Master of Business Administration

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Name RAMASAMY VINO PRADEEP
Batch Number 44
Student ID Cardiff Met ID : 20097181 ICBT ID : CL/Cardiff MB/11/230

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Unit code MBA 7003
Unit title Marketing Assignment 02
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Topic of the Case Study GIVEN
Learning Outcomes covered YES
Word count 4000 words
Due date / Time 28 Feb 2016 / 16:00
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other institution
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EXECUTIVE SUMMARY

The purpose of this report is to suggest a marketing plan for a local milk processing company
with is a small player in the oligopolistic competition industry which does not have self-
sufficient supply in Sri Lankan. The report covers the understanding of the market where it
competes, the competitors and where it can increase revenue and market share by catering to the
consumer needs. A budget for the next 2 years along with a risk evaluation plan has also been
presented.

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1. Introduction:

1.1 The industry

The history of milk consumption runs back to 4000BC in Neolithic Britain when human
developed lactase persistence genetically. Through the years it has blended into the global
culture and after the invention of pasteurization, milk consumption became a revolution. There
have even been milk wars in the recent history. (Source:
http://milk.procon.org/view.timeline.php?timelineID=000018)

Sri Lanka is not self-sufficient in milk and; imports over 70% of its milk requirement. The
import bill of dairy is approximately 15Bnn rupees. Currently Sri Lanka has around 2mn cattle
and 0.3Mn buffalo which produces over 350 liters. The districts with considerable milk
production in the country are Kurunegala, Badulla,Anuradhapura,Nuwara-Eliya. The
government policy on dairy development is aimed at producing 50% of country’s requirement of
milk by the year 2015. (Source: http://livestock.gov.lk/site/en/profile-of-the-livestock-sector)

1.2 Lucky Lanka milk processing PLC – An introduction

Lucky Lanka began its journey in 1991 as a self-employment by Mr.Lal Keerthi Gunawardana.
The business which started with the delivery of 100 cups of milk and a single cow, today has
been developed to a national level engage with thousands of milk farmers and millions of
customers contributing hundreds of employment opportunities to the country.

With the expansion over the years the company was incorporated as a limited liability company
in the year of 2007 and currently operates as a national level enterprise in a wider scale. Lucky
delivers a wide range of milk products comprises of Vanilla, Strawberry, Chocolate, Treacle,
fruit jelly, Fresh Fruit yoghurt, Curd, Pasteurized Milk, Sterilized Milk, UTH milk, Flavored
Milk, fruit drink bottles and Drinking yoghurt.

Being rewarded with SLS, ISO certifications and HACCP international standards were some of
the milestones of Lucky Lanka journey in heading towards a healthy nation.

Vision
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“We are stepping towards the World of Prosperity with Lucky” 

Mission
"Vision 2020 Global Lucky"

Source: (http://www.luckylanka.lk)

1.3 PESTLE
Political: Government needs Sri Lanka to be 50% self-sufficient in milk consumption by this
year. The guaranteed price given by the government to dairy farmers is insufficient.

Economic: Milk mostly imported for consumption in Sri Lanka. Demand is on an increasing
trend and potential to increase with higher spending power. The per capita consumption of milk
in Sri Lanka is only 40Litres whereas it is over 150Litres in developed nations like the Europe.

Social: Rural economy is based on agriculture. The company gives importance to CSR activities
such as conducting awareness programs for farmers to upgrade their knowledge in cattle farming
and training programs for retail dealers on how to improve and manage their businesses in
today’s competitive business environment.

Technological: Quality milk is mostly based on Good purification methods. Lucky Lanka has
sophisticated technology in which they have invested heavily and will continue to explore further
with technological advancement.

Legal: Has proper quality standard certifications such as SLS, ISO and HACCP and all legal
registrations with respective authorities. It is also a public quoted company, listed on the Diri
savi board of the Colombo Stock exchange.

Environmental: Handles disposal of waste as per quality standards and also promotes good
hygiene. Has had no environmental issue with the general public or environmental authorities.

1.4 Strengths, Weaknesses, Opportunities and Threats

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Strengths Weaknesses
 Easy decision making since the  Low market penetration due to
company is family owned. geographical restrictions and
 Fast growing in recent years in terms of inadequate supply
volume and market share.  Low product varieties. Only produces
 Yogurt is the strong hold of the Yoghurt, Curd and drinking milk,
Company.  Dependency on individual farmers for
 Local patriotic company supply
 The company is able to supply fresh  Bureaucratic management structure
milk products since it is produced with the features of nepotism. Siblings
locally and quick delivery period from of the founder comprise the board.
the farmer to the consumer.  Cannot be sold to industries in bulk
 Government tax on imported milk because of the easily rotting nature of
 Government subsidies and low taxes. the product.
 Inconsistent regulation of the industry.
 Inadequate education on animal health
among dairy farmers. So the cattle and
the milk both are prone to deceases.
Opportunities Threats
 The country is not self-sufficient in  Easy entrance of new players to the
milk. Imports comprise over 70% of the market. Even the government will
milk market. So there is a severe encourage new players to enter the
shortage in the supply from local market due to the shortage of local
sources. supply.
 Neighboring market India has huge  Price is mostly determined by the
potential since its population is importers since they control around
unaware of Yoghurt. 70% supply of the dairy market.
 Government backing to the dairy  Major players’ brand recognition
industry. They also announced compared to Lucky Lanka’s. The first
intentions to increase local supply by factor people take into consideration

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taxing imported milk.
 Consumers are always open to new
flavors in yoghurt and milk.
 The Star hotel industry does not
currently actively serve yoghurt as a
desert option. So there is a considerable
market available there.
 Yoghurt is a healthy and cheaper desert
alternative for the general public.
 Cheese and Butter products have not
yet been explored by the company.
Table1; SWOT
Master of Business Administration
when buying a dairy product is the
brand. Lucky Lanka is way behind
other competitors like Anchor,
Highland and Ambewela.
 Health risk associated with the milk.
Although pasteurization revolutionized
the milk industry, still concerns of
spreading deceases through milk has
not faded away due to the evolutionary
features of viruses. Even the cow can
be exposed to many viruses which
could miss the eye of the farmer.

2. The Competition
2.1 Introduction
The fresh milk industry consists of many players and lucky Lanka competes in an oligopolistic
competition market. Most of the milk requirement in Sri Lanka is imported since Sri Lanka
produces only about 30% of its requirement and is not self-sufficient. So the presence of foreign
brands like Fonterra is felt in the country significantly. Although they stated as importers of
powdered milk, they have expanded later in local production of fresh milk too. Due to their large
market share in the country, the smaller players take their prices as the benchmark prices for
products. The government, understanding the importance of fresh milk goodness and the
capability to local produce, has been backing the local farmers and encouraging local
entrepreneurs to venture into the fresh milk business by even subsidizing loans. The market
shares of these players are not revealed even by the players due to the high competitive nature of
the business, but we understand that Fonterra, Rich Life, Kotmale and Highland have captured
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most of the market share. The smaller players, like Lucky Lanka which has 2% of the market
share, run the business mostly as a family owned enterprise.

2.2 Competitor Value propositions

The competitors Value Proposition statements
Pelwatte Dairies Wholesome goodness of milk from our own meadows located around
Buttala directly to you. Pelwatte Diary Industries Ltd is one of the
leading dairy companies
Kotmale Dairies Diverse product portfolio of `Kotmale` serves the Sri Lankan
consumers dairy needs. It maintains topmost quality, with techniques
and practices which have been fine-tuned and sharpened over many
years of experience.
Rich Life dairies We are well poised to meet any research and development challenge
in dairy and fruit products with our manufacturing capacities
CIC dairies Supplier of healthy tasty nutrition to the nation
Highland Our products are natural, high nutrition and very fresh. This guarantee
is given to our valuable customers. 
Ambewela Giving consumers a wide variety of milk and other dairy products

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such as Cheese and Yoghurt, which will be manufactured to the
highest international standards. 
Royal Dairies We use milk to manufacture various kinds of products such as yogurt,
milk packets, gee and etc. Our main objective is to fulfill our
consumers taste and healthy life.
Rasoda Dairies We use milk to manufacture various kinds of products such as yogurt ,
milk packets, gee and etc. Our main objective is to fulfill our
consumers taste and healthy life.
Lily Dairies Dairy farm situated in Giriulla of North Western Province of Sri
Lanka which is the only village base farm cheese production unit
catering to nitch market in Sri Lanka. 
Ruwansiri dairies Believe that milk should taste just like milk- pure and simple. Since,
we assure and supply “Fresh milk every day” to our consumers.   
Chello Dairies Give the consumer superior taste with best quality at an affordable
price
Fonterra Brands Ensure we’re always producing the highest quality dairy products. 
Anchor
Table 2; Value proposition of competitors
(Source: Respective company websites)
2.1 Positioning map of competition

Customer reach

High

Quality

Low High

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Low

CIC Dairies
Pelawatte Dairies
Kotmale dairies
Ambewela Dairies
Highland
Lucky lanka
Fonterra
Rich Life Dairies

Figure1; Positioning map of major players

3. The Consumer needs

Whether it is for health or flavor, people have been consuming milk for centuries now. Often
referred to as mankind’s first probiotic, they are once again beginning to respect and appreciate
dairy considering the numerous health benefits that they get from it and strongly maintains that
position in peoples’ insets. Consumed in the right way milk can be healthy regardless of some
negative perceptions. Health experts state that the best milk to consume is that which is produced
from cows who are fed more grass than grain. This milk has fat that is very healthy to be
consumed, as most health issues are caused by sugar and not fat.

While pasteurized milk has many benefits which have been proved, the best tasting is the fresh,
minimally processed milk. Many mothers today, prefer milk that is taken from cows who
consume fresh and pure grass. Industrially produced milk is less common because of the usage of
antibiotics and corn and soybeans which are produced with pesticides and herbicides. Fresh milk
helps to remove long expiry period, low quality dairy from the industry. Fresh milk is best as the
only thing that needs to be done is to package it and sell it. Consumers prefer minimally

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processed, non-homogenized, 100% grass fed dairy. It will be a wise choice for the dairy
industry to follow the lead of these consumers.

Consumers also prefer variety of taste. The younger generation is taste experimental and would
prefer a variety of flavors in the products. The older generation is more concerned about the
purity of the dairy products as their risk tolerance when it comes to health is relatively much
lower to the younger generation. Value additions like more vitamins and healthier bacteria
content would help this cause.

Some of the obstacles of fresh milk include the high cost of small operations and the short shelf
life of fresh dairy. Overcoming these limitations will lead to the dairy industry being able to
provide healthy and better tasting milk to customers.

4. Marketing objectives
 Improve brand recognition
o The key for market growth is brand awareness and recognition. The consumer’s
first preference for purchasing is a reliable brand. The company has to seriously
consider and invest extensively in this aspect for sustainable growth.

 Increase market penetration to Suburbs

o Currently Lucky Lanka caters to the main cities only with the delivery campaign
of “Gedarata Kiri”. This concept should reach a wider coverage by penetrating
other dense cities and suburbs as well.
 Increase variety in flavors
o Although the company is trying to create innovative flavors in the yoghurt
market, they can extend these varieties to other products as well. E.g. Flavored
milk and curd.
 Increase drinking milk penetration
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o The drinking milk market is much larger than the yoghurt market. The company
has to penetrate more into this segment with more packed ready to drink milk
with variety of flavors and packaging such as tetra packs and plastic bottles.
 Improve farmer faithfulness for supply
o In order to provide consumers with all of the above mentioned variety of
products, the company has to have a solid supply chain. Therefore improvement
of relationship with the dairy farmers is very essential.
 Increase market share to 5%
o Although this is a tough task, it is reachable in the next 2 years if most of the
above targets are fulfilled.
 Grow top line by 30% YOY for the next 2 years
o Wider market penetration and increase in variety of products should increase the
business size of the company considerably.
 Increase bottom line 5% and 10% respectively for the next 2 years
o Although top line is targeted to grow at 30% YOY, the bottom line would not
increase in proportion due to the high capital investments and set up costs during
the next 2 years. However, the profitability would be higher after 2 years of
implementation.

5. STP
5.1 Segmenting
Geographical segmentation: a very potential and easily accessible market is the main cities in
Sri Lanka. The company can venture into untapped locations or even locations where Lucky
Lanka has not explored yet. The company can venture into these areas through agents or
distributors, hence is a B to B market.

The company can expand their “Gedarata Kiri” concept by widening their catering segment to
high dense cities and suburbs. These have to be upscale communities. This is a B to C market.

Physiographical Segmentation: Milk can be sold to the young generation as a lifestyle product
and can be marketed as an alternative quench for thirst since it is much healthier than fizzy

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drinks. The youth are the biggest potential consumers of this product. Yoghurt can be marketed
to small children and elders as a health product like the “Chundy bundy” campaign of Fonterra.

Demographic Segmentation: The products can be made available in Star hotels. Consumers
rarely see yoghurt as a desert option in the hotels. So the company has the potential to tap this
market in a effective way, which is a B to B market. They can also improve sales in apartment
schemes and apartments through their “Gedarata Kiri” concept, which is a B to C market.

Behavioral segmentation: The Company can supply to Elders’ homes and school canteens due
to the healthy nature of these products and can be promoted as an essential food for digestive
hygiene. Fresh milk products can be promoted and sold at sports events not only as a healthy
thirst quench, but also as a form of essential nutrients.

5.2 Targeting
 Main cities through agents, outlets and supermarkets.
o The company can increase the products’ availability and reachability to the
consumer by making available at all leading supermarket chains like Keells
Super, Arpico, Cargills and Laugfs supermarkets.
 Delivery in high dense areas such as housing schemes and apartments through “Gedarata
kiri”
o Lucky Lanka should further develop their revolutionary delivery concept of
“Gedarata Kiri” by increasing delivery within the suburbs of the main cities they
currently operate. This is the household segment to which they can expand to.
 Export to India with product awareness campaigns.
o Yoghurt supply to the Indian market has enormous potential. Even a marginal
market share of 0.1% could be higher than the entire consumption in Sri Lanka.
This could be a costly segment to venture into since the Indian population is till
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unaware of the quality and goodness of Yoghurt. This can be achieved through a
B to B approach by partnering with an Indian company for brand recognition.

5.3 Positioning
“Best quality milk at your doorstep”

Be the most affordable and best quality dairy supplier with easy access anywhere in the country.
Have the “Gedarata kiri” concept enhanced further, with all dairy related products available at all
main supermarkets and shops.

6. Marketing Issues / restrictions

The key restrictions and marketing issues that Lucky Lanka could face are

 Limited supply of dairy farmers in the country

 Distribution is expensive if done through own channels
 The products has to be kept in the right temperature for it to be fresh
 The product has a short expiry period
 Distributors might ask the company to accept returns if they couldn’t sell within expiry
period.
 Spread of a disease in cows could affect demand for flavored dairy products.
 Limited distribution mediums
 Agents and grocery owners would ask for higher credit period initially.
 Packaging has to be of superior quality for the product to be fresh.
 Initial sales will mostly depend on brand awareness.
 Brand awareness is an expensive investment and could take years to ripe returns.
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7. Marketing mix – 4Ps for 2 years

Year 1 Year 2
Product Venture more into ready-to-drink Continue to innovate new flavors to
milk. drinking milk.
Try for new flavors in Yoghurt, milk Try out other milk based products like
and curd. Cheese and butter by testing out into
the market.
Price No major change in price is required Create new pricing formula for the new
as the current pricing is competing products and Indian market due to the
effectively with competitors’ prices. high advertising cost required.
Offer complimentary products to the
grocery owners.
Place Make the products available in all Continue venturing into the suburbs
leading supermarkets and prominent through agents.
groceries in all major cities. Make the products available to other
Open further sales outlets as per their leading populated cities through
current concept of café structure. supermarkets and grocery shops.
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Export to India through agents.
Promotion Extensive below the line and moderate Increase above the line advertising
above the line advertising is required through funds generated during the
to reach the “Lucky Lanka” name previous year since this is a crucial
among the masses. aspect for stability and growth of
Conduct awareness campaigns in market share.
India. Conduct awareness campaigns in
Conduct educational programs on schools and public areas on the health
hygiene to the farmers. benefits of dairy products as against
other alternatives.
BTL advertising in India.
Table 3; Marketing mix

8. Execution plan and Budget

2015 2016E 2017E
Revenue 962,911,905 1,203,639,88 1,504,549,855
4
Cost of sales (594,662,553) (683,861,935) (793,279,844)
Gross profit 368,249,352 519,777,949 711,270,011
Other operating income 2,891,388 3,035,954 3,127,032
Administrative expenses (118,877,267) (128,387,448) (141,226,193)
Selling and distribution expenses (231,613,118) (289,516,397) (361,895,496)
Results from operating activities 20,650,354 104,910,058 211,275,354
Finance costs (46,468,337) (56,691,371) (68,029,645)
Finance income 670,874 670,874 670,874
Profit/(Loss) before taxation (25,147,108) 48,619,561 143,916,583
Tax expense (7,593,501) (7,897,241) 8,686,965
Profit/(Loss) for the Year ( 32,740,609) 40,722,320 135,229,618
Comprehensive income / (Expenses)
Actuarial gain /(loss) ( 85,287) - -
Income tax on other comprehensive income 3 ,583 - -
Comprehensive income for the year, net of (81,704)
tax
Total comprehensive income for the year, (32,822,314) 40,722,320 135,229,618
net of tax
Table 4; Forecast for 2 years

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Notes:

 Revenue – With the expected increase in distribution channels within the country in the
1st year and Indian market entry during the 2nd year, the revenue is forecasted to grow
steadily at 25% YOY
 Cost of sales – The cost of sales is expected to keep low again top line growth at 15% and
16% YOY during the next 2 years respectively thanks to the good rapport being built
with the suppliers.
 Other operating Income is expected to grow at a modest level of 5% and 3% respectively
since the company has to give full attention to its core business of milk product sales.
 Administration expenses are forecasted to grow at 8% during the 2016 and 10% during
2017 since more concentration will be put towards selling and distribution and the
company has to be tighter on excessive administrative spending.
 Selling and Distribution is the key during these two transformation years. The below
costs have been taken into consideration:
o Promotional Goods
o Research and development
o Labeling
o Distribution mediums
o ATL advertising – Commercials
o BTL advertising in India – Handouts
 Thus Selling and distribution expenses are estimated to grow at 25% YOY for the each of
the next 2 years.

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 Finance costs - More delivery vehicles and higher working capital requirements have
been taken into consideration in order to increase delivery channels and increase
distributors who might ask for credit. Therefore, the Finance costs are budgeted to
increase by 22% and 20% respectively for 2016 and 2017.
 Tax expense is budgeted to increase by 4% and 10% respectively for the next 2 years
with the growth in profits. This has been kept at low levels due to government subsidies
and low tax periods.

8.1 Risk evaluation

A survey of potential and current consumers should identify challenges the market faces that the
products needs to give immediate attention.

Agents and other businesses may require more time to convert into paying customers, causing a
cash flow problem if the company estimates higher sales than they actually do

 People need to recognize and trust your brand, and that process is time consuming. If the
marketing plan overestimates the effect of your brand or believes your brand is more relevant
than it presently is, the plan likely does not account for the extra time or marketing and
promotional efforts needed to build value and trust with distributors and consumers.

Develop a technique for identifying and assessing trends. Include a schedule for carefully
reviewing your competitors to uncover any new pricing strategies, new products and services or
shifts in their marketing positioning. The company also needs to look at trends in technology,
such as new automation processes. Consumer preferences may also change, especially in the
quality and taste of dairy products.

The plan also needs to include methods for accessing and continuously reviewing the success of
your marketing strategies.

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9. Conclusion
Lucky Lanka is operating in a very competitive market which is currently under-supplying for
the current demand in the country, keeping in mind that Sri Lanka’s per capita consumption is
only 40 Liters annually where it is over 150 Liters in developed countries. The company has an
added advantage comparative to its competitors since it is a pure local product. The company
which is specialized in Yoghurt has not yet fully realized the potential of fresh liquid milk.
Lucky Lanka can easily supply fresh milk where the processing cost is comparatively lesser to
yoghurt. The growth potential of the industry is enormous. Sri Lanka being very low in per
capita consumption of milk and good awareness about yoghurt by the masses helps this cause.
Sri Lanka has a major obligation of making the country self-sufficient in milk, but foreign
players play a crucial role in this oligopolistic market by even controlling prices and influencing
governments. The only challenge to the company is to reach its quality product among the
masses and to venture into drinking milk and other differentiated products. Sales and distribution
is the key to achieve this. With a market share of only 2% currently, Lucky Lanka can easily
spread throughout its untapped markets just by increasing distribution channels and good supply
to compliment same. With right working capital management and efficient distribution coupled
with a strong supply base, Lucky Lanka could easily be a prominent player in the dairy industry.

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10. References

Unknown. (2015). Overview of the company- Lucky Lanka. Available:

http://www.luckylanka.lk/company-overview. Last accessed 26th Feb 2016.

Ministry of Livestock & Rural Community Development. (2012). Milk Collection, Production

and Milk Powder Imports . Available: http://livestock.gov.lk/site/en/statistics. Last accessed
24th Feb 2016.

Prof. Ranawana, S. (2008). Dairy Industry in Sri Lanka: Problems and Prospects. Economic
Review: Aug. / Sep. 2008. 1 (1), p1-5.

Ranaweera, N.F.C. (2007). Sri Lanka: Opportunities for dairy sector growth. Sri Lanka:
Opportunities for dairy sector growth. 1 (1), p93-177.

Nanayakkara, P. (2013). Liquid Milk: On the path to self-sufficiency. Available:

http://www.businesstoday.lk/cover_page.php?issue=262. Last accessed 23rd Feb 2016.

Arunajith, U. (2014). Until the cows come home. Available:

http://www.sundaytimes.lk/140216/business-times/until-the-cows-come-home-85436.html.
Last accessed 22nd Feb 2016.

Merchant Bank of Sri Lanka PLC (2014). Lucky Lanka Milk Processing Co. Ltd. Initial Public
Offering. Colombo: Unknown. p1-137.

LUCKY LANKA MILK PROCESSING COMPANY PLC (2015). 2014-2015 ANNUAL REPORT &
ACCOUNTS. Colombo: LUCKY LANKA MILK PROCESSING COMPANY PLC. p1-52.

Armstrong, G and Kotler, P (2015). Marketing - An Introduction. 12th ed. England: Pearson

Education. p1-665.

Kotler, P Armstrong, G Agnihotri, Y.P, Haque, E.U (2010). Principles of marketing, A south

Asian perspective. 13th ed. India: Pearson Education. p1-617.

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