Written Analysis and communication I

Assignment I: Kanpur Confectionaries Private limited

Submitted to
Dr. Gita Chaudhuri
By
Amritanshu Shekhar
Roll No.14101200006

6 November 2014

School of Management and Entrepreneurship

Gautam Budh Nagar, U.P., 201314

Memo

Date September 20th, 1987

To: Mr A. Gupta, Chairman& MD, KCPL
From: Amritanshu Shekhar, Executive assistant to Chairman, KCPL
Subject: Memorandum (Memo)
Please find the attached report with the assessments and suggestions regarding the proposal from
APL.

Summary
Situation Analysis/Critical Issues

Family business of glucose biscuits.

Biscuit industry

Competitor analysis

KCPL: Positioning, History

Market change

Pearsons Agreement

Offer of APL.

Problem statement
What should KCPL choose, profit or dream or can they manage both?
Options
1. Accept APL offer
2. Do not accept APL offer
3. Improve its own market share

Criteria
1. Profit
2. Heritage/Vision/family values
3. Business nitty-gritty

Recommendation

Based on the evaluation of different option, I would recommend Do not accept APL offer.

Situation Analysis
Kanpur confectionaries private ltd (KCPL), a family business of glucose biscuits. The founder of
KCPL has a strong bonding with the company. It is a proprietary business which has been
running since 1945 by the founder and now by his sons. It is currently running its biscuit product
under the brand name of MKG. The company owner had the vision of emerging as a leading
national brand.
The biscuit industry unlike some industry was easy to setup, it require low skilled labor and
competition is very high. The competition of KCPL were from both organized and unorganized
sector. 70 new units started in the unorganized sector between 1975 and1980. They either sold
unbranded biscuits or sold them with brand names similar to the leading brands. In organized
sector eight new units were setup in UP.
KCPL is a popular brand in the north region, most of its consumer were middle class families in
urban and semi urban areas. After it reached the number two position in 1973-1974, the higher
management decided to increase the capacity to 240 tons from 120 tons in 1980-1981. The
market was getting more and more competitive, 15 % increase in excise duty and 7% increase in
sales tax has increased the labor and material cost required increase in price but competition
didnt allow it. The company slowly begin to lose profit and was currently running at half of its
capacity.
To offset its unutilized resource, KCPL made an agreement with Pearson Health drinks limited
for producing the health biscuit Good Health for it. Pearson promised an off take of 100-125
per month and a convert rate of Rs.3 per kilogram after reimbursing fully the cost of material,
but orders from Pearson initially was for 50 tons per month between 1986 and 1987. Pearson
didnt provide any technical guidance, it relied on the expertise of KCPL. The market response
to Good health biscuits was not very encouraging. Now that Pearson was using only 50 tons.
KPCL had a surplus of 70 tons (Total capacity- KCPL Own production- production for Pearson).

A-One confectionaries private limited had offered KCPL to counterbalance its 70 tons unused
capacity by producing biscuits for them. The company was interested in augmenting its supply
capacity by promoting contract manufacturing units (CMU). APL offered 3 year contract but
required change in process and equipment. KPCL would be required to buy the other ingredients
from authorized supplier of APL. It offered to reimburse the raw material expenses as per its
norms of consumption and pay a conversion rate of Rs. 1.5 per kilogram to cover the expenses
on labor, overheads and depreciation. The advantage of the proposal was in terms of avoiding
marketing, brand building and distribution expenses, and minimizing the business risks. The
disadvantage of the offer is that KCPL night lose independence. They might not be able to
concentrate on strengthening the MKG brand built over years.

Problem statement
What should KCPL choose, profit or dream or can they manage both?
Options
4. Accept APL offer
5. Do not accept APL offer
6. Improve its own market share
Criteria
4. Profit
5. Heritage/Vision/family values
6. Business nitty-gritty

Evaluation
Profit
Accept APL offer

Heritage

Business nitty-gritty

Profit will be positive Loss of

No marketing, brand

if the APL offer is independence, They

building

accepted and Pearson might not be able to

distribution expense

also

stays

customer
KCPL[Exhibit 2]

and

as concentrate on
of strengthening the
MKG brand built
over years.

Do not accept APL KCPL will continue KCPL can continue KNPC will have to
offer

to be in loss of to work on its brand handle all the

3006[Exhibit 1]

building

necessary business
nitty-gritty like
marketing, brand
building

Improve

its

own Company might not KCPL can work on KNPC will have to

market share

have immediate profit developing

operations.

its handle
It

can necessary

achieve the vision of nitty-gritty

its owner someday.

marketing,
building

Recommendation

all

the

business
like
brand

Based on the evaluation of different option, I would recommend Do not accept APL offer.
KCPL will never be able to expand as it will lose its independence. KCPL was among the top 2
companies in 1973-1974. It can again be among the top, if it could expand its capacity with
Pearson. It will not have to sacrifice its freedom if it does that.
Action Plan
KCPL should initiate conversation with Pearson and try to get the promised orders. It has its own
brand name and a very successful one, it can build on that and can be among the top.
KCPL can also develop its own R& D division to develop its own product and it should also
reduce it operating cost.

Exhibits
Exhibit 1 : KCPL with APL profit/loss account
components

KCPL and
APL

Change charge

1.5

APL Units(tones)

70

APL Revenue
APL Total cost
APL Profit

105000
148105.2632
43105.26316

MKG Units(tones)

120

MPG Revenue

2172000

MPG Total cost

2131902

MPG Profit
NET PROFIT

40098
3007.263158

Exhibit 2 : KCPL Pearson and APL profit/loss account

components

KCPL ,
Pearson and
APL

Change Rate

APL Units(tones)

90

Pearson Revenue

270000

Pearson Total cost

168857.1

Pearson Profit

101142.9

APL Units(tones)
APL Revenue
APL Total cost
APL Profit

70
105000
148105.2632
43105.26316

MKG Units(tones)
MPG Revenue
MPG Total cost

120
2172000
2131902.11

MPG Profit

40097.89

NET PROFIT

98135.64