Case Study On Mtr's Strategic Competitive Advantage 5z5k4

MTR FOODS - The Recipe of Quality Success in India a competitive advantage perspective Assignment - 1

Submitted to: Prof. Radha Krishna

Submitted by: Ranjan Shankar Shetty .B.K PGDM – IB (2009 – 11) Roll no - 40

MTR Foods – The recipe of Quality Success

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Executive Summary

We were taught, Quality can be thought of in of two dimensions: Quality as Reliability and Quality as Excellence (R.Jones)1. In this paper i identify and present how the two dimensions are being realized in the Indian food processing Industry through a process of “QUALITY THROUGH PRODUCTIVITY” by representing the Total quality management (TQM) at an Entity, where their Mission is “COMMITED TO QUALITY – PURE & PERFECT”. In particular i identify and trace the history and development of MTR FOODS in India which has focused on Quality as a competitive advantage, and it is called: MTR FOODS -

The Recipe of Quality Success in India a competitive advantage perspective.

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Building competitive advantage through functional level strategy.

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.

Ingredients

The Indian Food Processing Industry ............................................................................................................ 3 Food Safety and Hygiene .............................................................................................................................. 4 MTR FOODS – An Architect ........................................................................................................................... 4 MTR FOODS - The Genesis ............................................................................................................................ 5 MTR Foods – PURE & PERFECT ..................................................................................................................... 7 Quality a Way of Life – Food Safety Policy.................................................................................................... 8 MTR FOODS - ISO 22000 and HAC certified .............................................................................................. 9 MTR FOODS - QUALITY THROUGH PRODUCTIVITY (BSPIN) .......................................................................... 9 MTR FOODS – FARM TO FORK QUALITY ASSURENCE ................................................................................. 12 Wrapping Up ............................................................................................................................................... 12 Bibliography ................................................................................................................................................ 13

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The Indian Food Processing Industry The Food processing industry has an important role to play in linking the farmers to the final consumers in the domestic as well as the international markets. Food processing combined with marketing has the potential of solving the basic problems of agricultural surpluses, wastages, rural jobs, and better remuneration to the growers. India with a population of 1.14 billion and growing at about 1.34 % per annum (World Bank) provides a large and growing market for food products. Food products are the single largest component of private consumption expenditure, ing for as much as 49% of the total spending2. The complexities of urban life have greatly encouraged the emergence of the class of foods called Ready-to-eat (RTE) and Ready-to cook (RTC). From a virtually nonexistent category this segment grew to an approximately ` 4,500- ` 5,000 crore industry by 2009 (VYAS). The growth is expected to accelerate; the RTE3 foods market in India is clearly on a growth trajectory going by the 23 percent growth annually. One big challenge for these firms is quality. They need to meet global standards of food safety to increase India‘s share in world trade. Other key challenges include infrastructure backup and effective distribution networks.

(Ernst & Young, 2009) 2 3

Trading Economies – World Bank annual report 2010 RTE - Ready to eat

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Food Safety and Hygiene Food safety is a growing concern across the world. There is increasing need to provide greater assurance about the safety and quality of food to consumers. The growth of the RTE & RTC4, frozen foods, Ice Cream, etc., segment has led to increasing recognition and adoption of food safety measures. The capacity of India to penetrate world markets depends on its ability to meet increasingly stringent food safety standards imposed in developed countries. Food standards are expected to acquire greater importance given increasing concerns on food safety on the back of breakout of diseases such as BSE5, Avian Influenza, Bird Flu, Swine Flu, Super Bug, etc. on the one hand, and growing consumer demand for products which are healthy on the other. Compliance with international food standards is a prerequisite to gain a higher share of world trade and also gain on the domestic market.

MTR FOODS – An Architect MTR Foods Ltd., which stresses that its products are 100 percent vegetarian and contain absolutely no preservatives, is amongst the top five processed food manufacturers in India (Ernst & Young, 2009).

In order to ensure that their products have the ―just-cooked‖ freshness, the

company has adopted technology from the Defense Food Research Laboratory, Mysore. MTR has ISO6 22000 and HAC7 certification and their use of technology from the Defense Food Research Laboratory for their RTE products, which has won them a President‘s Award. MTR‘s wide range of products include RTE curries and rice, RTC gravies, frozen foods, ice creams, instant snacks and dessert mixes, spices and a variety of accompaniments such as pickles and papads. Most MTR RTE products can be stored in ambient temperature and require no refrigeration. The company has also expanded retail presence significantly (Roy, 2009); contemporary ‗Namma MTR‘ (is MTR‘s retail chain). Namma MTR is split into three sections. One section showcases the entire range of products. The second section is a novel concept kitchen where customers can interact with specialist chefs to learn about MTR products and watch live 4

RTC – Ready to cook Bovine spongiform encephalopathy 6 ISO - International Organization for Standardization 7 HAC - Hazard Analysis Critical Control Point 5

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demonstrations. This concept kitchen also works as an ideal platform for (allowing the company to understand and address consumer needs) The third section offers a variety of fast food — one can either eat here or get a quick take-away from the express counter) now serve consumers across Bangalore and Chennai.

MTR FOODS - The Genesis Before Mavalli Tiffin Room became MTR8 Foods, one of the country‘s leading processed food makers, it was a small restaurant operating in south Bangalore with a heady stream of faithful customers who swore by its idlis and dosas. MTR was founded as a coffee bar and restaurant by Parampalli Yajnanarayana Maiya and his brothers in the year 1924, which grew to become as a tourist attraction in Bangalore City. Having its origin in the city of Bangalore it is famous for the MTR restaurant located on the LalBagh Road in Bangalore and also for the pre-packed food articles which are sold in packets having the MTR brand. MTR also claims to be the inventor of the popular South-Indian breakfast item, Rava idli. Nineteen seventy-six changed everything. MTR, owned by the Maiya family, was forced into the FMCG business of selling instant food mixes by the Emergency. Turbulent times as they were, MTR‘s business came to a grinding halt after the government imposed pricing curbs. Price of the modest idli, for instance, was clipped to 10 paise from 25 paise while a cup of coffee had to be sold at 25 p from ` 1 under President‘s rule. Soon there was no stopping the mounting losses. MTR ran up losses of ` 25, 000 every weekday and up to ` 1 lakh on Sundays (BUREAU). Sixteen days after it was told to reduce prices, the restaurant was forced to shut shop. Due to heavy losses, Maiya had to close down the restaurant but to protect jobs of his employees he started a grocery store to sell spices and roasted flour mixes. That was the beginning of its entry into convenience or instant foods, such as rava idli, khara bath, rasam, sambar and dosa mix. Times were also changing. During the 1970s, women had begun to venture outside home for work, creating a market for MTR products. Once the Emergency was lifted, MTR‘s 8

MTR - Mavalli Tiffin Room

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restaurant was back in business. But the Maiyas had by then grown ambitions of entering the big league of consumer goods. ―We dreamt of the day when salesmen wearing neck ties would market our products. Just as Hindustan Lever did,‖ Mr. Maiya said (Economic Times). Though instant mix was an idea ahead of its time, MTR Foods wanted to be the frontrunner in the category. The company entered spices to increase brand popularity and expanded to neighboring states. From 1983 MTR started distributing its foods and in 1984 launched one of its bestsellers - the instant gulab jamun mix. In 1991, it moved to its modern plant at Bommasandra on the outskirts of the Bangalore city, where everyday 90 tonnes of foods products and one-lakh cones of ice-cream are manufactured. In 1994, the pickles plant made its debut and in 1996, the Indian pasta (vermicelli or semia) plant. In 1997, the company as renamed MTR Foods Limited (monstr_55).

By the late-1990s, MTR had invested in ` 1-crore facility for instant mixes and spices. A professional sales team was put in place. Forays into vermicelli, ready-to-eat foods, papads and softy mixes happened in stages during the next few years. The softy mixes failed to take off, but offered another opportunity. MTR imported softy machines and franchised kiosks across Bangalore. MTR softies were soon a resounding success and the kiosks doubled up as branding vehicles. Though those were flourishing days, funding problems loomed. MTR was constantly in talks with investors then. In 2000, the company received `6 crore from private equity investor Aquarius Capital. Still, a ` 27-crore investment in a vermicelli unit in Bangalore came to naught after a flaw in technology disrupted operations for three years. MTR had no option but write down around `22 crore in losses. In 2002, JP Morgan Partners invested ` 19.2 crore. Even so, problems persisted. Kannada actor Rajkumar‘s abduction and the frenzy over Kaun Banega Crorepati hit the company. MTR softies, which collected 40% of overall revenues at 9- 10 pm, saw this contribution dwindling to 2%. The division folded up as Bangaloreans stayed put at homes. In the Indian processed food market of `11 billion, MTR has a market share of about 70 per cent in the instant mixes segment, about 30 per cent in the vermicelli segment, around 8 per cent in spices, and modest presence in the icecream, pickles, papads, and snacks segment (Chand(Rediff)).

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Sooner or later MTR foods Collapsed financially, Mr. Maiya stanched the bleeding with losses of ` 15-17 crore in 2006-07. Still, the writing was on the wall for the family. MTR was taken over by Norway‘s Orkla in a ` 364-crore deal in 2007. This is what Mr. Maiya had to tell to the media after the Acquisition ―I never wanted to sell, A few years ago we started to realise that we did not have the financial backbone to develop the company in line with our ambitions. At first, we thought a private equity company is the right option for us, but in the end the answer was Orkla.‖

(TOI)

The result for the acquisition was ORKLA‘s willingness to have a licensing

arrangement for MTR brand. So the brand MTR FOODS had a new beginning but the commitment to Quality was never compromised.

MTR Foods – PURE & PERFECT The Obsession Unwavering obsession to Quality. Restaurant took extreme step of shutting shop, than compromising on quality to reduce prices in line with Government order, and this was the ion of MTR foods towards quality as a Competitive Advantage which is PURE & PERFECT Quality as defined in ISO standard - Stated Needs & Implied Needs to be met For MTR Quality = Pure & perfect i.e. • • • • • • •

Hygiene Nutritious Convenience Natural / no additives Available at the corner store To meet requirements of wider section of population Value for money

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The MTR Difference (MTR) What makes MTR a trusted, household name? 100% Natural - Our products are 100% natural have no preservatives and use only the finest, most authentic ingredients. Unparalleled tastes and flavor - Be it an Instant mix or a Ready to Eat dish, pickles or soups, all MTR products are known for their mouthwatering, "home-cooked" taste. Uncompromised Quality - We adhere to the most stringent quality standards, from sourcing ingredients to processing and packing. We are ISO 22000 and HAC certified. Technology - We use the latest technology to preserve the quality and freshness of our food. Our use of technology from the Defense Food Research Laboratory for our Ready to Eat products has won us the President's award. Vegetarianism - All MTR products are 100% vegetarian.

Quality a Way of Life – Food Safety Policy At MTR, quality is a way of life. Hazard Analysis and Critical Control Point or HAC, developed by the Codex Alimentarius Commission, is a global food safety standard. We have successfully met the stringent requirements for this certification. Our facilities are equipped with the latest systems. We adhere to

international

operations:

from

standards sourcing

across the

all

finest

ingredients to processing and packing using cutting-edge

technology.

Each

MTR

product carries this assurance of quality and meets the high expectations our consumers have from us. (MTR FOODS)

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MTR FOODS - ISO 22000 and HAC certified MTR is the first Indian processed foods company to be certified with the Hazard Analysis Critical Control Point (HAC) certification which is a rigorous standard of food safety and hygiene

(Business Line),

and ISO/TS 22002- Prerequisite programme on food safety

(ISO).

Hazard

Analysis Critical Control Point (HAC) is a systematic preventive approach to food safety adapted at MTR Foods. HAC – Identifies, Evaluates and Control Hazards which are significant food safety. WHY HAC IS NEEDED? (Ministry of Health and Family Welfare)

MTR FOODS - QUALITY THROUGH PRODUCTIVITY (BSPIN) Mavalli Tiffin Room – Quality then meant Hygiene - Sterilized silver crockery & cutlery, exit thro kitchen ―see to believe‖ concept, Purity of ingredients used Great taste.

MTR FOODS – Pure and Perfect HYGIENE This parameter has been made in to a productivity norm through a hygiene score card with the parameters of:

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 Personal hygiene of employees  Production environment hygiene  Machinery cleaning protocol Each work area is rated by an independent team and reflects in balance score card.

NUTRITION-PURITY This parameter has been made in to a productivity norm through Purchase and R&D9 KPI10- Control of value chain  Devoid of adulteration  Known source  Testing and storage

Convenience This parameter has been addressed as product type/ category       In total of

Instant Mixes & Vermicelli (Limited cooking) Meal compliments (Papad & pickles) Spices & spice blends (Masals & chutny powder) Frozen Foods (Heat and eat) Ready To Eat Desserts (Ice Cream & sweets) about 280 SKUs11. This addition of product under each category is a KPI for

the group.

Supply Chain The supply chain has KPI to measure productivity  Demand V/s supply  Variety Fill / Line fill  Volume fill /Case Fill 9

R&D – Research and Development KPI – Key Performance Indicators 11 SKU – Stock Keeping Units 10

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 Economy of supply  Carry & Forwarding cost as % freight  Wrong supplies  Wastages as % of sale

Human Productivity  Production: Labour Cost/CB12 or Kg  Sales: Marketing & sales cost /head as % of turnover made by individual  HR13: KRA14 i.e. volume & value contribution category wise.

Technology & systems – A culture  ISO 9001 & HAC certified & now ISO 22000 certified. All are part of the system. (MTR FOODS)  1st Indian Food Company to implement ERP system SAP in record 3 months and SAP award winner. (Express Computer Online)  Improvement In Working Capital  Reduced Inventory  Cost Control  Fatter Margins  Tabs on Defaulters  1st Indian food Company to be awarded by Prime Minister for technology absorption. (DFRL)  Always a winner of honest tax payer award.

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CB – Center Back (Measurement) HR - Human Resource 14 KRA - Key result area 13

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MTR FOODS – FARM TO FORK QUALITY ASSURENCE MTR Foods Control entire value chain  Sourcing o Tie up with farmers to grow exclusively for MTR o Quality control begins at Farms.  Manufacturing o Integrated facility with 100% in house manufacturing o State of the art testing equipment o GMP15 in Place  Consumer o Web Based System o 100% traceability with SAP ERP System

Wrapping Up The Indian food processing industry is one of the fast growing industry in the world, by considering the sheer population of India and the Economic growth expected, it is very important for any Entity in this business to consider and concentrate on Quality, as the consumer base in growing. An entity without ion and personal commitment no goal can be achieved and In this MTR FOODS have set an example, where all the entities needs to be nurtured and developed to absorb technology, imbibe culture and develop ion for Quality. And this is

MTR FOODS - The Recipe of Quality Success in India a competitive advantage perspective.

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GMP - Good manufacturing practice

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Bibliography

BSPIN. (n.d.). Retrieved 08 2010, 17, from http://www.bspin.org/MTR%20 BUREAU, E. (n.d.). News by Industry. Retrieved 08 2010, 19, from Economic Times: http://economictimes.indiatimes.com/articleshow/6025570.cms Business Line. (n.d.). Has MTR got its recipe right? Retrieved 08 2010, 19, from Boby Kurian: http://www.blonnet.com/catalyst/2003/06/26/stories/2003062600040100.htm Chand(Rediff), F. (n.d.). Money.rediff. Retrieved 08 2010, 19, from rediff.com: http://www.rediff.com/money/2002/aug/09mtr.htm DFRL. (n.d.). Technology Absorption Award - 2001. Retrieved 08 2010, 19, from Achievements of DFRL: http://drdo.res.in/lifesciencesconf/dfrlpro.htm Economic Times. (n.d.). Economic Times. Retrieved 08 2010, 19, from News By Industry: http://economictimes.indiatimes.com/articleshow/6025570.cms Ernst & Young. (2009). Flavors of Incredible India. Ernst & Young, 2009. Express Computer Online. (n.d.). ERP @ MTR. Retrieved 08 2010, 19, from Akhtar: http://www.expresscomputeronline.com/20050124/management01.shtml ISO. (n.d.). International Standard Organization. Retrieved 08 2010, 19, from Information Center: http://www.standardsinfo.net/info/livelink/fetch/2000/148478/6301438/inttrade.html Ministry of Health and Family Welfare. (n.d.). HAC. Retrieved 08 2009, 19, from Food Safety India: http://www.foodsafetyindia.nic.in/hac.htm monstr_55. (n.d.). Mtr Organization Analysis. Retrieved 08 2010, 19, from Essay for students.com: http://essaysforstudent.com/print.html?essay=44442 MTR FOODS. (n.d.). Food Safty policy. Retrieved 08 2010, 19, from MTR FOODS: http://www.mtrfoods.com/quality.htm

MTR Foods – The recipe of Quality Success MTR. (n.d.). MTR Difference. Retrieved 08 2010, 19, from MTR FOODS: http://www.mtrfoods.com/themtrdifference.htm R.Jones, C. W. (n.d.). Strategic management – An integrated approach. Biz tantra Publications. Roy, N. C. (2009). Regional bias. PROGRESSIVE GROCER, 62, 63, 64. TOI. (n.d.). Business. Retrieved 08 2010, 19, from Times of India: http://timesofindia.indiatimes.com/city/MTR-Foods-targets-Rs-500-crturnover/articleshow/283861.cms VYAS, M. (n.d.). ET BUREAU. Retrieved 08 18, 2010, from The Economic Times: http://economictimes.indiatimes.com/articleshow/5955739.cms World Bank. (n.d.). Trade Economics. Retrieved 08 18, 2010, from Trade Economics: http://www.tradingeconomics.com/india/population-growth-annual-percent-wb-data.html

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