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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. Porters 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
Logistic
s.

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

Thanking
All

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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
FMG XVIII A
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
 Organize
d
Unorgani Secto
ze d r
Sector 45
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 wouldnt
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 tofees. 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 FMG XVIII
into theA
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 afect the eventual Marketing
Strategy for
Parle

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

Increase in per capita income of

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

Huge gap between the

Wholesale Price
Index and the Consumer Price
Index.

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

India is currently the largest

producer of Biscuits in the
world.

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

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5. Porters Value Chain: Parle G
The Porters 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 dificult to
establish it.
Investments in promotions,
advertisements, and
product
establishment are very high.
The distribution system is
complex and dificult 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 FMG XVIIIofA
pack
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%.
ITCs 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. FMG XVIII A

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

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8. The Distrib
ution Channel work:
Parle Net

Manufacturing Unit of
Parle at various
locations

Parle Depots

Wholesalers and Distributors

Transportation to next level

Retailers: Pan-bidi/city stores

keting Management 2 Trimester 2 FMG XVIII A

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,A
FMG XVIII
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 eficiency 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
members 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: FMG XVIII A
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 ofered 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 Parles 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
Parles 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. Parles
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 companys 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 companys 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 diferent locations where the values of the companyFMGare XVIII
madeA
clear and enforced to the channel members.
 Also the fact that Parle being a cooperative society cannot aford 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--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. FMG XVIII A
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 doesnt 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 companys 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
retailers margin in case of Parle G is 8% as compared to Britannias
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 ofices in diferent
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. FMG XVIII A
 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 companys 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 industrys main problem.
While the other companies fail to replenish demand due to lack in
procurement of raw material, Parles 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
afect the cost of the product the company doesnt 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.

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