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Note on Parle Foods. - September 8th, 2010
Parle Products has been India's largestmanufacturer of biscuits and confectionery, foralmost 80 years. Makers of the world's largestselling biscuit, Parle-G, and a host of othervery popular brands, the Parle namesymbolizes quality, nutrition and great taste.With a reach spanning even the remotest
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villages of India , the company has definitelycome a very long way since its inception.
Many of the Parle products - biscuits orconfectioneries, are market leaders in theircategory and have won acclaim at the MondeSelection, since 1971. With a 40% share of the
total biscuit market and a 15% share of thetotal confectionary market in India , Parle hasgrown to become a multi-million dollarcompany. While to consumers it's a beacon of faith and trust, competitors look upon Parle asan example of marketing brilliance.
INTRODUCTION
A long time ago, when the British ruled India,a small factory was set up in the suburbs of Mumbai city, to manufacture sweets andtoffees. The year was 1929 and the marketwas dominated by famous international brandsthat were imported freely. Despite the oddsand unequal competition, this company calledParle Products, survived and succeeded, byadhering to high quality and improvising fromtime to time.
A decade later, in 1939, Parle Products beganmanufacturing biscuits, in addition to sweetsand toffees. Having already established areputation for quality, the Parle brand namegrew in strength with this diversification. ParleGlucose and Parle Monaco were the firstbrands of biscuits to be introduced, which laterwent on to become leading names for greattaste and quality. It was called Parle Gluco
Biscuits mainly to cue that it was a glucosebiscuit. It was manufactured at the Mumbaifactory, Vile Parle and sold in units of half andquarter pound packs.
Parle-G has been a strong household nameacross India. The great taste, high nutrition,and the international quality, makes Parle-G awinner. No wonder, it's the undisputed leaderin the biscuit category for decades. Parle-G isconsumed by people of all ages, from the richto the poor, living in cities & in villages. Whilesome have it for breakfast, for others it is acomplete wholesome meal. For some it's the
best accompaniment for chai, while for someit's a way of getting charged whenever theyare low on energy. Because of this, Parle-G isthe world's largest selling brand of biscuits.
HISTORY
Biscuits were very much a luxury food in India,when Parle began production in 1939. Apartfrom Glucose and Monaco biscuits, Parle did
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offer a wide variety of brands.
However, during the Second World War, alldomestic biscuit production was diverted toassist the Indian soldiers in India and the FarEast. Apart from this, the shortage of wheat inthose days, made Parle decide to concentrate
on the more popular brands, so that peoplecould enjoy the price benefits.
The incredible demand led Parle to introducethe brand in special branded packs and inlarger festive tin packs. By the year 1949,Parle Gluco biscuits were available not just inMumbai but also across the state. It was alsosold in parts of North India. By the early 50s,over 150 tonnes of biscuits were produced inthe Mumbai factory. Looking at the success of Parle-G, a lot of other me-too brands wereintroduced in the market. And these brandshad names that were similar to Parle GlucoBiscuits so that if not by anything else, theconsumer would err in picking the brand. Thisforced Parle to change the name from ParleGluco Biscuits to Parle-G.
Parle-G was the only biscuit brand that wasalways in short supply. It was heading towardsbecoming an all-time great brand of biscuit.Parle-G started being advertised in the 80's. Itwas advertised mainly through press ads. Thecommunication spoke about the basic benefitsof energy and nutrition. In 1989, Parle-Greleased its Dadaji commercial, which went onto become one of the most popularcommercials for Parle-G. The commercial was
run for a period of 6 years.
Parle-G grew bigger by the minute. Be it thepacks sold, the areas covered or the numberof consumers. It became a part of the dailylives of many Indians. It wasn't a biscuit anymore. It had become an icon. The next level of communication associated the brand with thepositive values of life like honesty, sharing andcaring.Thankfully today, there's no dearth of ingredients and the demand for more premiumbrands is on the rise. That's why, we now havea wide range of biscuits and mouthwateringconfectionaries to offer.
GLOBAL ENVIRONMENT
Going international is yet another trendfollowed by modern business houses.Internationalization and globalization is fastbecoming imperative for modern business dueto technological innovations, crumbling tradebarriers, global flow of capital and technology,
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information explosion, intensity of marketcompetition, changing life styles and thedemand for new products. Production facilitiesare being set up in different countries andproducts are being sold through a globalnetwork. Gradually, business houses areexposed to global competition which augurs
well for consumers. Internationalization of business is a means of sustaining a strongdomestic base in terms of technology, product,market and the capital over a longer period.
At the company level, globalization means twothings:(a) The company commits itself heavily withseveral manufacturing locations around theworld and offers products in several diversifiedindustries.(b) It also means the ability to complete indomestic markets with foreign competitors. Inthe popular sense, globalization refers mainlyto multi-plant operations.
¬ RELATING PARLE-G WITH THE GLOBALENVIRONMENT
According to Parle-G, the termGLOBALISATION does not merely meanimports and exports, but letting your presencefelt all over the world. Expansion andrecognition are the main factors of goingglobal. The immense popularity of Parleproducts in India was always a challenge totheir production capacity. Now, using more
modern techniques for capacity expansion,they have begun spreading their wings and aregoing global.
Parle biscuits and confectionaries are fastgaining acceptance in international markets,such as, Abu Dhabi, Africa, Dubai, SouthAmerica and Sri Lanka. Even the moresophisticated markets like USA & Australia,now relish Parle products.Parle-G continues to climb the stairs of success. Take a look at the global marketwhere it is being exported. First came theMiddle East then USA followed by Africa andthen Australia. An Indian brand, that's
exported to almost all parts of the world. Afterall that's what you would expect from theParle-G World's Largest Selling Biscuit.
Other international companies choose India asa global market because labour in othercountries is costly as compared to in India. InIndia things are quite easier. Government hasbecome more liberal for MNC’s to enter Indianmarket which results in high competition with
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the in-house companies. For example: Chinahas a huge impact on the Indian market.Cameras from Japan and China are of hi-techtechnologies which are available at thecheapest rates. There is a huge gap betweenthe prices of Indian products and such otherimported products. Another example is of
Intel-II.
They have now started manufacturing chips inIndia which further resulted as a toughcompetition to other Indian companies.Another international biscuit making companyis ITC which winded up its business within ayear due to tough competition laid by Parle-G.
Parle-G has a strong base in India since 1939.it has now become the largest biscuit sellingcompany in entire India and is also proved tobe three times more then the US based biscuitmanufacturing companies. Parle-G has 40factories working all over the country including6 mother units. These mother units are locatedat Mumbai, Rajasthan, Haryana, Bangladesh,Bhuj and Uttaranchal.
Raymond Vernon had introduced a product-cycle theory in late 1960s, but this theory isstill relevant till today. This theory explainsthat how companies go global. Initially, smallscale companies produce attractive productsand sell them in their home markets. Sooneror later, foreigners come to know about theseproducts. As the popularity of these productsincreases they start exporting them abroad. Asthe foreign demand grows, the economies of
foreign production changes. Eventually, thecompany starts setting up their own plantsglobally. In this manner various companies goglobal.But Parle-G doesn’t agree with this theory laidby Vernon. According to them there are fourstages that the company should follow forgoing global. They are: infancy, growth,maturity and decline. Parle-G is yet at thegrowth stage of the theory for going global.
Going global for any company involves risk.Hence, Parle-G recruits a special team formarket surveys called a market researchteam. This team keenly studies the culture,
market situation, fashions, preferences, habitsand taste of the consumers of the country theyare going to enter. As Parle-G is meant forpoor class of population, other variety inbiscuits made by Parle-G are for middle andupper class people, they need to study alllevels of society to launch the product similarto their conclusions. Supplying or launching anew product requires sample testing beforethe same. According to Parle-G, company
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should behave in the same manner and cultureas of its host country. They need to followtheir laid rules and regulations and their locallaws.
Parle-G will continue in its host countries thesame performance appraisal methods as in its
home country. Because they follow the normwhich says that the employees are of samecapabilities and talents everywhere eventhough the working conditions are not thesame. Hence, they would appraise theperformance of their employees based oncaliber and not based on the impression of thehost countries.
POLITICAL ENVIRONMENT
Ø RELATING PARLE-G WITH THE POLITICALENVIRONMENT
Two basic political philosophies are inexistence all over the world viz., democracyand totalitarianism. Parle-G followstotalitarianism as its basic philosophy.Totalitarianism is also called asauthoritarianism, individual freedom iscompletely subordinated to the power of authority of the company and concentrated inthe hands of one person or in a small groupwhich is not constitutionally accountable to theemployees. In this method, final decision istaken by the head only but after negotiatingwith everyone by conducting several meetings.
Parle-G biscuit is basically aimed for poorcategory of people as its price is only Rs.4since last 10 years which is affordable to anyclass of the population. Therefore governmentshould see that such companies which provideeconomic help to the country should not bedisturbed in any sense. Infact governmentshould help in such a way that such companiesgrow even more which can further improve theeconomic conditions of their domesticcountries. But in India the situation is totallyopposite. Parle-G pays excise duty which if itdoesn’t pay can reduce its MRP even lesserwhile other products such as cheese, jam,butter which are consumed by middle or upper
class people are exempted from paying exciseduty. In this way government in spite of manyrequests is not giving its helping hand toParle-G.
“Constitution has put several road blockswhich have checked the pace of the company’seconomic development.”
Parle-G is totally in favour of the above
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statement as they say new rules and policiesdepend on government to government. Theyadopt various laws for their own mutualbenefits.
ECONOMIC ENVIRONMENT
Economic environment refers to all thoseeconomic factors which have a bearing on thefunctioning of a business unit. Any businessfirm depends on the economic environment forall the inputs needed and also to sell theirfinished goods. Thus, it can be said thatbusiness depends on economy and economydoes not depend on the business.
The major macro-economic factors which haveconsiderable influence on business are:1) Growth strategy2) Economic systems3) Economic planning4) Industry5) Agriculture6) Infrastructure7) Financial and fiscal sectors8) Removal of regional imbalances9) Price and distribution controls10) Economic reforms11) Human resources12) Per capita and national income
RELATING¬ PARLE-G WITH THE ECONOMICENVIRONMENT
As part of the efforts towards a larger share of the global market, Parle has initiated theprocess of getting ISO 9000 certification.Parle-G had laid down its first factory in late1929. this factory used to manufacture onlysweets and candies. But later by 1989 theyalso started producing biscuits.
The four main contents used in Parle-Gbiscuits are:1) Wheat2) Vanaspati3) Sugar4) Salt
Process flow chart
Raw material testing
Mixing
Moulding
Baking
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Be it a big city or a remote village of India, theParle name symbolizes quality, health andgreat taste! And yet, we know that thisreputation has been built, by constantlyinnovating and catering to new tastes. Thiscan be seen by the success of new brands,such as, Hide & Seek, or the single twist
wrapping of Mango bite.
In this way, by concentrating on consumertastes and preferences and emphasizingResearch & Development, the Parle brandgrows from strength to strength.
Negative points of Parle-G:
HLL and ITC’s entry into biscuits will affectParleAfter testing the waters with niche offerings inuntapped segments of the biscuit market,heavyweights Hindustan Lever and ITC havenow forayed into the mass biscuit market.While ITC has launched its glucose brand,Sunfeast, HLL has decided to differentiate itsproduct, Modern ‘Energy’ Biscuits, by usingwheat and soya as ingredients. Importantly,both ITC’s and HLL’s new offerings are pricedat Rs 4 for a 100 gram pack, the same level asParle G and Britannia’s ‘Tiger’ glucose biscuits.
Given HLL’s and ITC’s massive distributionreach, this new development would clearlyhave a significant impact on the market sharesof both Parle and Britannia. In case the tasteof the new products do not go down very wellwith consumers, the already established
players may get some breathing space, but itwill be only a matter of time before that getscorrected and the pressure will soon be backon. Structurally, the entry of players such asHLL and ITC in the mass biscuit market isbound to affect the dominance of Britannia inthe biscuits market. What’s more, competitionfrom regional players such as Surya Foods,known for its ‘Priya Gold’ range of biscuits, hasalso increased. It certainly doesn’t help thatthe company has just had a change inleadership.
Further, since the company has hived-off itsdairy division, overall growth rates would
clearly be lower than what investors have beenused to for a while. As far as profitability goes,much depends on the company’s ability tofurther reduce costs, unless there is a furtherreduction in excise rates. Given the increase incompetition, taking price hikes may still besome time away. In such a scenario,Britannia’s long-term growth rate would turnout to be much lower than earlier estimates.It’s no wonder then that the stock has
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underperformed the market and peers in theFMCG sector by a huge margin during thecurrent rally. The stock still gets a discountingof around 14 times FY04 earnings, which,considering that growth rates will drop, givesthe feeling that the stock’s underperformancewill continue.
ITC Ltd has posted a 21.8% rise in net profitsto Rs 323.51 crore for the October-December2002 quarter (Q3) compared to thecorresponding period of the previous fiscal.Net sales during the quarter was reported atRs 1,647.60 crore, up 12.2% over thecorresponding of the previous period.In the nine months ended December 2002,ITC’s net profits were up 16% to Rs 1,047.93crore.
ITC said: "The company’s corporate strategyaims at creating multiple drivers of growthanchored on its core competencies."Its current focus is nearly exclusively on fourbusiness groups: FMCG, hotels, paperboards,paper & packaging and agri-business.
FUTURE PLANS
We strike to provide consistently high quality,nutritious, safe food products to meet theneeds and expectations of the customers byusing quality raw materials and adoptingappropriate process.We will continouslyendeavour to achieve customer satisfaction bythe implementation of food safety.Management system based on the good
manufacturing and hygiene practices. Themaintenance and up-key of the implementedsystem and continuous improvement of thesame are the responsibility of all at Parles andall of us will participate in all the Hazardanalysis and Critical Control point relatedactivities. To that end we will strivecontinuously to train our employees andprovide them an open and participativeenvironment.
OBJECTIVES FOR 2008
(1) Customer Focus: We must beat thecustomers expectations by ensuring zero
defect products from all locations.We mustincrease direct customer interface by ensuringmaximum school children and other visitors atall locations.
(2) P.Q.S Focus: Parle Quality System = PQS= Productivity Quality Safety.Productivity improvement by reducingdowntime, breakdowns, wastages, rework,
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thereby saving natural resources likefuel and power and also improvingproductivity/ efficiency of people by impartingtraining and other developmnetalopportunities.Quality improvement bystrict adherence toquality assurance norms without any
compromises.
Safety improvemnet by adhering in true spiritto HACCP (Hazard Analysis and Critical ControlPoints) philosophies.
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