INDUSTRY ANALYSIS

ON
BISCUIT INDUSTRY

Under the guidance of:

Mrs. SUKANYA (Assis. prof.)

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 CONTENTS

1) CHAPTER-1 INTRODUCTION

2) CHAPTER-2 PRODUCT LINES AND CUSTOMER BEHAVIOR

3) CHAPTER-3 GROWTH OF THE INDUSTRY

4) CHAPTER-4 TECHNOLOGY OF PRODUCTION AN DISTRIBUTION

5) CHAPTER-5 MARKETING

6) CHAPTER-6 INNOVATION

7) CHAPTER-7 STRATEGIES AND COMPETETION IN THE INDUSTRY

8) CHAPTER-8 BUSINESS ENVIRONMENT

9) CHAPTER-9 CRITICAL SUCCESS FACTORS

10) APPENDICIES

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 CHAPTER-1
INTRODUCTION

OVER VIEW OF THE INDIAN BUSCUIT INDUSTRY

Biscuit industry contribute Rs 8,000 crore to the FMCG industry and provide a
vast opportunity for growth, as the per capita consumption of biscuits is less than 2.1 kg

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in our country. India It is classified under two sectors: organized and unorganized.
Branded /Organized to Unbranded/Un organized market share of biscuit has been 70%
for Organized sector and 30% for Unorganized sector . Apart from Big 3( Britannia ,
Parle , ITC ) there are around 150 medium to small biscuit factory in India .

The Industry is now facing problem from increase of raw material price. With
Government VAT up to 12.5% has added to their woes .Biscuit consumption per capita in
India has grown to 2.1kg per capita in comparison to 10kg per capita consumption in
USA ,UK and Europe .

India Biscuits Industry came into limelight and started gaining a sound status in the
bakery industry in the later part of 20th century when the urbanized society called for
readymade food products at a tenable cost. Biscuits were assumed as sick-man's diet in
earlier days. Now, it has become one of the most loved fast food products for every age
group. Biscuits are easy to carry, tasty to eat, cholesterol free and reasonable at cost.
States that have the larger intake of biscuits are Maharashtra, West Bengal, Andhra
Pradesh, Karnataka, and Uttar Pradesh. Maharashtra and West Bengal, the most
industrially developed states, hold the maximum amount of consumption of biscuits.

Even, the rural sector consumes around 55 percent of the biscuits in the bakery products.
The total production of bakery products have risen from 5.19 lakh tonnes in 1975 to
18.95 lakh tones in 1990. Biscuits contributes to over 33 percent of the total production
of bakery and above 79 percent of the biscuits are manufactured by the small scale sector
of bakery industry comprising both factory and non-factory units.

The production capacity of wafer biscuits is 60 MT and the cost is Rs.56,78,400 with a
motive power of 25 K.W. Indian biscuit industry has occupied around 55-60 percent of
the entire bakery production. Few years back, large scale bakery manufacturers like

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cadbury, nestle, and brooke bond tried to trade in the biscuit industry but couldn't hit the
market because of the local companies that produced only biscuits.

The Federation of Biscuit Manufacturers of India (FBMI) has confirmed a bright future
of India Biscuits Industry. According to FBMI, a steady growth of 15 percent per annum
in the next 10 years will be achieved by the biscuit industry of India. Besides, the export
of biscuits will also surpass the target and hit the global market successfully.

Two Sectors of Biscuit Industry

In terms of volume biscuit production by the organized segment is estimated at

1.30 million tones. In the organized sector, the industry is dominated by Britannia and
Parle, which account for 70 per cent of the industry's volumes. The two major organized
players are Britannia and Parle. Britannia’s market share stands at Rs 27 billion. Parle
derives a large portion of its revenues from low-priced biscuits. Parle-G and Britannia
derive a fairly large share of their revenues from the medium- and premium varieties. In
fact, Britannia's market share in the medium and premium varieties is significantly
higher.

Other organized players include domestic players like Brakeman’s, Champion, Kwality,
Priya and MNC’s like SmithKline Consumer, Kelloggs, Sara, Heinz, Excelsia (Nestle)
and United Biscuits.
The unorganized sector consists of small bakery units, cottage and household type
manufacturing their goods without much packaging and distributing their goods in the
surrounding areas. Lower overheads due to limited local area, family management,
focused product lines and less expenditure on marketing help the unorganized sector to
grow.

The organized biscuit manufacturing industry‘s annual production were around 1.1
million tons in 2003-04, 1.25 million tons in 2004-05, 1.4 million tons in 2005-06, 1.6
million tons in 2006-07 and 1.7 tons in 2007-08.

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HISTORY OF BUSCUIT INDUSTRY

Biscuits are a very significant part of the food industry in most countries of the
world. A biscuit is a small baked product; the exact meaning varies markedly in different
parts of the world. The origin of the word "biscuit" is from Latin via Middle French and
means "cooked twice" (similar to the German Zwieback). Some of the original biscuits
were British naval hard tack. That was passed down to American culture, and hard tack
(biscuits) was made through the 19th century.

Biscuit can flourish in any environment where there is a base population, in the
immediate vicinity of the plant; a country with large population is well suited for a biscuit
plant. Biscuit is most suited for local production. This factor alone has made India a big
biscuit center. Biscuit Industry has flourished in India enormously over the years and is
still growing phenomenally.

This growth has funneled a growth of all facets of biscuit making in India. While the
modern India is considered a centre for software development, many do not realize that
one industry that has developed similar capabilities is Biscuit.

Today India can boast of being

• Most cost effective and reliable biscuit machinery making center.

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 • Most talented senior management and technical manpower pool for biscuit
making.
• Most number of biscuit production manpower and operating technicians
manpower
• Most reliable center for outsourcing manufacture of biscuits.
• Most cost effective center for food testing laboratories.
• Most cost effective and talented centre for product development, research and
formulation development.

FEDERATION OF BISCUIT MANUFACTIRE OF INDIA

FBMI, Established in 1950, from gathering of CEOs of small, medium and large
Biscuit manufacturing organizations in the country’s capital city, the Federation of
Biscuit Manufacturers of India, popularly known as FBMI has come to stay as the
premier forum of the organized segment the biscuit industry in India, by virtue of its
effective servicing and result oriented activities, with the prime objective of protecting
and promoting the interests and development of the Biscuit industry.

The FBMI represents the organized biscuit industry consisting of small scale, medium
and large biscuit manufacturers located in all zones and all States of the country. As the
apex body of the biscuit industry, the Federation strives to serve its members in particular
and the biscuit industry in general.

OBJECTS
• To promote, protect and safeguard the interest of the Biscuit manufacturing
industry, particularly in the small and medium sector
• To promote and develop a systematic and hygienic Biscuit manufacturing
Industry.

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 • To promote research and product development for the biscuit manufacturing
industry and the establishment of any research organization for the purpose,
particularly for the benefit of SMEs manufacturing biscuits
• To assist the small and medium biscuit manufactures in the purchase of flour,
inputs and other commodities and the provision for technical advice for
improving manufacturing techniques and marketing method
• To create appropriate bodies to advise Government of various aspects connected
with the development of the biscuit manufacturing industry. To obtain from any
such Government or authority rights, concessions and privileges which the
Association may think it desirable to obtain and to carry out, exercise and comply
with any such arrangements, rights, privileges and concessions.

LIST OF THE PLAYERS IN THE INDUSTRY

The major Brands of biscuits are - Brittania, Parle Bakeman, Priya

Gold,Elite,Cremica, Dukes, Anupam, Horlicks, Craze, Nezone, besides various
regional/State brands.

• Britannia ,
• Parle ,
• ITC foods ,
• Surya Foods
• others

Regional bakery brands

few regional players have made a mark in their respective zone,

• HARVEST GOLD

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 • CREMICA
• PRIYA GOLD
• DUKES
• COOKIE MAN
• ANMOL
• MONGINIS
• BONN
• BISK FARM
• ELITE
• ANUPAM
• MODERN
• SABISCO
• CHAMPION
• VEERMANI

FOREIFN PLAYERS
Foreign players like United Biscuits and McVities have also entered the fray.
However, these players have concentrated themselves in the super-premium and premium
segments.

BRIEF PROFILE OF THE PLAYERS IN THE INDUSTRY

BRITANIA INDUSTRIES LIMITED

Britannia Industries Limited is an Indian company based in Kolkata that is
famous for its Britannia and Tiger brands of biscuit, which are highly recognized
throughout the country. Britannia is one of India’s leading biscuit firms, with an
estimated 38% market share. Once upon a time, in 1892 to be precise, a biscuit company
was started in a nondescript house in Calcutta (now Kolkata) with an initial investment of
Rs. 295. The company we all know as Britannia today.

On the operations front, the company was making equally dynamic strides. In 1992, it
celebrated its Platinum Jubilee. In 1997, the company unveiled its new corporate identity
- "Eat Healthy, Think Better" - and made its first foray into the dairy products market.
Britannia strode into the 21st Century as one of India's biggest brands and the pre-
eminent food brand of the country. It was equally recognised for its innovative approach
to products and marketing.

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Main products produced by Britannia industries are,
Good Day,Tiger,Marie Gold,50- 50,Choco -chips,Choco - nuts,Little Heart,Nutri
Choice,Bourbon, NiceTime, Pure Magic, Milk Bikis,Jim -Jam,Cream Treats,Time Pass,
Digestive, etc.

PARLE COMPANY

In 1929 a small company by the name of Parle products emerged in British

dominated India. The intent was to spread joy and cheer to children and adults alike, all
over the country with its sweets and candies. Parle Products has been India's largest
manufacturer of biscuits and confectionery, for almost 80 years. Makers of the world's
largest selling biscuit, Parle-G, and a host of other very popular brands, the Parle name
symbolizes quality, nutrition and great taste. With a reach spanning even the remotest
villages of India , the company has definitely come a very long way since its inception.

Many of the Parle products - biscuits or confectioneries, are market leaders in their
category and have won acclaim at the Monde Selection, since 1971. With a 40% share of
the total biscuit market and a 15% share of the total confectionary market in India , Parle
has grown to become a multi-million dollar company. While to consumers it's a beacon
of faith and trust, competitors look upon Parle as an example of marketing brilliance.

Major products are,

Parle - G ,Hide and Seek, Krackjack, Hide & Seek, Milano, Magix, Digestive, Marie
Monaco Parle Marie, Kreams, Milk Shakti, Parle 20-20 Cookies ,Nimkin, etc.

Parle biscuits are indeed much more than a tea- time snack, they are considered by many
to be an important part of their daily food. Parle can treat you with a basket of biscuits
which are not only satisfying but are also of good and reliable quality. Parle biscuits cater

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to all tastes from kids to senior citizens. They have found their way into the Indian hearts
and homes.

ITC LIMITED

ITC was incorporated on August 24, 1910 under the name Imperial Tobacco
Company of India Limited. TC's foray into the Foods business is an outstanding example
of successfully blending multiple internal competencies to create a new driver of business
growth. It began in August 2001 with the introduction of 'Kitchens of India' ready-to-eat
Indian gourmet dishes. 2003 witnessed the introduction of Sun feast as the Company
entered the biscuits segment.

The packaged foods business is an ideal avenue to leverage ITC's proven strengths in the
areas of hospitality and branded cuisine, contemporary packaging and sourcing of
agricultural commodities. ITC has stood for quality products for over 90 years to the
Indian consumer and several of its brands are today internationally benchmarked for
quality.

Leadership in the Foods business requires a keen understanding of the supply chain for
agricultural produce. ITC has over the last 90 years established a very close business
relationship with the farming community in India and is currently in the process of
enhancing the Indian farmer's ability to link to global markets, through the E-Choupal
initiative, and produce the quality demanded by its customers. This long-standing
relationship is being leveraged in sourcing best quality agricultural produce for ITC's
Foods Division.

Major products by ITC are,

Milky magic, Marie, Golden Bakery, Dark Fantasy, Glucose, Dream Cream, Snack,
Sweet n Salt, Nice, Vita, Special, etc.

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SURYA FOODS & AGRO LIMITED

Surya Food & Agro Ltd. was incorporated in November 1992 and commenced its
commercial operations of manufacturing & selling of biscuits under brand “Priyagold” in
October 1993. Over a period, It established strong manufacturing capabilities and have
invested substantially in developing consumer preference for products. Its trademarks /
brands “Haq Se Maango” & “Priyagold” have emerged as one of the most powerful
brands in the FMCG sector. The company is committed to invest in brands,
manufacturing capabilities, deliverables and distribution strength.

Its strategy of strengthening the brands especially the umbrella brand “Priyagold” has
resulted in creating immense brand recall value. The company is continuing with its
effort of strengthening the brand with a scientific approach, which will result in growth of
customer base, price premium, consumer loyalty which is expected to result in increased
earning and ultimately enhancing enterprise value of the company.

Major products produced by the company are,

Butter Bite, Classic cream, Kids Cream, Bourbon, Marie Lite, Big Boss ,Magic Gold,
CNC, Cheese Cracker, Snacks Zig Zag, Don, Coconut Crunch, Cheez Bit, Chat Patta, and
etc.

CATEGERISATION OF PLAYERS IN THE INDUSTRY

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 Britannia and Parle the two food majors of India in the field of biscuits. In the last
years it was market segments which both have dominated and not much was seen to
disturb that arrangement. Parle with its Parle G , Krackjack and Manaco where as
Britannia has Good day , Marie gold , Creams.

Britannia dominated the premium segment of biscuits where as Parle dominated the mass
,low premium biscuits ,things were pretty predictable but for the entry of new players
have changed that status. Now that ITC and Priya gold are trying to break into their
market and have established themselves as important players in biscuit market . These
two major biscuit producers has are now forced to innovate products by the consumers to
create brands which could be differentiated.

Both are trusted brand are ranked in top brands for biscuit, both have a long history of
brands . The Major difference though is that where Britannia is revenues from bakery
products is around 90 % ,share of biscuit sales is around –80% for Parle.

PARLE VS BRITANNIA

Description Britannia Parle

Established 1896 1929
Nature of business Public ltd Family run business
No of manufacturing units 5 own ,40CMU 8 own units ,60 CMU
Market share ( value) 32.80% 32.94%
Ads Major methods Cricket events and players Celebrities endorse ment
New areas of promotion Environment Health and wellness

IMPORTANT BRANDS PITCHED AGAINST EACH OTHER

Category Britannia Parle Leader

Glucose Tiger Parle -G Parle-G
Marie Marie Gold Parle Marie Marie Gold

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Salty snacks 50-50 Krack Jack Krack Jack
Choco chips Good day Hide n seek Good day
Milk Milk bikis Milk sakhti Milk bikis
Bourbon Bourbon Hide n Seek Bourbon
Nice Nice ------ Britannia Nice
Multi grain Nutri choice ----- Nutri choice
Cream Cream Treat Kreams Cream treats
Cookie Good day 20-20 Good day

So the battle for market share continues and advantage is for consumers who will get
better product from both these biscuit majors .

Product Comparison

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 CHAPTER-2
PRODUCT LINES AND CONSUMER BEHAVIOR

RANGE OF PRODUCTS

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 Biscuit can he broadly categorized into the following segments (Based on
productions)
• Glucose (44 percent),
• Marie (13 percent),
• Cream (10 percent),
• Crackers (13 percent),
• Milk (12 percent),
• Others (8percent).

PRODUCT DESCRIPTION:

Biscuits contain high nutritive value and are manufactured from wheat-flour,
sugar, baking powder, condensed milk, ghee (fat), salt, jelly, dry fruits, various essences
and flavouring etc. Different type biscuits can be classified,

Glucose Biscuits: Glucose Biscuits are made with pure wheat, sugar, salt and other
ingredients. Glucose biscuits are the main stay of Indian biscuit industry . Glucose market
share was growing at a very low rate but suddenly for the last three years there has been
drop in glucose biscuit sale . All three major biscuit manufacturers( ITC ,Parle , Britannia
) has started re jigging their product mix ( SKU s ) in flavour of premium biscuit against
glucose biscuit .The Glucose share is almost 50% of the total biscuit market share.

Cream biscuits: Basic Characteristics of Product are,

• Crisp or crunchy texture
• Distinctive flavours(orange, butterscotch, and mango etc.)
• Flavors that may change (loss of initial flavour)

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Marie Biscuits:
These products are fragile and characterised by a low moisture content (<6%) low water
activity and are highly hygroscopic. It is viewed as a luxury tea-time snack but essential
daily food component for an average Indian household.

OTHER BISCUITS: Other biscuits include salt biscuits, sweet biscuits, cookies, and
bourbon etc.

COMPLIMENTERY PRODUCTS :

ATTA: Ground wheat (Atta) to flakes of wheat, or corn. Over the years, there has been a
steady process of technology up gradation and modernization in the traditional milling
industry. The grain-processing sector is largely un-organized, although there are a
few large players in the market. The Atta market appears poised to sustain a 40 per
cent growth rate.

Since the packaged flour market was explored first at a national level by the Mumbai
based DCW group in 1994, with "Captain Cook" Atta, some large players, like Hindustan
Lever (with its Annapurna brand) and Godrej Pillsbury (Pillsbury), Agro Tech (Healthy
World), Nature Fresh and ITC (Aashirvaad) entered the market. Traditional brands like
'Shakti Bhog' have also consolidated their position.

The market has huge potential as in urban areas (with market size of about 42 mn tons),
branded Atta accounts for 2-3% of consumption and is getting increasing acceptance.

MILK:
Milk is main ingredient of manufacturing process as well as a complimentary product.

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SUBSTITUTES:
Substitute Products are those which can be used as alternatives to the biscuits,
these includes,

BREAD:
Baked food product. It is made of flour or meal that is moistened into a dough,
kneaded, and usually leavened with yeast. A major food since prehistoric times, bread has
been made worldwide in various forms using a variety of ingredients and methods. The
principal grains used in such breads are wheat, barley, millet, buckwheat, rye, and corn.
In fact, bread is an excellent source of low-fat, complex carbohydrates. The renewed
interest in bread has led to consumers' taste for a variety of bread types.

The per capita consumption of bread in India is only around 1.5 kg to 1.75 kg in various
zones. The regional consumption of bread indicates that the southern states lead with
32% consumption while North, West and East zones consume about 27%, 23% and 18 %
respectively of the total bread production.

The decline in production and the increased presence of branded players have also
resulted in the closure of several bakeries in the small-scale sector. It is estimated that
more than 250 small-scale bread units closed shutters during the last five years.
Currently, the industry is witnessing a very competitive environment, and the customer's
taste and preference is deciding the sales pattern of various bread brands in the market.

CHOCLATES:

Food prepared from ground roasted cacao beans. It is consumed as candy, used to make
beverages, and added as a flavouring or coating for confections and baked products.
Duties and transportation cost make import of cocoa beans expensive. However, to fulfill
demand, industry mainly imports cocoa butter and powder, said an senior official with

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the Central Arecanut and Cocoa Marketing and Processing Cooperative, a major grinding
agency in the country.

Chocolate consumption is gaining popularity in the country on increasing prosperity

coupled with a shift in food habits, pushing up the country’s cocoa imports. India's
annual per capita consumption of chocolates is extremely low at just about 200 grams
compared with 8.5kg in Switzerland.

WAFERS:

A wafer is a crisp, often sweet, very thin, flat, and dry biscuit, often used to decorate ice
cream. Wafers can also be made into cookies with cream flavoring sandwiched between
them. They frequently have a waffle surface pattern but may also be patterned with
insignia of the food's manufacturer or may be pattern less. Many chocolate bars that
people eat have wafers in then such as : Kit Kat and Coffee Crisp.

ROTI:
It is one of the major substitutes for biscuits largely consumed by the people in india .

BAKERY PRODUCTS:
The bakery industry, production of which has been increasing steadily in the country, is
the largest among the processed food industries in India. The two major bakery
industries, viz. bread and biscuit account for about 82% of the total bakery products. The
annual production of bakery products, which includes bread, biscuits, pastries, cakes,
buns, rusks etc., is estimated to be in excess of 3 million tonnes. The cake and pastry
market estimated at 0.4 million tonnes, is the fast growing market with volume growth of
16%.

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CONSUMER BEHAVIOR:

This aspect basically focuses on the consumer behavior and perception about the biscuit
market, to find out the brand consciousness, purchasing capacity, taste and preferences of
the consumers.

Frequency of Eating Biscuits

As per the study conducted by FBMA, On the basis of frequency of eating biscuits, most
of the consumer consumes biscuit’s every day. Out of 50 peoples 27 said they eat biscuit
everyday, 7 people said they take once in a week and 16 people take sometimes
according to their mood. Thus, biscuit is major product of the FMCG sector.

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Taste Preferences:

While considering the consumer preferences on taste, 51% of the people do not have any
specific choice. They like to eat all kinds of biscuits. The remaining 19% like salty
biscuits, 15% like sweet and 15% like cream biscuits. Thus, most consumers do not have

any specific taste preference.

According to the Survey conducted by the FBMA ,outcome of responses were based on
various attributes like Crispness, Size, Nutrition, Ingredients, Freshness, and Flavors etc.
Below mentioned chart depicts various age segments Vis -a Vis their choices of tastes.

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Findings
• Out of the 4 respondents whose age were below 17 yrs , 75 percentage of
respondents opting Flavor as their highest priority.
• In the age category of 17 to 22 , the respondents opted Flavour were 60 percent
of the total. Rest 40 percent opting nutrition as their best alternative.
• People in the age group of 22 to 30 considered Nutrition (45%) as their best
choice.
• In the age segment of 32 and above, 71.4% of the respondents considered
Nutrition as their best alternative. A mix trend of Ingredients and flavour was
seen in this category as equal percentages (14.3%) of respondents went for both.

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 CHAPTER-3
GROWTH OF THE INDUSTRY

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GROWTH OF THE INDUSTRY

During the five and a half decades of post-independent India, the biscuit industry
in the country has achieved a position of pre-eminence as the third largest producer of
Biscuits in the world, after the USA and China.

The biscuit industry is been experiencing steady growth of 14-15% annually. In 2008, the
growth exceeded 16% mark on account of exemption from Central Excise Duty on
biscuits. Indian Biscuit Manufacturers’ Association (IBMA), instrumental in obtaining
the excise duty exemption, estimates annual growth of around 20% in the year 2008-09.
Growth in biscuit marketing has been achieved also due to improvement in rural market
penetration.

The annual Growth showed a decline of 3.5% in 2000-01, mainly due to 100% hike in
Central Excise Duty (from 9% to 16%). Production in the year 2001-02 increased very
marginally by 2.75% where in 2002-03 the growth is around 3%.

• 2003-04 - 15%
• 2004-05 - 14%
• 2005-06 - 14%
• 2006-07 - 13%
• 2007-08 - 15%
• 2008-09 - 17%(April – June)

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The annual Growth showed a decline of 3.5% in 2000-01, mainly due to 100% hike in
Central Excise Duty (from 9% to 16 %). Production in the year 2001-02 increased very
marginally by 2.75% where in 2002-03 the growth is around 3%.Thereafter the annual
growth increased to over 8 %. The Federation's estimate for the year 2007-2008 indicates
a growth of approximately 8% to 9%. According to IBMA, the biscuit industry in India
witnessed annual growth as 15% in 2003-04, 14% in 2004-05 and 2005-06, 13% in 2006-
07, 15% in 2007-08 and 17% in 2008-09.
While the growth rate has been stagnating during last 4 years, it has picked up
momentum during the 2007-08 and the first quarter of 2008-09 mainly on account of
exemption from Central Excise Duty on biscuits with MRP up to INR 100 per kg, as per
Union Budget for 2007-08.

On the other hand, import of biscuits, especially in the high price segment has started
from 1998-99, but however, the quantum of imports has not so far increased alarmingly
and has remained at around 3.75% of the consumption of biscuits in the country. Exports
of biscuits from India have been to the extent of 7.5% of the total production. Exports are
expected to grow further in the year 2007-08 and beyond.

Biscuit is a hygienically packaged nutritious snack food available at very competitive

prices, volumes, and different tastes. According to the National Council of Applied
Economic Research (NCAER) Study, biscuit is predominantly consumed by people from
the lower levels of society, particularly children in both rural and urban areas with an
average monthly income of Rs. 750.00.

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Annual Production:

The annual production of biscuit in the organized sector continues to be

predominantly in the small and medium sale sector before and after de-reservation. The
annual production was around 7.4 Lakh tones in 1997-98. In the next ten years, biscuit
production witnessed an annual growth of 17%, up to 2008-09. Though dereservation
resulted in a few MNCs, i.e. Sara Lee, Kellogs SmithKline Beecham, Heinz etc entering
the biscuit industry in India, most of them, with the exception of SmithKline Beecham
(Horlicks Biscuits), have ceased production in the country.

According to the production figures of members available up to the calendar year 2009 to
the FBMI, the total production is increasing from year to year. The production of biscuit
for the last 6 years is as under:
(In Lakh Metric Tonnes)
2003-04 - 11.00
2004-05 - 12.54
2005-06 - 14.29
2006-07 - 16.14
2007-08 - 17.14
2008-09-18.01

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The production of organized and unorganized sectors of the biscuit industry is in the
proportion of 60%:40% ratio. EXPORTS of Biscuit are estimated to be around 15% of
the annual production during the year 2007-08. IMPORTS of biscuits into India have not
shown any significant growth during the last two years and have not affected
production/sales by the Indian Biscuit industry.

GROWTH DETERMINENTS:

The main growth determinants of the industry are as follows:

 The focus on urban markets has also contributed significantly to the growth of the
biscuit industry.
 Focused advertising and new launches helped the biscuit industry to grow
 Catering to the mass marketing segments
 The excise duty cut on biscuits from 16% to 8% has given a boost to biscuit
industry.

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 CHAPTER-4
TECHNOLOGY OF PRODUCTION AND DISTRIBUTION

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COST STRUCTURE:
Biscuit Industry especially the Small & Medium Sector, consisting of around 150
units are facing erosion in their profitability and competitive capability, due to,
• Steep hike in cost of production on account of increase in prices of major raw
materials, i.e. Wheat Flour Veg. Oil, Sugar, Milk, Packaging Materials, Fuel.
Wages, etc. Recent increase in prices of Petrol/Diesel in May 2008 has further
resulted in cost push
• The above rates are excluding VAT & other Taxes as well as
• Laminate, hike in prices of Petrol/ Diesel, Revision of wages

The below table shows the detailed cost structure for different type of biscuits:

S.No Cost per Jan 08 May 08 Difference In %age

KG in Rs
1 Glucose85 31.08 31.73 0.65 2.09
gm
2 Crunchy bite 30.18 32.40 2.22 7.36
150 gm
3 Golmol 150 34.06 34.26 0.20 0.59
gm
4 Butter 250 41.59 43.82 2.23 5.36
gm
5 2 in 1 75 gm 39.01 41.06 2.05 5.26

6 Milk Cream 46.38 47.28 0.90 1.94

75 gm
7 Marie 17 gm 40.37 41.21 0.84 2.08

Cost of production has also been adversely impacted due to price hike in petrol and diesel
which indirectly leads to high transportation cost.

Biscuit making process:

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The process of biscuit manufacturing involves the following stages ,

MIXING: This is a process where all ingredients are put together in right proportion for
dough formation. These ingredients are then fed into Mixers where mixing is done and
dough is prepared for moulding/cutting .Major ingredients are flour, fat, sugar and others
as per the product one would like to have.

MOULDING: In this section we laminate the dough into sheet, which then passes down
to gauge rollers, and sheet thickness is achieved for moulder/cutter. Here we have a cutter
or moulder as per the variety where one gets the shape and sizes of biscuits.

BAKING: This is the area where we pass these moulded wet biscuit into baking oven.
The biscuits are baked on desired temperatures. Various type of heating are available now
days as per the convenience and cost. Different type ovens are available

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COOLING: These baked biscuits are then passed on to cooling conveyors for natural
cooling prior too packing .The temperatures are brought down to room temperatures.

PACKING: These biscuit are then stacked and fed into packing machine for packing
Different packing material are available for packing of these biscuit in different packs

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slug packs , pouch pack or family packs etc. These packs are then put into secondary
packaging like cartons to be transported to retailers.

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 CHAPTER-5
Marketing

MARKETING

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 According to Philip Kotler, Marketing can be defined as “a social and
managerial process by which individuals and groups obtain what they need and want
through creating, offering and exchanging products of values with others”.

Wholesale and Retail marketing in the Biscuit industry is carried out with a
network of C & F Agencies (for States and specific Districts), Dealers / Wholesalers
and Retail shops.

Market share data for Indian biscuit industry:

Here are market share data for biscuit industry from report s available at IBMA ( Indian
Biscuit Manufacturers Association) .

Major Market Share Holders –Organized Sector

Market share- Brands wise (volume )

PARLE 40%
BRITANNIA 38%
PRIYA GOLD 15%
ITC 11%
REST 6%

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Market Share - Sector wise

ORGANISED SECTOR UN ORGANISED SECTOR

70% 30%

Market share penetration- Population wise

URBAN RURAL
85%-75% 65%-55%

Market share - Region wise : Market share of the industry in india as per region

NORTH ZONE 25%

WEST ZONE 23%
EAST ZONE 28%
SOUTH ZONE 24%

Market share- Brands wise (volume )

PARLE 40%
BRITANNIA 38%
PRIYA GOLD 15%
ITC 11%
REST 6%

Market Share – product wise

Marie and Glucose 50%

sweet, crackers , cream ,milk 50%

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Marketing practices:

To establish a brand in this tough market is never easy. Since Biscuits are
convenience goods, new tastes and new products are essential to built excitement in the
market Biscuits are consumed by people of all ages, from the rich to the poor, living in
cities & in villages.
• While some have it for breakfast,
•For others it is a complete wholesome meal.
•For some it's the best accompaniment for tea,
•While for some it's a way of getting charged whenever they are low on energy.

Biscuit industry practices mass marketing, which appeals to masses. It is a product liked
by everyone and does not cater only to a specific group or part of the whole market. Thus
the industry adopted mass production, mass distribution and mass promotion of products
for all buyers.

Pricing mix

Biscuit is a comparatively low margin food product in the PMCG (Packaged Mass
Consumption Goods) sector. The commodity is also price sensitive, as a consequence of
which, even when the Excise Duty was doubled on biscuits in 2000-01 biscuit
manufacturers, including the major brands, were not able hike MRPs to the extend of the
steep increase in the Duty. Taxation, both Central Excise Duty as also State Sales Tax,
other miscellaneous levies i.e. turnover tax, local area tax, mandi taxes, purchase tax,
octroi etc, has been a major deterrent in the growth of the biscuit industry.

37
The CII Study Report has identified Biscuit as one of the products that should treated as
"Merit Good for the purpose of liberal tax policy both by the Centre and States.

• Most of the companies in the industry adopted the Market Penetration strategy i.e.
low price along with capturing of a large market
• Also they focus on providing good quality products at the same time, which
means it uses the value pricing method.
• The value-for-money positioning helps generate large sales volumes for the
products.

The biscuits industry now has two clear models. Parle products play the low price game
at all varieties of biscuits from glucose to cream.

Essentially, Parle plays a high volume, low margin game. But Britannia and Sunfeast
look at a two-pronged strategy. High margins in cream variants and volumes from the
Marie and Glucose segments.

For instance, cream biscuits from both Britannia and Sunfeast cost Rs 10 for 100 grams.
Parle, however, only charges Rs 5 for its cream variants. Except for Hide & Seek, all of
Parle’s products lie in the price range between Rs 4 and Rs 6 for 100 gram packs.

To be fair, in Glucose and Marie, the companies have little choice. As there is little
differentiation, consumers are extremely price sensitive. But these segments are
important. Marie and the popular glucose varieties make up for nearly 55 per cent of the
Rs 4,000 crore biscuits segment — a significant Rs 2,200 crore.

Packing

Biscuits' packaging has undergone a swift transformation. From Britannia's

functional Protective blister wraps, which prevent breakage, to Parle's stylish offering
packaging has been completely transformed.

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The packaging of bakery products is closely interlinked with production, preservation,
storage, transportation and marketing. The importance of packaging can further be
gauged from the fact that packaging constitutes a fair portion (10 to 25%) of the entire
cost of the pack.
Its common sight now that retailers are keeping small packs of biscuit in Jar. Britannia as
well as Parle s biscuits are now available in Jars and products priced in the range of Rs
12/- Rs15/- also.

Promotion:

Industry’s ability to connect to large population through various promotional events (such
as school’s industry visits to plant, talk & TV shows, rural programs) to target different
age segment will decide the market share.
Biscuits are available to consumers, even in the most remote places and in the smallest of
villages with a population of just 1500.

ADVERTISEMENTS:

The products were advertised mainly through press ads. The communication spoke about
the basic benefits of energy and nutrition.

Good advertisement policies due to which people are motivated to buy their product at
least once. For instance, ITC has the advertisement about a child entering the cream
world makes the children excited about the product leading to increase in sales. In the
year 1997, Parle-G sponsored the tele-serial of the Indian superhero, Shaktimaan that
went on to become a huge success

ITC typically follows a branding strategy under the umbrella name "Sunfeast". With
multiple sub-brands created under this banner. This has been logical for ITC due to its
late arrival into this category. A common brand name across its portfolio would ensure
better recall among the consumers.

39
CHAPTER-6
INNOVATION

40
Innovation:
Consumers today are demanding an increasingly wide variety of foods, retail
formats, and restaurant concepts. Food manufacturers, distributors, retailers, and
foodservice operators face additional demands as they strive to profitably supply the large
variety of goods and services on time and in the correct quantity.
Innovations fall into several categories and include application of new technology,
products & packs.
Innovation in the product line — biscuits with butterscotch cream with actual granules in
the cream, strawberry cream with flavor-enhancers and orange-flavored Marie.
The below graph shows the extent of innovation and technology adopted by the
companies operating in biscuit industry:

The companies, Parle and Britania are similar in technology and innovation and the
remaining companies are followed by the two major players of the industry.

Some of the new innovative products & packs introduced include Treat Fruit Rollz,
NutriChoice Digestive, NutriChoice SugarOut, Good Day Jumbo, Tiger – Banana
(fortified with iron), Good Day – Classic Cookies, Greetings – gift packs and a variety of
cheese variants. Several power brands were renovated to enhance their taste & health
appeal. Britannia is the only biscuit company to have removed trans-fat from all its
recipes.

41
LABOUR: The Biscuit industry is a labor intensive and employees 3.25 lakh people
directly and 35 lakh people indirectly.

However, escalation in the cost of production coupled with price hike in raw materials
has led to the closure of 8-10 small scale biscuit units and rendering 7,000 jobless

Innovation in packaging:

The biscuit pack must give mechanical protection to the product. This can be achieved
either by packing the biscuits in end-fold style portion packs or by gas flushing the pillow
packs, thus preventing breakage during transport and retail handling. Ready to sell
individually wrapped packs eliminates the hygiene factor risks since the biscuits do not
come in contact with the external environment. The appropriate films and correct sealing
prevents any infestation by insects. The result is a product, which is fresh and tasty
throughout its shelf-life. The pack must be perfectly heat-sealed in wrapping materials
with the required barrier properties against light, humidity and external odours.

In recent days, variety of flexible packaging materials are used for packing biscuits due to
advantages such as functionality, lower cost, printability, light weight, savings in freight
and other such factors.

Flexible Packaging Materials: These are used as wrappers, pre-formed pouches or

form-fill pouches. The oldest flexible film to be used was cellophane because of its
excellent gas barrier properties and heat sealability. MST, MSAT, Coated Cellophane
(MXXT) offer excellent moisture barrier, heat sealability and gloss. Cellophane became
less popular when it became too expensive and with the introduction of new materials
with better properties. Another material, which is widely used is Biaxially Oriented
Polypropylene film commonly known as OPP. For less demanding applications OPP
monofilm is used while for higher quality products, duplex OPP or OPP combinations
(pearlised or metallised ) such as OPP/PE, OPP/PET etc. are used.

42
Today most of the biscuits are packed in flexible laminates of composite structures,
where every component fulfills a specific function. These laminates have desirable
properties such as moisture barrier, gas barrier heat sealability, printability
characteristics, high production and overall economy.

ECONOMIES OF SCALE:
Economies of scale are factors that cause the average cost of producing something to fall
as the volume of its output increases.There are two types of economies of scale:

• Internal: These are cost savings that accrue to a firm regardless of the industry, market
or environment in which it operates.

• External: These are economies that benefit a firm because of the way in which its
industry is organized.

Internal economies of scale arise in a number of areas. For example, it is easier for large
firms to carry the overheads of sophisticated research and development (R&D) In the
recent scenario of the industry there is a crucial requirement for the companies to come
out with innovative products.

External economies of scale include manufacturing of bulk products, procurement of raw

materials in bulk etc.

Economies of scope: There is wider scope for the biscuit industry in India because of the
following factors,

 Population of the country

 Biscuits are Consumed by all the segments of the market, like , children, youth,
and adults
 Agriculture based industry: with the major inputs - wheat flour/atta sugar, milk
vanaspati/vegetable oil etc all being agriculture produces.
 Mass consumer segment.

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Logistics and Distribution:

The basic distribution channel implementing by the companies are,

MANUFACTURER
↓

C & AGENTS
↓

SUPER STOCKISTS

STOCKISTS

RETAILERS

The below graph shows the price and distribution levels of the industry, as it
shows , the Distribution of Britannia and Parle products are good with low price of
products compared to remaining companies in the industry.

44
 CHAPTER-7
STRATEGIES AND COMPETETION
IN THE INDUSTRY

45
PORTER’S FIVE FORCES MODEL
Michael Porter provided a framework that models an industry as being influenced
by five forces,

PORTER’S FIVE FORCES ANALYSIS

RIVALRY WITHIN THE INDUSTRY:

 Major players dominate the Indian market.
 High competition among the players in the industry to capture maximum market
share.
 Unorganized sector cannot compete with major players in the case of Advertising.

ENTRY BARRIERS : Low entry barriers because of,

 Capital intensive manufacturing, advertising and distribution
 Heavy competition from major players.

BARGAINING POWER OF SUPPLIERS:

 In the case of major players bargaining power of suppliers is very low as they
dictate the prices.
 The ingredients are basic commodities such as wheat , sugar etc.

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POWER OF BUYERS: High because of,
 Availability of many biscuits from low, moderate prices
 Availability of biscuits from non organized sector
 Loyalty of the buyers to biscuits that have brand identity makes them more
powerful in the case of new entries.

THREAT OF SUBSTITUTES: It is high because ,

 Substitute threat is more in the case of biscuits
 Growing packaged industry and bread industry
 Traditional Indian homemade snacks.

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High level of competition within the industry has lead to innovations in several areas,
thereby raising the overall capability levels in the sector. This will facilitate sustained
growth in the sector and help it to become globally
SWOT ANALISYS

Strengths
 Brand building capabilities:
Brand image of the company existing in the industry, every company has a strong
brand image to consumers.
 Diversified product range of the industry covering al segments.
 The depth of distribution
 Low and mid price range of the products
 Industry catering to masses, as in most developing economies, increasing
purchasing power is aiding the shift to affordable options.

Weaknesses

 Dependence on retailers and grocery stores for displaying diversified products on

shelf.
 Lack of technology up gradation

Opportunities

 Indian Biscuit Manufacturers’ Association (IBMA) estimates annual growth of

around 20% in next couple of years.
 The $220 Billion food industry is expected to grow to $300 Billion by 2015.
 Per capita consumption of Biscuits in the country is only 1.8 kg as compared to
2.5 kg to 5.5 kg in South East Asian countries and European countries, and 7.5 kg
in USA.

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  Growing demand of Sugar free cream crackers & diet biscuits.

 Opportunity to further grown in Urban & Rural market; Current penetration levels
are,
Urban Market: 75% to 85%
Rural Market: 50% to 65%
 Grow in southern and east India.
 A package of fiscal incentives provided by various State governments like
Himachal Pradesh, Uttaranchal, has encouraged companies to set up
manufacturing facilities in these regions. The excise exemption for 10 years and
income tax exemption for 5 years for units located in backward regions under
section 80IA have encouraged many companies to set up new units

Threats

 Fluctuations in the prices of raw materials, transportation costs & distribution

 cost due to high wedges and oil prices,
 Entry of ITC (having very good distribution channels) in to biscuit industry)
 Emerging local bakery products.

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 CHAPTER-8
BUSINESS ENVIRONMENT

50
PESTEL Analysis

PEST factors play an important role in the value creation opportunities of a strategy. However
they are usually beyond the control of the corporation and must normally be considered as either threats or
opportunities. Macro-economical factors can differ per continent, country or even region, so normally a
PEST analysis should be performed per country.

Political:
 Taxes: The Excise Duty on all Value Added food products like Nutritional and
health foods, high value Ready to Cook/serve products to be brought down to a
maximum of 8% from 16 %.
 Production and Distribution licenses have been liberalized.

Economical
 lack of technology up gradation in manufacturing, packaging etc has also been a
factor affecting our industry, along with inadequate financial credit and support
particularly for the medium and small scale biscuit units.
 Increase in per capita income in India
 India’s GDP growing at an average 8%

Social
 Increase in per capita consumption by all segments of the market
 India is 3rd largest producer of biscuit in the world
 Age: As a consequence of the high birth rates prevalent, a large proportion of the
Indian population is relatively young - in the age group of 16- 25years. This

51
 group is also high in consumption and therefore, this trend is expected to provide
a further boost to the growth of consumption in India.
 Lifestyle Increase in the population of working women and increasing prevalence
of nuclear double income families, especially in urban areas, are other trends
shaping lifestyles.
 Positive Perception among the people regarding products (biscuits).

Technological
 Innovation: lack of innovation and technology in production but has been
improving from past five years
 Improved Research and development activities in the industry.

Environmental

 Agriculture based industry

 Population in the country is also boosting the sales of the industry

Legal

 Taxation, both Central Excise Duty as also State Sales Tax, other
miscellaneous levies i.e. turnover tax, local area tax, mandi taxes,
purchase tax, octroi etc ,has been a major deterrent in the growth of the
biscuit industry. The CII Study Report has identified Biscuit as one of the
products that should treated as "Merit Good for the purpose of liberal tax
policy both by the Centre and States.
 Zero duty import of capital goods and raw material for100 percent export
oriented units.
 The excise duty on packaging materials and packaging machineries used
for the processed food industry should come down to 8%. Packaging
material for match sticks is exempted from excise duty.

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 The Sales Tax or VAT rates for all machinery used should be lowered to
the concessional rate of 4%

CHAPTER-9
CRITICAL SUCCESS FACTORS

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CRITICAL SUCCESS FACTORS OF THE BISCUIT INDUSTRY IN
INDIA are,

 India’s lower and middle class segment will continue to hold the key to success of
the biscuit industry in India.
 Distribution (in rural markets) and advertising (in urban markets Innovation) and
launching of new brands are being adopted by the companies to grab the market.
 The companies have added new variants into their existing brands including
stylish packaging.
 The focus on urban markets have also contributed significantly to the growth of
the biscuit industry.
 Standard grocers are the leading distribution channel, with one third of the
Indian biscuit market, by value. Traditional grocers are the only other channel to
take a double-digit share.

 Alliances – The biscuit manufactures able to maintain good relations with

distributors, whole sale suppliers and regional institutions (through CSR and other
community oriented activities) will have greater market share due to BUZZ
(mouth publicity) and media attention.

 Price The industry players will try to lower the procurement, production and
distribution costs through programs such as JIT, JITD, TQM, Per SKU
cost/Revenue analysis and will pass on these benefits to end consumers in terms
of lowered prices.

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CONCLUSIONS:

 In Indian BISCUIT Industry even the small companies are able to make profits.
 Indian biscuit Industry has a continuous growth and will not be hindered due to
external factors. Biscuit Industry has flourished in India enormously over the
years and is still growing phenomenally
 Entrepreneurs or businessmen who are in process of buying , installation of new
biscuit line should keep following points in mind ,apart from legal requirement of
industrial licenses , pollution clearance's and of course finances.

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REFERENCES

 www.google.com
 www.mofi.nic.in
 www.fbmi.in
 www.economictimes.com
 www.yahoo.com
 www.britannia.com
 www.parle-producuts.in

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