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Annexure-V- Cover Page for Academic Tasks

Course Code: ECO531 Course Title: managerial economics

Course Instructor: Pooja Kansra

Academic Task No.: 02 Academic Task Title: Case Study-Desi Bread Industry

Date of Allotment: 3/12/2019 Date of submission: 16th December 2019

Student’s Roll no:21,22,23,24 Student’s Reg. no:11908476,11908496,11908709,11908817


Evaluation Parameters: (Parameters on which student is to be evaluated- To be mentioned by students as
specified at the time of assigning the task by the instructor)

Learning Outcomes: (Student to write briefly about learnings obtained from the academic tasks)
Able to correlate the concepts of economics with real life situations

Declaration:

I declare that this Assignment is my individual work. I have not copied it from any other student‟s work or from
any other source except where due acknowledgement is made explicitly in the text, nor has any part been written
for me by any other person.

Student’s Signature:

Evaluator’scomments (For Instructor’s use only)

General Observations Suggestions for Improvement Best part of assignment

Evaluator‟s Signature and Date:

Marks Obtained: Max Marks obtained:________________


Introduction
India is a major manufacturing house for bakery products and is the third- largest
biscuit manufacturing country after USA and China (NPCS, 2013). The Indian
bakery market is valued at Rs. 3,295 crore and out of this, bread and biscuits hold
82% of the share (Assocham, 2012).

The bakery industry has achieved in third position generating revenue among the
processed foods sector in India. The first and second segments are wheat flour
processing and fruit and vegetables processing (Research and markets report,
2012).

The bakery industry comprises “organized and unorganized” sectors. The


unorganized sector accounts for about 67% of total biscuit production and 80% of
the total bread production and around 90% of the other bakery products, which
include pastries, cakes, buns, rusks and others (NPCS, 2007). Though bakery
industry of India has very long existence, it attained prominence only in the later
part of the 20th century.

A study conducted by the Confederation of Indian Industry (CII, 2008) reveals that
at present Indians spend half of their household expenditure on food items. With
over 1.2 billion population and 350 million strong urban middle-class Indian
processed foods market has a huge potential yet to be tapped. The Centre for
Agriculture and Rural Development (CARD & CACL Report, 2009) reports that
the youth is educated and wants to splurge earnings on quality stuff. Availability
and ease of use are progressively becoming the chief criterion for purchase and the
trend of eating out and buying packaged food which are relatively new
phenomenon, has witnessed an unprecedented rise.

The demand for processed and convenience food is increasing constantly due to
urbanization, changing lifestyle and food habits of the people. Liberalization of the
Indian economy and world trade, as well as rising consumer prosperity has thrown
up new opportunities for diversification in the food processing sector and opened
up new avenues for the development of deliberate food habits. There is perceptible
increase in the number of developing countries involved in the production of food
for export and internationalization of food tastes and habits which finally offers the
Indian consumers with newer high quality food products by using the latest state-
of-the-art technology.

Processing not only reduces the perishability but also increases shelf life of a
product and makes it available to the consumer in a ready-to-consume and
convenient form throughout the year. There is a growing demand for processed
foods due to the changing socio-economic environment such as disintegration of
joint family, increasing per capita income leading to diversification of food
consumption patterns, improved living standards, changing consumer profile of the
consumers and urbanization (GAIN Report, 2011). Besides, a desire to spend less
time on food preparation and more on eating out have now been accepted as a form
of entertainment. The consumption pattern has been shifted from raw food to
processed food and such shift has been more rampant in the rural areas
(Assochsam, 2012).
Case Structure

Organized Bread Industry Unorganized Bread Industry

Britannia (BIL), Modern Foods Local Bakeries


Industries Ltd (MFIL), Bonn, Kitty
and Harvest are the market
leaders presently.

Fit for mass production and Fit for customized needs or


consumption. regional tastes.

Very much popular in middle Preferred by middle and upper


and lower strata of Indian strata of Indian population.
population and business owners

Required to comply with Business is based on Trust and


industrial standards as per quality they provide.
government legislations.

Reason for Coexistence


Evolution of bread industry in India

Late 1990s

Government of India had reserved bread industry for Small Scale Industries (SSI)
status.

Wax-coated paper was the most preferred packaging material as it had the
capacity to absorb extra oil. But the wax packaging tended to open up in humid
conditions, resulting in the product getting infected

2000 – 2010

Between 2000 and 2010, the bread industry saw a huge shift from manual
production to automated production

Early 2000 was the turning point for the bakery products market because of an
increase in urbanization, changing food habits and the availability of reasonably
priced ready to-eat products.

The industry started using polythene for packaging as it offered a safe and fully
sealed product. The producers could create aesthetic packages with transparent
packaging Current Situation.

2011 onwards

Growing concern over health and having the ability to choose healthy foods is
leading to innovations in bread products.

With the fast food culture catching on, the demand for bread products has
accelerated.

Companies are entering the market with concepts such as live bakery-cum-cafés to
cater to today's youth who are looking for a nice ambience and access to wifi,
where they can relax and try new products. Global bakery chains like BreadTalk
and Cinnabon bakery have started bakery cafes.

Porter’s analysis
Threat of new entrants

 There are few players in the bread industry. The top five companies (BIL,
MFIL, Bonn, Harvest, Kitty) are estimated to only account for 80 percent of
the organized bread market.
 Given the Oligopolistic market structure, these top companies are well
established and are operating for decades.
 Logistics plays an important role in bread industry because of its short shelf
life, the big players have well established distribution network and trusted
suppliers.

Bargaining power of suppliers

 Direct distribution of products by manufacturers to organized retail segments


like supermarkets, departmental stores, etc. and sometimes directly to the
end consumers.
 As bread is a highly perishable item with a shelf life of only 2-3 days,
industries have a strong distribution network including various middlemen
and suppliers to reach every corner of the country.

Bargaining power of buyers

 Rural market is growing faster, while urban market accounts for approx.
65% of the demand.
 Brown and nutritional bread are fast growing segments while white bread is
the largest at 75%.
 Organized segment of the bread industry currently stands at 45%.

Threat of substitute products or services

 Entry of the mid-sized regional players is consolidating the industry towards


a more organized structure.
 Local Bakeries (unorganized sector, 55% of total market share), coming up
with more diversified product categories and attracting attention of new
generation.

Rivalry among existing competitors

 Since the market is oligopolistic, there are not many players.


 In terms of product offerings these companies make very generalized
products (eg. White bread, Bun, brown bread etc).

Other Challenges

 Legislations impacting food industry (prevention of Food Adulteration


Rules, Standards of Weight and Measures (PC) Rules, food safety and
standards act).
 Maintaining Quality Standards.

Conclusion

 Processed food industry is having high rate of increase when compared.


 Government is giving its support to the small scale industries
 At the all-India level, it is an oligopolistic industry, whereas at the lower
levels, it manifests itself as a monopolistic competition,
 The existence of baking process dates back to the prehistoric ages and the
various writings of different civilizations supported this fact.
 The Bakery Industry in India is observing a Robust Growth .
 Skilled Workforce are going to meet the needs of new age group tastes in the
market.
References:

http://www.fnbnews.com/Top-News/indian-market-has-huge-potential-for-bakery-
products-38710

https://www.techsciresearch.com/report/india-bread-market-by-product-type-
white-bread-brown-bread-fruit-bread-and-other-specialty-bread-by-distribution-
channel-supermarket-hypermarket-convenience-stores-etc-competition-forecast-
opportunities/1185.html

http://www.aibma.com/industry.html

https://www.marketresearch.com/product/sample-9010594