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Parle: Distribution, Logistics, and Management – a Report

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Table of Contents
1. Acknowledgement 3

2. About the „Biscuit‟ Industry 4

3. Parle: History and More 6


3.1 About Parle 6
3.2. History of the company 6
3.3. Parle Biscuits 6
3.4. The Production Units of Parle 7
3.5. Parle Annual Production (Biscuits) in Million Metric Tonnes 7

4. The Macro-environmental Factors 8

5. Porter‟s Value Chain: Parle G 9

6. The Perceptual map 10

7. Product Life Cycle 10

8. The Distribution Channel Network: Parle 11

9. The Parle G Distribution Network 12


9.1. Intensive Distribution 12
9.2. The Channel Members of the Distribution Network of Parle 12
9.3. The Channel Members and Logistics 12
9.4. Channel Dynamics 12

10. The Parle Distribution Network Logistics 13


10.1. Selection of Channel Members for Parle 13
10.2. Motivation of Channel Members 14
10.3. The Channel Members of the Parle Distribution Network 14
10.3.a. The Distributors 14
10.3.b. The Retailers 15
10.4. Evaluation of the Channel Members 15

11. Conflicts and Co-Operation 16


11.1 Conflicts among the Channel Members 16
11.2. Co-operation among the Channel Members 16

12. The Distribution Channel and Parle 17

13. Suggestions for the Parle Distribution Channel 18

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Acknowledgement

Parle: Distribution, Logistics and Management – a Report would not have been possible without
the support of the various distributors and Channel Members who were interviewed in the due
course.

We would like to acknowledge the valuable feedback from the factory unit of Parle: Parle Agro
Foods in Garia, Kolkata, West Bengal. A Special mention needs to be made for Mr. Bizeet
Kumar, Production Executive, Quality Control Division, Parle Agro Foods, Garia, Kolkata. He
was very helpful in furnishing the intricate details of how the distribution logistics of Parle
actually work.

Thank you, to Mr. Debanjan Sengupta, Production, Quality Control, Keventor Agro, Subsidiary
of Parle Agro, Kolkata. He was really kind to share details of the distribution channel prevalent
therein.

A special mention for Prof. Nalin Jain, teaching us the vital concepts of Channel Design and
Logistics.

We‟d sincerely like to acknowledge all the help that we got from various domains in the
successful execution of this project report.

Thanking All

Aakriti Kakkar
Gaurav Sharma
Gourab Kundu

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2. About the ‘Biscuit’ Industry
The Indian bakery industry is dominated by the small-scale sector with an estimated 50,000 small and
medium-size producers, besides the 15 units in the organized sector. Apart from the nature of the
Industry, which gravitates to the markets and caters to the local tastes, the industry is widely dispersed
also due to the reservation policies (relating to the small scale industries) of the government.

The two major bakery products, biscuits and bread, account for 82% of all bakery production. The
unorganized sector accounts for about half of the total biscuit production estimated at 1.5 million tons.
It also accounts for 85% of the total bread production and around 90% of the other bakery products
estimated at 0.6 million tons. The last includes pastries, cakes, buns, and others.

Biscuits are estimated to enjoy around 37% share by volume and 75% by value of the bakery industry.
The organized sector caters to the medium and premium segments, which are relatively less price-
sensitive. The organized sector is unable to compete at the lower price range due to the excise
advantage enjoyed by the informal sector.

The organized segment in biscuits has witnessed a steady growth of about 7.5%, conforming broadly to
the growth rate of GDP. Bakery industry in India is the largest of the food industries with annual
turnover of about Rs. 3000 Crores. The biscuits are becoming quite popular in rural areas as well.
Nearly 55% of the biscuits are consumed by rural sectors.

The biscuit industry in India comprises of organized and unorganized sectors. The FBMI represents the
organized biscuit industry consisting of small scale, medium and large biscuit manufacturers located in all
zones and all states of the country.

The biscuit industry is been experiencing steady growth of 14-15% annually. In 2008, the growth
exceeded 16% mark on account of exemption from Central Excise Duty on biscuits. The Industry
estimates project a 17+% growth of the industry. The sentiments are sedate in lieu of the economic
downturn that has hit the entire country. The FMCG sector on its part too is reeling under this slump.

20
18
16
14
12
10
8
6
4
2
0
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10*

Data courtesy: scribd.com

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Even today the Indian Biscuit Industry is dominated by the unorganized sector with a composite market
share of 55%.

Indian Biscuit Industry as on


2009-10

Organized
Sector
Unorganize 45%
d Sector
55%

Indian Biscuit Industry market share


as on 2009-10 (in %)

Sunfeast
Priyagold 9% Others
12% 9%

Britania
30% Parle
40%

Data courtesy: scribd.com

Major industry players


Organized Indian Biscuit Industry

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3. Parle: History and More
3.1 About Parle

Parle Products has been India's largest manufacturer of biscuits and confectionery, for almost 80 years.
Makers of the world's largest selling biscuit, Parle-G, and a host of other very popular brands, the Parle
name symbolizes quality, nutrition and great taste. With a reach spanning even the remotest villages of
India, the company has definitely come a very long way since its inception.

Many of the Parle products - biscuits or confectioneries, are market leaders in their category and have
won acclaim at the Monde Selection, since 1971. With a 40% share of the total biscuit market and a 15%
share of the total confectionary market in India, Parle has grown to become a multi-million dollar
company. While to consumers it's a beacon of faith and trust, competitors look upon Parle as an
example of marketing brilliance.

3.2. History of the company

In 1929 a small company by the name of Parle products emerged in British dominated India. The intent
was to spread joy and cheer to children and adults alike, all over the country with its sweets and
candies. The company knew that it wouldn‟t be an easy task, but they decided to take the brave step. A
small factory was set up in the suburbs of Mumbai, to manufacture sweets and toffees. A decade later it
was upgraded to manufacture biscuits as well. Since then, the Parle name has grown in all directions,
won international fame and has been sweetening people's lives all over India and abroad.

Apart from the factories in Mumbai and Bangalore Parle also in Bahadurgarh in Haryana and Neemrana
in Rajasthan, which are the largest biscuit and confectionery plants in the country. Additionally, Parle
Products has 7 manufacturing units and 51 manufacturing units on contract.

3.3. Parle Biscuits

Parle biscuits are linked with factors of power and wisdom providing nutrition and strength. Parle
biscuits are indeed much more than a tea- time snack, they are
considered by many to be an important part of their daily food. Parle
provides one and all with a basket of biscuits which is not only
satisfying but are also of good and reliable quality. Parle biscuits cater
to all tastes from kids to senior citizens. They have found their way
into the Indian hearts and homes.

Parle G is a source of strength for both body and mind due to the
sumptuous amount of milk and wheat. It is the Largest selling
Biscuit Brand in the world.

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3.4. The Production Units of Parle
The company also has plans to setup operations in Assam and Andra Pradesh in the near future.
Data source: Parle official website

3.5. Parle Annual Production (Biscuits) in Million Metric Tonnes

1.5

0.5

0
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
Data source: Parle official website

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4. The Macro-environmental Factors
The factors enlisted below affect the eventual Marketing Strategy for
Parle

Positives Negatives
Tax based incentives by the Rigid „Standards and Measures‟ act.
government. Value Added Tax Conformance to size.
Political Factors
Helpful state governments in
Production and distribution licenses are
providing incentives towards
difficult to attain.
infrastructural developments.

Increase in per capita income of


Indians. Rise in sugar prices manifold. (up by
over 25% in six months)
Economical Factors
Increase in the purchasing power on
Slump in the country‟s GDP to 6%
Indians.

Huge gap between the Wholesale Price


Index and the Consumer Price Index.

Technological Factors
Innovations in the sector, Boast to Better products mean heightened
Research and Development. competition.

India is currently the largest producer


of Biscuits in the world.

Social Factors
Better lifestyle, affluence and better „Health‟ consciousness consumers:
perception about biscuits some may move to healthier options.

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5. Porter’s Value Chain: Parle G
The Porter‟s Value Chain for Parle G has been assessed on the five parameters of power of suppliers
and buyers, treats from substitute and new entrant and the internal rivalry are as follows:
The threat of a new entrant in
the organized biscuit industry
for Parle is low:
 The industry is capital
intensive; with already so many
existing players in the market, a new
entrant would find it really difficult
to establish it.
 Investments in promotions,
advertisements, and product
establishment are very high.
 The distribution system is
complex and difficult to duplicate.

The Power of suppliers to affect


Parle G is fairly low:
 The basic commodities
such as wheat, sugar are available.
Though with the increasing gap
between the WPI and CPI, prices of commodities is a worry. Sugar especially is a bottleneck.

Intra-industry rivalry for Parle is high:


 Even though Parle is a comfortable market leader with 40% of the market share, there is
immense competition among the existing players to capture the maximum market share. The
USP of Parle G has been „price‟. A biscuit pack at Rs. 3, readily available in all pan-bidi shops
made it such a success story. But today this business model is being duplicated by the other
industry members.

The power of buyers is very high:


 Availability of many kinds of biscuits in the low and moderate pricing category. This forced
Parle G to come out with a Rs. 30 family pack of biscuits. It also modified its distribution
channel for the same purpose.
 The unorganized sector is always an option for the buyers.

The power of substitutes to affect the prospects of Parle G is also very high:
 The growing packaged snack industry is become a real cause for concern for the biscuit
industry. This is for this reason that most members of this industry have ventured into the
confectionary and packaged snack business as well.
 The traditional home cooked Indian snacks are always a threat.

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6. The Perceptual map The Indian Biscuit Industry Price v Distribution

Data source: scribd.com

 As per the above perceptual map, Parle G scores the best. It has the best distribution network
among the competitors. It also has the best „lowest‟ pricing strategy.
 Britania is the nearest to Parle, and its no surprise that Britania has 30% market share only after
Parle at 40%.
 ITC‟s Sunfeast and Priya Gold are somewhere in between in price and distribution network. A
market share in the region of 10% is evidence to the fact. Marino and Horlicks are niche players
hence, have a higher price and a less intensive distribution strategy.

7. Product Life Cycle

 Presently, Parle G is in the maturity stage of its PLC.


 Having said this, the brand is going strong.
 Intensive distribution employed.

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8. The Distribution Channel Network: Parle

Manufacturing Unit of Parle


at various locations

Parle Depots

Wholesalers and Distributors

Transportation to next level

Retailers: Pan-bidi/city stores

Procurement: Customers

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9. The Parle G Distribution Network
9.1. Intensive Distribution
Parle uses Intensive Distribution for Parle G. This is the ideal strategy for the market leader as intensive
distribution has the following advantages:
 Increases coverage and sales
 Increases product availability
 Encourages retailers to compete aggressive. Higher competition leads to narrower margins for
the retails hence, increases the ultimate margin for the manufacturer.

9.2. The Channel Members of the Distribution Network of Parle


The Parle distribution network for biscuits has essentially four levels as enlisted below:
 Parle Depots
 Wholesalers and Distributers
 Carry Forward Agents (if required)
 Retailers

9.3. The Channel Members and Logistics


Parle has nearly 1500 wholesalers, catering to 425000 retail outlets directly or indirectly. A two hundred
strong dedicated field force services these wholesalers and retailers. Additionally, there are 31 depots
and Carry and Forward agents supplying goods to the wide distribution network.

Parle has level 1, level 2, level 3 distribution channels levels.

Level 1:
Availability of Parle G biscuits at all departmental stores across the length and breadth of the country.

Level 2:
Since it's an FMCG product this channel exists for customers scattered throughout the country.

Level 3:
Mass consumption and suitable for National and International coverage. For e.g. Parle's international
operations consist of serving markets in the Middle East, Africa, South America, Sri Lanka, Australia and
North America for which the 3 level distribution channel exists.

9.4. Channel Dynamics


Parle has a multi-channel marketing system since it uses more than two marketing channels to reach all
its customer segments.

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10. The Parle Distribution Network Logistics
10.1. Selection of Channel Members for Parle
Parle takes into consideration a host of factors while selecting the channel members. This is because it
believes that selection of channel members is a long run decision and the rest of the decision regarding
the supply chain depends upon the efficiency and coverage by the channel members.

The following are the host of factors considered by the company in selecting the channel members:

 Authentication is required by the regarding the identity of the channel members, which includes the
name and address, photograph of the location.
 Proof of solvency which requires name and address of the channel member‟s bankers
 Safety of the inventory, which means that the distributor/ dealer should get the stock of the
company insured.
 Inventory or the perishable goods kept by the distributor/ dealer should be in good condition which
means a detail of storage space and Refrigeration facility is to be provided.

 Details of the delivery vehicle, which includes the following:


 Light Commercial Vehicles,
 Matador,
 3 Wheeler Van,
 Tricycle Van and Hand/Push cart.
 The number and model of each of the vehicle needs to be furnished to the company.

 Company acknowledges the fact that it needs to be sensitive to the market demands. For this it
requires that a number of salesmen needs to be present on the field.
 The salesmen too are divided into various categories like
 The Field salesmen
 Counter salesmen
 The details of Clerical Staff and labour are to be provided. The technical competence of the
salesmen needs to be mentioned.
 Details of the various products of other companies that the channel member keeps have to be
provided. The following also need to be furnished with the above:
 The annual sales of these products have to be mentioned.
 Details of complementary products and product lines need to be mentioned.

 Dealers of the company must carry a good reputation. This is due to the fact that Parle believes that
the reputation of the dealer affects the clientele in the long run.
 Market coverage by the distributors needs to be defined which includes details of Geographic
coverage and Outlets per market area.
 The company also requires the dealers to furnish any Advertising and Sales initiative undertaken by
them on behalf of the company.

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10.2. Motivation of Channel Members

Parle strongly believes in maintaining a good relationship with the channel members so that they are
genuinely motivated to work for the company. For the company, motivating its channel members is of
utmost priority because of the following reasons:
 If the channel members are motivated, they can also initiate advertising and sales promotion
schemes on behalf of the company.
 However to keep the channel members motivated to work, the company has to incur certain
costs but the benefits of it are felt in the long run.

10.3. The Channel Members of the Parle Distribution Network

10.3.a. The Distributors


 One of the main factors, which keep the distributors motivated, is the margin. Usually the margins
offered by Parle are 8%. Now-a-days it has been raised to 8.5%.

 Volume wise this comes out to be a big figure since Parle‟s product has a good demand in the
market. However compared to the other companies the margins are still lower since the new
players in the market offer a much higher margin. But the very fact that Parle‟s products have good
demand in the market motivates the distributors to stock it.

 Parle Products being a cooperative cannot afford to give heavy monetary incentives. Parle‟s
products are considered to be value for money since the company does not believe in charging high
margins. In fact all monetary incentives are just the short run means to promote the company‟s
product.

 In order to keep the Channel members motivated in the long run, Parle has build on the concept of
“Trade Marketing” which makes the dealers and the distributors believe that the company‟s
products are worthy of being pushed in the market.

 The company is organizing various Total Quality Management initiatives and workshops. Here
various counseling measures are undertaken by the company to improve the overall working of the
distribution network.

 Vision and mission statement: the company cascades down the vision to the various channel
members; this is done through various events organized by the company at different locations where
the values of the company are made clear and enforced to the channel members.

 Also the fact that Parle being a cooperative society cannot afford to spend exorbitantly on such
events therefore it has a very traditional way of organizing these get together which leaves an impact
on the members.

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10.3.b. The Retailers
 Trade schemes: these are undertaken by the company only for the hard selling items e.g. Biscuits
and Snacks etc. for these the company raises the margins by 2%, also schemes like good packaging
incase of butter and cheese is undertaken by the company. However this is only a short-term
initiative to push the products of the company.

 Glow boards: the company puts up glow boards at the retailer and pays the major portion of the
cost.

 Schedule of the salesmen: they provide the retails with this schedule so the retailers can pre
estimate the quantities of the various products needed.

 Infrastructure facilitation: the company facilitates the retailers to buy beautiful stalls by
formulating an easy payment program and a commitment to buy back the equipment at a reasonable
price when the value of the equipment has depreciated.

10.4. Evaluation of the Channel Members

Parle has a three pronged process to evaluate its channel members. These are the Beat Plan, the
Cumulative Performance plan and Target versus Achievement Plan.

 Beat plan: this plan is generated for the various product categories. A weekly schedule is
prepared for various markets and the retailers the turnover for each of the product is calculated
for the wholesale dealers.

 Cumulative performance: the performance of the dealers is averaged out over a period of
three years where a comparison is made of the present performance vis-à-vis the previous ones.

 Target versus achievement: the performance and the targets are compared and therefore
the gaps are identified which help in evaluating the wholesalers and the distributors and planning
for the next year as well. This is done for each of the product category.

 Other criteria: these need to be fulfilled by the channel members of Parle.


 Details of the bank guaranty
 Photographs of the offices
 Details of the wholesalers and the distributors‟ salesmen and the product lines they deal
in.
 The computerization facility available.
 The storage space.
 Stall facility with photograph.
 Details of the delivery vehicle with photograph.
 Summary of the monthly potential sales of markets.
 Summary of the product wise monthly sales potential of institutions.

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11. Conflicts and Co-Operation
Among the Channel Members and Parle

11.1 Conflicts among the Channel Members

 Ownership of assets: Previously the company used to give the products on lease to the
retailers, when the company wanted the stuff back; the retailer disagreed to comply and created
issues of ownership.
 Stocking issues: The company doesn‟t want the retailers to stock the competing brand in the
company leased stall, which at times s hard to manage as retailers tend to do it often.

 Replacement of products: The deterioration in the product calls for fail in replacement by
the company this major issue of vertical conflict.

 Credit policy: Compared to the market, the company‟s credit period is less that specially
incase of institutional sales is very important.

 Packaging: The channel members for easy storing demand a better quality of packaging.

 Replenishment: The replenishment of the stocks is not prompt in case of Parle cheese Biscuit
and all hard selling items.

 Margins: The Company provides least margins to all the channel members. For e.g. The
retailer’s margin in case of Parle G is 8% as compared to Britannia’s 12%

11.2. Co-operation among the Channel Members

 Parle quality circles: The members of the local channel meet together every month to share
issues and the achievements of the channel members. This is an ongoing activity facilitated by the
company offices in different locations; this enables the channel members to learn together and
reduces the horizontal conflicts among the wholesalers and the distributors.

 Pilot salesmen scheme: To reduce the financial burden of the distributors this scheme is run
whereby half the cost of the salesmen is born by the company and the rest half by the
distributor

 Scheduling of sales: The wholesalers and the distributors provide their respective schedules
of their sales men to the retailers so that the retailers can plan out and place the orders in
advance.

 Agreement defining rights: The company makes the distributors sign an agreement where
the areas of operation for each of the distributors are defined, therefore avoiding any conflict
amongst the distributors regarding their areas of operation.

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12. The Distribution Channel and Parle
 The company‟s strength is in the procurement of raw materials and essentially not the
distribution of its product. Even though Parle is the market leader in biscuits. But, distribution
logistics is the industry‟s main problem. While the other companies fail to replenish demand due
to lack in procurement of raw material, Parle‟s inventory management is sound.

 Parle has loyal cooperatives that provide products only to them, over time the relationship of
trust has built up with these people that Parle leverages now.

 The transport channel is another strong point for Parle. As these transporters have grown with
the company overtime; the bonding with them enables the company to give least margins when
it comes to the distributors in the industry, lowering the costs.

 Parle believes that there is an ongoing demand in the market and therefore no promotions are
needed to increase the sales, also the fact this would affect the cost of the product the company
doesn‟t undertake many promotion schemes.

 Parle is able to provide products at the least price in the industry, and is able to give least
channel margins as the channel members earn through volumes and not through high margins.

 The company has been able to push its new products into the market by hooking them onto the
fast moving products like Parle butter bite.

 Because of the strong relationship that Parle shares with the constituent channel members, it
forces the channel members to carry all its new products.

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13. Suggestions for the Parle Distribution


Channel
The following are the suggestions that Parle can implement to better its distribution
channels:

 Increase the margins:

In order to motivate the channel members it is also very essential for the company to
increase the margins for the hard selling items.

 Pushcarts:

These should be increased in number in order to increase the market reach (especially the
rural market). This can provide with a very effective channel.

 Parle should also go in for ‘Parle’ Zones:

It is primarily for big city retail outlets. Here all the Parle products can be stalked. This can
be an effective mode of „umbrella marketing‟. This strategy can be implemented in regions
where the footfalls are large in number.

The advantages of this alternative channel would be as follows:


 Full range display.
 Easier to promote new products.
 Easy to push impulse purchase products.
 The Parle Brand building exercise will be enhanced.

- The End

Marketing Management 2 Trimester 2 FMG XVIII A