EFL’s Summer of 2006

imageThe summer of 2006 was one of trial. Like the good and bad times indicated by the Quran, I had run into serious bits of difficulty that summer. On the one hand my fathers deteriorating health was well advanced and at work the worldly battle of commerce was reaching epic proportions.

To explain the above, one has to recount some history. We were working in Engro Foods at a very early stage of inception. I had joined the company when Sukkur factory was a hole in the ground. By March 2006, however, defying all odds, we had commissioned the factory in 8 months, collected enough milk for production, created the sales and distribution infrastructure and lastly found a name and launched a brand. All this was done on the back of a most driven bunch of people, who seemed to treat Engro Foods as their piece of the promised land. Precious and worth fighting for,

Olpers! Now what sort of name is that? Is that a milk? What does it mean? A red packaging in a blue/green industry; strange slim packaging and then those advertisements, they just did not show any dairy functionality. These were the barrage of criticism we faced in the first few months. We were firmly established as a challenger mentality brand and even some of my well wishers were looking doubtful.

To top it all, along came the launch of another new milk, with a catchy old jingle and a lot more money to spend in May 2006. They negated the innovation space we had created for Olpers, and were spending lots more money and operating in almost the same fashion, plus they were located slap in the middle of the milk shed, unlike us who were down south and far away.

Life was tough through late April and May. Our advertising funds were exhausted by now and the sales after the early days were bordering on 20k litres a day. This small sales was supporting a factory and other infrastructure. Worse still, raw milk prices had increased to the extent, that the low production and high costs meant that by June, we were facing negative contribution margins. For the uninitiated, this meant that for every litre of Olpers sold, our loss would increase. We were better off shutting the plant down, rather than selling. In short we were looking down a barrel of possible failure and like in all commercial enterprises, failures eventually find their source. Typically, it is the head or near it. So the reality was quite clear to me, I was standing near the edge of a precipice.

In that rather apocalyptic situation, a silver lining appeared on the horizon, when the two largest dairy players announced price increases in the trade. This meant we could now make a reasonable margin and at least reduce our losses, till we could somehow increase our sales. The Management Committee meeting to discuss what to do and when to increase our prices, was considered a foregone conclusion. It was just a question of when. Except that the oddest idea had lodged in my brain that particular day. It came on the back of a discussion with the Sales Director, who had wistfully mentioned that he would love to sell at lower prices for a couple of months, to get our volume going. When I mentioned this particular idea in the MC, quite predictably and justifiably, the ceiling blew away. But the more the discussion went on, the more I became convinced and later one or two of the other members too, that we needed to stay with the same price. When it was conveyed to our Chairman, he asked me if I knew what we were doing, because it was the oddest decision he had heard of; “that we were ready to sell at a contribution loss, rather than a margin”. To his credit, once convinced, he backed us to the hilt with the Board of Directors.

That decision of keeping Olpers price at negative margins, was the turning point in EFL. Next month in July we jumped to 130k litres a day sales and in August it went to 150k. By September when we finally took a price increase, we had grabbed significant share from our competitors. So much so, that in December 2006, not only did we deliver a much higher sales figure, but our bottom line performance versus plan was much better. By then we knew EFL had arrived, Alhamdulillah.

In the long years of my career, one cannot remember as crazy a move. Infact, I explain it to people, that had I been at a MNC, I would have probably been summarily removed from my position, but to EFLs credit, they allowed a totally left field decision to prevail and the risk paid off.

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About sarfarazar
I have been lucky! A long career with large scale organisations and some acclaim. Also, took time off to write, mentor and do some education and social development projects. I continue to mentor and help younger people in life. Inshallah, hope to write on various subjects in my blog.

22 Responses to EFL’s Summer of 2006

  1. adil says:

    As a business leader it must have been heartening to see the top leadership backing you. EFL also tried establishing an international footprint and had to back out. Why didn’t the management persevere and try to turn things around after all the halal foods space is growing exponentially.

    • sarfarazar says:

      Not all situations are alike. I cannot comment on the halal business, as its a recent event and therefore i am bound by my regulatory responsibility. Lets say we had sufficient reason to exit. EFL has never shied away from a challenge, but only if there is a clear vision and a road map to it.

  2. Syed Toqeer Abbas says:

    Nice experience sharing. Take away – never give up, relax, sit back , think around and act smartly in marketplace

  3. Shahzad says:

    yes vision with a road map and eyes on the shore could tie you during storm, well done Mr. Sarfaraz

  4. Sajjad Ahmad says:

    So the Bottom Line is ,Above everything is conviction and Believe . Once You took a decision then
    don’t doubt your own abilities . I am about to start my career. kindly remember me in Your Prayers..

  5. mhumayunmaqbool says:

    I believe that the challenge was to sustain the feeling of difference, a difference that you envisioned and imparted in product, and stay in target’s radar. Economic strains cause consumers to trade down, and chose low-price alternatives and a new product always faces issues in such conditions and your move on pricing helped Olpers stay connected with masses.

    One question. How did you ensure and convince board that Olper’s brand equity will not be shattered by offering a lesser price?

  6. sarfarazar says:

    my authority allows me to take price decisions and the BOD just gets business information. The risk of failure in the immediate is with the management. Why i liased with the Chairman was simply because of the strange nature of the decision. The Bod met in July, we had already done the deed in Jun. so by July the volume was up and I dont think the BOD would have had much to object about.

  7. irum says:

    Sir, Indeed very inspiring. like the way you write and think . Anxiously waiting for more ……

  8. FNZ says:

    Refreshing, honest blog. *Like*

  9. sarfarazar says:

    Thanks FNZ… πŸ™‚

  10. Manzer Naqvi says:

    My association with EFL has definitely taught me that if you have a vision, passion to excel and an honest tarrka of commitment on top; you’re bound to get success. EFL is a true success story for all of us. Me and my entire team are so proud to be the small contributors πŸ™‚

  11. Zubair Khan says:

    Engro Foods all product should be available at market, Engro ice cream was warmed welcome by the consumer but due to its unavailability in market place left other to sale while consumer were still walking in search of Oomor. We Pakistani are deserved to have good products to eat whom we can trust. Please make aggressive plan for summer which about to come.

  12. sarfarazar says:

    I am not sure if this is the right forum for that complaint πŸ™‚ ….suggest you write to me sarehman@engrofoods.com and tell me where Omore is not available. Sometimes it is a function of availability of freezers in a particular area and that comes down to a cost benefit analysis..thanks

  13. Shiraz Ahmed says:

    What about the Cheese sector? even more and more small players are jumping in, why not ENGRO yet? you can do it more professionally and hygenically! If we talk about supermarkets one can find 1 or 2 PK origin brands, rest is imported stuff… the way these small players do the processing and packaging, they can never even think to compete imported cheese from holland and Denmark in terms of extended shelf life and presentation, we are not talking about prices!

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