Strategies for Revival of Nurpur: A Case Study

Usman Zafar
MS Scholar
usman.zafar93@outlook.com

Zubai Khan
M.Phil Scholar
angelkhanz@yahoo.com

ABSTRACT
Purpose: Now a day’s competition in market is increasing day by day. Companies want to
grow their market share and want to capture more customer value. But some companies
could not; they hurt badly by the market forces this effect of company’s goodwill as well as
share price and profitability of company. Same case with effective management it also effects
Profitability. Some previous researches had focused on some different international or other
companies. This study has conducted specifically in context of Pakistan and Nurpur
Company, to know the reasons behind the decline and rapid uplift in share price of Nurpur
Company in this year.
Design/Methodology: Researcher use hybrid of both Quantitative and Qualitative survey
research method. Questionnaire from customers and Interview conducted from Employees of
Nurpur.
Findings: Results tell that company increased working and management efficiency which
leads to rapid increase in share price of Pakistan. Study argues that have inefficient
distribution channel and also have lesser marketing efforts to promote its products.
Practical Implication: Research is also beneficial for other companies which face this type
of situation.
Limitations: Interview of Executive could not be done, and Ratios analysis was limited, and
focuses on dairy industry, and use data till 2014 which is available till research time. So
paper cans suggest that for future can do analysis by using hybrid companies’ or Industry
technique.

Keywords: Advertisement, Ratios Analysis, Stock Buyback or Market/Product pull, Sales

Mix, Marketing Strategies.

P a g e 1 | 15

Electronic copy available at: https://ssrn.com/abstract=3337769

 1. Introduction
Milk the “White Gold”. In numerous regards the dairy business possesses an

exceptional position among alternate parts of farming industry. Milk is delivered on the daily

bases and gives a regular wage to the various little producers. Milk generation is very work

concentrated and gives a considerable measure of business. The livestock sector plays a vital

role in the economies of many developing countries. It provides food (specifically, animal

protein) in human diets, income, employment and possibly foreign exchange (Perrot,

Chatellier, Gouin, Richard, & You, 2018). Consumption of livestock products in developing

countries, though starting from allow base, is growing rapidly. Milk provides relatively quick

returns for small-scale livestock keepers (Minten, Habte, Tamru, & Tesfaye, 2018). Small

milk holders produce the vast majority of milk in developing countries where demand is

expected to increase by 25 per cent by 2025. Over 80 per cent of milk consumed in

developing countries (200 billion liters annually) is handled by informal market traders with

inadequate regulation (IFCN, 2014).

In dairy production Pakistan out performed its South Asian neighbors, lagging way

behind China in productivity growth but was way ahead in per capita milk consumption.

According to FAO (Food and Agriculture Organization) statistics the per capita milk

consumption in Pakistan increased from 126.1 kg per annum to 158.3 kg per annum

registering an increase of 2.3 per cent. (FAO, 2013) The global average per capita milk

consumption is 82.1 kg per annum and Pakistan’s consumption of milk is almost the double

of global average but is not the highest in the world.

According to latest statistics of 2014 Pakistan is the 4th largest milk producing

country in the world. Pakistan produced 33 billion litter of milk annually. In Pakistan 8

million farming household are in this dairy business with total group size of fifty million

animals. It has a livestock and agriculture sector contributing over 10% to the GDP, and a

P a g e 2 | 15

Electronic copy available at: https://ssrn.com/abstract=3337769

milk economy that in value terms is 27.7% of the total agriculture sector. Dairy is one of the

essential subordinate in livestock sector and holds remarkable growth and export possible. It

is an important component of Pakistan’s economy and supports around 5.5 million rural

families. There are various types of dairy milk manufacturing companies in Pakistan. (Nestle

milk pak ltd, Haleeb food ltd, Nurpur milk & products, Halla and Sabeen etc.
Table 1: Brands and Market Share

Name Market share%

Nestle Milkpak 49
Haleeb 40
Nurpur 05
Others(Halla and Sabeen) 06

Noon Pakistan Limited was established in Pakistan on September 26, 1966 as public

Limited company and the company is listed on Karachi Stock Exchange and Lahore Stoke

Exchange. The Nurpur is a member of Noon Group of Companies and is being overseen and

managed by highly qualified, experienced, technical & business professional Directors and

Senior Executives. Nurpur is on 4th number in 2014 according to Sales volume in Pakistan.

Data regarding sale of different brands which was taken from financial Statements is shown

in following Figure.

P a g e 3 | 15

Electronic copy available at: https://ssrn.com/abstract=3337769

 • Sales 2014
• 96,457,743,000

• Sales 2014
• 43,027,377,000

• Sales 2014
• 6,760,527,000

• Sales 2014
• 2,194,025,058

Figure 1: Sales Volume of top 4 Brands

The Company has achieved a growth of 682.73% in turnover in a span of four years

i.e. turnover of the Company has grown from Rs.311.27 million in 2004 to Rs.2,436.41

million in 2011, through a dedicated and experienced sales team. (Nurpur, 2011) The

company has won the prestigious brand recognition award “Brand of the year 2006-2007”

in the categories of Flavored Milk, Butter, Cheese and in year 2008-2009 won the award in

the category of “Butter” and again won the” Brand of the year award in 2010” in Butter,

Cheese and Flavored Milk category and also it is the first Dairy Company in Pakistan which

is ISO certified under ISO 22000:2005. (Yaseen, 2015).

1.1. Problem Faced By Nurpur:

“Nurpur” a player of Pakistan’s Dairy Market playing from 1960, and trying to

compete other companies and to survive in the dairy market. Earlier spam from 2011 Nurpur

was in profit and having a positive growth rate of 682.72% in 2004 till 2011. But from last

three years Nurpur is facing loss even that company can’t pay dividend and can’t achieve

Contribution Margin. Reason is that variable cost and operating cost is too high. There are

many reasons which discus here. 1st reason in ineffective sales mix of different product
P a g e 4 | 15

Electronic copy available at: https://ssrn.com/abstract=3337769

category provides by the company. Company’s major products are as in table No 2.1.
Table 2: Cost of Products
Product Cost
Butter & Cheese 15-20%
UHT Milk 10%
Flavored Milk 10%
Pasteurized Milk 10%

Here we can see cost of Cheese and Butter is more than other products, reason is that

these two products need -4°C and a huge cooling space to store other than UHT and

Pasteurized both just need which just need 0 degree temperature. In 2014 company set a

breakeven point on minimum sale of 233 Million. Now company sale is good but due to high

variable cost company can’t achieve its Contribution margin ratio. One major hurdle is

created by PFA (Punjab Food Authority) and PCSIR (Pakistan Council of Scientific and

Industrial Research) Laboratory. Basically milk contains two major fats. As in Figure,

Milk

SNF
FAT
(Sold Non-Fat)
Figure 2: Milk Components
After skimming “SNF” (Solid Non-Fat) is used in “Tea whitener” with Vegi Fat. And

“FAT” is used in Dairy Liquid by the combination of Whey Fat. In 2011 PCSIR claimed that

Nurpur using Vegi fat rather than the SNF, it is harmful for the health so pick your products

“Dairy Rozana” and “Chay Mix” from the metro areas. Because of the PCSIR statement

Nurpur faced different type of costs like pick up cost of unsold stock and all profit is

converted into cost because of no sale of defaulted products.

P a g e 5 | 15

Electronic copy available at: https://ssrn.com/abstract=3337769

 Market forces have strong Impact on Profitability of any company. While on other

hand in this research it also influence on Share Price of company. Parallel to Market forces

another factor which effect both on Profitability and Share Price is Efficient Managerial

Decision Making and Investment Decision Making. So we can drive our Hypothesis on

following Models Model A for H1 with Market Forces and B for H2 Managerial Change.
Model A

H1a Share price

Market
Forces Profitability
H1b

H1: Market forces have Impact on Share Price and Profitability of a company

H1a: Market forces have Impact on Share Price of a company.

H1b: Market forces have Impact on Profitability of a company.

Model B

Share price
H2a
Injection of
Investment
H2b Profitability

H2: Injecting the investment has Impact on Share Price and Profitability of a company

H2a: Injecting the investment has Impact on Share Price of a company.

H2b: Injecting the investment has Impact on Profitability of a company.

After the all scenario Nurpur facing high admin cost and that time to until Nurpur is

P a g e 6 | 15

Electronic copy available at: https://ssrn.com/abstract=3337769

in loss. (Nurpur, Financial Statement, 2014) By this Nurpur loss major market Portion.

Another reason is lesser advertisement and media hammering technique than its competitors.

Basically reason of low advertisement is also low budget, means back-end of every factor is

low budget. Not only in advertisement in fact in every field its suffering because of low

budget.

2. Methodology
In this Research, Researchers have used hybrid of Qualitative approach as well as

quantitative. Conducted a survey among the customers of Nurpur 71 Respondents fill the

questionnaire from which 27 respondents support Nurpur ratio is around 38%. And also

Employees Interview were conducted to get know how about reasons behind decline. Based

on this study and data collected, researcher did this study. In this research we collected

information through internet and through organization visit. The research is basically carried

out check the reasons behind the decline of Nurpur. The questionnaire was prepared to check

the consumer’s preference. Also did ratio analysis of Nurpur for check the profitability, cash

conversion cycle, payout ratio, EPS and so on.

3. Analysis
Table 3: Ratio Analysis and Cast Conversion Cycle
Years Current ratio Quick ratio Cash Ratio CCC
2010 0.73 0.03 0.04 (15.15)
2011 1.04 0.29 0.28 (24.39)
2012 0.80 0.06 0.04 (30.08)
2013 0.78 11.65 0.04 (82.47)
2014 0.87 0.40 0.38 (83.30)

3.1. Ratio Analysis

Formula

Current assets ÷ current liabilities

The ratio is very important for creditor because it tells the ratio of ability of a

P a g e 7 | 15

Electronic copy available at: https://ssrn.com/abstract=3337769

company to pay short term obligations and this ratio is more than satisfactory Nurpur just

needs to keep on its operation as it is and doesn’t need to bring change in anything so far.

Quick ratio

It tells most thoroughly by omitting inventory from current assets and including the

S.T Marketable investments and receivables.

Formula

Cash+ S.T Marketable investments+ receivables /Current Liabilities

The ratios tell company ability to fulfill its short term liability and this ratio is similar

to current ratio, but the difference is that it excludes inventory, which is the least liquid

current asset in order to measure the liquidity of the Company.

Quick or acid test ratio shows how much pure current assets a company has. It is a

more efficient measure of liquidity which shows how much company has highly liquid assets

to pay off $1 of current liabilities. In 2014 is going to down so it is not good ratio to win the

trust of creditors. It is not good sign for company performance that means company

performing not well.

Cash Ratio

Formula

Cash+ S.T Marketable investments/ Current Liabilities

In cash ratio how much we get by using short term marketable investments so in 2014

the value was 0.38 as compared to remaining years so it is good.

3.2. Case Conversion Cycle

Formula

Days of inventory on hand +days of sales outstanding –number of days payables

Cash conversion Cycle tells how much company has flexibility to invest their cash

and get profit greater it is better so in 2014 CCC is not good the value is high but in negative

P a g e 8 | 15

Electronic copy available at: https://ssrn.com/abstract=3337769

it is low.
Table 4: Profitability Ratios
Years Gross Operating profit Net profit Profitability Pre Tax
profit margin margin Ratio Profit
2010 0.11 0.04 0.01 0.05 0.02
2011 0.12 0.04 0.01 0.03 0.02
2012 0.12 0.03 0.01 0.03 0.01
2013 0.10 (0.03) (0.04) (0.09) (0.05)
2014 0.09 (0.03) (0.06) (0.10) (0.06)

Profitability Ratio interpretation

The ratio tells the firm profitability by using assets so company get profit by using

assets but in 2013 and 2014 they get loss that was (0.09), (0.10) respectively.

Gross profit interpretation

Gross profit of 2014 is 0.09. It fluctuate every year but in 2014 it is low than other 4

years that shows bit in effectiveness of operating manager so management can cope on it by

increasing sales and by decreasing cost of goods sold but ultimately difference not so much

so it is satisfactory.

Operating profit interpretation

It is (0.03) in 2014. In the mid of 2013 company is in profit but problem occur in the

operations so that’s why company bear to loss. It is upsetting that operating profit of Nurpur

is less than preceding years so management need to increase their efficiency and need to

decrease operating expenses and increase the gross profit.

Net profit interpretation

The net loss in 2014 is (0.06) because in 2014 company bear loss due to “Shezan”.

Management need to increase it by increasing operating profit. Hopefully this ratio would be

better next year by implementing the measurements to

Pre Tax Profit

It tells how much amount you have to pay out of sales in the form of tax. In 2014

P a g e 9 | 15

Electronic copy available at: https://ssrn.com/abstract=3337769

pretax loss was (0.06).

4. Findings
After the different analysis the first recommendation according to us is recipe should

be changed according to the standards set by PAF and PCSIR Laboratory. Now day’s peoples

are so much health conscious from the recent years, Nurpur should follow the PCSIR

standards otherwise it will be very difficult for survive him.

From last three years Nurpur is facing loss even that company can’t pay dividend and

can’t achieve Contribution Margin. Reason is that variable cost and operating cost is too

high. One reason is ineffective sales mix of different product category provides by the

company. Here recommend that Nurpur should concentrate on other products rather than

“Dairy Rozana” and “Chay Mix”. Quality of other products should be focused so that it may

overcome the loss.

In the dairy industry there are two main seasons one is lean season and other is flush

season. In flush season the growth of cow’s food is at the peak and in lean season farmers

face the shortage of food. So here researchers recommend that Nurpur should get more and

more milk in flush season and make more things in this season like cheese, butter and other

dairy products and store it for the Lean season. No doubt Nurpur have a high storing capacity

so Nurpur should follow recommendation with the intensiveness.

Nurpur is in gross profit but not in net profit and the main reason of net loss is high

admin cost like depreciation cost, insurance cost, auditor remuneration cost, rent and taxes

cost etc. 20% part is vehicle’s running and maintenance cost and legal and professional

charges cost in the whole admin cost. The total admin cost in 2013 was 8.2 million but in

2014 it increase to 11.1 million (Nurpur, Financial Statement, 2013).

The investment of 230 million is going to inject in the Nurpur, so here researcher

recommend that Nurpur should purchase new vehicles for the distribution of products and

P a g e 10 | 15

Electronic copy available at: https://ssrn.com/abstract=3337769

with the help of this investment make a strong own legal department, after that Nurpur have

no need to outsource the vehicles and legal consultant and because of less admin cost net loss

going to start convert in net profit.

Marketing of Nurpur is down because of deficient money researchers have to enhance

promoting methodology in Nurpur organization by utilizing advertising strategies in light of

the fact that as we realize that the showcasing consider will be in charge of helping the

association in the advancement and usage of its advertising, business improvement, and

advertising arrangements. By creating, keeping up and extending showcasing channels to

general society on the loose.

Our Both Hypothesis is accepted due to in H1 according to management H1b have

more Impact than H1a because senior Management says that Impact of Market forces in case

of Nurpur have more impact on Profitability than share price. Because in 2011 Nurpur faces

loss due to Market forces which have impact on Stock Buy back from retail stores

In H2, H1a have more Impact than H1b. Recently in 2014 Nurpur management have

changed and bring some investment due to company’s share price rises from 45Rs. Per share

to around 320Rs. Per share. So we can say that New Investment have positive impact on

Share price of company.

Researcher prescribe to enhance Cash Conversion Cycle (CCC) on the grounds that

first to add to the trust on suppliers to get advance ahead of time yet now one armed force

supplier investment in organization this is certain point for the organization in light of the

fact that organization utilize that venture to satisfy the need and requests as opposed to taking

credit from others. Because of this the gap in the middle of interest and supply will be

overcome with the time.

P a g e 11 | 15

Electronic copy available at: https://ssrn.com/abstract=3337769

 Company Distributor
Confidence

Confidence

Supplier

Figure 3: Confidence with Supplier and Distributor

You'll have to constantly build up your abilities to stay aware of changes in ranges, by

innovation, and you'll additionally need to stay informed concerning item and industry

improvements. To be profitable, you'll have to always concentrate on self-change. This may

include taking an administration instructional course to enhance your controlling abilities or

going to exchange shows to find out about new items and patterns before they hit the

business sector.

Organization need to build accessibility of the items on the grounds that larger part of

the clients are not mindful for the organization items the reason is that it is not accessible in

all over so research suggest that the organization concentrate on developing the center

business, Growing by sub-segmenting customers and Growing adjacent opportunities. It is

prescribed that the senior pioneers start the procedure by considering the development

potential inside of the present center business and the open doors and development potential

connected with making creative quality recommendations for underserved client bunches. As

the senior initiative gathering travels through this procedure, it will turn out to be clear if and

when nearby development choices ought to be considered.

P a g e 12 | 15

Electronic copy available at: https://ssrn.com/abstract=3337769

 5. Conclusion
This research has been reasoned that subsequent to investigating and contrasting the

Pakistani dairy industry, it has been also tackle the problems facing by the Nurpur

organization inside and outside the company and because of which despite the fact that the

gross benefit was all right however issues stirred when the working methodology got fizzled.

The proposals which have been given if taken after by the organization, can take the

organization towards achievement.

In the event that organization takes after that suggestion the Nurpur organization will

develop and move toward benefit. Now Due to some “Managerial Change” and “Effective

Decision Making” and some “Investment” company starts growing in perspective of Share

price. Its responsibility to top notch statistical surveying guarantees that it remains

completely mindful of changes in purchaser conduct and buyer tastes. Its amazing item

innovative work system guarantees that it is all around set to meet the test of changes in

purchaser desires.

6. Research Limitations
Although the research has reached its aim, there were some unavoidable limitations,

 Time barriers.

 Limited Hypothecation.

 It is not possible for us to search and gather the data of the whole population.

 We can’t get data as much as we want because of some secrecy of the Nurpur.

 Lack of financial resources.

 Meeting barriers

Every company has some confidential data or the business secrets which they cannot

share with anyone or with us due to which we only made research on the data they share with

us. It was difficult for us to visit the every department of the Nurpur in the Lahore as well as

P a g e 13 | 15

Electronic copy available at: https://ssrn.com/abstract=3337769

the Nurpur factor every time when it was required. Meeting with the Nurpur staff was the

main problem every time because we had to take appointment every time which delayed our

2 to 3 days at each appointment. That was also a problem for the Nurpur staff to give us time

from their busy schedule.

P a g e 14 | 15

Electronic copy available at: https://ssrn.com/abstract=3337769

References

Engro Foods, Financial Statement, 2013-14.

Engro Foods, Financial Statemnet, 2011-12.

FAO. (2017). Gateway to dairy production and products. Retrieved 2017, from Food and
Agriculture Organization of the United Nations: http://www.fao.org/dairy-production-
products/en/

IFCN. (2014). IFCN Dairy Report. Retrieved 2014, from IFCN, Dairy Data. Knowledge.

Inspiration: http://www.fao.org/3/a-i3913e.pdf

Minten, B., Habte, Y., Tamru, S., & Tesfaye, A. (2018). Transforming agri-food systems in

Ethiopia: Evidence from the dairy sector (No. 129). International Food Policy

Research Institute (IFPRI).

Nestle, Financial Statement, 2013-14.

Nestle, Financial Statemnet, 2011-12.

Nurpur, Financial Statement, 2013-14.

Nurpur, Financial Statemnet, 2011-12.

Perrot, C., Chatellier, V., Gouin, D. M., Richard, M., & You, G. (2018). Is the French dairy

sector competitive with European and global competition?. Économie rurale, (2),

109-127.

Shezan, Financial Statement, 2013-14.

Shezan, Financial Statemnet, 2011-12.

P a g e 15 | 15

Electronic copy available at: https://ssrn.com/abstract=3337769