Kanpur Biscuit Company Case Study Solution

SUMMARY
Situation Analysis
Kanpur Confectioneries Private Limited (KCPL) sales are declining as a result of increasing cost of production and competition in the biscuit industry. To utilize the surplus capacity and KCPL signed a contract of supplying 50 tonnes per month with Pearson Health Drinks Limited (PHDL). Later they also got an offer from A-One Confectioneries Private Limited to supply 70 tonnes of glucose biscuit per month. KCPL stakeholders have to decide whether to accept APL’s offer or reject it.
Problem Statement
The competition is very high in the biscuit industry and KCPL sales are declining and the brand might get diluted. Whether to accept offer at hand from APL to supply 70 tonnes of glucose biscuit per month which would utilize

reject the APL’s offer. It should work on the production of its own products along with the products of PHDL. Option 2 is to accept the offer form APL so that it’s able to recover from its losses and prevents the “MKG” brand from diluting.
Recommendation
It is recommended that KCPL choses Option 2. It would help KCPL to utilize its surplus capacity and also help the brand from wiping out. It will also be able to recover its losses.
Situation Analysis
Kanpur Confectioneries Private Limited was a family venture that was started in 1945 to sell candies under the brand “MKG” and diversified into making and selling glucose biscuits. The biscuit business had an increasing demand of 15% per annum with 25% net profit margin. The biscuit business offered an ease of entry because of the low investment required. It had many advantages like the production of the biscuits was simple, equipment’s required for production and the labour was easily

It has offered KCPL an order for producing 70 tonnes of glucose biscuit per month. The initial contract was for 3 years and would be increased if KCPL performs to expectations. APL will be supplying KCPL the pre-printed packing material. It will also inspect the production process and enable KCPL to adhere to quality procedures, any changes required will be on KCPL’s cost. APL’s offer included reimbursement of the raw material expenses as per its norms of consumption with a pay of conversion charge of Rs. 1.50 per kilogram to cover the expenses on labour, overheads, and depreciation. This offer would not only help KCPL use its rendered surplus capacity but also to make up for its losses if KCPL accepts this offer.
Recommendation
Studying both the options that are available with KCPL, risks and benefits of both the options along with the current position of the company, it is preferable that KCPL goes with the Option 2. If KCPL goes with Option 2 there is a probability that the brand might lose its independence but it will not get wiped off from the market, it will remain associated with a national player.
Action