LETTER OF TRANSMITTAL
2nd March, 2016 Mr. Tajuddin Ahmed Full Time Faculty Member, North South University Subject: Submission ―Situational Analysis Analysis of Food and Beverage Industry of Bangladesh‖
Dear Sir, Upon submission of this report on Situational Analysis on Food and Beverage Industry of Bangladesh, we would like to thank you for the guidance and support you have provided us
during the preparation of the report. Without your help it would have impossible for us to complete the report. Your generosity and liberality aid us to go further with this report without any hazardous situation. We have tried our best to put careful effort for the preparation of this report and hope that our endeavor will serve the purpose. We have collected most relevant information to make the report as analytical and reliable as possible. The practical knowledge and experience gathered preparing the report will surely help us in our future futu re professional life. It would be really grateful if you enlighten us your thoughts and views regarding the report. Thank you again for your support and guidance. Yours sincerely Sadia Afrin Md. Risalat Rahman Tamanna Tahsina Nishat Anjum Najiba Nuren Khan
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Executive Summary The global food and beverage retail industry has witnessed significant growth over the last five years and is expected to continue its growth momentum, reaching approximately US $5,776 billion in 2017 with a CAGR of 5%over the next five years. As per studies, macroeconomic factors such as burgeoning GDP, increasing consumer spending and changing lifestyle, taste, and preferences are expected to drive the industry over the forecast period. Although inflation, supply chain management, and quality control of products are some of the challenges being faced by the industry, rising demand for high quality food retailing services due to higher income levels is likely to drive the Food and Beverage market. The overarching theme dominating the food and beverage industry is exploding global demand and rapidly rising food prices. The breakneck economic growth of countries such as China, India, Brazil and Vietnam gives billions of people the ability indulge in ways previously enjoyed only by those tho se in developed nations. A massive massi ve influx i nflux of consumers onto the global food market has resulted in a rapid and sustained increase in food prices, stoking global inflation. Although some members of the food and beverage industry (primarily farmers and agribusinesses) benefit from higher prices, most corporations in the industry have seen their cost of doing business increase, biting into profit margins. Bangladesh‘s food and beverage industry is facing huge changes while going through
growth phase. The food and beverages industry is all companies involved in processing raw food materials, packaging, and distributing them. This includes fresh, prepared foods as well as packaged foods, and alcoholic and nonalcoholic beverages. Any product meant for human consumption, aside from pharmaceuticals, passes through this industry. The Food and Beverage industry is fragmented. The production in this industry is divided among a few different companies, however, no single firm has large enough share of the market to be able to influence the industry's direction or price levels.
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Table of Contents Industry Background ................................................................................. 1 PESTLE Analysis – Food Industry ......................................................... 10 PESTLE Analysis – Beverage Industry .................................................. 21 Porter‘s 5 Forces Model – Food Industry ............................................... 29 Porter‘s 5 Forces Model – Beverage Industry ........................................ 35
Life Cycle Analysis – Food Industry ...................................................... 41 Life Cycle Analysis – Beverage Industry ............................................... 42 Recommendations ................................................................................... 44 Development Plan ................................................................................... 47 Human Resource Requirement & Plan ................................................... 49 Conclusion ............................................................................................... 54
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Situational Analysis of Food & Beverage Industry of Bangladesh
Industry Background F ood ood I ndustr ndustr y of B anglades angladesh The food processing industry in Bangladesh represents one of the major potential sectors within the industrial segments in terms of contribution to value addition and employment. The sector accounts for over 22% of all manufacturing production and employs about 20% of labor forces. All food processing enterprises account for 2% of the national GDP. The food processing sector includes processing of cereals, pulses & oilseeds, bakery and confectionary, fruits and vegetables, dairy, carbonated beverages and non‐carbonated fruit juices, drinks, other beverage and various other food items. Status of Exports of Food and Snacks Products
Bangladesh Food and Snacks has now 370 members who are engaged in manufacturing, processing and exporting the products of this emerging sector. The export trend is shown in Table 01 of attached documents. Now about 90 items of agro‐ processed processed products are being exported to 70 countries throughout the world. Major export markets of agro‐ processed processed products are Asia, Middle East and Africa. Major exported items are pickle, drinks, juice, spices, rice, tea, party snacks (chanachur), nuts, mustard oil, chips, biscuits, rose water, candy, puffed rice, potato flakes etc.
GDP i mpact mpact There is a huge opportunity to expand our national GDP through export diversification of different agro‐ processed processed products produ cts like:
i.
Export maize/corn to Egypt and Nigeria as the soil of our country is suitable for large number of quality and tasty maize production.
ii.
Export of fresh horticultural food stuff in Iran, Indonesia, Turkey
The food processing sub‐sectors such as vacuum fried fruit chips, real potato chips, spices powder, bakery products, soft drink bottling, confectionary manufacture, frozen vegetables, processed fish, grain products, meat, poultry and milk processing, tomato paste, canned
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Situational Analysis of Food & Beverage Industry of Bangladesh jackfruit and pineapple, fast food, ready to eat breakfast cereals, food additives, flavors etc have huge potential in the domestic and export markets.
Forecasting about export earnings The food processing industry is growing rapidly and opening up new opportunities in terms of investment, technology and export.
Proposed export target for FY 2013‐14
Commodities
Value in million US$
Growth consider for export target on FY2013 ‐14
Frozen food
629.77
28.68
Frozen fish
63.55
5.00
Tea
2.62
5.00
Vegetables
128.83
20.00
Cut flower and foliage
44.52
5.00
Fruits
93.56
20.00
Spices
25.12
20.00
Dry food
48.64
12.00
Others agro‐commodities
238.83
30.00
Food can fulfill one of the most important physiological needs of human being. Human beings cannot live without air for a single minute, but without food, they also cannot survive. Food provides us with the necessary nutrition for our body. Its importance is indispensable. Due to the differences in human cultures, geographic locations, environment, climate etc. food items tend to change. Some might change in terms of ingredients (soybean oil in Asia/Palm oil in other continents), some might change in terms of presentation (food spread over banana leaves in India/on ceramic plates in other places), whereas some food items may change in terms of cooking (ovens in the west, gas/wood stove in the east) and
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Situational Analysis of Food & Beverage Industry of Bangladesh eating methods (using spoons & forks in the west as opposed to using chopsticks or hand in the east). Sometimes, entirely new branch of food types are also found in some places of the world. One such type of food is Fast Food. Now a day, fast food is an important food item of the people of the world. In Bangladesh especially in Dhaka city, the habit of taking fast food is also growing day by day. Those who are living in the Dhaka city the tendency to consume fast food is more in them compared to the people living in the rural areas of Bangladesh. This habit has been changed because of the urgency of the people. As a society develops, the economic activities are also increased and, therefore, people become busier in that society. This busyness of the people discourages them to prepare food at their houses. Thus, the only alternative is to consume food that is already prepared by others and preferably light food. A number of factors are considered by the people when they select fast food. Hence, this study was designed to identify the factors related to the preferences of the consumers of fast food in Dhaka city. The prime objective of this study is to develop a consumer behavioral profile for the fast-food industry in Bangladesh by identifying the preference factors. The specific factors are as follows:
To describe the fast food industry of Dhaka city, Bangladesh.
To identify the consumer preferences of the fast food products in Dhaka city.
To identify the factors related to consumer preferences of the fast food products in Dhaka city.
The group influence regarding fast food choices.
Fast food
Fast food (also known as Quick Service Restaurant or QSR within the industry itself) is the term given to food that can be prepared and served very quickly. While any meal with low preparation time can be considered to be fast food, typically the term refers to food sold in a restaurant or store with preheated or precooked ingredients, and served to the customer in a packaged form for take-out/take-away. Outlets may be stands or kiosks, which may provide no
shelter
or
seating
or fast
food
restaurants (also
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known
as quick
service
Situational Analysis of Food & Beverage Industry of Bangladesh restaurants). Franchise operations which are part of restaurant chains have standardized foodstuffs shipped to each restaurant from central locations. The capital requirements involved in opening up a non-franchised fast food restaurant are relatively low. Restaurants with much higher sit-in ratios, where customers tend to sit and have their orders brought to them in a seemingly more upscale atmosphere may be known in some areas as fast casual restaurants. The fast food culture started in Bangladesh in the nineties and became very popular. Fast food affects a community in many aspects. It is mainly geared towards the younger end of the market and the employees of the fast paced corporate world. The preparation and service times are relatively quick in case of fast food. Fast food can be clearly distinguished from snack/confectionery items by its perishable nature. Being a part of the developing countries, Bangladesh has her fair share of this fast food action. Starting around 90‘s, the fast food culture has taken the country by storm. The
first fast food shops started their businesses in the Bailly (a name of a road) road, beside the guide house auditorium. After that, the number of fast food shops started to grow exponentially. Local entrepreneurs were leaders in pioneering the fast food industry of Bangladesh. New brands i.e. Swiss, Helvetia etc. were to name some Bangladeshi fast food shops. In early 2000, Bangladesh saw the entry of the first international brand of fast food franchise come into the country. Pizza Hut and later KFC came into the Bangladeshi market having franchise with Transcom Foods Limited. Transcom Foods Limited (TFL) started its journey in 2003 as a franchisee of Pizza Hut, the first International Chain Restaurant in Bangladesh, and went on to sign the contract to become the franchisee of Kentucky Fried Chicken (KFC) in the year 2006. Bangladesh has a rapidly growing consumer market and due to a large population base, the demand for food products is always on the rise. The market and the product range have evolved significantly over the last decade and many companies have entered the food business which was otherwise not into this level of diversification in the past. Golden Harvest sees a lot of potential in the growth of the food market. The rational consumer is inclined toward having a good product at the right price. As the price is
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Situational Analysis of Food & Beverage Industry of Bangladesh determined by the market, the right thing to do is to have a good product made available for the consumers to take the right decision. Now, what is right for the consumer could only be defined by what s/he values for the money spent? If we focus on the core elements of product marketing, the focus should first be on the product, which has to be good as this is what would drive the business at all times. Packaging plays a vital factor as that has to attract the consumer at the shelf shouting ―Buy Me‖ and not the other brands. If the product is coming
from a reputed and trusted manufacturer, it is expected that the average consumer would be eager to buy that brand more than the other available brands. Putting all the chips together, Golden Harvest has given the best efforts to launch a range of products in the Food market to get a sizable share of the pie. The DITF 2014 gives them the right launch pad to showcase their products and create awareness for the consumers. Initially, there would be two product categories with 9 product variants which will be extended to 10 product categories encompassing more than 60 product variants and about a 100 different pack sizes. Based on the leadership position in the Frozen Food market, the company feels confident that the new product range would make the same impact in the market. The company has always strived to offer the best of products under the banner of ―Golden Harvest‖ so that the brand gets established for the ―Good Quality‖ product trust and
confidence among the consumers. This will be a new beginning for the food market and the company hopes to curve a niche for them with a strong market share facilitated with product line and consumer base that is already there for the frozen food products. As they bring in each new product category into the market, the consumers would have a better choice for those products and they would have a better quality product backed by the brand equity.
Bever age I ndustry i n B angl adesh The beverage industry of Bangladesh is an old, steady yet neglected industry. For many years, the only product of the industry was Carbonated Beverage or Carbonated Soft Drink (CSD) and the number of players was limited to only a handful. Today, the industry has flourished considerably with a bunch of new enterprises and through the introduction of newer and more diverse products. The Company has strong logistic fleet and manpower to
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Situational Analysis of Food & Beverage Industry of Bangladesh ensure the distribution of its beverage product to each corner of the market place. Even the unit has its own Cargo Vessels to service the Southern part of the country where waterways is holding a major part of the land. The satellite warehouses established at different logistic locations help to facilitate keeping the sufficient stocks in the remote areas. The beverage unit works under two different managements. The production and quality control of the beverage is maintained and strictly monitored by the international Coca Cola authority headquartered at Atlanta, USA, whereas the local operations are maintained under the supervision of Beverage Unit Management Board. International Management
At the lowest level of the International Coca Cola management team is the local authorized bottler, is accountable to the Country Manager of Coca Cola Far East Limited office located in Bangladesh. The hierarchy then goes up to the Vice President of South West Asia Regional Office to the President of Coca Cola India to President of Coca Cola EURESIA Group which is directly responsible to the highest authority for the operation of Coca Cola all over the work, the President of Board of Director of Coca Cola at Atlanta, USA. Local Management for Beverage Operation
The strategies and operations of the beverage units are maintained under the control of the General Managers of corresponding divisions. The General Managers are supervised by the Chief Operating Officer of the Coca Cola Operations, who is accountable to the Board of Directors composed of The Managing Director and Deputy Managing Directors. The operation and performance of the Coca Cola operations are closely monitored by the International Coca Cola Authority through its regional stations. its beverage products, i.e. Coca Cola, Sprite, Fanta Orange and Fanta Lemon are well known for providing best value to its clients for the cost they pay for it. Only have four products in its beverage line, so clearly they are not going for Broad Differentiation. Though the competition in the industry is tense than ever, still the price set by it is in the top region, so they are not eyeing to be the Low Cost Provider either. They produce no products for any niche group or for any special price facilitated groups, thus, strategically can be classified as he Best Cost Provider.
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Situational Analysis of Food & Beverage Industry of Bangladesh From the very beginning of its beverage operation, has been the market leader by a great distance. They never felt any necessity to make collaboration with any rivals. However, since is authorized for distributing its products only in half of the regions of the country, they made a strategic alliance with the enterprise, Tabani Beverage, that distributes on the other half of the country. According to this alliance, will provide and supply Tabani Beverage with all the products they need and Tabani Beverage is only authorized to distribute those to its own territory. Due to this alliance, though lost the authority for the distributorship all over the country, they made sure to utilize their total capacity of production by producing beverage products for the whole nation. After independence the food habit of Bangladeshi people has been changed a lot. Besides our traditional food consumer of Bangladesh like to take western food alsoafter 1980s. As a result of global marketing this was not too hard for the consumers. Different foreign food companies were established in Bangladesh. Beverage industry is one of them. But more interestingly we don‘t know beverage is also our cultural f ood because beverage doesn‘t mean only carbonated drinks. Yoghurt, soup and lacchi are also beverage of our own
tradition which consumed for the last 100 years in Bangladesh. But carbonated beverage is new in Bangladesh and today our research is on carbonated beverage market in Bangladesh and consumer reaction to it. Carbonated beverage entered into our market in the later part of 1980. At that time there were only few companies in Bangladesh. But by the change of time and western culture influences it‘s become very popular in Bangladesh. By year 2000 more than 12 Beverage Company operating business in Bangladesh and most of them are foreign companies. (Bangladesh Beverage: 2006). The soft drinks market in Bangladesh consists mainly of seven companies.
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Situational Analysis of Food & Beverage Industry of Bangladesh
Of these, Pran and Mojo are the only local brands. Coca-Cola, with its three varieties, namely, the cola-flavored Coca-Cola, the clear-flavored Sprite and the orange-flavored Fanta, is the number one soft drink producer in Bangladesh, as well as all over the world. Closing in on Coke is rival Pepsi. Pepsi is one of the oldest brands in Bangladesh. Pepsi first arrived in Dhaka in 1976 with the cola-flavored Pepsi, the clear-flavored 7up, the orange-flavored Mirinda and later introduced the mango-flavored Slice.
Types of Bever age: Water
Despite the fact that most beverages, including juice, soft drinks, and carbonated drinks, have some form of water in them; water itself is often not classified as a beverage, and the word beverage has been recurrently defined as not referring to water. Essential to the survival of all organisms, water has historically been an important and life-sustaining drink to humans. Excluding fat, water composes approximately 70% of the human body by mass. It is a crucial component of metabolic processes and serves as a solvent for many bodily solutes. Health authorities have historically suggested at least eight glasses, eight fluid ounces each, of water per day (64 fluid ounces, or 1.89liters), and the British Dietetic Association recommends 1.8 litters. The United States Environmental Protection Agency has determined that the average adult actually ingests 2.0 liters per day.
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Situational Analysis of Food & Beverage Industry of Bangladesh Alcoholic Beverages
An alcoholic beverage is a drink containing ethanol, commonly known as alcohol, although in chemistry the definition of an alcohol includes many other compounds. Alcoholic beverages, such as wine, beer, and liquor have been part of human culture and development for 8,000 years. Non-alcoholic Beverages
Non-alcoholic beverages are drinks that would normally contain alcohol, such as beer and wine but are made with less than .5 percent alcohol by volume. The category includes drinks that have undergone an alcohol removal process such as non-alcoholic beers and dealcoholized wines. Soft Drinks
The name "soft drink" specifies a lack of alcohol by way of contrast to the term "hard drink" and the term "drink", the latter of which is nominally neutral but often carries connotations of alcoholic content. Beverages like colas, sparkling water, iced tea, lemonade, squash, and fruit punch are among the most common types of soft drinks, while hot chocolate, hot tea, coffee, milk, tap water, alcohol, and milkshakes do not fall into this classification. Many carbonated soft drinks are optionally available inversions sweetened with sugars or with non-caloric sweeteners. Soft Drinks Industry like other developing and developed countries is getting much popularity in Bangladesh. The number of firms operating in this industry is getting increased. The market is also increasing in a greater portion. Today, most of the people in both urban and rural areas are taking soft drinks in a large amount. Our soft drinks industry follows some innovative, strong and continuous improving production and marketing techniques. Although quality is not the prime concern of our people, they mainly prefer cost effective soft drinks. The local companies are competing with global brands on the basis of lower cost. They are capturing the urban markets by offering some innovative marketing plan and offer. In rural areas they are very strong in distribution strategy and price effectiveness.
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Situational Analysis of Food & Beverage Industry of Bangladesh Our local brands understand the psychology of our people more than the global brands. That is why they are showing much more effectiveness in this sector. Besides, local brands are using technology based production plant with mass production and order to stock basis. Skilled and lower paid manpower, and innovative marketing projects are also the factors that are associated with success of these firms acting in this industry. Soft drinks have a huge market in Bangladesh because of the huge population density derived demand. Most of the soft drinks are of global brand. The production of the soft drinks is franchise or license basis.
PESTLE Analysis – Food Industry P for Poli tical Definition
These factors take into account the political situation of a country and the world in relation to the country. Political factors are how and to what degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labor law, environmental law, trade restrictions, tariffs, and political stability. All the policies, all the taxes laws and every tariff that a government levies over a trade falls under this category of factors. Relation/Representation
The political system of Bangladesh is followed by representative democracy. Despite being a democratic country the safeguards of democracy are not being exercised properly which have negative impact on business operation. Political unrest is almost a daily occurrence in Bangladesh which hinders the daily national and international trading system of the country. Foreign firms are feared to come in Bangladesh with FDI. Bangladesh is a democratic country in name but not in action. The following biased democracy safeguards are some of the main hindrances of international business in Bangladesh, such as, individual right to
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Situational Analysis of Food & Beverage Industry of Bangladesh freedom of expression, opinion and organization are restricted, media are more or less biased to the current government, there is more or less regular election sometimes major parties avoid election, there are often face to face clashes among the leading political parties, despite being the court system is independent most of the times its functions are directed by current government, corrupted political state bureaucracy, and corrupted political police and armed force. Abbreviation
Political decisions have a great impact on Food industry in Bangladesh. Generally, consumer food industry is not that much regulated in Bangladesh and imposed taxes and other duty charges are lower than the other sectors. However, political unrest hampers transporting goods, raise price of raw materials and overall production. Due to the scarce transportation availability, firms can neither collect required raw material to produce the foods nor can distribute the produced goods. Bangladesh can hardly export any commodities because of political unrest. It has an overall impact on the whole economy. Negative political environment hampers day to day business operations at almost every aspect. Strikes hamper cross border trade between Bangladesh and India, and other nations. Such circumstances not only temporarily paralyze business operations in the food industry, but hurt a company's international image in the long run. Companies who operate across the globe cannot then supply promised products and end up losing customers abroad. Moreover, there are several laws in Bangladesh for maintaining health and safety standards. The Bangladesh Pure Food Ordinance 1959: This is an ordinance to provide better control of the manufacture and sale of food for human consumption, The Bangladesh Pure Food Rules, 1967, The Food Grain Supply (Prevention of Prejudicial activity) Ordinance, 1956, and many more. Such laws and regulations limit the activities of the industry. http://www.adb.org/countries/bangladesh/economy
E f or Economic Definition
Economic factors include all the determinants of an economy and its condition. The inflation rate, the interest rates, the monetary or fiscal policies, the foreign exchange rates that affect imports and exports, all these determine the direction in which an economy might move,
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Situational Analysis of Food & Beverage Industry of Bangladesh therefore businesses analyze this factor based on their environment so as to build strategies that fall in line with all the changes that are about to occur. Relation/Representation
The economic system of Bangladesh is characterized by mixed economy in Bangladesh certain sectors of the economy are left to private ownership and free market mechanism while other sectors have significant state ownership and government planning. Despite political agitation early in 2015 that adversely affected transport services, exports, and private investment, growth in Bangladesh held up well because of brisk domestic demand, boosted by higher worker remittances, private sector wages, and public investment. Inflation moderated in FY2015 much as forecast in ADO 2015 from 7.4% a year earlier, reflecting large public stocks of food grains, normal weather, a supportive monetary policy, and lower global food and commodity prices that a steady exchange rate allowed to passed through. Export growth was 3.3% in FY2015, down significantly from 12.1% in FY2014. Garments — accounting for about 80% of total exports — grew slowly by 4.1%, reflecting supply chains disrupted by political demonstrations in early 2015, soft demand from the European Union and the US, and a marked decline in prices for cotton, a major input cost that can affect pricing. Imports rose by 11.2%, accelerating from 8.9% growth in FY2014. Larger imports of food grains, machinery, fertilizer, and industrial raw materials helped to propel the expansion. As exports grew significantly more slower than imports, the trade deficit widened noticeably. Despite a strong recovery in remittances, the current account recorded a small deficit slightly higher than the ADO 2015 forecast. Abbreviation
The GDP growth forecast for FY2016 is revised somewhat higher still with the expectation that exports will grow with continued economic recovery in the US and the euro area, strong expansion in remittances will boost consumption demand, private and public investment will pick up as the business climate improves under a stabilizing political situation, and spending will increase under the annual development program. In such a situation, where the economy is growing, and future economic prospects look reasonably good, demand for all products, as well as food is likely to rise, and so any investment into the Bangladesh food industry at this time, is likely to be fruitful.
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Situational Analysis of Food & Beverage Industry of Bangladesh http://www.marketresearchreports.com/countries/bangladesh
S for Soci al Definition
Social factors assess the mentality of the individuals or consumers in a given market. These are also known as demographic factors. Social indicators like exchange rates, GDP and inflation are critical to management. They can tell when it is a good time to borrow. These factors help find out how an economy might react to certain changes. A major socio-cultural factor influencing businesses and business decisions is changing consumer preferences. What was popular and fashionable 20 years ago may not be popular today or 10 years down the road. Different styles and priorities can undermine long successful products and services. For example, a clothing company must constantly be aware of changing preferences when creating new products or it will quickly become outdated. Changes in demographics are also a significant factor in the business world. As populations age, for example, markets for popular music and fashions may shrink while markets for luxury goods and health products may increase. Additionally, changes in the proportion of genders and different racial, religious and ethnic groups within a society may also have a significant impact on the way a company does business. Relation/Representation
Basically, socio-cultural factors are the larger-scale forces within cultures and societies that affect the thoughts, feelings, and behaviors of individuals. In this case, this has to do with business more. So, social or socio-cultural factors are things that affect lifestyle, such as religion, family or wealth. These can change over time. Food developers need to be aware of these changes to make foods that meet the needs of consumers. Food habits have changed drastically for the last decade in Bangladesh, and people nowadays are having varieties, which makes it tough for marketers to satisfy. Normally, for breakfast, people of Bangladesh used to eat ruti and parathas, but nowadays it has changed into cereals and loafs and breads of several kinds along with milk. For lunch and dinner, we eat traditional dishes, mostly, agro-based food items. But due to having lots and lots of restaurants and dine-outs, this trend has also changed. Nowadays, we tend to eat out and order foods from food-delivery companies, like food panda, Hungrynaki,com, etc. Also, we can see many fast food chains are getting popular at Bangladesh. Wimpy was one of the first international fast-food
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Situational Analysis of Food & Beverage Industry of Bangladesh franchises established in Bangladesh. Then came Pizza Hut, A&W, KFC and all the rest. Fast food restaurants are now spread all over Dhaka, the capital city as well as many other cities in the country. There are different types of fast foods and junk foods throughout the country. These include burger, sandwich, hotdog, chicken hot, mutton chop, beaf stak, roasted chicken, chicken tikka, gril chicken, role, patties, pakora, samosa, sngara, pizza, tandoor, French fries, fuska, wonton, nodules, aloo tikki, dal puri, chaat, chole bhature, pav bhaji and dhokla. Fat and calorie content in fast food depends on cooking process. Foods which are baked, roasted or cooked in tandoor have lower fat content. Hydrogenated oil used in cooking is rich in trans fats. Trans fat content in fast food is far higher than western food. Competition between the restaurants is intense. During the month of Ramadan, Pizza Hut gives special allyou can eat offers for Iftaar which prove to be quite popular. Pizza Inn, a franchise recently introduced to Bangladesh, has started to copy this tactic. Consumers show an overall positive attitude towards these chains because of quick and efficient service, quality of food, low prices and cleanliness of environment. Consuming fast-food has become a growing trend amongst the upper class society, teenagers and adults alike. Abbreviations
Socioeconomic conditions and cultural norms of our community have been changing. Food habits of our children are also changing facing such changes. Many of children are fond of readymade outside food. Some guardians are even reluctant in changing food habits of their children. They admit readymade outside food for their babies even willingly. ‗Food that can be served ready to eat fast‘ refers to fast food. Fast foods and junk foods are often used
interchangeably. Most junk foods are fast foods as they are prepared and served fast. But not all fast foods are junk foods, especially when they are prepared with nutritious contents. Eating out in Bangladesh has drastically increased and take-home or orders from delivery companies has increased rapidly. Hyperlink: Source materials\Group C - Food and Beverage - PESTLE 01\The growing popularity of fast food in Bangladesh _ Lamisa Husain's Blog.html
T f or Technology factors Definition
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Situational Analysis of Food & Beverage Industry of Bangladesh Technological influences that have an impact on how an organization operates that are related
to
the equipment used
within
the organization's environment. Due to
increased reliance on equipment, technological factors currently exert a considerably more important effect on the success of a business than they did only a hundred and fifty years ago. This element has become a key factor for organizations in assessing and listing issues that could have a potential impact on its operations and that could be critical to its long-term future. The pace of change in technology is becoming more rapid, and often changes that impact your market come from unexpected sources. Technological factors can be broadly divided into two areas: manufacture and infrastructure. By exploiting opportunities to update or alter their production an organization can gain market share, thereby attaining a strong competitive advantage. Technological advances have also allowed organizations much greater freedom of choice when deciding how best to manage their operations. For example, knowledge-based systems have enabled management to make better and more informed decisions in real-time. The rapid growth in networking capabilities, both in terms of being more reliable and having extensive coverage internationally, has allowed organizations to streamline their workflow and eliminate operational bottlenecks. Organizations that fail to keep up with technological advances leave opportunities for a smaller producer or new entrant to enter their market and erode their leadership status.
Relation/Representation
Today is the world of technology and innovation, as the consumers are more familiar with new technology. Therefore, the fast food company has to use channels such as social media websites to attract customers. Fast food companies mostly attract a young population, so games and toys in meals are introduced to attract children and youth. The improvement and innovation in inventory system and supply chain will make the business successful in an international context. Technology touches every facet of our lives – as it always has – but with the emergence of mobile devices and cloud computing making more of an impact than ever, someone would be hard-pressed to go anywhere and not find a high-tech piece of hardware or software around. These advances have made an impact everywhere, and one of the places we‘re seeing more and more technology is in the food and restaurant industry.
Between the arrivals of mobile devices on the table, online reservations, social media, and new payment methods, technology has infiltrated the food and restaurant industry like never before. Some of the advances will serve to improve the experience — both for the industry
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Situational Analysis of Food & Beverage Industry of Bangladesh and for the patron. Yet with every new advance comes a new challenge, and with technology moving faster these challenges can seem insurmountable. It‘s how the industry deals with these advances — and the challenges that accompany them — that will determine the fate of many restaurants, regardless of what‘s on the menu. Social networking sites have played a
huge role in shaping the views of society on a myriad of issues, and they are also playing a role in shaping people‘s opinions of dining establishments. Customers can leave their
thoughts on a restaurant – good or bad – when they check-in. In fact, they can simply be in the area of the restaurant and do that. If a patron has an experience they want to share on Facebook or Twitter (again, good or bad), they can influence a lot of users with just one update. But that‘s just the tip of the iceberg. But the use of mobile devices isn‘t limited to the
serving side of things. They can be used to track inventory, regular checklists, and can go so far as to be used in a similar way we use in our own home kitchens – as a way to help out new kitchen workers get a handle on the restaurant‘s menu items.
Abbreviations
Technology has never been more intuitive than it is today, and it‘s only getting better. It
allows restaurant patrons to find restaurants, rate them, and decide where they want to spend their hard-earned money when they go out to eat. It allows restaurant owners to be more efficient and effective in the areas they feel can be streamlined by hardware and software. But if used in the wrong place and at the wrong time, it can do a restaurant great harm – as it can with any industry. With a better understanding of the technology, the industry has better chance of thriving. And in tough times, those restaurants that are on the right side of the equation have a better chance of surviving. Hyperlink http://www.businessdictionary.com/definition/technological-factors.html http://www.free-management-ebooks.com/faqst/pestle-06.htm http://thenextweb.com/insider/2012/09/22/how-technology-changing-restaurantindustry/#gref
L for L egal F actors Definition
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Situational Analysis of Food & Beverage Industry of Bangladesh Legal factors relate to new laws or directives governing how businesses behave. This can be in relation to other businesses, customers or the environment. For example, businesses are subject to many laws that can dictate and restrict their behavior. Legislative changes occur from time to time and many of them affect the business environment. For example, if a regulatory body would set up a regulation for the industries, then that law would impact all the industries and business that strife in that economy, therefore businesses also analyze the legal developments happening in their environment. The list of legal factors that should be considered includes current and impending legislation that may affect the industry in areas such as employment, competition, and health and safety. Anticipated changes in legislation in the main trading partner countries should also be investigated. Recent years have seen a significant rise in the number of regulatory bodies that have been set up to monitor organizations' observance of legislation relating to all areas of operations, including consumer protection, employee welfare, waste disposal, and how their earnings and investments will be taxed. There are also the trading restrictions, quotas, and excise duties to consider. All these factors affect the way in which an organization functions and have cost implications that need to be taken into account when formulating business strategy. Relation/Representation
Food safety became last decades very important for both governments, producers of food products and consumers as well. Food safety is considering mainly three types of hazards: (a) microbiological hazards; (b) physical hazards and (c) chemical hazards. However, most of the chemical hazards have long term health problems for the consumers of food products. Chemical products or contaminants can be of different nature e.g. residues of pesticides or other phyto-products applied during the production of crops, fruits and vegetables, antibiotics applied in the animal production, environmental contaminants such as heavy metals or dioxins. In this group the allergens are considered as well. This are mostly natural food components e.g. proteins, which are provoking an allergic reaction with sensitive persons. Problems with food safety can be very divers in Bangladesh. However, food safety must be differentiated from food quality. Food safety is the basic requirement for a food product. Consumers may not become ill from eating a food product. Food quality on the other hand, is also important as food safety. Legal quality aspects This demand comprises the composition of food, nutritive values and other relevant properties, as for example composition of bread, composition of chocolate, nutritive value of milk etc. This can impose differences in the same type of a food product
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Situational Analysis of Food & Beverage Industry of Bangladesh placed on the market by different suppliers or in different countries. Some names of products are protected and can only be applied if the composition or the region of production is respected e.g. chocolate (max. 5% of other plant fats as cacao butter), e.g. champagne (sparkling wine from a specific region in France). The application of genetically modified organisms for producing foodstuffs must be seen as a legally organized quality aspect. In food taste, odour, visual quality, texture etc are important because food is associated with a nice feeling; consumers are judging food products severe when buying them. Discolorations, abnormal proportions, abnormal visual aspect etc have influence on consumer behavior.
Abbreviations
FOOD safety has become an important topic in Bangladesh as consumers of the country have become victim due to serious adulteration in food. This element focus on the problems arises in public health due to the presence of chemical hazard in food supply chain and supports require for food industry of Bangladesh in order to supply safe food to the end consumer. From the evidence it may be sated that in Bangladesh food safety rules and regulation not enough to deal with the problem. Now, the country is in difficult situation with chemical hazard in food stuff. Bangladesh authorities should develop: (a) adequate infrastructures including laboratory services for inspector; (b) as well as public awareness in order to manage the situation. However, strengthening infrastructures should include getting adequate trained personnel and expertise as well as tough enforcement.
Hyperlinks http://pestleanalysis.com/pestle-analysis-business-environmental-analysis/ http://www.ifrj.upm.edu.my/20%20(01)%202013/7%20IFRJ%2020%20(01)%202013 %20Islam%20(356).pdf https://www.gov.uk/government/publications/exporting-to-bangladesh/doing-businessin-bangladesh-bangladesh-trade-and-export-guide
E for Envir onmental f actor s Definition
Environmental analysis is a strategic tool. It is a process to identify all the external and internal elements, which can affect the organization‘s performance. The analysis entails
assessing the level of threat or opportunity the factors might present. These evaluations are
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Situational Analysis of Food & Beverage Industry of Bangladesh later translated into the decision-making process. The analysis helps align strategies with the firm‘s environment. The environmental factors include geographical location, the climate,
weather and other such factors that are not just limited to climatic conditions. These in particular affect the agri-businesses, farming sectors etc. Businesses are greatly influenced by their environment. All the situational factors which determine day to day circumstances impact firms. So, businesses must constantly analyze the trade environment and the market.
Relation/Representation
Industrial processes emit several thousands of inorganic and organic chemicals. Due to their emission, agricultural commodities and thus also our food may become contaminated with these compounds. It would not be feasible to monitor all the possible environmental contaminants in our food. Therefore a simple and pragmatic scheme was developed, in order to select these chemicals that are considered to be of prime importance. These criteria include the following:
production volume, since probably the amount of chemicals emitted is related to the total amount produced
pattern of usage or emission, since for example highly diffuse usage or emission would affect a higher amount of commodities
possible fate in the environment, since some contaminants may accumulate in the water, the soil or other environmental compartments
likelihood of entering in the food chain mechanism of entry into the food chain Persistence in the food chain, which is a key issue because of the problem of bioaccumulation and toxicity consequently, a restricted overview of some important organic and inorganic (heavy metals, nitrate) environmental contaminants should consider. Some of them are nitrate, poly-aromatic hydrocarbons etc.
Most important Organic environment contaminant in food chain is Dioxin and dioxin-like compounds, or DLCs that are found throughout the environment, in soil, water, and air. People are exposed to these unintentional environmental contaminants primarily through the food supply, although at low levels, particularly by eating animal fat in meat, dairy products, and fish. Numerous health effects have been linked to exposure to DLCs, including skin damage, cancer, non-insulin-dependent diabetes in adults, neurological and immune system impairments in infants, and endocrine system disruption. Many of these effects were
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Situational Analysis of Food & Beverage Industry of Bangladesh identified in individuals who had high levels of exposure. However, information is limited on how low-level DLC exposure through foods, defined as occurring in everyday life, influences the development of cancer and other diseases. Dioxins on the other hand were not intentionally produced. Bangladesh needs as well to strengthened national food inspection and enforcement services. The goal of this strategy should to develop and implement risk based inspection programs, enforced by properly trained, resourced and supervised food inspectors. The action will be based upon an analysis of the current food inspection system in Bangladesh, and this will guide the direction of proposed capacity building. Enhancements in food inspection are expected to take the form of risk-based and coordinated inspection programs. This will also include revision of the organizational framework for food inspection and the introduction of standardized inspection procedures and practices. There should also include the enhancement of inspector skills through updated training materials and progress towards the development of a Food Safety Policies and Strategies as well.
Abbreviations
Prevention of food borne illness and improvements in food quality requires the development and delivery of enhanced education on how to improve food safety and quality. This component should target small-to-medium scale food business, as well as consumer education about food safety, quality, and nutrition with a special focus on rural populations. These actions will result in increased public awareness of food safety and hygiene issues and how to prevent illness, with consumers being the major target. There should also be enhanced support for consumer associations. Training activities and technical support materials should also be developed for food businesses, and assistance in the introduction of food safety management programs. The delivery of such activities should include training trainers and technical units to provide guidance on implementation of Good Manufacturing Practices (GMP), Good Hygienic Practices (GHP) and the introduction of the Hazard Analysis Critical Control Point (HACCP) System for small-to-medium sized food enterprises. Hyperlink http://www.businessdictionary.com/definition/environmental-factors.html http://www.ifrj.upm.edu.my/20%20(01)%202013/7%20IFRJ%2020%20(01)%202013 %20Islam%20(356).pdf http://pestleanalysis.com/pestle-analysis-business-environmental-analysis/
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Situational Analysis of Food & Beverage Industry of Bangladesh
PESTLE Analysis – Beverage Industry P for Poli tical Definition
These factors take into account the political situation of a country and the world in relation to the country. Political factors are how and to what degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labor law, environmental law, trade restrictions, tariffs, and political stability. All the policies, all the taxes laws and every tariff that a government levies over a trade falls under this category of factors. Relation/Representation
Political unrest is almost a daily occurrence in Bangladesh which hinders the daily national and international trading system of the country. Foreign firms are feared to come in Bangladesh with FDI. Bangladesh is a democratic country in name but not in action. Political unrest hampers transporting goods, raise price of raw materials and overall production. Due to the scarce transportation availability, firms can neither collect required raw material to produce the Beverage nor can distribute the produced goods. Moreover, there are other political factors in the form of laws and regulations, such as the following: Food and Drug Administration (FDA) Regulation
These regulations define which ingredients can and cannot be used in the product, how the product is produced, where it is produced, as well as other laws concerned with the quality and health effects of the product.
There are potential fines set by the government if companies do not meet a standard of laws regarding manufacturing, production, and distribution.
·
Waste Management Regulation
Waste from firms' manufacturing plants must be taken care of in a responsible and legal manner. If any of the waste management laws change, companies must update their processes to abide by the law.
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Situational Analysis of Food & Beverage Industry of Bangladesh Abbreviation
Firms must provide nutritional information of their product to the customer
Employees must be provided with at least the required minimum wage and discrimination is not tolerated in the workplace
All factories of the firms must abide by standards and regulations.
If any of these laws change, companies must change their operations and procedures to avoid being fined or even worse, shut down. http://www.adb.org/countries/bangladesh/economy
E f or Economic Definition
Economic factors include all the determinants of an economy and its condition. The inflation rate, the interest rates, the monetary or fiscal policies, the foreign exchange rates that affect imports and exports, all these determine the direction in which an economy might move, therefore businesses analyze this factor based on their environment so as to build strategies that fall in line with all the changes that are about to occur. Relation/Representation
The economic environment is crucial to any industry in determining strategies and methods of achieving success, and the soft drinks industry is no exception. The economic system of Bangladesh is characterized by mixed economy in Bangladesh certain sectors of the economy are left to private ownership and free market mechanism while other sectors have significant state ownership and government planning. Abbreviation
Despite political agitation early in 2015 that adversely affected transport services, exports, and private investment, growth in Bangladesh held up well because of brisk domestic demand, boosted by higher worker remittances, private sector wages, and public investment. Inflation moderated in FY2015 much as forecast in ADO 2015 from 7.4% a year earlier, reflecting large public stocks of food grains, normal weather, a supportive monetary policy,
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Situational Analysis of Food & Beverage Industry of Bangladesh and lower global food and commodity prices that a steady exchange rate allowed to passed through. Export growth was 3.3% in FY2015, down significantly from 12.1% in FY2014. Garments — accounting for about 80% of total exports — grew slowly by 4.1%, reflecting supply chains disrupted by political demonstrations in early 2015, soft demand from the European Union and the US, and a marked decline in prices for cotton, a major input cost that can affect pricing. Imports rose by 11.2%, accelerating from 8.9% growth in FY2014. Larger imports of food grains, machinery, fertilizer, and industrial raw materials helped to propel the expansion. These factors indicate that the Beverage industry in Bangladesh is growing, as the demand and consumption is increasing. Hyperlink: https://sites.google.com/site/softdrinkindustrysaranalysis/2-pest-analysis/economicfactors-1
T f or Technology factors Definition
Technological influences that have an impact on how an organization operates that are related
to
the equipment used
within
the organization's environment. Due to
increased reliance on equipment, technological factors currently exert a considerably more important effect on the success of a business than they did only a hundred and fifty years ago. This element has become a key factor for organizations in assessing and listing issues that could have a potential impact on its operations and that could be critical to its long-term future. The pace of change in technology is becoming more rapid, and often changes that impact your market come from unexpected sources. Technological factors can be broadly divided into two areas: manufacture and infrastructure. By exploiting opportunities to update or alter their production an organization can gain market share, thereby attaining a strong competitive advantage. Technological advances have also allowed organizations much greater freedom of choice when deciding how best to manage their operations. For example, knowledge-based systems have enabled management to make better and more informed decisions in real-time. The rapid growth in networking capabilities, both in terms of being more reliable and having extensive coverage internationally, has allowed organizations to streamline their workflow and eliminate operational bottlenecks. Organizations that fail to keep up with technological advances leave opportunities for a smaller producer or new entrant to enter their market and erode their leadership status. Relation/Representation
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Situational Analysis of Food & Beverage Industry of Bangladesh Automation:
New tech advancement in manufacturing and quality improvement concepts are improving bottling operations efficiency.
High product volume requires high levels of automation in manufacturing. Technological advances increase the utility of employees and capital, which increases productivity.
High costs for new technology can be an entry barrier to new competitors.
Marketing:
Technological advancement helps create new brands and product lines to meet consumer preferences.
Improved logistics help products move through distribution channels more effectively. This keeps distribution costs down while increasing sales information to consumers.
Social media provides huge growth in consumer awareness, brand value/identity, promotions, and direct-to-consumer communication.
For decades, the beverage industry of Bangladesh has been a monopolistic market with Coca Cola the only market leader. Thus, undertaking any strategic moves, offensive or defensive, was unnecessary. However, as the competition grew, being offensive or defensive through adopting new strategic moves became more and more crucial.In 1987 the Company made an aggressive move to expand the market by installing a new H&K bottling line with an installed capacity of 450 Bottles Per Minute (BPM) bottling capacity at Comilla. With this move, the Company immediately gained the market leadership position from the Pepsi which was the leader for more than 27 years. Long term planning and aggressive marketing approach rewarded the Company with the market leadership position for the brands that remains till date.It also takes defensive moves time to time by sending messages of retaliation to its rivals by occasional price cut and offering frills. Such moves have become more and more common especially during the festive seasons like Eid. Abbreviations
Every sector is bent on leveraging technology to gain better productivity. Technology has completely changed supply chain policies and supplier relationships, which have led to better
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Situational Analysis of Food & Beverage Industry of Bangladesh inventory and cost control. Technology has also led to efficient automated guest services through touchscreens and handheld ordering devices.Additional help is now possible through the convergence of mobile technology and social media, which has brought consumers closer and has made it possible for markets to understand consumer behavior and needs better. The strategic focus of food and beverage companies is now to impact beyond marketing and drive innovation through every aspect of business in order to gain competitive advantage and a healthy market share. Hyperlink: http://www.assignmentpoint.com/business/report-on-bangladesh-soft-drinkmarket.html
L for L egal F actors Definition
Legal factors relate to new laws or directives governing how businesses behave. This can be in relation to other businesses, customers or the environment. For example, businesses are subject to many laws that can dictate and restrict their behavior. Legislative changes occur from time to time and many of them affect the business environment. For example, if a regulatory body would set up a regulation for the industries, then that law would impact all the industries and business that strife in that economy, therefore businesses also analyze the legal developments happening in their environment. The list of legal factors that should be considered includes current and impending legislation that may affect the industry in areas such as employment, competition, and health and safety. Anticipated changes in legislation in the main trading partner countries should also be investigated. Recent years have seen a significant rise in the number of regulatory bodies that have been set up to monitor organizations' observance of legislation relating to all areas of operations, including consumer protection, employee welfare, waste disposal, and how their earnings and investments will be taxed. There are also the trading restrictions, quotas, and excise duties to consider. All these factors affect the way in which an organization functions and have cost implications that need to be taken into account when formulating business strategy. Relation/Representation
Food and Beverage Laws pertain to the laws of safety and distribution for the food and beverage industry. While this area of the law obviously has heavy concentration on food safety and distribution, it is also subject to laws such as the Nutrition Labeling and Education Act of 1990 (NLEA) and the Food Safety Modernization Act of 2010 (FSMA). Similarly, a
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Situational Analysis of Food & Beverage Industry of Bangladesh wide array of regulatory agencies monitors the compliance of businesses in the food and beverage industry. These include the Food and Drug Administration (FDA) Federal Trade Commission (FTC), the United States Department of Agriculture (USDA), and a myriad of state agencies. There are also wide arrays of state and local laws that have an impact on the industry. The primary areas of concern for the food and beverage industry, as pertains to the law, are product safety claims, accurate labeling and advertising, and food import regulations. Other practice areas that often cross over with food and beverage law include contract, business laws, distribution networks, agricultural laws, personal injury, international trade laws, and many others. There are many international legal issues facing the food and drink sector health & safety, food miles, price inflation, competition, fair price to producers and affordability, all contributing to the difficult economic conditions we are currently experiencing. We are also seeing new legislation and tougher regulations being implemented on the environment, packaging, branding and waste. Not only is obesity increasing but so is consumers' interest in nutritional content, animal welfare and organic ranges. Food and drink manufacturers, distributors and retailers are feeling the pressure to meet both consumer and regulatory demands whilst securing the future success of their business. Being aware of the burning issues and providing reliable and timely advice is something that our food specialists pride themselves on.
Abbreviations
Soft Drinks Industry like other developing and developed countries is getting much popularity in Bangladesh. The number of firms operating in this industry is getting increased. The market is also increasing in a greater portion. Today most of the people in both urban and rural areas are taking soft drinks in a large amount. Most of the manufacturers of the soft drinks in Bangladesh hold only the license of manufacturing the products under the brand names or franchisee. Most of the manufacturers have the production plant of concentrate and syrup and bottling plant of their own. Most of the company does not need to outsource the bottling. But most of the manufacturers outsource the Raw materials e.g. Sugar, Carbohydrate, flavor and also the Can. Food safety regulations apply to each stage of food and beverage production, from processing and manufacture to distribution.
Hyperlinks
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Situational Analysis of Food & Beverage Industry of Bangladesh http://www.hg.org/food-and-beverages-law.html http://www.eversheds.com/global/en/what/sectors/food-and-drink/index.page https://www.business.qld.gov.au/industry/food/food-and-beverage/food-beverage-regulations
E f or En vironmental factors Definition
Environmental analysis is a strategic tool. It is a process to identify all the external and internal elements, which can affect the organization‘s performance. The analysis entails
assessing the level of threat or opportunity the factors might present. These evaluations are later translated into the decision-making process. The analysis helps align strategies with the firm‘s environment. The environmental factors include geographical location, the climate,
weather and other such factors that are not just limited to climatic conditions. These in particular affect the agri-businesses, farming sectors etc. Businesses are greatly influenced by their environment. All the situational factors which determine day to day circumstances impact firms. So, businesses must constantly analyze the trade environment and the market.
Relation/Representation
Fast moving consumer goods (FMCG) are experiencing a successive growth in our country and goods like beverages are in a flourishing state. Everyday thousands and thousands pieces of beverage products are being consumed. And to meet the demand and diversified taste, local as well as foreign companies are immerging and investing in this venture. Many local companies and foreign franchises have developed an extreme competitive environment in the beverage market. The beverage market is basically a compilation of wide range of mineral products with certain attributed affixed with it. The major product categories that are the core determinants of our market are enlisted below: Carbonated Soft Drink (CSD): These ranges of products are generally called refreshing
drinks. The concept was developed many decades before by a pharmacist in United States of America. Initially it was consumed under the prescription of doctors but later as time passed the concept was refined to make it a product for general consumption any time. Water is being process with various flavors along with carbon-dioxide (CO2) to obtain a tasty flavored fizzy drink that provides refreshment. Carbon-dioxide is being used to obtain the fuzziness that provides refreshment to human body.
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Situational Analysis of Food & Beverage Industry of Bangladesh Mineral water: Natural water is being chemically treated to attain a refined form of pure
water which is healthy for human consumption. Companies establish treatment plants to produce mineral water for the consumers. Fruit Juice: Natural fruits extracts are being process with various ingredients to form a liquid
condensed juice that can be consumed within a certain period of time. Energy Drink: The main conjunction of these products is that, it provides energy to the
consumer after consumption. The drink involves mineral water along with some ingredients process with Carbon-dioxide depicting a final product that provides energy to human being. 1. Introduction. Flavored water: It is form of mineral water processed with mild flavor that gives the water a
taste a bit different from the conventional mineral water. The concept is quite new and hasn‘t
been that much popular in our country. Non-Alcoholic Malt Beverage: Malt beverage is an American term for both alcoholic and
nonalcoholic fermented beverages, in which the primary ingredient is barley, which has been allowed to sprout ("malt") slightly before it is processed. A non-alcoholic beverage brewed in this fashion is technically identical to "non-alcoholic beer." Such a beverage is prepared by removing alcohol from the finished product to make it an alcohol free drink giving a close taste of beer and also the energy. Abbreviations
Design for Environment (DFE) involves designing products from recycled material, using materials or components that can be recycled, designing a product so that it is easier to repair than discard, and minimizing unnecessary packaging. In soft drinks industry product packaging strategies and designs are totally environment friendly. They use PET bottle, glass bottle, tetra pack etc for packaging their products. All of these are recyclable. Plastic from PET bottle can be easily reused. The same glass bottle can be used several times as long as it‘s not broken. Lastly, as the tetra packs are made of papers they rotted very easily. The
global giants like COCA COLA and PEPSI mostly prioritize on conformance, aesthetics, brand name and safety. But the local producers are different. Local industries do not strongly control quality. They are actually concerned with marketing and promotional activities as well as are targeting rural market mainly, where consumers are not much quality conscious
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Situational Analysis of Food & Beverage Industry of Bangladesh rather price sensitive. Sometimes the rural consumers do not think about taste and brand. For example, Uro Cola has grabbed rural market with their competitive lower price advantage. Hyperlink http://dspace.bracu.ac.bd/bitstream/handle/10361/3082/11364023.pdf?sequence=1 http://www.academia.edu/1807854/Success_Factors_of_Soft_Drinks_Manufacturers_In_Banglad esh https://www.csbsju.edu/Documents/libraries/zeigler_paper.pdf
Porter’s 5 Forces Model – Food Industry
The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it can help a new entrant to understand both the strength of the current competitive position, and the strength of a position a new entrant is considering to move into.
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Situational Analysis of Food & Beverage Industry of Bangladesh Five Forces Analysis assumes that there are five important forces that determine competitive power in a business situation. These are: a. Bargaining Power of Supplier b. Bargaining Power of Buyer c. Competitive Rivalry d. Threat of Substitute e. Threat of New Entrant
Food industry is one of the most important and dynamic industry of a nation. It is also very competitive. The structure of food industry is continually changing and evolving as food suppliers, manufacturers, and retailers adjust to meet the needs of consumers, who are increasingly demanding a wider variety of higher quality products.Having firsthand knowledge of consumer preferences and purchase habits, food retailers are positioned to transmit this information upstream to other segments of the supply chain. In the quest to meet consumer demands for variety, affordability, safety, and quality, the food retail sector is constantly evolving and generating innovative sale formats. Porter‘s Five Forces analysis gives us an overview of the industry and tells us t he current
situation of the industry. it gives us a comprehensive idea of what makes the industry attractive and also of its current situation. In an industry that is constantly changing and evolving it is essential to be well aware of the changes and o be able to anticipate of the changes and take measures accordingly. Bargaining Power of Supplier
Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm when there are few substitutes. Powerful buyers can have significant impact on prices of goods sold in the market. The presence of powerful suppliers reduces the profit potential in an industry. Suppliers increase competition within an industry by threatening to raise prices or reduce the quality of goods and services. As a result, they reduce profitability in an industry where companies cannot recover cost increases in their own prices. The bargaining power of Suppliers in Bangladesh‘s food industry there are several factors
that can be taken under consideration. All these factors play an important role in either increasing or decreasing the bargaining power of suppliers.
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Situational Analysis of Food & Beverage Industry of Bangladesh
Number of Supplier: Logistics support is still not adequately developed in Bangladesh as a result of this, number of supplier is less compared to the growing demand of the buyers. Hence suppliers gain a bargaining power over the buyers and producers. In food industry the suppliers act as the middle man who takes the raw materials from the producers and sells it to restaurants, local kitchen markets or supermarkets, and also to food processing companies. Since there is limited number of middle man this gives them a greater power over their buyers. Apart from that they do not have to worry about substitute system that can harm their business.
Importance of Supplier: the supplier plays a vital role in this industry. Their role cannot be easily replaced or substituted by any other system or organization. This makes them irreplaceable and gives them greater power over their buyers.
Threat of forward integration: The suppliers can also pose a threat of forward integration. The suppliers can choose to not sell their products through a middle man, rather sell it by themselves. For examples, with the growth of cities and towns farmers from nearby village can sell their product directly at the local markets. Again the middleman can opt to open their own outlet and sell directly to customers rather than to local vendors.
Taking all these factors in consideration, we can say that suppliers‘ bargaining power is high in this industry. Firms willing to invest in this industry must consider this and take measures accordingly. Bargaining Power of Buyer
The bargaining power of buyers is the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes. Firms can take measures to reduce buyer power, such as implementing a loyalty program.The presence of powerful buyers reduces the profit potential in an industry. Buyers increase competition within an industry by forcing down prices, bargaining for improved quality or more services, and playing competitors against each other. The result is diminished industry profitability. Food industry of Bangladesh is extremely competitive with many competitors offering varieties of services. Since the competition is high hence the number of buyers is also high. Bargaining power of buyers of Bangladesh‘s Food industry will vary on different factors.
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Situational Analysis of Food & Beverage Industry of Bangladesh
Concentration of Buyers: The number of buyers is high compared to sellers. Sellers have very little switching costs a result buyers cannot force the sellers to lower their prices. This gives buyers have very little bargaining power over sellers.
Type of product: The types of product that sellers sell are mostly undifferentiated and standardized reducing buyers‘ switching cost. But however, as there are limited
number of buyers, switching is not always a good option. Especially in Bangladesh, forming a good relation with new supplier takes a long time and can be difficult at times. Apart from that most sellers decide on a few benchmark prices below which they will not sell their products. These factors lower the buyer‘s power significantly.
Backward Integration: buyers pose a threat of integration. If the buyers can gain access to the sellers‘ method and knowledge of supply chain system then they can cut
the suppliers and invest in producing their own raw material. This can ensure good qualiry product at a much cheaper price. It can also become one of the core competencies of the firm. For example the superstore ‗Shopno‘ decided to cut off
their middle man and get their raw materials directly from the farmers. If more stores decide to follow this method then is will become a threat for the suppliers. Considering all these, we can say that bargaining power of buyer is moderate. But in terms of restaurant business their power is high as people with different choices are willing to pay extra for customized services from restaurants.
Competitive Rivalry
Competitive Rivalry is one of Porter‘s five forces used to determine the intensity of
competition in an industry. For most industries, intensity of competitive rivalry is the major determinant of the competitiveness of the industry. Industry rivalry usually takes the form of jockeying for position using various tactics. This rivalry tends to increase in intensity when companies either feel competitive pressure or see an opportunity to improve their position. The food industry of Bangladesh is extremely competitive. There are almost over 1000 restaurants and food shop in one single area of Dhaka city that provides different type of foods. Some offer specialized foods and this sets them apart from their customers. Restaurants in different areas also target different customer sets. There are several factors that play an important role in affecting the industry rivalry
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Situational Analysis of Food & Beverage Industry of Bangladesh
Numerous Competitors: The number of competitors is extremely high in this industry. There are several restaurants that serve the same quality of dishes and also provide the same environment. So competition among them is very high to gain maximum market share. Apart from that local kitchen markets also provide the same type of products as that of a super shop. So this gives buyers more options and increases rivalry.
Industry Growth: The growth of Bangladesh‘s food industry has slowed somewhat.
Though the population is increasing and people have more buying power than before the number of competitor is also increasing. This creates a lot of pressure on the new entrants to do something different to capture more market share and pressurizes the old firms to improve their service to retain their market share. All these factors increase competition.
Low Switching Cost: Switching cost of buyer is comparatively low in this industry. as there are numerous rivals in the industry. Buyers can easily switch to a different service provider that will fulfill their needs. Food industry is also very sensitive to price. Customers are often looking for good quality product and service at a lesser price. This forces the firms to lower their price and also at the same they must come up ways to differentiate themselves from their competitors.
Taking all these factors in consideration, rivalry is very intense in this industry. Firms wanting to invest must come up with creative ideas to stand out from their rivals. Threat of Substitute The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. For example, tap water might be considered a substitute for Coke, whereas Pepsi is a competitor's similar product. Increased marketing for drinking tap water might "shrink the pie" for both Coke and Pepsi, whereas increased Pepsi advertising would likely "grow the pie" (increase consumption of all soft drinks), albeit while giving Pepsi a larger slice at Coke's expense. In case of industries, threat of substitutes occurs when companies within one industry are forced to compete with industries producing substitute products or services.Substitutes limit an industry‘s potential returns by placing a ceiling on the prices that firms within that
industry can charge to make a profit. As the price-performance alternative offered by substitutes becomes more attractive, it becomes even more difficult for those firms to make a profit. Demand for substitutes can also reduce the demand for industry products and services.
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Situational Analysis of Food & Beverage Industry of Bangladesh Substitutes can create intense competition during normal economic times, and reduce potential profit increases during positive economic times. Identifying substitutes involves searching for other products or services that can perform the same function as the industry‘s product or service. So in case of Bangladesh‘s food industry,
it is difficult to come up with another industry that can fully replace food industry. Food is the basic need of human being and therefore is irreplaceable. This makes the food industry also irreplaceable. Hence food industry cannot have any substitute and so currently there is no threat of substitute. Threat of New Entrant:
Profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry. Unless the entry of new firms can be blocked by incumbents (which in business refers to the largest company in a certain industry, for instance, in telecommunications, the traditional phone company, typically called the "incumbent operator"), the abnormal profit rate will trend towards zero (perfect competition). Barriers to entry are factors that prevent a startup from entering a particular market. Barriers to entry act as a deterrent against new competitors. They serve as a defensive mechanism that imposes a cost element to new entrants, which incumbents do not have to bear. Bangladesh‘s food industry is very dynamic with a lot of competitor. There are very few
barriers to entry in this industry. Even then the barriers are not strong enough to prevent companies from entering in the market. Companies willing to enter this market must take into consideration the following factors:
Product Differentiation: Most of the product in food market is standardized and undifferentiated. Only the form and services offered to customers makes them different but only to a limited extent. So product differentiation os not so high in this industry and as a result anyone can follow their competitor‘s strategy and with
minimum improvisation can enter the market and do well in the market. The market is also profitable and still growing so more investors are entering in the market.
Capital Requirement: The capital required to enter this market is very less. The return on investment rate is also high. New entrants can enter the market with small capital
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Situational Analysis of Food & Beverage Industry of Bangladesh and can survive in the market. Since less capital is required to enter the market this makes the market less risky in terms of monetary investment. Considering all these factors we can assume that threat of new entrants in the market is very high. However when entering this market a new entrant can expect extreme competition from other established firms and also may face a market that has slow growth.
Porter’s 5 Forces Model – Beverage
Industry
The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it can help a new entrant to understand both the strength of the current competitive position, and the strength of a position a new entrant is considering to move into. Five Force Analysis assumes that there are five
important
forces
that
determine
competitive power in a business situation. These are: a. Bargaining Power of Supplier b. Bargaining Power of Buyer c. Competitive Rivalry d. Threat of Substitute e. Threat of New Entrant
It is a very useful tool for business strategists. It is based on the observation that profit margins vary between industries, which can be explained by the structure of an industry. The Five Forces primary purpose is to determine the attractiveness of an industry. However, the analysis also provides a starting point for formulating strategy and understanding the competitive landscape in which a company operates.
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Situational Analysis of Food & Beverage Industry of Bangladesh At present Bangladesh has a very competitive market of beverage. Bangladesh has arelatively hot weather and people tend to be thirstier. So they prefer to take soft drinksmost of the time. Beverage took the market of Bangladesh in the first half of 1980. Inthat time two or three soft drinks were available in the market. But now lots of beverage found in the market. This shows that the industry is growing and still has more potential to grow. Porter‘s Five Force
will give a comprehensive idea about the overall industry, its potential to grow and also the threats that a new entrant might face in the industry. This will also help new investors to form strategies that can help them to compete in the market. Bargaining Power of Supplier
The presence of powerful suppliers reduces the profit potential in an industry. Suppliers increase competition within an industry by threatening to raise prices or reduce the quality of goods and services. As a result, they reduce profitability in an industry where companies cannot recover cost increases in their own prices. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm when there are few substitutes. Bangladesh is a developing country and so the soft drinks are getting popular in our country. More companies have started to invest in beverage industry and this is increasing the market size and also developing the industry. The suppliers of all the raw materials play a vital role in this industry. Suppliers also affect the pricing of the product to an extent. Hence it is necessary for a new entrant to know what kind of power the suppler has in this industry. The soft drinks industries in our country outsource most of the ingredients (sugar, color, can) from outside countries. However some other ingredients (carbonated water, pet bottles and labor) are locally sourced. Raw sugar is the main ingredient for beverage. This raw sugar is not produced in Bangladesh and needs to be imported from Brazil. Currently sugar importers are more in number than beverage companies. So this gives the supplier less power over beverage companies. Apart from that, other raw materials such as color, flavoring all these are available in Bangladesh and also has more supplier than buyer. Hence considering these entire factor, we can say that the bargaining power of supplier is more than that of buyer. https://www.academia.edu/1807854/Success_Factors_of_Soft_Drinks_Manufacturers_In_Ba ngladesh http://in.reuters.com/article/bangladesh-sugar-imports-idINDHA41028920091027
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Situational Analysis of Food & Beverage Industry of Bangladesh Bargaining Power of Buyer
The bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes. Firms can take measures to reduce buyer power, such as implementing a loyalty program. The buyer power is high if the buyer has many alternatives. The buyer power is low if they act independently e.g. If a large number of customers will act with each other and ask to make prices low the company will have no other choice because of large number of customers pressure. The presence of powerful buyers reduces the profit potential in an industry. Buyers increase competition within an industry by forcing down prices, bargaining for improved quality or more services, and playing competitors against each other. The result is diminished industry profitability. The beverage industry of Bangladesh is gradually growing. With the growing population the demand for beverage is increasing day by day. Rural and urban areas have equal demand for beverage. This increases the number of buyers significantly. As a new entrant a firm must know the extent of buyer‘s bargaining power. This knowledge can help firm to reduce its cost
of production to offer customer more value for money. Mass population of Bangladesh consists of middle-income to lower income group. So this makes beverage market of Bangladesh price sensitive. So companies cannot charge too high from their customers. Again if the quality of product is low then the product will not survive competition. Apart from that, switching cost is also relatively very low. Buyers can easily switch from one brand to another whenever they feel like. This gives buyer a greater power over the firms. New entrant must consider all these factors when entering in beverage industry. Also when manufacturers are buying raw materials from supplier they possess higher bargaining power because the numbers of manufacturer are less than that of raw material suppliers. All in all, buyers have greater bargaining power in beverage industry. https://www.academia.edu/1807854/Success_Factors_of_Soft_Drinks_Manufacturers_In_Ba ngladesh https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysis#Bargaining_power_of_suppli ers Competitive Rivalry
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Situational Analysis of Food & Beverage Industry of Bangladesh Industry rivalry usually takes the form of jockeying for position using various tactics (for example, price competition, advertising battles and product introductions). This rivalry tends to increase in intensity when companies either feel competitive pressure or see an opportunity to improve their position. In most industries, one company‘s competitive moves will have a noticeable impact on the competition; other companies in the industry will then retaliate to counter those efforts. Companies are mutually dependent, so the pattern of action and reaction may harm all companies and the industry. Currently there are only four major beverage companies in the soft drink and juice market. Hence there are very less number of competitor. But even then it can be difficult to do well in this industry. This is because of the presence of giants like Coca-Cola and Pepsi. These two have the majority market share. Apart from that Mojo cola has also gained popularity among the Bangladeshi people. The companies operating in this industry are mostly equally balanced so they attack and retaliate as they strive for market share. Slow growth of market is another reason that leads to competitive rivalry among firms. The only means to stay in a slowly growing market is by gaining as much market share as possible. The fixed cost of starting a new beverage company is also high so companies want so companies fill capacity, thus leading to price cutting when there is excess capacity. High storage costs push companies to decrease prices to ensure sales.Companies in this industry mostly competes mostly on cost, flexibility and quality. The major players in this industry are Coca-Cola and Pepsi.Most companies in this industryfind it difficult to compete with Pepsi and Coca-Cola. As a result cannot survive in the industry for long. https://www.marsdd.com/mars-library/industry-rivalry-and-competition-using-five-forces/ https://www.academia.edu/1807854/Success_Factors_of_Soft_Drinks_Manufacturers_In_Ba ngladesh https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysis#Threat_of_substitute_product s_or_services Threat of Substitute
Threat of substitutes occurs when companies within one industry are forced to compete with industries producing substitute products or services. Substitutes limit an industry‘s potential returns by placing a ceiling on the prices that firms within that industry can charge to make a profit. As the price-performance alternative offered by substitutes becomes more attractive, it
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Situational Analysis of Food & Beverage Industry of Bangladesh becomes even more difficult for those firms to make a profit. Demand for substitutes can also reduce the demand for industry products and services. Substitutes can create intense competition during normal economic times, and reduce potential profit increases during positive economic times. Identifying substitutes involves searching for other products or services that can perform the same function as the industry‘s product or service. Positioning an industry‘s products or services against the substitutes may take place via collective
industry actions (for example, sustained advertising by industry participants). All these factors also apply in the beverage industry of Bangladesh. In summer people want to drink something cold or something that quenches their thirst. This they can do buy purchasing soft drinks and juice. This need can also be fulfilled by water. Hence water is the main substitute product of beverages. Water processing industries pose the threat of substitution to beverage industry. Water and other beverages also operate almost at the same price level and also give people the similar quantity. This can be a threat to the beverage industry and firms operating in this industry. Presence of substitute also reduces the switching cost of buyers. If buyers find beverages are not up to the mark or are not fulfilling their needs efficiently, they can easily switch to other substitutes since they are also operating at similar price level. All these factors must be considered by new entrants when deciding to invest in beverage industry of Bangladesh. https://www.marsdd.com/mars-library/industry-competition-threat-of-substitutes-and-portersfive-forces/ https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysis#Threat_of_substitute_product s_or_services https://www.academia.edu/1807854/Success_Factors_of_Soft_Drinks_Manufacturers_In_Ba ngladesh Threat of New Entrant
Power is also affected by the ability of people trying to enter market. If it costs little in time or money to enter the market and compete effectively, if there are few economies of scale in place, or if there is little protection for key technologies, then new competitors can quickly enter your market and weaken your position. If you have strong and durable barriers to entry, then you can preserve a favorable position and take fair advantage of it.Profitable markets that yield high returns will attract new firms. This results in many new entrants, which
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Situational Analysis of Food & Beverage Industry of Bangladesh eventually will decrease profitability for all firms in the industry, unless the entry of new firms can be blocked by incumbents. To block new entrants firms already operating in the industry must come up with some barriers for new entrants. Factors involved as barriers to entry may be either innocent (for example, the dominating company‘s absolute cost advantage) or deliberate (for example, high spending on advertising by incumbents making it very expensive for new firms to enter the market). Barriers to entry act as a deterrent against new competitors. They serve as a defensive mechanism that imposes a cost element to new entrants, which incumbents do not have to bear. Startups need to understand any barriers to entry for their business and market In order to compete in the beverage industry of Bangladesh, companies must attain economies of scale. Companies like Pepsi and Coca-Cola has already attained economies of scale thereby decreasing their cost of production. Along with that they have also created a very strong distribution network over the years. Companies trying to enter this market must consider these factors. The capital required to enter this market is also high. There are significant cost involving setting up a production plant, acquiring license from government, setting up distribution netork as well as the cost or marketing their product. Creating a brand image in this market is very difficult. Brands which have been operating in the market are very powerful and has good brand image. These factors increase the cost for a new entrant and also make surviving in this market difficult. These act as entry barriers and reduce the threat of new entrant in the market. Hence, considering all factors it can be concluded that the threat of new entrant in this market is comparatively low. https://www.marsdd.com/mars-library/barriers-to-entry-factors-preventing-startups-fromentering-a-market/
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Situational Analysis of Food & Beverage Industry of Bangladesh
Life Cycle Analysis – Food Industry
Food industry is a rapidly growing sector in Bangladesh, employing a significant portion of the labor force in the country. Between 2004 and 2010, the food processing industry in Bangladesh grew at an average 7.7 percent per annum. Bangladesh Bureau of Statistics, in its 25006 Economic Census, reported that there were approximately 246 medium-sized food processing industries employing 19 percent of the industrial manufacturing workforce in Bangladesh or 8 percent of the total manufacturing labor force. The food industry employs 2.45 percent of the country's total labor force and its share in the GDP was 2.01 percent in 2010. There are also numerous small scale factories and domestic units engaged in food processing throughout the country. According to some industry analysts, the food processing sector in Bangladesh is a 4.5 billion US Dollar
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Situational Analysis of Food & Beverage Industry of Bangladesh industry. In 2010, Bangladesh exported over $700 million worth of processed food and beverages, over 60 percent of them were shrimp and fish products. Food processing in Bangladesh has traditionally been small scale, with domestic or family business using common processing knowledge for the conservation and handling of raw agricultural commodities to make them usable as food and feed. Although commercial scale food-processing, using modern technology, especially for wheat and rice milling, mustard seed crushing and very limited bread and cookie manufacturing appeared during the 1960s, the growth of this sector did not gain momentum in terms of operational scale and quality until the 1980s. Recently, the defining characteristics of the industry have been the processing of increasingly diverse products to meet the changing demands of the Bangladesh population. The major food processing sub-sectors in Bangladesh include dairy, edible oil, sugar, rice, wheat, fruit and vegetable, tea, poultry/beef, pulses and spices and fish processing industries. Induced by the vigorous growth of the diverse middle class population of Bangladesh and the growing demands for additional consumption, the food processing sector is set to witness further hefty expansion in the coming years. Source materials\Group C - Food and Beverage - PESTLE 01\Food industry in Bangladesh Wikipedia, the free encyclopedia.html
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Situational Analysis of Food & Beverage Industry of Bangladesh
Life Cycle Analysis – Beverage Industry
Bangladesh has a highly dynamic beverage industry on which all the major international players such as Coca Cola, Pepsi Cola, Euro Cola, RC Cola, Pran Cola and Mojo Cola are present, together with a series of local carbonated soft drink brands. Moreover, the country is also experiencing considerable growth in the flat soft drinks segment that includes, for example, fruit juices and mineral water. But, research has shown that People crave soft drinks because they contain two stimulants — sugar and caffeine. Also, the water in soft drinks hydrates. Soft drinks contain considerable amounts of sugar, which is a form of carbohydrate. Consumption of excess sugar releases a hormone called dopamine, which induces pleasure in the brain. Caffeine, another key ingredient, stimulates the nervous system, and helps you to stay awake or restores alertness. With its slightly bitter taste, caffeine‘s also
used to enhance the flavor of carbonated soft drinks. Carbonated beverage entered into our market in the later part of 1980. At that time there were only few companies in Bangladesh. But by the change of time and western culture influences it‘s become very popular in Bangladesh. By year 2000 more than 12 Beverage
Company operating business in Bangladesh and most of them are foreign companies. In Page 43
Situational Analysis of Food & Beverage Industry of Bangladesh Bangladesh, the beverage industry is also at the growth stage of Industry Life Cycle. Bangladesh is a developing country and the population in Bangladesh is congenial for beverage business. In Bangladesh there are more than 16,00,00,000 people here so beverage industry have a bright future. Entrepreneurs have already taken some initiative to develop in this sector. But, this sector has yet to move to maturity stage. Soft drinks industry is one of the rapidly growing industries in Bangladesh. Current market research shows a very positive curve for the growth of Bangladesh‘s beverage industry in past few years.
Source materials\Group C - Food and Beverage - PESTLE 01\Success Factors of Soft Drinks Manufacturers In Bangladesh _ Tanmoy Das - Academia.edu.html
Recommendations People of Bangladesh are nowadays currently having a drastic change in their food habits. Food industry is one of the most important and dynamic industry of a nation. It is also very competitive. The structure of food industry is continually changing and evolving as food suppliers, manufacturers, and retailers adjust to meet the needs of consumers, who are increasingly demanding a wider variety of higher quality products. Having firsthand knowledge of consumer preferences and purchase habits, food retailers are positioned to transmit this information upstream to other segments of the supply chain. In the quest to meet consumer demands for variety, affordability, safety, and quality, the food retail sector is constantly evolving and generating innovative sale formats. Major population is now working, so it is very much difficult for them to cook regularly and maintain a proper healthy diet. The need for packaged food is growing rapidly. As a result people now no longer travel to restaurants like KFC, Pizza Hut, etc. They can easily store the food at home and use whenever needed.
Food industry is a rapidly growing sector in Bangladesh, employing a significant portion of the labor force in the country. Between 2004 and 2010, the food processing industry in Bangladesh grew at an average 7.7 percent per annum. Bangladesh Bureau of Statistics, in its 25006 Economic Census, reported that there were approximately 246 medium-sized food processing industries employing 19 percent of the industrial manufacturing workforce in
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Situational Analysis of Food & Beverage Industry of Bangladesh Bangladesh or 8 percent of the total manufacturing labor force. The food industry employs 2.45 percent of the country's total labor force and its share in the GDP was 2.01 percent in 2010. There are also numerous small scale factories and domestic units engaged in food processing throughout the country. According to some industry analysts, the food processing sector in Bangladesh is a 4.5 billion US Dollar industry. In 2010, Bangladesh exported over $700 million worth of processed food and beverages, over 60 percent of them were shrimp and fish products.
Food processing in Bangladesh has traditionally been small scale, with domestic or family business using common processing knowledge for the conservation and handling of raw agricultural commodities to make them usable as food and feed. Although commercial scale food-processing, using modern technology, especially for wheat and rice milling, mustard seed crushing and very limited bread and cookie manufacturing appeared during the 1960s, the growth of this sector did not gain momentum in terms of operational scale and quality until the 1980s. Recently, the defining characteristics of the industry have been the processing of increasingly diverse products to meet the changing demands of the Bangladesh population.
The major food processing sub-sectors in Bangladesh include dairy, edible oil, sugar, rice, wheat, fruit and vegetable, tea, poultry/beef, pulses and spices and fish processing industries. Induced by the vigorous growth of the diverse middle class population of Bangladesh. In its 25006 Economic Census, reported that there were approximately 246 medium-sized food processing industries employing 19 percent of the industrial manufacturing workforce in Bangladesh or 8 percent of the total manufacturing labor force. The food industry employs 2.45 percent of the country's total labor force and its share in the GDP was 2.01 percent in 2010. There are also numerous small scale factories and domestic units engaged in food processing throughout the country. According to some industry analysts, the food processing sector in Bangladesh is a 4.5 billion US Dollar industry. In 2010, Bangladesh exported over $700 million worth of processed food and beverages, over 60 percent of them were shrimp and fish products.
Food processing in Bangladesh has traditionally been small scale, with domestic or family business using common processing knowledge for the conservation and handling of raw agricultural commodities to make them usable as food and feed. Although commercial scale Page 45
Situational Analysis of Food & Beverage Industry of Bangladesh food-processing using modern technology especially for wheat and rice milling, mustard seed crushing and very limited bread and cookie manufacturing appeared during the 1960s, the growth of this sector did not gain momentum in terms of operational scale and quality until the 1980s. Recently the defining characteristics of the industry have been the processing of increasingly diverse products to meet the changing demands of the Bangladesh population. The major food processing sub-sectors in Bangladesh include dairy, edible oil, sugar, rice, wheat, fruit and vegetable, tea, poultry/beef, pulses and spices and fish processing industries. Induced by the vigorous growth of the diverse middle class population of Bangladesh and the growing demands for additional consumption, the food processing sector is set to witness further hefty expansion in the coming years. The food processing industry in Bangladesh represents one of the major potential sectors within the industrial segments in terms of contribution to value addition and employment. The food processing Sub ‐ sectors such as vacuum fried fruit chips, real potato chips, spices powder, bakery products, soft drink bottling, confectionary manufacture, frozen vegetables, processed fish, grain products, meat, and milk processing, tomato paste, canned jackfruit and pineapple, fast food, ready to eat breakfast cereals, food additives, flavors etc have huge potential in the domestic export Markets. The industry report Pasta Market in Bangladesh to 2019 - Market Size, Development, and Forecasts offers the most up-to-date market data on the actual market situation, and future outlook for pasta in Bangladesh.
of the pasta market in Bangladesh to 2019 and identify market opportunities -entry, market expansion, and other business strategies by identifying the key market opportunities and prospects uded in this PDF format industry report.
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Situational Analysis of Food & Beverage Industry of Bangladesh
Land (4000metre square)
5,000,000,0
Building and Civil Work (3000 metre square)
4,960,502,6
Plant Machinery and Equipment:
15,000,000,0
Vehicles
50,000,00
Office Furniture and Equipments
10,535,00
Pre Operating Costs
25,634,95
Interest during Construction
17,343,90
Initial Production Costs: Raw materials and inputs
110,698,3
Utilities
16,3794
Maintenance and Repair
45,000
Labor
50000
Administration Costs
10,000
Cost of Marketing and Distribution
40,000
Advertising
2,000,000
Depreciation
30,4853
Total Investment
25,917,704,1 (26 Crores)
Development Plan *Pre operating cost includes project implementation cost such as installation, startup, commissioning, project engineering, project management etc and capitalized interest during construction.
Projected Turnover: Macaroni price per packet
65
Projected Sales Target per annum:
10000
Total Expected Net Sales in 1st Year
650000
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Situational Analysis of Food & Beverage Industry of Bangladesh Projected Fixed Costs (Depreciation, Rent, etc) Projected Variable Cost per Unit
10,30,600
20
Sales Per Unit
65
Break Even Point (Total Fixed Cost/Sales per unit-Variable cost per unit)
22902 packets of Macaroni
Year of Break Even Point: BEP/projected sales per annum
=22902/10000 =2.3 years
Payback Period:
Payback Period= Investment/CashFlow per year = 26crores/3.46 We plan to target sales in the first year to be Tk 650000. And in every year this target sales is likely to increase with increasing population, demand, popularity and other factors relating to the demand for instant macaroni. Thus, considering these factors, we expect the cash flow to increase by a rising percentage every year. In accordance to our income statement assumptions, we expect the payback period to be around 7 years. Analysis:
Successfully implementing instant Macaroni in Bangladesh Food Industry requires spending significantly on land, Machines, equipment, which consumes the largest portion of the initial capital. Furthermore, it requires incurring several other costs, which includes pre operation costs, human resource requirement costs, initial production costs, etc. Along with these costs, it is also essential to allocate enough money for advertising, marketing and distribution of the product to efficiently penetrate the market. Thus, by working out all the necessary expenses, we project the initial investment will be around 26crore. However, this instant food sector of the industry is promising enough to consider this investment. To help realize whether the business would be lucrative, we calculated the break-even point (BEP). BEP is the point at which total cost and total revenue are equal: there is no net loss or gain, and until one has "broken even." According to the projected profits and expenses, the
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Situational Analysis of Food & Beverage Industry of Bangladesh break even for instant macaroni will be achieved at 22902 units, which is fairly an achievable number within a few years, as population is increasing at a rapid pace in cities especially the capital and citizens becoming increasingly busy – young adults, couples and with the advent of nuclear families (with working parents) mean that the demand for ―ready to cook‖
convenience food is on the rise. Since the BEP is 22902 units, it indicates that at the projected target sales, it will take a little over 2 years to break even and start making profits. Thus, from the middle of 2nd year, our macaroni business is expected to start earning profits. Also, we have tried to work out the Payback period for the investment. The payback period in capital budgeting refers to the period of time required to recoup the funds expended in an investment, or to reach the break-even point. It is calculated by dividing the investment cost by annual cash flows. The instant food demand is following a rising trend, and under this context, it is likely that the annual cash flows from sales will be rising through the years of business since the first production. Thus, in accordance to our projected income statement values, the investment amount will be recouped within 7 years of inception by earning 13% on an average every year.
Human Resource Requirement & Plan Our project aims to create employment for 50 people. The establishment of such factory will
have a foreign exchange saving effect to the country by substituting the current imports. The project will also create backward linkage with the agro processing sub sector and forward linkage with the catering sector and also generate income for the Government in terms of tax revenue and payroll tax. Our estimated human resource requirement is given in the table below: Serial Number
Job Title
1 2 3 4 5 6 7 8
Plant Manager Secretary Financial Manager Accountant-clerk Cashier Salesman/Purchaser Store keeper Technical & Production Manager Quality Control Officer Production Supervisor
9 10
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Required number of persons 01 01 01 02 02 01 02 01 02 01
Situational Analysis of Food & Beverage Industry of Bangladesh 11 12 13 14 15 16 17 18
Shift Leader Mechanic Electrician Operator Production Worker Cleaner driver Guard
02 02 02 07 15 02 02 04 50
Total
Training of Employees The production supervisor, 2 quality controllers, 2 shift leaders, 2 mechanics and 2 electricians will be given 3 weeks on - the - job training on production and quality control, and equipment maintenance by an advanced technician of the equipment supplier during the construction and commissioning. In addition, 7 production operators will be given two weeks on - the - job training on operation of equipment by the in - house skilled technical personnel. Salary and Bonus
Apart from a basic salary our employees will also get bonuses. Bonus will be gives during festivals. Apart from that, bonuses will also be given out on a one-time basis to reward employees for their high performance. They might be given to either an individual employee or a group of employees. Bonuses will be awarded when an employee meets objectives set for attendance, production, sales, cost savings, quality, or performance. Benefits: This will consist of any supplement to wages and salaries. The benefits that we will
provide our employees are as follows:
Health Plans: We shall provide free medical check-ups twice a year for all our employee and their family members.
Life Insurance: Those who have worked more than 3 years. Life insurance benefit will be provided to our employees so that they can have a secure future.
Holidays or sick leaves: We shall provide sick leaves to our employees depending on the circumstances. Apart from that they will get holiday leaves for religious festivals.
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Situational Analysis of Food & Beverage Industry of Bangladesh Marketing Plan Product: The final quality of our products requires, first and foremost, the best raw materials: the best semolinas and flours, as well as the necessary wheat to produce them,
with most suitable characteristics and technical specifications. The Turkish laws oblige the production of macaroni to be done from semolina made of durum wheat. Macaroni produced of semolina has a high quality as it contains a high amount of protein. The main raw materials required for pasta production are semolina /flour and water. Semolina is one of the three different outputs of durum (extra hard) wheat obtained by milling. Water is an input used to shape the dough and then removed during drying process. The production of macaroni mainly involves mixing, kneading, extrusion, drying and packing. In preparing pasta dough, the semolina/ flour and water and in some cases egg emulsion and other ingredients are measured in a pre-determined ratio into a mixer where they are mixed into a consistency of wet sand i.e. a conglomeration of millions of tiny moist granules. The mixing is normally accomplished for 12-15 minutes and mixture is usually made to have about 30% moisture. The quantity of water depends on the drying temperature employed in the manufacturing process. In continuous press, mixing is effected under the application of vaccum. The presence of air bubbles in the pasta dough gives the product a chalky appearance and reduces its mechanical strength. At the end of mixer, the dough is received into a specially designed augur, which is mounted in tightly sealed cast housing. Here, the kneading of the dough, the feeding of the macaroniforming die with the dough and the creation of pressure required for forcing the dough through the extrusion die opening is affected. The kneading operation is necessary to give uniform texture and colour to the finished macaroni product. Most presses have kneading plate of perforated metal at the end of the screw. This breaks the dough into very small streams and recombines it to work out any inequalities in the dough and filter out chunks of dry dough and extraneous matter so that it will not plug the die. During extrusion, a considerable amount of heat is generated, for the reason of which extrusion cylinders are equipped with water-cooling jacket to dissipate heat and hold the extrusion temperature constant. For the best results, the macaroni temperature should be held between 45oC and 50oC.
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Situational Analysis of Food & Beverage Industry of Bangladesh The technology of production is simple. Machinery can easily be purchased from India. The production machinery and equipment include those required for both the spaghetti (long cut pasta) and macaroni (short cut pasta) production lines. The pneumatic feeding line equipment, utility equipment and laboratory equipment are common for both production lines of the envisaged plan. The main accessories required for the envisaged pasta-macaroni plant include set of rectangular and round dies with bronze or Teflon interchangeable inserts, microprocessor die washer, die soaking tanks and die storage shelves. The ancillary equipment are required for the thermal unit include superheated water generator with accessories, gas oil burner with accessories, automatic pressurization plants complete with loading pumps, safety devices, instruments and accessories, water softening system, pumps for superheated water distribution, electric switchboard, etc. There will be a separate room for testing and controlling the quality of our macaroni. Our Macaroni will be available in two flavours initially: 1. Insta MAC-Classic Cheese (Go CHEESY!) 2. Insta MAC-Spicy(Spiced up!)
Target Market:
The main market segment of Insta Mac is basically the kids and the working peoples of the current urban society. In more detail it also includes target markets of middle class and upper middle class. Our product will be available at different reputable departmental stores and area wise big departmental store as well. This product will make sure that people consuming it gets a proper and balanced diet and all the nutrition facts they could have had from a proper meal. Nutrition Value of Macaroni: Nutrition Facts Serving Size 1 serving (252 g) Per Serving% Daily Value* Calories 207 Calories from Fat 56
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Situational Analysis of Food & Beverage Industry of Bangladesh Total Fat 6.2g10% Saturated Fat 2.2g11% Polyunsaturated Fat 0.8g Monounsaturated Fat 1.5g Cholesterol 15mg5% Sodium 1061mg44% Potassium 211.68mg6% Carbohydrates 29g10% Dietary Fibre 1.3g5% Sugars 1.3g Protein 8.5g Vitamin A 3% · Vitamin C 0% Calcium 9% · Iron 13%
Per 2000 calorie Price:
Keeping in mind the target market, the packaging would be done in such a way that it attracts the customer. Since our product is instant macaroni, it will be available in microwave proof bowl. The price per bowl is calculated TK 65 so that it is affordable for maximum number of people. Place:
Our product will be available at different reputable departmental stores and area wise big departmental store as well. This product will make sure that people consuming it gets a proper and balanced diet and all the nutrition facts they could have had from a proper meal. Promotion: As a part of our promotional activities we can give discounts initially. We can set up booths at different departmental stores and provide sample macaroni for tasting as a part of promotion. Positive Word of Mouth is very important for our promotional
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