KANPUR CONFECTIONERIES

PRIVATE LIMITED
Case Analysis
INTRODUCTION
 KCPL STARTED IN 1945, BY MOHAN KUMAR GUPTA.
 FIRST ENTERPRENEUR TO SET UP A CANDY UNIT IN UP.
 IN 1946 TO 1950, 30 UNITS WERE SET UP IN UNORGANISED SECTOR OF
RAJSTHAN TO SELL VARIETY OF CANDIES.
 BY 1960’S HE WAS A MARKET LEADER IN CANDIES IN NORTHERN REGION.
 DECIDED TO INVEST SURPLUS CASH TO DIVERSIFY INTO GLUCOSE BISCUIT
MAKING UNDER “MKG” BRAND.
 DURING 1970’S DEMAND WAS GROWING AT MORE THAN 15%.
 IN 1973-74 KCPL REACHED NO.2 POSITION IN THE MARKET.
 IN 1986-87 DECREASED THE MONTHLY PRODUCTION OF ‘MKG’ BISCUITS.
 MKG BISCUITS WERE KNOWN FOR THEIR QUALITY, CRISPNESS AND
AFFORDABLE PRICE.
 IN 1986-87 KCPL SOLD 360 TONNES TO SMALL AND MEDIUM SIZED
INSTITUTION.
 IN MAY 1986 SIGNED CONTRACT WITH “PEARSON HEALTH DRINKS LTD” FOR
PRODUCTION OF GOOD HEALTH BISCUITS.
TECHNOLOGY AND OPERATION
 Biscuit making involved ingredients Maida, Sugar, Vanaspati and certain
preservatives in proportion.

 Qualities of material was checked in laboratory for impurities.

 Biscuits were manually packed in packets of 100 grams.

 Dependent on both casual and permanent workers.

 Salary for permanent were 2.75 lakh/month and wage for casual labour
Rs.50/day.

 Absenteeism were high.

 Production varies from 2 tonnes/day to 6tonnes/day.

FAMILY MEMBERS AND
RESPONSIBILITIES
 Mohan Kumar had 6 sons.

 Eldest son ALOK KUMAR joined business in 1960 and looked after FINANCE and
LIASON department. Later became CHAIRMAN and MD of KCPL.

 Second son vivek joined business in 1965 and looked after HUMAN RESOURCE and
MANUFACTURING.

 Youngest son sanjay joined business in 1974 and was responsible for MARKETING,
LOGISTIC and ADMINISTRATION.
MARKETING STRATEGY BY MKG
 Advertised in vernacular news paper.

 Joined hand with local retailers to advertise the

brand.

 Extended its range and offered cream, salt and

Marie biscuit.
COMPETITORS
 1973-74 Market was dominated by A-ONE Confectioneries private Ltd and
International Biscuit Limited.

 1975-80 competition increased with setting up of 70 units in organised sector.

 8 new units were set up in organised sector of UP.

COMPETITORS MARKET STRATEGY
 Small Competitors sells unbranded biscuits.

 Sold them with a brand names sounding similar to the leading brands.

 Intimated the packing style of leading brand.

PROBLEMS FACED BY KCPL
 Could not increase price to take care of rising cost of labour and raw material.

 Did not have national scale to reduce the cost considerably.

 Did not have premium image to get higher price.

 1983-84 and 1986-87 sales declined.

 The candy business was on decline.

 Candy business was closed.

PRODUCTION AND FINANCIAL
POSITION OF KCPL OVER TIME
 In 1973-74 Monthly sale was 110 tonnes

 In 1980-81 Sale was increased to 15% and turnover was 2 crore and Net Profit.

 increased to 12% Profit was 20 lakh.

 Also in 1980-81 KCPL doubled its capacity from 120 tonnes to 240 tonnes per
month.

 In 1983-84 Sale increased to 3 Crore and Net Profit to 25 Lakh.

 In 1986-87 average production of Biscuit was 120 tonnes per month.

PROPOSAL BY PEARSON
 It promised a load of 100-120 tonnes.

 Conversion rate RS 3 per Kg.

 In 1986-87 its order was 50 tonnes.

 Reimburse full cost of material

 Allow KCPL to run on existing line of business.

 Officers check quality of biscuit before dispatch .

PROPOSAL OF APL
 In 1987 it offered initially 70 tonnes per month.

 Conversion rate Rs 1.5 Kg

 Inspect the production process and recommend changes if required and would be carried out by KCPL of its
own.

 Supply pre-printed packing material.

 To adhere quality procedure, 2 quality officer of APL would be appointed.

 Supply APL secret ingredients to KCPL.

 Required to buy material from APL authorised dealer.

 Reimburse raw material cost.

 Initial contract is for 3 years.

OPTIONS AVAILABLE WITH KCPL
 OPTION 1:
KCPL can accept the offer from APL and become its
CMU
 OPTION 2:

KCPL can reject the offer and continue with production

of MKG and GOOD HEALTH for PEARSON
OPTION 1
 Contract capacity can be increased if KCPL meet
expectation.

 KCPL can improve and evolve the production

procedure with technical help that is been provided
by APL.

 It will be in profitable situation so it can be able to

improve its own situation of MKG
OPTION 2:
 Pearson can increase the production from 50 tonnes
to 100 tonnes which will eventually increase the
profit margin.

 Since PEARSON biscuit is not doing good in maket

as APL biscuits have already captured the market
so probability to increase the production is less.

 MKG is also running in loss.

 PARTICULARS "MKG" APL Total Of each Total Of MKG Total of APL(North Total of MKG producing 70 MKG producing 50 MKG producing 100
PARTICULARS Region) APL(National) tonnes For APL tonnes for Pearson tonnes for Pearson

1200(National)
Sales per month(in tonnes) 120 200(North)

Price per tonne 18100 19000 Total Sales 2172000 3800000 22800000 1366866.67 1113750 2227500

Consumption of maida per tonne(in

kg) 750 700 Total Cost of Maida 900000 1372000 8232000 490000 375000 750000

Consumption of vanaspati per

tonne(in kg) 150 140 Total Cost of Vanaspati 624000 933333.3333 5600000 326666.6667 260000 520000

Consumption of sugar per tonne(in

kg) 200 190 Total Cost of Sugar 288000 437000 2622000 152950 120000 240000

Price of maida per bag of 50 kg 500 490

Price of vanaspati per tin of 15 kg 520 500

Price of sugar per bag of 100 kg 1200 1150

Preservatives and Packaging cost(in Total Cost of Preservatives and

tonnes) 1000 1000 Packaging 120000 200000 1200000 70000 50000 100000

Casual labour cost per tonne 300 400 Total labour Cost 36000 80000 480000 21000 15000 30000

Wage rate 50 80

Permanent salary bill per month() 275000 NA Total Salary 275000 458333.3333 2750000 160416.6667 114583.3333 229166.6667

Interest per month 10000 NA Total Interest 10000 16666.66667 100000 5833.333333 4166.666667 8333.333333

Other fixed commonities 60000 NA Total Cost of commonities 60000 100000 600000 35000 25000 50000

TOTAL COST 2313000 3597333.333 21584000 1261866.67 963750 1927500

PROFIT -141000 202666.6667 1216000 105000 150000 300000

PROFIT %ge -6% 5.633802817 5.6338028 8.32100592 15.56420233 15.56420233

ACTION PLAN
 KCPL accept the proposal of APL.

 Continue contract with PEARSON Group.

 Working for both company KCPL could also improve

its own production line Brand image of MKG by
their secret ingredients and technical up gradation.
THANK YOU
QUESTIONS IF ANY?