Abrar Hasan

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National Foods A Success StoryA Pakistans
Case Study
Presented by Abrar Hasan Chief Executive March
2, 2007
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Fact Sheet
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National Foods - Facts

• 37 years of innovation
• Rs. 3 billion in sales
• 300 product SKUs
• 6 manufacturing units (Karachi, Bin Qasim,
  Lahore)
• Central Warehousing (Lahore, Gujranwala, Multan,
  Islamabad)
• Rs. 1 million to the economy everyday in shape of
  taxes
• 350 towns covered across Pakistan
• 1500 employees
• Annualized Growth Rate of 23 for the last 35
  years

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Our Footprint
30 countries around world
409 distributors
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Return on Capital Employed
6
Earnings Per Share
7
Sales
8
Product Categories
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Our History
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Philosophy
Purpose National Foods must focus on Customers
needs and serve them with Quality Products at
affordable prices at their doorsteps.

• Founders Philosophy
• National Foods must focus on customers needs
  and serve
• them with quality products at affordable
  prices at their
• doorsteps.
• Our products must be pure and conform to
  international
• standards.
• Our research must continuously produce new
• adventurous products scientifically tested,
  hygienically
• produced in safe and attractive packaging.
• We must create environment in our offices and
  factories
• where talents are groomed and have opportunity
  to
• advance in their careers.
• We must prove to be recognized as good corporate
• citizens, support good causes-charity and bear
  fair share
• of taxes.
• Reserves must be built, new factories created,
  sound
• profits made and fair dividend paid to our
  stock holders
• through building a reliable brand.
• National Foods Ltd. must get itself recognized
  as leader

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Core Values

• Passion
• We act with intense positive energy and are not
  afraid of taking risks. We challenge ourselves
  continuously and have pride for what we do and
  are good at it.
• Customer Focus
• We see the world through the eyes of our
  customers. We do everything possible that makes
  them happy.
• People Centric
• We put our people first. Treat them with respect
  and actively contribute towards their
  development.
• Teamwork
• Our roles are defined, not our responsibilities.
  We believe in going the extra mile to accomplish
  our goals. We coach and support each other
  ensuring everyone wins. We have a WE versus I
  mindset.

• Leadership
• We are a part of the solutionnever the problem.
  We act like owners and have a positive influence
  on others.
• Ethics
• We dont run our business at the cost of human or
  ethical values.
• Excellence in Execution
• We saywe do we deliver. We talk with our
  actions. We strive for nothing but the best.
  Execution is the key to winning!
• Accountability
• We see, we act. We take full responsibility for
  our actions and results. We dont blame others
  for our mistakes we analyze them and correct
  them.

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Humble Beginnings
Dinar Chambers
This is where it all began
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Present Infrastructure
S.I.T.E
Port Qasim
National Foods as it stands today
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Milestones
Evolution
1970
1978
1982
1985
1986
1988
1989
1990
Plain Spices
Basic Recipes
Ingredients
Iodized Salt
Table Salt
Pickles Health Food
Recipes Snacks
1993
1997
1998
1999
2002
2005
2006
2000
Raj Masala
Ronaq
Vermicelli
Ketchup
Custards Rivaaj
Squeezy
Jams Jellies Chinese Range
Moving towards House of Brands Strategy
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Brand Promise
Convenience
Purity
Hygiene
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Challenges

• Brand Positioning
• Quality, Hygiene and Purity
• Commodity to Value Addition
• Concept of packaged commodities under the
  National Brand- The Big Idea
• Trade Resistance
• Biggest Competition
• Lesser Margins as against loose
• Convincing consumers for convenience
• Price Gap
• Perceived Quality gt Perceived Price
• Free From Impurities
• Commonly available, the distribution challenge

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Decades of Performance

• The Big Idea
• Changing consumer mindset
• Competing with the loose
• The fight to survive

1970-80

• The move towards value addition -Salt Recipes
• Public Limited company
• International alliances

1980-90

• UNICEF Alliance
• Diversification of product range
• ISO Certification
• Separate SBU for Export- Raj Masala
• Move to professionalism

1990-00

• JCR VIS
• Launch of Ronaq and Squeezy
• Automation
• Port Qasim

2000-07
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Success Through Management Excellence
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Management Excellence

• Financial Planning
• Product Development
• Branding
• Marketing and Selling
• Operations

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FINANCIALS The Focal Point
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FINANCIALS The Center Point

• The whole business plan is designed around
  financial parameters
• Sustainable Growth Model A practical approach
  to achieving top-line growth and bottom-line
  results. It looks at how much growth an entity
  can generate by maintaining the same financial
  relationships as the year before.
• Growth Rate Return on Equity (Base year) X
  Retention Ratio

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Sustainable Growth Rate
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FINANCIALS The Center Point

• Maintaining Financial Discipline Is The Key
  ..which is achieved through optimizing
• Equity Growth
• Minimum target is 30 per annum
• Cash flows
• Through sustainable growth model achieve self
  sufficiency through own cash generation from
  operations
• Bottom Line
• Minimum EBIT KPIs
• .. and through minute analysis of
• CBM / CAM (Contribution Before / After Marketing
  Investment) for each Division Region
  Product Category and even SKU Customer

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FINANCIALS The Center Point

• Balanced approach for all automation and
  expansion projects maintaining sustainable debt /
  equity ratio
• Controlled utilization of available external
  financial resources for working capital
  requirements
• Optimum return on investment (ROI) model
• Efficient financial planning
• Maximum utilization of export credits
• LIBOR based financing with exchange risk
  hedging
• Online collection system
• Above average credit rating of A by JCR VIS

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FINANCIALS The Center Point

• Better tax planning yet contributing over Rs.350
  million / annum to the government treasury
• Cost controlling through responsibility
  accounting via .Proper accounting of cost at
  various cost centers and their timely
  reporting

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Product Development
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Product Development

• RD
• State-of-the-art facilities (HPLC, FTIR)
• All our products conform to US FDA, CFIA, Canada,
  EU and AQIS standards
• Formal Procedures
• Global Sourcing and Alliances
• Certified Vendor Program
• UNICEF
• Oriental Merchants
• Cerebos Foods

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Effective Supply Chain Management
Manufacturer
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Branding
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Branding

• Moving gradually towards
• House of Brands since 2000
• National
• Rivaaj
• Ronaq
• Raj
• Squeezy

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Branding

• Marketing and Selling
• Building the finest Selling and distribution
  network
• Retail coverage of more than 80,000 outlets
• Coverage of 350 towns across Pakistan
• Direct Reach up to 50 of Pakistan
• Clear and focused marketing message
• More focus on functional benefits and fitting the
  brand into consumers lifestyle
• Not afraid to experiment
• Rivaaj
• Innovation of ideas
• First company to introduce packaged spices
• Squeezy
• Iodized Salt

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Marketing Research

• Research Methods
• CLTs (Central Location Testing) and HUTs (Home
  Usage Testing)
• Culinary Experts and Consumers are on Product
  Development Panel
• Brand Health Trackers
• Brand awareness
• Advertisement Awareness
• Top of mind recall
• Consumer Panel
• Category Maps
• Market and segment penetration
• Shares
• Volume and tonnage consumption
• Pre Post Launch Ad Testing
• AdWiser (Certified Software of AC Nielsen)
• Post Launch Evaluation
• Learn from Mistakes

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Brand Building Activities

• Brand building Activities
• 360 degree communication
• TV advertising
• Brand Activation
• In Store Promotions
• Merchandising Drive

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Operations
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Operations Quality Assurance
ISO 9001 Certified
Good Manufacturing Practices
HACCP Certified
Microbial Testing Capability
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Operations Human Resources

• People Philosophy
• Getting the right people
• Competitive pay systems
• Reward mechanism
• Empowerment
• Training and Development
• Internal Programs
• Cross functional exposure
• Skill Development

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Operations Human Resources

• Performance Management
• Goals strategically aligned from functional to
  individual level
• Regular quarterly reviews of business KPIs
• Celebrating success
• Organizational Development
• Benchmarking best practices
• Restructuring and realignment of business
  processes
• Consultants to source know-how

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Operations IT Infrastructure
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Operations Information System
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Corporate Social Responsibility
Mission The primary objective of our social
initiative is to improve the quality of life in
Pakistan by eradicating illiteracy throughout
Pakistan.

• Adult Literacy
• Womens Education
• Nutrition Awareness

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Key Performance Indicators

• RD
• No of New Product Introductions
• Product and Process Improvement Index
• Procurement
• Out of Stock Index
• Material Sourcing Quality Index
• Supply Chain
• Warehouse Utilization
• Freight Monitoring Cost/Ton

• Financials
• EPS
• ROE
• GP by Category
• Net Profit
• Same Category Sales Growth
• Cash flow Generation
• Equity Growth

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Key Performance Indicators

• Production
• Tonnage per man-hour
• Wastages
• Factory Operating Expense / Ton
• Equipment Efficiency
• QA Operational Compliance

• Marketing Sales
• Zonal Profitability
• Retail Audit
• Brand Image Tracker
• UA Study

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Corporate Governance

• Designing of internal operational and financial
  polices
• Regular external audits by A.F.Fergusons (PWC)
• Independent compliance testing through outsourced
  internal audit function to Ford Rhodes Sidat
  Hyder (EY)
• Quarterly reporting to audit committee

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Key to Success

• Be Brand Oriented
• Think only in branded terms
• Only way to create value
• Invest in know how first then technology
• Technology would naturally become indigenous
• Do things right the first time, you dont get A
  second chance

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Futurist Vision

• Emerging Scenario
• Free Trade
• Global Village
• Emphasis on Lifestyle enhancing products
• Convenience the major key
• Opportunities
• South East Asia (SAARC)
• Major Growth Segment
• Pakistan
• India
• Africa and CAS
• Next wave of growth

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Our Vision
To be a Rs. 50 billion food company by the year
2020 in the convenience food segment by
launching products and services in the domestic
and international markets that enhance lifestyle
and create value for our customers through
management excellence at all levels.