It might be hard for Pakistan’s current generation to comprehend this but back in the 80’s and for the better part of the 90’s the water we drank was from the tap and boiled while the milk we had did not come in fancy packaging. But of course there was demand for healthier and cleaner options of these products. Mineral water took its time to hit the market but back prior to the millennia with few of its kind available, the name that was synonymous with branded milk was Haleeb.
The journey began in 1984, when Chaudhry Dairies Ltd (CDL) established a plant over 37 acres of land with a capacity to process 80,000 liters of milk per day. The next year, they started supplying Ultra High Treatment (UHT) milk that took almost no time in becoming a popular choice. In 1987, the company started sale under the title of “Haleeb” brand.
It was also the first dairy unit to acquire ISO 9002, HACCP and ISO 14000 certifications. Even though, Haleeb was not the only brand for this kind of milk, its latest technology gave it a clear edge over more than twenty other plants operating in the country, including Nestlé MilkPak . The continued success of the company allowed it to venture into new product lines and by 2004 Haleeb had morphed into the corporate identity of “Haleeb Foods”.
Fast forward to 2017 and the former market leader in the milk category that enjoyed more than 52 percent share of the market of packaged milk in 2006-07 is now down to less than 2 percent. The company’s management has been revamped and the marketing strategy is being shaped from scratch again.
In such a highly competitive market, gaining back lost share is no small challenge, yet Haleeb is gearing itself to gain back its market leadership in the white milk category.
How and why Haleeb Foods lost out on its market and how does it aim to gain back its long-lost glory? To seek answers to these questions Profit met Chief Operating Officer of Haleeb Foods Haroon M. K. Lodhi.
CDL sold its controlling interest in Haleeb to Mega Conglomerate Private Limited (MCPL) in 2009. The company claims to be one of Pakistan’s biggest conglomerates and has quite a diverse portfolio ranging from shipping and logistical services to cement and with Haleeb it is now in the dairy business as well. The company has reported assets of more than Rs 9 billion with M.Habibulla Khan as its chairman. Three years after buying CDL, in 2012 MCPL got managerial control.
The failure of the old Haleeb
The downfall of the company can mostly be attributed to the previous management’s shift in focus from their core product, white milk, to other categories. Although those other categories have not resulted in a total loss as Haleeb is still number two in the tea whitener category, Engro and Nestle have taken over the market space vacated by Haleeb in the white milk category.
“Our focus is on building the brand Haleeb Milk again.” said Chief Operating Officer (COO) Haleeb Foods, Haroon Lodhi.
Haleeb may have seen some tough times in 2007-08 but Haroon maintains that the real setback came in 2016 at the hands of the government when the dairy sector was moved from the zero rating category to the tax exempt category which meant that the company would no longer be able to claim the credits for value-added tax paid on inputs. “This caused the sales tax that the company paid to become part of the cost.” added Haroon.
Shifting more blame on the government, the COO explained that the 25% extra duty imposed on powdered milk dealt another major blow and the company is yet to recover from this cost. However it is unlikely that the company absorbs the entire 25% increase in cost without passing it on to the customer.
Rubab Gardezi, Brand Manager of House of Nurpur explains, “Haleeb did not keep its focus on the white milk category which was scooped up by new players in the years from 2005 to 2007, which is when Olpers entered the market and took a major chunk out of their share”.
Not only that but she added that the quality of Haleeb’s product also went down allowing other players to take their market share. Explaining this further she added “since white milk is a commoditized product, and the margins on commoditized products are very low as compared to differentiated products, Haleeb shifted its focus to the latter and lost out on the former as a result, meanwhile other companies, both new and old players like Nestlé, kept their focus on white milk and more importantly its quality”.
Losing to loose milk
The Pakistani milk market is also a unique one. Loose milk accounts for 95 percent of the total milk market in the country. The remaining five percent is shared between packaged milk supplier giants like Engro and Nestlé and some former leaders like Haleeb. On the state level, a number of bodies like Pakistan Standard Quality Control Authority (PSQCA) and Punjab Food Authority (PFA) are responsible for ensuring that quality milk is being provided by these packaged milk producers.
Estimates suggest that Pakistan produces around 38 billion litres of milk annually and only 1.3 billion litres of this is sold in packaged form while the remaining is sold as khula (loose) milk and a large amount of this is wasted as well.
The loose milk industry remains highly unregulated due to its sheer size. The odd raid to curb adulterated loose milk is conducted but by and large the sector remains free to operate and pays close to no tax nor did they take any measures to ensure quality or hygiene. This makes loose milk very cheap and as such there is high demand for it.
“The whole industry is suffering but we are also losing out to other players. Plus we are also competing with loose milk which is making things harder for us. Add to this the fact that water is added to loose milk to increase its quantity to dupe unaware consumers into thinking that it is less expensive” Haroon of Haleeb said.
The battle between packaged milk and loose milk is not a new one. Despite massive campaigns being run by packaged milk producers, the milk market is still dominated by the milkmen selling loose milk in metal containers. To add to the packaged milk producers’ problems, the Supreme Court (SC) in September of 2016 ordered – on a petition filed with the apex court – the University of Agriculture Faisalabad, the University of Veterinary and Animal Sciences Lahore and the PCSIR to conduct a chemical examination of all domestic and international brands of packed milk available in the market.
In January the findings were released and out of the six brands tested in the Ultra High Temperature (UHT) category only Haleeb was found to be unsafe for consumption as it contained formalin and cane sugar.
“Our samples were sent to three labs, two of them said that it was safe for consumption and one said that it was not good enough. I won’t name them but one government lab said that it was not good. Instead of giving us a chance to defend our position, the media picked up the first report and highlighted it.” explained Haroon.
“What was seriously questionable was the fact that all 3 labs tested milk from the same batch so how could the same milk be passed by 2 labs and failed by one? Quite clearly there was something not right with the testing procedure of this one lab” said Haroon
The media coverage hurt other brands as well but Haleeb felt the brunt of it. At the same time the Punjab Food Authority (PFA) was conducting a separate inquiry into Haleeb and their finding was contradictory to the SC’s report. Haroon says that the media did not carry the PFA report and this skewed coverage proved so harmful to Haleeb that consumers stopped buying their milk.
“The government has never carried out a strict campaign against these milkmen who bring low quality and harmful milk to households and instead go after the packaged milk companies perhaps because it is far easier to corner a few milk processors rather than thousands of loose milk sellers, who are unconcerned anyway about their reputation”. Haroon added.
An official from Nestlé shed more light on the matter saying that the court case was regarding the quality of packaged milk as well as loose milk. She attended most of the court proceedings and there were two issues deliberated in the court, the quality of water available, be it tap water, bottled water or purified water, and the quality of packaged milk vs. loose milk.
She added that Punjab Food Authority is holding talks with Milk Suppliers and Sellers Association in Punjab regarding their means of transportation, preservation, hygiene, animal care etc. to account for the quality of the milk supplied by them.
New kids on the block
Back in 1999 CDL experimented with plastic bottles and sterilized milk when it entered into a joint venture with Candia, a French product that was to be packaged and licensed by CDL in Pakistan.
After this Haleeb made an attempt at packaging milk in tetra fino packaging. ‘Haleeb Dairy Queen Milk’ was launched in a soft pillow shaped carton.
Haleeb was too early with these products but new players have recently tested the market with pasteurized milk with good results. Millac and Dayfresh lead in Karachi while Anhaar, Farm Fresh, Premá, Gourmet, Halla, Nurpur and Prime are available in Lahore. Anhaar also offers its product in plastic packaging.
Pasteurized milk is first and foremost cheaper than UHT. Prices are close to loose milk and it is a much healthier option. The problem back in 1999 with this variety of milk was the different color and taste as compared to UHT milk. A more informed consumer base now realises that in reality UHT loses its color, not the other way around.
Pasteurized milk currently has only a 3% share in the packaged milk market, which might not be much there is room for growth. One of the biggest challenges it faces is the short shelf life (two to three days) and in the absence of a high-quality cold chain infrastructure it is difficult to maintain the freshness and quality of the milk for even that short a period.
Nonetheless the UHT producers, apart from the challenges posed by loose milk now have to worry about the new kids on the block as well.
The Tea Whitener
The PFA may have given Haleeb’s milk a clean chit but the story with their tea whitener is different. As Haroon explains it “After the 18th amendment, the Punjab Pure Food rules were put in place. They were conflicting with the national standards governed by the Pakistan Standard Quality Control Authority (PSQCA). All our products are registered and certified with PSQCA and all our packs have their stamps. They test and audit our products.”
The Punjab Pure Food rules however have different definitions of tea whitener. After deliberations with the PFA Haleeb has been able to convince them to apply national standards to their milk whitener. The only condition PFA had was that Haleeb clearly display on their packaging whether the product inside is milk or whitener. Haroon says they already do this.
Thanks to that one lab report, the quality of Haleeb’s white milk did come into question but when it comes to tea whitener Haroon says that it is top notch. The main input in tea whiteners is vegetable oil which according to Haroon, Haleeb imports from the USA or Europe rather than sourcing it locally. He very confidently invited the PFA to even check their L/C records to confirm where the vegetable oil is imported from. He added, “While Haleeb is following the quality and marketing standards for tea whiteners, which is not milk, most other companies in the market are not doing so”.
Improving and maintaining the quality of their tea whitener brand ‘Tea Max’ is a sound strategy as it is currently the fastest-growing category of milk in Pakistan. The major advantage of tea whitener as opposed to white milk is the cost saving. Only 30% milk is required to make a litre of tea whitener explained an industry expert.
The huge amount of tea consumed in Pakistan coupled with the average price of Rs 18 to 20 for a 250ml pack of tea whitener makes the product quite attractive to consumers of loose milk. It is a smart way to introduce them to a packaged form of milk (packaged tea whitener) to eventually move them onto the main product – packaged milk.
It is no wonder therefore why every milk processor is making tea whitener. Engro’s ‘Tarang’ is the market leader with around 52 % (Source: Nielsen Retail Audit Report, 2015) share in the tea whitener category followed by Haleeb’s ‘Tea Max’ with 25% market.
The remainder is shared by the likes of Shakarganj’s ‘Chaika’, Nurpur’s ‘Chai Mix’, Premier’s ‘Millin’ and Nestlé’s by ‘EveryDay’.
Rebuilding the brand image
Haleeb is now focusing on all purpose milk as part of their marketing and advertising strategy. They have started supplying in smaller packaging as well and are targeting different socioeconomic classes (SEC’s) with different packaging. For the KP province, they did research and began producing a specific packaging for the All Max brand based on imagery and designs that were preferred in that geographical area. This differentiation is also done in terms of the size of the packaging, for example in the case of Haleeb milk, as smaller packs are sold cheaper, the 250ml pack is targeted at SEC B and C.
The Tea Max product is popular in the outskirts of main cities but the company is now planning to enter big stores like Jalal Sons and Al-Fatah to target the main urban population as well. “We have most of our sales at wholesale stores and second tier stores. We are at Metro, Imtiaz and Hyper and now we plan to enter Al Fatah and Jalal Sons stores by next year.” explained Haroon.
Over the years Haleeb has paid little attention to their marketing strategy resulting in very little innovation towards the image building of the brand. Other brands did not make the same mistake with examples like Olpers that hit the market with “Subah Bakhair Zindagi”, Good Milk (Shakarganj Food Products) came up with “Roz Roz Goodmilk Piya Karo” and Nestlé brought “Khalis Hi Sab Kuch Hai”.
Haleeb however stuck with their ‘Garha’ milk with “Aik Garha Rishta Umer Bher K Liye”.
As Ex-CEO Engro Foods Sarfaraz Rahman puts it, “From mid 90s to mid-2000 they [Haleeb] marketed ‘gaarha doodh’ which was in accordance with the mentality of milk consumers here at the time. They sort of created that market. They are like ‘the grandfather brand’ of processed milk brands. Unfortunately, since mid-2000s (2005) they started to decline.”
The resistance to move away from their image of ‘the grandfather brand’ is one the reasons Haleeb never really adapted to a changing market. Justifying the delay in taking this step he said that the new management firstly had to clean its house and remove the problems persisting in HR and other parts of the company. Now that that has been taken care of, Haleeb can move on to focus on its branding. For this around Rs400 million out of the Rs16 billion they made in revenue in 2016 has been dedicated to marketing.
Disruption using research and activation
The marketing strategy of Haleeb is dedicated towards building a family product image and aimed towards the younger generation. Haroon said that this decision was made after an extensive research and study program. Their new marketing strategy is a 360 degree program where they will venture into several different platforms for marketing and advertising. “We have main key accounts; we have brand ambassadors who are standing there convincing the consumers to buy this brand. We have seen the result of such campaigns and they actually work.” explained Haroon.
“We have to go slow. We have to build it really well and in a thoughtful manner. For now we are doing door to door selling and door to door trial generation activities.” added Haroon.
Haleeb has conducted field research in 36 areas of Lahore. The purpose was to communicate the brand to households in those areas and of the 28,000 households visited in four weeks 98% responded. “These are the people who were either using loose milk or our competitor brands” said Haroon referring to their research.
A parallel survey was also conducted in those 36 areas of Lahore to see the effects of their activity for which data was collected in between and after the activity period. Haroon claims that the results showed a 36% increase in Haleeb sales. They plan to monitor it again in the mid of and end of April.
Will it work?
According to Haroon, Haleeb is all set to regain its lost market share. “The quality checking systems in practice ensure that it will become the favoured product for the consumers.” He also has high hopes for the market to respond well to their measures after conducting their research.
Other players in the market do not share Haroon’s optimism. Rubab Gardezi from Nurpur is of the opinion that this market is so competitive that merely advertising or marketing will not help Haleeb gaining any more market share. “Some big player has to give way in the market to allow Haleeb to take over, just like Olpers did with Haleeb. There is no room otherwise to take back the market share.”
Sarfaraz Rahman believes that the milk industry as a whole is headed for choppy waters. “I am not directly a part of the dairy industry now so I am not very certain on how the re-launch is [shaping up].”The packaged milk industry overall has recently seen a decline in consumers due to the ongoing speculation and rumors on social media on quality of packaged milk”. he said
The media speculation and rumours about its quality will die down eventually and are even manageable to an extent. The real threat however still persists to be the market for loose milk.
Haleeb’s problem is twofold. On one hand there are issues, challenges and restrictions the entire industry has to face and are to a large extent out of Haleeb’s hands. Tax hikes, failed quality checks, negative PR owing to the media and tough competition from new entrants and loose milk are all variables that have negatively affected the industry in the past and will continue to do so in the future. All the company can do is deal with them as they come.
The second problem is inherent within Haleeb and its history. Years of an uninterested management that was focused on higher margins has destroyed a one-time giant. In the process the quality of what should have remained its flagship product, white milk, suffered. Procrastination over rebuilding its own image while ignoring what others were doing with theirs gave way for more innovative brands to enter the market.
As the second best brand of tea whitener on one end while being close to last in the white milk category at the other end, it seems most if not all of the revenue Haleeb currently makes is from the former and that is where its limited resources should be deployed.
Has Haleeb set itself on a stagnant trajectory with respect to white milk? It’s research numbers may tell a different story but considering the current market dynamics it may be easier for Haleeb to reinvent itself but not so much the market it wishes to re-conquer.