Porters 5 Forces for Del Monte India

Company name: Field Fresh Pvt. Ltd. (Del Monte Foods) SBU: Processed foods & beverages Strategic group: Nestle (Maggi), HUL (Kissan), Dabur (Real) Industry Analysis: A. Bargaining Power of Suppliers-Low Switching costs- low Differentiation of inputs- low Threat of forward integration- high Supplier concentration- low The Porter’s “Five Forces” framework for packaged food & beverage industry analysis Bargaining Power of Buyers- Low Buyer concentration: less Buyer Volume: low Switching cost: low Brand identity: strong Ability to backward integrate: less Threat of Potential Substitutes-

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High Price performance differentiation: low Switching cost: low Buyer propensity to substitute: high Threat of New Entrants- Medium Brand Identity: strong Switching costs: low Access to distribution: tough Proprietary product differences: low Capital requirements: High Access to necessary inputs: Tough Industry competitors Degree of Rivalry- High Industry is expected to grow at CAGR of 9% Brand identity: Strong Switching costs: low Product differences: low Diversity of Competitors: high B. Key Success Factors: a) Distribution-related KSFs: A large network of distributors Efficient and responsive supply chain Efficient usage of Retailer shelf space as Display Trustworthy relationship with retailers b) Marketing-related KSFs: Top of the mind brand recall Motivated Sales team trained in having good product knowledge Point of Sale advertising Special offers and bulk buy deals for retailers Attractive and strong product packaging c) Other types of KSFs: High product quality standards in norm with food standards and guidelines Product innovation capabilities with respect to new product launch and time to market C. Industry’s Dominant Features: Market size and growth rate Number of rivals: In certain product categories, such as, ketchup and sauces, the industry is dominated by a few large companies with national presence but overall it is fragmented into many small and regional companies. Number of buyers: Market demand is fragmented among several buyers across the country and hence buyers do not enjoy much of bargaining power Degree of product differentiation: Product of other companies is less differentiated leading to heightened price competition. Product Innovation: Development of new and differentiated products is important D. Industry Driving Forces: Booming modern retail Increasing globalisation of industry leading to several foreign companies foraying into India Changes in consumer behaviour marked by increased health consciousness and adoption of urban and outgoing lifestyle Burgeoning middle class with increased purchasing power SWOT StrengthReputed and trusted International BrandEntry in India with Bharti, a well-known brandHuge investment potentialHigh quality of products| Weakness Presently sales volume is too low, so difficult to retain distributors, and get new ones. Products are not available in sachets and tetra packs (lower priced), hence people put off.

There are packaging issues with juices (Metal Cans)High credit period handicaps distributors. | OpportunityImmense market potential in India Increasing Income level of peoplePeople are slowly developing taste of canned juices which is good for companyPeople are liking the taste of company’s ketchup with its unique flavorsVery less competition for few products like fruit cock tail, fruit slices etc| ThreatWith more and more players entering into market, the competition has made it a price war with very low margins. Distributor confidence is very low as the products do not move as fast as competitors.

Due to high credit period given to retailers, Distributor money is blocked causing them to lose interest and thus motivation to promote products on their own| Building Competitive Advantage: Resource-based view The company derives its competitive advantage from the valuable resources it has. The biggest resource that the Co is leveraging is the global product range and brand identity of Del Monte and the backing of Indian partner Bharti Enterprises further add to the credibility of the Brand in India which differentiates it from its competitors. 1. Threat to Sustainability Imitation- Local importers are importing foreign products in the same space and climbing the peak that has started flattening because of heightened competition. Substitution- Several companies which are hitherto in contract manufacturing are forward integrating and displacing the company’s business model of importing Del Monte products and marketing in India. Private labels of retailer are yet another threat to sustainability. Hold-up- Tremendous amount of added value created is lost to retailers and the distributors as the Brand Del Monte is newly launched in India and it doesn’t enjoy much of bargaining power.

The company has to give special offers to both the distributors and the retailers to stock the company’s products which eat into the value created. Slack- Lack of performance-based pay leaves the company’s sales men less motivated to maximize the sales. Secondly, frequent defects in the product packaging leads to sales return causing dead stock that dissipates the added value. 2. Strategic challenges facing the company Pan India penetration- India has a huge market potential but there is cut throat competition and price war between major FMCG players.

To reach across the length and breadth of country is a formidable task in front of company. Creating Brand awareness- Top of the mind recall for Del Monte products is still low in India despite the promotions carried out by the Co. Building long-term relationships with the distributors and retailers- As the Co. is new in India its products are not as fast moving as its competitors leading to delayed payments from retailers to distributors and at times the payments due even go bad debt leaving the distributor in the distressed state. Thus, many dealers leave the dealership causing the disruption in the supply chain.

 

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Porters 5 Forces for Del Monte India. (2017, Sep 12). Retrieved May 24, 2022 , from
https://studydriver.com/porters-5-forces-for-del-monte-india/

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