Group-5

Abdul Moeed (15P00002)

Arsalan Bhatti (15P00005)
Mian Hashim Ayaz (15P00031)
Muhammad Usman Basit (15P00011)

MBA-1 (2015-2017)
Section-A (Winter Term)

WACC
Case: 5

Daali Earthfoods: The Expansion Issues

Course Title: Management: Policy & Practice

Course Instructor: Ms. Tania Hassan
Dated Submission: 01-12-2015

Lahore School of Economics

Group-5 Daali Earthfoods: The Expansion Issue: CASE-5 MBA-1 (2015-2017)

Contents
Summary: .............................................................................................................................................. 3
Qualitative Facts: .................................................................................................................................. 4
Quantitative Facts:................................................................................................................................ 6
Major Problems: ................................................................................................................................... 8
Minor Problems: ................................................................................................................................... 8
Alternative: ............................................................................................................................................ 8
Recommendation: ................................................................................................................................. 9
Conclusion: ............................................................................................................................................ 9

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Group-5 Daali Earthfoods: The Expansion Issue: CASE-5 MBA-1 (2015-2017)

Summary:

Daali means The Gift of a basketful of Seasonal Produce.

The real dilemma for Ms. Marium (CEO of Daali Earth Foods) is to decide that whether she
should sell the company or expand it. But she is facing the problem of in capacity to expand
it. She started the company with her friend who is an actress; Ms. Samia Mumtaz. So it is
tough for her to manage things alone. The idea of organic foods came to her when she
decided to feed her children on natural foods but she wasnt able to find it. So she took the
initiative to start the company of producing the organic foods.

Ms. Samia started producing food on her 14 acres of land in Bedian village in Lahore. She
invested in the company and then started working as a sleeping partner. She stopped
interfering in the business operations and Ms. Mariam was totally responsible for sales and
marketing. Initially Ms. Mariam contracted with two desi Chakkis for her products. Later
on, more products were added to production line. Services of Chakkis were performed at
Pind Hairr near to Rorra Pind and their workshop was based on two rooms. They started
selling to Alfatah and Jalal sons and later on Green Valley in Lahore and also in Karachi,
Islamabad and Faisalabad. For Packaging of products, Daali used recyclable and
biodegradable materials to oppose plastic. Also she uses brown paper for flour, porridge,
glass and glass for oil, honey and jams.

Ms. Samia also opened a shop in Mini Market, Lahore with the name Panjeeri. But she
wasnt able to continue it further in 2010 because of expenses and personal hectic schedule in
acting career as well as raising her child. In 2011, Ms. Mariam started micromanagement
strategy because she was very concerned with the quality and organic foods. She had
leadership qualities but she handled all the operations from buying of raw materials to
supplying of products. Due to high demand and variety of products, she opened the workshop
at Pathano Wali Gali near Harbhanspura, Lahore. It was a bigger place and contained four
rooms. Currently, Daali Earth Foods is catering 8 10 % of Lahore, Karachi, Islamabad and
Faisalabad. Its goals are to achieve 30 % of more sales within the next year i.e. 2014.

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Group-5 Daali Earthfoods: The Expansion Issue: CASE-5 MBA-1 (2015-2017)

Although Daali Earthfoods has indirect competition with Sungold Organics, Roshni
Association, Alfarid Corportation, Dawn, Engro Foods and Ashrafi (not in organic products),
still Mariam is struggling to deliver products that are free from pesticides and fertilizers.
Daali is working on small scale with 2 3 workers with services of 2 Rickshaw Walas.
Products are minimally processed and rich in dietary fiber. Daali main products are flour,
daals, bread, rice, oil, honey, porridge and spices. In order to expand the show, she needs
almost 1.5 million Rupees but again the problem is still that she needs entrepreneurial ability
for bigger level.

Pakistan isnt performing on organic farming rather they use the subsidies on importing
fertilizers. There is no certification issuing authority; companies should propose government
to issue the certificates so that organic farming can be encouraged within Pakistan. Globally
Australia, Europe, UAE, India, Iran and many others have shifted on Organic Farming
because of the health concerns of their nations. Also USA, Canada, Japan and many countries
call producers for special certifications. So Pakistan government should also work onto this.

Qualitative Facts:

The owners were MBA graduates and had quite decent management backgrounds.
They had correctly identified the need to reach the niche market.
Organic foods are produced through methods which did not involve supplementing
of hormones, antibiotics or synthetic inputs such as pesticides and chemical
fertilizers. Therefore, there was a considerably lower risk of diseases and other health
risks from the consumption of organic food.
The two partners philosophy was that grains, fruits, vegetables, dairy and other
poultry products exist in ideal nutritional stability in nature. The entire initiative to
create Daali was to offer a healthy alternative to food grown using chemicals and
dirty water. It promotes healthy activism in Pakistan in order to get people back to
their desi lifestyle.
According to the CEO of Harvest Tradings, organic farming is the best option to
produce quality agriculture products that are healthy and cheaper to cater to domestic
needs.
Globally, organic agriculture has increased by about five times (in terms of acreage)
in as many years. There is also a global emphasis on obtaining certification for the

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Group-5 Daali Earthfoods: The Expansion Issue: CASE-5 MBA-1 (2015-2017)

market of organic food. Because of these regulations, it is produced according to

standards set by national governments and international organizations.
Billions of rupees can be saved by switching to organic farming as it saves the cost
of importing fertilizers.
Samia and Marium are the pioneers of the now emerging organic food movement in
Pakistan.
Daali is the only company that is supplying to the domestic market. Ignoring indirect
competition, it holds the entire market share of Pakistan
Daali made its way into the market, despite a lack of consumer awareness.
Due to the Daali consumers increasing demand of organic food, they expanded their
product line and varieties. This helped them convince managers of renowned
departmental stores/superstores such as Alfatah and JalalSons, and to expand their
reach as well.
Establishment of Panjeeri as a separate business to promote and provide varies
Daali products and other local products, even though it was short-lived, was an effort
to reach out to consumers nonetheless.
Marium possesses leadership qualities and handles much of the supply chain,
including the supply of products to shops in Karachi and Lahore.
New workshop in Harbhanspura was bigger than the previous one. It allowed 4
different chakkis to be set in one room, and all worked at a slow pace so nutrients do
not get any harm from it.
This facility was used for multiple purposes & had four rooms: 1) Chakkis.
2) Raw material storage. 3) Filling and packaging. 4) Honey storage.
Products are protected from pests and harmful insects using natural ways ,eg. Neem,
bayleaf and kalonji sachets in Daali flours and the use of solid rock salt along with
these in storage areas.
Air purification in storage areas involves dhooni, which is smoke from verified
plants like harmal and guggal.

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Group-5 Daali Earthfoods: The Expansion Issue: CASE-5 MBA-1 (2015-2017)

Daali is socially responsible as it is contributing what it can towards a healthier

environment. Like it uses recyclable and biodegradable materials in packaging, use
of brown paper and glass so it can be reused.

Quantitative Facts:

Salman Taseer was willing to by Daali for Rs.10 million.

This farming system is prevalent in Oceania and Australia, making upto 425% of
global organic land, equivalent to 10 million hectares.
Global turnover in Europe is 12 billion Euros at 10% growth rate.
Government of Pakistan provided Rs 50 billion subsidy for fertilizer section.
Samia Mumtaz made an initial investment of Rs. 200,000.
Panjeeri provided about 25-30 items of Daali Earthfoods at a minimum.
Marium had 2 runners each for the Karachi and Lahore markets.
Daali is dealing with 8-10% of Lahore, Karachi, Islamabad and Faisalabad market. It
aims to achieve about 30% of more sales within the next year.
At least Rs.1.5 million is required to buy raw materials from Daalis 4-5 suppliers
that are spread among Pakistan.

Yearly Net Income Comparison

1600000

1400000

1200000
Net Income (Pk Rs.)

1000000

800000

600000

400000

200000

0
2009 2010 2011 2012
Year

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Group-5 Daali Earthfoods: The Expansion Issue: CASE-5 MBA-1 (2015-2017)

Comparison of Annual Raw Materials Requirement

Desi Black Chick Pea

Desi Barley
Raw Material

Desi Sarson

Haldi

Wheat

0 50 100 150 200 250 300 350 400 450

Weight in MON (x40 Kgs)

Issues & Symptoms:

Issues: One of the partners Ms. Samia Mumtaz, though a sleeping partner is unable to put
her efforts in managing the company.
Symptoms: As, she is busy focusing and pursuing her acting/ show business career.
Issues: Stringent regulation for sale and export of organic food products.
Symptoms: Currently EU, USA, Canada, Japan and may other countries requires certain
certifications for import of organic food within their borders.
Issues: Conventionally grown crops and agricultural products not safe for human
consumption.
Symptoms: Use of artificial and chemical fertilizers and pesticides, having harmful effects
on land, environment and human health causing land infertility and various diseases.
Issues: Instead of promoting and supporting organic agricultural activities in Pakistan,
government is providing support and subsidies to the modern agricultural.
Symptoms: Government subsidy for the fertilizer sector.
Issues: Initial reluctance of consumers to accept organic products, creating sales and
marketing issues.
Symptoms: Slow penetration into to local market, lack of consumer awareness and limited
product lines available for sale.
Issues: With expansion of business, shop named Panjeeri was set up to market Daalis
products, but not successful.

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Group-5 Daali Earthfoods: The Expansion Issue: CASE-5 MBA-1 (2015-2017)

Symptoms: MS. Samias personal commitments to her career and due to high operational
costs and low profit margins.
Issues: Unfair market competition by non-organic products.
Symptoms: Direct or indirect competitors like Sungold organics, Roshni association Dawn
and Engro foods.
Issues: Financial crunch especially during the crop harvesting seasons, because of bulk
purchasing of raw materials at annual basis.
Symptoms: With growth in sales and to ensure constant quality of its products they had to
bulk buy raw products from farmers during the harvesting seasons.

Major & Minor Problems:

Major Problem: Financial constrains and expansion problems due to increasing demand of
Daalis Organics products. Should they sell their business and exit or to expand by arranging
funds for bulk purchasing and operations.

Minor Problems: Some of the core problems faced by Daali Earthfoods that could be
categorized as minor problems are listen as under:

Ms. Marium being the active partner and the only manager, she is unable to handle
expanding business alone.
Due to expansion and the nature of the business Daali Earthfoods is facing financial
crunch, for annual bulk buying of raw materials.
Micromanaging techniques of Ms. Marium.
How to expand operations and marketing and sales.
Quality control and assurance of Daalis organic products.
Problem building a competent human resource.

Alternative:

She can make another partnership or hire a manager in order to expand her business.
The one only reason for demand of organic foods was the excessive use of fertilizers,
so she should conduct some awareness programs however possible.
She should raise her voice in National or Provisional assembly with someones help.
First it must be analyzed that where is more demand needed for these products, then
she should open a shop there.

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Group-5 Daali Earthfoods: The Expansion Issue: CASE-5 MBA-1 (2015-2017)

In order to compete with giants like Engro Foods, she can merge her business with
someone else in order to cope with the market.
Instead of annual buying in bulk, they could go for self-sufficiency by leasing land
and producing their own raw material.

Recommendation:

They should not sell their business as they have put in a lot of effort in creating a
niche market and public awareness for organic products.
There is a huge potential for growth in local and international market. Hence, they
should avail expansion opportunities.
She can apply for a bank loan or she can merge her business with a major food
company or she could also approach venture capitalists for financing.
She should take help from her partner or approach professional HR recruiters in order
to hire a competent team.
As this industry is a growing industry with continual development, there is a very
high chance that Daali will be worth much more in the future.

Conclusion:

Given all of the above facts and figures, we conclude that it would be quite profitable for
Daali to expand because there are a lot of options for the owners to consider before giving up.
Plus, in such an era in which people are getting more concerned and aware regarding
healthcare issues, Daali, as a pioneer in organic farming in Pakistan, can become a solution to
these growing problems for their consumers.