheru, known as the BHP (Bhai Pheru Plant). Due to its tremendous success and a high demand for its products especially Haleeb Milk the company set up another plant at Rahim Yar khan. The RYK plant is a state of the art facility. Covering an area of over 72 acres the plant it equipped with the latest technology and was a very fine project that Haleeb Foods undertook. Liquid milk was the first product produced at the company and was a huge success. There were around 20 to 25 other dairy companies operating in Pakistan at that time but Haleeb as a company was still able to stand out of the clutter. It was an incredible team of over 700 employees at the BHP and an outstanding marketing team that contributed to this success. Haleeb foods has segmented its product portfolio into multiple brands including Haleeb, Candia and Tropico. Haleeb is the flagship brand of the company. Haleeb UHT milk is available in five SKUs of Tetra pack packaging. (Irfan, 2012) Due to its strong positioning of being the thickest milk best for tea and the highest top of mind awareness in the dairy industry of Pakistan the company has been able to increase its sales and has had a significant consumer and trade penetration of the brand. It is also available in Tetra Fino packaging under the brand of Dairy queen. By strictly following the quality control measures the company was also one of the first few companies in Pakistan to get ISO certified. This had a huge impact on the perceived quality of its customers and help boost sales in its early years. The company has also been a pioneer in introducing the tetra pack Fino packaging and introducing sterilized milk in the country. The company has diversified into multiple products and a vast product line over the years. The basic product line extension includes products like Haleeb Cream, Haleeb Butter, Haleeb Asli Desi Ghee, Daizy yoghurt, Candia, Just fruit, Tropico juice, Haleeb Labban, Haleeb Funday juice, Haleeb Good day etc. The company entered into a franchise agreement with Caddilac France and launched Candia milk in 1999. Candia was available in two variants i.e. Candia classic (a tea whitener) and Candia candy up (flavored milk) for kids. This was a successful venture before the company started to underperform. Today Haleeb Foods no longer produces Candia. The company has a vast distribution network covering a number of cities across Pakistan. This is one factor that contributed positively to its success and help the company build an ever growing consumer network. Initially Haleeb also started to export some of its products to countries like Korea, Hong Kong, Middle East, China, Bangladesh, Afghanistan, UK and U.S.A but due to its poor financial performance in the more recent years it could not continue this for long. The primary reason for its success was the huge emphasis the company laid on continually improving its quality and following very strict quality control measures. The quality certifications that Haleeb as a company has are as follows: HACCP (In process controls for safer products) ISO 9001(Better quality for higher customer satisfaction) ISO 14001(Environment friendly operations) The company was able to in cash these certifications for quite some time before the quality of its products stared to deteriorate and was questioned by the customers and its distributors. The company has its operations largely centralized at its head office which is located at 135 Ferozpur Road Lahore. Most of its departments are based at the head office for example finance, marketing, human resources, sales, administration and information technology. The remaining however are based at its Bhai Pheru Plant. Regional offices of the company are spread across the country in cities like Rawalpindi, Karachi, Peshawar, Quetta and Rahim Yar Khan. This facilitates its distribution and eventually sales. VISION: Optimizing resources to deliver sustainable growth3 MISSION STATEMENT: Productivity: Be a highly efficient effective organization People: Develop a team of passionate and committed individuals whose goals are completely aligned with the corporate objectives Portfolio: Maintain a portfolio designed to meet changing consumer expectations by delivering nutritious and high quality food solutions in a cost effective manner Profit: Maximize long term return to shareholders while being ethically responsible Partners: Develop sustainable and mutually beneficial relationships with customers, suppliers and other stakeholders Planet: Be a responsible corporate entity by helping build sustainable communities3 CORPORATE VALUES: Integrity and Ethics: For more than two decades, Haleeb Foods Ltd (HFL) has emerged as a company that believes in fair dealing, honesty and reliability. Members of Haleeb family are determined to observe and follow the utmost ethical standards required for any business to run smoothly. This is reflected in the daily functions, where all employees are facilitated with equal opportunities, barring any differentiation on the basis of gender, religion, cast, color and other variables. We are focused towards promoting the merit-based culture, assuming it to be a fundamental pillar for success. We take pride in how we conduct the business, while consistently emboldening everyone to do the right thing at all hours. (Haleeb Foods Ltd., 2012) Pursuit of Excellence: We at Haleeb Foods Ltd (HFL) are geared towards delivering exceptional performance consistently. We achieve this by maintaining a competitive spirit throughout, which helps us in elevating our business in terms of profitability, growth and accomplishing inspiring levels of success. Our primary focus is to serve our consumers with the best value for their money. Irrespective of the economic conditions, we do not hesitate in challenging boundaries and rather excel with hope. (Haleeb Foods Ltd., 2012) Empowerment and Accountability: Management at Haleeb Foods believes in providing employees with avenues through which sense of ownership is created and authority is delegated. This not only boosts the morale of an individual but also helps in contributing towards efficiency and productivity. Empowerment results in devolution of trust and establishment of a healthy working environment. Delegating responsibility does not abandon personal accountability. Thus, in order to enjoy an effective and desirable outcome, competent monitoring processes are practiced, where each employee takes responsibility for their respective decisions. (Haleeb Foods Ltd., 2012) Cooperative Spirit: Admitting the importance of teamwork, Haleeb Foods Ltd passionately promotes the culture of sharing knowledge and working collectively. The concept of working with coordination comes in handy for reaping benefits from pooled talent and expertise ultimately resulting in higher productivity. We provide a platform, where going an extra mile to accomplish team objectives is a common routine. Simultaneously, personal satisfaction amongst employees is achieved. To add further value to our work practices, experienced and capable counseling is provided that enables employees to work under a shared vision. (Haleeb Foods Ltd., 2012) Environment, Health and Safety: Haleeb Foods Ltd has successfully managed to align its goals with procedures that prioritize and comply with employee safety and health. Acknowledging the paramount significance and vitality of human capital for ensuring a successful business, the company arranges wellness programs sided by comprehensive safety literature to educate the employees about safe working environment. HFL facilitates employees with prompt first aid service and medical treatment, accompanied by periodical medical check-up, a trained team for fire-fighting, emergency exit drills, employee/workers locker management and laundry management. Last but not the least; Haleeb is privileged with ISO 9001-2008, 14001 and 2200 certifications. (Haleeb Foods Ltd., 2012) Corporate Social Responsibility: Haleeb Foods Ltd encourages its employees to contribute consistently and positively towards a better standard of life, not merely for its customers but also for the community. Not assuming profitability to be the only business objective, Haleeb foods has integrated its operations with activities that help giving back to the community. In order to be recognized as a socially active entity, Haleeb Foods has supported the project of MEDA Pakistan; Pathways and Purse strings. Besides empowering the less advantaged, Haleeb Foods Ltd is also cautious about being environment friendly, through strict obedience of waste reduction and numerous other practices. (Haleeb Foods Ltd., 2012) MANAGEMENT TEAM: Designation Name Chief Executive Officer Faisal Imran Hussain Malik Director Finance Basit Humayun Chairman Ilyas M Chaudhry Senior Manager Human Resource Salman Nawazish General Manager Sales Khurram Mehr Malik Brand Manager Naveed Ali Shigri General Manager Plant Farooq Ayub Khan Manager RD Rao Muhammad Imran Manager Warehouse Logistics Muhammad Ali Shahid Head of Supply Chain Rizwan Ahmad Head of Technical Haseeb Ahmed Malik COMPETITORS: Pakistans FMCG sector is largely dominated by the two big giants namely Nestle and Engro Foods. Both are huge firms with a large customer base and operating very successfully in different products categories. Haleeb Foods has faced immense competition from these firms. Nestle and Engro are both highly profitable with Nestle, a multinational company being the market leader with a very diverse product portfolio. Products like Milk pack, Olpers and Good milk have posed a serious threat to Haleeb milk. Currently however, considering the economic and political conditions of the country no firm is performing at its full potential. High inflation rates, rising oil prices, power shortages have all contributed to the closing down of many ventures. The competitors are also having a difficulty in surviving in this tough environment. By focusing on making its processes and policies Haleeb can improve its competitive position and rise again. It has to have a strong product portfolio and a very constructed marketing plan to regain its lost fame and success. PRODUCT CATEGORIES: Haleeb as a company has always placed its customers first. In an attempt to fulfill the ever changing needs and meet the increasing demands of its customers the company has diversified its product portfolio gradually over the years. Many products like Candia milk and Skimz milk that were present in the market before are no longer available and have been replaced by new products. The company has upgraded many of its recipes and re-launched a couple of products in an attempt to better meet the needs of its target market. Some of the latest product categories at Haleeb are: UHT Milk: Haleeb was the first company that introduced UHT milk in Pakistan. The UHT milk category currently includes Haleeb milk only. Haleeb Milk is homogenized and standardized milk which is safely packaged using the Tetra packs latest packaging technology. It has a shelf life of about 3 months or more and is one of the most famous and best selling brands in the Haleeb family. It is produced on different SKUs like the Haleeb 250ml, Haleeb 500ml and so on. Skimz was another product in the UHT milk category which was mainly targeting the diet conscious people has now been removed from the portfolio as a result of the financial issues faced at the company. It was positioned primarily as a perfect source of calcium and vitamins for stronger bones and healthier individuals. In addition to its high calcium content, Skimz was also good for maintaining an individuals blood pressure. Beverages: Several products are produced at the Haleeb production plant as part of the beverage category. Some well-known beverages include Just fruit, Fun milk, Tropico and Haleeb doodh. Just fruit, as the name suggests is a fruity drink produced using farm fresh fruits. It is available in a wide variety of flavors including Apple, Orange, Mango and Grapes. It is a ready to drink beverage available in a small 200ml pack. Fun milk was primarily targeted at the kids. It has always been believed that children should have a high intake of milk as it is good for their health. It makes their bones strong providing them with the necessary calcium content but unfortunately not many kids really like drinking milk. This was the basic idea behind the launch of this product. It offered several variants including chocolate, strawberry and vanilla. Again it was available in a 200ml pack. Haleeb doodh was again flavored milk available in chocolate, strawberry, almond and cardamom flavors. The primary difference in Haleeb doodh and fun milk was the packaging. Haleeb doodh was targeted at the adults where as fun milk was positioned as milk for only kids. Tropico, in addition to being available in a 200ml pack is also available in a 1000ml family pack. It is positioned as pure juice nectar available in Mango, Orange and Apple flavors. Chilled Dairy: The chilled dairy segment is has products under a common brand name DAIZY. It includes Daizy yogurt, butter, cheese and raita. Daizy yogurt is a naturally sweetened yogurt packaged carefully to preserve its natural goodness. It is considered good for enhancing the immune system and for the digestive system. Daizy yogurt is available in 200gm and 400gm shrink wrapped trays. Daizy butter is another very healthy dairy product produced at the Haleeb factory. Butter is made of pure natural fats and has a high content of vitamin A and D. It is made on different tetra pack SKUs and is thus available in five sizes ranging from 20g to 1000gm. Daizy cheese is a milk based product. It gives your pizzas sandwiches etc a much better taste and is one of the best selling products at Haleeb. It is made in 2kg packs, 1kg pack and 200gm pack. Each pack contains a fixed number of wrapped cheese slices. Daizy raita is a variation in the traditional yogurt. Keeping in mind the Pakistani culture the company came up with this product a few years ago. Pakistani people love to have raita with a lot of these meals so it Daizy raita serves as a readymade raita enhances every food moment and makes their food taste delicious. Fats: A number of products with a high fat content are also produced at Haleeb. Fat is a bi product of processed milk and the company utilizes it to the fullest. Two main fat based products that complement the overall portfolio are Asli desi ghee and Haleeb cream. Haleeb Asli Desi Ghee is made of pure natural butter. The butter is processed further by heating it and the result is incredible. It is again targeting the Pakistani market and a large target audience as is considered very healthy and nourishing. Also the product has a shelf life of 1 year which facilitates its distribution and contributes positively to its sale. It is available in three sizes namely 2kg, 5kg and 16kg. Haleeb cream is one product produced at the Haleeb plant which contributing to its overall profitability even today. The research and development department has worked really hard to make the cream competitive and do well in the market. The product is positioned as healthy, nutritious product that has a smooth texture and tastes delicious. It is available in 200ml pack and has a shelf life of 6 months. Whitener: Tea whiteners are increasingly being used around the globe as a substitute to fresh milk. Tea max is considered one of the best in this category. Haleeb tea max is a product that is primarily targeting SEC C and has done very well in the market. It has generated enormous sales volumes for the company and is considered the best in its category. It is available in 200ml and 250ml packs. It has a shelf life of three months. Dairy queen is also targeted at the lower class of the society. It is a relatively cheaper product and is packed in pouches to reduce the cost and price further. It is a standardized, homogenized product with 3.5% fat and 8.5% non fat content. It is available in a 6 layered Tetra pack fino packaging and has a shelf life of 3 months. MANUFACTURING PROCESS AT HALEEB Haleeb Foods Limited has its own manufacturing and production facilities as mentioned above. The current operational plant at Bhai Pheru is highly efficient. It is generally perceived that packaged milk is unhealthy and not good for use however Haleeb ensures consistent and good quality products by having an efficient manufacturing process. The process for making Haleeb milk is as follows: Collection of raw milk Testing Pasteurization Standardization Homogenization Sterilization Ultra heat treatment (UHT) Packing It is only after following all these steps that Haleeb milk is made available to the end users. The company has a number of milk collection centers where raw milk is delivered by gawalas, small scale farmers and some milk providing companies. This milk is tested for its acceptance at the milk collection centers. There are 14 tests that are conducted to ensure good quality at this level. Once the milk is collected, company owned trucks collect this milk from different centers and bring it to the BHP. Here the milk is again tested and then pasteurized, standardized and homogenized before finally being packed using Tetra pack Fino machines. CURRENT SCENARIO AT HALEEB FOODS LTD Haleeb started off as a very successful business venture but unfortunately could not sustain its high profitability and success. Companys profitability started to decline over the years along with the quality of its products. The Rahim Yar Khan project had a huge impact on the companys financial position and although it is a state of the art facility, its still not operational today. Haleeb rents out its tetra pack section at RYK to Nestle during the high demand season. Due to the poor management of resources and not very well managed decisions the company has incurred huge losses for the last few years. In Nov 2011 Haleeb foods ltd was acquired by a large giant in the market namely Mega and Forbes. They appointed a new chief executive officer, Mr. Faisal Imran Hussain Malik who is a highly qualified and a very competent person. Since November 2011 Haleeb is in the process of restructuring. The company which once had over 750 employees currently has cut it down to only 450 employees. A lot of firing and termination of incompetent people (in the managements view) took place. The company is highly unstable since then but is gradually moving towards stability. The new management has a very unique and a different management style from what the employees at Haleeb were used to. This is one reason that led to a highly demotivated workforce at the company. The employees and the top management are having issues in adjusting with each. The large number of terminations has created high levels of job insecurity, employees no longer feel that they belong to the organization and on the other hand the management is highly dissatisfied by the performance they deliver at work. Employees who are competent and have hands on experience in various fields are resigning, thus fueling the workforce problem. As a result of this, management has started to hire new employees at a very fast pace. Management trainee programs are formally introduced into the company in an attempt to inject new blood into the organization. Instead of making things better this new hiring is worsening the situation. Older employees show resistance towards the newer ones while the management is training them and investing huge sums of money in their development. The element of job insecurity is also worsening. Poor human resource management and a highly de-motivated workforce are having serious implications on the companys performance. Although Haleeb is recovering from its losses but most of its products are failing in the market. a lot brands have shut down, retailers are not really interested in stocking its products, customers perceive the quality of its products to have deteriorated and so on. If all this continues the Company would definitely going to go down the drain in the near future. It now has to be thought that what can make the situation better? A better workforce? What does it take to have a more competent workforce? What could make the workforce at Haleeb really motivated at this point in time? This is the question that I am going to address in my research project. Competitors Analysis Pakistan has a well developed Fast Moving Consumer Goods sector that contributes a significant amount to the overall economy. Haleeb Foods is a well known FMCG in the country. The company is currently facing intense competition from the other FMCG companies operating in the country like Nestle, Engro Foods Ltd., Shezan and Nurpur etc. In order to successfully compete in the market and regain its lost market share the company should carefully analyze its competitive activities. Nestle Pakistan: Nestle Pakistan is one of the leading companies in the country. It is also a very well reputed company with its operations spread all across the world and has employed over 250,000 people across the globe. The success of the company can also be attributed to the competent and hard working work force comprising of people from different backgrounds, race, nationality etc. nestle has managed to successfully operate worldwide by having a well defined economic model and a vast customer base over the years. The company has certain strengths and weaknesses which are discussed below as part of the SWOT analysis: Strengths: Strong product portfolio. Consistently good quality products. Excellent company image. Well developed marketing strategies and campaigns. Highest market share in the country. Weaknesses: Weak distribution channel. Use of reactive rather than proactive marketing approaches. Excessive focus on profitability. Opportunities: An ever growing market for health conscious consumers. Develop a well managed distribution system. Growing market for bottled water as the infrastructure in Pakistan further deteriorates. Can cater the rural areas and further expand their markets. Threats: Changing consumer trends and demands. Ever intensifying competition. Government regulations in the form of taxes that lead the company to raise prices. High inflation rate in the country. Very few entry barriers further intensifying competition. Engro Foods Ltd Engro Foods is another fats growing company in the fast moving consumer goods sector of the country. The company operates in several areas across Pakistan and has a diversified portfolio. It is a direct competitor to Haleeb Foods ltd. Some of the strengths weaknesses of the company are explained in the SWOT analysis below: Strengths: Strong brand name Large customer base Continuous research development Fully automated third generation plant Good relationships with farmers Weaknesses: High distribution costs Weak product portfolio Improper capacity utilization Lack of ISO certification Haleeb Foods Ltd Haleeb as mentioned above was one of the biggest dairy companies in the country but unfortunately could not keep pace with the changing market environment. The company has lost its market share to its close competitors like Nestle and Engro foods. Strengths: Best dairy company Thickest milk Wide customer base Innovative tetra pack packaging Weaknesses: Declining market share Lack of focus Weak employee base Weak distribution channels Opportunities: Growing market for packaged milk and milk products More competent workforce Developing distribution channels Covering untapped market areas Utilizing capacity at the Rahim Yar Khan plant Threats: Intensifying competition Changing market trends High inflation rate in the country Changing economic conditions Financial Analysis Ratio analysis for Nestle Pakistan is given in computed in the table above. Nestle is a well reputed and a well performing FMCG company in Pakistan. It is the market leader and has highest market share in the industry. The companys overall financial performance is satisfactory and compared to Engro it is much superior. As we infer from its profitability ratios that the company is profitable. Its gross margin, net profit margin and the operating profit margin have shown a slight decline from 2009-2010. But is ROA has increase to 11.02% in 2010 and ROE increased to 16.7%.Which is a good indicator of the companys health. It shows that the companys assets are paying off well. When compared to Engro it is can be seen that the gross profit margin ratio is higher (23.27%) as compared to the ICIs 19.1% in 2010. The net profit margin for Engro however is -3.4% as compared to the ICIs + 6.9%. This shows that Engro has high operating expenses like the administrative expense etc. in this regard Nestle performance is superior. The comparison of the liquidity ratios, more precisely the current ratios show that Nestle has a ratio of 2.17 whereas Engro has a ratio of 0.9. Nestle is in a better position in terms of it liquidity. The liquidity implications for the firm were positive as shown by the increase in the working capital from 82.19 million in 2009 to RS 320.6 million in The inventory turnover ratio shows that Nestle has an inventory turnover almost double the amount of Engros. Engros inventory turnover is 3.39 whereas for Nestle has an inventory turnover of 6.67. The higher the inventory turnover the better it is for the company, so Nestle is better off. From the efficiency ratios at Nestle, we can infer that Nestle, Engro and all other companies in the industry are facing problems. The hiking oil prices and gas and energy crisis are all increasing the companys expenses. Haleeb Foods Where Nestle is the market leader, Haleeb was established in 1986 and its first product was Haleeb milk. Since then, it has continued to provide quality products to its consumers with product and packaging innovations. The overall analysis of the firms financial statements shows that the company is not doing well. Compared to the industry leaders like Nestle and Engro, Haleeb is not that large a company. A deeper look into the company shows that its profitability has decreased from 2009-2011. Its net profit margin has reduced to 4.83% in 2011 from 7.19% in 2009. Although it is not a good indicator for the company, it still higher than the Engros -1.9%. This shows that compared to the industry averages Engro is doing poor in terms of its profitability. In terms of the gross profit margins Engro has superior results compared to both Nestle and Haleeb. From this we could conclude that the cost of goods Engros liquidity position is weak as compared to its competitors. Its current ratio of 0.9 in 2010 is even lower than the Haleebs 1.1. Turnover ratios on the other hand shows that Engro is doing better than the Haleeb foods, it has a higher inventory turnover of 3.3 is higher than the Haleebs 2.8 in 2010. This shows that Engro is selling off its inventory faster as compared to Haleeb foods. Overall, from the above analysis we can conclude that Engro is better than the competitors in terms of its activity ratios. It is effectively managing its turnover whereas the ultimate measure of a companys success, the profitability ratios reveal that Haleeb is doing poor. It seriously needs to improve its profitability in the coming years. Engro The overall profitability of the company is decreasing its return on shareholders equity is also showing a negative trend of -17.19% in 2011 and so is the return on common equity.. This decrease is mainly due to the increase in the companys expenses primarily its administrative expenses and the taxes. The cost of goods manufactured, have also increased for Engro. Looking at Engros gross profit margins over the last three years we can conclude that the companys gross profit was stable at around 23% in the financial years 2009 and 2010. However ion 2011, due to a rise in expenses the companys gross profit has slightly decreased to 20.8%. Engros gross profit is showing a fluctuating trend. It was around 2.8% in 2009 then rose to 5.1% in 2010 and then again fell to 4.1% in 2011. These changing trends and fluctuations can be attributed to the changing market environments and the highly variable national and global economic trends. Engros net profitability ratios show a large amount of uncertainty as it was 0.7% in 2009, and then fell further to negative 3.4% in 2010. However, in 2011 it can be seen that although the companys net profit margin is negative it is still showing a positive trend towards betterment. Return on asset ratio is ratio is showing a declining trend which is not a healthy sign. Current ratio shows the relationship between the current assets and the current liabilities of the company over the last s increase in assets is accompanied by an increase in the liabilities. This is why the current ratio for Engro did not improve. It has been stable around 0.9% over the last few years. Quick ratio at Engro is showing a slow increasing trend which enables us to conclude that the current assets of the company is increasing. For Engro, their debt to equity ratio decreased tremendously to almost o% in 2010 but unfortunately the company could not maintain it and it rose to 6.3% in 2011. Engro should effectively manage its debt to equity ratio as an increasing trend in this ratio is not a very good sign of the health of the company. It shows that the company is focusing more on debt financing as opposed to equity financing and this will affect the companys image in the eyes of the shareholders. Engros debt to assets ratio has been increasing for the last three years with s significant increase from 0