Kanpur Confectioneries Private Limited Case Study

Written Analysis and Communication I

Assignment 1: Kanpur Confectioneries Private Limited (A)

Submitted to
Dr. Gita Chaudhuri

By
Shishir Kumar
Roll No. 1410120030

8.11.2014

School of Management and Entrepreneurship
Gautam Budh Nagar, U.P., 201314

Kanpur Confectionaries Private Limited

DATE : September 11’ 1987
TO : Mr. A K Gupta, M.D, Kanpur Confectionaries Private Limited
FROM : Shishir Kumar, Executive Assistant to M.D, KCPL
SUBJECT : Recommendation on Offer of CMU by APL

Please find the attached recommendation on the CMU proposal made by APL for producing A-One glucose biscuits.

Summary
Situation Analysis
• Kanpur Confectioneries Private Limited, family biscuit business
•

Situation Analysis/Critical Issues:

The company is operating from Kanpur, Uttar Pradesh which covers operations in the northern region of India. Biscuit industry is a growing market due to low investment, low skilled labor. Due to this reason many new manufacturing companies comprising organized as well as unorganized were opened and has increased competition. KCPL’s MKG is a popular brand which was perceived as affordable and of good quality. This was the reason that they had doubled their production capacity from 120 tons per month to 240 tons per month in 1980-81. KCPL founder Mohan Kumar had a vision to build ‘MKG’ as leading national brand and competing with APL. However the product, MKG glucose biscuit was not differentiated and also the prices for raw materials, labors were increasing thus they were losing their market share to competitors. One of the reason for loss was lack of forethought. They never tried to understand the competitor. The competitors updated themselves technologically, thus reducing their cost and gained market. This was the same reason due to which had to close their candy

During the declining phase, Pearson Health Drinks Limited contracted KCPL to initially produce 50 tons per month of biscuits with a promise of order extension to 100-125 tons. Pearson reimbursed a conversion charge of ₹3 per kilo which helped KCPL to minimize its loss. Market perception of Pearson’s health biscuits was not good. It was considered costly compared to A-One which was perceived as both affordable and healthy. Due to this, the market share of Pearson was declining and also indicated a reduced chance of order extension from Pearson to KCPL. A-One Confectioneries Private Limited (APL) showed interest to expand by contract manufacturing units (CMU). KCPL has received offer by APL to produce 70 tons per month with an expectation of increase in order. APL reimbursed at conversion charge of ₹1.5 per kilo. KCPL was supposed to incorporate required changes at own cost to meet production requirement of APL. The market perception of APL was good as they didn’t increase price for past 3 years. The response was supposed to increase which will help KCPL eventually in gaining more order.

Problem Statement:
Whether to accept CMU offer of