Situation Analysis
Kanpur Confectionaries Private Limited (KCPL) is a family owned business, producing glucose, cream, salt and Marie biscuits under the ‘MKG’ brand. MKG is a popular brand among the middle class families in urban and semi-urban areas of North India and the biscuits are known for its quality and affordability. KCPL’s founder’s vision is to emerge as a leading national brand in future. Once among the leaders of the market in 70’s with fairly high revenue, KCCL stands stuck in the middle of competitive environment today.
The glucose biscuit industry is very attractive due to growing demand in India and due to high margins as much as 25%. The process of production is very simple, requires low investment and less skilled labor, making it an easy to enter industry. Rise of unorganized sector has increased competition. Two national players, A-One Confectioneries Private Limited (APL) and International Biscuits Limited dominate the industry. APL’s average monthly sale was 200 tonnes.
Being on the number two position with monthly sale of 110 tonnes in the regional market and responding to the growing demand of glucose biscuits, KCPL doubled its capacity from 120 tonne per month to 240 tonne per month in 1980-1981. But high absenteeism rate of employees, 50% and scarcity of ingredients like maida, sugar and vanaspathi led to uneven production. Current average monthly production is 120 tonnes.
Costs of labor and materials are rising. 70 units in unorganized sector were able to keep their costs low as they did not pay taxes and followed unethical practices, giving a tough competition. In addition, 8 new units were setup in the organized sector in U.P. KCPL followed ethical management practices laid by its family, it paid all the taxes. It did not reduce its costs taking care of rising costs of labor nor does it had a premium image to get a higher price. As