Haleeb Foods Company Analysis
Keywords: haleeb foods swot, haleeb foods 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 pack’s 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 SKU’s 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.
Optimizing resources to deliver sustainable growth3
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
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)
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)
Chief Executive Officer
Faisal Imran Hussain Malik
Ilyas M Chaudhry
Senior Manager Human Resource
General Manager Sales
Khurram Mehr Malik
Naveed Ali Shigri
General Manager Plant
Farooq Ayub Khan
Rao Muhammad Imran
Manager Warehouse & Logistics
Muhammad Ali Shahid
Head of Supply Chain
Head of Technical
Haseeb Ahmed Malik
Pakistan’s 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.
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:
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 pack’s 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 SKU’s 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 individual’s blood pressure.
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.
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 SKU’s and is thus available in five sizes ranging from 20g to 1000gm.
Daizy cheese is a milk based product. It gives your pizza’s 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.
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.
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
- Ultra heat treatment (UHT)
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 gawala’s, 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. Company’s 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 company’s financial position and although it is a state of the art facility, it’s 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 company’s 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.
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 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:
- Strong product portfolio.
- Consistently good quality products.
- Excellent company image.
- Well developed marketing strategies and campaigns.
- Highest market share in the country.
- Weak distribution channel.
- Use of reactive rather than proactive marketing approaches.
- Excessive focus on profitability.
- 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.
- 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:
- Strong brand name
- Large customer base
- Continuous research & development
- Fully automated third generation plant
- Good relationships with farmers
- 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.
- Best dairy company
- Thickest milk
- Wide customer base
- Innovative tetra pack packaging
- Declining market share
- Lack of focus
- Weak employee base
- Weak distribution channels
- 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
- Intensifying competition
- Changing market trends
- High inflation rate in the country
- Changing economic conditions
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 company’s 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 company’s health. It shows that the company’s 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 ICI’s 19.1% in 2010. The net profit margin for Engro however is -3.4% as compared to the ICI’s + 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 Engro’s. Engro’s 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 company’s expenses.
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 firm’s 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 Engro’s -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
Engro’s liquidity position is weak as compared to its competitors. Its current ratio of 0.9 in 2010 is even lower than the Haleeb’s 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 Haleeb’s 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 company’s success, the profitability ratios reveal that Haleeb is doing poor. It seriously needs to improve its profitability in the coming years.
The overall profitability of the company is decreasing its return on shareholder’s 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 company’s expenses primarily its administrative expenses and the taxes. The cost of goods manufactured, have also increased for Engro.
Looking at Engro’s gross profit margins over the last three years we can conclude that the company’s gross profit was stable at around 23% in the financial years 2009 and 2010. However ion 2011, due to a rise in expenses the company’s gross profit has slightly decreased to 20.8%.
Engro’s 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. Engro’s 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 company’s 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 company’s image in the eyes of the shareholders. Engro’s debt to assets ratio has been increasing for the last three years with s significant increase from 0.017in 2010 to 0.810 in 2011. This is not a good sign for the company because it shows that the total debts for the company have increased significantly whereas the total assets have not increased at the same rate.
The financial ratio analysis of Engro indicates that the company’s inventory turnover ratio has been relatively stable over the years. This shows that it has efficient inventory control, sound sales policies and is trading in quality goods with a good reputation in the market. Engro’s asset turnover ratio is 1.16 for the year 2011. It has been stable over the last few years and is similar to other competing firms in the industry. An asset turnover ratio that is lower than the industry average indicates that the company is not generating sufficient sales volume compared to its asset investment. It should best utilize its asset investment.
The above analysis reveals that Engro on the whole has a very weak financial position for the last few years. This is because of the declining sales and an overall poor performance on the company’s part. The financial situation is seen to be improving in 2009.
From what I found from my field works is that in the present year, 2012 the company has started picking up in terms of sales and profitability. They have identified new customers and are aggressively trying to sell their products.
Overall from the above competitor analysis we can conclude that Pakistan has a highly competitive Dairy industry with only a handful of firms having most of the market share. This tough competition means Haleeb has to work really hard in order to re establish itself as a known brand and regain its market share. The financial analysis clearly shows that Haleeb is the weakest of the three largest firms in the Dairy sector. The company started incurring losses since 2005 and it is mostly attributed to the poor performance of its milk collection and Dairy services department. The quality and quantity of the collected milk started to deteriorate since 2005 and this led to the ultimate poor quality milk for the end consumers. Nestle is a multinational company, has set up strict controls and measures to provide consistently good quality milk to the end consumers so keeping this in mind Haleeb should also do the same otherwise it won’t be able to survive in the competitive industry for long. Consumers should be given maximum importance and quality should not be compromised at any cost. It can also be noted that the profitability ratios show a decline for Haleeb and are worse compared to the others in the industry. Pakistan has been going through a number of issues lately, the energy crisis and ever increasing commodity prices and high inflation rates to name a few. This has led to an overall increase in the cost of doing business in the country. These economic, political and social forces are seen to negatively affect the Dairy industry too but Haleeb’s sales and profitability is seen to be affected the most. To sum it all up it can be said that Haleeb needs to have well defined and strategically thought out strategies and should chalk out a clear competitive advantage in order to stand out of the clutter. It also needs to increase its marketing budget as comparing on this dimension also shows that it is way behind competition. Nestle and Engro foods both spend much more on marketing and primarily advertising. Haleeb should allocate its scarce resources accordingly. Only this can help improve its competitive position.
Literature Review of the Industry
Examining the Relative Competitiveness in Packed Milk Brands in Pakistan
Dr. Rizwana Chang*
Faiz Muhammad Shaikh** echo
“Average yields in the Haleeb and Nestle were substantially higher than the other milk producers. In particular, milk solids per cow in the farms of Dairy Queen and Haleeb were 30 per cent and 32 per cent higher respectively.” (Chang & Shaikh, 2010)
In the article, the authors tell us about the two players in the packaged milk industry and that how their respective average yield are much higher than the ones of other companies in the market, but the milk production per cow is greater 30% higher in the case of Dairy Queen and 32% higher for Haleeb.
“Based on the data the Haleeb had lower cash costs as a per cent of output compare with Nestle and Engro foods actually appeared to have the lowest cash costs per product volume during the same period” (Chang & Shaikh, 2010)
The data analysed in the research shows that Haleeb foods has lower cash costs in comparison to Nestle. Engro foods, another player of the market had the lowest cash costs per product volume.
“Moreover, on a broader view only Nestle is enjoying higher profit margins than other dairy farms” (Chang & Shaikh, 2010)
The study also concluded that Nestle is currently leading the market with the highest profit margins compared to the rest of the companies in the packaged milk industry.
Dairy Industry in Pakistan: A Scenario
SARWAR, M., M.A. KHAN, MAHR-UN-NISA AND ZAFAR IQBALâ€
“Milk and milk products represent 27% of total household expenditures on food items in Pakistan. Per capita availability of milk in Pakistan is 82.4 kg per annum. About 80 thousand tons of dry milk, worth rupees 1213.5 million, was imported to Pakistan during 1999-2000 to meet local demands of milk.” (Sarwar, Khan, Nisa, & Iqbal, 2002)
The study conducted by Sarwar, Khan, Mahr-un-Nisa and Iqbal gives us some numerical figures regarding the scenario of the dairy industry in Pakistan. Their research depicts that out of the total expenditure on food items in Pakistani households, milk products amount for 27% of the total. For every person there is a total yield of 82.4 kg of milk per year. Due to the excess demand, there was a total of about 80,000 tons of dry milk imported to Pakistan in order to cater the shortages during the years 1999-2000.
DAIRY DEVELOPMENT IN PAKISTAN
“The dairy sector in Pakistan plays a significant role in the national economy and its value is more than that of the wheat and cotton sectors combined (FAO, 2006a). Estimated annual milk production in 2007/2008 was approximately 42.17 million tones, making Pakistan one of the world’s top milk producers (FAOSTAT, 2010). Some 95 percent of all milk is produced from small-scale rural and peri-urban holdings with two to three milking animals (Social Sciences Institute NARC, 2003).” (Zia, Mahmood, & Ali, 2011)
The authors used the research conducted by the FAO and NARC to explain the significance of the dairy sector on Pakistani economy. It also tells us that the dairy industry is more valuable than even the wheat and cotton sectors combined. The milk production estimate for the years 2007 to 2008 was 42.17 million tones, this makes Pakistan world’s top milk producer according to FAOSTAT in 2010. NARC analyzed that 95% of the milk is being produced in rural and peri-urban small scale farmers.
“A major proportion of milk is consumed in tea, which is a common drink, so milk is demanded by every household in the country. Consumers in Pakistan can be categorized as rural or urban. Major differences between the two are in their access to milk production, purchasing power, and taste preferences, while both share a very high preference for liquid milk, with some milk by-products such as lassi and yoghurt also in demand.” (Zia, Mahmood, & Ali, 2011)
The authors also talk about the major part of milk consumption at homes which is tea, an extremely common hot beverage that is used in every household. This makes the demand for milk in all households very high. They categorized the milk consumers into two categories, rural and urban consumers. The difference between the two segments is the access to the milk, the purchasing power and the preference of taste. There is a huge demand for by-products such as lassi, yogurt etc.
The White Revolution- Dhoodh Darya
Huma Fakhar et el, Market @ccess Promotion – Asia & Fakhar Law International & Geoff Walker
“The processors remain a key driver of the dairy industry with constant reinvestments and diversification of product portfolio. The processors have a small share of 3-4% of the total produced milk, whereas they invest the most and pay the highest taxes. The eight major dairies of the country include Nestlé, Nirala, Halla, Noon, Milac, Dairy Bell, Dairy Crest and Premier, while other smaller ones have also emerged. Nestle is the biggest processing industry of the sector, collecting over 1000 tons of milk daily. This company intends to invest an additional US$ 480 million over a period of five years. Similarly Haleeb, Noon Dairy, HALLA (Idare-e-Kisan), Dairy Crest, Nirala Dairy and Premier Dairies are continuously investing to upgrade their plants.” (Huma Fakhar et el, Market @ccess Promotion – Asia, Fakhar Law International & Geoff Walker, 2006)
In this article the authors tell us about the milk processing companies. They tell us that the processing companies are they major drivers of the dairy industry as they contribute in the development by making investments. The authors also named the various major players in the dairy industry. Nestle is the leading brand at the time in Pakistan.
“The processed milk sector of Pakistan contributes 0.43% to the GDP, and this is likely to grow in the coming years. Growing urbanization and globalization are changing lifestyles in Pakistan. Dairy as a sector has the ability to influence this change, and indeed the industry must change with changes in society, or it will stagnate. The processing sector can play a critical role in creating a consumer pool for itself in the new urbanized Pakistan.” (Huma Fakhar et el, Market @ccess Promotion – Asia, Fakhar Law International & Geoff Walker, 2006)
The processed milk industry is growing in Pakistan, at article tells us that it contributes 0.43% to the GDP and is expected to grow in the future. They also talk about the dairy industries abilities to change the lifestyles and that it needs to or the industry might stagnate.
“A product category penetration report from 2005 shows that in the food basket, the highest penetration is achieved by tea 97%, loose milk 93% and rice 92%14. This trend shows the scope and opportunity of milk as a staple diet higher than even rice. The report further suggests that powdered milk and UHT are likely to be two winners for urban milk demand. In other words the processor industry should concentrate in the value added segment. The key focus should be to add value to base products by various means and to create points of difference in the products wherever possible.” (Huma Fakhar et el, Market @ccess Promotion – Asia, Fakhar Law International & Geoff Walker, 2006)
The trend mentioned in the article and reproduced above tells us that milk has the potential to be staple diet even more than rice. The study also concludes that powdered and UHT milk is the future of the urban milk demand in Pakistan and that the milk processors should utilize their resources to building and developing these products and to add value to them for a safer and a healthier future. This can be achieved by taking care of a number of measures such as Branding, Flavor, Functionality, Segmentation/customization, Development of specific food solutions, for health, diet control etc, Organic products, Packaging; improved packaging solutions will be the key to introducing the above trends in the local market.
Literature Review of the Area of Research
- Taming the organizations
Employee motivation refers to the willingness of the employees to perform. It is the driving force that helps an individual to constantly try to achieve specific goals or objectives. Employee motivation is an important factor to keep an organizations workforce going and lead the organization on the path of success.
“Taming an organization is simply a process by which leaders place the contributions, involvement, and loyalty of employees above those of the organization, striving to guarantee organizational subservience to employees’ efforts to improve productivity, efficiencies and approaches essential to competitive readiness and organizational renewal. Moreover, organizational leaders ‘need to get out of the way’ and allow employees to work effectively and efficiently, enabling workers to demonstrate creative, insightful, and innovative approaches to business problems and performance difficulties (Ulrich et al. 1999). Additionally, organization leaders need to understand that the way they treat their employees determines performance, productivity, loyalty, growth and development.” (Gilley, 2001)
Motivation is an essential factor that plays a dominant role in determining an organizations performance as it is said to have an impact on the employee’s performance and productivity. Organizations that fail to understand this and do not give their employees the empowerment and enough room to perform are hardly ever successful. Employee motivation is seen to have a direct impact on productivity and management (leaders or managers) when come in the way of their employee’s performance, positive contributions, innovative ideas and effort, the employees value diminishes and their motivation levels go down. This is synonymous to communicating to the employees that the organization and its policies and procedures are more important than the employees and sets up a difference of opinion which leads to poor employee performance and productivity, high absenteeism, high turnover, disloyalty, lack of trust between the management and the employees and so on.
“In reality, organizational leaders are communicating that the organization is more important and valuable than their employees, setting up a confrontation that results in increased employee turnover, disloyalty, mistrust, poor performance and productivity, low morale and, ultimately, organizational sabotage on the part of some employees. Furthermore, the organization misses opportunities to improve their growth, efficiency and profitability.” (Gilley, 2001)
Thus Gilly indicates that it is important for management to “Tame” its organization. Keeping in mind that this is not an easy task, certain strategies like establishing compensation and reward systems that improve performance, designing jobs with the view to improve organizational performance, clearly defined job descriptions, having innovative Human resource policies and well designed HR recruitment and selection strategies can play a vital role in raising the motivation levels throughout the organization and in turn increasing productivity.
- Strategic human resource management effectiveness
“A strategic approach to HRM seeks to provide competitive advantage proactively through its human resources. Resources confer enduring competitive advantage to a firm to the extent that they remain scarce or hard to duplicate, have no direct substitutes and enable companies to pursue opportunities (Barney, 1991). The resource-based view posits that human and organizational resources, more than physical, technical or financial resources, can provide a firm with sustained competitive advantage because they are particularly dif. cult to emulate (Lado et al., 1992; Lado and Wilson, 1994;Wright and McMahon, 1992).Consequently, HRM should ideally work to enhance the firm’s competitive position by creating superior human capital skills, experience and knowledge that contribute to firm economic value (Snell and Dean, 1992).” (Richard & Johnson, 2001)
Strategic human resource management plays a crucial part in developing and sustaining an organization and its competitive advantage. A competent workforce can prove to be an important asset for an company and a distinct source of competitive advantage that is hard to duplicate as opposed to the other resources. It is increasingly believed that human resources if strategically managed can prove to be a more vital resource compared to the financial, technical and other resources available to an organization. this strategic human resource management should be viewed as an investment on the firms part as it pays of in the form a unique, distinct competitive advantage that the rivals will find difficult to imitate and thus will provide the firm with improved performance and productivity. The findings of the study conducted by the authors Richard and Johnson suggest that firms with superior levels of Strategic human resource management experience performance gains.
- Employee engagement: an examination of antecedent and outcome variables
In his study “Employee engagement: an examination of antecedent and outcome variables” the author Brad Shuck tries to establish a link between employee engagement and the organizational productivity. By quoting several other studies by different authors he says:
“Because employees who report being engaged at work demonstrate greater workplace performance, the concept of engagement has gained widespread international attention. Conceptualized as a positive state of employee motivation (Kahn 2010), research (Harter, Schmidt, and Hayes 2002; Rich, LePine, and Crawford 2010, Saks 2006) has shown that employee engagement shares an important relation with organizational outcome variables such as productivity, organizational citizenship behaviors, and overall job performance. Researchers have made significant strides in exploring the potential relations between engagement and performance-related outcome variables that suggest enhancing engagement could create a compelling competitive advantage for organizations across the globe.” (Shuck, Reio Jr, & Rocco, 2011)
Employees who are more engaged in their work tend to perform better. Employee is defined as an employee’s behavioral or emotional state that drives them towards a certain goal or objective. It is one of the important variables that impact the overall employee motivation. As employee engagement in work increases so does his/her level of motivation to do that work and this ultimately has a positive impact on productivity and job performance. It would not be wrong to state that employees who are highly engaged in their work tend to perform better and are more result oriented thus increases the overall organizational productivity. Employees who are engaged in their work tend to put in extra effort to perform better and achieve their and the organizations goals. The author linked job engagement with the intention to turnover and through his research he concluded that employees who perceive their work as meaningful and develop a liking for it were more prone to be engaged in the tasks they performed and thus less likely to leave the organization. This shows that high employee engagement with their work leads to a reduced employee turnover i.e. less employees are going to leave the organization.
Employee development and organizational performance: a review of literature and directions for future research
“There is a widespread belief that a positive relationship exists between employee development and organizational performance. That is, the axiom is offered that organizations which offer an array of learning opportunities enable employees to perform better on their jobs which, in turn, enable the organization as a whole to perform better as well (Torraco and Swanson 1995). In this way, employee development programs are logically related to organizational performance. Although lacking a substantial research basis, the principle has generally been supported through the human resource development and management practices of selected organizations. It is posited that successful companies achieve that status, in part, because they commit substantial amounts of their resources to employee development programs.” (Jacobs & Washington, 2003)
As mentioned by the authors, Jacobs and Washington, many scholars and business professionals believe in the fact that when focused on organizational performance, one must take into account the development of an employee as they are directly proportional to each other. As more and more effort is made to develop the employee, his working standards increase resulting in a positive impact on an organizations performance. Most successful companies are in fact successful due to their commitment to employee development programs, they utilize their resources in establishing these programs so that the employees are able to benefit from them and result in motivated, hard working and skillful employees who work for the betterment of the organization leading it to become a well respected and a highly successful one.
“As a process, employee development encompasses the learning of all individuals in organizations – including frontline employees, professionals or managers – and can be delivered through a range of approaches, including off-the-job and on-the-job training programs, educational programs and seminars, job rotations, self-study materials and mentoring programs, among others.” (Jacobs & Washington, 2003)
Furthermore Jacobs and Washington also say that the employee development process does not only relate to a certain segment of employees but all of them including “frontline employees, professionals or managers”. There are various ways to implement the development programs such as on and off the job training programs, educational seminars, job rotation strategies, mentor programs and also self-study materials can be provided to the employees.
Methodology for determining employee perceptions of factors in the work environment that impact on employee development and performance
“Performance has been said to be a result of individuals, the work environment and their interaction (Ilgen and Favero 1985). Carson et al. (1991) indicated that the work environment impacts on individual behaviors on the job as well as impacting directly on work outcomes. Gilbert’s (1996) Behavior Engineering Model indicates that both work environment factors and individual factors impact on performance. The Job Characteristics Model of Hackman and Oldham (1980) indicates that the key job characteristics are skill variety, task identity, task significance, autonomy and feedback. These characteristics work in conjunction with critical individual psychological states, to produce motivation, satisfaction and high performance.” (Ripley, 2003)
Ripley, using various literatures in the above extract explains that performance is a result of employees, the environment of their workplace and the level of interaction between the employees. Work environment influences the employee’s behavior both at the workplace and also directly impinge on the quality of their work. The key job characteristics mentioned above when successfully linked with each individual employee’s nature or psyche, they can produce high levels of motivation in the employees and lead to high performance and satisfaction in the employees.
- Improving employees’ work centrality improves organizational performance:
Work centrality is another variable that is often seen to impact employee motivation. Work centrality refers to the amount of effort that individuals want to put in their work. It is observed that higher the work centrality of the employees the better they perform. In his study the author Moshe Sharabi, he compares changes in work centrality among individuals who experienced high-quality work event to individuals who did not experience these developmental events. He is of the view that enhancing work centrality is an essential function that human resource managers should perform as it has a direct positive impact on employee motivation, satisfaction and loyalty. He says
Our study revealed that expressive work events (autonomy, interest, variety, and responsibility) slightly increased the work centrality of individuals who experienced them; but the most interesting finding is that among those who did not experience expressive work events, there was a meaningful decrease of work centrality so that eventually their work centrality was much lower than those who did experience expressive work events. By improving autonomy, interest, variety, and responsibility, an individuals’ work centrality was maintained, whereas preventing these expressive needs lead to declining work centrality. Recruiting employees without adding expressive characteristics/events to their work, leads to a decrease in their work centrality in the long term. This causality demonstrates the essentiality of fulfilling employees’ expressive needs; hence, it is necessary for HRD managers to implement work design and job enrichment processes (such as those described by Hackman and Oldman 1980) and increased empowerment. These HRD activities were found to be contributors to greater autonomy, interest, variety, and responsibility, which are important factors in increasing motivation, job satisfaction (Campion and McClelland 1991; Hackman and Oldman 1980; Conger and Kanungo 1988) and maintaining high work centrality. (Sharabi & Harpaz, 2010)
As work centrality plays can be used as an important tool to increase employee motivation across an organization, employers should increasingly try to boost the employee centrality of their respective employees. This, as suggested above can be done by making the job worth doing, interesting and enticing for the workers. Another important thing to note is that it intrinsic factors to motivation like autonomy, variety, interest and responsibility are among the major ones that help improve centrality and on the other hand employees who were not offered these intrinsic rewards throughout their work life were low on centrality and eventually de-motivated. Thus these kinds of rewards are an essential part of the employee motivation and should not be neglected at any cost. An easy ways of ensuring this is to implement the concept of job enrichment at all levels of employment.
- High Involvement work systems
(Edwards & Wright, 2001) explain that the way employees are managed also affects their performance and productivity. There is a general view that High Involvement Work Systems (HIWS) tend to increase the overall productivity of employees in a particular work setting. It is believed that HIWS has a positive impact on productivity as it makes the employees work harder as they are given more autonomy to perform tasks as they want to and are also given a sense of responsibility i.e. the employees are to take responsibility as to what they do. This is the reason they work hard and achieve their goals.
- Does Employee motivation have a direct impact on the productivity and the quality of work at Haleeb Foods Ltd?
Haleeb Foods limited was a company with the highest market share in the Dairt industry in the early 1990’s. The company has experienced a sharp decline in its sales and profitability from the year 2005 till today. The management at Haleeb has identified that employee productivity has declined over the years and is one of the most serious problem at hand. There is a rise in employee absenteeism, hardly any deadlines are ever met, the quality of the final product is always poor, production is at fault every other day causing heavy financial loses to the company. The management has elaborated that the employees don’t treat the organization as their own; they just come here to work and nothing more than that. Thus no extra effort or hard work is put in.
Work needs to be redone most of the times as it does meet the set standards. The top management has to monitor each and every process to ensure consistent quality of work as the employees take no responsibility. Production faults and disruptions is a norm at the Plant at Bhai Pheru.
It is seen that the employees are not performing to their fullest potential and can do much better. The company wants to identify if the poor employee performance and productivity can be related to employee motivation. Are the employees at Haleeb Foods Ltd De-motivated? And is it because of de-motivation that they are not giving their best in terms of the quality of work and the productivity on the whole? And if yes then what should the company do to improve the situation?