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Analysis of

Kanpur Confectioneries Private Limited (A)

By
G Abhishek Rao
Roll No- 14S602
Tapmi

Executive Summary
Kanpur confectionaries private limited (KCPL) was established in 1945. KCPL was basically into candy
business. In 1970 KCPL started manufacturing biscuits and it performed really well. In 1975 KCPL started
facing severe competition from various units in the unorganized structure. The candy business was also
on decline and so the business was closed down by the family.
In 1985 Pearson Health Drinks Limited (Pearson) decided to diversify into health biscuits. Pearson wanted
to outsource its manufacturing process. And they chose KCPL for the job. The response to the biscuits
were not very good. It seemed that the biscuits were too highly priced.
In September 1987 APL (A-one Confectioneries Pvt. Ltd) offered to subcontract manufacturing to KCPL.
APL wanted to expand its supply to the market by subcontracting orders to other manufacturers.
However, APL wanted to retain full control over the quality and production processes.

Background and Situation Analysis


KCPL was started by Mohan Kumar Gupta in 1945 to sell sugar candies under the brand MKG. It
evolved greatly to become at one time the 2nd largest seller of biscuits in the market. But now the
condition for KCPL is not that good. The following time line can be attributed for KCPL.

1945
KCPL was established. Started
selling sugar candies under the
MKG brand.

1946
KCPL setup a production unit
in Jaipur. 30 more units were
setup in the next 4 years.

1954
To reduce operational costs
KCPL moved its production
facilities to Kanpur in UP.

Late 1960's
KCPL became the leader in
the candy business in
northern region.

1980-81
KCPL net profits stood at Rs.
20 lakhs. A 12 % increase
over the previous year. The
capacity of production was
also 240 tons/month.

1970
KCPL ventured into production of
glucose biscuits. The demand for
these was growing at 15% p.a.
Also, extended the range of
products offered under MKG like
cream, salt and Marie biscuits.

1983-84
The sales increased to Rs. 3
crores. The net profit stood at
Rs. 25 lakhs.

1973-74
KCPL reached 2nd position in the
market with a sale volume of 110
tons/month.

1986-87
KCPL average monthly
production 120 tons.
Monthly salary bill Rs 2.75
lakhs.

MKG brand was very well advertised by KCPL using newspapers, hoardings at cross roads etc.
But it wasnt marketed properly.
During the 1970s though the business was profitable but it was constrained by the scarcity of
ingredients. Here again the company could have tried brining in the ingredients from other
sources.
During the period 1975-1980s KCPL faced severe competition from both organized as well as
unorganized players. The unorganized units avoided paying taxes as well as imitated leading
brands in name and packaging style. This led to decline in market share of KCPL. KCPL could
have responded to this in a better way if the company could have been branded properly.
The company should have looked for greater visibility among the customers when it was doing
well.
In 1985 Pearson subcontracted its newly ventured health biscuits manufacturing process to
KCPL. The biscuits were not that successful as it seemed to be highly priced. KCPL should have
foreseen this and should have tried to cut down the manufacturing costs.
Also KCPL didnt do anything about bringing in a change in the employees attitude due to which
there was uneven production.
The candy line was closed by 1986-87 because of declining market. This could have also led to
negative impact for the company among its customers.
On September 8, 1987 APL (A-One Confectioneries Private Limited), a leading national biscuit
manufacturer, in order to reduce its cost of manufacturing and increase its supply wanted to go

for CMUs (Contract Manufacturing Units). But they wanted to retain the manufacturing process
and quality checks as per their norms.
On September 10, 1987 Mr. Alok Kumar Gupta chairman and MD of KCPL and his 2 brothers
held a meeting to discuss whether or not to become a contract manufacturer for APL.

Problem Statement
KCPL is in a dilemma of whether to accept the offer of being a subcontract manufacturer to APL or not

Strategies Implied

SWOT analysis:-The SWOT analysis for KCPL

Strengths

Weakness

Good customer Base

High labor costs

Core Values of the company

Scarcity of ingredients

Brand loyalty among the


customers.

Workers absenteeism

Threats

Opportunities

Growth rate of demand for


biscuits-15% p.a.

Might lose out on its


autonomy

Subcontract manufacturing for


APL

Additional investments for


changing manufacturing
process

Access to elite production


process so can better its own
production

Decline in MKG brand


value

Directional Policy Matrix

HIGH

Market
Attractiveness

KCPL continues to
manufacture Good
Health Biscuits.
Canteens of institutions
estimated
demand
around 2400 tons and
KCPL sold only 360 to
these.
Many more players or
competitors coming into
the market which will
lead to better way of
producing goods at lower
costs.
KCPL doesnt take the
subcontract.

Presently incurring
losses.

Cost of production is very


high so able to produce
only half of the
capability.

LOW

KCPL takes the


subcontract.

KCPL will have access to


the manufacturing
processes and quality
checks of A-one.

KCPL brings in new ways


to cut costs so as to
compete with other
major players.

Targets middle and lower


income group.

Its joint venture with


Pearson to produce
biscuits.

Brand Name of MKG

LOW

HIGH
KCPLs
Competitiveness/ Strength

So here, KCPL has the following options:1. Accept APLs subcontract manufacturer proposal.
2. Continue in the same way and try to revive its own brand.
3. KCPL can also try to revive the venture ship with Pearson.

Selection and Implementation


In my opinion KCPL must accept the proposal made by APL i.e. subcontracting manufacturing. Presently
we can see that KCPL is not doing that well in the market and thus cannot afford to spend more on its
branding. Also the risks involved in reviving its own brand is more. So KCPL should subcontract
manufacturing for APL. This will also let them access the production technology and quality assurance
processes of APL from where KCPL can learn.
KCPL must presently focus on APLs manufacturing but it should also look to strengthen and revive its
own brand. With KCPL accepting the subcontract there will be assured returns which can again be used
to revive the MKG brand.
The subcontract would also allow them to change their production line. Even though this involves costs
but it will be helpful for them as the production would yield better quality products.
As a contingency plan KCPL must look to revive MKG brand. They need to solve the problem of uneven
production due to absentees. Better incentives might reduce the absentees. KCPL can also look to
capture more of the market from the institutes. Presently it supplies only 360 tons of the 2400 tons
demanded in the market. So there is potential for a lot of improvement in this area.
Also KCPL can outsource the manufacturing process to any of the entrepreneurs or unorganized player
in the same terms as APL has done to KCPL. This will not only reduce the costs but will also help it fare
better in the market place and withstand the competition.

So KCPL must look to take one of these options and clearly understand the implications and costs as
mentioned, involved in each before going on with the implementation.

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