Indian Biscuit Market
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The Indian Biscuit Market
Prepared and submitted by:
Ritushree RayAbhishek BagheriaAjinkya DesaiBhumika GuptaTable of Contents
3The Biscuit scenario in India
4The Biscuit Case study: Lens on Parle G
5A look at the Competitors(Porters five forces at play)
5Parle Products Limited
7SWOT ANALYSIS: Select competitors in the biscuit industry.
8Problems faced by the Biscuit Industries in India
10Insights on the consumer survey
The Biscuit Scenario in India An analysisBiscuits, which were once considered to be a sick-mans diet, have now become one of the most loved food product in the country. The growth prospects of the Indian biscuit industry are bright. Even though the country is the third largest consumer of biscuits after the US and China, the per capita consumption is very low. It stands at about 2 kg in comparison to more than 10 kg in the US and UK. Various factors including availability of cheap labor in the country and easy availability of raw materials present huge export potential to the industry. Players including Parle, ITC and Britannia are expanding overseas. Countries such as the USA, Bangladesh and the Russia are being seen as the potential markets. The India food processing sector is currently growing at an average rate of 13.5% annually. The industry is expecting a higher growth rate due to the government support being provided in terms of improving the supply chain, by building large primary collection and distribution centers across India involving the private sector, in the period 2012-17. This article aims at studying the Indian biscuit market in detail by carrying out a situation analysis to understand the dynamics, current scenario of the industry and the future prospects for existing manufacturers and new entrants.
At present the following states can be regarded as the biggest consumers of biscuits in India: Maharashtra
Andhra PradeshThe rural sector in India presently accounts for almost 55 percent of the biscuit consumption.Pattern of Biscuit Consumption (On Zonal basis)in the country are as below:
The Indian biscuit industry has a yearly production of almost INR 3 thousand crores and is the biggest among all the food based industries operating in the country. The Indian subcontinent on the whole is regarded to be one of the top producers of biscuits in the world along with countries like the US.
The biscuit industry inIndiawitnessed annual growth as below:-Annual ProductionThe organized biscuit manufacturing industrys annual production figures are given below:
Organized & Unorganized sector balance in the Biscuit Scene:The organized and unorganized sector of the biscuit industry is in the proportion of 70%:30% ratio.
Rural-Urban penetration of Biscuit:Urban Market:75% to 85%
Rural Market:50% to 65%The Biscuit Case study: Lens on Parle GParle introduced its offering in the glucose segment way back as 1939 under the name Parle Glucose, which was later renamed as Parle G in the 1980s. Since launch the biscuit brand has been strongly associated with offering value for money, a marketplace perception that has remained unaltered for more than 60 years. This value for money perception lead to Parle G becoming the largest selling biscuit brand in the world in 2002. This consumer perception has not been limited to the brand itself but has extended to the entire glucose biscuit category. Consequentially, all manufacturers of glucose biscuits within the Industry have been forced to tow the low price line. Problems at hand:1. Short term problems:
However due to increasing prices of crucial inputs such as wheat and sugar which comprise 55% of manufacturing costs, Parle is faced with a decisional dilemma.
Although Parle G as a brand enjoys formidable equity in the market, its equity is based on VFM positioning. It is the only value dimension due to which consumers are loyal to Parle G and the Glucose biscuit category which is under crisis because of factors like inflation, VAT increase, and increase in cost of inputs. The increased costs have led to a decline in a margins from 15% to around 10% which is not feasible for the continuation of the brand category.2. Long term problems:
It is a market leader for the established product Parle-G. It also has the largest distribution network. Nevertheless, Parle-G has no brand loyalty.
The pressure to reinstate margins has led to consideration of an increase in prices that could adversely affect consumer perception and demand.
On the Advertising point of view ITC, Sunfeast and Britannias Tiger are adopting the similar attitude towards Glucose biscuits concentrating on the IQ development and growth of the children same as Parle-Gs approach of G mane Genius fame. Here a unique and fresh perspective needs to be brought in to maintain dominance in the market.
Still untapped avenues of rural markets which needs to be broken into for Parle G to reinstate its claim as the Market Leader.
For the purpose of this article we have studied the following companies- Parle, Britannia, Sunfeast, Priya-Gold and Anmol.
The Situation Analysis using Porters five forces:Taking Porters fiver forces analysis method into play we know the five dynamic forces affecting the current market scenario: Intensity of competitive rivalry;
Threat from new entrants;
Threat from substitutes;
Bargaining power of buyers;
Bargaining power of suppliers (raw materials)
Causes of the Problems Faced by Parle G- The Glucose Giant
1. Rise in prices of inputs: Rising prices of almost all raw materials/inputs, i.e. wheat flour, vegetable oil, sugar, milk, etc.
Sharp increase in the cost of production because of hike in cost of packaging, fuel, transportation, wages etc.
2. Rise is Production Cost:
Adverse impact on production and marketing of biscuits due to levy of value added tax (VAT) at the highest rate of 12.50% (in place of sales tax @ 8%) as compared to vat 4% on similar food products.
3. Decrease in Profit Margin:
Stagnation in prices of biscuit on account of stiff competition and thin margin of profit
Biscuit Industry especially the Small & Medium Sector, consisting of around 275 units are facing erosion in their profitability and competitive capability, due to steep hike in cost of production on account of increase in prices of major raw materials, i.e. Wheat Flour Veg. Oil, Sugar, Milk, Packaging Materials, Fuel Wages, etc. Recent increase in prices of Petrol/Diesel in May 2008 has further resulted n cost push.
4. Change in Consumer Perception
Inadequate adoption of modern technology, equipment, packaging and distribution.
Increase in the awareness of consumers have led to increase in expectations and aspirations which at times are difficult to meet.The Objective:
The main objective to be focused throughout the case analysis lies in solving the problems of:
To reinstate the margins back to 15% but it involves analysis of various constraints through logistics and reasoning.
It is a very price sensitive market owing to the Value for Money (VFM) which has been the underlying USP of Glucose biscuit category of Parle G. So maintaining the same and battling the increasing prices is one of the major objectives of the Parle-G case.
Another major objective of the situation crisis is re-instating the brand PARLE-G on a premium scale as well concentrating more on the high quality premium biscuits and cookies to build on the BRAND loyalty and ensure customer satisfaction on a higher and more permanent level.
Tapping the remote and untouched rural market share and build a brand awareness among them.These being the weaknesses hold competition as its main weakness. It could further lead to profit erosion and entry of unbranded players into the market. Notwithstanding these threats, the company beholds many opportunities such as exports and affluence. The growing affluence shows the rise in purchasing power of the consumers. Parle-G has been strongly associated with offering the Value for Money, a marketplace perception that had remained unfaltering for more than 60 years.
Now we discuss the Competitors of Parle G in a detailed manner below with their corresponding products in market and the chunk share:
A look at the Market Players in Biscuit Industry Parle Products LTD.
Founded in 1929, Parle Products Pvt. Ltd ranks among the top biscuit brands in India. The company has 7 manufacturing units of its own and 51 manufacturing units on contract. Accounting for about 30-35% of market share in the biscuit industry this company is famous for brands like Parle G, Krackjack, Hide & Seek Milano, Hide and Seek, Magix and Monaco.
Parle has been one of the leading biscuit brands in India for the last 8 decades. Parle-G is reputed to enjoy the most sales among all biscuit brands in the world. Its biscuits offer a fantastic combination of quality, taste, and nutrition. Parle biscuits are available even in faraway villages.
At present the company has a 40 percent share of the Indian market for biscuits and is a multi-million dollar organization.
Following are the various brands of biscuits offered by Parle: Parle G(Glucose Biscuit) Monaco-Salted Cracker Hide & Seek Choco Chips Hide & Seek Bourbon Hide & Seek Fab Coconut Cookies Milk Shakti BritanniaBased in Bangalore Britannia Industries Ltd. is reputed as being one of the top biscuit brands