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KANPUR CONFECTIONERIES PRIVATE LIMITED

Case Analysis

INTRODUCTION

KCPL STARTED IN 1945, BY MOHAN KUMAR GUPTA.


FIRST ENTERPRENEUR TO SET UP A CANDY UNIT IN UP. IN 1946 TO 1950, 30 UNITS WERE SET UP IN UNORGANISED SECTOR OF RAJSTHAN TO SELL VARIETY OF CANDIES. BY 1960S HE WAS A MARKET LEADER IN CANDIES IN NORTHERN REGION. DECIDED TO INVEST SURPLUS CASH TO DIVERSIFY INTO GLUCOSE BISCUIT MAKING UNDER MKG BRAND. DURING 1970S DEMAND WAS GROWING AT MORE THAN 15%.

IN 1973-74 KCPL REACHED NO.2 POSITION IN THE MARKET.


IN 1986-87 DECREASED THE MONTHLY PRODUCTION OF MKG BISCUITS. MKG BISCUITS WERE KNOWN FOR THEIR QUALITY, CRISPNESS AND AFFORDABLE PRICE. IN 1986-87 KCPL SOLD 360 TONNES TO SMALL AND MEDIUM SIZED INSTITUTION.

TECHNOLOGY AND OPERATION

Biscuit making involved ingredients Maida, Sugar, Vanaspati and certain preservatives in proportion. Qualities of material was checked in laboratory for impurities. Biscuits were manually packed in packets of 100 grams. Dependent on both casual and permanent workers. Salary for permanent were 2.75 lakh/month and wage for casual labour Rs.50/day. Absenteeism were high. Production varies from 2 tonnes/day to 6tonnes/day.

FAMILY MEMBERS AND RESPONSIBILITIES

Mohan Kumar had 6 sons.

Eldest son ALOK KUMAR joined business in 1960 and looked after FINANCE and LIASON department. Later became CHAIRMAN and MD of KCPL.

Second son vivek joined business in 1965 and looked after HUMAN RESOURCE and MANUFACTURING.

Youngest son sanjay joined business in 1974 and was responsible for MARKETING, LOGISTIC and ADMINISTRATION.

MARKETING STRATEGY BY MKG

Advertised in vernacular news paper. Joined hand with local retailers to advertise the brand. Extended its range and offered cream, salt and Marie biscuit.

COMPETITORS

1973-74 Market was dominated by A-ONE Confectioneries private Ltd and International Biscuit Limited.

1975-80 competition increased with setting up of 70 units in organised sector.

8 new units were set up in organised sector of UP.

COMPETITORS MARKET STRATEGY

Small Competitors sells unbranded biscuits.

Sold them with a brand names sounding similar to the leading brands.

Intimated the packing style of leading brand.

PROBLEMS FACED BY KCPL

Could not increase price to take care of rising cost of labour and raw material. Did not have national scale to reduce the cost considerably. Did not have premium image to get higher price. 1983-84 and 1986-87 sales declined. The candy business was on decline. Candy business was closed.

PRODUCTION AND FINANCIAL POSITION OF KCPL OVER TIME

In 1973-74 Monthly sale was 110 tonnes In 1980-81 Sale was increased to 15% and turnover was 2 crore and Net Profit. increased to 12% Profit was 20 lakh. Also in 1980-81 KCPL doubled its capacity from 120 tonnes to 240 tonnes per month.

In 1983-84 Sale increased to 3 Crore and Net Profit to 25 Lakh.


In 1986-87 average production of Biscuit was 120 tonnes per month.

PROPOSAL BY PEARSON

It promised a load of 100-120 tonnes. Conversion rate RS 3 per Kg. In 1986-87 its order was 50 tonnes. Reimburse full cost of material Allow KCPL to run on existing line of business.

Officers check quality of biscuit before dispatch

PROPOSAL OF APL

In 1987 it offered initially 70 tonnes per month.

Conversion rate Rs 1.5 Kg


Inspect the production process and recommend changes if required and would be carried out by KCPL of its own.

Supply pre-printed packing material.


To adhere quality procedure, 2 quality officer of APL would be appointed. Supply APL secret ingredients to KCPL. Required to buy material from APL authorised dealer. Reimburse raw material cost. Initial contract is for 3 years.

OPTIONS AVAILABLE WITH KCPL


OPTION 1: KCPL can accept the offer from APL and become its CMU OPTION 2: KCPL can reject the offer and continue with production of MKG and GOOD HEALTH for PEARSON

OPTION 1

Contract capacity can be increased if KCPL meet expectation. KCPL can improve and evolve the production procedure with technical help that is been provided by APL.

It will be in profitable situation so it can be able to improve its own situation of MKG

OPTION 2:

Pearson can increase the production from 50 tonnes to 100 tonnes which will eventually increase the profit margin.

Since PEARSON biscuit is not doing good in maket as APL biscuits have already captured the market so probability to increase the production is less.
MKG is also running in loss.

PARTICULARS

"MKG"

APL

Total Of each PARTICULARS

Total Of MKG

Total of APL(North Region)

Total of APL(National)

MKG producing 70 tonnes For APL

MKG producing 50 MKG producing 100 tonnes for Pearson tonnes for Pearson

Sales per month(in tonnes)

120

1200(National) 200(North)

Price per tonne Consumption of maida per tonne(in kg)

18100

19000

Total Sales

2172000

3800000

22800000

1366866.67

1113750

2227500

750

700

Total Cost of Maida

900000

1372000

8232000

490000

375000

750000

Consumption of vanaspati per tonne(in kg) Consumption of sugar per tonne(in kg)

150

140

Total Cost of Vanaspati

624000

933333.3333

5600000

326666.6667

260000

520000

200

190

Total Cost of Sugar

288000

437000

2622000

152950

120000

240000

Price of maida per bag of 50 kg

500

490

Price of vanaspati per tin of 15 kg

520

500

Price of sugar per bag of 100 kg

1200

1150

Preservatives and Packaging cost(in tonnes)

1000

1000

Total Cost of Preservatives and Packaging

120000

200000

1200000

70000

50000

100000

Casual labour cost per tonne Wage rate

300 50

400 80

Total labour Cost

36000

80000

480000

21000

15000

30000

Permanent salary bill per month()


Interest per month

275000 10000

NA NA

Total Salary Total Interest

275000 10000

458333.3333 16666.66667

2750000 100000

160416.6667 5833.333333

114583.3333 4166.666667

229166.6667 8333.333333

Other fixed commonities

60000

NA

Total Cost of commonities

60000

100000

600000

35000

25000

50000

TOTAL COST

2313000

3597333.333

21584000

1261866.67

963750

1927500

PROFIT

-141000

202666.6667

1216000

105000

150000

300000

PROFIT %ge

-6%

5.633802817

5.6338028

8.32100592

15.56420233

15.56420233

ACTION PLAN

KCPL accept the proposal of APL. Continue contract with PEARSON Group. Working for both company KCPL could also improve its own production line Brand image of MKG by their secret ingredients and technical up gradation.

THANK YOU
QUESTIONS IF ANY?

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