Demand Estimation for Britannia Biscuit Industry

Topics: Regression analysis, Supply and demand, Consumer theory Pages: 11 (3296 words) Published: August 8, 2010
Demand Estimation for Britannia Biscuit Industry

Our objective was to study the demand variation of Britannia Biscuits in India with respect to certain variables like, Price, Price of the substitute (Parle Biscuits), Income of Consumer and Population. To achieve this we assume all other factors like Tastes of Consumer, Advertising etc are constant. The biscuit industry is taken as a whole without differentiating between various segmented brands. To arrive at the demand function of Britannia, multivariate regression analysis has been used over non linear model. All data has been taken from the Centre for Monitoring Indian Economy (CMIE) database.

1.1 Biscuit Industry in India:
Indian Biscuit Industry is the largest among all the food industries and has a turnover of around Rs.3000 crores. India is known to be the second largest manufacturer of biscuits, the first being USA. However, the per capita consumption of biscuits in India at 2.1 kg is considerably lower than other countries. It is classified under two sectors: organized and unorganized. Bread and biscuits are the major part of the bakery industry and covers around 80 percent of the total bakery products in India. Biscuits stand at a higher value and production level than bread. This belongs to the unorganized sector of the bakery Industry and covers over 70% of the total production.

India Biscuits Industry came into limelight and started gaining a sound status in the bakery industry in the later part of 20th century when the urbanized society called for readymade food products at a tenable cost. Biscuits were assumed as sick-man's diet in earlier days. Now, it has become one of the most loved fast food products for every age group. Biscuits are easy to carry, tasty to eat, cholesterol free and reasonable at cost. States that have the larger intake of biscuits are Maharashtra, West Bengal, Andhra Pradesh, Karnataka, and Uttar Pradesh. Maharashtra and West Bengal, the most industrially developed states, hold the maximum amount of consumption of biscuits. Even, the rural sector consumes around 55 percent of the biscuits in the bakery products.

The total production of bakery products have risen from 5.19 lakh tonnes in 1975 to 18.95 lakh tonnes in 1990. Biscuits contributes to over 33 percent of the total production of bakery and above 79 percent of the biscuits are manufactured by the small scale sector of bakery industry comprising both factory and non-factory units.

The production capacity of wafer biscuits is 60 MT and the cost is Rs.56,78,400 with a motive power of 25 K.W. Indian biscuit industry has occupied around 55-60 percent of the entire bakery production. Few years back, large scale bakery manufacturers like Cadbury, Nestle, and Brooke Bond tried to trade in the biscuit industry but couldn't hit the market because of the local companies that produced only biscuits. The biscuit industry has Herfindahl Index of around 0.25 indiacting it is of the monopolistic competition type. Also the entry and exit of firms in the industry is not very tough.

The Federation of Biscuit Manufacturers of India (FBMI) has confirmed a bright future of India Biscuits Industry. According to FBMI, a steady growth of 15 percent per annum in the next 10 years will be achieved by the biscuit industry of India. Besides, the export of biscuits will also surpass the target and hit the global market successfully. In 2003 the Biscuit market in India was estimated to be above 0.8 million tonnes with a vlue of about Rs. 45 billion. The share of the organised sector in the biscuit market was estimated to be above 50%. Britannia and Parle held more than 80% of the organised sector share in value terms. The market was going at a rate of 5% to 8%, however with the introduction of ITC by 2007 Sunfeast had become a Rs 5 billion brand growing at 15% per annum.

1.2 Britannia Industries:
Britannia Industries Limited is an Indian company based in Kolkata that...

References: • Managerial Economics Principles and Worldwide Applications, Sixth Edition, Dominick Salvatore
• Marketing Management , A south Asian Perspective,13th Edition, Philip Kotler
• Quantitative Methods for Business, 10th Edition, David Anderson
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