Kanpur Confectioneries Case Analysis

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. 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. 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. 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.
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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. 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.
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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.
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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. 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. 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. 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. 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. 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. 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.
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He is a Mechanical Engineer.
 Mr. Sanjay Gupta, graduate in arts joined company in 1974. He handles marketing,
logistics and administrative.

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