Competitive Position Assignment - Hatsun Agro

Hatsun Agro Product limited (HAP) is in the business of manufacturing and marketing of Milk, Milk
Products, Ice creams and cattle feeds. It comes under the food processing industry.

Tagline: Nothing added. Nothing removed

USP: Hatsun strength lies in maintaining good relations with its source – the dairy farmer.

The food processing industry is a growing sector that has gained prominence in recent years. With
growing urbanisation processed food is in high demand. Today dairy sector is moving towards
bringing novelty in dairy products with special focus on value-added products. The consumers who
have greater preference for branded milk and milk products are the drivers for the growth of
organised dairy players who see faster growth in next three years. The consumption of branded milk
products viz., curd, butter, Paneer, cheese, ice-cream and Lassi has been on the increasing trend in
comparison with milk consumption which is a positive signal for dairy based companies to expand
their product portfolios. On the other hand thanks to the millions of small & marginal dairy farmers
who have been backbone for not only making the country to become self-sufficient in milk
production but also the world’s leading milk producer.

SWOT Analysis for Hatsun Agro

Strength 1. Over the years, Hatsun has been recognized for its ingenious strategies to
deliver premium quality products processed using avant-garde technologies.

2. An early adapter of technology-developed solar power system for its chilling

station in villages which faces lack of electricity

3. Decentralization of cold chain-Installing it near the source(village)

4. Hatsun state of the art processing units handles 2 million litres of milk per day.
Its units are equipped with modern laboratories for extensive quality control.

5. Has established an extremely efficient supply chain management, direct

procurement from source, superior logistics and a widespread distribution
network spearheaded by exclusive franchise outlets
 6. Hatsun procures fresh milk directly from the farmers. To facilitate it in this
process Hatsun has around 4,500 'Hatsun Milk Banks' (HMBs) covering over
8,000 villages. Around 3 lakh plus farmers pour their milk at these HMBs
everyday

Weakness 1. Rising animal feed costs

2. Price sensitive market and intense competition means limited market share

Opportunities 1. Demand for milk and milk products is likely to rise continuously and there is
substantial growth potential

2. Increase in population and rise in income levels due to urbanization will see
shift in the consumption pattern in favour of value added products

3. Consumers, these days prefer traditional beverages like butter milk, lassi, etc.
as compared to carbonated beverages-because people are becoming more
health conscious

Threats 1. Lack of awareness among farmers about the quality parameters, including
microbiological and chemical contaminants as well as residual antibiotics.

2. Increase cost of power

3. Gloomy global economic environment

Processed Food-Dairy Industry Analysis
In evaluating the industry, environmental analysis plays a major role considering the factors like
Demographic trend, socio cultural influence etc. The effect of these factor drives the business
performance.
Demographic Trend
A large proportion of the Indian population is
relatively young - in the age group of 20- 59
years. This generation are also high in
consumption and therefore, this trend is
expected to provide a further boost to the
growth of consumption in India.
More men and women in the working sector
and prevalence of nuclear family – More
demand for processed foods especially dairy
products.
Technological Developments
Well-developed R&D and technical capabilities
of Indian firms
Alternative electricity source (Solar Energy)
helping in decentralizing plants near to
source(villages)
Macroeconomic Impact
Inflation –It can increase the cost of raw
materials
Higher Disposable Income
Socio Cultural influence
More and more urbanisation, the urban
consumers have been exposed to western life
style. They have more disposable income at
their end.
It has been assessed by Euro-monitor
International, a market research company, that
the amount of money Indians spend on meals
outside the home has more than doubled in the
past decade to about US$ 5 billion a year, and is
expected to further double in the next 5 years.
Political-Legal Pressure
Increased regulation of food standard
Growing awareness of food safety
Global Trade issues
Trade issues going between India –US and
China-US
Application of high tariff on import
Key Competitors by Revenue

Major competition for Hatsun Agro are major milk producing and manufacturer of value added milk
product. Amul is the leading player as it pans across India followed by Mother dairy and Hatsun
which is a major player in southern part of India. Following pie chart represent the revenue of the
individual firms which are in highly competitive.

Porter 5 forces analysis for Hatsun Agro

1. Threat of new entrants –

• The food processing industry is very large and competitive; it is not uncommon for firms within
the industry to do quite well. As a result, many companies enter into the market every year in an
attempt to gain a portion of the profitable market.

• Procuring the good quality raw material at cheaper price from the farmers is the most critical task

• The infrastructure investment is quite high in food processing (dairy) sector. Therefore the
challenge for new entrants is high sunk cost.

Hence, considering above factors the Threat of new entrants is low.

 2. Threat of substitutes –

• The cross price elasticity of demand is high as there are multiple companies with similar products
at comparatively same price. There are big brands in this industry like Nestle, Amul, Parag,
Kwality etc. The new companies are coming up with different innovative products at relatively
same price.

• Moreover there is no switching cost in this sector. Consumer has wide variety of choices on its
plates and can easily switch from one to another.

Hence the threat of substitute is high for Hatsun Agro Product Ltd. It has to either continuously invest
into R&D or it risks losing out to disruptors in the industry.

3. Bargaining power of buyers/consumers –

• Low switching .cost (strong force): The buyers have options and are willing to switch towards one
with lower price and higher quality products.

• High Substitute available For HAPs different product like Arokya milk, Curd, Arun Ice Creams ,
Ibaco ice creams we have similar products from Amul,Avin and Cavin whose products are equally
good.

• Buyers’ concentration: The buyers are not concentrated and are in large numbers but this factor
cannot overshadow the other two factors as HAP operate only in few states.

These factor shows consumers have immense buying power. For HAP to address this strategic issue
partially it needs to strengthen its brand value. HAP can also experiment with price differentiation to
reduce this effect.

4. Bargaining Power of suppliers –

• Limited Quality supply (Strong force): Since the end products needs to be of high quality the
procurement of raw materials should be of good quality The number of suppliers in this case are
limited therefore those few suppliers have a strong bargaining power.

• Supplier have many alternative to sell their products ,hence price paid for the raw material should
be competitive

Therefore bargaining power of suppliers is high and additional cost of storing those products while
procuring it and testing those needs to be taken care
 5. Rivalry among existing players –

• Numerous competitors of HAP are Big Players like Amul, Parag, Heritage and many small
companies which are region specific. Since this industry is regulated so not much experiment can
be done in terms of price and prices needs to be in coordination.

• The exit cost is high

• With growing urbanisation the demand for processed food is increasing and is not cyclical.

• Hatsun has successfully created its brand value in southern part of India with utmost quality of
products and is growing in sync with the industry growth.

Therefore, the intensity of rivalry is moderate

Hatsun Agro Capability Analysis

o Pricing o Testing and o Wholesalers

o Cold chain o Promotion and
Cost o Transportation Quality check
advertising events
o Fuel o Production of o Retailers
Drivers o Delivery time Dairy products
o Production Material o Storage
Facilities
o Maintenance

Firm Infrastructure:

Good Finance, Planning, Quality Control, Brand Recognition

Technology department:

Farmer’s data (quantity, Fat & SNF% along with the farmer's unique number) base management on cloud
server

All process right from procurement till distribution is leveraged by technological development

Procurement:

Responsible for purchasing goods, services and material. The aim is to secure the lowest possible price for
the purchases of highest possible quality. In addition to it, the firm manages the animal husbandry so that
the quality is not compromised.

Human Resource Management:

To acquire the right talent to support the activities for smooth functioning of organisation and
manufacturing of products.

Competitive Position of Hatsun Agro

Hatsun has dominated the market in southern part of India by having 60 % market share in Tamil
Nadu and 35 % market share in entire southern region.

The packaged milk sold under the Arokya brand contributes to 65 % of the Hatsun revenue, whereas
Ice Cream under Arun Brand plus its Ice cream parlour brand Ibaco contributes to 9 % of its revenue.
The remaining is generated by Value added product like Curd, Ghee etc.

If we consider only the Ice cream Brand of Hatsun, it has a significant share in the Indian Market
around 4 %, whereas Amul ,Kwality Walls, Cream bell Mother Dairy have 14 %, 8 % , 6.5 %, 4.5 %
respectively. With its unique and quality product in ice cream it is confident to capture more market
in coming years.

The critical price point for any dairy firm is the ability to procure milk at a reasonable price. Hatsun
has direct procurement from farmers- Amul Model – has an edge over its competitor. Hatsun
revenue has been doubled in last 4 years and the cash flow is on a positive trajectory.

As of now Hatsun has narrow scope, operating only in southern states and Maharashtra and Orissa.
They are in process of expanding it to other parts of India as well.
References

https://www.hap.in/about-us.html#

https://www.mbaskool.com/brandguide/food-and-beverages/5603-hatsun-agro.html

https://www.outlookbusiness.com/specials/the-outperformers_2018/doughty-milkman-4559

https://www.moneycontrol.com/financials/hatsunagroproducts/profit-lossVI/HAP#HAP

https://www.moneycontrol.com/financials/paragmilkfoods/profit-lossVI/PMF01#PMF01

https://economictimes.indiatimes.com/industry/cons-products/food/amul-turnover-grows-13-
to-rs-33150-crore-in-2018-19/articleshow/68674269.cms

https://en.wikipedia.org/wiki/Mother_Dairy

https://www.indiainfoline.com/company/hatsun-agro-product-ltd-profit-loss/management-
discussions/13023

https://www.outlookbusiness.com/enterprise/feature/all-season-flavour-4209