Shimla dairy products was a 30 year old family business turned into limited company, which manufactures a wide variety of cheese and other products (including ghee, butter and processed cheese). It manufactures and sells about 29 varieties of cheese. The company currently has two plants with a total capacity of 10000 liters of milk processing. Shimla dairy had been experiencing a growth of 15-20% in sales per annum as opposed to 7-8% growth for the other cheese manufacturing companies in the market.
Licensed by the government as a food manufacturer, Shimla is working towards being ISO 9002 accredited and certified with HACCP. Shimla sold its cheese in major Indian cities of New Delhi, Mumbai, Chennai, Kochi, Bangalore and Hyderabad. It had recently extended its operations to the cities of Ahmedabad, Kolkata and Goa. The major customer for Shimla is the hotel industry (Five-star and the mid-low end) which contributes for about 46% of its revenue. Others include restaurants (20%), Retailers (17%) and Pizza chains (17%). It also generates sales through distributors , with one or two distributors in each city.
These distributors had exclusive rights for the city and supplied to hotels, restaurants and retail outlets. Shimla dairy has brought about few operational changes, like introducing a night shift to ensure higher quality of milk. Also, the testing for bacteria, yeast and moulds has been improved. Compared to its competitors Shimla dairy has a very low plant capacity and this has lead to the loss of few contracts by the company. Inspite of all these, Shimla had been facing a few problems and is looking out on ways to improve its sales.
Few questions, which they are considering are should it explore a particular niche (high or low end cheese)? , which area to concentrate on? How to market its products better? Should the production facilities be expanded? How to create more brand awareness? To analyze the company’s position better , the strengths and weaknesses of Shimla dairy are analyzed . Strength and Weakness analysis (Shimla Dairy): Strengths: * High quality product/s * High sales improvement * High growth in sales (15- 20%) * Wide variety of products * Huge emphasis given on the quality of the product Weaknesses: Limited processing capacity when compared to competitors.
Location of the processing plant at a very high altitude makes transportation costlier. * Direct sales only to few supermarkets and bakeries * Distributors had the exclusive rights for those particular city sales. * Heavy reliance on banks for working capital * Zero percent revenue was used for marketing purpose. * Too many varieties , considering the plant capacity * Product recall due to defect in storage conditions or problem in transit, which added an additional cost to the company. External Environment Analysis: Cheese Industry in INDIA
Until recently cheese market in India was in infancy but was now poised into a growth stage. A decade ago cheese was a fairly new product to Indian market. But with about 1. 2 billion young, growing population and the growing desire for western style foods and increasing penetration into the Indian market, Cheese has grown rapidly in India. The branded cheese market was estimated to be 9000 tonnes per annum valued at 1. 8 billion. In addition, Indian dairy sector is expected to triple its production in the next 10 years. The increase is expected to reflect in the cheese industry too.
Also, India is the lowest cost producer of milk in the world. The market scene in India proves it to be favorable for foreign investment in the sector. Cheese industry in India is not highly regulated. However Government was expected to bring about a policy that non certified cheese shall not be sold. Cheese was mainly consumed in urban areas. Competition : The competition in cheese industry, especially the low end cheese is fierce. Many international brands entered the market. In addition there are many new entrants into the market like Amul, Britannia, Vadilal, Verka, Nandini, Dynamix etc.
The entry of the new players and increased marketing activity was expected to expand the market. In anticipation of growth, most of the major players were in the process of expanding their production capabilities. These firms posed tuff competition to Shimla Dairy. To understand the market condition better, following is the opportunities and threat analysis. Opportunity and Threat analysis: Opportunity: * Focus on South Indian restaurant segment as consumption is higher compared to North. * Can explore the pizza chains segment Increase the processing capacity, hence attracting more large scale customers * Milk, which is the major raw material, is available at lowest price.
Increasing awareness of cheese and its varieties * Increasing willingness of people to explore new western-style taste * More and more varieties of cheese being introduced. Threats: * The milk yield per cow is on the decreasing side * Fierce competition, thereby limiting the profit margins * No regulation by the government thereby spawning new entrants in low end cheese area. * Lack of sources for funds to increase the production capacity.