Juhayna…

Juhayna Food Industries

Strategic Management
Project

AAST MBA – El Dokki

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Table of Content

Contents Page

Introduction………………………………………………………………………………….3

1. JUHAYNA FOOD INDUSTRIES COMPANY PROFILE

1.1. Company Background……………………………………………………………………3
1.2. Corporate Values…………………………………………………………………………3
1.3. Quick view on Product Mix……………………………………………………………....4
1.4. Vision and Mission……………………………………………………………………….5

2. KEY EXTERNAL FORCES

2.1. Industry Overview………………………………………………………………………..5
2.2. Economic Forces – PEST + L Analysis………………………………………………….7
2.3. Juhayna Food Industries Direct Competitors…………………………………………….10
2.4. The Global Challenge…………………………………………………………………….11
2.5. Competitive Profile Matrix (CPM)…………………………………………………….....13
2.6. Opportunities & Threats………………………………………………………………….13
2.7. External Forces Evaluation (EFE)………………………………………………………..14

3. KEY INTERNAL FORCES

3.1. Management / Value chain / Distribution Channels…………………………...………….15
3.2. Strengths & Weaknesses……………………………………………………….…………17
3.3. Internal Factor Evaluation (IFE)………………………………………………………….17

4. INTEGRATING STRATEGIES
4.1. Past and Current Strategies…………………………………………………………….....18
4.2. Long Term Objectives – LTOs…………………………………………………………...20
4.3. SWOT Analysis…………………………………………………………………………..21
4.4. Strategic direction “SPACE Matrix”……………………………………………………..22
4.5. Future Strategies………………………………………………………………………….23

Sources are provided when the data is used.

Introduction
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The past decade has seen dramatic looses in some industries. Firms that had been performing well
suddenly announced large losses. Renowned companies losing market share to other companies due to
relying heavily on their own strengths and paying no/little attention to external factors representing lost
opportunities or inappropriately responding to threats. Companies must continuously assess their position
in the industry and know where they are heading in the future. Hence, the key issue is strategic
management.

In this paper we present the strategic plan for Juhayna Company-the famous dairy manufacturer. We will
scan the environment, develop the company’s vision and mission statement; assess external and internal
factors, establish long term objectives, generate, evaluate, and select strategies. Flowing from the afore-
mention, we will proceed with implementation with the strategy.

1. JUHAYNA FOOD INDUSTRIES COMPANY PROFILE

1.1. Company Background

Juhayna Food Industries is a leading Egypt-based manufacturer specialized in the production, processing
and packaging of milk, yoghurt, juice and juice concentrate. During the past three decades Juhayna has
succeeded in winning the loyalty of consumers who have come to view our wide variety of quality
products as trusted household names.
Juhayna has the well-earned reputation as trendsetter in both manufacturing know-how and product
innovation. Recent market studies indicate that Juhayna enjoys a level of brand awareness that is
significantly more pronounced than its leading competitors on the Egyptian market.

By building a state-of-art industrial infrastructure, Juhayna has steadily increased production capacity
while developing and expanding its product range. Today the company has 209 different products on
supermarket shelves that are produced at six separate manufacturing facilities with the industrial capacity
to yield a total of 2,900 tons per day.

1.2. Corporate Values

Our business model is based on the belief that growth must have a positive effect on society as a whole.
In addition to creating new job opportunities through the expansion of our operations, our commitment to
developing quality products and utilizing the most up to date production techniques has helped to upgrade
quality standards in the Egyptian food industry as a whole.

1.3. Quick view on Product Mix

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Dairy Milk:
Juhayna has catered to diverse market segments with a wide range of products that are developed with
specific needs to serve all tastes of their target market segments.
In 1987 Juhayna became the first Egyptian company to offer safe, healthy, packed milk products to the
local market.

In Dairy Milk we have below brands:

Juhayna Milk, Bekhero Milk, Halebo, Mix, Jino and Foam Milk

Yogurt, Cream and Cheese:

In 1987 Juhayna was the first company in Egypt to launch a natural, packed yoghurt product. For over
two decades Juhayna has maintained market leadership with its innovative, high-quality yoghurt and
yoghurt-based products.

In Yogurtn Cream and Cheese we have below brands:

Plain Yogurt, MIX Yogurt, Actilife, Zapado, Rayeb, Creams and Cheese

Juice:
Since 1987 when we first introduced our packed juice to the market we have been producing the highest-
quality juices from the largest and most modern manufacturing facilities for juices and drinks in Egypt
and the Middle East, equipped with the latest, state-of-the-art technology.

In Juice we have below brands:

Juhayna Juice, Pure, Bekhero, Jump and Tingo

1.4. Vision and Mission

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Vision
“Juhayna is a leading food for all ages, and a friend for all generations”

Mission
“Juhayna perseveres in providing Products that are healthier, tastier, and classier while increasing
shareholder’s value and focusing on the most updated state-of the art technology as well as our employees
who represent our most valuable asset”

2. KEY EXTERNAL FORCES

2.1. Industry Overview

Supply view: The number of larger dairy farmers has been continuously increasing; even the bulk of the
national dairy herd is concentrated among small farmers. Nevertheless, with the number of cattle in the
country declining in recent years, cattle farmers have often imported dairy cattle in order to maintain and
expand local production. However these imports were restricted or banned when disease concerns
appeared, mainly in European countries. This has resulted in production constrains. Gradually, the
majority of restrictions are lifted now, including the ban on imports of US and European Holstein cows.
This reflects a positive milk outlook.

However, Egypt’s dairy industry as largely underdeveloped. The numerous small-scale procedures
dominating the sector produce mainly for their own consumption, with any surplus production sold to
extended family members and other members of the local community. The larger-scale farms which are
slowly appearing are already providing a boost to Egypt’s dairy production and we expect that investment
in the dairy sector and improving production will pick up in coming years, driven by strong demand.

Demand View: Dairy products have become an important component of the Egyptian diet. It is estimated
that around 75% of Egyptians consumer milk that has not been packaged or pasteurized.
However, this figure is dropping rapidly as health and hygiene concerns as well as rising incomes see
more consumers convert to higher-value packaged milk products. Bearing in mind these changing
consumption patterns as well as strong population growth, it is believed that fluid milk consumption will
rise by a robust 12.3% to 2.03mn tonnes by 2016. Given the significant domestic supply gap, demand will
continue to be met by a combination of local production and imports. Meanwhile, powdered milk is
forecasted to experience a 15.2% rise in consumption to 59,900 tonnes by 2016, with full demand being
met through imports.

Dairy sector Attracts Investment and expands internationally:

In June 2010, a public share offer by Egyptian dairy goods and juice maker Juhayna Food Industries
worth EGP 192mn (US$34mn) was oversubscribed by 6.8 times. Juhayna is said to be a leader in Egypt’s
packaged dairy goods sector with a 65% market share, according to some sources. Its goods are exported
to more than 48 countries, including the US, Europe and the Gulf states.

Dairy is among the better performing of Egypt’s agribusiness subsectors, with numerous investment and
employment opportunities throughout the value chain and, increasingly, in the manufacture of processed
dairy goods. The industry has seen a real turnaround from the dynamics exhibited prior to 1998, when
unregulated street trading of milk was very much the norm. In such an unregulated environment it was
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very easy for health and hygiene standards to be routinely bypassed, resulting in the need for consumers
to engage in the time-consuming practice of boiling all milk purchases.

GDP growth has contributed to heightened demand form locals for value-added goods such as processed
cheese, ice creams and yogurts. Saudi Arabia’s largest dairy company Almarai acquired Beyti for US
$115mn on June 2009 as part of its plans to engage on a US $1.6bn expansion plan outside of the Gulf
countries to 2013. Almarai is reportedly aiming to capture half of Egypt’s dairy market by that year and
will invest EGP 100mn (US $18.3mn) in upgrading Beyti’s operations. It is thought that Almarai will
strive to introduce and array of fruit-milk drinks into Egyptian market through its joint venture with
PepsiCo.
In December 2009, ownership of Beyti was transferred to International Dairy and Juice, Almarai’s joint
venture with Pepsi.

Almarai isn’t the only company eyeing opportunities in Egypt. In 2009, the world’s largest dairy exporter,
New Zealand’s Fonterra, announced a partnership with Arab Dairy Products to market its products in
Egypt. According to a report in National Business Review, Arab Dairy Products will manufacture and
market Fonterra’s Anchor cheese brand. Arab Dairy Products will invest EGP 100mn in upgrading their
facilities to produce Fonterra products. It is expected that more international investment in Egypt’s dairy
sector in coming years as companies seek to benefit from strong demand driven by a fast-growing
population and rising per capita incomes.

In addition to attracting outside investment, Egypt’s dairy sector is starting to benefit from a more
international outlook aimed at improving the sectors access to raw materials. In February 2010, Reuters
reported that Gozour, the food unit of Egyptian private equity firm Citadel Capital, was in advanced talks
to buy an Ethiopian food firm in its bid to boost self-sufficiency in raw materials. It is therefore quite
feasible that Gozour may be looking to Ethiopia as a potential source of dairy cattle and milk. The
purchase of the Ethiopian firm would mean Gozour could start “contract farming” in Ethiopia. This
involves financing farmers and in return reaching agreements to use the produce in factories in Egypt and
eventually plants in Ethiopia. Gozour has three primary lines of business: agri-foods and dairy, Fast-
moving consumer goods, and intermediate industries such as flour milling and production of skimmed
milk powder.

Table: Egypt Milk production & consumption, 2007-2012

2007 2008 2009 2010 2011 2012f
Milk Production, ‘000 tonnes 1,470.0 1,530.5 1,472.0 1,654.0 1,680.5 1,706.4
Liquid Milk Consumption, ‘000 tonnes 1,508.0 1,577.0 1,749.0 1,763.0 1,812.0 1,826.2
Sources: FAPRI, BMI.

Table: Egypt Butter production & consumption, 2007-2012

2007 2008 2009 2010 2011 2012f
Butter Production, ‘000 tonnes 6.5 10.5 10.0 14.6 14.6 14.7
Butter Consumption, ‘000 tonnes 56.0 56.7 58.2 60.0 61.3 61.8
Sources: FAPRI, BMI.

Table: Egypt Cheese production & consumption, 2007-2012

2007 2008 2009 2010 2011 2012f
Cheese Production, ‘000 tonnes 420.0 420.0 445.0 454.0 456.3 460.1
Cheese Consumption, ‘000 tonnes 425.0 428.0 464.0 469.6 471.9 475.6
Sources: FAPRI, BMI.
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Table: Egypt Whole Milk Powder consumption, 2007-2012

2007 2008 2009 2010 2011 2012f
Whole Milk Powder consumption, ‘000 35.0 44.0 47.0 50.0 52.0 51.5
tonnes
Sources: FAPRI.

Risks to outlook
The main risk on the supply side in the form of disease, as the vast majority of the livestock herd is used
primarily for dairy production and is periodically affected by outbreaks of lumpy skin disease and foot
and mouth disease. The related import bans by the government are the other main risk. With world dairy
prices rising and more countries looking to increase domestic production, local producers will continue to
face stiff competition on the international market for high quality cattle.

On the demand side, the main risk if food price inflation, as most Egyptian consumers are highly price-
sensitive; any rise in prices is likely to have an impact on many consumers. If this were to continue, many
consumers may drop dairy products from their diets as many still regard dairy goods as luxury products.
Any sustained economic downturns would have such an effect, particularly on fresh milk consumption.

2.2. Economic Forces – PEST + L Analysis

Economic Forces:

Egypt has low GDP per capita. In addition to its population being the largest in the region, the fact that
disposable incomes are set to rise markedly over the long term means Egypt’s country structure benefits
from probably the most dynamic upside potential, which confirms the country’s standing as one of the
Middle East’s most exciting investment destinations.

Key Economic variables:

Availability of credit & Level of disposable income
Low wages in global terms are advantages for foreign investors, however it’s a disadvantage on the side
of demand as the disposable income is low although it is slightly increasing.

Interest rates
9.25%. Historically, from 1991 until 2012, Egypt Interest Rate averaged 11.8

Inflation rates
Headline CPI published by the Central Agency for Public Mobilization and Statistics on October 10, 2012
reflected an inflation of 6.22% as of September of 2012. Historically, from 2001 until 2012, Egypt
Inflation Rate averaged 9.0%.

Government budget deficits

Despite a reduction, a number of restrictive tariffs remain in place and serve as a barrier to entry for many
international brands, particularly as the country has a high food and drink trade deficit
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Consumption patterns (July - March 2011/2012)

Agriculture, Irrigation & Fishing
Manufacturing Industries &
Petroleum Products
Construction & Building
Wholesale & Retail Trade
Tourism
Educational Services
Other Services
Crude Oil, Mining & Natural Gas
Electricity & Water
Transportation & Communication
Financial Services, Insurance and
Social solidarity
Housing and Real Estate Activities
Health Services

Unemployment trends
12.6% in the second quarter of 2012. Historically, from 1993 until 2012, Egypt Unemployment Rate
averaged 10.1 %.

Source: http://www.tradingeconomics.com/

GDP growth & Trade balance

Market: Egypt SE

Indicators Figure Date

Real GDP growth 1.8 (%) 2010/11
Real GDP at market prices 236 (B) USD 2010/11
Trade Balance -33.3 (B) USD 2011/12

Tax rates: 11.2%.

Political/Legal Forces
- Bio-security, food safety & other regulations from the ministry of health
- Government future trends will most likely be more transparent, helping firms not politically
connected with the government secure lucrative contracts
- Following the new GATT Treaty, opportunities will increase tremendously for the export of
Agricultural products in general and dairy products in particular.
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- Although there is a law prohibiting Urban construction taking over on the already limited land
suitable for agricultural production, however there is not much enforcement
- Some lack of awareness that lead to poor irrigation and diminishing water supply
- High unemployment may lead to political resistance to privatization plans.

Social- Cultural Forces

Social, cultural, demographic, and environmental changes:
With a population of 90 million, Egypt is the largest market in the Arab world.
Population growth at 2.0% is considered high compared to developed countries. Nearly 45.0% of the
population is under the age of 18, which creates a sizeable consumer base. Income per capita is enjoying
higher than average growth as a result of ongoing economic reforms. The expansion of the middle class
segment, economic openness and better living standards have improved health consciousness across
growing segments of the Egyptian population. Industry statistics point to strong growth for years to come,
supported by favorable demographic and economic profile.

Per capita income

GDP - per capita (PPP):
$6,600 (2011 est.)
country comparison to the world: 136
$6,600 (2010 est.)
$6,400 (2009 est.)
note:data are in 2011 US dollars
Source: THE WORLD FACTBOOK www.cia.gov

Disposable income
22
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Lifestyle Indicators
2008 2009 2010 2011 2012
Internet Users (‘000) 13,636.6 18,757.2 23,799.2 28,599.1 31,688.5
New Registrations for passenger 55.2 53.6 69.1 75.0 0.0
cars (‘000)
Consumer expenditure on food
54,226.8 64,423.1 70,691.2 74,874.4 74,968.4
(US$ million)

https://www.cia.gov/library/publications/the-world-factbook/geos/eg.html

Technological Forces
The use of automated systems is taking over; it helps so much in reducing the time of production while
increasing the capacity and production. Example: the microchip injected in cattle to monitor and make
sure that all the herd has been milked.
Also there is the infrastructure of communication and connectivity that made it easier to communicate and
so manage the supply chain.
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The high tech laboratories that enable fast and accurate examination of the products for healthy concerns
and also for the R&D

2.3. Juhayna Food Industries Direct Competitors

Competitive Forces, Identifying rival firms

Juhayna is well positioned in the local market supported by its long track record, brand recognition and
comprehensive product offerings. Juhayna’s wide distribution network provides it with a competitive
edge compared to other players as it enables it to reach out for different market segments in an efficient
manner. As mentioned earlier, given the growth potential of the Egyptian market, competition is likely to
intensify which would grow the market alongside heightened competition.
In the packaged milk segment, Juhayna has a controlling market share. For plain milk, market share stood
at 69.0% at the end of 2009. The second largest producer had a market share of 9.0%. For flavored milk,
Juhayna’s market share stood at 74.0% in 2009 compared to 11.0% for the second in line. Market
composition remained more or less stable over the past four years. The increased competition can be
detected by the modest decline in Juhayna’s market share since 2006. However, given the wide gap
between Juhayna and other dairy producers and the company’s competitive cost and distribution
advantages, it is unlikely that market ranking would alter in the foreseeable future.

In the yogurt segment, Juhayna is well positioned in both the spoonable and drinkable category, holding a
market share of 31.0% and 86.0% in 2009, respectively. The company responded swiftly to fast growth in
the yogurt market by introducing 46 SKUs including value added products, which gave strong boost to its
market share.
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In the juice segment, local operators Beyti and Enjoy are the company’s main rivals. Both local
companies can potentially grow to become strong competitors. Enjoy was recently acquired by Citadel
Capital’s fully integrated food subsidiary, Gozour.

Juhayna also faces stern competition from large multinational players such as Danone and Lactalis. Both
Companies have become increasingly active in the yogurt segment in an effort to capitalize on the rapid
market growth and size. Danone’s success in capturing a market share followed an aggressive marketing
campaign coupled with competitive pricing strategy. Similar to Juhayna, Danone is likely to be
introducing additional value added products to capture a sizeable share of market growth. Lactalis
recently acquired Nestle, one of the world’s leading confectionary groups. The backing of Nestle is
certain to strengthen Lactel’s presence in markets where it is present including Egypt.

2.4. The Global Challenge

To say the global dairy industry has had a colorful past would be an understatement. A history of
interventionist government policies has resulted in ructions in the supply side over the past four decades,
particularly in the once highly regulated European dairy industry. The slow removal of highly
distortionary policies has contributed to rationalization in European dairy production.
Dairy consumption has also undergone a wild ride in the past few decades. Consumption of dairy
products has historically been volatile.

The growth in Chinese dairy consumption is already having large implications for global production and
trade in dairy products. Dairy trade traditionally absorbs less than 5% of global cow milk production, but
global trade is already starting to lift with the expansion of Chinese demand.
The rise and rise of the New Zealand dairy industry has indeed been impressive, and they look set to ride
on the Dragon’s back for some time yet. But the prosperity has not been shared in Australia over the past
decade. Not because the Chinese haven’t demanded Australian product – they have, and are Australia’s
fastest growing export market – but rather because Australian dairy production has been rocked by
drought throughout the 2000’s. Australian milk production fell sharply from 2001 to 2008.
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Geographical segmentation
The European Union is the largest dairy producing region, with annual (cow) milk production in 2010 of
134 million tonnes, followed by the US (86million tonnes), India (47.7million tonnes) and Russia
(32.8million tonnes).

India is the world’s most significant consumer of ‘fluid’ milk with annual consumption of 47.1 million
tonnes in 2010 vs the EU-27’s 33.7 million tonnes and 27.9 million tonnes in the US.
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2.5. Competitive Profile Matrix (CPM)

Enjoy Juhayna Almaraai

Critical Success Factors Weight R WS R WS R WS
Market Share 0.18 3 0.54 4 0.72 4 0.72
Product Quality 0.12 3 0.36 4 0.48 4 0.48
Consumer Loyalty 0.15 3 0.45 4 0.6 4 0.6
Global Expansion 0.1 2 0.2 4 0.4 4 0.4
Organization Structure 0.04 2 0.08 3 .12 2 0.08
Production Capacity 0.12 3 0.36 3 0.36 3 0.36
Price Competitive 0.04 4 0.16 2 0.08 2 0.08
Management Experience 0.08 2 0.16 4 0.32 3 0.24
Advertising 0.1 2 0.2 4 0.4 3 0.3
Financial Position 0.07 2 0.14 4 0.28 3 0.21

Total 1.00 2.65 3.76 3.47

The CPM above implies that the weakest company is Enjoy and the strongest is Juhayna.

2.5. Opportunities & Threats

Opportunities:
1- Egypt benefits from a large pool of cheap labor, particularly useful for labor intensive
commodities
2- The government will continue to invest in land reclamation projects, increasing area available for
agricultural output and so cattle breeding.
3- Future trends will most likely be more transparent, helping firms not politically connected with
the government secure lucrative contracts
4- Efforts towards banking-sector consolidation should bring down the cost of private sector credit
and fuel small business growth over the long term
5- Both global milk consumption and international dairy trade to continue to grow over the next
decade
6- Current competitive position and ability to grow milk supply provide an opportunity to deliver
increased economic benefits to the economy
7- There is a phenomenal scope for value addition with innovations in product development,
packaging and presentation such as Butter, Yoghurt and Cheese.
8- Exports opportunities in milk proteins through Casein, Caseinates and other dietary proteins.
9- Introduction of value-added products with different flavors, Ice creams, flavored milk, Dairy
sweets, etc. are to be undertaken.
10- High birth rates which opens an opportunity for Infant foods as milk is a basic for nutrition
11- Efforts are on to exploit export potential of reputed brands.
12- Following the new GATT Treaty, opportunities will increase tremendously for the export of
Agricultural products in general and dairy products in particular.
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Threats:
1- Urban construction is taking over on the already limited land suitable for agricultural production
2- With the prices of many agricultural commodities increasingly volatile, Egypt will face
increasing competition for many key imports
3- Poor irrigation and diminishing water supply
4- High unemployment may lead to political resistance to privatization plans.
5- Although levels of education are relatively high, there is a considerable mismatch between the
skills taught in schools and those required by most employers
6- Most countries in the world have huge long-term potential to increase milk supply
7- Global competition will be tougher “USA, New Zealand, Brazil, Pakistan, China and Saudi
Arabia”
8- The opportunities for growth in dairy exports may be lost if:
8. A – Regulation unnecessarily restricts production volume.
8. B - Dairying is unable to adopt more nutrient and water efficient farm systems – leading to
greater need to regulate.
9- Cost of production on-farm increases to an uncompetitive level driven by production (not profit)
focus and/or compliance costs.
10- Product quality/integrity is undermined through bio-security, food safety or industry reputation
disasters.
11- Changes in profitability of dairy compared to beef production and cropping in areas of potential
low cost production.
12- Milk vendors of the un-organized sector are occupying the pride of place in the industry.
Organized dissemination of information and creation of public awareness about the harm that the
Un-organized venders do to the producers and the consumers will show a steady rise day by day

2.6. External Forces Evaluation (EFE)

Key External Factors Weight Rating Weighted

Score
Opportunities:
1- Egypt benefits from a large pool of cheap labor, particularly .05 3 .15
useful for labor intensive commodities
2- The government will continue to invest in land reclamation .08 3 .24
projects, increasing area available for agricultural output and
so cattle breeding.
3- Efforts towards banking-sector consolidation should bring .05 2 .1
down the cost of private sector credit and fuel small business
growth over the long term
4- Both global milk consumption and international dairy trade to .1 4 .4
continue to grow over the next decade
5- There is a phenomenal scope for value addition with .05 4 .2
innovations in product development, packaging and
presentation such as Butter, Yoghurt and Cheese.
6- Introduction of value-added products with different flavors, .15 4 .6
Ice creams, flavored milk, Dairy sweets, etc. are to be
undertaken.
7- High birth rates which opens an opportunity for Infant foods .15 2 .3
as milk is a basic for nutrition
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Threats:
1- Urban construction is taking over on the already limited land 0.12 2 .24
suitable for agricultural production
2- With the prices of many agricultural commodities increasingly 0.06 2 .12
volatile, Egypt will face increasing competition for many key
imports
3- Poor irrigation and diminishing water supply 0.08 1 .08
4- Most countries in the world have huge long-term potential to 0.03 2 .06
increase milk supply
5- Global competition will be tougher “USA, New Zealand, 0.05 3 .15
Brazil, Pakistan, China and Saudi Arabia”
6- Cost of production on-farm increases to an uncompetitive level 0.03 3 .09
driven by production (not profit) focus and/or compliance
costs.
Total 1.00 2.73

With a score of 2.73 Juhayna shows an above average response to existing opportunities and threats
in the industry.

3. KEY INTERNAL FORCES

3.1. Management / Value chain / Distribution Channels

Management
Juhayna’s operation is run by a solid management team headed by the group’s founder and current chief
executive. The company’s top executives have a combined experience of more than 230 years in the fast
moving consumer goods industry (FMCGs) with reputable international and regional firms including
Procter & Gamble and Arthur Anderson.

The Value Chain:

On the supply side the farms of Juhayna uses Holstein cattle which is a breed of cattle known as the
world’s highest production dairy animal, there is also medical care for the herd,

Bottles are made in Egypt through a fully automated system; while the cartoon packages are imported
from Saudi Arabia on high quality standards.
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Operations:

The herd is cleaned via an automated system to make sure they are clean before milking, then air drying,
then to milking, milking is also automated. After finishing they clean the cows again for bacteria, and
then the milk is taken to 3 degrees fridges, then to storing towers then to trucks; the trucks leave the
factory in 1 hour time, the trucks are cleaned before and after they are filled, trucks go to another area to
be pasteurized.

Quality Assurance and Control:

Milk Pasteurization: through tubes heating up to 78 degree to kill bacteria, then the bottles are prepared
and the expiry date is printed with rate of 50000 bottles per hour, filling takes 6 seconds per bottle, then
the milk is checked again & defected products are removed manually and good products are taken to
storage unit using a bar code system to store all the products, this system is fully automated.

Also the R&D hardly checks products and check the juice tasting.

Then the products are taken to distribution center and then to distributors
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3.2. Strengths & Weaknesses

Strengths:
1- Biggest Market share
2- Strong brand name
3- Strong & high experienced management team
4- Wide variety of business portfolio & products
5- Well established distribution matrix
6- Well established and financed R&D division
7- Reasonable product price which enables strong competition in the market
8- Concentration on healthy products
9- Spread in a large number of countries all over the world
10- Availability of capital for expansion or expenses

Weaknesses:
1- Lack of resources for packaging
2- Lack of skilled functional & technical skilled workers
3- Seasonality of production reduces plant capacity utilization increasing capital requirements and it
restricts product mix
4- Instable prices of fruits which affects the profit margin
5- Dependability on imports in areas of shortages, such as milk powders
6- Processing industry is smaller in scale than the main international competitors.
7- Scale in marketing is better than average but also below main international competitors, leading
to cost disadvantages
8- Emergence of strong competitors such as Almaraai

3.3. Internal Factor Evaluation (IFE)

Key External Factors Weight Rating Weighted

Score
Strengths:
1- Biggest Market share 0.14 4 0.56
2- Strong brand name 0.08 4 0.32
3- Strong & high experienced management team 0.04 4 0.16
4- Wide variety of business portfolio & products 0.07 3 0.21
5- Well established distribution matrix 0.05 3 0.15
6- Well established and financed R&D division 0.08 4 0.32
7- Reasonable product price which enables strong competition in 0.06 4 0.24
the market
8- Concentration on healthy products 0.04 3 0.12
9- Spread in a large number of countries all over the world 0.05 3 0.13
10- Availability of capital for expansion or expenses 0.09 4 0.36
Weaknesses:
1- Lack of resources for packaging 0.03 2 0.06
2- Lack of skilled functional & technical skilled workers 0.04 2 0.08
3- Seasonality of production reduces plant capacity utilization 0.05 1 0.05
increasing capital requirements and it restricts product mix
4- Instable prices of fruits which affects the profit margin 0.03 1 0.03
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5- Dependability on imports in areas of shortages, such as milk 0.04 2 0.08

powders
6- Processing industry is smaller in scale than the main 0.02 2 0.04
international competitors.
7- Scale in marketing is better than average but also below main 0.01 2 0.02
international competitors, leading to cost disadvantages
8- Emergence of strong competitors such as Almaraai 0.08 1 0.08
Total 1.00 3.01

Conclusion of the IFE:

Juhayna has a strong internal position with a score of 3.01

4. INTEGRATING STRATEGIES

4.1. Past and Current Strategies

Juhayna’s pursued strategies are centered on building an integrated operation and implementing vertical
and horizontal expansion plans. The existing business structure provides the company with presence
across the different segments of the value chain starting with the supply of quality raw milk and fruits
passing through production and ending with distribution. The recent addition of farming to the group’s
operations was aimed at gaining control over the quality and supply of raw materials. Owning a
distribution fleet and network has the added benefit of optimizing distribution costs and monitoring
customer satisfaction. Going forward, the company intends to replicate its business model in a number of
regional markets.
Juhayna accomplished integration strategies that were designed to achieve three objectives:

1- Backward integrations, including supply of raw milk, fruits and fruit concentrates through
owning and operating agricultural farms,
2- Horizontal and vertical integration through product and geographic expansion, and
3- Forward integration where Juhayna delivers its products to end customers via its own distribution
network.

Illustration of an Integrated Business Model

Backward Integration

Supply of Raw Material

Horizontal
Raw Material
Integration
Fruits
Product Expansion Forward
Fruits Concentrate Integration
Geographic
Expansion Distribution
 19

Backward Integration
Raw milk is the main input for dairy and yogurt, the two largest business segments for the group.
Together, they generated 80.6% of consolidated revenues in 2009. Dairy products encompass milk,
cheese and cream. One of the main risks in this industry is the strong bargaining power of milk suppliers
which can cause interruption to supply of raw materials and quality inconsistency. Juhayna’s strong
market presence enables it, to some degree, to minimize such risk through maintaining a good network of
milk suppliers with the appropriate quality standards.
Raw milk is close to 50.0% of total production cost thus securing supply of quality raw milk has always
been at the top of management’s agenda. Besides working closely with milk suppliers, the company
ventured into farming in order to secure its raw milk requirements from within the group. In 2008,
Juhayna bought an indirect 40.0% stake in Milkes Dairy, a company that runs a state of the art dairy farm.
Following the acquisition, the group’s animal headcount reached 2,500 from 1,460 and the milk yield
grew to 35 kg per cow per annum from 30 kg per cow in2008.
The investment is expected to have a positive impact on the quality of milk supply which is measured by
the average bacterial count per milliliter (TBC thousand/ML). Currently the ratio of Juhayna’s raw milk
input is 70.
Milkes Dairy’s ratio is at par with international standards at 50. The farm presently provides the company
with 7.0% of its raw milk requirements. Management is intending to expand its farming operations to
ultimately achieve self sufficiency in its raw milk requirements.
In its continuous efforts to strengthen control over the production chain, Juhayna built a concentrate
production facility, Modern Concentrate Company, to secure its needs of fruit concentrates for the juice
production operation which generates 18.2% of total revenues. In 2009, the company bought 10,000 acres
of farm land that it intends to use to grow a portion of its own fruits in order to produce concentrates.
Currently, nearly 76.0% of juice requirements are sourced in house and the balance is sold to third parties.

Horizontal Integration
Juhayna’s horizontal expansion is a major pillar in its strategy. Horizontal expansion encompasses
enhancing the product portfolio and increasing production capacity to capitalize on market growth. In
2009, Juhayna consolidated all of its products under the Juhayna brand name and logo. The motive
behind this move was to create consumer awareness of the product’s brand quality and grow market
share. Products fall under four lines namely dairy, yoghurt, juice and concentrates.

Forward Integration
Time is a crucial element in the dairy industry due to the short life span of the product. Timely delivery of
raw materials and end products in and out of the factory is vital. Juhayna has therefore invested heavily in
building its own distribution network at both ends of the spectrum. The company’s network is divided
into its own distribution outlets and sub-distributors in remote areas. The distribution coverage provides
Juhayna with comprehensive access to consumers across the country. The company has direct access to
25,000 outlets and indirect access to 50,000 outlets through sub-distributors. In addition, the company
owns a fleet of 523 vans, both chilled and dry.
The wide distribution coverage provides the company with direct interaction with the different income
and market segments. For example, in rural areas Juhayna distributes brands targeted at low and middle
income consumers, while in urban areas it markets the more costly, high end products. Juhayna’s
distribution network is comprehensive in terms of its geographic footprint and customer categories which
could be difficult to replicate by other producers thus providing the company with a competitive edge:
• Having a wide distribution network and own fleet enforces continuous brand awareness and lowers
marketing and distribution expenses,
• Direct access to customers ensures that customer service and satisfaction are under the company’s own
supervision and is therefore not compromised in addition to allowing it to monitor market trends and
consumers’ behavior,
 20

• More effective market penetration and customer reach,

• Continuous tracking of replacement levels and sales volume.
Management indicated that major supermarket chains and hypermarkets, are becoming the company’s
fastest growing customer base. Accordingly, the company’s current sales strategy includes strengthening
relationships with major chains in order to grow market share further.

4.2. Long Term Objectives – LTOs

Juhayna is aiming to accomplish the long-term objectives listed below:

1- Amongst future capital expenditure is heavy investment in the company’s 10,000 acre farm
dedicated to satisfy its raw material requirements.
2- Additional investment is planned in acquiring additional land and expanding the farming business
in attempt to securing raw milk supply internally
3- Product diversification through expanding the range of existing products as well as entering new
product segments
4- Enhancing the regional operations in markets such as Libya, Jordan and Lebanon where the
company has established brand recognition
5- Replicating the business model in Egypt in other markets
6- Regional and local acquisitions of complementary businesses.
 21

4.2. SWOT Analysis Strengths: Weaknesses:

1- Biggest Market share 1- Lack of resources for packaging
2- Strong brand name 2- Lack of skilled functional &
3- Strong & high experienced technical skilled workers
management team 3- Seasonality of production reduces
4- Wide variety of business plant capacity utilization
portfolio & products increasing capital requirements
5- Well established distribution and it restricts product mix
matrix 4- Instable prices of fruits which
6- Well established and affects the profit margin
financed R&D division 5- Dependability on imports in areas
7- Reasonable product price of shortages, such as milk powders
which enables strong 6- Processing industry is smaller in
competition in the market scale than the main international
8- Concentration on healthy competitors.
products 7- Scale in marketing is better than
9- Spread in a large number of average but also below main
countries all over the world international competitors, leading
10- Availability of capital for to cost disadvantages
expansion or expenses 8- Emergence of strong competitors
such as Almaraai
Opportunities: SO Strategies: WO Strategies:
1- Egypt benefits from a large pool of Using the Strength of our R&D to Filtering and seeking of good skilled workers
cheap labor, particularly useful for labor introduce Value Added products Going global makes us cooperate and
intensive commodities integrate the processes to achieve the
2- The government will continue to invest Taking advantage of our Market Share economies of scale
in land reclamation projects, increasing and brand name to hunt the opportunity
area available for agricultural output of the high birth rate and the shortage in The government aid will support in stabilizing
and so cattle breeding. the market. the prices of supplies and raw materials.
3- Efforts towards banking-sector
consolidation should bring down the
cost of private sector credit and fuel
small business growth over the long
term
4- Both global milk consumption and
international dairy trade to continue to
grow over the next decade
5- There is a phenomenal scope for value
addition with innovations in product
development, packaging and
presentation such as Butter, Yoghurt
and Cheese.
6- Introduction of value-added products
with different flavors, Ice creams,
flavored milk, Dairy sweets, etc. are to
be undertaken.
7- High birth rates which opens an
opportunity for Infant foods as milk is a
basic for nutrition
Threats: ST Strategies: WT Strategies:
1- Urban construction is taking over on the Exporting will be done carefully To secure resources of supplies and raw
already limited land suitable for choosing the target markets to access materials
agricultural production easily and smoothly
2- With the prices of many agricultural It is so important, the research and
commodities increasingly volatile, The availability of capital will facilitate development functions are of very high
Egypt will face increasing competition the access to any market and operations importance
for many key imports will function successfully in all alike
3- Poor irrigation and diminishing water markets Cooperation and integration of processes with
supply suppliers of packages and know-how transfer
4- Most countries in the world have huge for future further expansion
long-term potential to increase milk
supply
5- Global competition will be tougher
“USA, New Zealand, Brazil, Pakistan,
China and Saudi Arabia”
6- Cost of production on-farm increases to
an uncompetitive level driven by
production (not profit) focus and/or
compliance costs.
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4.3. Strategic direction “SPACE Matrix”

Internal Strategic Position External Strategic Position

Financial Strength (FS) Environmental Stability (ES)
Leverage = 0.66 Technological changes = - 0.5
Liquidity Quick Ratio = 1.05 Rate of inflation = - 1
Liquidity Current Ratio = 1.54 Demand variability = - 2
Leverage (debt\Total Assets) = 0.38 Price range of competing products = -3
Barriers to entry = -2
Competitive Advantage (CA) Industry Strength (IS)
Market share = -2 Growth potential = 3
Product quality = -2 Profit potential = 4
Product life cycle = -3 Financial stability = 3
Customer loyalty = -1 Technological know-how = 3
Competition’s capacity utilization = -1 Resource utilization = 2
Technological know-how = -3 Ease of entry into market = 2
Control over suppliers & distributors = -2 Productivity, capacity utilization = 1

FS=.9075 ES=-2 IS=3 CA=-2 X= -2+3=1 Y=-2+.9075= -1.0925

FS

6
Conservative Aggressive
5

CA -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 IS

-1

-2

-3

-4

-5
Defensive Competitive
-6

ES
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The SPACE matrix draws the attention to the direction of Competitive which implies the following of
below strategies:

1- Integration
2- Market Penetration
3- Market Development
4- Product Development

Combining above with the older strategies we followed “integration strategies” and the trend we are
following in exporting and expanding abroad “Market Development” leaves us to Market Penetration and
Product Development Strategies.

4.4. Future Strategies

The conclusion of both the SPACE matrix and the SWOT analysis resulted strategies will formulate the
combination of the below strategies to follow:

1- SWOT SO Strategies with SPACE Product Development strategy

Via using the Strength of our R&D to introduce Value Added products

Market Penetration strategy taking advantage of our Market Share and brand name to hunt the
opportunity of the high birth rate and the shortage in the market.

2- WO Strategies with Market Development strategy

Filtering and seeking of good skilled workers

Going global makes us cooperate and integrate the processes to achieve the economies of scale

Market Development would best fit.

The government aid will support in stabilizing the prices of supplies and raw materials.

3- ST Strategies with Market Development strategy

Market Development will be done carefully choosing the target markets to access easily and smoothly

The availability of capital will facilitate the access to any market and operations will function successfully
in all alike markets
 24

4- WT Strategies with integration & product development strategy

Further backward integration to secure resources of supplies and raw materials

Product Development is so important; the research and development functions are of very high
importance.

Cooperation and integration of processes with suppliers of packages and know-how transfer for future
further expansion by backward integration.

Sources are provided when the data is used.