Strategic Case Analysis (SCA)

Individual Assignment

Milk for the Nation

 MILK FOR THE NATION
The dairy farming has always been in the blood of Kamal Kirihami, whose father was a dairy farmer in
Haputale. Kamal is professionally qualified in marketing, and serves as a marketing executive in both
manufacturing and insurance industries.

Though he is fascinated about cattle rearing and agriculture, he did not expect any opportunities would
come his way to work as a marketer in the dairy industry of Sri Lanka. However, Kamal saw an
advertisement in Top Jobs for a marketing manager for the country’s largest milk producing company -
Milco Limited. He has applied for the job and was subsequently called in for an interview.

Milco is a public company which belongs to the Ministry of Livestock Development and is known to all Sri
Lankan households as the manufacturer of Highland milk products. Their products range from liquid milk
to dry milk powder. Additionally, they produce a complete range of dairy products such as cheese,
butter, ghee, yoghurt and ice cream. Milco, formally known as ‘Milk Board of Sri Lanka’, was
established in 1956 by the government through foreign aid in view of establishing the dairy industry in Sri
Lanka in a more systematic manner and producing sufficient milk to the nation. Ensuring a guaranteed
income to the dairy farmers and attracting Sri Lankan consumers to dairy based products are some other
objectives of establishing the above entity. A milk collection and chilling centre network was introduced in
1974 and they later established their factory complex in Ambewela to produce ‘’Highland” dry milk
powder. Through various management practices and business models introduced during the last six
decades, Milco became the largest public owned dairy company in Sri Lanka. Due to opening the Sri
Lankan market to international milk producing giants in the early 1980’s, a considerable market share of
Milco was captured by New Zealand and Australian brands. Some of the world giants including Fonterra
group and Nestle have penetrated the market through their global products and branding
campaigns. After the 80’s, the market share of Highland gradually decreased due to their
inadequate promotional efforts and consumer preference for the flavours of imported milk powders.
Milco’s other dairy products, introduced under the brand name of “Highland” has also faced challenges
from both international and local competitors. In addition, yoghurt, butter, cheese and ice cream
markets have also became extremely competitive in recent years by stimulating market followers to
lead through many other new brands.

Born in Haputale and being a son of a dairy farmer, Kamal is well aware about Milco and its Highland
milk powder factory. Milco has a network of over 60,000 milk farmers’ island wide and 2300 farmer
corporative societies for providing raw milk. They provide approximately 30,000 liters of milk on a daily
basis to 100 chilling centres attached to factories located in five different areas in Sri Lanka. Each factory
is specialized for a particular product including dry milk powder, condensed milk, youghurt and ice cream.
Milco has an island wide distribution network covering even the remotest boutiques and shops.

The interview panel was impressed with Kamal’s knowledge on Milco and the dairy industry. Prof. Kiriya - a
renowned economist and one of the expert panelists has given a detailed introduction about current milk
industry and its challenges. According to Prof. Kiriya, the world’s annual milk
production is about 650 million tons and a majority of people consume it in the liquid form. While
other dairy products have also a considerable demand, milk in powder form is more popular in
developing countries. In most developed countries, milk powder is not available as it is considered as
an inferior product. Since fresh milk consumption is growing year on year, milk powder
consumption is in a downturn. However, due to heavy demand in developing countries including India,
China and other Asian countries, milk powder has become one of the highest traded agricultural
commodities in the world. Milk powder production in the world is mainly dominated by New Zealand
and Australia, while considerable amount of milk powder is produced in Belgium and Netherlands in
Europe. Currently, China is the largest importer of milk powder. Prof. Kiriya further stated that Sri
Lanka is the fourth highest importer in milk powder in the world. Out of the country’s whole dairy
consumption, approximately 60% is imported while there is only a 40
% share for local suppliers. He also stated that approximately 4 billion rupees is spent on 300,000 tons
of dairy imports annually. Further, India being one of the largest milk consumers in the world, became
self-sufficient and is the largest milk producer in the world. Sri Lanka is still lagging behind.

He also highlighted some ambitious plans Milco is considering in order to expand their capacity in
processing plants from 200,000 to 300,000 liters of milk. While Highland is planning for two new
factories for producing milk powder and ice cream with the support of the Livestock Ministry, Milco
wants to provide better cattle and improved technology in dairy farming to increase milk
production. “With the expected increase, we can double our production capacity in all dairy
products. Marketing has a crucial role in promoting our products to the customers. We need every
family to consume Highland dairy products daily” Professor emphasized the importance of marketing
Milco.

“Whoever who will be the marketing manager of Milco, needs to focus on current and future
expected market conditions with a solid plan to face these issues successfully and make us the
leading dairy brand in all categories in Sri Lanka” - Chairman of Milco stated to Kamal. As stated, the
current market conditions are favourable to a greater extent. Imported milk brands have been facing
numerous issues during the last few years both globally and locally. A milk powder brand from New
Zealand - considered as the market leader was strongly attacked by the media and medical
fraternity for containing animal and vegetable fat, which cause many negative impacts to the health.
Further, many foreign milk powder brands, known as reliable and quality dairy brands were
significantly attacked by many lobbying groups. Some brands were prohibited from exporting to
China, due to the global crisis of contamination. Highland being the prime locally produced milk
powder, saw an increased consumer demand during the last five years due to its freshness and
quality. As a result, Highland was able to capture a 30% of solid market share in the Sri Lankan milk
powder market.

“Pelawatte” – a locally made milk powder became popular in Sri Lankan market during the recent past.
However, Pelawatte’s production capacity is currently not reaching the 30% reach of Highland.
Highland is now seeking favourable opportunities and expecting the title of market leader in the
long run.

While the industry is facing challenges, current competition and new entrants to the market have
increased immensely due to low import taxes on milk powder. There are about 12 milk powder
brands available in the local market, out of which only two are locally sourced brands. Other
brand are imported from Australia, New Zealand and Netherlands. In recent years, most of the
food manufacturing companies have diversified their businesses by entering the milk powder
market. They have benefitted significantly through their existing distribution network and brand
presence. Advertising milk powder brands was banned since year 2000, aiming to reduce the
consumption of milk powder, while diverting consumers more towards fresh and liquid dairy
products. However, the impact of this government policy on Highland was insignificant, since
Highland was traditionally having the highest loyalty in the market. The ban was lifted in 2014.
Currently, Highland has the least advertising exposure and budget among all milk powder brands.

Dynamics of traditional milk powder giants has also changed in recent years. Milk powder brands
from New Zealand has once again conquered the market after the negative publicity on their
powdered milk by strategically shifting to produce more liquid milk products. Traditionally the
market was dominated by Highland, but currently it consists of a larger number of emerging
competitors. Most of the competitors are multinationals, invested heavily on attractive packaging
and flavours targeting children. Highland still uses their traditional packaging and bottles with
long experienced flavours of vanilla, chocolate and strawberry, which is less attractive to children.
The traditional plain yoghurt market once dominated by highland is currently conquered by
another local yoghurt maker and followed by several international brands with a vast variety of
flavours and mixes.

“Kamal, we do like to give you an opportunity, but we need to know your plan to increase the
demand for Highland products in all aspects and market share in all categories. More importantly,
we need to promote Highland liquid milk over dry milk powder, which is the healthier option. We
need everyone in Sri Lanka to embrace and consume our dairy product range, since our
expectation is to fulfil the nation’s nutritional demands in all possible aspects. We simply need to
become the dairy producer of the nation and make Sri Lanka self-sufficient in milk similar to what
Amul does in India. While ensuring the above expectations, you need to increase the demand for
our products”. Prof. Kiriya concluded the conversation.

Kirihami was invited to produce a complete report to the management covering the marketing
strategies for increasing the brand value and market share on all categories of Highland dairy
products.

CASE QUESTIONS

Question 01

After the interview, Kirihami realised that Highland had developed a strong brand presence in Sri
Lanka five decades ago. However, the current competitive environment created through opening
the market to global giants and the emergence of local producers is a challenge to the market
leadership of Highland.
Assuming you are Kamal Kirihami, prepare a report highlighting the current market situation and
marketing strategies that can be used to increase brand value and market share in all categories of
Highland dairy products.

Question 02

The current trend in the Sri Lankan dairy market is in favour of fresh and non-contaminated local
products, for which Highland is doubly qualified. Yet, Highland has not taken the fullest
advantage of this situation. Recommend a justified marketing mix for Highland liquid milk to take an
advantage of the current trends.

Question 03

Do a proper RISK evaluation for Highland. You are permitted to gather information from external
sources other than the case study.

WORD ALLOCATION FOR THE REPORT

Please refrain from copying-and-pasting information from the Internet or another source and
make sure to reference your work according to the Harvard referencing format.

Note: Please refer the given assignment marking scheme for marks allocation.
Table of Content
Page No
Executive Summary
1. Task 01……………………………………………………………………..06
2. Task 02……………………………………………………………………..34
3. Task 03………………………………………………………………….….37
4. Conclusion……………………………………………………...………….48
5. References……………………………………………………………...…. 49
6. Annexes…………………………………………………………………….51
Acknowledgement
I would like to express the gratitude to the people who have helped me most in the
completion of the Strategic Case Analysis. I am grateful to the lecturer Mr Nimal
Rathnayake for the continues support and guidance.

As special, thank of mine goes to “Sri Lanka Institute of Marketing” who deliver me the
golden opportunity to complete the case regarding the “Milk for the Nation”; under the
subject of the Strategic Case Analysis, in the curriculum of Post Graduate Diploma in
Marketing (PGDIP).

I would also like to thank my parents and colleagues who have helped me a lot in
finalizing this assignment within the limited time frame.

Mihiri Wimalaseana
Executive Summary
“Highland” is a pioneer of the dairy industry in Sri Lanka with the excellence and the
experience of six decades, especially with the up and downs. “Highland” is a family brand,
of the “Milco Pvt Ltd”; 100% government-owned company.

In Task 01, analysis the current market situation and strategies for the “Highland” to
enhance the brand value and the market share in all the categories of “Highland” dairy
products

In Task 02 analysis, the marketing mix variables for the liquid milk of the “Highland”. In
the case of “Highland” has not taken the fullest advantage of being pioneer f the dairy
industry in delivering quality and nutritious dairy products.

In Task 03, of the case analysis the risk of the “Highland” as a family brand of “Milco Pvt
Ltd.”
Task 01

“Highland Current Market Situation and

Strategies to Overcome”

Management of Milco (PVT) Ltd

15 th November 2019

Kamal Kirihami
Table of Content
Page No
1. Term of Reference…………………………………………………03
2. Procedure………………………………………………………….04
3. Executive summary…………………………………………….…05
4. Findings……………………………………………………..…….06
5. Conclusion………………………………..……………………….27
6. Recommendation………………………..………………………...30
7. Reference………………...………………………………………..31

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 1. Term of Reference
“Highland” is a well-known household brand in Sri Lanka, which had up and down as a
government-owned company. A vision of “Milco”, to be the “Best in Class” nutritious food
and Beverage Company in Sri Lanka. Due to the current issues, trend and the health
concerns of the consumer, numerous opportunities are available for “Milco”.

For the purpose, it is crucial to identify the appropriate strategies to uplift the brand value
and the market share of the “Milco dairy products”, which is operated under the family
brand of “Highland”.

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 2. Procedure
For the purpose of completion of the report, secondary data are collected and used.
Below Secondary data sources are used,
 Published annual reports of Milco (pvt) Ltd
 Department of census and statistics data
 Department of animal production and health
 The dairy site
 Journal articles
 Newspaper articles
 Magazines
 Books
Further, Amul as a successful dairy brand of rural Indian Farms of cooperative societies;
is referred and referenced
Followed the existing knowledge and the understanding of the dairy market and dairy
brands of Sri Lanka.

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 3. Executive Summary
The report, of “Highland Current Market Situation and Strategies to Overcome” is
discussed the market situation, from the perspective of the external factors which are
influenced for the operation of the “Milco (pvt) Ltd”. PESTLE analysis and the porters’
five forces analysis models are used to identified influenced by the external environmental
factors.

Porter’s value chain model and SWOT analysis are the micro-environmental factors, which
are used for the identification of the internal factors influenced by the “Highland and its
product range”. The recommendation of the report is delivered by using the Ansoff Matrix,
which ultimately introduced the strategies to overcome the current drawbacks of the
“Highland Family Brand”.

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 4. Findings

4.1.Current Market Situation

“Highland” is a well – known household brand name, which is operated under the
government-owned company “Milco (pvt) Ltd” for the last six decades. Known as one of
the key players in the dairy industry in Sri Lanka, “Highland” dairy product are pioneers in
delivering “high quality and nutritious products” to the consumers.

The current market share and the performance of the last 10 years as follows,

Source: Treasury.gov.lk, 2019

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4.1.1. Pestel Analysis

4.1.1.1.Political Environment

 Current government view of the dairy industry makes a self – sufficient in the year
2020. Sri Lanka imported 5,000 heads of high yield cattle from Australia in May to
boost local dairy production. (The Dairy Site, 2017).
 President Maithripala Sirisena has paid attention to solving the issues of dairy
farmers. (The Dairy Site, 2017).
 Cattle Transport Licenses Temporarily Suspended. (The Dairy Site, 2017).
 The Policy Development Office of the Prime Minister’s Office has conducted a
research study on the present status of milk production and beef consumption in Sri
Lanka.as lack of dedicated production line and supply chain for beef, leather and
cattle bones. (The Dairy Site, 2017).
 As a part of the government’s policy to promote domestic dairy production with the
participation of youth entrepreneurs to start an island-wide programme to create
10,000 youth dairy entrepreneurs in Sri Lanka on the proposal made by President
Maithripala Sirisena. (The Dairy Site, 2017)
 Milch Cows from Australia for Medium-scale Dairy Farmers among fifty middle-
scale entrepreneurs in Nuwara Eliya, Matale, Kandy, Kurunegala and Badulla
districts. (The Dairy Site, 2017).
 US Department of Agriculture through the Food for Progress Program announced
a new US$ 21 million project to help increase the productivity of Sri Lanka’s dairy
sector, and connect thousands of Sri Lankan farmers to local and regional markets.

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  French Government agreed to extend its assistance to Sri Lanka, by providing a
€13.9 million concessional loan for the implementation of Development of Six Mini
Dairies Project. (The Dairy Site, 2017)..
 The government aims to develop the local dairy industry by introducing people to
use fresh (liquid) milk instead of imported milk powder(The Dairy Site, 2017).

Furthermore, the government intervention in the dairy industry mainly leads for all products
produced under the corporate brand of “Highland”, as the main ingredient for the
production of any “highland” product is “Liquid Milk”.

4.1.1.2.Economic Environment

 Open economic policy in 1970 also caused the global players to operate in the Sri
Lankan dairy industry.
 The agricultural sector contribution to the Gross Domestic Product (GDP) was 21.3
percent in 1998; in 2018 is shown with the dramatic decrease of 10.7. Thus, a slight
increase in the service sector compared to the agriculture sector in a total of 57.7%
(Cbsl.gov.lk, 2019)
 Total milk production recorded a notable expansion in 2018. Accordingly, total
milk production increased by 19.0 per cent to 471.6 million litres in 2018, compared
to 396.2 million litres in 2017. (Cbsl.gov.lk, 2019)
 Cow milk production increased by 17.7 per cent to 385.7 million litres, while
buffalo milk production increased by 25.3 per cent to 85.9 million litres in
comparison to 2017. (Cbsl.gov.lk, 2019)
 Meanwhile, milk production at the National Livestock Development Board
(NLDB) decreased to 14.7 million litres in 2018, from 15.0 million litres in the
previous year. (Cbsl.gov.lk, 2019)

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 The number of milking cows increased by 11.2 per cent to 329,380, while the
number of milking buffalo cows increased by 8.9 per cent to 94,200 during 2018.
 Despite increased production, milk powder imports grew by 6.3 per cent to 99,028
metric tons at a value of Rs. 50.3 billion during 2018. (Cbsl.gov.lk, 2019)
 Since domestic milk production is only sufficient to meet around 45 per cent of the
total demand of the country, it is essential to address the existing issues in the sector
while encouraging milk producers to enhance their production capacity.
(Cbsl.gov.lk, 2019)
 Meanwhile, the average cost of milk production increased to Rs. 47.67 per litre due
to the price increase of concentrate feeds, while the average Farm gate price
remained broadly unchanged at Rs. 66.88 per litre as in the previous year
(Cbsl.gov.lk, 2019)

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4.1.1.3.Social Environment

 Sri Lankan consumers are switching from powdered milk to liquid milk due to the
presence of Dicyandiamide (DCD) in imported powdered milk in Sri Lanka yet
remains obscure in the minds of the general public (Malavipathirana, 2014).
 "A great amount of energy is spent on removing the moisture of milk to produce
milk powder,”."87 percent of the moisture has to reduce to three percent to make
milk powder for which heat treatment is required up to 160 C and as a result,
destroys many nutrients. Nimal Pathirana, Director, Production (Dairy Sector) of
Cargills Quality Dairy. ." (Nanayakkara, 2013)
 The World Health Organization says the per capita consumption should be 200ml
per day, but Sri Lanka has not yet reached 100ml, Said by Nimal Pathirana,
Director, Production (Dairy Sector) of Cargills Quality Dairy. ." (Nanayakkara,
2013)
 There is a trend of consumption of UHT liquid milk among the school children and
younger crowd.
 "Developed a very positive trend due to the growing awareness amongst consumers
regarding the value of liquid milk consumption", said by Nimal Pathirana, Director,
Production (Dairy Sector) of Cargills Quality Dairy. ." (Nanayakkara, 2013)
 Yoghurt and ice cream are highly popular among any age group in the country.
Consumers are now more likely to have ice cream in various flavours. Butterscotch,
fruit and nut, karuthakolomba and blueberry.

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 Consumers are highly concerned about the nutrition value of dairy products.
Moreover, consumers are highly considered non – fat products produced by milk
for a healthy life.
4.1.1.4.Technological environment
 Considering the dairy industry the new technology is used to get raw milk from the
cows also to taking care of the cattle.
 Further, technology is used to check the quality of the milk at the collection centres.
Also, check the quality of the milk from the delivery bowsers before entering into
the processing plants in the laboratories.
 In the processing plant, the processing of the milk is done by machine including
filtration, separation, pasteurization, ultra heating, chilling and homogenization,
packaging and ready for transportation.
 In the processing of the liquid milk, is delivered the byproducts of pasteurized milk,
sterilized milk, ultra heating milk and curd.

 Separate processing plants are used to produce yoghurt, ice cream, cheese,
condensed milk, ghee, butter, cheese and powdered milk. As all these products are
the by-product of milk and various steps needed to be passed in the processing of
the product.

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 4.1.1.5.Environmental Factors

 The climate and weather changes are caused in the production, delivery and sales
of the dairy products.
 A severe drought followed by heavy rainfalls in Sri Lanka has hit large swaths of
cropping areas, threatening the food security of some 900,000 people in last June
of 2019. (The Dairy Site, 2017).
4.1.1.6.Legal Factors

Mainly, the agriculture policy of the country is caused. Department of animal production
and health (DAPH) is one of the main body that is providing the registration of the farms.

 Currently, Milo (pvt) Ltd is a 100 % government own company. Due to that, “Milo
PLC” faces a lot of government intervention and influence from the government
official’s ministers and politicians. Government companies are funded by the
government. Another hazard is that politicians are employed, the political party co-
workers as a treat of the election. Not having a regular state policy for agriculture,
dairy industry and the dairy farmers are highly caused for operationalization of the
Milo (pvt) Ltd.

 All Island Dairy Association for being the cooperate body for all dairy farmers in
Sri Lanka.

 Further, as a government body bounded by the parliament, treasury of Sri Lanka,

auditor general and the ministry of agriculture and live stroke.

 Government rules and regulation for importing milk powder from Sri Lanka.

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 4.1.2. Porters Five Forces Analysis

Bargaining Power of Bargaing Power of Threat Of New

Threat of Subsitutite Competitive Rivarly
Buyer the Supplier Entrance
• consumers are •Market is driven by •all yorgurt products •Brand Loyalty of Kids for •The many major
Anchor Newdale
prefer to buy 5 or 7 the local mik selling at the same Youghurt is high
players in the
youghurt at once. producers and the price of Rs 35/= •High intial investment and industry are in the
•Consumers in all farm operated by •but certain quality fixed cost for intiated the same size
age groups; are the major players parameters are plant produce youghurt •players have
purchased like ambewela, there. •secured interllectual different
propoty as, Trade mark,
•switching to an cargils and cic •Anchor Newdale, taste of the yorgurt and positionong
altenative product is •No substitute for CIC, Ambewela, licenses strategies
relatively simple the milk as a main Kothmale, Lucky, •Exisiting players have •differnces between
ingrident. close customer relations
and is not related rich life and prima by organizing competition
players and their
high costs. stella and CSR projects product and have
•product is •switching cost of •strong distribution price pric
differentiated and the customer is low. chanels of the competition.
compeitors. specially
can replaced by the •higher demand for anchor newdale
•barriers to exist are
substitute. the low - fat •SMEs in production of the high because of
youghurt among the youghurt high fixed cost
adults

High Low High High High

4.1.2.1.Yoghurt

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 4.1.2.2.Butter

Bargaining Power of Bargaing Power the Threat of New

Threat of Substitute Competitive Rivary
the Buyer Suplier Entrance
•Customers purchase • suppliers are local •High intial •substitutes are •Two foreign player
product at a time dairy farmers and investment and fixed available - anchor and one local player
•Product is farmer societies cost butter : saulted and • Players have
strategegically • No subsititute for •Brand loyalty of the unsulted , Lurpak and different startergies
imporatnt to the milk customers - Anchor pelwatta. •No much difference
customer in daily •switching cost in Butter •switching cost of the between the players
•Customer can not between supliers are •Protect intellectual customer is low but price competition
make the product low property • High demand for the is available
himself •Anchor have close low - fat butter • Barriers to exist is
•switchin to an customer relations among adults and old high
alternative product is aged group.
simple and not • relatively high priced
related high cost are charged by
•customer does not substitutes
know about the
production cost of
the product

High Low Low Medium Medium

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 Strategies
4.1.2.3. Ice Cream
Barganing Power Bargaing Power Of Threat Of New Threat Of
Competitive Rivary
Of Buyer Supplier Entarnce Substitute
•For certain •supliers are milk •High intial •Brand loyalty of •Major local players
occations farmers, farmer investment and customer - in the market -
consumers buy in societies and own fixed cost to elephant house elephant house,
large volumes- farms of producers intiate the plant and cargils majic cargils majic,
weeding, alms •producers •Higher brand • close customer imorich, kothmale,
giving and party purchase from the loyalty for - relationships •few foreign
•product is milk farms and elephant house •switching cost of players - haagen
differentiated and deliver proper •access to raw customer is low dazs, baskin
can be replaced income for them materials are not •consumers are robbins and
with substitutes •no substitute for controlled by tent to purchase heavenly majic
•switching cost of the milk existing players low sugar ice •players have
the consumer is •switching cost • Low switching creams difference
low from one supplier cost for customers •consumers would strategies
•consumer can from another is •existing players like to have •there is not much
produce by low have long term difference flavours difference
themselves. customer relations than the usual- between their
•Customers not butter products but in
have low margins scotch,cookie ice price
and are not price- cream, blue berry •barriers to exit is
sensitive etc high due to the
fixed cost

High Low Low High High

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 4.1.2.3.Liquid Milk
Bargaing Power of the
Buyer
•Customer is not much
aware of the production
cost
•the product is stategically
important
•all most all the consumers
can not produce the
product themself
•switching to other
product is simple and low
cost
•Product is
undifferentiated and can
be replaces by substitutes
Medium
Bargaing Power of the
Threat of New Entarnce
Supplier
•No subsitiuts are avalible •Legislation of the
for the particular input government to encourage
•switching costs from one the entrepreures to
supplier to another are engage in dairy farmimg
low • Low switching cost of the
consumer as avalibility of
products are high
•medium relationship of
the consumers of the
exisiting players
•brand loyalty of the
consumer for ambewela&
kothmale
•High intial cost and fixed
investment due to the
expiry of the milk
Low High
Threat of Substitute Competitive Rivary
•Many substitutes are •There are may players in
avalilable the market
•to some extent •There is not much
consumers are loyal; differentiation between
specially kids and the players and their
teenagers products, hence, there is
•switching of the customer much price competition
is low between the players
•all the substitutes are •Players have different
charge premium price strategies
than the highland •Barriers for the exit ae
•trend of difference due to the high fixed cost
flavours of milk
High High
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 4.2.Micro Environment
4.2.1. Value Chain

The value chain model introduce by the Michel porters in 1985, the activities of the firms
are divided into two;

 Supporting Activities
 Primary Activities

The value chain of “Highland”

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 4.2.2. Supporting activities
4.2.2.1.Firm’s infrastructure

“Milco” is consisted of four factories. Colombo factory, digana factory, polonnaruwa

factory and ambewela factory. Colombo factory was established as the first factory of milk
under the Colombo project. Which is accounted for produce 40000 L of milk in a single
day. Products like yoghurt, ice cream, sterilized milk and pasteurized milk are made in the
Colombo factory. Cheese is made in the digana factory. The total processing capacity of
35000L of milk is used to produce, yoghurt, curd, sterilized milk, UHT milk and
Pasteurized milk.

Polonnaruwa factory of “milco” is produced ghee, UHT milk, Curd, condensed milk and
yoghurt using 45000L of milk daily. Ambewela factory is produced, powdered milk and
butter; using the Denmark technology of dairy.

4.2.2.1.1. Quality Management

 Total Quality Management (TQM) model is used to improve the quality of the milk;
to purify the milk, remove the acidity and the sour from milk.
 To the extent, the shelf life of the dairy products uses, the quality raw milk delivered
by the farmers and farmer societies.

4.2.2.1.2. Financial Management

 “Milco ” is government privately owned company, funded by the treasury of the
country. Finance of Four factories of milco is coordinated and operated by the
Colombo factory. One finance manager and a team are allocated for each factory of
the country.
 Daily, weekly and monthly fund requirements and allocations are done by the
Colombo factory.

4.2.2.2.Human Resource Management

The policies of the “Highland” to establish and maintain the betterment of the dairy farms
of the country.

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“Highland” taking care of the farmers, through the farmer management societies all over
the country. By providing below services to the farmers.

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4.2.2.3.Technology Development
 “Milco” is now taking advantage of the “new technology available” as recently,
launched a new plant in ambewela through the aid of government. This plant was
designed by using Denmark technology in the dairy industry.
 Fully automated milk processing plant and newest computerized laboratory
facilities to check the quality of the milk.
 Distributed Equipment to check the quality of the milk in farmer management
Society
 Used technology the milk to cool and transfer to the four factories in the country
from the regional collection centres located in islandwide.
4.2.2.4.Procurement
 Established 2300 such as Farmer Management Societies (FMSs) in this network.
 Around 65,000 Farmers (Members) are benefited
 Farmer network help to get 150,000 litres of high-quality raw milk daily, which is
more than 40% of the national milk collection.

Source: (Milco.lk, 2019)

21 | P a g e
 4.2.3. Primary Activities
4.2.3.1.Inbound Logistics

Source: (Milco.lk, 2019)

 The cold storage network of bowsers

 Chilled trucks
 Collect the milk, process the full cream milk powder products and deliver to the
market within five days of the period.
4.2.3.2.Operations

As a leader in producing quality and nutritious dairy product producer in Sri Lanka; use its
own quality check parameters and mechanism and quality assurance laboratory to ensure
the consumer trust.

Tetra packs are used for packaging; which easies for consumption for the consumers.

4.2.3.3.Outbound Logistics

Distribution of highland to available the highland dairy products all over the island

It is crucial to distribute the dairy products in a cold chain of logistics/vehicles until it

reaches the wholesaler, distributor, dealer or retailer

22 | P a g e
4.2.3.4.Marketing And Sales
 “highland” is not powerful in the marketing of the products through the mass media.
 As it is a household brand of six-decade, have a strong connection with the older
generation of the country. Hence, the kids and the teenagers do not much concern
about the “Highland dairy products” due to the lack of advertising and new product
development.
 Sales are driven and achieve profits because of the established consumer trust in six
decades ago.
 Less concern about digital marketing to cater to consumers using the advancement
of new technology.

4.2.3.5.Services
 “Highland” is the symbol of the quality and nutritious dairy products
 “Highland” delver the permission to visit the factory for the public and see the
production process inside the factory. Ultimately leads to achieving the consumer
trust of quality and nutritious dairy products.
 Opportunity to visit the factory is especially given for the school children of the
country.

23 | P a g e
 4.3.SWOT Analysis

Strengths Weaknesses

Opportunities Threats

The SWOT Analysis of the highland brand as follows,

Strengths
•Government private comapny - closer supervision an government aids for the uplifting
and production of "highland products".
•"Household brandname"
•Product range diversified from liquid milk to dry milk powder, butter, cheese, ice cream,
youghurt, ghee, condenced milk etc.
•Strong distirbution chain covering the each retailer of the country
•Popular for the "quality and nutritious" dairy products among consumers
•Earn and reputed consumer trust

Weaknesses
• Lack of concideration of mass marketing of the "Highland" dairy
products
• Lack of consideration packaging of the products
• Regular flavours are used in production of dairy
• Lack of research and developmet
• No innovative products
• Higher bureaucracy

24 | P a g e
Oppertunities
•Consumer distrust of imported powdered milk
•Higher demand for the "highland milk powder" due to the controversyof powdered milk
•Government policy to be self sufficient in milk in 2021
•Expanding the plant and production capacity with foregin aid

Threats
• higher consumption of the imported powdered milk by the locals
• Higher consumer engagement with foregin brands
• threat of the new entrance to the market and grab the market share -
pellwatte

25 | P a g e
 5. Conclusion

In conclusion, “Highland” is a family brand of the “milco (pvt) Ltd”. Which

is 100 percent government-operated company in Sri Lanka. A vision of “To
be the “ Best in Class ” nutritious food and beverage company in Sri Lanka”.

Hence, the introduce o the open economic policy in 1977, “Highland” is faced
to competition from the local and foreign players. Due to the urbanization of
the country, the agricultural economy of the country is moving to the service-
based economy. The agricultural contribution to the GDP decreased up to 10%
from 20% in the last 20 years.

Thus, the “Yahapalanaya Government” with the aim of being self-sufficient

in the year 2021; introduced new policies and uplift the opportunities for the
dairy farmers of the country.

The aim of self-sufficient in milk production of the government benefitted for

the “milco” in numerous ways. A new powdered milk production plant in
ambewela using the Denmark technology of dairy. Ultimately increased the
capacity of production of litres in milk in “milco”.

The controversy of the imported powdered milk is caused to increase the

demand of the “highland powdered milk” in the market and consumers are
tent to buy “liquid milk” instead of the “imported powdered milk”. Consumers
are highly concerned about the quality and nutritious value of dairy products.

The lack of labour in managing the cattle and herd are caused to develop new
machinery for the dairy industry. The environmental changes were cased in
the last few years, negatively cased for the dairy farmers. The legal framework
for agriculture and the live stroke, encourage locals to step into agribusiness.

26 | P a g e
The value chain of the “Highland” is incorporated with cultural values of Sri
Lanka. The value chain of “highland” is discussed along with the supporting
activities and the primary activities.

The firm structure is inherent with TQM which is operated from the step from
the dairy collection centres in the villagers. All the technical knowledge and
the types of equipment are distributors to the FMSs island-wide. “Milco” is
also funded by the general treasury of the country, in collaboration with the
“Ministry Of Agriculture”. “Milco (pvt) Ltd” consists of four main factories,
island-wide milk chilling centres and collection centres. Moreover, the FMSs
and the village milk collection centres.

“Milco” was established for a proper mechanism of milk production and the
distribution of the island and ultimately, save and contributed for the local
dairy farms. In the case of that, milco is cultivating FMSs for the betterment
of the local dairy farms and for the proper price for the milk.

Denmark technology in dairy processing is used in especially in ambewela

factory; which is fully automated and computerized. Computerized
laboratories are used to check the quality of raw milk and produced dairy
products.

“highland” network has consisted of 2300 FMSs and around 65,000 farmers
(Members) are benefited. Farmer network help to get 150,000 litres of high-
quality raw milk daily, which is more than 40% of the national milk collection.

Considering the primary activities, the dairy farmers are collect raw milk and
deliver to the village FMSs. From village FMSs to the regional chilling and
collection centres and from then to the nearest highland factory. The latest
available technology is used for the processing of dairy products. The capacity
of milco dairy production has increased up to 410,000 L per day. Then

27 | P a g e
delivered the dairy products to every niche and corner of the country. Through,
the retailers, wholesaler, distributors, dealers and the highland milk bars.

Consumer trust and values of the brand are still inherent in the products of the
highland. Which is caused to move teenagers and kids for the substitutes.
Thus, old aged and adults are still familiar with the brand. Less mass
marketing and packaging are used. “Highland” provides its services to the
public, by giving the opportunity to visit the factory as a visit. Which is caused
to impressed and delightful lifetime experienced for the visitors.

28 | P a g e
 6. Recommendation

6.1.Market Penetration

Highland market penetration strategy is consisted of expanding the customer base in the
current market. Following steps are recommended for the market penetration of highland
products.

 Relaunched the “highland milk bar” concept of the modern café, which available
all the highland products to consume. Including the Yoghurt, Ice – cream, cheese,
butter, curd, condensed milk and milk powder. In addition, the sweets made of
highlands products for consumption.
 Highland cool carts availability in the bus station, railway stations, near the
government officers and near the schools.
 Being an available product for consumer in every supermarket chain.

6.2.Product Development

A new product is delivered for the existing consumer base of the “Highland”.

29 | P a g e
 Pizza Cheese, Lactose-free Milk, Fat-free yoghurt, Fat-free curd, sugar-free ice cream,
sugar-free condensed milk and low-fat butter are the new product developments of the
“Highland” including all the product ranges.

Consumers are highly concern about the amount of fat and sugar consist of in the product.in
addition, it has become a trend among the consumers, to enjoy a healthy diet.
Product
Existing New
Existing Market Penetration Product Development

Yoghurt, Ice – cream, cheese, Pizza Cheese, Lactose-free Milk,

Fat-free yoghurt, Fat-free curd,
butter, curd, condensed milk
sugar-free ice cream, sugar-free
and milk powder condensed milk, low-fat butter
Markets
Market Development Diversification

Highland Products in the Highland chocolate spread

Maldives Lassi
Health-conscious Chocolate
Teenager Paneer
New
Kids

6.3.Market Development

In this case, “Highland” will cater to the new markets using the existing products.

The Maldives is an attractive market for selling dairy products. As fewer dissimilarities
have occurred between the consumer tastes.

Due to the increasing number of non Communicable diseases (NCDs), consumers are
willing to have dairy products, which suits for their daily consumption. Fat-free yoghurt,
sugar-free ice cream, sugar-free condensed milk and low-fat butter are the variations of the
existing highland product. Which have a higher demand from the health-conscious
consumers.

30 | P a g e
Kids and teenager segments are highly competitive; thus, develop higher sales due to the
higher consumption. By adding the variation for the existing highland products; both
markets can be easily touched.

6.4.Diversification

Diversification is into practice when a new product is launched into a new market. In
addition, diversification involves a higher risk; Conglomerate Diversification Strategy is
used.

Highland chocolate spread – chocolate spread is for the three-segment, kids, teenagers and
for working women. As the existing chocolate spread is not affordable in price for the
shoppers.

Lassi - drink made with yoghurt diluted with water and flavoured with salt or fruit juice
(WikiDiff, 2019). The target for teenager, young adults and working men and women

Chocolate – there are many chocolate brands are available in Sri Lanka, thus, consumers
are not much satisfied with the taste of the chocolates. Market include the consumers of all
the age groups, which highland targeting.

Paneer - fresh cheese made by adding an acid like lemon juice to hot milk to separate the
curds from the whey (MyRecipes., 2019).the target market of the paneer mainly the Tamil
and Muslim housewives and working women.

31 | P a g e
7. References
1. Cbsl.gov.lk. (2019). National Output, Expenditure and Income. [online] Available
at:
https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/publications/annua
l_report/2018/en/6_Chapter_02.pdf [Accessed 10 Nov. 2019].
2. The Dairy Site. (2017). Cattle Transport Licenses Temporarily Suspended in Sri
Lanka. [online] Available at: http://www.thedairysite.com/news/52246/cattle-
transport-licenses-temporarily-suspended-in-sri-lanka/ [Accessed 10 Nov. 2019].
3. The Dairy Site. (2017). President Intervenes in Dairy Farmer Grievances. [online]
Available at: http://www.thedairysite.com/news/51684/president-intervenes-in-
dairy-farmer-grievances/ [Accessed 10 Nov. 2019].
4. Ranaweera, N. (2007). Sri Lanka: Opportunities for dairy sector growth. [online]
Fao.org. Available at: http://www.fao.org/3/i0588e/I0588E08.htm [Accessed 10
Nov. 2019].
5. The Dairy Site. (2017). Research Sheds Light on Sri Lanka's Milk Production, Beef
Consumption. [online] Available at:
http://www.thedairysite.com/news/52274/research-sheds-light-on-sri-lankas-milk-
production-beef-consumption/ [Accessed 10 Nov. 2019].
6. The Dairy Site. (2017). SL Govt Promotes Youth Dairy Entrepreneurs. [online]
Available at: http://www.thedairysite.com/news/52405/sl-govt-promotes-youth-
dairy-entrepreneurs/ [Accessed 10 Nov. 2019].
7. The Dairy Site. (2017). Sri Lanka to Import More Heads of Cattle from Australia.
[online] Available at: http://www.thedairysite.com/news/51088/sri-lanka-to-
import-more-heads-of-cattle-from-australia/ [Accessed 10 Nov.
2019].Treasury.gov.lk. (2019). Statement of cooperate intent milco (pvt) Ltd.
[online] Available at:
http://www.treasury.gov.lk/documents/63940/732722/MILCO.pdf/8535195c-
8084-49ff-8e5f-7b069f511235 [Accessed 15 Nov. 2019].
8. Milco.lk. (2019). Milco Private Limited. [online] Available at:
http://www.milco.lk/procurement.html [Accessed 15 Nov. 2019].
9. Kela (2019). Value chain of amul. [online] Slideshare.net. Available at:
https://www.slideshare.net/shivanimaheshwari35/value-chain-of-amul-120463907
[Accessed 15 Nov. 2019].

32 | P a g e
10. vdocuments.mx. (2019). Amul Value Chain - [PPTX Powerpoint]. [online]
Available at: https://vdocuments.mx/amul-value-chain.html [Accessed 15 Nov.
2019].
11. YouTube. (2019). Amul The Taste of India. [online] Available at: h Amul.com.
(2019). GCMMF :: Amul - The Taste of India | Bread Spread Producers in India |
Milk Chocolate Milk Health Drinks Manufacturers of India | Powder Pasturized
Milk in India | Pure Ghee Manufacturers | Pasturized Butter Producer in India.
[online] Available at: https://amul.com/ [Accessed 15 Nov.
2019].ttps://www.youtube.com/user/amultv [Accessed 15 Nov. 2019].
12. Seasofchange.net. (2019). Value chain and model – Seas of Change. [online]
Available at: http://seasofchange.net/value-chain-model-dairy-india/ [Accessed 15
Nov. 2019].
13. WikiDiff. (2019). Yoghurt vs Lassi - What's the difference?. [online] Available at:
https://wikidiff.com/yoghurt/lassi [Accessed 15 Nov. 2019].
14. MyRecipes. (2019). https://www.myrecipes.com. [online] Available at:
https://www.myrecipes.com/ingredients/what-is-paneer [Accessed 15 Nov. 2019].
15. Parliament.lk. (2019). Annual Report 2015. [online] Available at:
https://www.parliament.lk/uploads/documents/paperspresented/annual-report-
milco-pvt-ltd-2015.pdf [Accessed 15 Nov. 2019].
16. Samad (2019). Amul b12. [online] Slideshare.net. Available at:
https://www.slideshare.net/sabirsamad/amul-b12 [Accessed 15 Nov. 2019].
17. Jameel, F. (2019). ANSOFF Matrix analysis of Amul. [online] Fahad-
jameel.blogspot.com. Available at: http://fahad-
jameel.blogspot.com/2007/02/ansoff-matrix-analysis-of-amul.html [Accessed 15
Nov. 2019].
18. Bedi, D. (2019). Amul - Marketing Plan. [online] Slideshare.net. Available at:
https://www.slideshare.net/DishaBedi1/amul-marketing-plan [Accessed 15 Nov.
2019].

33 | P a g e
Task 02

The issue of the presence of Dicyandiamide (DCD) in imported powdered milk in Sri Lanka
yet remains obscure in the minds of the general public. DCD is a simple synthetic chemical
compound consisted of elements of carbon, nitrogen and hydrogen. DCD is a precursor of
melamine, and its uses are diverse. The crux of DCD related to this discussion is its use in
pastures of countries having a giant dairy industry (for instance New Zealand), where
thousands of cattle are fed. The basis of such use is to manage possible environmental
pollution risk of cattle farming. In addition to that, the structure of the DCD exhibits its
potential to be used as a nitrogen fertilizer which is an essential element in pasture (plant)
growth. (Malavipathirana, S., 2014)

The controversy of the imported milk powder products in a few years back is caused by the
high demand for “liquid milk”. Consumers were reluctant to purchased “imported full
cream milk powder” from the market, especially from the Fonterra brands. This lead to an
opportunity for the local milk powder producers like “Highland” and “Pelwatte”. Due to
the controversy suddenly the demand for the local producers was increased and the “full
cream milk powder” become a scared product for consumption for the locals.

Today’s consumers are more educated than the past and identified the risk and the health
issues of consuming the “imported powder milk” for daily consumption. Social media
platforms as Facebook and WhatsApp were the main information and sharing source
among the peer and the family. Ultimately lead consumers to consume the “liquid milk”
instead of the “imported powdered milk” considering the health benefit and the nutritious
value. Ans mainly consumers are looking for “fresh and non – contaminated milk” from
the market.

Sudden open window opportunity is an advantage of “Highland”, which can be easily

converted into a corridor opportunity. Furthermore, this is to be lead for the increase of
market share, brand visibility and brand value. Hence, “Highland” is a dairy product for six
decades in Sri Lanka along with consumer trust. Produced products which, involved “good

34 | P a g e
 quality and the nutritious value”. Moreover, “Highland” can fill the market gap of “liquid
milk” through the expertise of dairy production and operation in the last six decade.

Existing Highland Liquid Expected Liquid Milk

Gap
Milk Products Products by Consumers

Consumers have required the “Milk” especially for the preparing of the “bed tea” in the
morning. “Liquid Milk” is the best and healthy alternative for the “imported powder milk”.

Due to that, it is crucial to introduce a “liquid milk” especially design for the preparing of
the “Bed Tea”. The product needs to be affordable for each social class, long self-life and
require to cover every niche and corner of the island in distribution.

So, in the category of the “Highland Liquid Milk”, especial design “liquid milk” is launched
for the “Tea”. Further, the product also will have variations of “Low Fat and Nonfat”.

Product Name – Highland Milk for Tea

Packaging - image id used to describe the packaging and packing
material.1L, 2L and 5L are also designed in glass bottles
Sizes - 100ml,200ml,250ml,450ml,750ml,1L
Prices - 100ml, - Rs 25/- 200ml – Rs 50/-
250ml – Rs 60/- 450ml – Rs 110/- 750ml – Rs 180/-
1L – Rs 220/- 2L – Rs 400/- 5L – Rs 990/-
Promotion Campaign – “Bed Tea with your Favorite Milking
Partner – Highland”

35 | P a g e
Element Existing Highland Liquid Design Product To Meet The
Milk Products Customer Expectations
Product Design Undifferentiated from the Differentiated from the substitute
substitutes.
Features Full cream Milk for Tea
Fresh Milk Non – fat milk
UHT Vanilla Full cream with double sweetness
UHT Chocolate Full cream unsweetened
UHT strawberry
UHT coco milk
UHT falooda
Low-Fat milk
Lactose-Free milk
Packaging Unattractive and low quality High quality and eye catching
Polyethylene packaging are packaging
used Packaging colour – blue, white, green
and red
Use “tetra packs” and glass bottles for
different sizes
Sizes 180ml 100ml
250ml 200m
450ml 350mll
750ml 500ml
1L 750ml
1L
Quality Maintain the “pure quality and the nutritious value of the products”
Price Competitive and low cost pricing is used.
As “Milco” is aiming to provide best quality dairy products at
economical pricing.
Ultimately majority of the public can purchase the high quality liquid
milk at reasonable price.
Place Location Retail shops , school canteen, Retail shops , school canteen,
university canteen, office university canteen, office canteen,
canteen, supermarkets, supermarkets, highland milk bar,,
highland milk bar Premium super markets
Direct Dealer Attractive Carts with cooling facilities
Channel
Transportation Chilling bowsers to transport milk and chilling trucks for distribution
Coverage Not 100% covered Covered 100%
Acquisition Dairy Farmer>> Village FMSs>>Regional Collection>>Chilling
Channel Center>> Factory
Distribution Highland>> Carrying and forwarding agent >> Distributor >> Dealer /
Channel Retailer / Highland Shoppe >> Customer
Highland >> Modern retail
Promotion Advertising No Advertising Television
Radio
Social media advertising
Bill board advertising
Sales No Sales promotion Coupon contestant
Promotion
Event No event sponsorships Sponsor for kids reality show
sponsorships Sponsor for a game show

36 | P a g e
Task 03

Risk is an integral part of running a business and all companies face risks. What classifies
a business from the rest is their ability to manage these risks. Hence, risk management
should be considered as a vital element on which a company builds its corporate strategy.
In the modern market context, risk can be defined as the probability or threat of a liability,
loss or other negative occurrence caused by external or internal vulnerabilities, which
would affect the desired objectives. (Lmfgroup.lk, 2018).

Over Crowding
Competitive Risk
Superior Product

Changing
Technology

Lack of Market
Growth
Risk Of High
Market Changes
Growth Markets
Price Variations

Change in Key
Success Factors

Resource
Constrains
Company
Limitations
Distribution
Limitations

37 | P a g e
3.1.Competitive Risk
3.1.1. Overcrowding

Too many competitors are entered and operated in the market and attracted by the growth
situations in the industry. There are some local and foreign players are trying to attract the
consumers in the market.

Ambewela is a local producer in the dairy industry operating under the Lanka Milk Foods
Group (LMF); produce yoghurt, liquid milk, cheese and ultra-heated milk (UHT). Further,
Lakspray is the full cream milk powder brand operated under the LMF.

Anchor is a foreign player and operated under the Fonterra brands. All full cream milk
powders are imported from New Zealand. Hence, the liquid milk products, yoghurt, curd
and UHT product are produced using the raw milk collected from the dairy farms in the
country.

Moreover, the Fonterra brands in full cream milk powder category, which operated in Sri
Lanka are Rathi, Red Cow, Anchor Gold and Anchor shape - up Non – Fat milk.

38 | P a g e
Kothmale

Kothmale is a local player and operated under the cargils quality food products. Produce
cheese, butter, ice cream, liquid milk and yoghurt from the milk of Sri Lankan dairy farms.

Pelwatte

Palwatte is a local dairy manufacturer; produce butter, milk, powdered milk, ice cream, and
yoghurt. Pelwatta has huge market demand from the consumers because of the DCD
chemicals in imported full cream milk powder product. Thus, pelwatta is unable to fulfil
the demand.

Maliban

Local milk powder brand, which imported full cream milk from
New Zealand and distributed within the island including non –
fat powdered milk.

The risk due to the overcrowding is higher in the competitive

risk in a high growth market.

3.1.2. Superior Product

Fonterra Brands are the market leader in the dairy industry in Sri Lanka. Especially in full
cream milk powder category, which accounts for 60 percent share of the total market.
Maliban and Lakspray account for 12 percent of the market and act as market challenges.
Nespray and highland act as market followers. Hence, pelwatte was a market nicher and

39 | P a g e
currently converted into a market follower due to the higher demand from the consumers
and trying to fill the market gap for the Full Cream Milk Powder by a local producer

The risk of the superior product is also high under competitive risk.
3.2.Market Changes
3.2.1. Changing Technology
 Sensors are used to recognize cows through their spot patterns, internal and external
behaviour, nose print, width between the eyes, placement of the ear tag, or the
length of their head. (Arnold, 2019)
 Robotic cow milking equipment is used to milk the cows, washes, massages and
feed cows. (Arnold, 2019)
 Drones are for aerial monitoring of land and cows grazing, farmers can respond
immediately to emergencies and possibly save the life of crop or an animal. (Arnold,
2019)
 Collar technology is an ID sends information through a transponder to keep track
of cow's health, milk production levels, milking frequency and how much activity
the cow is getting vs. how much the cow is eating. (Arnold, 2019)
 Rotating swinging cow brush rotates at a comfortable speed that cows love and
often queue to be next in line to use this massager. (Arnold, 2019)

The risk of the change in technology is higher under the market changes.

40 | P a g e
3.2.2. Lack of Market Growth
At the current growth rate of 1–2 percent, the sector will need to grow at about 15 percent
annually for the next eight years, with no increase in total consumption. (Ranaweera, N.,
2007). Sri Lanka still only produces milk to meet 40% of demand, and therefore needs to
import milk and other dairy products (Ft.lk, 2019). Key statistics of the dairy industry
from 2008 to 2017 shows the imports of milk and milk products to Sri Lanka. Cattle and
buffalo population and annual milk production of Sri Lanka from 2008 to 2017.
(Annexes1)

The risk of low market growth of the industry for the high risk. To make the market balance
companies tend to increase imports of milk powder from the countries like New Zealand
and Australia

3.2.3. Price Variations

Identifiable price variation can be seen in the liquid milk categories and full cream milk
powder categories comparing to the “Highland” liquid milk and full cream milk powder.

41 | P a g e
As the retail price of highland liquid milk accounts for Rs. 220/=. Hence, Anchor, Rich life,
Kothmale and nestle retail price accounts for Rs 230/=; it is a premium price considering
other liquid milk produces as NLDB and Ambewela; also the retail price equivalent to
highland.

Source : (Ceicdata.com, 2019)

Source : (Ceicdata.com, 2019)

Full cream milk prices suddenly had an increase from July 2018 by Rs 50 /- and current
full cream milk powder price accounts for Rs. 395/=. Hence, full cream milk powder price

Rs. 395/= Rs. 345/=

42 | P a g e
Considering all the players in the full cream milk powder category; priced are similar as,
full cream milk powder is an essential household item and price is controlled by the
government. Thus, pelwatte priced its full cream milk powder for Rs. 345/= using low
price strategy.

There is also a high risk in price variation in “powdered milk” as its price is controlled by
the government as a necessary household item.

3.2.4. Change in Key Success Factors

Success Categories Indicator of Success Success Factor

Farm Profitability and
farmer wealth
Manufacturing industry
success
International Marketing
Success
Future industry success
Societal success
Continuing technological
advance.
Farm Profit
Net farm income per
hectare
Milk solids per hectare
Manufacturing cost
Market Returns
Stable ownership structures Robust governance
New product development
Newmarket development
Politicians that listen to
industry
The vitality of rural towns
Executive incubator
Technological progress
has enabled the industry to
grow through increased
productivity. This has been
Farmer Skills
Climate
Technological
improvement in
technologies, labour-saving
and irrigation
Technology
Pricing
Economies of scale
Legislative support
Reduced global subsidies
Effective connections to
market demand
Clever investment
Educated and committed
leaders
Negotiation
R&D investment has been
inconsistent. IP worries
impede dissemination.

43 | P a g e

Farmer engagement in
the development of
industry policy, strategy,
structure and operations
Major disease-free status
of national herd
Sources: Key elements of success and failure in the NZ dairy industry
on the farm, in processing
and along with the supply
chain.
Farmer participation has
been critical in the testing
of industry proposals,
building industry loyalty
Disease-free status has
reduced barriers for
international trade and
reduced compliance costs
The industry is ruthless in
its debates and competent
protagonists have at times
been lost to the industry
leadership
Efficient management of
animal health policies,
processes and funding has
involved significant
tension

There is also a higher risk involved in the key success factors of the dairy industry. As the
deviation in any factor cause for the loss of the operation in the dairy industry.

3.3.Company Limitation
3.3.1. Resource constraint

Highland also collect milk from the farms and farmer societies; thus, milk from them
should be in required quality to meet the company goals and objective and to provide
quality dairy products to the consumer.

 Lack of human resource to guide and educate the dairy farmers.

 Lack of educated and trained human resource to examine the health of cattle and
herds.
 Inaccessible of machinery to check the quality of the milk in the dairy collection
centres and chilling centres.
 Unavailable of modern factory complex to expand the production.
 Improper distribution network and team.
 Insufficient finance for the operationalization of the company.
 Improper or neglect of the reinvestment opportunities of the gain in business
activities.
 Inadequate laboratory to examine the quality parameters of the products.

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As resources are limited in nature due to that scarcity arises. Scarcity involves a higher
risk; therefore, managing the limited resources in an effective manner is crucial.

3.3.2. Distribution Limitation

 Unavailable of a distribution management system connected with all the
distributors and the dealers in the country.
 Improper sales force management system course lack of effective communication
and coordination of the sales team.
 Possibility for the out of stock
 High inventory cost

The risk involved in the distribution is also high; without the proper distribution
management, the dairy products are not available for the consumers’ consumption.

3.4.Types Of Risks
The type of risks for “Milco (pvt) Ltd” in operation of the dairy industry in Sri Lanka, as
follows,

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Source: Treasury.gov.lk, 2019
Foreign Exchange Risk – the tendency for the losses due to the fluctuation of the exchange
rates. “Milco”, is facing for the situation, when, importing machinery and cattle. As the Sri
Lankan Rupee value is less than the foreign currency value. Hence, the conversion of the
funds received from the foreign aids into Sri Lankan Rupees. (LKR) deliver much value
due to the high value of the foreign currency.

Information Risk - the risk of the cyber-attacks and the data received is not accurate.
Information is a key resource for companies in a competitive market place. Due to the
higher bureaucracy of the government-owned company the risk of data security is

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moderate. Due to the lack of knowledge in computerization and the cyber-security the
tendency to data loss is higher.

Political Risk - the risk of financial, market or personnel losses because of political
decisions or disruptions. Also known as "geopolitical risk." For example, political decisions
by governmental leaders about taxes, currency valuation, trade tariffs or barriers,
investment, wage levels, labour laws, environmental regulations and development
priorities, can affect the business conditions and profitability. (Investinganswers.com,
2019) the political risk of Sri Lanka is currently at a peak level due to the presidential
election of the country. Due to the governmental change due to every five years is caused
by the policy changes in the country.

Physical Risk

Physical Risk is risks for the employees, buildings and assets. Common physical risks are
fires, water damage and theft or vandalism. (Yip, 2017). The physical risk for the “Milco”
is low due to the continues employee attention and factory maintenance and security.

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4. Conclusion
“Milco (PVT) Ltd is a government-owned company, which is operated and manage a well
– known household brand for six decades; called “Highland”. “Highland” is a brand name,
which is consisted of the years of consumer trust on quality and nutritious dairy product in
Sri Lanka.

Before, the introduction of the open economic policies in 1977, “Milco” was the market
leader in the dairy industry in Sri Lanka. However, the government intervention and the
availability of the multinational player in the country is caused “highland” to lose the
market share to some extent. Thus, protecting the local dairy farmers in the country still
“Highland” is the market leader in the “Liquid Milk Category”. Thus, “Highland” is not
considered the advantage of the situation in the market.

For the purpose, of getting an insight about the market situation in the dairy industry in Sri
Lanka and the “Milco”; pestle analysis, potters five forces analysis, porters value chain
model and the SWOT analysis are taken place.

In the intention to increase the consumption of the “Liquid Milk” instead of the “Imported
Powdered Milk”, a marketing mix for the “Liquid Milk” is introduced to solve the market
gap of the consumer expectation of consuming fresh and non-contaminated local products.

Finally, the risk involved in a high growth market is analyzed in term of competitive risk,
market changes and company limitations. Moreover, the type of risk involved for the
operation the “Highland” is also addressed.

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5. References
1. Lmfgroup.lk. (2018). Annual Report. [online] Available at:
http://www.lmfgroup.lk/wp-content/uploads/2018/08/Lanka-Milk-Food-Annual-
Report-2017_18.pdf [Accessed 12 Nov. 2019].
2. Arnold, A. (2019). How Smart Tech And The Digital Age Is Benefiting The Dairy
Industry. [online] Forbes.com. Available at:
https://www.forbes.com/sites/andrewarnold/2019/01/02/how-smart-tech-and-the-
digital-age-is-benefiting-the-dairy-industry/#bf4bedf62f71 [Accessed 11 Nov.
2019].
3. Malavipathirana, S. (2014). A LESSON FROM DCD ADULTERATED
POWDERED MILK - WHAT WE OUGHT TO DO TOMORROW. [online]
Pgis.pdn.ac.lk. Available at:
http://www.pgis.pdn.ac.lk/yrf/sci2014/23/final%2001_Part23.pdf [Accessed 10
Nov. 2019].
4. Nanayakkara, P. (2013). BUSINESS TODAY -Liquid Milk: On the path to self-
sufficiency. [online] Businesstoday.lk. Available at:
http://www.businesstoday.lk/cover_page.php?issue=262 [Accessed 10 Nov. 2019].
5. Cbsl.gov.lk. (2019). National Output, Expenditure and Income. [online] Available
at:
https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/publications/annua
l_report/2018/en/6_Chapter_02.pdf [Accessed 10 Nov. 2019].
6. Sundaytimes.lk. (2019). Crisis-hit Fonterra milk controls 60 % of local market | The
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http://www.sundaytimes.lk/130519/business-times/crisis-hit-fonterra-milk-
controls-60-of-local-market-44508.html [Accessed 12 Nov. 2019].
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view/Dairy-deeds/58-673137 [Accessed 12 Nov. 2019].
8. Ceicdata.com. (2019). Sri Lanka | Retail Price: Colombo: Milk: Powder: Anchor |
Economic Indicators. [online] Available at: https://www.ceicdata.com/en/sri-
lanka/retail-price-by-commodity-colombo-city-period-end/retail-price-colombo-
milk-powder-anchor [Accessed 12 Nov. 2019].
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Scrimgeour, Frank. (2008). Key elements of success and failure in the NZ dairy

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 industry [online]
https://www.researchgate.net/publication/37807776_Key_elements_of_success_a
nd_failure_in_the_NZ_dairy_industry[Accessed 12 Nov. 2019].
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[online] Marketing91. Available at: https://www.marketing91.com/marketing-mix-
of-a [Accessed 15 Nov. 2019].
11. prezi.com. (2019). Marketing Mix. [online] Available at:
https://prezi.com/ivxr5wpmaucq/marketing-mix/ [Accessed 15 Nov. 2019].
12. Heidi Cohen. (2019). 4Ps Of The Marketing Mix: The Best Guide To Show You
How To Triumph - Heidi Cohen. [online] Available at:
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14. DMSpro Jsc | Sales and Distribution Management Solution. (2019). Six Risks In
Fast-Moving Consumer Goods (FMCG) Management. [online] Available at:
https://www.dmspro.vn/en/six-risks-in-fast-moving-consumer-goods-fmcg-
management/ [Accessed 16 Nov. 2019].
15. Investinganswers.com. (2019). Political Risk Definition & Example |
InvestingAnswers. [online] Available at:
https://investinganswers.com/dictionary/p/political-risk [Accessed 16 Nov. 2019].
16. Yip, C. (2017). 6 Types of Business Risks You Need to Know | Experian .... [online]
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 Item 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Cattle and Buffalo Population
Cattle
Buffalo

Annual Milk Production ( L )

Cow Milk
6. Annexes 01

Buffalo Milk
Total Milk Production

Beef Production (000 MT) =

Human Population ( m )

Per-capita Availability Kg/ Year

Milk and Milk Products ( LME) =
Beef
Key Statistics of Dairy Industry 2008 – 2017

Exports +
Milk and Milk Products ( kg )
Beef and Beef Products (Kg)

Import +
Milk and Milk Products (Kg. )
Beef and Beef Products (Kg)

Cost of Production
Fresh Milk (Rs)
Average Retail Price
Fresh Milk (750ml)
Beef Rs/Kg.
Checked by;
and Statistic

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S.A.A.P.Samarasundara
Sri Lanka Custom & HRTI
Source: Department of Census

DAPH - LPE Division (Modified)

Prepared by; M.I.S. Marasinghe