The Indian Biscuit Market

Prepared and submitted by:

Ritushree RayAbhishek Bagheria

Ajinkya DesaiBhumika Gupta

Table of Contents

The Biscuit scenario in India 3

The Biscuit Case study: Lens on Parle G 4

A look at the Competitors(Porter’s five forces at play) 5Parle Products Limited 5

Britannia 5

ITC Sunfeast 6

Priya Gold 6

Anmol Biscuits 6

SWOT ANALYSIS: Select competitors in the biscuit industry. 7

Problems faced by the Biscuit Industries in India 8

Consumer Survey 10Purpose 10

Methodology 10

Insights on the consumer survey 10

The “Biscuit” Scenario in India – An analysis

Biscuits, which were once considered to be a sick-man’s 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 Karnataka West Bengal Uttar Pradesh Andhra Pradesh

The 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.  

Annual Growth

The biscuit industry in India witnessed annual growth as below:-

  

  

Annual Production

The organized biscuit manufacturing industry‘s 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 G

Parle 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 1980’s. 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 Britannia’s Tiger are adopting the similar attitude towards Glucose biscuits concentrating on the “IQ development and growth” of the children same as Parle-G’s 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 Porter’s five forces:

Taking Porter’s 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:

o Parle G(Glucose Biscuit)o Monaco-Salted Crackero Hide & Seek Choco Chipso Hide & Seek Bourbono Hide & Seek Fabo Coconut Cookieso Milk Shakti

Britannia

Based in Bangalore Britannia Industries Ltd. is reputed as being one of the top biscuit brands in India. The company was established way back in 1892 and till today has managed to maintain a distinctive position in the Indian biscuit industry specially with its most popular brand called Tiger.

Britannia is presently one of the biggest brands in India and also the leading food related brand. It is well known for its ground breaking approach towards product manufacturing and marketing. Forbes Global has rated it as one of the Top 200 Small Companies of the World & it is also the second most trusted brand in India.

Following are its various brands in the biscuits segment:

o Milk Bikiso Tiger(Glucose biscuit)o Nutri Choiceo 50-50o Rusks

Sunfeast

Sunfeast is the biscuit brand of ITC and was initiated during July 2003. To start with the brand dealt with glucose, Marie, and cream biscuits.

Following are the major brands of Sunfeast:

o Sunfeast Milky Magico Sunfeast Dream Creamo Sunfeast Dark Fantasyo Sunfeast Glucose Biscuit(Glucose Biscuit)o Sunfeast Dark Fantasy Choco Fills

Priya Gold

Priya Gold is a part of Surya Foods & Agro Ltd that was established during November 1992. Its commercial operations, which included selling and making biscuits under the brand name Priya Gold started during October 1993.

Following are the various biscuits and cookies offered by Priya Gold:

o Italiano Cookieso Butter Biteo Glucose –V(glucose biscuit)o Kids Creamo Classic Cream

Anmol (North & East Regional player)

Anmol Biscuits is especially popular in eastern and northern India. It has a couple of top class production units at Noida and Dankuni in West Bengal.

Following are its main products:

o Lemon Mazaao Anmol Glucose Biscuito Coco Nuttyo Cream Crackero Bakersville

Anmol Biscuit is available in 42 SKUs.

SWOT ANALYSIS : Analyzing the Go-To-Market Approach “biscuit by biscuit”

STRENGTHS WEAKNESS OPPORTUNITIES THREAT ANALYSIS

PARLE(Parle G)

Low costGood ads and visibilityMarket Leader in Glucose BiscuitSizeable market shareLargest distribution systemDifferent sizes of packing available.

Fewer share in Premium biscuit market and largely Dependent on Parle-GLack of schemes for retailers and distributors

Tie-up with schools as a part of meals and corporates/hotel chainsExpected Increase in the number of middle income group households.

Highly advertised brands of the competitors.Competition from multinationals, local companies and local bakeries.Emerging substitutes

ITC Sunfeast(ITC Sunfeast Glucose biscuits)

Wide distribution networkLow costand good quality product

Dependence of the company on tobacco sales.Negative association with tobacco

Rural marketsTie up with hotels, government, schools, hospitals, etc.

Similar biscuit products by competitors

BRITANNIA(Tiger)

Strong distribution network Availability of products even in the remotest of areasMajority share in the market.Marketing and advertising efficiency

Heavy expenditure on advertising and marketingSimilar products produced by many companies means high brand switching

Increase in purchasing power of people in IndiaProduct line extensionExpansion in other countries

Lower price offering  competitorsLocal bakeriesMarket capture by competitors especially Parle.

ANMOL BAKERY PVT LTD(Anmol Glucose Biscuits)

100% vegetarian ingredients.. In total 24 biscuit products.Market entrant in the Glucose Biscuit category and good hold over regional share

Concentration on a few geographic segments only. Lack of skilled work forceLimited advertising and visibility

Tie up with local government bodies for greater exposure.Increased production at new plant in Odisha

Established players like Britannia, ITC Sunfeast, Parle etcMany local competitors like Priyagold, Raja Biscuits etc.Local bakeries.

Surya Food and Agro Ltd(Priya Gold – Glucose V)

150000 MT pa capacity Recent IRCTC exclusive kiosks tender

Limited advertisement and visibilityConcentrated in Noida UP, still seen as a regional player, nation-wide coverage missing.

Untapped national marketMore diversified products in the range of biscuits, cookies, chocolates, confectioneries, beverages and juices.

Big manufacturers like Parle, ITC, etc

Regional competitors like Sobisco, Anmol Bakers Pvt. ltd, Raja Biscuits etc

Research methodology:

Involves the study of lifestyle and mindset of people with respect to biscuit consumption.

Uses the concept of psychographic analysis to understand the culture associated and take it into consideration while designing surveys and verbal questionnaires.

The next step involves sampling based on the research design adopted:

Sampling:

The consumers from both urban and rural areas are targeted since this will take into account a major chunk of the consumer base for insecticides in India. This is planned over a period of 2 months during different season all over India depending on the environmental factors. We will be using the probability sampling as it allows us to calculate confidence limits for sampling error.Research design:

Following the above market research plan the following steps need to be followed for successful research and analysis:

Consumer Survey:

Purpose:

The purpose of conducting the consumer survey was to understand consumer behavior and perception about various biscuit brands present in the market. Some parameters that were observed were brand consciousness, spending trends, taste preferences and frequency of eating.

Methodology:

For conducting the survey in an effective manner, a questionnaire was developed to assist us in recording the consumer responses. The location for conducting the survey was Sanquelim market due to its proximity to the campus. The team conducted the survey on a Saturday in anticipation of increased customer footfall at shops and supermarkets due to the impending weekend and the festival of Nag Panchami. The questionnaires were filled by a sample size of 20 consumers. The survey was conducted mainly at kirana stores and few supermarkets in Sanquelim. Conducting the survey proved difficult due to the following reasons.

Consumers were not willing to spare few minutes to answer the questions asked. The group faced difficulties in asking questions due to lack of familiarity of the local

language. Some of the consumers were not willing to disclose their spending patterns.

Survey Results:

Understand how do the consumers think, relate, select & consume Biscuits (what could be some the basis for segmenting the consumers)

The survey was conducted on small sample size of people in the following age groups 13-20 years 23-26 years 45-55 years

In addition to consumers a few retailers were also interviewed.

13-20 years

This group mainly consists of school going and college kids who rely on their parents for the purchase. The key points in this group are

The people in this group are concerned with the taste Buy the products after watching the commercials especially the ones they can relate to but are

not brand conscious.

23-26 years

This group consists of young professionals who are self-reliant and have a fast paced life. The key points of this group are:

The people of this group feel that the brand matters the most as the brand alone initiated the buying process

They are concerned as to where they buy. They gathered information mainly through T.V commercials.

45- 55 years

This group consists of middle aged people. They are not brand conscious. Key points are: They look out for simple tastes unlike the younger generations that prefer cream biscuits Many of them would buy from a local manufacturer ( unorganized) than from a supermarket.

How a seller manages SKUs of biscuits, do they have any insight (with respect to biscuit marketing)

Retailer’s point of view

A few retailers were also interviewed and were asked their views on the whole scenario Some retailers don’t keep small SKU’s (stock keeping units) of glucose biscuits as they have

smaller profit margins. They avoid purchasing certain brands based on close monitoring of customer buying habits. They make the most profit on medium SKU’s of cream biscuits

They owe their sales to brand loyalty and good experiences with the previous purchase of a product

They claim that the children play the decision makers in the family hence attributes like taste and design play an important role in the purchase of the product

There is however a mixed response as to whether the price or weight should remain constant.

Alternate Solution:

The reach of the organized sector in the rural areas is 50%-60% as compared to 70%-85% in the urban areas. These local rural players have established a long lasting relations which the brands are not able to break. People in rural interiors prefer the freshly baked biscuits to the packed ones. They believe them to be fresh and healthy.

So to resolve this issue the alternate solution that can be proposed is:

Objectives:

While targeting the rural consumers, the companies have to take into account the factors of low literacy level, under developed infrastructure and logistic, low purchasing power, difficulty in media reach, etc. So creating awareness is the major step.

The product not just has to be available to them, but also acceptable and accessible. Parle can organize day fairs, melas and haats like the pushkar mela, rural sporting event,

establish rural retail hubs like the hariyali kisan bazars, aadhars, choupal sagars etc. Apart from these marketing gimmicks, it is important that the right manager is entrusted with

tapping in the rural market as it requires a different mindset and separate marketing and sales skills.

Open plants near the villages to give the villagers options for cheaper and fresh biscuits readily available with low cost of production to the company

Barriers:

Cost of setting plants Convincing villagers and changing mindset is easier said than done. Manager mindset and proximity to villager (consumer mindset) is tough to create.

Recommended Solution and Justification :

Tactical move

Case 1:

Price increase from INR 1 to INR 2 with 16.5 SKU (grams).

Indian masses prefer the small packages as it garners product purchase by nonusers, one time users and new users.Small packages has helped a lot of leading MNC’s attract non users, one time users and new time users. They helped in creating demand for low penetration categories.

Assumption: Assuming an income rise at the bottom of the pyramid and Indian trends, the popular 16.5 SKU of Parle-G biscuits demand should not be affected This should help in achieving the 15% revenue.

Case 2:

Price unchanged for INR 4 and SKU (gms.) reduced from 82.5 gms. to 72.6 gms.

INR 4 SKU of the Parle G is the most popular brand among the Parle G products. It fetches 50% of the annual sales revenue. From the provided data of the past (in 2004) we find out that: sales do not get affected with the reduction in the SKUs with price unchanged. But with price hike of Rs. 0.50 there was a 40% decrease in sales

Hence this similar strategy which was followed in the past to reduce the SKUs with the same price will definitely increase the required profit percentage along with sales as well as maintaining the trust of the consumers and will help in raising the revenue to the original 15%. This move will also boost the VFM (Value for money) USP of Parle-G.

Strategic Move

Taking into consideration 3 major players in the glucose biscuit category:

Parle G, Britannia Tiger Sunfeast glucose:

It is found that:

Current Target Market: School going children.

Advertising-Promotion Approach: Concentration on the “health and intelligence increasing” attributes of the product.

Proposed Market:

1. School going children2. Health conscious youth3. Elderly population

Proposed Product Expansion:

1. Multi grain glucose biscuits2. Vitamin and protein enriched glucose biscuits.3. Sugar free Variety of Glucose biscuits

No sugar free biscuit has been introduced in the glucose category of biscuits, hence Parle G can be a pioneer yet again in the market with diversified range of Products under the Glucose Biscuit CategoryThus Parle G will emerge as a unique brand providing a host of varieties in the glucose category of biscuits catering to the VFM market as well as the premium market.

References:

1. http://www.ibmabiscuits.in/industry-statistics.html2. http://www.mindtools.com/pages/article/newTMC_08.htm3. http://www.markintell.com/porters-five-forces-analysis4. Parle G: IVEY 9B10A022 by R Chandrasekhar5. http://business.mapsofindia.com/top-brands-india/top-biscuit-brands-in-india.html