Strategic Analysis of Mitchells Fruit Farm Ltd.

Objective of Analysis
Our objective is to strategically analyze Mitchells tactics to utilize value chain efficiencies and market trends and impact of those tactics on the companys financial indicators

Road Map
In 1947, as a result of emergence of Pakistan, Mitchells lost three fourth of its market to India In 1957, the Mitchells family sold majority of its shares to the Pakistani investors Sophisticated food processing machinery was installed and additional products were added to a growing range of preserves, fruit, drinks, juices, canned fruits, sauces and vinegar In 1980 came the sweetest chapter of all with diversification to confectionery industry

 In 1983 Mitchells golden jubilee was celebrated with a fan fare and a chocolate bar, appropriately named as "Jubilee" was launched to commemorate the event In the year of 1994 it was ISO certified, the first food company to be certified In 2001, Mitchells launched moulded chocolate and launched products like gift box of pralines, golden hearts and top milk was accepted by consumer.

Mitchells Prodcuts

Jam Jellies and Marmalade - 15 products Squashes and syrups - 22 products Ketchup and sauces - 20 products Canned food 19 products Fruit drinks 13 products Bottled water 2 products

Competitors
SQUASH MARKET 1. Shezan 2. Sundip 1. 2. 3. 4. 5. PRESERVES MARKET Shezan Salmans Ahmad Rafhan National

 SAUCES AND TOMATO KETCHUP MARKET 1. Shezan 2. Ahmad 3. Knorr 4. Rafhan 5. National

1. 2.

PICKLE MARKET
Shezan National

3.
4.

Shangrilla
Ahmad

 CONFECTIONERIES MARKET 1. Candy land 2. Mayfair 3. Hilal 4. Kidco 5. Nestle 6. B.P

FACTORY OF MITCHELLS
The production facilities and factory offices are situated in the Renal Khurd district near Okara This place is about 115 kilo-meters far from the head office of the company in Lahore. The capacity of the plant is not determinable as it is a multi product plant Capable of producing several interchangeable products The farms of MITCHELLS Fruit Farms Limited are also occur between renal Khurd and Okara The farms of the company lying on the area of 450 acres. The distance between renal and Okara district is round about 13 km

Importance of Location
Renala Khurd is home to the food processing company "Mitchell's Fruit Farms Limited It has orchards of guava & citrus running b/w the lower bari doab canal and the Multan Road This region is also well known as a major producer of sugarcane & rice These crops can be cultivated due to abundance of water supplied by the lower bari doab canal & smaller water channels.

 Okara District is famous for its fertile lands, peaceful natural environment and green fields of potato, tomato, sugarcane, wheat, rice and maize crops Oranges and Mangoes orchards are famous Okara District is also famous for the lemon, guava & grapefruit orchards, belonging to the food processing company, Mitchell's Fruit Farms Limited The orchard runs for about 6 miles

 Following fruits are being cultivated / grown at Mitchells own agriculture land. Lemon 100% Grape Fruit 100% Sevlik Orange 100% Tomato 30% Garlic 30%

Quality Control & Training

From selection of the finest fruits, to processing and packaging, quality control plays a key role in every step of the process Quality Control staff Up-to-date laboratory Two line-control labs for the Groceries and Sugar Confectionery divisions Incubation lab Updating of employee skills by training Acquisition of new technology Re-evaluation of its quality control and quality assurance system Management

Target Market: up to 80 years. Core target market includes ages between 15 30 Age: 10 and above for chocolate and confectionery Family Life Cycle: Young, Children and Old people Psychographics: Middle, Middle Upper, Lower, Lower Upper, Upper class

COUNTRIES WHERE MITCHELLS MAKE IMPORTS

1. 2. 3. 4. 5. 6. 7. Malaysia Singapore Indonesia England Philippine China Germany

MAJOR IMPORT ITEMS OF MITCHELLS

COCOA BUTTER COCOA POWDER HPK OIL (HYDROGENATED PALM KERNELS) METAL CAPS PINEAPPLE CONCENTRATE

LOCALLY PURCHASED ITEMS

The following are the major items that MITCHELLS Fruit Farms Limited purchase from the domestic market: Raw material includes spices, tomatoes, fruits, vegetables, colours and flavours. Packaging material- Packages Pvt Ltd Different types of chemical because of their low quantity are purchased from the domestic market Engineering solutions

Distribution
Premier is responsible for managing the distribution system of the company. Mitchells has divided the whole country into three regions and there are about more than 270 distributors.

Pricing
Different pricing strategies are used for different products Normally, the strategy makers use premiumpricing strategy

The reasons of adopting this strategy are: 1. Very good repute and image of the company 2. Best high quality of the products. 3. Mitchells target middle, upper middle & elite class of the total food market

Trade Trends
The traditional food retail sector comprise about 95% of all food retail stores in Pakistan While the modern retail sector (hypermarkets, supermarkets, discount stores, etc.) make up the remaining 5% Pakistan GDP is about 20 trillion Rupees GDP growth is about 2.7 % Pakistan has a population of over 170 million consumer with middle income class estimated at about 25% of the total population With a share of expenditures on food and beverages estimated at 42% of income

Headline Industry Data

2012 food consumption growth = +7.8%, CAGR forecast to 2016 = +9.3% 2012 soft drinks value sales growth = +14.2%, CAGR forecast to 2016 = +8.8%

2012 grocery retail sales growth = +20.9%, CAGR forecast to 2016 = +12.2%

SWOT

TOWs Matrix

Porters Five Forces

Threat of New Entrants: Threat of entry depends upon the extent to which there are barriers to entry A food company requires a big manufacturing unit which requires a huge capital investment Groceries-manufacturing unit is highly capital intensive and because of high capital investment it has high risk for new to enter introduction

Suppliers Power: Foreign suppliers have power of bargain because the material is not available locally and the buyer dont have any option other than import, so the supplier charge the high prices and transaction is done through banks by opening letter of credit and buyer also has to bear high transportation cost and import duties. local suppliers have small fruit farms, food companies are highly capital intensive so they dont have any power because they cant do forward integration.

 There are large numbers of fruit, vegetables, sugar and other raw material suppliers so the buyer checks the quality of suppliers products and make contract with any one which meet their requirements regarding quality as well as price Another reason of no influence of the suppliers over the Mitchell's is that the company itself producing large amount of fruit, vegetables, milk and butter. In this way, backward integration reduces the power and influence of suppliers of the raw material Mitchell's has very good repute in the market since from the 1933. another fact is that Mitchell's is the market giant in its industry, so every supplier want to work with the Mitchell's

Buyers Power: The buyers dont have any power because the prices of the products are fix Competition among food companies leads the company to face problems in the price competitiveness

Competitive Rivalry: It could be concluded that the food market is highly competitive. And the degree of competition in the industry is increasing day by day. Which may cause Mitchells to change its premium pricing strategy

Substitute: Consumers have following options: Nestle Shezan Haleeb Ahmed Salmans

Impact of Strategies in Financial Terms

Financial Indicators Analysis

Sales breakup

Review
Overall economic conditions in the country did not improve over the previous year As a result managing the manufacturing operations with frequent Electricity and Gas outages amidst low economic growth together with high inflation remained an unending challenge The costs of main Raw & Packaging materials as well as Energy continued to rise necessitating selling price adjustments The company's net sales recorded a growth of almost 30 % rising from Rs. 1,377 million to Rs. 1,794 million This rise was supported by groceries and confectionery sales showing an upward trend of 49 % and 9%, respectively Exports recorded an 81% increase in value

 Optimization of costs and operating margins helped in increasing Operating Profit from Rs. 107 million to Rs. 147 million. Improvements in the Supply Chain and sound management of Working Capital helped in limiting increase in financial charges from Rs.37 million in the previous year, to Rs. 38 million Short term running finances secured: Rs 154,794,581 in 2011 Rs 166,615,728 in 2010

 As a result of all the efforts After Tax Profit for the year was Rs 73 Million compared to Rs 46 million in the corresponding period last year The Company manages liquidity risk by maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities At September 30, 2011, the Company had Rs 390 million available borrowing limits from financial institutions Rs 13.580 million cash and bank balances

Financial Ratios Analysis

Conclusion
Mitchells is in growing sector Growing population of Pakistan Caters basic necessity good Inflation, per capital income and power tariffs are causing problems Showed rapid growth in export, company should focus more geographic locations

 Company identified right tactics to increase operating profits and increase working capital efficiencies to perform above industry average Company has strong history and brand name Most of companys products are still relatively young in industry ( chocolates, juices and other confectionery) A good future prospect