Parle-G

A Report

This has been the flagship product of the company and since its introduction in 1939, has been associated with offering value for money (VFM). In December 2009, with rising input prices of two major raw materials, sugar and wheat flour, Parle faced a difficult decision involving the potential price increase of Parle-G. With the rise in the manufacturing costs in the last 18 months, the margins of Parle-G had decreased from 15% to 10% and there was enormous pressure on Parle to reinstate the profit to 15% for which the hike in prices looked imminent. Earlier attempt at raising the prices in Jan 2004, its first in 13 years was not met with success. Parle had hiked the price of its 100-g packet of 16 biscuits from Rs. 4 to Rs. 4.50. The 100-g packet was Parle’s best selling SKU, contributing to 50% of brand revenues every year.which declined their sales. Four years later Parle focused on reducing the weight of the 100-g package in phases. Consumers did notice this change but acceptive of it as long as the prices of the packet remained untouched In spite of these measures, the price hike seemed likely to restore margins, particularly because the company had ramped up its own manufacturing capacity by 10% on an investment of Rs. 500 million in 2008. But, price setback received by the company in 2004 indicated that the consumers were very sensitive to any price hike and thus had the company in the dilemma. As Parle-g is the leader of the industry so the competitors followed Parle-g in their pricing strategy

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railway stations. schools etc.INDIAN BISCUIT INDUSTRY India is the third largest producer of biscuits in the world. the five main categories of biscuits were glucose.organized and unorganized. (BIL) launched its Tiger Glucose brand of biscuits. The biscuit manufacturing is divided into two sectors. factories. The unorganized sector ruled the low price varieties proving local stores with freshly baked biscuits and the producer . contributed to about 10% of parle’s sales revenue. COMPETITORS • • Parle first faced nationwide competition in its glucose segment In 1996. after U. POSITIONING 2 . sweet. In the organized sector. marie. The organized sector produced 1. The second segment included hospitals.7 million tons of biscuit per annum..A and China. Of late growth in premium categories had superseded the earlier high growth rate low-price categories. The company segmented its customers for Parle-G into two types: retail and industrial consumers. cream and milk. with a growth rate of 15%.retailer relationship was not easy to break for the branded players.S. The former consisted of 60% of the national market but received tough competition from the unorganized sector comprising of mom and pop establishments catering to markets of rural interior. valued at Rs. • Soon after ITC entered with Sunfeast Glucose biscuits. 110 billion in 2008. Britania Industries Ltd. The age group of 5-14 formed 20% of total population and had potential to generate lifelong revenues for the brand. CONSUMERS. Children and mothers comprised the first segment with children being 60% of target audience.

4. 700 million on advertising and sales promotion.• Parle-G before 1980 was called Parle Gluco to differentiate itself from prevailing competition. It was a vulnerable position • customers were migrating to high end biscuits owing to growth in their income KEY DECISIONS The decision by Mr. Parle-g is 3 . kulkarni should be little bit risky by increasing the price as well as it can be tricky too by not increasing the weight because if we look at current scenario income level is high and purchasing power of customers are high. • Parle-G contributed to 68% of total revenue and Rs. constituting approximately 2% of annual revenues ISSUES IN DECEMBER 2009 • To overcome the entrenched VFM perception which could make a huge difference in Parle-G’s handling the current pricing dilemma. 600 million to Rs.00 SKU contributed 50% to its annual sales. Parle-G also replaced cooked meals in primary schools mid day meals scheme Since 2004 • Parle had been spending between Rs. • Secondly Parle’s huge dependence on a single brand and a single SKU seemed dangerous. 50 paisa or one rupee increase in the price is not going to affect the pocket of customers much and therefore price sensitivity will be less as we know that Parle-g is the market leader and if parle-g will increase the price then competitors will also increase the price because raw material price is high and competitors are also helpless only because of parle-g they are not able to increase the price. • • In late 1990’s the company started focusing on kids.

tea companies Packaging. Present market scenario shows stiff competition so to acquire the mind share of the customer it is important for parle-g to rejuvenate its traditional product. Marketing strategies • • • Reducing in operational cost. hide & seek and compensate with low margin products such as parle-g • Tie up with central govt.g. The current perception shows that parle-g has an outdated packaging which is been the same for a quite a long time.since it has outdated packaging. for schemes like mid day meals 4 . milk biscuits and number of SKUs are constantly reducing. there is room for attractive packaging. so it is important for parle-g to reposition its product. shared transport Tie up with other consumer goods e. Since the taste has been changing with time the children are attracted towards cream. Parle-g has acquired the image of affordable and whole some product.famous for perception of value for money if it is eroded then they will lose their majority of market share which in turn will effect the sales and revenues of the company CURRENT PERCEPTION Parle-g is always been regarded as a health benefit product. • Increase the price of premium product such as bourbon. e. it is being viewed as a commodity rather than a plan.g.This product emphasis on the concept of physical fitness for the young and for boys in particular for muscular strength.

we can conclude that instead of changing the price of the product focusing more on the sales boost of the product and also looking into the opportunity of penetrating new markets where the reach is low or negligible will lead to better prospects in increasing the profit margin.• • • Increase the number of SKUs Reduce the size of the biscuit and keeping the number of biscuits same Product placement KEY LEARNING POINTS • • • • Price sensitivity Supply chain efficiency management Managing operations and related cost Marketing strategies CONCLUSION.learning from previous incident of 2008 issue which included the drop in sales of parle-g regarding the price change. 5 . Also changes can be included in operational and supply chain of the product to reduce production cost.

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