Parle Products Limited

Parle Products Limited

Sameer Alve – Section A

PART A

EXTERNAL INDUSTRY ANALYSIS

Industry TrendThe 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.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

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

Annual Growth Rate of Biscuit Indusrty in India

Annual Growth Rate

Two Sectors of Biscuit Industry

60%

40%

Unorganized Sector

Organized Sector

Annual Production:

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

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

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

Annual Production Figures in Million Metric Tonnes

Annual Prod. Fig

Industry Players

Other Players• HLL, • Bisk Farm, • Anmol, • Elite, • Cremica, • Dukes, • Anupam, • Craze, • Nezone

Major Market Share Holders –Organized Sector

Parle35%

Britannia31%

Sunfeast9%

Priyagold15%

Others10%

PEST

Political • Taxes• Production and Distribution licenses

Economical • ↑ in per capita income• India’s GDP growing at an average 8%

Social • ↑ in per capita consumption• India is 3rd largest producer of biscuit• Age• Lifestyle• Perception

Technological• Innovation • R&D

Five Forces-Capital intensive manufacturing, advertising and distribution system.

-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

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

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

Low

Power of

BuyersPower

of Suppliers

Threat of a new entrant

Threat of

substitute

Internal Rivalry

High

High

Low High

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 : 75% to 85%Rural Market : 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

Strategic MapsHigh

Price

LowPoor Distribution Good

BritanniaParle

Priya Gold

SunfeastHorlics

Marico

Strategic MapsHigh

Nutrition Content

LowUnknown Brand Known

BritanniaParle

Priya GoldSunfeast

HorlicsMarico

Strategic MapsHigh

Innovation

LowPoor Technology Advanced

BritanniaParle

Priya Gold

Sunfeast

Horlics

Marico

Strategic Maps

Poor Packaging Advanced

BritanniaParlePriya Gold

Sunfeast

HorlicsMarico

KSFs & Threshold FactorsKSFs• Price• Distribution Network• Nutrition content• Brand• Innovation

Threshold• Technology• Packaging

Matrix – Put market share as last rowKSFs Weight Parle Britannia Priya

GoldSunfeast Marico Horlics

Price 35% 9 8 5 4 2 2

Distribution Network

25% 9 8 6 4 3 2

Nutrition Content

20% 8 8 5 4 4 4

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 Score

8.8 8.2 5.52 4.2 2.92 2.53

Market Share 35% 31% 15% 9% 6% 4%

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.

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

Parle Products – Biscuits

• Parle – G• Krackjack• Monaco• Kreams• Hide & Seek• Marie• Milk Shakti

Parle Production FactoriesOpportunity

To Grow

Competency Ladder

Resources:- People- Brand- Market

Knowledge- Distribution

Channels- Machinery- Factories- Technology

Incompetency:

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

Peripheral Competency:-Geographically located factories

- Effective brand marketing- Attractive packaging

Threshold Competency:- Newer & Innovative

products

Competitive Advantage:- Healthy Products

Sustainable Comp Adv:- Strong sales / distribution

N/W - Value for money products-Understanding of consumer

psyche

Strategic Competency:- Strong sales / distribution

N/W - Value for money products- Healthy Products- Understanding of

consumer psyche - Newer & Innovative

products

Distinctive Competency:- Strong sales / distribution

N/W - Value for money products-Healthy Products- Understanding of consumer

psyche

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

Value Proposition

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

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

SWOTStrengths1. Parle Brand2. Diversified Product Range3. Extensive Distribution Network

(Availability in most remote villages)4. Low & mid range price segment

catering to mass5. Better understanding of consumer

psyche

Weakness1. 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 – O1. 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 – T1. 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)

S – O1. 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 – T1. 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)

Threats1. 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

Opportunity1. 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

Recommendations

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

Recommendation-1Promotion of Parle brand

a. Promote Parle brand through schemes such as “Parle Gramin SwasthaYojana” (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’.

Recommendation-2Study 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.

Recommendation-3Advertise products segment wise as follows

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

b. Cream biscuitsTo 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.

INDUSTRY Framework

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.

Thus, Distribution will no longer be a KSF

Poor Distribution Good

BritanniaParlePriya Gold

SunfeastHorlics

Marico

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.

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.

What will the new value proposition be for Parle?

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.

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

• Thank You.

- Sameer Alve. (Section A, MBA2009_B3)

Asian Institute of Management.

Makati, Philippines.

Write to – [email protected]