Introduction to Engro Pakistan:

Engro Chemical Pakistan Limited is the second largest producer of Urea fertilizer in Pakistan. The
company was incorporated in 1965 and was formerly Exxon Chemical Pakistan Limited until
1991, when Exxon decided to divest their fertilizer business on a global basis and sold off its equity
of 75% shares in existent company. The Employees of Engro, in partnership with leading
international and local financial institutions bought out Exxon’s equity and the company was
renamed as Engro Chemical Pakistan Limited. Engro is a public limited company listed on the
Stock Exchanges of Karachi, Lahore and Islamabad.

The principal activity of the Company is manufacturing, purchasing and marketing of fertilizers.
The Company is also involved in the production and marketing of seeds and has invested in joint
ventures engaged in chemical related activities. As part of its diversification strategy, controlling
interest was acquired in a company offering industrial solutions in automation and control. A new
milk plant has been established at Sukkur the milk is branded as Olpers.

Mission Statement:

Engro is progressing day by day because they have a vision and mission the keeps the motivated
and keeps them going. Their mission as they describe as:

“Our mission is two fold, to help farmers maximize their farm produce by providing quality plant
nutrients and technical services upon which they can depend. To create wealth by building new
businesses based on company and country strengths in petrochemicals, information technology,
infrastructure, food and other agriculture sectors.”

And further describing the adoption fashion they say,” In pursuing the mission we shall at all times
be guided in our conduct and decision making by our core values.”

Vision Statement:

Engro’s vision is

“To be the premier Pakistani enterprise with a global reach, passionately pursuing value creation
for all stakeholders”.
A Diversified Conglomerate.

Fertilizer Business

Agriculture accounts for 25% of GDP and 45% of employment in Pakistan Second largest Urea
producer of Pakistan .Capacity975 KT/A Market share20% Second highest phosphates sales
(~400KT/A) –Market Share 23% ECPL’s Margins are by far the best in the industry. Zarkhez
(NPK) Market leader -Capacity 160 KT/A –Market Share 95% Urea shortage expected to grow to
1.2 million tons/annum by 2010. World’s largest single-train Urea plant of 1.3 million tons being
setup at a cost of US$ 950 million. On commencement of operations in mid 2010, cash fixed costs
of the new plant will be a third of the existing plant; scale & brown field synergies Gas
consumption at the new plant will be 15% less than the existing plant. Engro’s Daharki complex
will become the world’s fifth largest Urea production site; 2.28 million tons, 3 plants.

Engro Energy Limited

Established in 2006-100% owned subsidiary Pakistan is facing growing energy deficit -Energy
consumption has been growing at 7% per annum Setting up a 220 MW gas based power plant at a
cost of $220 million with commercial operation in 2009 Short-listed along with 3othercompanies
for privatization of Jamshoro Power Company

Engro Innovative Automation Limited

Acquired majority stake (51%) in a knowledge based company Innovative Engineering &
Automation Ltd in 2003 Market Leader in domestic Industrial Automation –Honeywell distributor
in Pakistan Expanding internationally to synergize, and benefit from lower costs at home and higher
demand abroad Now operating in Dubai, UAE which contributes 25% of revenue and half of the
profit Company’s first IP product “iboiler”launched internationally in 2006 Acquired an automation
company in the US in Dec. 2006; mandated to develop outsourcing opportunities

Engro Vopak Terminal Limited

A 50-50 JV with Royal Vopak of Holland; established 1997 Royal Vopak is the world’s largest
independent tank terminal operator Engro Vopak handles 70% of liquid chemical imports in Pakistan
.Setting up our country’s first Cryogenic facility for ethylene imports
Well positioned for setting up proposed LNG terminal –under active consideration of the
government; Cost US$ 350 –400 million.
Food industry in Pakistan.
The food and its allied products industry is considered Pakistan’s largest industry, and is believed to
account for 27 percent of its value-added production. Trade sources estimate the sector's total value
of production is over rs.46 billion (rs.58.00 equal usd 1.00 at the current exchange rate). Pakistan’s
food industry produces cooking oils, hydrogenated vegetable oils, sugar, flour, dairy products such
as milk, butter, yogurt, cheese and ice-cream, biscuits, breads and confectionery, fruit juices and
fruit juice drinks, carbonated beverages, snack foods based on rice, potatoes, corn and pulses,
processed chicken, jams, jellies, squashes, sauces, pickles, and some cereals and canned fruits. The
fish, meat, fruit and vegetable sectors are underdeveloped partly for lack of adequate infrastructure,
including storage and transportation facilities. Government policies and plans are expected to greatly
increase the development of seafood’s industry. Development and implementation of milk standards
is also essential to define milk price based on quality. Dairy science and technology education
universities also need to support industry in dairy breeding, nutrition, industrial management and
product quality.

Presently no under-graduate program is available in the country to support this sector. Presently,
Pakistan has only a few scholars in prime principles of dairy science including animal breeding and
genetics, dairy nutrition, dairy management, and dairy technology to support and develop dairy
industry. It is essential because the veterinarian could only provide support to the animal industry
developed on the animal production science principles. Animal or dairy production science is
altogether a different subject than that of veterinary education.
In conclusion, development of dairy cooperates, restructuring of Extension; research and educational
institutions could perk up rural oriented dairy sector to market oriented dairy industry that guaranteed
food security social and economic growth in Pakistan.

Engro Food
Engro Foods Limited is subsidiary of Engro Chemical Pakistan Ltd. which is one of the most reputed
enterprises in Pakistan with more than 40 years of diversified business operations in the areas of
fertilizer and chemicals. Engro Foods started its business operations in March 2006 and with the
successful launch of Olpers Milk, Tarang, Olwell, and Olpers cream, it has established itself as a
major player in the foods business. Engro Foods has already set up two processing plants at Sukkur
and Sahiwal. With the ever expanding milk collection network and processing facilities, the Supply
Chain has geared us for the growing sales of our products

We believe that our recent successes will take us to our goal: To be one of the biggest players in the
food business. Our aim is to dominate the food business, and to achieve this we will settle for nothing
less than the cream!
Our Values.
Integrity
We have an open disclosure policy and transparent processes. All our business activities /
transactions are carried out honestly and with fairness.
Our People
Have passionate people with intelligent and firm approach towards business. To facilitate these
people we give those challenging opportunities, training, fun loving environment, necessary
resources and facilities. We publicly recognize our talent.
Innovation
Innovation is the way of life at EFL. It is valued, encouraged and rewarded in all aspects of our
operations.
CSR
We stand committed to sustainable business growth and ensure 100% compliance of CSR by
ensuring the safety of our people, assets and the community in which we operate. EFL takes
significant strides in poverty alleviation - both rural and urban, environmental safety and build up of
farming expertise.
Consumer Centric
Consumer is the reason for our existence as a business.

PORTERS FIVE FORCES MODEL

 1. THREAT OF NEW ENTRANTS:

The average entrepreneur can't come along and start a large food company. The threat of new
entrants lies within the food industry itself. Some companies have carved out niche areas in which
they underwrite dairy supply. These food companies are fearful of being squeezed out by the big
players. Another threat for many food companies is other food services companies entering the
market.

 Capital requirements
Competing in a new industry requires resources to invest. Production of packed products requires
huge investment of financial, human, technical, and marketing resources. At the moment Engro
Olper’s have some threats like from new entrant’s goodmilk product of shskargang food.

 Economy of scale

Economy of scale determines entry because they force potential competitors either to enter on a
large scale bases (a costly and perhaps risky move) or to accept a cost disadvantage. Moreover,
new entrants in the pasteurized milk business may encounter scale related barriers not just in the
production, but in the advertising marketing, distribution, financing, and raw milk purchasing as
well, Engrofoods achieved its breakeven in 2003

2. BARGAINING POWER OF SUPPLIERS:

The suppliers of food might not pose a big threat, because of the reasons;

 Number of suppliers

Raw milk is standard commodity and is available in the open market from a large number of
milkmen. If anyone refuses to sell its product then company can buy it from others who are already
willing to sell to company.
  Importance of volume to supplier

Suppliers also have less leverage to bargain over price because the company is purchasing the
large volume of their milk and suppliers don’t have much option to sell milk to others.

3. BARGAINING POWER OF BUYERS:

The individual doesn't pose much of a threat to the food industry. Large clients have a lot more
bargaining power with food companies. Large corporate clients like airlines and retailers pay
millions of dollars a year. There are large numbers of distributors, who are buying and distributing
the product, so their bargaining power is low and company have leverage to dictate implement its
terms and conditions to distributors.

 Backward integration

Another reason of low bargaining power is that no buyer/distributor has the resources to start
involve in backward integration.

4. AVAILABILITY OF SUBSTITUTES:

This one is pretty straight forward, for there are plenty of substitutes in the food industry. Most
large food companies offer similar suites of services. Companies focusing on niche areas usually
have a competitive advantage, but this advantage depends entirely on the size of the niche and on
whether there are any barriers preventing other firms from entering.

5. COMPETITIVE RIVALRY:

The food industry is becoming highly competitive. The difference between one Food Company
and another is usually not that great. As a result, food industry has become more like a commodity
- an area in which the food company with the low cost structure, greater efficiency and better
customer service will beat out competitors. Food companies also use higher investment returns
and a variety

of food investment products to try to lure in customers. In the long run, we're likely to see more
consolidation in the food industry. Larger companies prefer to take over or merge with other
companies rather than spend the money to market and advertise to people.

Not only local but attempts by cross border competitors or companies to gain stronger foot hold in
each others domestic market boosts the intensity of rivalry, especially when the foreign rivals have
lower cost or very attractive products. In case of Engro foods so far nestle and hale are the only
diverse rival and another players that has just joined the UHT Milk sector is goodmilk, no doubt
the competition between Engrofoods and Haleeb is quite intense both are engaged in consistent
homework just to break and attract the customer towards each other but goodmilk is adding to the
competition between the sector.

SWOT Analysis

Strength
Engro’s back.

Olper’s is a brand of ENGRO foods. This means that consumers can relate their former image of
ENGRO foods to Olper’s. ENGRO is a well established brand name in Fertilizer, IT and
infrastructure business. The brand is well known so customers will automatically have a brand
association with Olper’s and see it as a premium quality product. ENGRO is world renowned so
it can easily attract foreign investors in backing it against other competitors such as Nestle.
ENGRO foods can easily afford research and development costs for Olper’s have in order to
introduce new products. It can also distribute the brand through better channels because of its long
term relationship with distributors in the agriculture sector.

PR with farmers

ENGRO has been interacting with the farmers for fertilizers and has gained quite a good reputation
over the years. It has led to a strong bond and long term relationship with the farmers who are
willing to supply milk to the company. This is an added advantage and strength for the company
because it will never be short of milk production. The farmers also won’t have to look elsewhere
to sell their milk.

Positive response from customers

In first year, EFL crossed 1.4 billion sales figure which shows customers’ satisfaction upon EFL’s
products. 4. Its taste, quality proposition and world-class quality proposition system.

Strong consumer & product research

Olper’s done a strong consumer & product research before and after launching the product. This
has provided them the perfect launching pad to eventually emerge as a global player in the food
industry. To develop its future portfolios, EFL has hired various global research partners like AC
Nielsen, Mindshare, JWT Asiatic and MARS marketing and advertising agencies.

Third-Generation Plant
EFL only, has the third-generation UHT milk plant in the country. EFL plant is the only plant in
Pakistan that uses Bactofuge technology to virtually eliminate bacteria and ensure premium quality
and hygiene. Moreover, it is also setting up another milk processing plant in Central Punjab
(Sahiwal) with an investment of Rs. 2 billion (US $ 33 million).

 Worldwide fame of Engro.

 Efficient milk collection system.
 Keeping high quality standards.
 Integrated distribution and warehousing facilities.
 Successful related diversification.
 Generic brand name of Olper’s
 Large market share of Engro innovative and chemicals.
 Having Good reputation in the market by strong brand name i.e. Engro

Weaknesses

Olwell TVC
Olwell ad which is based on Western life style, ENGRO foods brand management showed a man
who put off his clothes & remain just in his undergarments, or half nude lady in a cat walk or men
admiring the figures of a lady in mix gender health club. In this ad they are creating associations
with the brand through the stripes, which is a highlight of Olwell packaging. Half naked people
have been shown with tattoos of the same stripes in order to show that they are loyal consumers
of Olwell. Also, the talent, situations and locations connects well with the ad to give Olwell a
premium positioning. The brilliant marketing people at ENGRO Foods failed to analyze is that the
market they are targeted the ad on, is Pakistan, where practicing Muslims reside, who have strong
religious beliefs. When making the ad, the brand managers were focused on, making an ad that
should give the brand the most premium look and feel amongst the target consumers but on the
other hand they were least bothered about the ethics, religious beliefs and cultural values.
Owning Red Color
The company has not owned the color red like Nestle has a green Milkpak; Haleeb has a blue
carton etc. This may create problems because when a consumer enters a grocery shop, then he/she
might have problems in recalling the brand because there is no color association attached to
Olper’s. The company may need to find a suitable color in which to focus its upcoming marketing
strategies.
Low Quality Milk
EFL is not having its own dairy farms; it largely collects loose milk from farmers & gwalas through
its 40 milk collection centers, which sometimes is of low quality and impure because they add
vegetable oil to milk to get higher prices.
Packaging
EFL is dependent upon Tetra Pak for the packaging of its entire dairy products. Tetra Pak is the
only option available to Olper’s for packaging because it is having monopoly in the packaging
sector in Pakistan. Due to this reason, Tetra Pak can charge them higher and it could increase the
production costs.
Milk collection & distribution costs
EFL’s 34 out of 40 milk-collection centers are located in Punjab, where as its only milk processing
facility is situated near Sukkur (Sindh). It increases the milk collection & distribution costs; and
also increases the chances of milk getting spoiled because of increased traveling time.
Narrow brand portfolio
It has been more than a year now, when EFL launched its first dairy product, Olper’s Milk on
March20, 2006. But EFL’s brand portfolio still consists of just 3 products i.e. Olper’s Milk, Olwell
Milk and Olper’s Cream. Whereas its competitors like Nestle and Haleeb Foods have a much
diversified line of dairy products.

 Unable to compete in price sensitive segment of UHT milk market.

 Under-utilization of the capacity.
 Unable to fulfill the demand of local powder milk market.
 Not yet ISO certified
Opportunities

Increased funding by Government

Government has decided to increase farmers’ funding. This is an opportunity for ENGRO foods
because previously due to weather conditions and other reasons there was lots of wastage of milk
but now that can be reduced as farmers will be better able to store milk for longer time periods.
Increased consumption of PLM
Competition may create opportunities for the company because each competitor in the milk
industry wants to increase penetration of processed liquid milk and so they will create awareness
for consumers through different advertising media. This will ensure the increase in the
consumption of processed milk instead of lose milk and so will in turn lead to increase in sales for
the company. Therefore there will be an opportunity for accelerated growth.
Awareness
Growing dissatisfaction with loose milk and increasing awareness about health and hygiene issues
have led to increased processed milk consumption.
Third largest producer of milk
Pakistan is the Third largest producer of milk in the world with a total production of 32 billion liter
of milk a year, whose value is more than that of the combined value of wheat and cotton, from a
total herd size of 50 million milch animals (buffaloes and cows). Livestock accounts for 46.8
percent of agricultural value added and about 10.8 percent of the GDP. Milk is the largest
commodity from the livestock sector accounting for 51 percent of the total value of the sector. Due
to the steps taken by the government and private sector, country’s annual milk production is
expected to grow at an additional 3 billion liters in the next few years. This is quite an opportunity
for ENGRO foods as there is lot of growth in this part of the sector.

 Improving Economy
 Population growth rate.
 High urbanization rate.
 High literacy rate.
 Flexible government policies for food industry.
 Have significant growth opportunities
 Has sufficient capital to expand.
 Has the potential to innovate and differentiate the company's products to sustain a
competitive advantage
  May merge with other global businesses to eliminate competitors.
 Having Capable of expanding into other markets of the world

Threats

Competition
Competition may pose a threat because the company will have to maintain its leadership in an
expanding market so that it doesn’t lose its market share to its competitors. For Olper’s it might
be difficult to penetrate in a market where the loyalties exist for such brands as Nestle and Haleeb.
These brands have been in the milk industry far too long and have left a mark in the minds of
consumers in terms of quality. Competition seems to be getting tougher as a result of new players
entering the dairy market.
Perceptions and Price Differentials
Consumers’ perceptions and price differentials can cause a threat for the company. It is important
that Olper’s comes up to the expectations of the customers and fulfills its conformance quality that
is the company meets its promised specifications. Consumer’s preferences change with time and
prices might create certain barriers in terms of the profit margins for Olper’s. For example, lose
milk is still cheaper than packaged milk and that is also one factor that people still prefer to buy
lose milk.
Has many major global competitors with its main one being Nestle Pakistan, Haleebfoods can be
substituted by other milk producer made by its competitors.
These competitors may develop marketing strategies to eliminate The Engrofoods Olpers. There
may be an economic downturn in the business cycle.
 High inflation rate.
 Low purchasing power.
 Decrease in GDP growth rate.
 Increasing interest rates.
 Decreasing investment.
 Recessionary period in business cycle
 Competition with Nestle, Engro Foods and the new entrants.
 Engrofoods is currently facing are increase in Sales Tax
 EXTERNAL FACTOR ANALYSIS
For Engrofoods

OLPERS NESTLE HALEEB

Critical Success Factors Weight Rating Score Rating Score Rating Score

Research &
1 Development 0.08 3 0.24 3 0.24 4 0.32

2 Advertisement 0.09 3 0.24 4 0.36 3 0.27

3 Financial Position 0.09 3 0.27 3 0.27 3 0.27

4 Market Share 0.07 2 0.14 4 0.28 3 0.21

5 Product Quality 0.08 3 0.24 3 0.24 3 0.24

6 Price Competitiveness 0.11 3 0.33 3 0.33 2 0.22

7 Management 0.10 3 0.30 4 0.40 3 0.30

8 Global Expansion 0.08 3 0.24 4 0.32 3 0.24

9 Customer service 0.06 3 0.18 3 0.18 2 0.12

10 Sales And Distribution
Network 0.09 3 0.27 4 0.36 3 0.27

11 Production Capacity 0.07 2 0.14 3 0.21 4 0.28

12 Alliances 0.08 3 0.24 4 0.32 3 0.24
Total
1.0 2.76 3.51 2.98
 Competitive Profile Matrix (CPM)

CORE COMPETENCIES & KEY SUCCESS FACTORS:

There are several core competencies of EFL given below;

 EFL foods Pvt. Ltd has been able to build a good brand name in a number of years. There
are several consumers who are loyal to the brand and do not shift to other brands. Building
a good brand name is not easy. It takes years to build a brand image by providing the best
quality to its consumers which Haleeb Foods have done. They have consistently delivered
which provides a competitive advantage to the company of having a good name in the
market.

 EFL has one of the most modern plants which has the latest technology and has a high
production capacity. They produce 80,000 liters of milk in a day which is not a small
amount of milk. They have an advantage of higher production as people are demanding
more and more packed milk so they can meet the increasing demand easily.

KEY SUCCESS FACTORS:

 Research & Development
 Financial Position
 Market Share
 Product Quality
 Price Competitiveness
 Management
 Global Expansion
 Customer service
 Network Sales And Distribution
 Production Capacity
 Alliances
COMPETITIVE ANALYSIS

The strategic priorities of Nestle Pakistan are claimed to be focused on delivering shareholder
value through the achievement of sustainable, capital efficient and profitable long-term growth.
Improvements in profitability would be achieved with due respect to quality and safety standards
at all times.

In line with the above objective, Nestle Pakistan aims at growing into a number one food company
in Pakistan in the shortest possible time with the unique ability to meet the needs of consumers of
every age group - from infancy to old age, for nutrition and pleasure, through development of a
large variety of food categories of products with highest quality.

Nestle Pakistan envisions that the company should develop an extremely motivated and
professionally trained work force, which would drive growth through innovation and renovation.
Special training programs have been designed for employees at each level to keep up with and
develop this vision.

Grand Strategy Matrix

For Engrofoods

Rapid market growth

Rate

Quadrant II Quadrant I

Engrofoods

Weak competitive Strong competitive

Position Position

Quadrent III Quadrant IV

Slow market growth

Rate