Identifying the problem:
Profit margins were plummeting up to 15% with raw materials price increasing by 55%, VFM being the most associated thing for Parle-g which is hindering them to raise the prices.
Defining the problem:
Company is not able to change the price and attain the desirable margins due to the VFM perception associated with Parle-g, and facing problem with unorganized sector with a market share of 40%.
Defining the solution objective:
• Directing the company away from the VFM perception associated with Parle-g.
• Tinkering with grammage will not work for long term perspectives so we should look for a strategy of price moves to attain margins which were profitable.
• Targeting the age group of 0-14 comprises of 20% of population in which both buyers and influencers will generate the lifelong revenues for the company.
Analyze the cause of problem:
• Problem is with the VFM message that worked with the in starting years, but now due to the competitor’s entry and increase in the raw materials price the company want to increase the profit margins. They should move away from VFM and support them by brand. It will give results in long term.
• Even when the price is increased people are accepting that, but due to VFM message is not able to increase the price and when company increase the price by 0.50 ps the sales of the 100gm packet dropped by 40% within six months.
• Raw materials increased by 55%, consequently the profit margins increased by 15%.
• VFM perception led Parle-g to become the largest selling biscuit brand by volume by 2002.
• Apart from the grammage the company had brought the manufacturing centres closer to the wholesalers by franchising production so as to reduce distribution costs.
• 15 % of the Indian production was exported, domestic demand for biscuits fuelled industry growth. Exports formed 5% of the Parle’s revenues.
• Biscuit industry was divided in to two organized and unorganized formal share was 60% and other was 40%, in that organized sector glucose biscuit category represented 42% of organized biscuit market.
• Decisions related to the margins for trade channels were decentralized at the local level, where as decisions related to the end prices that the consumer paid were centralized at the corporate office in Mumbai.
• It positioned as “fortified nourishment” that nurtured an overall development of mind and body and enabled both mental and physical agility among children.
• Parle-g was contributing 68% of the company’s annual sales revenue, and the INR4.00 SKU was contributing to 50% of Parle-g’s annual sales revenue.
• If company wants to increase the price, periodic increase in suggested because the customers will get used it, and they don’t mind loosening their wallets when brand delivers value in a dimension as perceived by them.
• The SKU’s can be packed depending on rural and urban markets, INR 2; INR 4 with grammage of 38.5 and 82.5 can be used respectively.
• For the urban market the SKU’s of INR10,15,25 and 40 can be used because of large base of consumers in those areas
• Marketing plan includes segmentation, targeting and positioning , in segmenting the SEC class as mentioned below are to be considered and in that segment children of 0-14 years should be targeted which gives lifelong revenues for the company. The positioning of the products can be changed from VFM to healthy snack, this could one of the way to deal with price sensitiveness.
• We can’t afford to lose any SEC class as the least number of households are 2.2 millions its quite a good amount of consumers but our priority should be of C, D, E2, R2, R3, R4.
• SWOT Analysis:
• Market leader of the glucose biscuits segment
• Distribution, 15 million retail outlets...