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Parle Products Limited

Sameer Alve – Section A

Parle Products Limited Sameer Alve – Section A

PART A EXTERNAL INDUSTRY ANALYSIS

PART A EXTERNAL INDUSTRY ANALYSIS

Industry Trend

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.

Annual Growth Rate of Biscuit Indusrty in India

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09

Annual Growth Rate

in India 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2003-04 2004-05 2005-06 2006-07

Two Sectors of Biscuit Industry

Unorganized

Sector

40%

Two Sectors of Biscuit Industry Unorganized Sector 40% 60% Organized Sector

60%

Organized

Sector

Two Sectors of Biscuit Industry Unorganized Sector 40% 60% Organized Sector

Annual Production:

The organized biscuit manufacturing industry‘s annual production figures show YOY growth indicating rising consumption pattern in India.

Annual Production Figures in Million Metric Tonnes

2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2003-04 2004-05 2005-06 2006-07
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
2003-04
2004-05
2005-06
2006-07
2007-08

Annual Prod. Fig

1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2003-04 2004-05 2005-06 2006-07 2007-08 Annual

Industry Players

Industry Players Other Players • HLL, • Bisk Farm, • Anmol, • Elite, • Cremica, •
Industry Players Other Players • HLL, • Bisk Farm, • Anmol, • Elite, • Cremica, •

Other Players

HLL,

Bisk Farm,

Anmol,

Elite,

Cremica,

Dukes,

Anupam,

Craze,

Nezone

Players • HLL, • Bisk Farm, • Anmol, • Elite, • Cremica, • Dukes, • Anupam,
Players • HLL, • Bisk Farm, • Anmol, • Elite, • Cremica, • Dukes, • Anupam,
Players • HLL, • Bisk Farm, • Anmol, • Elite, • Cremica, • Dukes, • Anupam,
Players • HLL, • Bisk Farm, • Anmol, • Elite, • Cremica, • Dukes, • Anupam,
Players • HLL, • Bisk Farm, • Anmol, • Elite, • Cremica, • Dukes, • Anupam,

Major Market Share Holders – Organized Sector

Others

10%

Parle 35%
Parle
35%
Major Market Share Holders – Organized Sector Others 10% Parle 35% Priyagold 15% Sunfeast 9% Britannia

Priyagold

15%

Sunfeast

9%

Britannia

31%

Major Market Share Holders – Organized Sector Others 10% Parle 35% Priyagold 15% Sunfeast 9% Britannia
PEST Political • Taxes • Production and Distribution licenses
PEST
Political
• Taxes
• Production and Distribution licenses
Social • ↑ in per capita consumption • India is 3 rd largest producer of
Social
• ↑ in per capita consumption
• India is 3 rd largest producer of biscuit
• Age
• Lifestyle
• Perception
Economical • ↑ in per capita income • India’s GDP growing at an average 8%
Economical
• ↑ in per capita income
• India’s GDP growing at an average 8%
Technological • Innovation • R&D
Technological
• Innovation
• R&D
• ↑ in per capita income • India’s GDP growing at an average 8% Technological •

Five Forces

Threat of a new entrant

Five Forces Threat of a new entrant Power of Buyers -Capital intensive manufacturing, advertising and distribution

Power

of

Buyers

-Capital intensive manufacturing, advertising and distribution system.

Lowmanufacturing, advertising and distribution system. - High competition among existing players to capture

- High competition among existing players to capture maximum market share. High High
- High competition among
existing players to capture
maximum market share.
High
High

Highplayers to capture maximum market share. High High Threat of substitute The ingredients are basic commodities

Threat

of

substitute

The ingredients are basic commodities such as wheat, sugar etc.

Power Low of Suppliers
Power
Low
of
Suppliers

Internal

Rivalry

wheat, sugar etc. Power Low of Suppliers Internal Rivalry -Availability of many biscuits from low to

-Availability of many biscuits from low to moderate prices - Availability of biscuits from non- organized sector

-Traditional Indian home made snacks - Bread -Growing packaged snacks industry

of biscuits from non- organized sector -Traditional Indian home made snacks - Bread -Growing packaged snacks

Opportunities & Threats

Opportunities

- Indian Biscuit Manufacturers’ Association (IBMA) estimates annual

growth of around 20% in next couple of years.

- The $220 Billion food industry is expected to grow to $300 Billion by

2015.

- Per capita consumption of Biscuits in the country is only 1.8 kg as compared

to 2.5 kg to 5.5 kg in South East Asian countries and European countries, and 7.5 kg in USA.

- Growing demand of Sugar free cream crackers & diet biscuits

- Opportunity to further grown in Urban & Rural market; Current penetration levels are

Urban Market :

:

Rural Market

75% to 85% 50% to 65%

- Grow in southern and east India

Threats

- Fluctuations in the prices of transportation costs & distribution cost due to high wedges and oil prices - Entry of ITC (having very good distribution channels) in to biscuit industry

cost due to high wedges and oil prices - Entry of ITC (having very good distribution
Strategic Maps High Marico Price Horlics Sunfeast Priya Gold Britannia Parle Low Poor Distribution Good
Strategic Maps
High
Marico
Price
Horlics
Sunfeast
Priya
Gold
Britannia
Parle
Low
Poor
Distribution
Good
Strategic Maps High Marico Price Horlics Sunfeast Priya Gold Britannia Parle Low Poor Distribution Good

Strategic Maps

High

Strategic Maps High Parle Britannia Priya Sunfeast Gold Horlics Marico Brand Known Nutrition Content Low Unknown
Parle Britannia Priya Sunfeast Gold Horlics Marico
Parle
Britannia
Priya
Sunfeast
Gold
Horlics
Marico

Brand

Known

Nutrition

Content

Low

Unknown

Strategic Maps High Parle Britannia Priya Sunfeast Gold Horlics Marico Brand Known Nutrition Content Low Unknown

Strategic Maps

High

Innova

tion

Low

Parle Britannia Priya Gold Sunfeast Horlics Marico
Parle
Britannia
Priya
Gold
Sunfeast
Horlics
Marico

Poor

Technology

Advanced

Strategic Maps High Innova tion Low Parle Britannia Priya Gold Sunfeast Horlics Marico Poor Technology Advanced

Strategic Maps

Sunfeast Priya Parle Britannia Gold Horlics Marico
Sunfeast
Priya
Parle
Britannia
Gold
Horlics
Marico
Strategic Maps Sunfeast Priya Parle Britannia Gold Horlics Marico Poor Packaging Advanced

Poor

Packaging

Advanced

Strategic Maps Sunfeast Priya Parle Britannia Gold Horlics Marico Poor Packaging Advanced

KSFs & Threshold Factors

KSFs • Price • Distribution Network • Nutrition content • Brand • Innovation
KSFs
• Price
• Distribution Network
• Nutrition content
• Brand
• Innovation
Threshold • Technology • Packaging
Threshold
• Technology
• Packaging
Price • Distribution Network • Nutrition content • Brand • Innovation Threshold • Technology • Packaging

Matrix – Put market share as last row

KSFs

Weight

Parle

Britannia

Priya

Sunfeast

Marico

Horlics

Gold

Price

35%

9

8

5

4

2

2

Distribution

25%

9

8

6

4

3

2

Network

Nutrition

20%

8

8

5

4

4

4

Content

Brand

13%

9

9

6

5

3

3

Innovation

7%

9

9

7

5

4

2

Total Score

 

44

42

29

22

16

13

Weighted

 

8.8

8.2

5.52

4.2

2.92

2.53

Score

Market Share

 

35%

31%

15%

9%

6%

4%

  8.8 8.2 5.52 4.2 2.92 2.53 Score Market Share   35% 31% 15% 9% 6%

PART B INTERNAL ANALYSIS

PART B INTERNAL ANALYSIS

Parle - Company Background

India's largest manufacturer of biscuits for almost 80 years.

With a reach spanning even the remotest villages of India.

35% share of the total biscuit market in India.

• With a reach spanning even the remotest villages of India. • 35% share of the

Parle Values

“The great tradition of taste and nutrition is consistent in every pack on the store shelves, even today. The value-for-money positioning allows people from all classes and age groups to enjoy Parle products to the fullest”

Source – http://www.parleproducts.com/about/about_core_values.asp

age groups to enjoy Parle products to the fullest” Source – http://www.parleproducts.com/about/about_core_values.asp

Parle Products – Biscuits

Parle – G

Krackjack

Monaco

Kreams

Hide & Seek

Marie

Milk Shakti

– Biscuits • Parle – G • Krackjack • Monaco • Kreams • Hide & Seek

Parle Production Factories

Opportunity To Grow
Opportunity
To
Grow
Parle Production Factories Opportunity To Grow

Competency Ladder

Sustainable Comp Adv:

- Strong sales / distribution N/W

- Value for money products -Understanding of consumer psyche

Distinctive Competency: - Strong sales / distribution N/W - Value for money products -Healthy Products
Distinctive Competency:
- Strong sales / distribution
N/W
- Value for money products
-Healthy Products
- Understanding of consumer
psyche
Competitive
Advantage:
- Healthy Products

Competency:

- Strong sales / distribution N/W

- Healthy Products

- Value for money products

- Understanding of consumer psyche

- Geographically located factories

- Effective brand marketing

- Newer & Innovative

products

- Attractive packaging

- Newer & Innovative products - Attractive packaging Strategic Competency: - Strong sales / distribution N/W
Strategic Competency: - Strong sales / distribution N/W - Value for money products - Healthy
Strategic Competency:
- Strong sales / distribution
N/W
- Value for money products
- Healthy Products
- Understanding of
consumer psyche
- Newer & Innovative
products
Peripheral Competency: -Geographically located factories - Effective brand marketing - Attractive packaging
Peripheral
Competency:
-Geographically located
factories
- Effective brand marketing
- Attractive packaging
Resources: - People - Brand - Market Knowledge - Distribution Channels - Machinery - Factories
Resources:
- People
- Brand
- Market
Knowledge
- Distribution
Channels
- Machinery
- Factories
- Technology
Threshold Competency: - Newer & Innovative products
Threshold Competency:
- Newer & Innovative
products
Incompetency:
Incompetency:
Channels - Machinery - Factories - Technology Threshold Competency: - Newer & Innovative products Incompetency:

Strategic Competencies

- An in-depth understanding of the Indian consumer psyche

- Nutritious Products

- Newer & Innovative products

- Strong sales / distribution N/W

- Value for money products

- Nutritious Products - Newer & Innovative products - Strong sales / distribution N/W - Value

Value Proposition

KSFs

Price

Distribution Network

Nutrition content Brand Innovation

Competencies An in-depth understanding of the Indian consumer psyche

Healthy Products

Newer & Innovative products

Strong sales / distribution N/W

Value for money products

We at Parle continuously strive for high quality & nutritious biscuits meeting your changing health needs at every corner of India by producing new value-for-money products.

biscuits meeting your changing health needs at every corner of India by producing new value-for-money products.

SWOT

Opportunity 1. Estimated annual growth of 20% 2. The 220 B$ food industry is expected
Opportunity
1. Estimated annual growth of 20%
2. The 220 B$ food industry is
expected to grow to 300 B$ by 2015.
3. Low Per capital consumption of
Biscuits (1.8 KG) as against 5.5 KG in
South East Asian countries.
4. Increasing demand for Sugar free
cream crackers & diet biscuits
5. Current penetration levels
Urban Market : 75% to 85%
Rural Market
:
50% to 65%
6. Growth in southern and east India
Threats 1. Hike in cost of production due to hike in prices of raw materials
Threats
1. Hike in cost of production due to hike
in prices of raw materials and
increase in transportation plus
distribution cost due to high wedges
and oil prices
2. Entry of ITC (having very good
distribution channels) into biscuit
industry
Strengths 1. Parle Brand 2. Diversified Product Range 3. Extensive Distribution Network (Availability in most
Strengths
1. Parle Brand
2. Diversified Product Range
3. Extensive Distribution Network
(Availability in most remote villages)
4. Low & mid range price segment
catering to mass
5. Better understanding of consumer
psyche
S – O 1. Increase penetration in southern India and eastern India (S1, S5, O6)
S – O
1. Increase penetration in southern
India and eastern India (S1, S5, O6)
2. Expand in rural market (S1, S2, S3,
S4, S5, O5)
3. Cater to new diet conscious segment
(S1, S3, S4, S5, O4)
4. Advertising of Parle products using
celebrities such as sport person
(Cricketer – very popular game in
India) (S1, S5, O2, O3, O5, O6)
S – T 1. Shift towards products (SKUs) that are highly appreciated in urban market
S – T
1. Shift towards products (SKUs) that
are highly appreciated in urban
market (heath conscious mothers)
and price sensitive rural market
rather than just increasing no of SKUs
(S1, S3, S4, S5, T1, T2)
Weakness 1. Dependence on retailers & grocery stores for displaying diversified Parle products on shelf
Weakness
1. Dependence on retailers & grocery
stores for displaying diversified
Parle products on shelf to induce
impulsive buying
2. Dependence on Parle-G (glucose
biscuit) under Parle umbrella
W – O 1. Heavy promotional campaigns in rural areas , southern & eastern India
W – O
1. Heavy promotional campaigns in
rural areas , southern & eastern
India to increase brand awareness
to boost ‘top of the mind recall’
sales. (W1, O3, O5, O6)
2. Advertise and promote Parle’s
nutritious brands other than Parle-
G in educated urban market
looking for healthy products (W2,
S3, S4, S5, S6)
W – T 1. Capture more market share of other biscuit segments using distribution channels
W – T
1.
Capture more market share of other
biscuit segments using distribution
channels by associating individual
products with a promotion.
Example – the stylish cream biscuit
is promoted by bollywood star,
Marie products are branded as
family snacks product etc. (W1, W2,
T1, T2)

Recommendations

To get benefits of growing biscuit industry, I have following 3 recommendations to Parle.

Recommendations To get benefits of growing biscuit industry, I have following 3 recommendations to Parle.

Recommendation-1

Promotion of Parle brand

a. Promote Parle brand through schemes such as “Parle Gramin Swastha Yojana” (a network of ambulance van visiting rural areas giving basic medical treatments educating people on nutrition deficiency problems and promoting Parle nutritious products)

b. Promote Parle brand through T. V. shows such as “Parle Sakhi ” (“Parle - Friend of Women”). The weekly T. V. show will cater to health issues of women and children and will explain long term benefits of healthy diet)

Results Expected – Improved sales through “Top of mind recall”. Reduced competition for ‘visible shelf space’ in small grocery and retail stores. Brand Loyalty. Communicating Parle value of ‘Nutrition Product’.

shelf space’ in small grocery and retail stores. Brand Loyalty. Communicating Parle value of ‘Nutrition Product’.

Recommendation-2

Study revenue and cost of each of the SKUs (products) of Parle

ITC’s entry into the biscuit industry will pose challenges to the number one position Parle has held over decades. Before further diversifying into producing more products to cater to market niche, I recommend Parle to carry out detail study of each SKU.

This is to avoid adding more complexity to existing production & distribution process with addition of SKU eventually leading to lowered net income.

Results Expected – The study should help Parle forecast and plan future launches, stop producing unprofitable products and focus on emerging / highly demanded products. The study will also help Parle utilize its deep distribution channels effectively and efficiently as per consumer demand.

The study will also help Parle utilize its deep distribution channels effectively and efficiently as per

Recommendation-3

Advertise products segment wise as follows

a. Nutritious/Glucose biscuits

Advertisement by doctors/dieticians to explain the benefits to heath conscious consumers Advertisement by cricketers (Cricket is a very popular game in India) to attract youth

b. Cream biscuits

To be endorsed by bollywood (film) starts

c.

Marie

To be advertised as a family tea time snack

Results expected –

Increased penetration in rural, southern and eastern market. Attracting health & diet conscious people.

expected – Increased penetration in rural, southern and eastern market. Attracting health & diet conscious people.

INDUSTRY Framework

INDUSTRY Framework
INDUSTRY Framework

How the industry success factors will change over next 8-10 years?

How the industry success factors will change over next 8-10 years?

Biscuit industry going forward

With GDP growing at average of 8% and government’s spending on infrastructure projects, many local distributors will evolve and existing players will have penetrated deep inside urban and rural markets.

many local distributors will evolve and existing players will have penetrated deep inside urban and rural
Thus, Distribution will no longer be a KSF Sunfeast Priya Horlics Britannia Gold Parle Marico
Thus, Distribution will no longer be a KSF
Sunfeast
Priya
Horlics
Britannia
Gold
Parle
Marico
Poor
Distribution
Good
Distribution will no longer be a KSF Sunfeast Priya Horlics Britannia Gold Parle Marico Poor Distribution

Promotion & Alliances will emerge as new KSFs

Promotion – Industry’s ability to connect to large population through various promotional events (such as school’s industry visits to plant, talk & TV shows, rural programs) to target different age segment will decide the market share.

Alliances – The biscuit manufactures able to maintain good relations with distributors, whole sale suppliers and regional institutions (through CSR and other community oriented activities) will have greater market share due to BUZZ (mouth publicity) and media attention.

and other community oriented activities) will have greater market share due to BUZZ (mouth publicity) and

Will Price be still a success factor?

Yes, very much.

The industry players will try to lower the procurement, production and distribution costs through programs such as JIT, JITD, TQM, Per SKU cost/Revenue analysis and will pass on these benefits to end consumers in terms of lowered prices.

JIT, JITD, TQM, Per SKU cost/Revenue analysis and will pass on these benefits to end consumers

What will the new value proposition be for Parle?

KSFs Price Nutrition content Brand Innovation Promotion Alliances

Competencies An in-depth understanding of the Indian consumer psyche

Healthy Products

Newer & Innovative products Value for money products

Parle provides nutritious and innovative products through better understanding of consumer needs. Parle promotes relations with customers and its rapport with business partners help it achieve operational efficiency and manufacture ‘value for money’ products.

rapport with business partners help it achieve operational efficiency and manufacture ‘ value for money ’

Thank You. - Sameer Alve. (Section A, MBA2009_B3) Asian Institute of Management. Makati, Philippines.

Write to – alvesameer@yahoo.com

Sameer Alve. (Section A, MBA2009_B3) Asian Institute of Management. Makati, Philippines. Write to – alvesameer@yahoo.com