This case was prepared by Afsana Tazreen as part of the Center for Enterprise and Society’s Bangladesh Business

Case Study
Writing Project. Other cases and more information about the Center can be found on the Center’s website:
http://www.ulab.edu.bd/CES/home/. Afsana is a researcher at CES. Editing was done by Daniel M. Sabet.

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ENTERING A NEW INDUSTRY WITH A NEW PRODUCT

Late in 2002, key decision makers of Bangladesh’s largest agro-processing company PRAN-RFL Group
were toying with a new business idea. They knew that to remain the market leader in agro-processing,
PRAN had to continue to innovate. While other companies expanded their businesses by entering into
existing markets, PRAN’s size and vision allowed it to create entirely new markets and explore the
untapped ones. The managers knew that apart from flavored milk, there had been little innovation in
the milk market in the last decade, which was failing to provide for the changing needs of consumers. As
such, they saw an opportunity in the dairy industry. This case explores PRAN’s entry into the milk market
and how they approached the challenges in marketing a new product idea.

COMPANY BACKGROUND

PRAN, which stands for Programme for Rural Advancement Nationally, is one of the leading food and
beverage producers in Bangladesh. It was formed in 1985 by Major General (Retd) Amjad Khan
Chowdhury with a vision to create wealth by adding value to farm-produce and generate employment
and income in rural areas.1 The company has come a long way since then and has grown into one of the
biggest in the country. It also exports its products to over 82 countries of the world. PRAN produces a
wide range of products, which include beverages (e.g. fruit juice, fruit-flavored drinks, carbonated drinks,
bottled water) confectionary (e.g. instant noodles, pickles, jam, chanachur) baked goods (e.g. cakes,
crackers, biscuits) grains and spices and dairy (liquid milk, ghee, butter, yoghurt drink). The company lives
by the motto “Eat Delicious. Live Healthy,” conveying to consumers that they can enjoy what they eat
and still live a healthy life.2

THE MILK MARKET IN 2003

In 2003, Bangladesh’s dairy market was dominated by unprocessed, raw milk, which accounted for over
80 percent of the market. The branded, processed segment of the market was dominated by imported
powdered milk and locally produced liquid pasteurized milk. Although smaller, this section of the market
was highly profitable, as it was primarily oriented towards Bangladesh’s growing middle class. When
PRAN decided to enter the dairy industry, there were only two key players, which controlled 75 percent
of the processed liquid milk market (See Figure 1):

 Milk Vita was established in the late 1960s, and, as the only large-scale packaged and processed
liquid milk producer, it enjoyed a virtual monopoly. 3 In the 1990s, other players began to
emerge, and Milk Vita’s market share fell to 53 percent.

 BRAC entered the market with its Aarong brand much later in 1998. By 2003, it had a market
share of 22 percent.

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Figure 1: The processed liquid milk market (2003)

Both Milk Vita and Aarong sold pasteurized milk, which needed to be refrigerated to retain its freshness
and which most households boiled before consuming. The need to boil the milk was both a weakness
and an asset to pasteurized milk producers. On the one hand, boiling was an extra step that took time
and did not match the pace of life of a growing middle class on the go. On the other hand, Bangladeshi
consumers were used to boiling the milk and had a preference for warm milk. If PRAN could eliminate
the need to boil the milk and convince a segment of Bangladeshi consumers that this was desirable, the
company could claim a significant percentage of the market share.

INTRODUCING THE CONCEPT OF UHT MILK

Ultra High Temperature (UHT) milk, also known as “long-life milk” is a common product in grocery stores
in many developed parts of the world. The extra treatment at high temperatures enables the milk to be
stored unopened at room temperature for extended periods. In Bangladesh, however, the concept was
relatively new, and UHT milk was rare. The brands available were exclusively imported, very expensive
and targeted towards the high-end market. For example, while it was possible to buy a liter of
pasteurized milk for Tk 28, a liter of imported UHT milk typically cost around Tk 200! (See Table 1) The
managers at PRAN knew that they could produce domestic UHT milk at a fraction of the price of the
imported varieties.

Table 1: The imported milk market in 2003 and 2013

2003 2013
Price per liter Price per liter
(Tk) (Tk)

Cowhead 200 277

So Good (UHT soymilk) 220 286
Naarmann 130 180

With the UHT market wide open, they saw it as an opportunity in the waiting. Not only would the
product be attractive to the more time-conscious consumers, but it would be far more attractive to the
suppliers. UHT milk does not require refrigeration until after opening; it has much longer expiry periods,
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and it can easily be transported and stored. The managers realized that this would enable them to
expand their distribution network and penetrate the urban market located outside the capital. Table 2
provides a summary of the differences between pasteurized and UHT milk in Bangladesh.

Table 2: The differences between Pasteurized and UHT milk in Bangladesh

Pasteurized Milk: Ultra High Temperature (UHT) Milk:

 The process was created in 1864  The process was created in the 1960s

 Heated at 72 degrees C for 95 seconds  Heated at 140 degrees C for 4 seconds

 Most of the bacteria are not destroyed  Most of the bacteria are destroyed

 Needs refrigeration  Does not need refrigeration

 Needs to be boiled or heated  Can be consumed directly without being

before drinking boiled or heated

Of course, while UHT milk was more convenient for both consumers and suppliers, the managers at
PRAN knew that they faced a considerable challenge. First, habits are hard to change, and consumers
used to powdered and pasteurized milk would be hesitant to purchase this new product. Clearly, the
company would have to educate the consumers. The cost was the second major concern. Although
PRAN’s UHT milk would be far cheaper than imported UHT milk, it would still be somewhat more
expensive than the pasteurized variety. PRAN would not only have to convince the consumers that the
convenience of UHT milk made it preferable to pasteurized milk, but it would also have to convince them
that this convenience was worth paying a premium for. Third, PRAN would be taking on two powerful
and established competitors with large market share.

PRAN ENTERS THE INDUSTRY: THE MARKETING STRATEGY

Target Market: The managers at PRAN decided to target their product at the upper-middle class families
with children. They felt that they could better pitch the product among educated, health conscious
people, preferably in families where both partners were working. They thought that working women
would naturally prefer to save the time offered by UHT milk’s convenience and that their concern for
their families’ health and wellbeing would lead them to choose a product of higher quality. These
families were also the most likely to be able to pay the higher price of UHT milk. PRAN also planned to
tap into the urban market outside the capital. As UHT milk is easier to transport and store, this would
give them a strategic advantage over their competitors outside of the capital, where supply chains were
harder to maintain.

Pricing: PRAN’s competitors Aarong and Milk Vita sold their pasteurized milk at a retail price Tk 14 per
500 ml. PRAN calculated that its cost of production was Tk 11.6 per 500 ml, meaning that they could
potentially compete for price wise but at a very lower profit. On the other hand, they felt that they had
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a higher value product with a more complex production process that middle-income consumers would
be willing to pay more for. While they felt confident that they could charge this premium, they did not
want to set the price too high until they were assured of a customer base. As such, they decided on Tk
16 per 500ml as their maximum retail price (MRP) to help penetrate the market, with the option to raise
the price further down the road. In fact, by 2012, the MRP would rise to Tk 40 per 500ml while the MRP
of Milk Vita and Aarong rose to Tk 18 only.

The Brand: Many of Bangladesh’s conglomerates launch new products under new brands; however,
PRAN is a branded house, which means that the company labels all its products with the PRAN name.
This would be highly desirable in marketing UHT milk as the PRAN name was well known and trusted.
The familiarity and goodwill would be important in convincing the consumers that UHT milk was worth a
premium price. The PRAN name would also help in taking on its well-established competitors. Using the
PRAN name did come with a risk, however. If the new product was poorly received or if any of PRAN’s
other products experienced a setback, then the brand as a whole would suffer.

Packaging: The managers knew that the packaging for PRAN’s new product had to be unique so as to
stand out on the shelves. The vibrancy of the design was aimed to differentiate it from its competitors’
(see Exhibits 1 and 2 ) so that it would have an immediate point-of-sale impact both on-shelf and in-store
display units. PRAN designed its package to be distinct from its competitors. The package sported PRAN’s
characteristic red and yellow logo on a backdrop of green and blue, which represented pastures under
the open sky. The managers chose to use the image of a typical Australian black and white cow so that
consumers would relate the milk with an international high-valued product. The images would appeal to
its middle-class consumers, who were used to buying imported powdered milk from Australia and New
Zealand. The quality of the packaging was also superior to others, as it stopped UV rays, which helped to
preserve the freshness of the milk. Initially, a 500 ml pack was designed to entice trial and to encourage
repeat purchases. It was not until 2012 that the 1 liter pack was introduced in the market, once PRAN
UHT milk had comfortably settled in the market and the target market was familiarized with the
product.

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Exhibit: 1 PRAN Milk Packages

Exhibit: 2 Competitors’ Milk Packages

Advertisements: PRAN had to consider different approaches to advertising. Many advertisements are
meant to be simple and catchy. An example of this would be the “Got Milk?” campaign that was used in
the United States in the 1990s. The campaign would simply feature a cute child or a celebrity with a glass
of milk. Often the spokesperson would have a “milk mustache” or some milk on their upper lip. The
image was accompanied by the simple phrase “Got Milk?” Although this campaign had been highly
successful, PRAN reasoned that it needed a different approach. Its target consumer was more highly
educated than the general population and needed to be further “educated” about why PRAN’s UHT milk
was superior. As such, it opted for very detailed ads that would cover various aspects of the product
ranging from the nutritional value of milk, definitions of UHT and pasteurization, packaging quality and

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technical aspects of manufacturing to supply chain and corporate responsibility. The ads are shown in
Exhibit 4 and 5 discuss how PRAN brought the concept of “dairy hub” (groups of farmers) to Bangladesh,
and how it is the only dairy company which sources its milk directly from the hub. The ad goes on to say
that PRAN is exclusively responsible for training the farmers to take proper care of their cows. PRAN also
provides services, such as food, living conditions, and veterinary services to ensure the animals’ health
and wellbeing, resulting in better quality of milk. The advertisement also mentions that PRAN is the only
company which uses the “six-layer aseptic package” by Tetrapak. PRAN emphasizes that its UHT milk is
not only better than the packaged pasteurized milk, but it even surpasses the milk fresh from the cow, as
both of these require boiling that reduces the nutritional value of the milk more than PRAN’s controlled
process. As such the advertisements use the slogan, “PRAN UHT milk, and the best source of nature’s
goodness.”

Exhibit: 3

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Exhibit: 4

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Exhibit: 5

Trade customers: The launch strategy of any new product is critical. The managers at PRAN were aware
that product launching could either make or break their product. A successful launch not only has to
interest potential customers to try the product, but it needs to develop buy-in from distributors and
retailers who stock the product for consumers. To gain the support of its trade customers, PRAN
conducted one-to-one briefings with over a 100 key trade customers, including distributors and retailers.
This helped PRAN build awareness and commitment to the launch and obtain significant orders for
merchandising ahead of the launch date.

THE FINANCIAL PICTURE (2003 AND 2013)

PRAN UHT milk was launched commercially in September 2003. During that year, PRAN sold 2.87 million
liters for a total revenue of Tk 41.62 million, which gave it 6.37% of the market share and a profit of Tk
8.33 million (see Table 3). This was not a bad start for the first year of operations. Having proven that
UHT was profitable, PRAN’s competitors soon followed suit. In 2006, another competitor, Farmfresh
joined the UHT milk market while Aarong followed in December 2012.

Table 3: Financial information for PRAN UHT in 2003

Category PRAN UHT

Cost per unit (Tk) 11.6
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 Retail price of PRAN per unit (Tk) 16.0
Selling price per unit (Tk) 14.5
Volume sold (in million liters) 2.87
Total cost (Tk in millions) 33.29
Total revenue (Tk in millions) 41.62
Total profit (Tk in millions) 8.33
Market share (%) 6.37
Source: Interview with Ruhul F. Talukder (Sumon) Head of Marketing, PRAN Dairy Limited

By 2012, PRAN was producing both pasteurized and UHT milk. In total, the company was selling 26.35
million liters of milk a year, of which 12.90 million liters was UHT milk. Combined, PRAN controlled
16.35% of the total market share of processed liquid milk, placing it as third in the market (See Figure 2).

Figure 2: PRAN’s position in the processed liquid milk market (2013)

Source: PRAN. 2013. Bangladesh Processed Milk Market. Internal document: April.

Despite the new entrants to the UHT market, PRAN continued to dominate, controlling 59% of the total
UHT market share (See Figure 3).

Figure 3: PRAN’s position in the UHT milk market (2013)

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Source: PRAN. 2013. Bangladesh Processed Milk Market. Internal document: April.

CONCLUDING REMARKS:
PRAN’s UHT milk could in many ways be considered a success. The company had managed to grab a
reasonable percentage of the market share in the very first year it entered a new industry with a new
product, and it also enjoyed a profit of Tk 12.63 million. Still, the challenges were far from over.
Although it had become the leader in the UHT milk market, Milk Vita and Aarong still held 73% of the
total liquid processed milk market. As such, PRAN’s challenge for the future would be to determine how
to further increase its market share.

QUESTIONS FOR DISCUSSION

1. What are the factors a company should consider while entering a new industry with a new
product? Explain in details each of the factors you have to explore for this product which
includes:

a. Economic Factors
b. Social & Cultural Factors
c. Political & Legal Factors
d. Market Attractiveness
e. Capabilities of the Company (SWOT Analysis) [Marks=10]

2. Why did PRAN wish to venture into the dairy industry? Why did it decide to enter with UHT milk,
which was a relatively new concept for the milk consumers in Bangladesh? [Marks=05]

3. What were the advantages of UHT milk as opposed to pasteurized milk? [Marks=05]

4. What were the Strengths and Weaknesses of PRAN’s target market, pricing, branding, and
packaging strategies? Describe the Target Customer Profile and their current 4P Strategies in
details. Which Ps do you think needs to be changes and what steps would you take to change
them? Assume the project is moving from Introduction Stage to Growth Stage in the product
life cycle (PLC) and make sure to describe all the changes in details with a practical example.
[Marks=10]

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 5. Why did PRAN opt for such detailed advertisements? What are the strengths and weaknesses of
this approach? What other approaches to advertising UHT milk might PRAN have taken?
Design some Alternative Promotional Strategies explaining in details if you are using Push or
Pull Strategy and what is the justification of choosing that strategy. Also explain in details what
Promotional Budgeting Strategies would you choose for this company and explain/justify why
you choose that strategy. [Marks=10]

6. While PRAN has the largest market share of the UHT milk market, it has a much smaller
percentage of the larger milk market. What steps could PRAN take to improve its Market Share
assuming that there are new Regulatory Instructions from the Government instructing all milk
producing farms to shift from selling pasteurized mild to UHT milk? Explain in details the changes
in the 4Ps based on the new regulatory force coming into effect. [Marks=10]

Instructions:
You have to answer all the questions in details giving at least 1 example for every strategy you explain.
Use Times New Roman as your font; the font size should be 12 with 1.5 spacing. Please submit your
Project in a WORD file Saved in your Name & ID and mail it back to me by the 20 th of April. No
submissions will be accepted after the April 20 th. This is a group Project where you can have maximum 3
people in a group. Your Total Marks for the assignment is 50. Good luck to all.

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1
Thakkar, Pooja. PRAN: Pride of Bangladesh in Agro-Processing Sector. Company Reports: PRAN Food Ltd. businessreviewaustralia.com.
2
www.pranfoods.net
3
Das, SC. 2000. The Story of Milk Vita in Bangladesh. Food and Agricultural Organization.