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growth in premium categories had superseded the earlier high growth rate low-price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

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 • 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

• 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

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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 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

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 • 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

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.