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Parle G Case Solution
Parle-G, the company’s leading glucose biscuit brand, was concomitated with offering minimum price for maximum utility. Parle-G maintained the price of $1 since 1990 following the uppermost value. In January 2004, the price of Parle-G rose from INR 4.00 to INR 4.50 and resulted in a drop in sales of more than 40%. Hence, due to this shrinkage in sales, Parle fixated on reducing the weight rather than amplifying prices. Other than reducing weight, cost regulating processes were also undertaken. Furthermore, Parle supplied an estimate of 650,000 tons of biscuits of which 500,000 encompassed Parle-G. Parle-G had loyal consumers and it wasn’t until 1996 that the glucose category of Parle faced competition. Parle had spent millions on the sales promotion and Parle-G was sold in around 2.5 million outlets. Ultimately, the major crisis faced by Parle was coming up with a strategy to overcome the price predicament and protection from high sales.
Following questions are answered in this case study solution
What is the market structure for Parle in the overall biscuit segment?
What do you think about the price elasticity of demand for Parle-G?
What kind of challenge does Parle-G’s price sensitivity pose for Parle?
What should Parle do to retain its overall profitability?
Case Analysis for Parle G
1. What is the market structure for Parle in the overall biscuit segment?
The major market structures involve perfect competition, oligopoly, monopoly, and monopolistic competition. The perfect competition reflects a market structure in which various companies sell an analogous product and any particular company is unable to select prices. This indicates that in case a company increases its price, the quantity demanded tends to fall for the product as consumers shift to the products of the competitors which manage to provide similar requirements. Hence, in perfect competition, it is crucial for all the companies to maintain their prices with those of their competitors in order to continue their dealings. Furthermore, the market share of the company fails to have an impact and influence on the pricing.
Parle’s company had 40 percent of the entire biscuit marketplace in India. In addition to Parle-G in the glucose category, the luxury biscuit portfolio included Monaco, Hide n Seek Fun Centre, Cheeslings, Sixer, Jeffs, and Krack Jack. Premium brand margins ranged between 25 and 30 percent. Due to their distinct contributions to the bottom line, Parle-G, Monaco, and Krack Jack were recognized as the key brands. There was still room for growth in the premium category, which expanded at a rate of about 20% per year, despite Parle having a wide biscuit portfolio with product options in all of the major biscuit categories.
Prior to the British multinational Britannia Industries Ltd. (BIL) launching its Tiger Glucose biscuit line in 1996, Parle faced little to no competition in the glucose industry. In 2003, IT Ltd. (ITC), an Indian conglomerate with operations in hotels, agriculture, paper goods, and retailing, released Sunfeast Glucose. Both the immigrants benefited from significant investments. Parle-G, on the other hand, continues to dominate the mainstream market.
In 2003, Hindustan Unilever, a major manufacturer of consumer-packaged goods (CPG), also entered the glucose market. Its endeavor was to expand its failing bread division. The company outsourced the production of its products to two different locales. It left the biscuit company two years later for a number of reasons, including a cost-profit imbalance. Parle also had a few regional competitors, albeit their national effect was minimal.
Tiger Glucose and Sunfeast Glucose, like Parle-G, were available in a variety of SKUs with prices averaging US$1 per kilogram. Because they were rookies, the two new brands were particularly affected by rising expenses. They experienced similar SEC infiltration experiences as Parle-G. Both have large retail networks that they have developed over many years of doing business in the Indian CPG market. Both have quickly established brand equity among young people as a consequence of aggressive advertising efforts.
Due to the potential of the Indian food business, global goliaths like Nabisco in the United States, Campbell Arnott's in Australia, and United Biscuits in the United Kingdom were all vying for the Indian biscuit market. They intended to concentrate on the luxury biscuit market since it was anticipated to increase over the next years, it was advantageous for brand expansion, and it would result in higher profits.
Parle had a strong influence in the glucose category. Parle-G was chiefly used by the citizens and had a reputable market share in the industry. However, in 2004, when Parle increased the price of Parle-G from INR 4.00 to INR 4.50 the demand fell immensely and sales dropped by higher than 40 percent. Hence, this reflects a lack of control of price. There was competition faced in the premium category initially which was gradually expanded to competition faced in the glucose category as well. Initially, Parle had a near-monopoly in the glucose category as there was little to no competition faced by Parle. However, after BIL launched its Tiger Glucose biscuit line which was followed by the entry of Hindustan Unilever in 2003, and other regional competitors.
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