Parle – G

1. Based upon secondary data, you are supposed to describe and analyse the existing STP strategy that has been adopted by your chosen company/brand.

Parle products pvt. Ltd manufactures Parle-G biscuits. It was launched in 1939. It is the world’s top selling biscuit brand. Parle-G is popular because of its Glucose Strategy and well known as for its taste, great nutrition content, and quality. Its marketing strategy makes it undoubtedly the market leader in the biscuit category for decades.

Parle-G segments its customers based on geography. It is consumed by people all over India irrespective of age and status. It has a big market base in both urban and rural. It has great emotional connect with Indians. Even though the product mainly targets school going children, it is preferred by adults as well. It is consumed as a tea time snack in most Indian households. As it is believed to be a healthy and nutritious food when compared with other biscuits, people have it for breakfast too. Some people charge themselves with Parle-G, when they need instant energy. Parle-G follows mass marketing technique, with which it caters not only a specific group, but the whole market as well.

Parle-G has positioned itself as a special glucose biscuit, with high energy and nutrition. It is positioned in the minds of people as a biscuit that has value for money. After keen and deep analysis of Indian consumer behaviour, they have fixed this low price to make it affordable for everyone. This marketing strategy is their main strength. They have attained this differentiation by highly tactful economies of scale, which is why it is difficult for any other rival companies to compete Parle-G in the glucose biscuit category. It concentrates on the taste and preferences of Indian consumers. This differentiation is attained by means of packaging (image) and distribution. The product can be immediately recognized by its white and yellow coloured wax paper wrapper with the picture of a girl child. The airtight pack keeps the biscuits fresh and crisp for a long time. It has the most

intensive distribution coverage. Parle has almost 13 manufacturing units along with 75 manufacturing units on contract in both rural and urban areas. It has nearly 1,500 wholesalers working all over the world, catering 4, 25,000 retail outlets directly or indirectly. In addition to field force services, there are 31 depots and C&F agents to supply goods to the wide distribution network. It is available to consumers even in remote villages, which have a population of only 1500.

The company uses famous slogans like “G maane Genius”, “Parle-G mera sapna sach hoga”. All its advertisements state about the basic benefits of energy and nutrition. In 1989, Parle-G’s Dadaji commercial became a huge success and was run for a period of 6 years. The brand is always associated with positive values like morality, sharing and caring. It had also sponsored the tele-serial ‘Shaktimaan’, which helped it regain market share at a greater pace, when other rival brands like Britannia Tiger showed up. This successful marketing mix and commitment, has helped it to capture 70% market share in India and also to become the first Indian FMCG brand to cross the Rs 5,000 crore mark in retail sales.

2. You will then proceed with an Environmental Analysis (PESTLE) vis-à-vis the chosen co./brand to identify trends and future outlook for this category/sector. Specific to the co./brand you can use a 5-Forces model to crystallize your conclusions based upon PESTLE and competitor analysis.

Macro environment analysis – PESTLE

Political/Legal-

Parle started manufacturing Parle-G during World War II, almost a decade after Parle started its operations. It was one of the limited eatables that could reach the military people thereby gaining credibility. Government’s licensing and excise policy has been stringent for Parle-G under the Congress government. In order to keep excise duty at bay, Parle-G has to keep low prices. This was government’s policy to ensure Parle- G was affordable by poor.

Social-

Parle-G forms an integral part of every household in India as an affordable snack liked by all ages. With a low cost, it offers value for money, thus appealing to the psyche of Indian consumers. Parle also came out with Parle-G gold, a premium version of Parle-G aimed at people in band of people having a higher income as compared to poor. It has a wide reach- during Mumbai floods, Parle-G managed to get biscuits to the victims. Parle-G in a way symbolizes quality, health and trust. Based on the existing marketing strategy, it can try and differentiate itself based on lifestyle catering to people who come from different walks of life eg. Athletes, Engineers working in MNC, etc.

Economic Factors-

Income of the consumer group decides its core expenditure. As parle-G is a low priced product of Rs.4 per pack, it is consumed by all income groups. Due to its low-price, consumers with lower and medium income-level mostly prefer Parle-G. Poor buyers buy it because of its affordability and high glucose-content, to satisfy their hunger, whereas medium income-level buyers get motivated as it is perceived as a value-for-money product.Parle-G once faced the cost pressure and it increased its product price per pack from Rs 4 to Rs 4.50. So, it incurred a loss. 12.5% increase in price caused 30% drop in sales. Although Parle-G is a brand like Colgate, which holds a monopoly in its respective market share but then too Parle-G is a supplementary product. Supplementary products are highly price sensitive. Parle-G largely targets middle and lower income group and so as the price increased that year, consumer bought the cheaper substitute .In order to increase global market share Parle-G got the ISO 9000 certification . Keeping this in mind, it can try and cater to the premium class consumers and shed off its image of being a brand just for low income consumers.

Environmental-

India’s geographical and weather conditions ensure that Parle-G can be consumed throughout the year. As such Parle-G as a product does not pose any threat to the environment and neither does its raw materials. Owing to its popularity and high demand in India, Parle-G faced major issues with its production capacity but has now incorporated modern techniques and innovations to go global and also catering adequately to the domestic demand. With the latest technologies at hand, Parle–G would adequately meet the growing demands but it can also work on decreasing the broken biscuits.

Technological -

Parle-G faced lot of issues from the British Government, so machines were developed for production. Parle-G used newspaper waxing as packaging material. Parle-G survived and thrived because of its quality and it’s improvisation from time to time. With the rise in demand for premium biscuits and there being no option for the consumers, Parle-G launched premium gold category which gave consumers a richer formulation and a bigger biscuit (6.7 gm against the standard 4.7 gms).Decade ago Parle-G launched Parle-G Magix which had chocolate and cashew to take over Britannia but it did not do well. In context with this, we can say that with improvisation and release of new products there should also be an improvisation in the marketing strategy to differentiate those new products.

The Porter's Five Forces model is a simple but powerful effective tool to understand where power lies for any business. It helps to decide how to take advantage of a situation and avoid making the wrong decisions.

PORTER’S MODEL FOR PARLE-G

1. Bargaining power of suppliers: Low

Number of suppliers :

Parle-G‘s raw materials are basic commodities like wheat and sugar. There are many suppliers for these and hence, the suppliers do not have great power to bargain with Parle. This works in favor of Parle- G.

More diverse distribution channels

Parle-g’s biggest strength is its distributive network including wholesalers, depots and a whopping 6 million retailers. The more diverse distribution channels become the less bargaining power a single distributor will have. This positively affects Parle-G.

Volume of orders

Parle-G‘s suppliers are heavily dependent on the high volumes of their orders which gives the former leverage to cut volumes and reduce the supplier’s profits. This gives the suppliers lesser scope of bargaining.

Low cost of switching suppliers

Because of the large number of suppliers of Wheat, Sugar, etc. and the ease of availability of these basic goods, cost of switching to new suppliers that Parle may face is very low; which further reduces the bargaining power of suppliers.

2. Bargaining Power of Customers: High

Number of customers

In 2012, Parle- G became the world’s largest selling biscuit brand, selling about 100 Crore packets across every size in a month. Parle-G’s customers are loyal.

Many competitors with similar productsConsumers for such a product are likely to change their preference based on taste and quality. Many competitors to Parle-G are available in the market (Tiger, Sunfeast, etc.). This restricts Parle-G to increase prices or compromise on quality.

Price Sensitivity:The biggest USP of Parle-G is its low cost. This strategy of low price makes the brand very sensitive to any change in price, increasing the bargaining power of customers.

3. Threat of Substitution : Medium

Performance of substitutes:Substitutes for biscuits are products like wafers, bun, namkeen, potato chips, etc. Many customers are also diverging towards bakery-made biscuits and confectionary. Even though biscuits are meant to be taken as snacks, Parle-G has a loyal consumer base. And for most, it is a food supplement rather than an evening snack and a healthier option because of its glucose content.

Cost of change:The low price of Parle-G ensures that there is no comparable price difference when a consumer switches to substitutes.

4. Threat of new competitors :Low

Time and Cost of entry:Because of an already overflowing range of products in this market, and every product is unique, it is very difficult for a new entrant to enter this market.

Economies of Scale:

With its absolute economies of scale, it becomes difficult for rivals to compete Parle-G in that category, without their margins getting affected.

Brand Loyalty:Customers are usually loyal to one brand and only a strong brand name is required to break this.

5. Already existing Competitors : High

The major players in this sector are Britannia Tiger, Marie, PriyaGold, ITC, etc.Although there are major competitors of Parle-G, it continues to remain the largest market share holder.

3. You will then identify the challenges, hence facing the co./brand.

The main challenges that the brand faces are the presence of two big rivals – Britannia and ITC. Both the players have deep pocket to promote their brand and pose a big threat to parle-G.

Promoting the brand into upper middle class family is a challenge as people have a basic perception about Parle-G that it is low price product, manufactured especially for the rural.

The market has lots of fake brands, which is again a threat to parle-G.

4. Perform now a SWOT analysis

STRENGTH:

Powerful Advertising by well- known celebrity

Brand Value (very high customer loyalty for PARLE)

Comparatively low price

Largest distribution System

WEAKNESS :

Quite tough competition (many competitors are there)

No uniqueness

Improper Packing (Breakage of biscuits)

Low share in premium market

Mass marketing

Good understanding of consumer psyche

High dependence on retailers

Opportunities :

Estimated growth rate of 15 % (YOY)

Opportunities to associate with various government initiatives such as Mid-day meal scheme

As Young generation is the main target, the population of the consumer base always has positive growth

Low per-capita consumption

Threat :

Tough competition from powerful advertised brand like Britannia

Effective substitute such as wafers and bakery products .

Increase in sale of cheap bakery product

High cost of production due to increase in raw material cost

5. Identify issues that marketing needs to take up and resolve

There are always certain challenges that a product faces, no matter what the market share is. In the case of Parle-G too, there are a few issues that marketing needs to resolve:

Threat of fake brands

Parle-G has a mass appeal in the rural areas. Fake brands like Parel-G, Parle Jee take advantage of this consumer base and their lack of brand recognition. They have packaging similar to that of Parle-G which can confuse the customers to buy them instead of Parle-G. This causes significant loss in revenue and might adversely affect the reputation of Parle-G, especially if these substitutes end up having a bad quality. Parle-G is known as ‘biscuit ka pooda’ in rural areas, which again reflects the lack of brand recognition. Marketing could create more awareness in terms of brand recognition.

Mass Marketing v/s Differentiated marketing

A major chunk of Parle-G‘s revenue is from the Tier-1 and Tier-2 cities. However, no differentiated marketing strategies are implemented for this segment of consumers. Parle-G’s advertising and marketing campaigns are always at a national level. They mostly target children, but not other segment of people who can use Parle-G as a source of energy or a quick snack.They could venture into differentiated marketing by projecting Parle-G as not only as a low-cost brand of biscuit but also as a health food and complete nutrition package.

No share in the premium category

Parle-G tried to enter the premium biscuit category with Parle-G Gold in 2012, but could not gain the popularity that they aspired for. Having a premium biscuit brand named after Parle-G was counter – intuitive for the consumers, who would easily switch to other more popular brands like Sunfeast and Hide n Seek. They could have specifically come up with strategies to target segments that consume such biscuits and try to negate the image of ‘low cost’ that Parle-G carries along with it.

Relevance in coming decades

Nowadays other substitutes for glucose biscuits are coming up in the market every day –like oat and ragi cookies- that are preferred by the youth today. With the increasing per capita income, Parle-G cannot hold on to marketing itself as a ’low-cost’ biscuit. With this in mind, Parle came up with its new campaign “Kal ke genius”- the first initiative in the decade. However, marketing team needs to come up with more innovative ways to attract consumers from the youth category.

Competition

Biggest competitors for Parle-G are Britannia and ITC. They have rigorous marketing and advertising campaigns. So, Parle-G came up with a new campaign which was its first move in this decade. The product has to concentrate in different advertising techniques, to face the intense competition.

6. Choose a growth path (Intensive; Integrative; Diversification), giving justification for your choice. This could be largely based upon possibilities in identifying new segments; new positioning; new target markets that may help your co./brand to grow further.

Parle-G has been a market leader in the glucose biscuit industry for a few decades now. We believe that the growth strategy that Parle-G must apply should be Intensive. To be specific it should adopt market penetration strategy.

The focus of the market penetration strategy must be on Rural Markets as they are the main consumers. The Rural market penetration is 50 -65% and there is still a substantial portion, which can be targeted. The company already has an extensive distribution network, which would play a crucial role in this strategy.

The most effective way would be to target the young generation as they would grasp faster and also help in spreading positive word about the biscuit.

Some of the activities would be to associate with government initiatives such as National Rural health mission centres, mid-day meals for school children etc. This would not only build a liking for the product among children but also create strong credibility of the product being a healthy, beneficial and a complete nutrition package. It could also organize fairs in villages where the village elders can be explained in their own regional dialects the useful health advantages of Parle-G so that they can promote it among other villagers, the fairs could also have fun activities for kids with prizes as Parle-G biscuits to develop a sense of attachment for it among the children.

Parle-G has been given a stiff competition from Britannia’s Tiger Biscuit but due to its market domination over many years and the “milky taste” of Parle-G it continues to remain the market leader. In the past though the cost of the ingredients increased and Parle-G increased its cost by 50 paise, it lost a huge market share to Tiger biscuit. We would suggest that in future if the prices of the ingredients were to increase again then the extra costs could be bared by the higher end biscuits of Parle products such as Hide n Seek, Milano etc. since the consumers would not mind spending a rupee or two more for these biscuits.

Parle-G could also focus on removing fake brands from the market such as Parle Jee, Parel-G etc. which can easily confuse the rural population and hence cause a lot of loss in revenue.

Glucose Biscuit has a healthy image perception among customers. Parle can increase sales and profits by developing new product of potential interest to its current markets with a product development strategy to grow intensively. They could grow by introducing new parle-G (Parle-G nutria) with more nutrients and glucose at the same price to target health conscious customers.

References:

http://www.lawteacher.net/free-law-essays/international-law/segmentation-reveals-only-the-firms-opportunities-in-ville-parle-international-law-essay.php

http://articles.economictimes.indiatimes.com/2013-02-13/news/37079254_1_parle-g-parle-products-glucose-biscuit-brand

http://parlegcompany.blogspot.in/