Price warrior

Parle-G enjoys close to 70% market share in the glucose biscuit segment and has held its
price line for 25 years now. Ranju Sarkar explains how.
Its a brand that has held its price line at Rs 4 for 25 years now the price was last raised in
1994 by 25 paise. So, its not for nothing that Parle-G is the worlds largest-selling biscuit by
volumes. Not that the company didnt try to raise prices to offset the overall hike in costs.
Three years ago it did so, but quickly rolled it back after volumes fell sharply and consumers
wrote to lodge their protest.
We want to cater to the masses and have consciously tried not to increase the price. ParleG is available for Rs 50 a kg. There are very few food items that are available for Rs 50-60 a
kg, says Pravin Kulkarni, General Manager (Marketing), Parle Products. Parle is, of course,
not doing it for charity. Soaring input prices meant it opted for reducing the weight of the
biscuit than increasing the price first from 100 gm to 92.5 gm in January 2008, and then
to 88 gm in January this year in line with other biscuit-makers and FMCG players.
Regular customers would have noticed the number of biscuits in a pack come down from 16
to 15 even as each biscuit became lighter, but they seemed to understand the cost
pressures on the firm. The gamble paid off: Parle was able to sustain its volumes. Strict cost
control at every point in its supply chain also helped Parle entered into forward contracts
with suppliers, outsourced production, increased the number of manufacturing locations to
60 and consolidated buying. Raw material costs account for 60 per cent of the total costs in
this segment and packaging costs (plastic films) account for 20-25 per cent of this.
Nirmalaya Kumar, professor of marketing at London Business School, feels its a very smart
strategy. At this price point, price becomes more important than the weight of the biscuit.
Its very interesting and similar to the dollar stores in the US, he says.But price is not its
only USP. What makes the Parle G brand tick is also that it has been positioned on the health
platform (a single pack of biscuit offers 450 calories). Its earlier punchline was Parle-G:
swadh bhare, shakti bhare (full of taste and energy). Currently, the brand uses two
punchlines. Parle-G: G for Genius and Hindustan ki Taakat (the countrys strength).
The brand, says Kulkarni, meets different needs of customers: calories (energy), nutrition
and value-for-money enough reasons why Parle-G enjoys close to 70 per cent market
share in the glucose biscuit category and probably has the deepest reach. It reaches 2.5
million outlets, including villages with a population of 500 people, on a par with Unilevers
Lifebuoy, ITCs cigarettes or mobile pre-paid cards. Its also one of the few FMCG brands in
the country, whose customers straddle across income segments.
The brand is estimated to be worth over Rs 2,000 crore, and contributes more than 50 per
cent of the companys turnover (Parle Products is an unlisted company and its executives
are not comfortable disclosing exact numbers). Last fiscal, Parle had sales of Rs 3,500 crore.
Competition has, of course, been trying to wean away customers from Parle. Britannia
relaunched its Glucose-D biscuit as Tiger in 1995 and boasts of 17-18 per cent share, while
ITCs Sunfeast glucose has captured 8-9 per cent, according to industry sources.

Even Levers had forayed into this segment in 2003 and launched a glucose biscuit branded
as Modern, after it acquired the bakery business of Modern. There are strong regional
brands, including Priya Gold (west), Cremica (north) and Anmol (east).
But they still have their work cut out. Nirmalaya Kumar feels the Parle-G story is so
fascinating that it deserves to be a case study. What would be interesting to see is whether
it will be able to retain its leadership in the coming years as income grows in the hinterlands
and consumers upgrade and develop new tastes.

Cadbury sees sweet success in low-unit price packs Mr Anand Kripalu, President
(Asia), and MD
Chocolates and confectionery major Cadbury India, which launched its blockbuster brand
Cadbury Dairy Milk in Rs 2 packs a little over a year ago, is seeing a surge in sales volumes
as consumers lap up its offerings.
In an interview to Business Line, Mr Anand Kripalu, President (Asia), and Managing Director,
Cadbury India Ltd, said, For the Cadbury Dairy Milk brand, I would say that the Rs 2 pack
could be almost 15 per cent of the volumes of the brand now. And, its been in the market
only for the last 15 months.
Massive opportunity
Only when aspirational brands have offers which allow them to be accessible, does the
market explode, Mr Kripalu explained.
I think there is enormous opportunity at that end of the market. In fact, India is the kind of
the market where there is a massive opportunity at the top, middle and the bottom, and you
cant choose and say I will play only in onewith a 70 per cent share you have to play all,
he elaborated. Cadbury, which has a lions share of the Rs 2,000-crore chocolate market,
had seen topline growth of 23 per cent and bottomline growth of 28 per cent last year.
Asked why the company didnt hit on this strategy earlier when the market always existed,
Mr Kripalu said that playing a low unit price game requires a change in manufacturing and
mindset. It requires different kinds of machines, packaging, and the supply chain has to
ensure distribution and availability. And, I suppose, for anything there is a time, he added.
Price points
Elaborating on the low unit price (LUP) market, Mr Kripalu said that consumers buy SKUs
(stock keeping units) first and brands second. They buy a commodity at Rs 2. If this brand
is not available at this price point, they will buy some other brand at Rs 2. So, you (the
consumer) are in the market for an SKU first very often, and the brand second. Therefore,
getting price points right is fundamental, he explained.
Asked about brand loyalty in the LUP price market, he said a brand may be relevant to the
consumer, but if it is outside his price matrix, then it is not as relevant. Particularly in India,
if you start getting into lower price points, affordability is fundamental. It may be less
relevant when you go from Rs 40 to Rs 45 or Rs 45 to Rs 50. If a consumer has Rs 2 in his
pocket, and the product price is Rs 3, the company is out of the market for that consumer.
And, that is so true of this country, he explained.
Asked about the spiralling input costs of commodities, Mr Kripalu said both cocoa and sugar
are matter of concern. However, he said that the company was a great believer that
affordability and volume growth are fundamental to business success in this country. So, to
the extent possible, pricing has to be protected and nurtured.
What the company does every time there is cost pressure, is cut costs across the business.
Price increase is the last decision and not the first. So we try harder and harder to squeeze
cost everywhere else in the business. And we have done that, he added.