Parle-G

A Report

This has been the flagship product of the company and since its introduction in 1939, has been

associated with offering value for money (VFM).

In December 2009, with rising input prices of two major raw materials, sugar and wheat flour, Parle

faced a difficult decision involving the potential price increase of Parle-G. With the rise in the

manufacturing costs in the last 18 months, the margins of Parle-G had decreased from 15% to 10% and

there was enormous pressure on Parle to reinstate the profit to 15% for which the hike in prices looked

imminent.

Earlier attempt at raising the prices in Jan 2004, its first in 13 years was not met with success. Parle had

hiked the price of its 100-g packet of 16 biscuits from Rs. 4 to Rs. 4.50. The 100-g packet was Parle’s best

selling SKU, contributing to 50% of brand revenues every year.which declined their sales. Four years

later Parle focused on reducing the weight of the 100-g package in phases. Consumers did notice this

change but acceptive of it as long as the prices of the packet remained untouched

In spite of these measures, the price hike seemed likely to restore margins, particularly because the

company had ramped up its own manufacturing capacity by 10% on an investment of Rs. 500 million in

2008. But, price setback received by the company in 2004 indicated that the consumers were very

sensitive to any price hike and thus had the company in the dilemma. As Parle-g is the leader of the

industry so the competitors followed Parle-g in their pricing strategy

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INDIAN BISCUIT INDUSTRY

India is the third largest producer of biscuits in the world, after U.S.A and China. The biscuit

manufacturing is divided into two sectors- organized and unorganized. The former consisted of 60% of

the national market but received tough competition from the unorganized sector comprising of mom

and pop establishments catering to markets of rural interior. The unorganized sector ruled the low price

varieties proving local stores with freshly baked biscuits and the producer - retailer relationship was not

easy to break for the branded players.

In the organized sector, the five main categories of biscuits were glucose, marie, sweet, cream and milk..

The organized sector produced 1.7 million tons of biscuit per annum, valued at Rs. 110 billion in 2008,

with a growth rate of 15%. Of late growth in premium categories had superseded the earlier high growth

rate low-price categories.

CONSUMERS.

The company segmented its customers for Parle-G into two types: retail and industrial consumers.

Children and mothers comprised the first segment with children being 60% of target audience. The age

group of 5-14 formed 20% of total population and had potential to generate lifelong revenues for the

brand. The second segment included hospitals, factories, railway stations, schools etc. contributed to

about 10% of parle’s sales revenue.

COMPETITORS

Parle first faced nationwide competition in its glucose segment

In 1996, Britania Industries Ltd. (BIL) launched its Tiger Glucose brand of biscuits.

Soon after ITC entered with Sunfeast Glucose biscuits.

POSITIONING

Parle-G before 1980 was called Parle Gluco to differentiate itself from prevailing competition.

In late 1990’s the company started focusing on kids.

Parle-G also replaced cooked meals in primary schools mid day meals scheme Since 2004

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Parle had been spending between Rs. 600 million to Rs. 700 million on advertising and sales

promotion, constituting approximately 2% of annual revenues

ISSUES IN DECEMBER 2009

To overcome the entrenched VFM perception which could make a huge difference in Parle-G’s

handling the current pricing dilemma.

Secondly Parle’s huge dependence on a single brand and a single SKU seemed dangerous.

Parle-G contributed to 68% of total revenue and Rs. 4.00 SKU contributed 50% to its annual

sales. It was a vulnerable position

customers were migrating to high end biscuits owing to growth in their income

KEY DECISIONS

The decision by Mr. kulkarni should be little bit risky by increasing the price as well as it can be tricky

too by not increasing the weight because if we look at current scenario income level is high and

purchasing power of customers are high, 50 paisa or one rupee increase in the price is not going to

affect the pocket of customers much and therefore price sensitivity will be less as we know that Parle-g

is the market leader and if parle-g will increase the price then competitors will also increase the price

because raw material price is high and competitors are also helpless only because of parle-g they are not

able to increase the price. Parle-g is famous for perception of value for money if it is eroded then they

will lose their majority of market share which in turn will effect the sales and revenues of the company

CURRENT PERCEPTION

Parle-g is always been regarded as a health benefit product, it is being viewed as a commodity

rather than a plan.This product emphasis on the concept of physical fitness for the young and

for boys in particular for muscular strength. Parle-g has acquired the image of affordable and

whole some product. The current perception shows that parle-g has an outdated packaging

which is been the same for a quite a long time. Present market scenario shows stiff competition

so to acquire the mind share of the customer it is important for parle-g to rejuvenate its

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traditional product. Since the taste has been changing with time the children are attracted

towards cream, milk biscuits and number of SKUs are constantly reducing, so it is important for

parle-g to reposition its product.

Marketing strategies

Reducing in operational cost. e.g. shared transport

Tie up with other consumer goods e.g. tea companies

Packaging- since it has outdated packaging, there is room for attractive packaging.

Increase the price of premium product such as bourbon, hide & seek and compensate

with low margin products such as parle-g

Tie up with central govt. for schemes like mid day meals

Increase the number of SKUs

Reduce the size of the biscuit and keeping the number of biscuits same

Product placement

KEY LEARNING POINTS

Price sensitivity

Supply chain efficiency management

Managing operations and related cost

Marketing strategies

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CONCLUSION- learning from previous incident of 2008 issue which included the drop in sales of

parle-g regarding the price change, we can conclude that instead of changing the price of the

product focusing more on the sales boost of the product and also looking into the opportunity

of penetrating new markets where the reach is low or negligible will lead to better prospects in

increasing the profit margin. Also changes can be included in operational and supply chain of

the product to reduce production cost.

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