SWOT ANALYSIS: ACI Foods Limited

Prepared for:
Dr. Syed Ferhat Anwar Course Instructor Strategic Marketing (M411)

Prepared by: Sadia Musarrat Chowdhury Saddruzzaman Noor Rowena Afreen Tawsif Saleheen S.M. Albaab-Ur-Rahman BBA Batch 14 Roll#09 Roll#10 Roll#19 Roll #52 Roll#59

August 12, 2009 Institute of Business Administration University of Dhaka

1.1 Advanced Chemical Industries Limited As one of the leading conglomerates in Bangladesh, Advanced Chemicals Limited (ACI) specializes in four primary sectors: Pharmaceuticals, Agribusinesses, and Consumer Brands and Community Products. Then known as Imperial Chemical Industries, the organization started as a pharmaceutical company in 1968, but moved on to initiate its Consumer Brands in 1995. The organization has 3, 339 employees and in the year 2008 generated a net turnover of TK. 7, 365 millions. ACI Foods Limited is one of the major subsidiaries of ACI. The leading brand of ACI Foods Limited is 'Pure'. Under this brand ACI markets a number of food products which includes spice, edible oil, snacks, and confectionary. ACI is responsible for simultaneously manufacturing, marketing and distributing these food products. As a brand 'Pure' aims to cater to the demand of Bangladeshi customers to have pure, healthy food. Products under the 'Pure' brand are also exported to Australia, UAE, Kuwait, Saudi Arabia, Bahrain, Qatar and many other countries. Our main objective is to construct a market strategy best suited for ACI Foods Ltd. to release a new line of instant noodles. 1.1.1 ACI Foods Ltd. ACI Foods Ltd. has gone through expansions in its product line to enter new markets left untapped by its competitors. The basic categories of its product portfolio are: Basic Spices Mixed Spices Snacks Edible Oil

Confectionary Among these categories, the snacks category is most appropriate for instant noodles. Other products in this category include Puffed Rice and Pure Toast exclusively for the export market and Fun Chanachur for local and export. As such, releasing the instant noodles would not conflict or cannibalize the other products. 1.2 Nestle (Maggi) Julius Maggi established the brand Maggi in 1884 with the intention to improve the diet of laboring class. He first started with leguminous flour, highly nutritious, cheap source of protein, easily digested and simple and quick to prepare. Later in 1886 he introduced Maggi Soups, followed by wurze, giving a meaty, spicy taste to Maggi Soups and leguminous flour. After success full test market with Malaysian Noodles in 1996, Maggi 2 Minute Noodles was launched in Bangladesh in 1997 with local production. Maggi soup was launched in 2000. Currently Maggi is leading the instant noodles and soups market.

1.3 Fu-wang Foods Fu-wang Foods entered Bangladesh market in the Food & Beverage Processing Industry in 17 February 1997 and started production in the same year. It got its ISO certificate in 1998. It has got listed into both Dhaka Stock Exchange and Chittagong Stock Exchange in July 2000. It currently has two major product lines: A) Foods, B) Beverages. Under Foods it as three product sub-lines: A) 1. Fu-wang Bread & Biscuit a. Chinese Bread b. Egg Stick c. Family Bread d. Milk Bread e. Mini Bread f. Nutritious Biscuits g. Sachima h. Sweet Bread i. Tiffin Bread 2. Fu-wang Cake a. Birthday Cake b. Flower Cake c. Cheese Cake d. Fruit Cake e. Lemon Cake f. Marble Roll Cake g. Strawberry Cake h. Vanilla Cake 3. Fu-wang Fast Food a. Beef Burger b. Chicken Burger c. Chicken Sandwich d. Chicken Pattie e. Hot Dog B) The beverage line includes: 1. Green Ten 2. Orange Please 3. Mango Juice 4. Mineral Water

5. Premium Pack Noodles 6. Family Pack Noodles 7. Fu-wang- Chips

2. Competitor Information Web Address ACI http://www.acibd.com/ Employees Annual Sales 3339 Revenue Net Asset Income 1,076 Million Liability Business Value Stock Value

5756.81 2,278 Million Million

4,987 2,205 Million Million

Quality 521.30 Customer Focus Fairness Transparency Continuous Improvement Innovation N/A N/A N/A 45.00

Nestle FuWang Foods

N/A

N/A

N/A N/A

N/A N/A

N/A N/A

N/A N/A

N/A N/A

http://www.fu N/A wanggroup.com/ N/A

Cocola N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

2.1 INTERNAL ENVIRONMENT STRENGTH & WEAKNESS

ACI: Pure Strength 1.Strong financial backing 2.Production of raw material(Flour and spices) needed for Instant noodles under the same brand name 1. Making export quality goods for the local market 2. Own Product R&D facility 3. Synergistic product diversification Pure Salt 1.Strong internal financial accountability 2.Commitment to positive public image

Nestle : Maggi

Cocola

Fu-Wang: Food

What are your business advantages?

Pioneer and market leader (68%) in Instant Noodles

Lowest Price in the market.

Fulfills the quality gap between Cocola and Magi

What are your core competencies

1. Taste and perceived quality 2. Very strong brand image Instant Noodles 1. Consistent taste and quality 2. keeping 100% TOM awareness in instant noodles Toast

Where are you making the most money?

What are you doing well?

Weakness What areas are you avoiding? Where do you lack resources Beverage Poor market research facility Ignoring the market for teens

ACI: Pure

Nestle : Maggi

Cocola

Fu-Wang: Food

What are you doing poorly Where are you losing money? What needs Improvement?

1. Supply Chain Management 2. Trend follower ACI Puffed Rice Supply Chain Management

1. Low consumer household penetration 2. High MOGE Stagnating product line

2.2 EXTERNAL ENVIRONMENT OPPORTUNITIES & THREATS

ACI: Pure
Opportunities Over the last 15 years, people have increased the proportion of income spent on food from 43% to 48%

Nestle : Maggi

Cocola

Fu-Wang: Food

Any beneficial trends?

Global product portfolio

Niches that competitors are missing? New Needs of Customers? Spicy Instant Noodles Implementation of SAP will enhance efficiency

For teens Spicy Instant Noodles Only one using latest air-dried noodles

For teens Spicy Instant Noodles

For teens Spicy Instant Noodles

New Technologies Threats Obstacles to overcome? Aggressive competitors? Successful Competitors? Negative economic factors? Government Regulations? Changing Business Climates?

ROI is low Instant Noodles: Fu-Wang Instant Noodles: Maggi Income--because instant noodles is not a commodity Grey Market Invaded by foreign brands Changing taste and consumption behavior

Low-price competitors Instant Noodles: Fuwang Noodles: Cocola Nestle has been affected by global recession 136% tax on imported instant noodles Invaded by foreign brands Changing taste and consumption behavior

Invaded by foreign brands Changing taste and consumption behavior

Vulnerabilities?

Invaded by foreign brands Changing taste and consumption behavior

3. Competitive Analysis (SW) Comparison Sheet 3.1 Product, Price and Selection The market is divided into 2 sections: Traditional Noodles and Instant Noodles. Maggi is the sole manufacturer of instant noodles, with some foreign brands taking a miniscule MS (0.01%). Fu-Wang and Cocola are the primary competitors of Maggi in the traditional noodles section. Currently, there are two flavors from Maggi locally available: The Curry Flavor and the Masala Flavor. According to Mr. Rahman, approximately 75% of the revenue comes from the spicier Masala Favor. Given below is a chart containing the SKU of the three main industry players, divided into 3 categories: Light snack, Guest serving and the Family Pack: Brand Weight Price Tk. 13 Tk. 12 Tk. 11

Light Snack Maggi 62gm Fu-Wang 70gm Cocola 70gm

Guest Serving [4 packets] Maggi 248gm Tk. 50 Fu-Wang 280gm Tk. 45 Cocola 280gm Tk. 33 Family Pack/8 Packets Maggi 496gm Tk. 98 Fu-Wang 560gm Tk. 85 Cocola 700gm Tk. 110 3.2 Analysis and recommendation It is interesting to note that while Cocola provides the same or higher quantity than Fu-Wang at a lower price, Fu-Wang noodles still has a higher MS (19%) than Cocola (17%). Maggi, which has the lowest FMV among the three is the market leader with 68% MS. Thus, we can conclude the market is not sensitive to price-quantity ratio and rather depends on taste and quality assurance. Thus, if ACI chooses to enter the noodles market, its best bet would be to release instant noodles at the FMV of Fu-Wang. Doing so, would help ACI achieve the taste and quality parity while providing added convenience over Fu-Wang at a lower price than Maggi.

3.3 Quality According to AC Nielsens market report on the consumption pattern in the noodles industry, Maggi Instant Noodles enjoys the highest perceived quality followed by Fu-Wang and then Cocola Noodles. The consumer perception of quality is most influenced by Brand Reputation [36%], followed by Recommendations [28%] and Packaging [20%]. 3.4 Image Since its inception, ACI has created a place in the mind of consumers for their transparency and reliability. They have worked very hard to maintain this image. For instance, when some employees were caught importing goods without paying the proper taxes on behalf of ACI, the company immediately dismissed those employees and made public apologies. On the other hand, Nestle also has a very good reputation in the consumers mind and a very strong brand image. 3.5 Sales Method and location ACI has a distribution channel widespread in Bangladesh and also abroad. If it tries to venture in instant noodles industry, this sales force could be used. But apart from using its distribution networks Nestle took some steps that enabled them to increase the popularity of Maggi more rapidly. One of them is using a Maggi Net Basket. They hung a separate basket just for Maggi in every store. This way the consumer is instantly exposed to Maggi Noodles upon entering a store. This has been a great aid in building Maggis market share and creating TOM awareness in consumers mind. ACI can follow such innovative method to break into the market. ACI can also set-up kiosks selling cooked instant noodles in the places where footfall of the target consumers are highest in order to boost sales. 3.6 Advertising and promotion As an international brand, Maggi has some advantages in advertising sector than ACI products. The TVCs of Maggi are telecasted in television channels in India by Nestle India. These televi sion channels are more popular to our target market rather than the local channels used by ACI. So in this aspect Maggi has a clear advantage in creating awareness. Maggi also runs some very successful below the promotion in order to give people an experience of their product. One of them being sending Maggi Vans to schools across Bangladesh and feeding the kids noodles. Though this is a very costly campaign ( 17 tk per kids) but it is also very successful among the kids. Also Maggi regularly offers special promotional campaign i.e. offering small gifts with the Maggi Noodles etc. ACI must need to use both ATL and BTL activities if they venture into instant noodle market to capture their target market.

3.7 Appearance Since snacks are impulse buys to a certain extent, catching the eye of the consumer is often half the battle won. All the brands nowadays use the color yellow, red and green predominantly in their packaging. It is noticeable that a package more successful noodles like Maggi Instant Noodles and FuWang Noodles contain the image of cooked noodles or the end product on their package.

3.8 Economy Being manufacturers of mostly commodities and other small involvement products, ACI Limited has not been negatively affected by the global recession. In 2008, ACI Limited had a Gross Profit of TK 2, 278 millions, which was significantly higher than the Gross Profit in the previous years. In 2007 the Gross Profit was TK 1, 667 millions; whereas in 2006 it was TK 1, 176 millions. In the aforementioned years, ACI Limited has increased its product lines with small involvement products. Thus despite the bad economy ACI Limited has the opportunity to make more profit by extending its line of low involvement products. However, ACI Limited tried introducing higher end product in the form of Low GI Rice. The product was marketed at selected outlets and was expected to expand to further outlets based on its sales. However, being higher in price, the product did not receive popularity in the market. Such negative reaction towards a higher end product can be attributed to the bad economy. (Information based on interview with Ms. Luna, Brand Manager, Pure, ACI Foods Limited.) Keeping this in mind, care should be taken so that the brand of noodles launched by ACI should not be perceived as premium-priced in anyway. 3.9 Legal Primary competitors of ACI Limited in the FMCG market are multinational companies (MNCs). Such MNCs are obliged to import various raw materials at a steep tax rate of 130%. Thus the legal framework creates an opportunity for ACI to have cost effective advantage over its main competitors. However, ACI Limited has factories in various locations based on availability of raw materials. Factories at different locations, as well as transportation of products and raw materials have to face extortion because of weak legal infrastructure. This has been a problem significant enough for them to use the river network as much as possible to transport raw materials to the factory. (Information based on interview with Ms. Luna, Brand Manager, Pure, ACI Foods Limited.)

3.10 International Trade ACI is also exporting its Pure Brand products to Australia, UAE, Kuwait, Saudi Arabia, Bahrain, and Qatar. Success of Pure Brand overseas suggests that ACI has the opportunity to promote Fun Brand in the international arena. (Source: www.aci-bd.com) ACI puffed rice has a good market in Saudi Arabia. However, due to low shelf life of puffed rice the product is not being exported to other countries nor sold in the domestic one except in a limited way during Ramadan. If ACI does not come up with alternate ways, the company would lose the market in Saudi Arabia. (Information based on interview with Ms. Luna, Brand Manager, Pure, ACI Foods Limited.) 3.11 People ACI currently employs 3, 339 people. Departments in ACI are value driven, and each department has its own P&L account. In fact, if any product requires input from another section like Fun Chanachur sometimes requires raw materials from Pure Ata then they have to do so at close to market price at certainly higher than cost price. Thus, internal competition further motivates the people in the organization. Lack of co-ordination between various departments hinders efficiency. No internal purchase is practiced in the company. ACI brands purchase raw materials made within the same organization at market price. This way the organization has the threat of losing cost effectiveness in the market as a potentially profitable product may get unnecessarily overpriced. 3.12 Industry Instant noodles are generally targeted towards children of 7-12 years of age. Though they are the core target group, mothers (ages 25-40) are the secondary target audiences or shoppers. This instant noodles are mainly targeted towards SEC A, B & C, urban and semi urban. In semi urban areas 80% buyers are fathers, they buy for their children. Children find instant noodles tasty. They can have it whenever they want to, usually breakfast and evening snacks. Mothers also like it because children like it and it easy to cook as well as healthy. There is an annual demand for more than 9,000 tons noodles, among which the demand for traditional noodles is 4,000 tons. Top players in this market are Maggi (market share 68%, growing at 40%MAT), Fu-wang (market share 19%) and Cocola instant (market share 18%).

3.13 Purchasing Power Bangladesh having a GDP of 6,149,432 million BDT with 12.66% growth rate is often listed among Least Developed Countries. Noodles are targeted towards SEC A, B and C, because it has become a convenient snack for all the classes. 3.14 Social According to a report on AcNielson (a leading Marketing Research firm) we found out that the noodles are generally used as morning and evening snacks. Instant noodles are very popular among children within the range of age of 7 to 15, because of its taste and preparation time. It has become the first choice of mothers for its easy to prepare kind and taste attracting the core target group, the children. It is also used to serve in front of guests in semi-urban areas. Currently Maggi instant noodles brand from Nestle is leading the instant noodles market with a market share of 68%, while Fu-Wang noodles are leading the traditional noodles market. 3.15 Media access General people of Bangladesh are exposed to several media. Most of them are not open to internet yet. So, companies producing consumer goods generally use these media tools: ATL o Television o Radio o Billboards o Printed Advertisements (both newspaper and specialty magazine) o Internet (not yet used by any of the companies) - BTL o Sampling o Road shows o Activation campaigns However, the growing teen population has become increasingly net savvy and completely detached with local Television channels. Thus, a substantial potential lies in marketing strategies focusing less on costly TV campaign and more cost-effective and accurate internet marketing. 3.16 Infrastructure According to Mrs. Basrin Luna (Brand Manager, Pure, ACI Foods Limited) the highway transport of Bangladesh is not reliable. So, they always use marine route to transport raw materials from their -

factories to factories, although in case of distribution channel, they have to depend on highway transport. Other companies, however, cannot take the advantage of this naval route because of their factory location. 4.0 BCG Matrix

Product
Pure Salt Pure Atta Pure Basic Spice Pure Mix Spices Pure Cnfectionary Pure Snacks Positions: 1. Cash Cow (high market share, low growth) 2. Dog (low market share, low growth) 3. Star (high market share, high growth) 4. Question Mark (low market share, high growth) CASH COW Pure Salt, Pure Atta

Position
Cash Cow Cash Cow Question Mark Star Question Mark Dog

STAR Pure Mix Spices

Market Share DOG Pure Snacks QUESTION MARK Pure Basic Spices, Pure Confectionary

Growth The position of products on BCG Matrix has been decided through extensive interview with the Brand Manager of ACI Pure.

5.0 Consumers Viewpoint The Importance of the variables to the consumer cannot be gauged as there is no accessible market information in this area. However, we conducted a pilot survey on 15 individuals using this particular questionnaire: Sir/ Madam, We are students of BBA Program of Institute of Business Administration (IBA) conducting a survey on the importance of various factors concerning a company that is important to a consumer. All information collected will be used for purely academic purpose and confidentiality and anonymity of the respondent will be strictly maintained. We would greatly appreciate your participation and insight concerning this matter. Thank you. Rank the factors below according to their importance to you: Factors Rank From the pilot survey, we found that the top 5 Internal Factors are: Internal 1. Quality 1. Products 2. Selection 2. Price 3. Price 3. Quality 4. Company Reputation 4. Selection 5. Advertising 5. Expertise The top 5 External Factors are: 6. Company Reputation 1. Media Access 7. Location 2. Technology 8. Appearance 3. Social 9. Sales Method 4. Purchasing power 5. Economy 10. Advertising 11. Image External 01. Technology 02. Economy 03. Legal 04. International Trade 05. People 06. Industry 07. Purchasing Power 08. Social 09. Media Access Based on these factors we will further focus on both the internal strengths and weaknesses as well as external opportunities and threats around these factors in order to have a strategy more accurately reflecting the consumers expectations. A second part of the survey was also conducted to gauge consumer perception and insight about the noodles industry and its main players along with that of ACI.

Pilot Survey For Consumer Insight Into Instant Noodles Industry

Dear Sir/Madam, we are a group of students from the Institute of Business Administration, University of Dhaka, conducting a survey on consumer perceptions of the instant noodles industry. Please fill up the questionnaire below to help us understand the current scenario better. All the information provided by you will be used for educational purposes only and will be kept strictly confidential. Age: ______ ________ Gender: M/F Occupation:____________ Monthly Income:

1. Have you ever purchased any product from ACI Pure brand? 2. If yes, what product did you buy? Pure Salt ____ Pure Atta____ Pure Basic Spice____ Pure Mix Spice____ Pure Confectionary____ Pure Snacks____

Yes

No

3. How did you come to know about ACI Pure? Please Tick

Television Advertisement Magazine Shopping Outlets

Newspaper Family and/or Colleagues Others ______________________

4. Have you purchased instant noodles?

Yes

No

5. What quantity of instant noodles do you purchase every month? Please Specify ______

6. How would you rank the following companys instant noodles in terms of quality? [1 = Very Poor, 5 = Very Good] Maggi Noodles____ Cocola Noodles____ Fu Wang Noodles___

7. What level of importance do you attach to each of these features when purchasing instant noodles? [1 = Not important at all, 3 = Indifferent, 5 = Very Important] Feature Quality Selection Price Company Reputation Advertising 1 2 3 4 5

8. What do you think of the following companys noodles in terms of the following features? [1 = Very Poor, 3 = Neutral, 5 = Very Good] Feature Quality Selection Price Company Reputation Advertising Maggi Noodles Fu-Wang noodles Cocola Instant Noodles

9. Do you recall any advertisement of ACI Pure brand?

Yes

No

From the survey, the numbers were collated and resulted in the average scores for each company given below:
Feature Quality Selection Price Advertising Maggi Noodles Fu-Wang noodles Cocola Instant Noodles 4.5 3 3.5 4 3.5 2 4 2.5 2 3 2 4 3 3

Company Reputation 5

This survey was conducted only to get a rudimentary idea of what consumer thoughts are on the market and will be delved into further as we go into a proper survey ona much larger sample group.