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For Office Use: 
Grade 
Written Analysis and Communication 
Individual Assignment No 3 
Case Analysis Report On 
‘KANPUR C...
Page 2 of 13 
EXECUTIVE SUMMARY: 
Kanpur Confectionaries Private Limited is a biscuit manufacturing company. Initially it ...
Page 3 of 13 
SITUATIONAL ANALYSIS: 
Kanpur Confectioneries Private Limited (KCPL), founded by Mohan Kumar Gupta is a bisc...
In due course top management of KCPL was also changed. In 1982, Mohan Kumar, who has six 
sons handed over the KCPL’s lead...
EVALUATION OF OPTIONS: 
i) Accept APL’s offer and become CMU 
a. Advantages: No expenses on advertisement, attracting cust...
This option is like a gamble. If the new product gets a positive response then it can fulfill all the 
objectives and can ...
Page 7 of 13 
ACTION PLAN: 
KCPL will have to make good relations with the institutes. Talk to premier institutes and take...
Report Exhibit 1: Company’s Timeline 
Page 8 of 13 
1945 
KCPL Founded by Mr. Mohan Kumar Gupta in Jaipur dealing 
mainly ...
Report Exhibit 2: Biscuit Manufacturing Process 
Maida 
(Manually) 
Page 9 of 13 
Vanaspati 
Cylinder 
Sugar Syrup 
Cylind...
Page 10 of 13 
Report Exhibit 3: APL’s Offer 
ADVANTAGES DISADVANTAGES 
 Assured return on investment (ROI) 
 Access to ...
Report Exhibit 5: KCPL and its competitors’ statistics 
Page 11 of 13 
Company 
Plant 
Location 
Dominant 
Region 
Sales i...
Report Exhibit 7: Family Introduction 
 Mr. Mohan Kumar Gupta, Founder of KCPL and Father of 6 sons. 
 Mr. Alok Kumar Gu...
UNDERTAKING: 
To Whom It May Concern: 
I, Jayant Kushwaha, hereby declare that this assignment is my original work and is ...
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Kanpur Confectioneries Case Analysis

Kanpur Confectioneries Case Analysis

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Kanpur Confectioneries Case Analysis

  1. 1. For Office Use: Grade Written Analysis and Communication Individual Assignment No 3 Case Analysis Report On ‘KANPUR CONFECTIONERIES PRIVATE LIMITED (A)’ Submitted by:- Name : Jayant Kushwaha Roll No : 141119 Section : ‘A’ Institute of Management, Nirma University Date of Submission: September 11, 2014
  2. 2. Page 2 of 13 EXECUTIVE SUMMARY: Kanpur Confectionaries Private Limited is a biscuit manufacturing company. Initially it had good business but with increase in competition and under production brought losses to them. Firms proposed offers capable of fetching profits but bigger problem is sustainability of the company. Options available are; accepting the offer, increase efficiency of workers, introduce new product, optimum utilization of capacity and focusing on canteens. But some objectives have to be kept in mind like there should be no losses, no effect on brand identity, no compromise with family principles and future growth. So the best solution seems to be focusing on canteens. Word Count: 100
  3. 3. Page 3 of 13 SITUATIONAL ANALYSIS: Kanpur Confectioneries Private Limited (KCPL), founded by Mohan Kumar Gupta is a biscuit manufacturing company started in 1945 in Jaipur. Mohan Kumar was keen learner as earlier he used to work in a candy unit and then started his own business with the dealership of candies under the brand name ‘MKG’ at the age of 28 years only. After gaining some experience and insight about the market, he set up his own production unit in Jaipur in 1946 (exhibit 1 shows the timeline of the company). He was an excellent tactician also, as when competition grew and he could not compete on costs he shifted his candy-making unit to Kanpur where he can manufacture candies at a little low cost and target new market. He invested in advertisement smartly, in vernacular newspaper and hoardings to connect with common people. Also with good dealership network in Bihar and MP he was able to make KCPL the market leader in his region. Mohan Kumar was a visionary too as he could see growth in biscuits demand (15% p.a.) and attractive margins this product has. Also sugar is the common raw material for both candies and biscuits (biscuit manufacturing process flowchart given in exhibit 2). So he decided to invest his surplus from candy business to enter into biscuits’ business. Business grew fast but limited raw materials didn’t allowed it to flourish. But still they managed to be the number 2 players in biscuit market in northern region with extended range of Cream, Salt and Marie biscuits. Prince Biscuits was the market leader with 130 tonnes sales followed by KCPL with 110 tonnes sales followed by International Biscuits with 100 tonnes sales. In year 1980-81 there turnover was Rs. 2 crores (growth of 15% compared to last year) and in year 1983-84 it was Rs. 3 crores. The installed production capacity was 240 tonnes per month and their average monthly production was 120 tonnes. In 1973-74 glucose biscuit was the growing segment of the biscuit industry and many unorganized sector entered the market. A-One Confectionaries Private Limited (APL) and International biscuits dominated the market and these new entrants made the market more competitive. KCPL got stuck in middle as it could not increase the prices whereas raw materials and labour cost rose and it did not have that big scale to reduce costs considerably. Between 1983-84 and 86-87 KCPL’s sales declined and it incurred heavy losses. By now APL had become a leading player with monthly sales of 200 tonnes. KCPL was reduced to fourth position with sales of 120 tonnes.
  4. 4. In due course top management of KCPL was also changed. In 1982, Mohan Kumar, who has six sons handed over the KCPL’s leadership to his eldest son, Alok Kumar. Their background, joining year and responsibilities are given in exhibit 7. KPCL then joined hands with Pearson and jointly launched ‘Good Health’ biscuits but the response was not good and KCPL had to encore loss of Rs.141000 (exhibit 6). On September 8, 1987 APL came up with an offer of expanding its supplying capacity by contract manufacturing units (CMU). KCPL can provide those units but this contract had its own pros and cons (exhibit 3). So, now Alok & his Brothers have to decide what to do with this opportunity before someone else grabs this. Page 4 of 13 PROBLEM STATEMENT: To regain its position as one of the biscuit market leader and extent its market share to premier customers. OBJECTIVES: Objectives in accordance with their priority are:- 1. To eliminate losses and bring profits 2. To maintain the brand they have made over the years 3. To abide by the principles laid down by the family 4. To grow business and become no. 1 company of India. OPTIONS: i) Accept APL’s offer and become CMU ii) Increase efficiency of laborers and decrease absenteeism iii) Introduce new variant of biscuits for premier customers iv) Optimum utilization of the increased capacity v) Focus on canteens of institutions (Mass consumers)
  5. 5. EVALUATION OF OPTIONS: i) Accept APL’s offer and become CMU a. Advantages: No expenses on advertisement, attracting customers or brand building. Regular income, expertise in production and low risk b. Disadvantages: No power in decision making and uncertainty of future relations with APL. If ACL asked to change production process or equipments then capital expenditure will have to be made by KCPL. This option can bring profits for company but it may dilute the K CPL’s brand itself or worse eliminate the brand from market. ii) Increase efficiency of laborers and decrease absenteeism a. Advantages: If workers will work efficiently it will definitely increase the productivity eventually decreasing the cost per ton of production. b. Disadvantages: Workers may ask for higher wages. Also we may have to become a bit strict which may break the family principle of no labour exploitation. As it is said a company is known by its workforce and an efficient loyal workforce can do wonders for an organization even with limited resource. This option satisfies all the objectives except for the principles. It’s not necessary that we have to be very strict or exploit them but this sudden strictness may create a feeling of extra burden and exploitation in the minds of workers. iii) Introduce new variant of biscuits for premier customers a. Advantages: New variant will give a diversity to the company and options to the customers. Also it can be a way to cater a new market which was untouched till now. b. Disadvantages: There is no guarantee of product being a hit in market. Also it will require a lot of capital as new assembly lines and machines will be required. Page 5 of 13
  6. 6. This option is like a gamble. If the new product gets a positive response then it can fulfill all the objectives and can make KCPL the king of market in no time. And if it’s a fail then the company’s survival will be at stake. iv) Optimum utilization of the increased capacity a. Advantages: The Company will be able to utilize the capacity to its full potential which will bring down the cost encored per ton of production. b. Disadvantage: More raw material will be required which company cannot afford at present as they are already making losses. For capital they can take loan but increased production means more labor. This option can recover losses and is totally controlled by the company. But this may not be sufficient if they want to become no. 1. v) Focus on canteens of institutions (Mass consumers) a. Advantages: Profits will be low here but the risk involved is also low. Also there’s not much promotional or advertisement cost involved. As the sales will increase the cost per ton of production will go down. b. Disadvantages: Canteens usually are not bothered about quality. They just want more quality at low price. So we have to really work upon our cost reduction to increase our profit share. This option satisfies all the objectives except for making company no. 1. Page 6 of 13 RECOMMENDATION: Option 4th and 5th both satisfy the same sets of objectives (Exhibit 4). But still I think option 5th i.e. focus on canteens of institution will be the best option. It will provide regular income and we will produce according to the order which will help us avoiding over production and inventory storage cost. Also total demand from institutional canteens is around 2400 tons per month and KCPL has only acquired only 1.25% (360 tons in a year i.e. 30 tons per month) of the total demand. So there’s a huge scope of increasing the market share here.
  7. 7. Page 7 of 13 ACTION PLAN: KCPL will have to make good relations with the institutes. Talk to premier institutes and take them into confidence that we will provide good quality at lower price. Keep profit margin less initially and as the customers increase and production increases, cost per unit of product will go down automatically increasing the profit margin. CONTINGENCY PLAN: If this plan doesn’t works or is taking too long then we can consider 4th option i.e. optimum utilization of increased capacity.
  8. 8. Report Exhibit 1: Company’s Timeline Page 8 of 13 1945 KCPL Founded by Mr. Mohan Kumar Gupta in Jaipur dealing mainly in Sugar Candies under brand "MKG". 1946 First Production Unit in Jaipur 1950 30 production units in the unorganized sector in Rajasthan to sell variety of candies. 1954 New candy making units shufted to Kanpur. 1970 Enter into biscuit market with glucose biscuits under the same brand MKG. 1973-74 Reached No. 2 posotion in the northern biscuit maket. 1980-81 Capacity doubled from 120tonn/month to 240tonn/month. 1982 Mohan Kumar handed over the leadership of KCPL to Alok Kumar. 1985 Candy production line discontinued. 1986 Agreement with Pearson 1987 Offer from APL
  9. 9. Report Exhibit 2: Biscuit Manufacturing Process Maida (Manually) Page 9 of 13 Vanaspati Cylinder Sugar Syrup Cylinder Mixing Unit Moulding Unit Oven Packing Department
  10. 10. Page 10 of 13 Report Exhibit 3: APL’s Offer ADVANTAGES DISADVANTAGES  Assured return on investment (ROI)  Access to APL’s manufacturing expertise  No marketing, brand building and distribution expense  Help them to utilize the surplus capacity  Loss of independence in decision making.  Uncertainty of future relations with APL.  Dilution of ‘MKG’, company’s own brand and family prestige. Report Exhibit 4: Objectives Options Evaluation Matrix Options → Objectives ↓ (Decreasing Importance) Accept APL’s offer and become CMU Increase efficiency of laborers & decrease absenteeism Introduce new variant of biscuits for premier customers Optimum utilization of the increased capacity Focus on canteens of institutions (Mass consumers) To eliminate losses and bring profits √ √ √ √ To maintain the brand they have made over the years √ √ √ √ To abide by the principles laid down by the family √ √ √ To grow business and become no. 1 company of India √
  11. 11. Report Exhibit 5: KCPL and its competitors’ statistics Page 11 of 13 Company Plant Location Dominant Region Sales in tons (year 1973-74) Capacity in tons (year 1973-74) Kanpur Confectionaries Private Limited (KCPL) Kanpur, UP Northern India 110 120 A-one confectionaries private limited (APL) Chennai, Tamil Nadu Southern India 900 Prince Biscuits Agra, UP 130 150 International biscuits limited Mumbai, Maharashtra Western & Eastern India 100 800 Report Exhibit 6: Profit Loss Calculation in the year 1986-87 SALE PER MONTH (tones) = 120 Price per ton = 18100 Total revenue = 18100*120 = 2,172,000 Expenditure for 1 ton Price of maida = 7500 Price of sugar = 2400 Price of vanaspati = 5200 Preservative = 1000 Cost of casual labour = 300 Total variable cost = (7500+2400+5200+300+1000)*120= 1, 968,000 Fixed cost (labour + interest+ other commitments) = 345,000 Total cost = variable+ fixed cost = 2,313,000 Loss = revenue – total cost = 141000
  12. 12. Report Exhibit 7: Family Introduction  Mr. Mohan Kumar Gupta, Founder of KCPL and Father of 6 sons.  Mr. Alok Kumar Gupta, Chairman & Managing Director (Handles Finance and Liaison functions). He is the eldest son among the six and a commerce graduate, joined company in 1960.  Mr. Vivek Gupta, joined company in 1965 handles HR Management and Manufacturing. Page 12 of 13 He is a Mechanical Engineer.  Mr. Sanjay Gupta, graduate in arts joined company in 1974. He handles marketing, logistics and administrative.
  13. 13. UNDERTAKING: To Whom It May Concern: I, Jayant Kushwaha, hereby declare that this assignment is my original work and is not copied from anyone/anywhere. If found similar with sources, I take complete responsibility of action Page 13 of 13 taken thereof by WAC team. Signature NAME: Jayant Kushwaha ROLL NO: 141119 SECTION: A

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