Case study of Parle-G and analysis:

Parle is a leading biscuit manufacturing company in India established in 1939, this

brand had been strongly associated with offering value for money (VFM), a

perception created in the market unfaltering for more than 60 years , which was not

only associated with Parle-G biscuits but had come to define the entire glucose

biscuit category. Presently, the company is facing a decline of profit margins from

15% to 10% in the category of glucose biscuits. This is only due to the increase of

prices of major raw materials sugar and flour which comprised 55% of

manufacturing costs risen during the past 18 months. Parle had the distinction of

having maintained the $1 per kg price point for Parle-G since 1990, and it also

being the largest selling biscuit brand by volume in world stated by a study made

by Global market research firm A C Nielsen in 2002.

In jan 2004, the company made a first attempt to raise the price of its 100g packet

of 16 biscuits from Rs4 to Rs4.50 as the most of the revenue‟s portion was

contributed by this brand nearly 50%.As result within the span of six month sales

of the 100-gm packets declined by 40% showing the negative consumer reaction.

Again after 4 years the management focused on reducing the weight of the pack in

phase wise. Even the no. of biscuits were reduced from 16 to 15.In addition to

these the company has taken cost-control measures to safeguard the margins by

following ways:

1) Bring manufacturing centers near to wholesalers by franchising production

so as to reduce the distribution costs.

2) The company had also consolidated buying and entered into forward

contracts with vendors of raw materials to reduce supply chain costs etc.,

where similar ways

India was the 3rd

largest producer of biscuits in the world, the USA and China.

Manufacturing sector mainly consists of two sectors 1)organized &2) Unorganized

.Low- priced varieties ruled in the rural markets which have put up entry barriers

for branded biscuits which are the players mainly in unorganized sector. In the

organized sector, the 5 main categories of biscuits were glucose, marie , sweet,

cream and milk. Glucose was a high-volume low margin biscuit category that

represented 42% of the biscuit market and was accompanied by strong consumer

expectations of low price points. The growth strategy of all biscuit companies was

to secure the migration from the entry-level glucose category to the indulgent

categories. The organized sector produced 1.7 million tons of biscuits per annum

valued at Rs 110 billion in 2008 where this category was growing at average rate

of 15%. A study by Mckinsey Global Institute, released in May‟07, showed that

the income levels of households in India were rising and categorized into 5 types

basing on the individual annual incomes:

1) Globals (those earning above Rs1million per annum).

2) Strivers (earning between Rs500,000 and Rs 1 million per annum).

3) Seekers (earning between Rs200,000 and Rs500,000 per annum).

4) Aspirers (earning between Rs90,000 and Rs200,000 per annum).

5) Deprived (earnings below Rs90,000 per annum)

Company background:

In 1929, Parle had started its operations as a manufacturer of candies in sub-urban

Mumbai in western India. A decade later, it diversified into making biscuits. The

company deployed state-of-art machinery that provided automatic printing and

packaging and has the largest baking oven in Asia. Parle had 10 manufacturing

sites of it own , in addition to 60 contracting manufacturing facilities, located

across India. The company had 40% share of the total biscuit market in India and

15% share of the total confectionery. Parle produced approximately 650,000 tons

of biscuits per annum, of which Parle-G, the flagship brand, comprised 500,000

tons. The company recorded sales revenue of Rs 35 billion in 2008-09, of which

Parle-G‟ contribution alone was 68%. The company had adopted a “follow the

customer” strategy of targeting the Indian diaspora whereby the potential

customers were already aware of Parle-G brand in their home country. Parle had 3

contract manufacturing facilities outside India one in Bangladesh and two in South

Africa.

Consumers:

The most widely used consumer classification system in India was known as socio-

economic classification, which was developed by the market Research society Of

India in the early 80s.In 2005-06 India had 207.1 million households of which

Parle-G had penetrated 96.8 million households, where the penetration rate of

glucose category of the Indian biscuits industry was 84%.The company segmented

its customers for Parle-g into 2 groups i.e., retail and institutional consumers.

Children and mothers comprised the first segment. Children formed 60% of the

target audience for the company where the category of children aging between 5 to

14 years. The second segment consists of the institutional consumers includes

hospitals, factories, rly. Stations, schools, govt. offices and other corporate offices

which received a discount of 3-4 % on bulk purchases.

Competitors:

BIL and ITC Ltd. are the two main competitors for Parle-G in the glucose category

in domestic market in India. Even the Hindustan Unilever a multinational

consumer packaged goods company, had also entered into this category of biscuit

manufacturing.

Advertising And Promotion:

Every year since 2004, Parle had spent between Rs600 million and Rs 700 million

on advertising and sales promotion, which constitutes 2% of annual revenues. Of

late, the company had begun to reply on celebrity endorsements, a promotions

tactics popular with some of Parle-G„s competitors. Parle was airing commercials

in which Aamir Khan a popular Actor became entangled in humorous situations,

which supported the tagline “G for genius.”

Distribution:

India had 15 million retail outlets spread across the country Parle-G was sold in

2.5 million outlets. It was available in every village with a population of 500

people on a par with pre-paid mobile cards. The company had 8000 wholesalers

who had their own sales force. The company‟s sales organization structure was

based on the geographies and included zonal sales managers, divisional sales

managers, area managers, sales executives and sales officers. The logistics were

handled by depots, which also served as clearing and forwarding agents

COMPARISIONS IN EXIHIBITS-1

1) From observations Rs 5 pack is not at all necessary in the market as the

difference between the weights of Rs5 pack and Rs4 pack in the month of

Dec 08- Dec 09 which is 5.5 grams.

2) From observations Rs 12 pack is not at all necessary in the market as the

difference between the weights of Rs15 pack and Rs12 pack in the month M

ay 07- Jun 08 is 13 grams.

3) From observations Rs 25 pack is not at all necessary in the market as the Rs

20 pack is enough to serve in order to decrease the cost of packing.