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CHAPTER 1 INTRODUCTION

INDIAN BUSCUIT INDUSTRY Biscuit industry contribute Rs 8,000 crore to the FMCG industry and provide a vast opportunity for growth, as the per capita consumption of biscuits is less than 2.1 kg in our country. India It is classified under two sectors: organized and unorganized. Branded /Organized to Unbranded/Un organized market share of biscuit has been 70% for Organized sector and 30% for Unorganized sector . Apart from Big 3( Britannia , Parle , ITC ) there are around 150 medium to small biscuit factory in India . The Industry is now facing problem from increase of raw material price. With Government VAT up to 12.5% has added to their woes .Biscuit consumption per capita in India has grown to 2.1kg per capita in comparison to 10kg per capita consumption in USA ,UK and Europe . India Biscuits Industry came into limelight and started gaining a sound status in the bakery industry in the later part of 20th century when the urbanized society called for readymade food products at a tenable cost. Biscuits were assumed as sick-man's diet in earlier days. Now, it has become one of the most loved fast food products for every age group. Biscuits are easy to carry, tasty to eat, cholesterol free and reasonable at cost. States that have the larger intake of biscuits are Maharashtra, West Bengal, Andhra Pradesh, Karnataka, and Uttar Pradesh. Maharashtra and West Bengal, the most industrially developed states, hold the maximum amount of consumption of biscuits. Even, the rural sector consumes around 55 percent of the biscuits in the bakery products. The total production of bakery products have risen from 5.19 lakh tonnes in 1975 to 18.95 lakh tones in 1990. Biscuits contributes to over 33 percent of the total production of bakery and above 79 percent of the biscuits are manufactured by the small scale sector of bakery industry comprising both factory and non-factory units. The production capacity of wafer biscuits is 60 MT and the cost is Rs.56,78,400 with a motive power of 25 K.W. Indian biscuit industry has occupied around 55-60 percent of the entire bakery production. Few years back, large scale bakery manufacturers like cadbury, nestle, and brooke bond tried to trade in the biscuit industry but couldn't hit the market because of the local companies that produced only biscuits. The Federation of Biscuit Manufacturers of India (FBMI) has confirmed a bright future of India Biscuits Industry. According to FBMI, a steady growth of 15 percent per annum in the next 10 years will be achieved by the biscuit industry of India. Besides, the export of biscuits will also surpass the target and hit the global market successfully.

HISTORY-Parle Legacy Parle Products fame and familiarity is undeniable. Considering its extensive reach, the brand Parle is known and recognized by everyone. Over the years, Parles sweets and biscuits have become a household name. From kids to adults, everyone loves and cherishes these treats. It gives us great pleasure to see our consumers enjoy and embrace Parle products on daily basis. Our confectioners and chefs have the utmost authority at Parle. Had it not been so, the beginning of Parle would have been quite different. In 1929 a small company by the name of Parle products emerged in British dominated India. The goal was to spread joy and cheer to children and adults alike, all over the country with its sweets and candies. Although, the company knew that it wouldnt be an easy task, they decided to take the brave step. A small factory was set up in the suburbs of Mumbai to manufacture confectionery products. A decade later this factory was upgraded to manufacture biscuits as well. Since then, the Parle name has spread in all directions and has won international fame. Parle has been sweetening the lives of people all over India and abroad. Apart from the factories in Mumbai and Bangalore, Parle also has factories in Bahadurgarh, Haryana and Neemrana, Rajasthan. These are the largest biscuit and confectionery plants in the country. Additionally, Parle Products also has 10 manufacturing units and 75 manufacturing units on contract. Milestones - The Decades of Progress 1929: The first year of operation. Our only assets were hard work and hope. 1939: Ten years of determined effort brought results. Things began to take shape. And we tried even harder. 1949: The formative years were over. We had come of age. 1974: Here was the first evidence of Parle as it is today.

OVERVIEW Parle G 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 to 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 the consumers it's a beacon of faith and trust, competitors look upon Parle as an example of marketing brilliance. Available Anywhere Today, the great strength of Parle Products is the extremely widespread distribution network. Even at the remotest places, you can buy Parle biscuits and sweets from the local grocer. It has taken years to create this extensive network. Parles sales force started with one salesman in Bombay and some agents in few other cities. Gradually, Parle Products expanded. Soon sweets and biscuits were being sent by rail to Calcutta, Delhi, Karachi, Madras and other major cities. As production increased, distribution was amplified. Full time salesmen were appointed in different areas. Currently, Parle Products has over 33, 00,000 distribution outlets.

Products of Parle MILANO BOURBON

HIDE & SEEK Parle-G Parle Marie KrackJack Golden Arcs Top

BUSCUIT

Nimkin Kreams Milk Shakti 20-20 Cookies MONACO Digestive marie

Other

SWEETS

Melody

Mango Bite

Chox

Kachcha mango bite

Poppins

other

Snacks

Fulltoss

Parle Wafers

Monaco smart chips

CHAPTER 2 GROWTH OF INDUSTRY

GROWTH OF THE INDUSTRY

During the five and a half decades of post-independent India, the biscuit industry in the country has achieved a position of pre-eminence as the third largest producer of Biscuits in the world, after the USA and China.

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. Indian Biscuit Manufacturers Association (IBMA), instrumental in obtaining the excise duty exemption, estimates annual growth of around 20% in the year 2008-09. Growth in biscuit marketing has been achieved also due to improvement in rural market penetration.

The annual Growth showed a decline of 3.5% in 2000-01, mainly due to 100% hike in Central Excise Duty (from 9% to 16%). Production in the year 2001-02 increased very marginally by 2.75% where in 2002-03 the growth is around 3%.

2003-04 - 15% 2004-05 - 14% 2005-06 - 14% 2006-07 - 13% 2007-08 - 15% 2008-09 - 17%

The annual Growth showed a decline of 3.5% in 2000-01, mainly due to 100% hike in Central Excise Duty (from 9% to 16 %). Production in the year 2001-02 increased very marginally by 2.75% where in 2002-03 the growth is around 3%.Thereafter the annual growth increased to over 8 %. The Federation's estimate for the year 2007-2008 indicates a growth of approximately 8% to 9%. According to IBMA, the biscuit industry in India witnessed annual growth as 15% in 2003-04, 14% in 2004-05 and 2005-06, 13% in 2006-07, 15% in 2007-08 and 17% in 2008-09. While the growth rate has been stagnating during last 4 years, it has picked up momentum during the 2007-08 and the first quarter of 2008-09 mainly on account of exemption from Central Excise Duty on biscuits with MRP up to INR 100 per kg, as per Union Budget for 2007-08.

On the other hand, import of biscuits, especially in the high price segment has started from 1998-99, but however, the quantum of imports has not so far increased alarmingly and has remained at around 3.75% of the consumption of biscuits in the country. Exports of biscuits from India have been to the extent of 7.5% of the total production. Exports are expected to grow further in the year 2007-08 and beyond.

Biscuit is a hygienically packaged nutritious snack food available at very competitive prices, volumes, and different tastes. According to the National Council of Applied Economic Research (NCAER) Study, biscuit is predominantly consumed by people from the lower levels of society, particularly children in both rural and urban areas with an average monthly income of Rs. 750.00. Annual Production:

The annual production of biscuit in the organized sector continues to be predominantly in the small and medium sale sector before and after de-reservation. The annual production was around 7.4 Lakh tones in 1997-98. In the next ten years, biscuit production witnessed an annual growth of 17%, up to 2008-09. Though dereservation resulted in a few MNCs, i.e. Sara Lee, Kellogs SmithKline Beecham, Heinz etc entering the biscuit industry in India, most of them, with the exception of SmithKline Beecham (Horlicks Biscuits), have ceased production in the country.

According to the production figures of members available up to the calendar year 2009 to the FBMI, the total production is increasing from year to year. The production of biscuit for the last 6 years is as under:

(In Lakh Metric Tonnes) 2003-04 - 11.00 2004-05 - 12.54 2005-06 - 14.29 2006-07 - 16.14 2007-08 - 17.14 2008-09-18.01

ANNUAL PRODUCTION OF BISCUIT INDUSTRY


20 15 10 5 0 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

The production of organized and unorganized sectors of the biscuit industry is in the proportion of 60%:40% ratio. EXPORTS of Biscuit are estimated to be around 15% of the annual production during the year 2007-08. IMPORTS of biscuits into India have not shown any significant growth during the last two years and have not affected production/sales by the Indian Biscuit industry.

GROWTH DETERMINENTS: The main growth determinants of the industry are as follows: The focus on urban markets has also contributed significantly to the growth of the biscuit industry. Focused advertising and new launches helped the biscuit industry to grow Catering to the mass marketing segments The excise duty cut on biscuits from 16% to 8% has given a boost to biscuit industry.

CONSUMER BEHAVIOR FOR Parle-G

In India it is a habit to have biscuits along with chai or tea - Parle G is referred to as "biskut" in rural areas - thus when asked for biskut to a shopkeeper it simply means Parle-G biscuit in rural areas. Understanding consumer behavior is tough. The study of consumer behavior includes the knowledge about the consumer, his buying motives & buying habits. Keeping all this in mind, the factors influencing the buying behaviour of consumers are: Parle-G being a consumable product is not influenced by factors like cultural factors. As shown above, social factors are further sub divided into 3 parts namely reference groups, family & social role & status.

Reference Group People, especially kids are always influenced by the people around them. They are influenced by friends, relatives, family members specially elder siblings, etc. so if they see anyone around them having parle-G biscuit, they too want to eat it.

Family In his case also, if its a usual habit of the family members to have pale-G with tea or coffee, the kids in the growing stage or any new member joining the family for tea will form a similar habit or the later will be offered the same biscuit.

Personal Factors The factors whose intensity differs from person to person are together termed as personal factors. They are as follows :-

Age Parle-g is consumed maximum by the kids in the age group of 5-10 years i.e. the growing age group. Kids, who have formed the habit of having Parle-G in their early stages of life, continue this practice even after growing up. They continue their consumption of Parle-G even after they grow up.

Occupation The buying behavior of the consumer is influenced also by the occupation he or she belongs to. In case of Parle-G, the purpose for buying the product varies from a person with a high post in a M.N.C. to a poor laborer. For the executive employee, he may or may not buy the product. He may buy a more expensive or an imported biscuit brand because he can afford it. Also he may buy it only to be one of the many snacks available to him. On the other hand, a poor laborer would buy a packet of Parle-G simply to satisfy his hunger. For him, it is not matter of choice or luxury, but a necessity because its the easiest & the cheapest he can get.

Income Income of a person decides its core expenditure segment. If a laborer earns a fixed amount & if a biscuit like parle-g which for sure ensures high level glucose content & immediate energy regained, he would defiantly opt to buy a parle biscuit packet & not spend even that minimal amount of Rs.4 on anything else. But since Parle-G is a lowpriced, value for money product a persons income does not really play a role in influencing the purchase of the product. Consumers of all income groups do buy the product.

Psychological Factors Motivation For Parle-G the main & the basic motivation which pulls consumers towards buying it is simply hunger. This is what pulls the consumers towards the purchase of Parle-G. Also, since biscuits are perceived as snacks, when a consumer is drinking tea he or she is motivated to buy Parle-G at that time.

Perception Consumers believe Parle-G to be a good quality product which is cheap too. They also perceive it to be a great snack with tea

SWOT ANALYSIS

STRENGTHS

Low price as compared to competitors Sizeable market share in the country. Offers variety of products under its brand. Different sizes of packets are available. An experienced team of sales and marketing executives. Deep and effective coverage Largest distribution system.

WEAKNESS

Breakage of biscuits while delivering to retailers No proper replacement system for broken biscuits to retailers Improper and irregular supply. Fewer shares in Premium biscuit market. Dependent on its flagship brand, Parle-G Poor packaging in family pack of glucose biscuits. Lack of schemes for retailers and distributors.

OPPORTUNITY

Rising demand for innovative packaging in packaged foods. Retaining loyal retailers or wholesalers. Improving supply system for established brands. Huge scope for some Parle products in medical shops. Information revolution brought about by the television. Good scope for snacks and namkeens, if launched and properly promoted by Parle.

THREAT

Highly advertised brands such as Britannia. Ever increasing competition from multinationals and local companies. Increase in sale of cheap local bakery products. Emerging substitutes like wafers, snacks and toast. Margin war among the major Brands

MAJOR PLAYERS

BRITANIA INDUSTRIES LIMITED Britannia Industries Limited is an Indian company based in Kolkata that is famous for its Britannia and Tiger brands of biscuit, which are highly recognized throughout the country. Britannia is one of Indias leading biscuit firms, with an estimated 38% market share. Once upon a time, in 1892 to be precise, a biscuit company was started in a nondescript house in Calcutta (now Kolkata) with an initial investment of Rs. 295. The company we all know as Britannia today. On the operations front, the company was making equally dynamic strides. In 1992, it celebrated its Platinum Jubilee. In 1997, the company unveiled its new corporate identity - "Eat Healthy, Think Better" - and made its first foray into the dairy products market. Britannia strode into the 21st Century as one of India's biggest brands and the pre-eminent food brand of the country. It was equally recognised for its innovative approach to products and marketing. Main products produced by Britannia industries are, Good Day, Tiger, Marie Gold,50- 50,Choco -chips, Choco - nuts, Little Heart, Nutri Choice, Bourbon, NiceTime, Pure Magic, Milk Bikis, Jim -Jam, Cream Treats, Time Pass, Digestive, etc.

ITC LIMITED ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India Limited. TC's foray into the Foods business is an outstanding example of successfully blending multiple internal competencies to create a new driver of business growth. It began in August 2001 with the introduction of 'Kitchens of India' ready-to-eat Indian gourmet dishes. 2003 witnessed the introduction of Sun feast as the Company entered the biscuits segment. The packaged foods business is an ideal avenue to leverage ITC's proven strengths in the areas of hospitality and branded cuisine, contemporary packaging and sourcing of agricultural commodities. ITC has stood for quality products for over 90 years to the Indian consumer and several of its brands are today internationally benchmarked for quality.

Leadership in the Foods business requires a keen understanding of the supply chain for agricultural produce. ITC has over the last 90 years established a very close business relationship with the farming community in India and is currently in the process of enhancing the Indian farmer's ability to link to global markets, through the E-Choupal initiative, and produce the quality demanded by its customers. This longstanding relationship is being leveraged in sourcing best quality agricultural produce for ITC's Foods Division. Major products by ITC are, Milky magic, Marie, Golden Bakery, Dark Fantasy, Glucose, Dream Cream, Snack, Sweet n Salt, Nice, Vita, Special, etc.

SURYA FOODS & AGRO LIMITED Surya Food & Agro Ltd. was incorporated in November 1992 and commenced its commercial operations of manufacturing & selling of biscuits under brand Priyagold in October 1993. Over a period, It established strong manufacturing capabilities and have invested substantially in developing consumer preference for products. Its trademarks / brands Haq Se Maango & Priyagold have emerged as one of the most powerful brands in the FMCG sector. The company is committed to invest in brands, manufacturing capabilities, deliverables and distribution strength. Its strategy of strengthening the brands especially the umbrella brand Priyagold has resulted in creating immense brand recall value. The company is continuing with its effort of strengthening the brand with a scientific approach, which will result in growth of customer base, price premium, consumer loyalty which is expected to result in increased earning and ultimately enhancing enterprise value of the company. Major products produced by the company are, Butter Bite, Classic cream, Kids Cream, Bourbon, Marie Lite, Big Boss ,Magic Gold, CNC, Cheese Cracker, Snacks Zig Zag, Don, Coconut Crunch, Cheez Bit, Chat Patta, and etc.

PARLE VS BRITANNIA Description Established Nature of business No of manufacturing units Market share ( value) Ads Major methods New areas of promotion Britannia 1896 Public ltd 5 own ,40CMU 32.80% Cricket events and players Environment Parle 1929 Family run business 8 own units ,60 CMU 32.94% Celebrities endorse ment Health and wellness

IMPORTANT BRANDS PITCHED AGAINST EACH OTHER Category Glucose Marie Salty snacks Choco chips Milk Bourbon Nice Multi grain Cream Cookie Britannia Tiger Marie Gold 50-50 Good day Milk bikis Bourbon Nice Nutri choice Cream Treat Good day Parle Parle -G Parle Marie Krack Jack Hide n seek Milk sakhti Hide n Seek ---------Kreams 20-20 Leader Parle-G Marie Gold Krack Jack Good day Milk bikis Bourbon Britannia Nice Nutri choice Cream treats Good day

So the battle for market share continues and advantage is for consumers who will get better product from both these biscuit majors .

PORTERS 5 FORCES MODEL: PARLE G

Fig- Porters 5 forces model

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 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.

EXPORTS

Almost all of Parle products are market leaders and as recognition of their quality, have won Parle 111 gold, 26 silver and 4 bronze Monde Selection medals since 1971. Parle Products Pvt. Ltd. is a US $ 1 Billion conglomerate started in India in 1929. Parle manufacture and market biscuits and confectionaries. Parle have state-of-the-art machinery with automatic printing and packaging facilities. Parle biscuit baking oven is the largest of its type in Asia. Over the decades, the efforts of Parles Research & Development wing have made the repertoire of its products grow manifold. In biscuits, Parle Products has offerings in glucose, milk, sweet and salted cream, wafer crme, cumin seed and cheese categories. In confectionery, Parle have a range of toffees and hard-boiled candies available in chocolate, mint, cola, and tropical fruit flavors. Some of these are double layered toffees and center filled candies. They are packed in rolls or pillow packs, or have a single or double twist wrapping. Almost all of Parles products are market leaders and as recognition of their quality, have won them 111 gold, 26 silver and 4 bronze Monde Selection medals since 1971.Parle enjoys a 40% share of the total biscuit market and a 15% share of the total confectionary market, in India.

Import-Export The immense popularity of Parle Products in India was always a challenge to its production capacity. Now, using more modern techniques for capacity expansion, we have begun spreading its wings and we are going global. Parle biscuits and confectionaries are fast gaining acceptance in international markets, such as the Middle East, Africa and South East Asia. The more sophisticated economies like U.S.A., UK, Canada, Australia and New Zealand are also relishing Parle products. As part of the efforts towards a larger share of the global market, Parle has initiated the process of getting ISO 9000 certification. The Parle name symbolizes quality, health and great taste. And yet, we know that constantly innovating and catering to new tastes has built this reputation. This can be seen from the success of its new brands such as Hide & Seek, Mangobite etc. Today, the Parle brands have found their way into the hearts and homes of people all over India and abroad.The Parle biscuit brands, such as, Parle-G, Monaco, Krackjack, Marie Choice, Hide & Seek and confectionery brands such as Melody, Poppins, Rolacola, Mangobite enjoy a strong imagery and appeal amongst consumers across the world. This has resulted into Parle-G being the Worlds Largest Selling Biscuit.