Case study Report:

Kanpur confectioneries Private limited

by

Saumya Sahoo

Code No. AM2611

Executive Summary

Kanpur Confectioneries Private Limited (KCPL) is a leading biscuit manufacturing company in north region until in 1975 it faced a stiff competition by the unorganized as well as organized sectors to sell glucose biscuit. By 1980 the company incurred loss since there was a significant decline in sales . In 1985, it became a contract manufacturer of Pearson health drink limited to produce 'Good health' biscuits. The joint venture by KCPL and Pearson Limited was not a success since it faced stiff competition from A-one Confectioneries Private Limited(APL). On September 1987, APL expressed their desire to expand its supply to the market by subcontracting orders to other manufacturers including KCPL. But KCPL should work on reviving it's brand image since Mohan Kumar, founder of KCPL had the vision of KCPL emerging as a leading national brand and competing successful with APL.

Situation Analysis:

On September 10 1987, Mr Alok kumar Gupta, chairman and managing director of KCPL, held a meeting with his brother to discuss about their decision of becoming a contract manufacturer of A-one confectioneries private limited (APL). APL was a leading national player in Biscuit manufacturing company.

KCPL was started by Mohan Kumar Gupta to sell sugar candies under the brand 'MKG'. He implemented various marketing strategies in building the brand 'MKG'. Various phases that KCPL had been gone through is discussed below.

Phase 1960-1970:

KCPL's Biscuit manufacturing business showed acceleration owing to Huge growth in demand of biscuits at more than 15%p.a. Extended the business by selling Ice-cream, salt and Marie biscuits under the brand 'MKG'.

Phase 1973-1974:

Prince Biscuits was the market leader in northern region with 130 tonnes sales followed by KCPL with 110 tonnes sales followed by International Biscuits with 100 tonnes sales followed by A-one biscuits in forth position.

Phase 1975-1980:

Competition increased with the advent of unorganized sector into the market who enjoyed tax evasion and imitation of packaging style of leading brands. As a result KCPL got stuck in middle as it could not increase its price to take care of rising costs of labor and material.

In 1980-1981, KCPL doubled its capacity from 120 tonnes to 240 tonnes.

Phase 1983-1987:

KCPL's sale declined and it incurred heavy losses. Candy business was on decline and hence was closed.

In 1985, Pearson health drink limited entered into a joint-venture with KCPL to manufacture 'Good Health' biscuit. The initial response of Good Health biscuit was not very encouraging since it faced stiff competition from APL. Hence the joint-venture by Pearson and KCPL was a failure.

On September 8 1987, Mr Bharat Shah, chairman of APL mentioned in a meeting of Confectioneries Manufacturers Association of India(CMAI) that his company was interested in augmenting it supplying capacity by promoting contract manufacturing units (CMU) that made biscuits according to specifications mentioned by APL.

Problem Definition:

KCPL is in dilemma and has to decide their response to the offer of becoming a contract manufacturing unit of APL along with pros and cons of accepting the offer.

Decision Criteria:

SWOT analysis of 'MKG' brand is shown below:

OPPORTUNITIES

Changing Consumer preference Become CMU Explore new markets Estimated Annual growth of 15%

THREATS

Entry of various new entrants i.e organized sector as well as unorganized sector.

Increasing distribution cost

STRENGTH

Extensive distribution network low and medium price range Business ethical values of company

WEAKNESS

Dependence on retailers and grocery stores for displaying MKG product on self.

High percentage of absenteeism Uneven Production

They should take decision based on SWOT analysis:

1) Future of MKG as a brand

2) Pros and cons of becoming a CMU of APL

3) Profits

Options:

1. Rebuild 'MKG' brand2. Approach Pearson health drink limited with a new business strategy.3. Accept APL's offer

Selection and Implementation:

The KCPL should work on reviving it's brand. KCPL has to work on technology upgradation, increasing capacity utilization and managing a efficient workforce. The prime problem with KCPL was that the fifty percent of the work force used to abstain from work without notice which led to uneven production. Monthly wage scheme will lower the number of absenteeism. KCPL should make an effort to join hands with unorganized sector to convert them into organized sector under KCPL and promise them to pay a good conversion rate with a condition that KPCL should retain full control over the quality and production process. This would increase the sale capacity of KCPL.

'MKG' should adopt Market Penetration Strategy i.e. low price along with capturing of large market. On the other hand they should focus on providing good quality product at the same time, which means it should use value pricing method. The value for money positioning helps to generate large sales volume for the product. For example, the MKG biscuit can be sold for Rs2,Rs5,Rs10 and Rs25. This strategy will serve two benefits. First of all, sales of loose biscuit will reduce to large extent and secondly it will be consumed by people of all age groups and from rich to poor.

Moreover, KCPL should adopt strategy to target young generation i.e. the school going children and the college going students. The margins of profits will be low but if sales are made to only canteens of institutions, then the expenses on advertisement and others to increase sales will reduce and so the profits will increase.

KCPL should make an effort to associate with various government initiatives like Primary education scheme, national rural health mission centers and mid-day meals being serve in primary school. This will help in Brand registration and target new profitable markets.

Secondly on the retailer side, 'MKG' has to take strict measures against vendors who used to sell loose biscuits. The consumers are heath conscious. An awareness about selling of loose biscuits and pseudo biscuit that are manufactured under less hygienic production condition will rebuild 'MKG' brand image in the mind of the consumers. Poster respentating a

comparison of pseudo biscuit and MKG biscuit should be advertised in newspapers, hoarding on crossroads as well as retailers shop to promote the brand.

KCPL should approach Pearson health private limited with a new business strategy. The product should be launched at lower price. Conversion rate of Rs 1.5 per kilo rather than Rs 3 per kilo can reduce the cost of product to some extent such that KPCL can utilize its surplus capacity.

As a contingency plan, KCPL can accept the offer of APL. For KCPL, such CMU offered advantages such as getting assured return on its investment and access to APL's manufacturing expertise, but the disadvantages were the possible loss of independence in decision making, dilution of company's own brand 'MKG' and family prestige. For APL, CMU route was an attempt to reduce its cost of manufacturing.

Monitoring:

1. Alok Kumar looked after finance and liaison function. Vivek looked after human resource management and manufacturing section. Sanjay looked after marketing, logistic and administration. They should interact every week to review the operation and performance of business.

2. Keep a vigilant eye on the competitor's movement.3. Appoint supervisor to monitor Hygienic production condition.4. Production greatly depends upon efficiency of work force. Mr. Vivek Gupta should

strictly monitoring the activity of work force and take strict measure against those who abstain from work without prior notice.

5. Sales of glucose biscuits are highly price sensitive. A small increase in price will result in high decline in sales. A slight increase of Re 1 will make the consumer switch to other brands. Hence monitoring on price and cost of production is necessary.