Case Study: Kanpur Confectioneries Pvt. Ltd.

Outline of the Report

In 1945-46, Mohan Kr. Gupta started Kanpur Confectioneries Pvt. Ltd., and started selling sugar candies under the brand ‘MKG’ in Jaipur. Competition became fierce, and profits soared down. In 1954, he shifted his unit to Kanpur to reduce costs. There after few years, he diversified into biscuit manufacturing industry. Soon, many competitors came up, and it became difficult to capture market.

KCPL then started manufacturing biscuits for Pearson, which couldn’t help much. Now, it has the option to work as CMU for APL. There are few TnC with this deal such as possible loss of independency, low profit margin, ‘MKG’ brand reputation etc.

KCPL has three possible options,

• KCPL should continue working with Pearson, as well

Evaluation In brief

I recommend that KCPL should work as CMU for APL, as well as continue working for Pearson and manufacture its own brand ‘ MKG’

Situation Analysis

In 1945-46, Mohan Kr. Gupta started Kanpur Confectioneries Pvt. Ltd., and started selling sugar candies under the brand ‘MKG’ in Jaipur. Competition became fierce, and profits soared down. In 1954, he shifted his unit to Kanpur to reduce costs.

In 1970, he diversified his business and started manufacturing glucose biscuits under the same brand ‘MKG’. Market grew at more than 15% per annum, and net profit margin was 25%.In 1973-74, KCPL reached the number 2 position in the market, with monthly sale of 110 tonnes. In 1980-81, KCPL doubled its capacity from 120 tonnes to 240 tonnes per month. Their turnover in biscuits’ business was Rs. 2 crores, which was 15% more than last year. Its net profits were Rs. 20 Lakh, which was 15% more than last

Further in 1983-84, sales jumped to Rs, 3 crores, and net profits to Rs. 25 Lakhs.

During the same period, many new competitors came up in organized as well as unorganized sector. Considering rising costs of labour and raw material, KCPL’s sales declined from 1983-87, capacity became surplus and losses incurred. Ultimately, In 1985, Candy manufacturing unit of KCPL was closed down.

In 1985, Pearson Health Drinks started outsourcing production to KCPL at conversion rate of Rs. 3 per kilo. Pearson promised requirement of 100 to 125 tonnes per month, with initial order being 50 tonnes per month. Unfortunately, market response to Pearson’s Health focused biscuits was not very encouraging, as they were high priced with no extra benefits.

In 1987-88 KCPL approached APL (national and regional leader in biscuits segment, with over 1200 tonnes of monthly sales) to function as CMU (contract manufacturing unit) for APL. APL offered to place initial order of 70 tonnes, with conversion rate of Rs. 1.5 per Kg. This deal had both advantages and disadvantages; it would help KCPL to utilize its full capacity, marketing costs, risks, have a stable source of income etc., but then this would also be a stigma to Mohan Kumar’s vision and MKG