Milk Powder

Topics: Milk, Dairy product, Dairy products Pages: 2 (319 words) Published: June 25, 2011
Nestle/Milkpack case

Target market:
Major urban centers
Modern housewives for convenience and quality
Lower-income consumers

Raw milk (fresh from the cow)
Milk powder (convenience)

Strategic options:
Produce milk powder to smooth seasonal mismatch.
Competitor of UHT milk.
NIDO (Nestle) 24% market share.
NIDO highest prices.
Find foreign venture partner?
Want to produce milk powder, infant formula, butter oil and butter. Technical difficulties for Greenfield.

Why joint venture?
Highest market share in milk powder, can provide technology and reputable brand name. Already brand recognition in Pakistan, thus familiar with market.

High royalties to established brand.
Large multinational venture might dominate Milkpak.

Pro’s Nestle
Base in dairy products.
Started out with infant formula.
Plants in 60 countries, already business in Pakistan.
Looking to fulfill long-term goals.
Want decentralization, give JV own identity and responsibility. This was can better adapt to foreign market. Provide R&D and technical assistance to subs.
Growing interest in Pakistan market.
Informal channel of communication.

Con’s Nestle
Want majority ownership in JV and want royalties.

How to make cons pros?
Majority ownership Nestle means that MP bears the least risk. Because MP has technical difficulties in setting up a Greenfield MP needs Nestle and Nestle needs royalties for its technology. But this is one of the few requirements. The JV will get its own management and gets a lot of responsibility. This makes it easier to adapt to the Pakistan market. This is also the trust Nestle puts in MP, since Nestle will bear most of the risk due to the majority ownership. Nestle also has the highest market share for milk powder, which can be used to gain a good reputation.

In short
Nestle bears risk, puts MP in charge of the subsidiary, gives technological and R&D support, which is what MP is looking for, but needs...
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