The Break-Up of the RPG-DFI Joint Venture

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Case Details:

Case Code : BST229
Case Length : 15 Pages
Period : 1999-2009
Organization : RPG Enterprises And Dairy Farm International
Pub Date : 2006
Teaching Note :Not Available
Countries : India
Retail ing

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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In 1886, Sir Patrick Manson, a Scottish surgeon, along with five Hong Kong businessmen, established DFI to provide the expatriate Europeans in Hong Kong with uncontaminated cow's milk at a reasonable price. By 1898, there were over 15,000 European residents in Hong Kong and this led to a brisk demand for DFI's milk.

In 1904, DFI opened a retail store in Hong Kong to sell imported frozen meat. In 1918, it opened yet another retail store that mainly sold rice to the fishing community of Hong Kong. By 1928, there were six DFI retail stores in Hong Kong and the company also serviced Macau and certain other Chinese cities through its affiliates and subsidiaries.

In the mid-1990s, DFI expanded its product range to become a major food retailer and distributor. In 1972, DFI was acquired by Hong Kong Land (a company which was a part of Jardine Strategic Holdings Ltd ).However, DFI was allowed to retain its own name and operate independently...

The Joint Venture

In August 1999, RPG entered into a joint venture with DFI. RPG spun off its FW division as FoodWorld Supermarkets Ltd. (FSL), and DFI obtained a 49 percent stake in this by making an initial investment of $ 6 million. RPG held the remaining 51 percent stake in the company. In addition, DFI also obtained a 49 percent stake in RPG Guardian Ltd., which owned the Health and Glow stores...

RPG's New Retail Strategy

According to some industry observers, RPG now had to start a retail business almost from scratch, as it had lost the well-established FW brand to DFI. However, RPG was confident that it could build upon the 'more than 100-year-old Spencer's brand', which was still respected, especially in the southern part of India, to re-establish its retail business. Another problem that RPG faced was that, unlike other organized retailers like Pantaloon Retail (India) Ltd (Pantaloon) and Trent Ltd (Trent), it did not have a pan-India presence, in spite of the fact that it was one of the first companies to enter the organized retailing sector in India...

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