Indian Institute of Management
Ahmedabad

IIMA/BP0268(A)

Kanpur Confectioneries Private Limited (A)
On September 10, 1987, Mr. Alok Kumar Gupta, 47, Chairman and Managing Director of
Kanpur Confectioneries Private Limited (KCPL), was in a meeting with his brothers, Vivek,
42, and Sanjay, 33,to decide their response to the proposal of A-One Confectioneries Private
Limited (APL) that KCPL might consider becoming its contract manufacturer. APL was a leading national player in the confectionery industry. It had desired to expand its supply to the market by subcontracting orders to other manufacturers. However, it wanted to retain full control over the quality and production processes of biscuits produced for them. It had promised the sub-contractors that it would compensate them adequately in terms of volume of business and conversion charges. To KCPL the advantages were in getting assured return on its investment and access to APL's manufacturing expertise but the disadvantages were in the possible loss of independence in decision making, dilution of ‘MKG, ’company’s own brand, , and family prestige.
The Company
KCPL was started in 1945 by Mohan Kumar Gupta, then 28, in Jaipur Rajasthan State, to sell sugar candies under the brand `MKG’. Earlier, he was a worker in a candy unit in Jaipur.
He started his own business with the dealership of candies produced by others. With the experience gained, he set up a production unit in Jaipur in 1946. Thirty units were set up in the unorganized sector in Rajasthan to sell a variety of candies between 1946 and 1950. As competition increased the net profit margins came down. KCPL could not compete on costs as its costs were higher than those of the other manufacturers. It could not charge a higher price as its candies were not considered by the market to be different from others. Mohan
Kumar faced a