strategic practices of the of Keells Food Product PLC

[ ] August 18, 2014

Introduction

As the global economy slowly turns itself around and begins its long-term recovery driven by

rapid growth in Asia, greater stability in the United States and the Middle East, tempered

somewhat by Europe’s continuing economy troubles. Sri Lanka today stands on the verge of

success and prosperity.

With the permanent peace to the country in May 2009, the Sri Lankan Government has

accelerated economic progress through a series of measures such as control of inflation,

Reduction of interest rates, encouragement of tourism sector……etc.

Therefore today’s business organizations should have a well-managed strategies within the

organization in order to get the maximum output from its employees as well as to increase the

efficiency and effectiveness of the day to day work activities in an economical way while reaching

the objectives of the organization. It doesn’t matter whether the organization is large scale or

small but almost all the organizations should have to achieve their best not because they have to

but to survive in the market while achieving the organization’s goals and objectives. So having

well-managed strategies are a complete and utter plus point for any organization where every

organization is looking for maximum efficiency and effectiveness.

After finishing the module “Strategic Management” I have been asked to fulfill a report as the

end semester assignment on the topic of “Analysis on Strategies used in a selected organization”.

I have chosen “Keells Food Product PLC” which is one of the leading companies in meat industry

in Sri Lanka for my assignment. As one of the leading companies in Sri Lankan market, I had the

argument of how it looks like the strategic practices in Keells Food Product PLC. So it’s one of the

best chances I’ve got to study the strategic practices in an organization where I can recommend

some other our views points as well.

So with that, I am pleased to present strategic practices of the of Keells Food Product PLC on

behalf of the Strategic Management module. By studying this report you would be able to

understand the strategies used in the Keells Food Product PLC and how effective it has

established within the Keells Food Product PLC.

Page 1HIGHER DIPLOMA IN BUSINESS MANAGEMENT

[ ] August 18, 2014

Keells Food Product PLC

John Keells Holdings PLC (JKH) specializes in the sectors of Food & Beverage, Transport, Leisure,

Information Technology, BPO, Financial Services, Property Development, Plantation and Investor

Services. JKH preserves the identity of each sector group, yet successfully bring them together as

John Keells Holdings PLC.

The Food & Beverage Sector Group is home to a portfolio of leading brands in the Beverage,

Frozen Confectionary, and Processed Meats categories which include "Elephant" carbonated soft

drinks, "Elephant House" Ice Creams, and the "Keells" and "Krest" ranges of Processed Meats. All

brands are market leaders in their respective categories and are supported by a well-established

distribution channel of almost 80,000 Outlets Island wide.

Keells Food Products PLC is presently Sri Lanka’s market leader in the processed meat industry

and enjoys a market share of approximately 70%. A subsidiary company of John Keells Holdings,

Keells Food Products PLC started its operations in the year 1983, and today takes the pride being

solely responsible in developing the Sri Lankan Processed Meats industry to its current heights.

Keells Food Products PLC have kept abreast of the industry through strategic investments in

state-of-the-art food processing technology, quality control systems, an aggressive companywide

R&D orientation and ground breaking marketing leadership in the food industry of Sri Lanka.

‘Keells’ world class Sausages, Meat Balls, Hams, Bacons, Cold meats and ‘Krest’ battered and

crumbed delicacies combine gourmet taste, nutrition and offer superior quality. The range offers

convenience to meet today’s demanding lifestyles of consumers all over the world.

Keells Food Products PLC, the first meat further processing company with SLS product

certification, ISO9001:2000 and HACCP certification, today it serves local markets, super markets,

hospitality industries as well as certain markets in India, United Arab Emirates & Maldives.

Mission of the company“To be the largest provider of value added meat, fish and vegetable products in Sri Lanka while

establishing regional brand presence and catering to international markets with Asian

communities, environmental friendly technology.’

Vision of the company


[ ] August 18, 2014

“Our passion is to deliver pleasure and nutrition throughout peoples lives, through exciting and

superior products, whenever and wherever they choose to eat and drink”

Objectives

Specific Objectives

To be familiarized with the safe and hygienic production procedures from raw materials

to finished products at Keells Food Products PLC.

To be familiarized with the quality assurance practices and laboratory testing those are

applied for raw and finished products.

General Objectives

To familiarized with the general working procedure and basic manufacturing practices

and to obtain practical experiences and knowledge on quality assurance, research and

development and other functional and operational aspects of the meat processing plant.

To develop personal skills such as problem solving ability, interpersonal skills, leadership,

ability to work as a team to achieve targets, that are demanded by the current

organization atmosphere.

To identify the strengths and limitations the plant as well as to point suggestions for the

improvement of the factory.

Distribution and marketing of Keells products

Keells and Krest companies produce wide range of processed meat and battered and crumbed

products respectively. Raw materials are received from local as well as international suppliers and

then those are sending to processing section after quality inspection. Finished products are sent

to finely cold storage after giving assurance for quality. From Finely cold stores, products are

distributed to local markets, hotels and super markets as well as international markets. Product

complaints are come back to the factory in an opposite way to product flow. Customer complaint

sheets are distributed to shop keepers and they collect complaint. Monthly evaluations and

remedial actions are under taken by the department of quality assurance.


[ ] August 18, 2014

SWOT analysis of Keells Food Products Plc

1. Strengths

High Quality Conscious

Keels products are the only processed meats in Sri Lanka that conform to the SLS (Sri

Lanka Standards) certification, whilst the processes that are carried out are aligned to

incorporate ISO 22000 standards. Moreover at an organizational level our entire

operations conform to ISO 9000 standards. Also Keells Food Products is having food

quality standards, such as ISO 9001 certificate, HACCP certificate for food safety

management tool and SLS certificates.

High technology

Having Modern Technology and qualifies works throughout the process and upgraded

machineries and equipment. They incorporates some of the most modern semi-

automated machinery conforming to international standards for hygiene and safety,

such as sausage linking machine (to automate the portioning and hanging process, at

high speed) peeler machine, slicer machine and a thermoform packaging machine in

their Keells range factory.

Having the best Laboratory among in asia and Modern storage facilities.

Keels hold a high web technology which is speed, quick download, easy navigation bars,

customer friendly and corporate colour for their web strategies

2. Weakness

High Staff Turnover

High staff turnover can hurt Keells ability to compete, because replacing valuable staff is

expenses

Weak R&D

Weak R&D can slow Keells growth as competitors out-innovate Keells.


[ ] August 18, 2014

3. Opportunities

Online Market

The online market offers Keells the ability to greatly expand their business. Keells can

market to a much wider audience for relatively little expense. "Online Market" will have

a long-term positive impact on the entity, which adds to its value.

Innovation

Greater innovation can help Keells to produce unique products and services that meet

customer’s needs.

New Services

New services help Keells to better meet their customer’s needs. These services can

expand Keells business and diversify their customer base.

New Products

New products can help Keells to expand their business and diversity their customer

base.

4. Threats

French fries, which accounts for a small segment of sales in the Krest Range faced stiff

competition from cheaper variants introduced into the market by their competitors. However

due to stock pressure and distribution strengths the product grew rapidly adding 36% growth. It

is believed further marketing support and changes in the marketing mix will further grow this

category.


[ ] August 18, 2014

Porter’s five forces of Keels Food products Plc

1. Threat of New Entrance

The threat of new entrants is very low in the food and beverages industry. The industry is very

mature and it has successfully reached economies of scale. In order to compete in this industry a

retailer must be able to achieve economies of scale.

Supply side of keels: high economics of scale, because high volume of own production, thus it

will reduce the cost per unit as they can spread fixed cost over more units, employ more

efficient technology, or command better stipulations from suppliers. So these deter entry by

forcing the hopefuling entrant either to come into the industry on a large scale or to accept a

cost disadvantage.

Demand side: discourage the entry by limiting the willingness of customers to buy from a

newcomer and by reducing the price the newcomer can command until it builds up a large base

of customers.

Another barrier to entry is that it takes an incredible amount of capital requirements

technological cost. It takes an extreme amount of capital not only to be able to manufacture and

sell the products but also to keep up with the research and development that is necessary for

the innovation requirements. High initial investment will be required for building or renting new

stores, manufacturing plants, storages, and also to extend customer credit, build inventories,

and fund start-up losses. Thus the barrier is particularly great if the capital is required for

unrecoverable and therefore harder to finance expenditures, such as advertising or research and

development. Access to distribution channels is another high barrier to entry. A company must

find a retailer to sell their products or have their own retails.

Finally, strong brand loyalty of customers also contributes to entry barriers. But as switching cost

for buyers are low, the threat of new entrants could be characterized as moderate.

2. Bargaining Power of Suppliers

The bargaining power of suppliers is very low in this industry. There are so many suppliers to

keels, they have wide range of different suppliers, thus can easily switch to another supplier if it

is necessary. Suppliers are business partners of keels, so that the bargaining power of them is

relatively low; however, suppliers will protect them through reasonable pricing.


[ ] August 18, 2014

Though the local supply of chicken and meat could not meet the demand last year. Even though

agreement with key suppliers, keels faced shortages during the year. They were import the

shortfall from their foreign suppliers from Europe and Australia.

3. Bargaining Power of Buyer

The group of keel’s buyers is formed by individual customers, Pizza Hut, McDonalds and Hotels.

The bargaining power of the buyers is moderately high. There is a high volume of buyers and

large retailers dominate in the food and beverages market. The buyers also are a significant

portion of the industries revenue. If they cannot keep their buyers happy then they risk losing

them to their competitors. The buyers have low switching cost if they are not happy. The reasons

why the power is not completely high is that the buyers do have the ability to integrate

backwards into the industry.

4. Threat of substitutes

There are many Products for product substitute in the industry and the buyer’s cost of switching

to the substitute is low. The threat of product to product substitutes is high thus, its affect

profitability of the company. So that they should keep distance itself from substitutes through

product performance, marketing etc. It also effects the growth of the company and the bonanza

of industry that they reap in good times. Some of the substitutes are bakeries, non-carbonated

substitutes for beverages such as juices, milk, fruit drinks, and coffee and tea are maintaining a

strong foothold in the market. And the entry of low cost sausages and in some instances

unbranded sausages sold in loose form, poses a challenge to the industry in maintaining the

integrity of the products.

5. Intensity of Rivalry among Competitive

Rivalry among the competitors is very strong in this industry. The major competitors are so

closely balanced that it increases the rivalry. In order to gain market share in the food and

beverage must gain market share by taking it from their competitors. One of the other reasons

for high rivalry is lack of differentiation opportunities. Competitors make similar products for

example sausages, ice cream etc. The competitors are compared to one another constantly, their

price, quality, packing, and in many other aspects. Also competition among the market

competitors, including price, price discounting, new product introductions, advertising wars,

promotions etc. are very high. Thus, it limits the profitability of the company.


[ ] August 18, 2014


[ ] August 18, 2014

Competitive Strategy of Keells Food Products Plc

For a company to be successful it must be competition oriented. A good competition strategy

should focus on the weaknesses of the competitor but avoiding the strengths. The company

then launches attacks against the weak points of the competitor. This would enable one

company to gain a competitive advantage against the other companies. Differentiation, focused

differentiation, best cost provider and low cost leadership are some strategies put forward. Such

strategies can be adopted by a company to gain favor in the market. For example Keells Food

Products Plc and Gills Food Products (Pvt) Ltd, two similar companies competing for the same

market can employ these strategies to outdo each other.

Differentiation is a strategy where a company produces goods that are different from those

offered by other companies. Keells Food Products Plc for instance may decide to produce

products different from those of Gills Food Products (Pvt) Ltd by simple modification of the

ingredients and by launching innovative products. Keells Food Products Plc can increase the

quality of its products and therefore can charge slightly higher prices. This would make it stand

a high chance of winning the consumer’s confidence. The high premium charged covers the

additional cost of production.

Under Differentiation Strategy,

New Product innovations

Keells Food Products PLC (KFP) sustained its market leadership position in the processed foods

category through a range of marketing strategies aimed at strengthening its market share, whilst

connecting more closely with the consumer. The Company has been driving innovation and high

brand recall in an effort to enhance the consumption of our products. Based on a combination of

consumer feedback and R&D efforts, we are constantly formulating new products that fulfill the

expectations of our consumers. Modern lifestyles have created a huge demand for healthy

convenience foods and the Keells power snack was created to fill this need, as it offers a filling

and nutritious snack with adequate protein. Keells product range boasts some unique

innovations that excite buyers and remain in line with evolving consumer trends.’ Their

innovation map is a vibrant source of charting new directions for their products and inspires the

Research and Development team to use the insights to create products that truly delight

customers.


[ ] August 18, 2014

Technology superiority

Having Modern Technology and qualifies works throughout the process and upgraded

machineries and equipment. They incorporates some of the most modern semi-automated

machinery conforming to international standards for hygiene and safety, such as sausage linking

machine (to automate the portioning and hanging process, at high speed) peeler machine, slicer

machine and a thermoform packaging machine in their keells range factory.

Product quality and reliability

Recognizing that consistent quality plays a pivotal role in retaining consumer loyalty towards our

products, Keells remain committed to deliver this promise vis-à-vis strategic investments in

technology. By augmenting capabilities at both our manufacturing plants in Ja-ela and Pannala,

they aspire to become the pinnacle of manufacturing excellence.

Their state-of-the-art manufacturing technology has been instrumental in revolutionizing the

industry and transforming accepted norms and practices. As they strive to uphold the tenets of

their customer promise, they remain fully compliant with all applicable regulatory standards for

quality. Their overriding emphasis on quality and food safety has encouraged them to secure SLS

quality systems certification along with ISO 9001 certification for quality management standards

and ISO 22000 for Food Safety Standards.

With customer health and safety being of paramount importance to Keells, they have structured

all their systems and processes to optimize process efficiency at every level of the operation and

ensure customer health and safety is not compromised at any stage of the product life cycle. The

process is further supported by regular system audits that ensure all processes maintain

optimum performance standards, with prompt remedial actions being initiated to rectify

irregularities and system malfunctions.

Comprehensive customer service

Keells’s passion is to deliver excellence stems the belief that the only sure way forward is to

become a truly consumer-centric organization that is sensitive to the needs of its customers.

Resonating throughout the organization and reflected in all aspects of the business, is KFP’s

commitment to build a truly communicative, customer-centric culture. In place are a series of

highly focused consumer initiatives that help them, not only to gain an insight into customer

perceptions, but also to table the customer receptivity to their product range at varying stage of

the product lifecycle. Supported by a number of outdoor promotional initiatives, Keells

continued their close associations with customers across the country.


[ ] August 18, 2014

Recommendations

Keels Food products Plc must deliver products with more nutritional value because

consumers more focused on quality, including nutritional content. Keels Food products

Plc has to reformulate some of their products to increase nutritional value or eliminate

undesirable ingredients. Doing this while maintaining existing product attributes for

flavor and price can lead the organization to gain competitive advantage.

Keels Food products Plc must create more formula agility. Ingredients like beef, chicken

and even potatoes have inconsistent quality and chemical makeup, so KFP have to adjust

formulation to maintain consistency in their final products. Consumers and retailers have

higher expectations for product quality, availability, and price performance. The

responsibility on the Keels Food products Plc has to be creating formulas that better

mitigate the issues of ingredient variability and availability based on seasonality and

unpredicted disruptions. Formulas also have to address the need for products to

maintain their nutrition and taste over a longer shelf life.

Keels Food products Plc must continually drive down costs. With the upward trends of

food commodity, production, and distribution costs and the downward pressure on

pricing from retailers, KFP can turn to formulation to produce greater efficiency and

lower costs.

Keels Food products Plc must get a necessary action to minimize environment impact.

Keels Food products Plc have to hire more skilled labors.


[ ] August 18, 2014

Conclusion

The business environment today makes it imperative for food manufacturing companies to

continually improve their responsiveness to the dictates of consumers, retailers, government

regulators, shareholders, and suppliers. I believe there is a compelling case for food

manufacturing companies to implement a differentiation strategy that optimizes the process for

creating new formulas and the quality of every formula. According to my view point that is the

case Keells Food Product Plc has choose differentiation as their competitive strategy.

Differentiation has helped Keells Food Product Plc.to:

Deliver new products to market faster.

Better respond to changing consumer demands, meeting or exceeding taste and

ingredient requirements.

Lower production costs.

Easily meet all food safety and other regulatory requirements.


[ ] August 18, 2014

References

Books

Keels Annual Report 2013-2014, Food products Plc

Keels Annual Report 2012-2013,Food products Plc

Keels Annual Report 2011-2012,Food products Plc

Web addresses

http://www.keellsfoods.com/

http://gillslanka.com/


http://www.keellsfoods.com/

Business

strategic practices of the of Keells Food Product PLC