Case Study Kanpur Confectioneries.

Summary – KCPL was established in 1945 by Mohan Kumar Gupta, in Jaipur, in the Northern Indian state of Rajasthan, to sell sugar candies under the brand "MKG". Initially from a candy dealership he set up a production plant in Jaipur. Later on due to stiff competition he had to shift the plant to nearby state Uttar Pradesh. He expanded his business by establishing a dealers’ network in the neighboring states of Bihar and Madhya Pradesh (MP). He appointed three sales representatives to cover the entire state, establish dealerships and promote “MKG” as a leading brand. He advertised “MKG” in regional (Hindi) newspapers and on hoardings at major intersections. By 1970, KCPL had emerged as a leader in the candy business in the region. Mohan Kumar decided to diversify by investing his surplus cash in manufacturing glucose biscuits and selling them under the brand “MKG”. Mohan Kumar saw the biscuits venture as an extension of the candy business as sugar was the common raw material in both of the production processes, he He rented warehouses in key towns to stock the biscuits and continued to advertise the brand in newspapers and retail shops. The business was profitable, but the acceleration of production was constrained by the scarcity of ingredients such as flour, sugar and vegetable oil. He extended his range and offered cream, salt and Marie biscuits under the MKG brand. In 1980-81, KCPL doubled its capacity from 120 per month to 240 per month. The same year, its biscuits business had a turnover of INR 20 million, an increase of 15% over 197980. Its net profits were INR 2 million, an increase of 12% over the previous year. In 198384, its sales increased to INR 30 million and its net profits to INR 2.5 million. Later Mohan introduced 3 of his sons in this business and task between them was decided and responsibilities was divided amongst them. “MKG” was a popular brand in the Northern region. MKG biscuits were known for their quality, crispness and affordable price. The main consumers of “MKG” biscuits were middle-class families in urban and semi-urban areas. Families in metropolitan cities preferred products by APL or International. Due to Sevier neck to neck competition in the market and the presence of well-established national brand It could not withstand the competitive pressure. Hence, between 1983-84 and 1986-87, its sales declined. Its capacity was rendered surplus. It incurred a loss. In 1985, Pearson Health Drinks Limited (Pearson), a multinational company selling a nourishing health drink called "Good Health," decided to diversify into health biscuits by building on its goodwill in the health drink market. It also decided that it would not set up its own manufacturing facility. Instead, it would outsource its supply from small- and medium- scale units and provide technical support. KCPL saw this as an opportunity to utilize its surplus capacity. It also hoped to learn new tools of quality management. It did not see Pearson as a competitor. The agreement was signed at Pearson's corporate office in Paris in May 1986. The market response to Good Health biscuits was not very encouraging. They were seen as high-priced biscuits without any additional benefits. Customers perceived A-One biscuits as healthy and energy-boosting biscuits. Moreover, the price of A-One biscuits was two-thirds that of "Good Health" biscuits. APL had stressed in its advertisements that its biscuits contained milk solids, which consumers perceived as an important benefit. On September 8, 1987, Bharat Shah, Chairman of

APL, mentioned at a meeting of the Confectioneries Manufacturers Association of India (CMAI) that his company was interested in augmenting its supply capacity by promoting contract manufacturing units (CMUs) that made biscuits for APL according to its specifications. He also stated that his company would provide technical guidance to the CMUs and pay fair conversion charges. APL competed with both national and regional players in various biscuit segments. It had aspirations of becoming a leader in every region. It had entered the Northern sector in 1973-74. By 1986-87, it had become a leading player in the region with a monthly sale of 200 MT. Alok Kumar(eldest son) presented APL's proposal to his brothers. The proposal had both advantages and disadvantages. A clear advantage was that it required no marketing, brand building and distribution expenses on KCPL's part and minimized its business risk. It would also help them utilize their surplus capacity. The main disadvantage was the possible loss of independence. The brothers also feared that they might not be able to focus on strengthening the “MKG” brand, which had been built by two generations over the years. In fact, the family's name and prestige was tied to the success of the biscuit line. In KCPL's early years, Mohan Kumar had envisioned that it would emerge as a leading national brand and compete successfully with APL.

According to me they should not join the hands or accept the proposal of APL. APL being the well-established company was slowly becoming dependent on CMU for reducing the majour manufacturing cost, and by this they would also expand their business and stay on top of the market. KCPL was a brand which people already knew, people have experience of its products which it offered and it also had a defined customer based which consisted mainly of middle class families. If KPCL will join hands with APL its existence in market would be risk. And it merely will serve as a manufacturer for APL, and the decision-making power would also be taken away along with the pride of their own brand. So KCPL should relaunch its biscuits with something innovative and new or come up with a new flavor which will help it to expand its existing market that is from west and east region of India and to expand its MKG brand in new markets. It should revitalize the product with association with Pearsons drinks, as this will be beneficial for both the companies, for KCPL it will be an opportunity to do or offer something new to its customer and show its presence in the untapped markets of India where APL leads. The majour problem with KCPL was that it was not a national brand and its main competition was with a national brand and the product offered by them was nearly the same, so it was nearly impossible to surpass a well established national brand which make a similar product in market, this could only be possible by KCPL by bringing new innovation, taste and better distribution process in the market.

SWOT of the decision of joining hands with APL. Strengths     

it required no marketing, brand building and distribution expenses on KCPL's part and minimized its business risk. A contract for three years with APL. It would also help them utilize their surplus capacity. Will help them to survive in the market by working for them. Give them a feeling of prestige to be the part of a bell recognized brand.

Weakness –        

the possible loss of independence. Downfall of brand MKG, by which family name and pride was attached. Diversion of the KPCL’s vision planned by Mohan Kumar during the start of business to be the leading national brand and compete successfully with APL. No power to control. Lots of restriction imposed. Some cost have to incurred by the company. Be dependent on APL Follow set rules and guidelines by APL only.

Opportunities – 

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Better understanding of the customers, distribution network, marketing, production plan, operations, and other important process which KCPL can use in their own internal organization to help its MKG brand grow in the market . Open gates to new ideas and different approach or new product lines.

Threats –   

No sure existence in competitive market. Change in consumer taste, technology, preference. Emergence of some international player which will capture market share of APL hence effecting the business of the company as it is also associated with APL now.

Suggestions for KCPL in the present situation, and in the stiff competition when it has refused to join hands with APL.  

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KCPL should at this time, plan an line extension in the market, and at same time a brand extension for different target market like upper class. KCPL as it is established in rural area should expand its roots deep in those areas and strengthen its network over their so that in those areas it would be the only player and will also generate revenues for the company. It should instead of competing with APL focus on how it is different with APL, and should convey the same with the customers, by conveying its USP (unique selling proportion). It should devise a new pricing strategy. It should introduce packaging of new and not yet offered size in the market which could be either very small or large one or both. MKG brand name should be used for the launch of new product or range, or the new range should be associated with MKG brand as it is recognized by the people and is not new to them which will make it easy to accept. Product innovation Packaging focused to target market. Use of skimming pricing technique to show the premium nature in the market and differ oneself from competition. Customer driven and consumer focused advertisements. Pricing the product so that it justifies the value it provides to the consumers. Us of brand elements and brand association to create a whole new image of the brand in the market. Marketing the product with emotions associated with it, as it is very effective marketing tactics.

Submitted by – Yash Gupta [email protected] 700607117, 9589171073