Dairy Industry1

8/3/2019 Dairy Industry1

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Invest Capital Markets LimitedPrivate & Confidential

Location & Supply Chain

Business Economics

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Invest Capital Markets LimitedPrivate & Confidential 2


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Invest Capital Markets LimitedPrivate & Confidential 3

Pakistan Strategically Located

Cross Roads

Ideally placed to supply dairy products to regional

countries at competitive prices

Supply

4th largest producer of milk in the world with an annual

production of approx. 42 billion liters

Demand

One of the largest consumers with a per capita

consumption rate of 201 liters per annum approx.

United

Kingdom

Processed raw

material from

Slough, UK

Manufacturing or

Blending & Packaging

Facility

Middle

East

Export to

Middle East

Region

Exploring & Creating Markets

Iran


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Sindh

Punjab

Lahore

Karachi

4

Punjab

63%Sindh

23%

Others

14%

Milk Production

Sukkur

Jehlum

Gujranwala

Okara

Domestic Market Dynamics

Locating

Integrated Business Setup


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Penetration Strategy

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Most of the procurement takes place at the household level or collection centers

6.5 million households are involved in this industry

Nestle & Engro collect milk from over 500,000 households on daily basis

Competition in collections process

Ensuring quality and preserving milk for extended period requires significant capex

Securing and developing continuous supply is criticalIndustryFacts

Households

Milk Collection Centres

Dairy Companies

Small Cattle Farms

Company operated In-house Cattle FarmsSupplyChain

75%

25%

Producers Collectors Processors


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Building Synergies

6

H

ouseholdsMilk Collection &

Commodity

Procurement

Technology &

Business

Infrastructure

Branding &

Marketing

Distribution &

Retail

End-to-End Solution

C

onsumers

Processing

High consumer recognition & acceptability

Network of one national distributor and 180 sub-distributors

Established consumer brands like Sensodyne, Macleans,

Eno, Iodex, etc.

State of the art technological infrastructure

Well developed R&D infrastructure and on-ground quality

human resource.

Established infrastructure for milk

collection

Ensuring high quality during

collection process

Strong processing capabilities

Experience of handling malted

products.

Investor Strengths Potential Partner


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Potential Partners

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Leading player in UHT Milk Segment

Started in 2005 Aggressive Strategy

Highly Leveraged

Future Plans Powdered Milk & Nutrition Products

Leading Player in the industry Trend Setter

Owns Milo An established brand

Recently launched Nesquick

Focus on High Value Added segment

Distress Situation

Failed to keep pace with Nestle

Milk Collection & Quality Issues

Established Footprint

Butter Renowned Brand

Lack of presence in Powdered Category

Started in 2005 Limited Operation

Milk Collection & Quality Issues

Distressed Situation

Strong History

Quality milk collection capability

Presence in Powder Segment

Leading Bulk Supplier

Has plans to launch similar product

Prior knowledge of making Horlicks

No conflict of interest/Potential

competition



Dairy Industry of Pakistan



Dairy Industry of Pakistan- Overview

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Pakistan is the fourth largest

producer of milk, during year 2010-

11 46 million tons of milk was

produced with consumption of 37

million tons.

Approximately 60% to 70% of

the demand is fulfilled by

domestic manufacturing while

the remaining 30% to 40% is

met by imports.

The Milk production is

expected to grow 2%

annually due to the high

domestic and the export

demand

6.5 million households are

involved in dairy farming in

Pakistan reason being the

population in Pakistan is

mostly saturated in rural

areas and they consider it a

secure source of income.

The milk produced is mainly

distributed in raw formthrough informal channels

however the processed

industry is only 7% of the

tradable milk. Thus there is

great opportunity and

potential to grow the

processes milk business.

Livestock and agriculture

sector contributes over 21%

to the GDP and the milk

economy is about 27.7% in

value terms.

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2

6

5

4

3



Milk Production System

Milk Production

Tradable

Unprocessed Milk(93%)

Gawala (41%)

Milk Shop (35%)

Industrial sweets(17%)

Processed milk(7%)

Ambient UHT(4%)

Chilled Dairy

(0.5%)

Powder (2.6%)

FarmerRetention

Wastage

There are two different types of milk

marketing systems in the country

Organized dairy sector: this segment occupiesvery low share but as the trend changed,

processed milk industry became the key driver

of the overall growth of the dairy industry asthey constantly reinvestments and

diversification of product portfolio

Traditional milk marketing: Small scale milk

producers in rural and unban areas collect milk

and distribute them directly to the house holds

or milk shops

Nearly 16% of milk produced is wasted in

transportation and other inefficiencies in

the industry.

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Processed Milk Segments

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Ambient

UHT

Chilled

Dairy

Powder

Processed milk can be further

segment into following

categories:

Ambient UHT

This segment contributes only 4% in the total tradable milk

segment.

The market size was 790 millions as of December 2010.

Chilled Dairy

The first entry in branded yogurt segment was done byNestle.

Yogurt is a widely consumed milk form in Pakistan which is

present at Pakistans dining table.

Powder

This segment holds approximately 3% market share.

Growing

up and

all

purpose

55%

Infant

Nutrition

18%

Tea

Whitening

27%

Powder Milk

Segmentation



Past and Future trends

of Growth

0200

400

600

800

1000

1200

1400

2005 2010 2015

Volumeinmillio

nliters

Ambient UHT Powder Chilled dairy

Ambient UHT: Industry volumes have

grown at a CAGR of 10% from 2006-

2010 and a similar trend is expected

going forward.

In future the growth expected is 11% as

conversion from loose milk to UHT

industry is expected to grow at a ratefaster than the overall milk market.

Powder: Conversion from loose milk to

powder milk is still a very small part of

the overall milk trade in Pakistan.

The segment is expected to grow at a

respectable rate of 14% in next fiveyears.

Chilled Dairy: this segment has grown

at a CAGR of 19% in last five years and

will continue to grow at an expected

CAGR of 11%

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Prominent Players- Engro Foods

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The Company started operations in 2006 and has become a major player in the

Food Industry of Pakistan in a span of few years

The company has captured a noticeable share of 39%

with launches of multiple products.Market Share

Business segments

Market leader

The companys business segments are divided into juices

and dairy products.

Engro Foods has achieved unprecedented success in the

UHT dairy industry by achieving market leadership

Current statusThe dairy farm of the company is the one of the largestdairy farm of Pakistan currently having 1259 imported

animals and producing 20000 liters of milk.

Future Growth

The company products are highly consumer preferred

items. Omor has grown by 100% in FY10 with a volume

of 12.2 million liters and a market share of 17%. Thus

the company future prospects are bright


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Within the food sector, Nestle has been a shinning star all along as it provided so

far a gigantic appreciation in its market capitalization of almost 200% since Jun-

10.

In UHT market the company stands with the market

share of 32%.Market Share

Business segments

Market leader

The companys business segments are divided into dairy

products, notional products and beverages

The company is the market leader occupying

approximate 65% market share

Current statusThe company is producing various dairy products besidepackaged milk like fruit yogurt, raita, nestle yogart and

powder milk (Nido).

Future GrowthThe company is expected to grow at a CAGR of 20% in

future.

Prominent Players- Nestle Pakistan



Shakarganj Food Products has developed an elaborate system of collecting milk

directly from the farmers on a daily basis, ensuring freshness of the product

After Engro and Nestle the company occupies the

highest share.Market Share

Business segments

Dairy segment

The company is producing dairy products as well asjuices. The highlights of the dairy product are Good milk,

Good slim milk, cream and Desi ghee.

The fresh milk thus collected is processed using state of

the art UHT (ultra high temperature) technology and

aseptically packed in Tetra Pak filling machines

Current statusNearly 80 percent of the total raw milk is supplied fromcompanys dairy plant. The plant packing capacity at the

time of acquisition was 75,000 litres per day of UHT

liquid milk and 5 metric tonnes per day of powder milk.

Future Growth

Various value added food products, including dairy and

fruit products, are in different stages of development.

New products are planned for launch in future.

Prominent Players- Shakarganj Foods Product Ltd



Haleeb Foods was established in 1986 and its first product was Haleeb milk.

Since then, it has continued to grow and occupy market share by offering new

products

The company occupy's approximately 5% to 6% market

shareMarket Share

Business segments

The company has wide verity of dairy products underits brand name. The UHT products include haleeb milk,

tea max, Skims and dairy queen. Beside this company

also produce flavored yogurt, skims powder milk, ghee

cheese and butter

Current status

Apart from its extensive nationwide distribution

networks, Haleeb Foods is also serving several export

markets including South Korea, Bangladesh, Afghanistan

and the Central Asian states

Future GrowthThe company expects positive growth through

innovative marketing and expansion plan

Prominent Players- Haleeb Foods

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