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HALDIRAM’S IN CHINA- A STRATEGIC ANALYSIS

BY: GROUP F

• PGX104-CHETAN BARAPATRE

• PGX125-SUNIL MALIK

• PGX107-HARVEEN SINGH JOHAR

• PGX103-ANWESH CHAKRABORTY

• PGX118-SAIKAT BASU

• PGX119-SAMRENDRA KUMAR SINGH

1

HALDIRAM’S IN CHINA – A STRATEGIC ANALYSIS

CS – 1 Project Details

Basic premises:

Country of interest: People’s Republic of China

Place of interest: Hong Kong (Special Administrative Region of PRC)

Period of interest: 2013- 2014

Industry: Fast food- Vegetarian Snacks and RTE (Ready To Eat)

Company: Haldiram Snacks Private Limited

Modus Operandi: Restaurant and exclusive retail

2


Haldiram’s – Mission, Vision & Goal

3


Haldiram’s – Brief History

Started as a one man shop in 1937 by Gangabisanji alias Haldiram Agarwal in Bikaner, Rajasthan.

Set up a shop in Delhi in 1982. By next decade became a Food Company synonymous with taste, hygiene and innovation.

Controls a domestic market share of about 30% in Namkeen sector.

Started exports in 2001. USA was the first market Haldiram’s started exporting, mostly due to the large Indian population present there.

Today Haldiram's is a 4 Million dollar brand that is present across USA, UK, Middle East. Present in supermarkets the world over (eg. Tesco, Somerfield's, Spinney's and Carrefour.

Haldiram’s today has become a way of life for Indians no matter which country they live in.

4


Haldiram’s – Awards & Certifications

Awards:

Haldiram’s bagged the prestigious ‘INTERNATIONAL AWARD FOR FOOD & BEVERAGES’ awardedby Trade Leaders Club in Barcelona, Spain in 1994.

The Group has also to its credit ‘KASHALKAR MEMORAIL AWARD’ presented by All India FoodPreservers Association (Regd.) in 1996 at its Golden Jubilee Celebration for manufacturing thebest quality food products.

APEDA EXPORT AWARD 2001-2002’, awarded by Agricultural & Processed Food Products ExportDevelopment Authority for the outstanding contribution to the promotion of Agricultural &Processed Food Products during the year 2001-2002.

MERA DELHI AWARD – 2004’ for the exemplary contribution in the fieldof export

Quality certifications:

ISO 9002

HACCP

5


Haldiram’s - Journey

1937

•Shop in Bikaner

1982

•1st Shop in Delhi

1991

•Split into three units

•Haldiram’s (Delhi)

•Haldiram’s Prabhuji(Kolkatta)

•Haldiram’s Nagpur (Nagpur)

1997

•Largest manufacturing plant for Namkeen’s in Nagpur

2001

•Started Exports under Haldiram’s International.

•Presence in USA, Canada, Middle East, Africa, Afghanistan, Australia, New Zealand, Malaysia.

• Today exports stand

at $6 Million

• Expected growth of

40% over the next 5

years.

• Plans of Expansion in

Algeria, Jordan,

Yemen, Taiwan,

Columbia, Cyprus,

Ukraine, Libya,

Sweden, Finland,

and China.

6


Haldiram’s - Competencies

The Core competency of the company lies in

Food Taste – Traditional Indian authentic taste.

Food Quality – Best quality raw material and latest industry practices to create the taste

while maintaining hygiene and contemporary packaging with increased shelf life &

freshness.

Innovative – Branding of “Namkeens”, adaptability to ever changing trends, inventing

and re-inventing themselves to maintain a competitive edge.

7


Haldiram’s – China Plan

Entry Into China New Market – Old

Product

2014 - 2018 – Exclusiveretail store andrestaurant.

Branding as TraditionalIndian Restaurantcatering to the world.

2019 – Haldiram’s brandestablishment.

Overcoming thebreakeven point andmaintaining profitmargin of minimum 20%.

2020 - Chain of Retail stores

and restaurants throughout

China.

8

We start our analysis with the basic foundation work…..


China - Snacks market classification

► Traditionally the snacks industry was divided into chips and crisps, flavoured nuts, extruded snacks, ethnic

snacks & popcorn

► Currently China’s snack food industry technically involves seven sub-sectors :

► Biscuits and other baked foods

► Canned vegetables and fruits

► Candy and chocolate

► Cakes and bread

► Roasted seeds and nuts

► Preserved fruit

► Canned meat and poultry

9


PESTLE Analysis

• Govt. efforts to raise quality and safety standards

• Edible produce and processed goods are strictly controlled and

regulated

• Evolution of organic agriculture practices in China

• Tight health regulations and other forms of lease versus licensed

hawker restrictions

Political

• Consistently high GDP growth rate

• Huge investment in domestic infrastructure and social welfare

• Sales of branded food products is expected to grow from US $150

billion to US $650 billion by 2017

• The growth is anticipated to be in traditional areas such as baked

foods, soft drinks, fast food etc.

• In 2011, Hong Kong was ranked second in the “Ease of Doing

Business Index” behind Singapore.

Economic

• Higher Urban disposable incomes and living standards

• On average, 36% of household income is spent on food, but

this can range from 47%, for the lowest income group, to

28% for the highest

• Chinese consumers are highly focused on value

• High growth expected in packaged food sales in recent

future.

• China‘s rapid economic growth

• Country‘s changing consumption patterns, diets appear to

be shifting to include more poultry, eggs, dairy products,

fruits, vegetables, fish, and fats and oils

• Consumers are demanding a wider variety of food products• Food retailing is moving from to modern ―hypermarkets‖,

convenience stores and fast-food restaurants

• Diet patterns indicate that snack time fits anywhere in

between meals

• Resident Indian community is quite large (20,444 as per 2006

census)

Socio-cultural

10


PESTLE Analysis

• Main legal aspects of business are:

• Minimum capital requirements are stricter

• Registration

• The Ministry of Commerce deals with large projects

• Provincial or local authorities handle projects with an

investment less than $30 million.

• Taxation

• The rate of VAT is around 13% - 17%.

• The general rate of national income tax is 30% plus local tax

of 3%.

Legal

• China‘s organic sector has seen rapid growth over the last decade

• The market for Organic products is growing with consumer interest

and demand.

• Use of high technology in food storage, heating and production.

• Large scale automation & consolidation of processing technology

Technological

• China has established three certification categories for eco-labelled

food products: Green Food, Hazard-Free Food and Organic

• China has developed 28,600 kinds of hazard-free agricultural products

and set up 24,600 hazard-free production bases to date

• Most stringent organic standards in the world

• Consumers are concerned about environmental problems.

• Chinese consumers are among the least likely to eat imported foods

• China implemented a ban on plastic shopping bags in June 2008.

• Growing demand of Organic food products

Environmental

11


Porter’s 5 forces analysis

Competitive rivalry within

industry

Threat of substitute products

Bargaining power of the

suppliers

Threat of new entrants

Bargaining power of

consumers

• High profitability levels: As per National Bureau of Statistics, China’s fast food industry

has already become the biggest and most attractive profit zone with a high profit

rate

• Low capital requirement: Compared with other industries, the fast food industry in

china requires less capital, the majority of which is allocated to food materials and

rentals

• Low barriers to entry: Given that there are very few food patents, the barrier to entry

is relatively low. There are no secret formulae or special cooking methods that would

prevent entry

• Minimum retaliation by incumbents: Although there are a few major players in the

industry who enjoy large market share, nobody is able to play a monopolist to create

large scaled attacks to new entrants

High threat of new entrants

• Medium perceived levels of product differentiation among different categories

• Low switching cost: As most customers only search for fullness and taste through fast

food, their switching cost could be very low when turning to a substitute

• High buyer propensity to substitutes: Fast food consumers tend to be less loyal and

change their choices frequently, which lead to a high propensity to substitutes.

Medium threat of substitutes

12




industry



suppliers


Bargaining power of

consumers

• Many more buyers than sellers: The switching cost of buyers is very low thus making

them very powerful.

• Buyers are price sensitive: Since consumers have low brand loyalty and diverse

choices, they would allocate more importance on price and tend to become

sensitive to price fluctuations

• High availability of substitutes: Most fast food brands have a large number of outlets,

especially within popular districts, making different substitutes easily available.

High bargaining power of consumers

• Low degree of differentiation of inputs: As the inputs generally would be raw

materials, the degree of differentiation can be very low

• Supplier switching cost would be very low: As the number of suppliers is very high, the

switching costs are low.

Weak bargaining power of suppliers

13




industry



suppliers


Bargaining power of

consumers

• Large number of players: Competitors vary from large foreign and domestic multi-

store food chains and snacks brands to single shops and roadside vendors thus

making the competition very tough.

• Medium diversity of rivals: Diversities with cuisine, operation pattern and business

models are medium among rivals due to intense competition.

Great intensity of competitive rivalry

14


Competitor analysis

With regard to keen competition in fast food chain industry in China, we would like to analyze the competitive situation and relativeadvantages of “Haldiram’s” by comparing with the established RTEs and restaurants.

McDonalds KFC Burger King Subway

Market share 18.1 % 44 % 0.2 % 0.2 %

Branches More than 900 More than 2000 More than 12 More than 140

Food variety Hamburgers, chicken,

french fries, soft drinks,

coffee, milk shakes,

salads, breakfast

Fried chicken, grilled

chicken, desserts, salads,

big box meals, breakfast

Burgers, fries, chicken, fish,

salads, breakfast

Large sandwich,

salads, soups

Positioning Be the customer’s

favourite place and way

to eat

To sell food in a fast and

friendly environment that

appeals to proud,

conscious and health

minded customers

To prepare and sell quick

service food to fulfil guest’s

needs more accurately, quickly,

courteously and in cleaner

environment

Offer quality product

that is made specific

to individual

customer’s tastes.

Target customers Family with kids without

a lot of money

Family with kids without a

lot of money

Young customers aged from 18

to 34 willing to spend more on

higher quality product

Mass public

Foreign competitors- Fast food/ QSR/ RTE

15


Competitor analysis

Café de coral Fairwood Maxim’s MX Branto

Market share 21 Data is not available Data is not available Negligible

Branches 150 94 760 1

Food variety Chinese and western

cuisines ranging from rice

plates to sandwiches

Chinese, Japanese and

western cuisines ~ divided

into breakfast, lunch,

afternoon tea and dinner

Chinese, Japanese,

western, Vietnamese and

Thai food, cakes, coffee,

shakes

Sandwiches, indianised

chinese, south indian,

pizzas and north indian.

Positioning Quality product to

customers at affordable

prices

Eat posh at Fairwood Bringing to customers a

new menu, interior and

dining environment in the

fast food industry

Indian pure vegetarian

cuisines

Target customers Customers that seek go

od food, fun dining exper

ience at affordable price

s

Customers aged 24- 35 who

want to eat posh and have

fun

Specifics are not

available

Indian customers and

curious foreigners and

chinese

Domestic competitors- Fast food/ QSR/ RTE

16


Substitute analysis

Mars Nestle PepsiCo (Frito

Lays)

Mamee Want want

Market share 43 (chocolate) 7 (chocolate) 3.2 4.3 10

Portfolio Mostly into sweets

and chocolates

Mostly into sweets

and chocolates

Chips, wafers,

popcorn, nuts

Chips, wafers,

popcorn, nuts

Rice crackers

Positioning Most chocolatey

premium chocolate

that gives a feel of

“me time”

Highlights the value

of the products and

the greater benefits it

brings to consumers,

stressing its superiority

over other similar

goods

Creating high-end

snacks as well as

those that appeal to

what it diplomatically

calls “value”

customers

Providing nutritious

food products of

superior value and

taste and offer a

trendy innovative

yet sensational

eating experience

Become china’s and

world’s number 1

nutritional and

healthy choice

Target

customers

Customers aged 13-

40

Young and middle

aged customers

Young and middle

aged customers

Young and middle

aged customers

Young and middle

aged customers

Foreign and Domestic competitors- Snacks & sweets

17


Haldiram’s – SWOT Analysis

• Brand Awareness among Indians

• Variety

• Quality and hygiene

• Traditional Indian Taste

• Efficient packing

• Less advertising and promotion

• Involved only in Indian snacks and

flavours (packaged)

• Outlets and restaurants are limited.

• Not in services segment - online

order / home delivery

• Increase its reach – more outlets

• Aggressive advertisement and

promotion

• Introduce organic products - health

conscious segment

• Home Delivery and online order for

restaurant

• International competitors – well

organised

• Local Players (unorganised)

• Changing customer trends (health

consciousness)

• Inclination of Chinese towards

Chinese & Japanese cuisine

18


Strategies based on the Analysis done

Position Haldiram’s as “high quality, healthy and hygienic” brand

RTE packaging to be done as per current government guidelines and

consumer pro-environment expectation

Focus on organic raw materials

Enter PRC through Hong Kong based fast food restaurant & packaged

food (RTE)

Promote as “value for money” by being healthy and tasty vegetarian

snack

Promote brand as ethnic Indian specialties

19


Strategy Selection

•Lower Cost

•Lower adaptation

•Lower Cost

•Higher adaptation

•Higher Cost

•Lower adaptation

•Higher Cost

•Higher adaptation

Trans

NationalGlobal

Inter

national

Multi

domestic

Exporting Licensing

Joint Venture

Franchising

Wholly owned

subsidiaryTyp

e o

f C

orp

ora

te S

tra

teg

yM

od

e o

f En

try


Strategy Formulation – New Market

Project – Establish Haldiram’s in the vegetarian snacks & meal market of China

What

Exclusive retail shop cum restaurant

Where

Hong Kong. It is one of the most densely populated cities with people from different ethnicities,

esp. Indians

Why

China – most populous country in the world, 2nd in GDP. Snack food industry in china is RMB 3.5

Billion.

Culture of China – Outings in family of 6. Restaurant to serve Indian food tastes.

Increase in Urban Culture – Snacks on the go.

21



How

Packaged snacks to be imported from Indian Factory.

Raw material sourcing (Restaurant)

Establish contracts with whole sellers in market. Use Guanxi.

Build business ties with big local supplier companies for local and India import opportunities.

Use of local ingredients

Employees

Recruits from local area for reception, waiting and serving – avoid language barrier

Indian waiter especially for Indian customers.

Cooks from India to prepare authentic Indian food from the menu.

22



Traditional store design & Innovative Menu

Store to be made as per traditional Indian style

Additional decoration with respect to occasion - Chinese and Indian festivities

Restaurant menu to include primarily Indian food apart from Continental dishes

Special Offers during festivals

Drive through and 24 hour service

Starting of 24hr service to cater city’s busy nightlife

Drive through for on the go customers.

Infusion of Tradition

Reception and waiters to be dressed in Traditional Indian attire except for Chinese festival occasions.

Special packaging for snacks during Indian and Chinese festivities

23



Target Customers

Indian Diaspora

Chinese looking to try traditional Indian food

Packaged snacks for busy working class

Foreign tourists, Business professionals, & international students (IIM Shillong PGPEx )

Share Experience

Collect feedback from customers on the way out

Analyse issues and improve customer experience

Adapting Marketing V3.0

24

Marketing V3.0

Involve

Engage

Relationship

Making world a better place


China - Legal Aspects of Business (LAB)

Setting up WFOE: Essentially a Pvt. Ltd. company incorporated in Hong Kong

Shareholding: 100% shareholding by a foreign company is allowed.

Share Capital: There is no minimum or maximum requirement for share capital. The general

norm is to have a authorized share capital of HKD 10,000 represented by 10,000 ordinary

shares of HKD 1.00 each and the issued/paid-up capital is usually 1 share of HKD 1.00

REGISTRATION

Foreign investors must retain a PRC entity that is authorized or permitted by relevant

authorities to act as a sponsor. The sponsor will submit all the documents to the examination

and approval authorities on behalf of the foreign investor.

TAXATION

Hong Kong has a flat corporate tax rate of 16.5% on assessable profits.

Usu

ally

, it t

ak

es

ab

ou

t 4

-7 w

ork

ing

da

ys

to

inc

orp

ora

te a

co

mp

an

y in

Ho

ng

Ko

ng

25


Investment Overview

26

Total Annual

Variable cost = INR 270 Lakhs

Annual Wages

INR 100 Lakhs

Raw Material

INR 50 Lakhs

Rent

INR 120 Lakhs

One Time Fixed Cost

INR 250 Lakhs

Total

Investment in 5

years

INR 1600 Lakhs


Revenue Generation

150200

270

400

580

82109

165

219

333

0

100

200

300

400

500

600

700

2014-15 2015-16 2016-17 2017-18 2018-19

Revenue (INR Lakhs)

Avg daily customers

Revenue Avg daily customers

27

Assumption: Average

customer spending

per visit

INR 500

Breakeven target

(INR 1600 Lakhs)to be

achieved by

2018 -19


Milestones

2015 - 2019

Brand Building as a synonym for Quality & Hygiene

Brand placement in Middle Class segment

Advertisements to promote the brand values of Quality, Hygiene and Freshness

Involve regular women in advertisements – Target home makers

Capture a market share of 2 - 5 %

Vision 2020

Setting up restaurants in Shanghai, Beijing, Macau and Qingdao

Increasing market share to 8 - 10 %

28


Import Plan

Product: Tomato based derivatives from China

Objective : To strengthen the Ready to Eat segment of the business in India

Current interest exists in various Indian curries in frozen food segment

Tomatoes are a main source of cooking in Indian cuisine

To keep a stringent check on raw material sourcing to ensure highest quality

Import of tomato products is an imperative to the diversification strategy of

Haldiram

29


The need for import

Reason for Imports

Not enough suppliers available in India

Product range available in India is not diverse

Erratic supply

Huge variation in tomato prices leads to variation of cost of the raw materials

Tomatoes from China have a different taste and more suitable for our product

30


China as import Partner : Why?

China’s Urumqi, the capital of Xinjiang is a hub of tomato farming and processing

units

Xinjiang is mostly famed for its ripe, red tomatoes. Xinjiang's tomato industry began in

1978 and has 49,12,00,000 Sq.mtr in farmland. Its related enterprises have the

capacity to process 3.8 million tons of tomatoes annually.

Xinjiang's tomato exports are mainly in form of tomato paste.

China’s tomato is of a different kind than that of India.

It has more pulp and less water content. This Results in

higher output.

31


China as import Partner : Why?

Attractive Pricing - Lesser Freight charges. China’s Government

incentives to it’s exporters make price and freight competitive.

Less development time

Diverse range available

No seasonal variations

Italy and Spain, Why not taken into consideration

Italians love their tomato. Italy and Spain don’t export in bulk. They

cater more to the retail segment

Local consumption is high

Price is not attractive

32


Import process : How to do it?

Other options considered

Asian countries like Thailand, Malaysia, Vietnam and Turkey.

How to select vendor

Size of operations

Manufacturing capabilities

Exposure to overseas markets

Reliability

Product range

Logistics support

Ease of operations

Price

33


Import process : How to do it?

Certifications required

HACCP – Hazard analysis, Critical control point

ISO 9001

As a HACCP certified organization, we ought to chose a vendor with the same certifications.

Backup Plan

Maintain at least 2-3 good suppliers

Legal obligation

Process should be in line with Indian laws of FERA hence no trade with countries like Somalia

34


Final Selection of suppliers

Based on the above analysis, various Chinese vendors were considered for imports.

COFCO Xinjiang Tunhe Co Ltd

Xinjiang Chalkis Tomato Co Ltd

Xinjiang Xinjian Tomato Products Co Ltd

Product range

Aseptic paste

Tinned paste

Diced tomatoes

Whole peeled tomatoes

Sun dried tomatoes

Tomato powder

Tomato fiber - thickening agent

Tomato lycopene extract products

35


Leverage from the vendors

Xinjiang Chalkis Tomato Co Ltd was considered the final partner

with others as the backup source

Tinned paste – The base ingredients for all gravies

Diced tomatoes – one of the ingredient/additive of the Indian

cuisine

Tomato powder – for entry into soups and instant Sauce Mix

segments

Tomato fiber - thickening agent to assist as gravy viscosity enhancer

Tomato lycopene extract products – Natural food color and helps maintain

nutritional value of the final product

36

37

So,

Are you ready

to place your

order!

THANK YOU

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