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Entire Notes for Parle-g Case Study_11mba0068

Entire Notes for Parle-g Case Study_11mba0068

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Published by Mohan Vamsi
Parle-G case Study
Parle-G case Study

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Published by: Mohan Vamsi on Jun 20, 2012
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Case study of Parle-G and analysis:Parle is a leading biscuit manufacturing company in India established in 1939, thisbrand had been strongly associated with offering value for money (VFM), aperception created in the market unfaltering for more than 60 years , which was notonly associated with Parle-G biscuits but had come to define the entire glucosebiscuit category. Presently, the company is facing a decline of profit margins from15% 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 alsobeing the largest selling biscuit brand by volume in world stated by a study madeby 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 packetof 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 salesof 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 inphase wise. Even the no. of biscuits were reduced from 16 to 15.In addition tothese the company has taken cost-control measures to safeguard the margins byfollowing ways:1)
 
Bring manufacturing centers near to wholesalers by franchising productionso as to reduce the distribution costs.2)
 
The company had also consolidated buying and entered into forwardcontracts with vendors of raw materials to reduce supply chain costs etc.,where similar waysIndia was the 3
rd
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 barriersfor branded biscuits which are the players mainly in unorganized sector. In theorganized sector, the 5 main categories of biscuits were glucose, marie , sweet,cream and milk. Glucose was a high-volume low margin biscuit category thatrepresented 42% of the biscuit market and was accompanied by strong consumer
 
expectations of low price points. The growth strategy of all biscuit companies wasto secure the migration from the entry-level glucose category to the indulgentcategories. The organized sector produced 1.7 million tons of biscuits per annumvalued at Rs 110 billion in 2008 where this category was growing at average rateof 15%. A study by Mckinsey Global Institute, released in May
07, showed thatthe income levels of households in India were rising and categorized into 5 typesbasing 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-urbanMumbai in western India. A decade later, it diversified into making biscuits. Thecompany deployed state-of-art machinery that provided automatic printing andpackaging and has the largest baking oven in Asia. Parle had 10 manufacturingsites of it own , in addition to 60 contracting manufacturing facilities, locatedacross India. The company had 40% share of the total biscuit market in India and15% share of the total confectionery. Parle produced approximately 650,000 tonsof biscuits per annum, of which Parle-G, the flagship brand, comprised 500,000tons. The company recorded sales revenue of Rs 35 billion in 2008-09, of whichParle-G
contribution alone was 68%. The company had adopted a
follow thecustomer
strategy of targeting the Indian diaspora whereby the potentialcustomers were already aware of Parle-G brand in their home country. Parle had 3contract manufacturing facilities outside India one in Bangladesh and two in SouthAfrica.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 whichParle-G had penetrated 96.8 million households, where the penetration rate of 
 
glucose category of the Indian biscuits industry was 84%.The company segmentedits customers for Parle-g into 2 groups i.e., retail and institutional consumers.Children and mothers comprised the first segment. Children formed 60% of thetarget audience for the company where the category of children aging between 5 to14 years. The second segment consists of the institutional consumers includeshospitals, factories, rly. Stations, schools, govt. offices and other corporate officeswhich 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 categoryin domestic market in India. Even the Hindustan Unilever a multinationalconsumer packaged goods company, had also entered into this category of biscuitmanufacturing.Advertising And Promotion:Every year since 2004, Parle had spent between Rs600 million and Rs 700 millionon advertising and sales promotion, which constitutes 2% of annual revenues. Of late, the company had begun to reply on celebrity endorsements, a promotionstactics popular with some of Parle-G
s competitors. Parle was airing commercialsin 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 in2.5 million outlets. It was available in every village with a population of 500people on a par with pre-paid mobile cards. The company had 8000 wholesalerswho had their own sales force. The company
s sales organization structure wasbased on the geographies and included zonal sales managers, divisional salesmanagers, area managers, sales executives and sales officers. The logistics werehandled by depots, which also served as clearing and forwarding agents

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