Parle G- Sales and Distribution

Parle: Distribution, Logistics, and Management – a Report

Marketing Management 2 Trimester 2 FMG XVIII A

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Table of Contents 1. Acknowledgement 3

2. About the „Biscuit‟ Industry 4

3. Parle: History and More 6

3.1 About Parle 6

3.2. History of the company 6

3.3. Parle Biscuits 6

3.4. The Production Units of Parle 7

3.5. Parle Annual Production (Biscuits) in Million Metric Tonnes 7

4. The Macro-environmental Factors 8

5. Porter‟s Value Chain: Parle G 9

6. The Perceptual map 10

7. Product Life Cycle 10

8. The Distribution Channel Network: Parle 11

9. The Parle G Distribution Network 12

9.1. Intensive Distribution 12

9.2. The Channel Members of the Distribution Network of Parle 12

9.3. The Channel Members and Logistics 12

9.4. Channel Dynamics 12

10. The Parle Distribution Network Logistics 13

10.1. Selection of Channel Members for Parle 13

10.2. Motivation of Channel Members 14

10.3. The Channel Members of the Parle Distribution Network 14

10.3.a. The Distributors 14

10.3.b. The Retailers 15

10.4. Evaluation of the Channel Members 15

11. Conflicts and Co-Operation 16

11.1 Conflicts among the Channel Members 16

11.2. Co-operation among the Channel Members 16

12. The Distribution Channel and Parle 17

13. Suggestions for the Parle Distribution Channel 18



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Acknowledgement

Parle: Distribution, Logistics and Management – a Report would not have been possible without

the support of the various distributors and Channel Members who were interviewed in the due

course.

We would like to acknowledge the valuable feedback from the factory unit of Parle: Parle Agro

Foods in Garia, Kolkata, West Bengal. A Special mention needs to be made for Mr. Bizeet

Kumar, Production Executive, Quality Control Division, Parle Agro Foods, Garia, Kolkata. He

was very helpful in furnishing the intricate details of how the distribution logistics of Parle

actually work.

Thank you, to Mr. Debanjan Sengupta, Production, Quality Control, Keventor Agro, Subsidiary

of Parle Agro, Kolkata. He was really kind to share details of the distribution channel prevalent

therein.

A special mention for Prof. Nalin Jain, teaching us the vital concepts of Channel Design and

Logistics.

We‟d sincerely like to acknowledge all the help that we got from various domains in the

successful execution of this project report.

Thanking All

Aakriti Kakkar

Gaurav Sharma

Gourab Kundu



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2. About the ‘Biscuit’ Industry The Indian bakery industry is dominated by the small-scale sector with an estimated 50,000 small and

medium-size producers, besides the 15 units in the organized sector. Apart from the nature of the

Industry, which gravitates to the markets and caters to the local tastes, the industry is widely dispersed

also due to the reservation policies (relating to the small scale industries) of the government.

The two major bakery products, biscuits and bread, account for 82% of all bakery production. The

unorganized sector accounts for about half of the total biscuit production estimated at 1.5 million tons.

It also accounts for 85% of the total bread production and around 90% of the other bakery products

estimated at 0.6 million tons. The last includes pastries, cakes, buns, and others.

Biscuits are estimated to enjoy around 37% share by volume and 75% by value of the bakery industry.

The organized sector caters to the medium and premium segments, which are relatively less price-

sensitive. The organized sector is unable to compete at the lower price range due to the excise

advantage enjoyed by the informal sector.

The organized segment in biscuits has witnessed a steady growth of about 7.5%, conforming broadly to

the growth rate of GDP. Bakery industry in India is the largest of the food industries with annual

turnover of about Rs. 3000 Crores. The biscuits are becoming quite popular in rural areas as well.

Nearly 55% of the biscuits are consumed by rural sectors.

The biscuit industry in India comprises of organized and unorganized sectors. The FBMI represents the

organized biscuit industry consisting of small scale, medium and large biscuit manufacturers located in all

zones and all states of the country.

The biscuit industry is been experiencing steady growth of 14-15% annually. In 2008, the growth

exceeded 16% mark on account of exemption from Central Excise Duty on biscuits. The Industry

estimates project a 17+% growth of the industry. The sentiments are sedate in lieu of the economic

downturn that has hit the entire country. The FMCG sector on its part too is reeling under this slump.

Data courtesy: scribd.com

0

2

4

6

8

10

12

14

16

18

20

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10*



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Even today the Indian Biscuit Industry is dominated by the unorganized sector with a composite market

share of 55%.

Data courtesy: scribd.com

Major industry players

Organized Indian Biscuit Industry

Parle40%

Britania30%

Priyagold 12%

Sunfeast 9% Others

9%

Indian Biscuit Industry market share

as on 2009-10 (in %)

Organized Sector

45%Unorganized Sector

55%

Indian Biscuit Industry as on

2009-10



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3. Parle: History and More

3.1 About Parle

Parle Products has been India's largest manufacturer of biscuits and confectionery, for almost 80 years.

Makers of the world's largest selling biscuit, Parle-G, and a host of other very popular brands, the Parle

name symbolizes quality, nutrition and great taste. With a reach spanning even the remotest villages of

India, the company has definitely come a very long way since its inception.

Many of the Parle products - biscuits or confectioneries, are market leaders in their category and have

won acclaim at the Monde Selection, since 1971. With a 40% share of the total biscuit market and a 15%

share of the total confectionary market in India, Parle has grown to become a multi-million dollar

company. While to consumers it's a beacon of faith and trust, competitors look upon Parle as an

example of marketing brilliance.

3.2. History of the company

In 1929 a small company by the name of Parle products emerged in British dominated India. The intent

was to spread joy and cheer to children and adults alike, all over the country with its sweets and

candies. The company knew that it wouldn‟t be an easy task, but they decided to take the brave step. A

small factory was set up in the suburbs of Mumbai, to manufacture sweets and toffees. A decade later it

was upgraded to manufacture biscuits as well. Since then, the Parle name has grown in all directions,

won international fame and has been sweetening people's lives all over India and abroad.

Apart from the factories in Mumbai and Bangalore Parle also in Bahadurgarh in Haryana and Neemrana

in Rajasthan, which are the largest biscuit and confectionery plants in the country. Additionally, Parle

Products has 7 manufacturing units and 51 manufacturing units on contract.

3.3. Parle Biscuits

Parle biscuits are linked with factors of power and wisdom providing nutrition and strength. Parle

biscuits are indeed much more than a tea- time snack, they are

considered by many to be an important part of their daily food. Parle

provides one and all with a basket of biscuits which is not only

satisfying but are also of good and reliable quality. Parle biscuits cater

to all tastes from kids to senior citizens. They have found their way

into the Indian hearts and homes.

Parle G is a source of strength for both body and mind due to the

sumptuous amount of milk and wheat. It is the Largest selling

Biscuit Brand in the world.



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3.4. The Production Units of Parle

The company also has plans to setup operations in Assam and Andra Pradesh in the near future. Data source: Parle official website

3.5. Parle Annual Production (Biscuits) in Million Metric Tonnes

Data source: Parle official website

0

0.5

1

1.5

2

2003-042004-05

2005-062006-07

2007-082008-09



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4. The Macro-environmental Factors

The factors enlisted below affect the eventual Marketing Strategy for

Parle

Positives Negatives

Tax based incentives by the

government. Value Added Tax

Rigid „Standards and Measures‟ act.

Conformance to size.

Helpful state governments in

providing incentives towards

infrastructural developments.

Production and distribution licenses are

difficult to attain.

Increase in per capita income of

Indians. Rise in sugar prices manifold. (up by

over 25% in six months)

Increase in the purchasing power on

Indians. Slump in the country‟s GDP to 6%

Huge gap between the Wholesale Price

Index and the Consumer Price Index.

Innovations in the sector, Boast to

Research and Development.

Better products mean heightened

competition.

India is currently the largest producer

of Biscuits in the world.

Better lifestyle, affluence and better

perception about biscuits

„Health‟ consciousness consumers:

some may move to healthier options.

Economical Factors

Social Factors

Political Factors

Technological Factors



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5. Porter’s Value Chain: Parle G The Porter‟s Value Chain for Parle G has been assessed on the five parameters of power of suppliers

and buyers, treats from substitute and new entrant and the internal rivalry are as follows:

The threat of a new entrant in

the organized biscuit industry

for Parle is low:

The industry is capital

intensive; with already so many

existing players in the market, a new

entrant would find it really difficult

to establish it.

Investments in promotions,

advertisements, and product

establishment are very high.

The distribution system is

complex and difficult to duplicate.

The Power of suppliers to affect

Parle G is fairly low:

The basic commodities

such as wheat, sugar are available.

Though with the increasing gap

between the WPI and CPI, prices of commodities is a worry. Sugar especially is a bottleneck.

Intra-industry rivalry for Parle is high:

Even though Parle is a comfortable market leader with 40% of the market share, there is

immense competition among the existing players to capture the maximum market share. The

USP of Parle G has been „price‟. A biscuit pack at Rs. 3, readily available in all pan-bidi shops

made it such a success story. But today this business model is being duplicated by the other

industry members.

The power of buyers is very high:

Availability of many kinds of biscuits in the low and moderate pricing category. This forced

Parle G to come out with a Rs. 30 family pack of biscuits. It also modified its distribution

channel for the same purpose.

The unorganized sector is always an option for the buyers.

The power of substitutes to affect the prospects of Parle G is also very high:

The growing packaged snack industry is become a real cause for concern for the biscuit

industry. This is for this reason that most members of this industry have ventured into the

confectionary and packaged snack business as well.

The traditional home cooked Indian snacks are always a threat.



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6. The Perceptual map The Indian Biscuit Industry Price v Distribution

Data source: scribd.com

As per the above perceptual map, Parle G scores the best. It has the best distribution network

among the competitors. It also has the best „lowest‟ pricing strategy.

Britania is the nearest to Parle, and its no surprise that Britania has 30% market share only after

Parle at 40%.

ITC‟s Sunfeast and Priya Gold are somewhere in between in price and distribution network. A

market share in the region of 10% is evidence to the fact. Marino and Horlicks are niche players

hence, have a higher price and a less intensive distribution strategy.

7. Product Life Cycle

Presently, Parle G is in the maturity stage of its PLC.

Having said this, the brand is going strong.

Intensive distribution employed.



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8. The Distribution Channel Network: Parle

Manufacturing Unit of Parle

at various locations

Parle Depots

Transportation to next level

Wholesalers and Distributors

Retailers: Pan-bidi/city stores

Procurement: Customers



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9. The Parle G Distribution Network

9.1. Intensive Distribution

Parle uses Intensive Distribution for Parle G. This is the ideal strategy for the market leader as intensive

distribution has the following advantages:

Increases coverage and sales

Increases product availability

Encourages retailers to compete aggressive. Higher competition leads to narrower margins for

the retails hence, increases the ultimate margin for the manufacturer.

9.2. The Channel Members of the Distribution Network of Parle

The Parle distribution network for biscuits has essentially four levels as enlisted below:

Parle Depots

Wholesalers and Distributers

Carry Forward Agents (if required)

Retailers

9.3. The Channel Members and Logistics

Parle has nearly 1500 wholesalers, catering to 425000 retail outlets directly or indirectly. A two hundred

strong dedicated field force services these wholesalers and retailers. Additionally, there are 31 depots

and Carry and Forward agents supplying goods to the wide distribution network.

Parle has level 1, level 2, level 3 distribution channels levels.

Level 1:

Availability of Parle G biscuits at all departmental stores across the length and breadth of the country.

Level 2:

Since it's an FMCG product this channel exists for customers scattered throughout the country.

Level 3:

Mass consumption and suitable for National and International coverage. For e.g. Parle's international

operations consist of serving markets in the Middle East, Africa, South America, Sri Lanka, Australia and

North America for which the 3 level distribution channel exists.

9.4. Channel Dynamics

Parle has a multi-channel marketing system since it uses more than two marketing channels to reach all

its customer segments.



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10. The Parle Distribution Network Logistics

10.1. Selection of Channel Members for Parle

Parle takes into consideration a host of factors while selecting the channel members. This is because it

believes that selection of channel members is a long run decision and the rest of the decision regarding

the supply chain depends upon the efficiency and coverage by the channel members.

The following are the host of factors considered by the company in selecting the channel members:

Authentication is required by the regarding the identity of the channel members, which includes the

name and address, photograph of the location.

Proof of solvency which requires name and address of the channel member‟s bankers

Safety of the inventory, which means that the distributor/ dealer should get the stock of the

company insured.

Inventory or the perishable goods kept by the distributor/ dealer should be in good condition which

means a detail of storage space and Refrigeration facility is to be provided.

Details of the delivery vehicle, which includes the following:

Light Commercial Vehicles,

Matador,

3 Wheeler Van,

Tricycle Van and Hand/Push cart.

The number and model of each of the vehicle needs to be furnished to the company.

Company acknowledges the fact that it needs to be sensitive to the market demands. For this it

requires that a number of salesmen needs to be present on the field.

The salesmen too are divided into various categories like

The Field salesmen

Counter salesmen

The details of Clerical Staff and labour are to be provided. The technical competence of the

salesmen needs to be mentioned.

Details of the various products of other companies that the channel member keeps have to be

provided. The following also need to be furnished with the above:

The annual sales of these products have to be mentioned.

Details of complementary products and product lines need to be mentioned.

Dealers of the company must carry a good reputation. This is due to the fact that Parle believes that

the reputation of the dealer affects the clientele in the long run.

Market coverage by the distributors needs to be defined which includes details of Geographic

coverage and Outlets per market area.

The company also requires the dealers to furnish any Advertising and Sales initiative undertaken by

them on behalf of the company.



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10.2. Motivation of Channel Members

Parle strongly believes in maintaining a good relationship with the channel members so that they are

genuinely motivated to work for the company. For the company, motivating its channel members is of

utmost priority because of the following reasons:

If the channel members are motivated, they can also initiate advertising and sales promotion

schemes on behalf of the company.

However to keep the channel members motivated to work, the company has to incur certain

costs but the benefits of it are felt in the long run.

10.3. The Channel Members of the Parle Distribution Network

10.3.a. The Distributors

One of the main factors, which keep the distributors motivated, is the margin. Usually the margins

offered by Parle are 8%. Now-a-days it has been raised to 8.5%.

Volume wise this comes out to be a big figure since Parle‟s product has a good demand in the

market. However compared to the other companies the margins are still lower since the new

players in the market offer a much higher margin. But the very fact that Parle‟s products have good

demand in the market motivates the distributors to stock it.

Parle Products being a cooperative cannot afford to give heavy monetary incentives. Parle‟s

products are considered to be value for money since the company does not believe in charging high

margins. In fact all monetary incentives are just the short run means to promote the company‟s

product.

In order to keep the Channel members motivated in the long run, Parle has build on the concept of

“Trade Marketing” which makes the dealers and the distributors believe that the company‟s

products are worthy of being pushed in the market.

The company is organizing various Total Quality Management initiatives and workshops. Here

various counseling measures are undertaken by the company to improve the overall working of the

distribution network.

Vision and mission statement: the company cascades down the vision to the various channel

members; this is done through various events organized by the company at different locations where

the values of the company are made clear and enforced to the channel members.

Also the fact that Parle being a cooperative society cannot afford to spend exorbitantly on such

events therefore it has a very traditional way of organizing these get together which leaves an impact

on the members.



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10.3.b. The Retailers

Trade schemes: these are undertaken by the company only for the hard selling items e.g. Biscuits

and Snacks etc. for these the company raises the margins by 2%, also schemes like good packaging

incase of butter and cheese is undertaken by the company. However this is only a short-term

initiative to push the products of the company.

Glow boards: the company puts up glow boards at the retailer and pays the major portion of the

cost.

Schedule of the salesmen: they provide the retails with this schedule so the retailers can pre

estimate the quantities of the various products needed.

Infrastructure facilitation: the company facilitates the retailers to buy beautiful stalls by

formulating an easy payment program and a commitment to buy back the equipment at a reasonable

price when the value of the equipment has depreciated.

10.4. Evaluation of the Channel Members

Parle has a three pronged process to evaluate its channel members. These are the Beat Plan, the

Cumulative Performance plan and Target versus Achievement Plan.

Beat plan: this plan is generated for the various product categories. A weekly schedule is

prepared for various markets and the retailers the turnover for each of the product is calculated

for the wholesale dealers.

Cumulative performance: the performance of the dealers is averaged out over a period of

three years where a comparison is made of the present performance vis-à-vis the previous ones.

Target versus achievement: the performance and the targets are compared and therefore

the gaps are identified which help in evaluating the wholesalers and the distributors and planning

for the next year as well. This is done for each of the product category.

Other criteria: these need to be fulfilled by the channel members of Parle.

Details of the bank guaranty

Photographs of the offices

Details of the wholesalers and the distributors‟ salesmen and the product lines they deal

in.

The computerization facility available.

The storage space.

Stall facility with photograph.

Details of the delivery vehicle with photograph.

Summary of the monthly potential sales of markets.

Summary of the product wise monthly sales potential of institutions.



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11. Conflicts and Co-Operation Among the Channel Members and Parle

11.1 Conflicts among the Channel Members

Ownership of assets: Previously the company used to give the products on lease to the

retailers, when the company wanted the stuff back; the retailer disagreed to comply and created

issues of ownership.

Stocking issues: The company doesn‟t want the retailers to stock the competing brand in the

company leased stall, which at times s hard to manage as retailers tend to do it often.

Replacement of products: The deterioration in the product calls for fail in replacement by

the company this major issue of vertical conflict.

Credit policy: Compared to the market, the company‟s credit period is less that specially

incase of institutional sales is very important.

Packaging: The channel members for easy storing demand a better quality of packaging.

Replenishment: The replenishment of the stocks is not prompt in case of Parle cheese Biscuit

and all hard selling items.

Margins: The Company provides least margins to all the channel members. For e.g. The

retailer’s margin in case of Parle G is 8% as compared to Britannia’s 12%

11.2. Co-operation among the Channel Members

Parle quality circles: The members of the local channel meet together every month to share

issues and the achievements of the channel members. This is an ongoing activity facilitated by the

company offices in different locations; this enables the channel members to learn together and

reduces the horizontal conflicts among the wholesalers and the distributors.

Pilot salesmen scheme: To reduce the financial burden of the distributors this scheme is run

whereby half the cost of the salesmen is born by the company and the rest half by the

distributor

Scheduling of sales: The wholesalers and the distributors provide their respective schedules

of their sales men to the retailers so that the retailers can plan out and place the orders in

advance.

Agreement defining rights: The company makes the distributors sign an agreement where

the areas of operation for each of the distributors are defined, therefore avoiding any conflict

amongst the distributors regarding their areas of operation.



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12. The Distribution Channel and Parle

The company‟s strength is in the procurement of raw materials and essentially not the

distribution of its product. Even though Parle is the market leader in biscuits. But, distribution

logistics is the industry‟s main problem. While the other companies fail to replenish demand due

to lack in procurement of raw material, Parle‟s inventory management is sound.

Parle has loyal cooperatives that provide products only to them, over time the relationship of

trust has built up with these people that Parle leverages now.

The transport channel is another strong point for Parle. As these transporters have grown with

the company overtime; the bonding with them enables the company to give least margins when

it comes to the distributors in the industry, lowering the costs.

Parle believes that there is an ongoing demand in the market and therefore no promotions are

needed to increase the sales, also the fact this would affect the cost of the product the company

doesn‟t undertake many promotion schemes.

Parle is able to provide products at the least price in the industry, and is able to give least

channel margins as the channel members earn through volumes and not through high margins.

The company has been able to push its new products into the market by hooking them onto the

fast moving products like Parle butter bite.

Because of the strong relationship that Parle shares with the constituent channel members, it

forces the channel members to carry all its new products.



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13. Suggestions for the Parle Distribution

Channel

The following are the suggestions that Parle can implement to better its distribution

channels:

Increase the margins:

In order to motivate the channel members it is also very essential for the company to

increase the margins for the hard selling items.

Pushcarts:

These should be increased in number in order to increase the market reach (especially the

rural market). This can provide with a very effective channel.

Parle should also go in for ‘Parle’ Zones:

It is primarily for big city retail outlets. Here all the Parle products can be stalked. This can

be an effective mode of „umbrella marketing‟. This strategy can be implemented in regions

where the footfalls are large in number.

The advantages of this alternative channel would be as follows:

Full range display.

Easier to promote new products.

Easy to push impulse purchase products.

The Parle Brand building exercise will be enhanced.

- The End

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Parle G- Sales and Distribution

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