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Dark Truth Of Parle G Biscuits 馃敟 | Why Parle G is Still Sold For Rs.5 ? | Business Case Study - YouTube
Channel: Aditya Saini
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You or me, maybe there's no one who had not ate ParleG.
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But have you ever thought that everything's rates have changed.
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House, Bikes, Food, Petrol became costly but today also ParleG is of 5 Rs only.
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The question is But Why?
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ParleG's revenue in 2013 was 5000 Crs but in 2021 it reached to 13000 Crs.
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The question is that biscuit's price is same then how this is possible?
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So the secret is - All simple things are not easy.
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Parle used some simple business strategies due to which they have 70% market share in Gluco Business industry.
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The question is what Parle did?
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And most importantly what are those business lessons we can learn and implement in our business?
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The story starts in 1880,
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when Mohanlal Dayal shifted from Surat to Mumbai started a small toffee factory with 12 of his family members.
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Yes, it's true.
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Many less people know that Parle's first product wasn't ParleG but orange candy.
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India at that time was under British Governance.
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And people were compelled to use their products.
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Finally in 1939, Parle launched their first biscuit.
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It was named Parle Gluco Biscuit.
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This biscuit had 2 qualities -
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1) The biscuits were cheap so anybody could afford it.
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2) Taste was so yumm that from kids to old people, everybody enjoyed it.
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And then people started consuming Parle biscuits rather than British brands.
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And then came 1987 and from here everything was going to get changed for Parle.
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In this year, many gluco biscuits got launched in market.
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And every biscuit used to add Gluco in their name.
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After this people started forgetting Parle Gluco as they found Gluco word everywhere.
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Parle needed to change the way of playing this game.
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And they changed name from Parle Gluco to 'Parle G'.
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As there were so many biscuits with name Gluco that people were unable to differentiate them.
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In 2003, ParleG became the most selling biscuit in the world.
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But why same price from many years ?
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If the biscuit price is same then how company is growing ?
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So the answer is in Consumer Utility Perception.
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Now listen to me very very carefully.
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When we buy any product in market we justify its cost based on its utility logic.
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Ask a 18 year boy who has iPhone that why he bought iPhone?
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In majority cases he will give you 10 reasons but he would never tell that
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He bought iPhone due Social Status.
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B'coz by telling this he can't justify iPhone's cost.
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Similarly when we buy things emotionally but try to justify it logically.
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Now think where Parle G is consumed.
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Tea, Coffee, Milk - except these 3 things hardly ParleG is consumed anywhere.
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Had you ever thought why people don't consume Hide&Seek, Bourbour, Oreo on regular basis with them.
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B'coz Utility Perception is different about those biscuits.
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If we want to eat something sweet and snacky then we will eat them.
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But we don't use them on daily basis with tea coffee.
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In this case most people consume ParleG.
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Hide&Seek's price has changed 2 times in last 5 years.
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But no one complained about it.
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Do you know why ? B'coz of utility perception.
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As per people, Hide&Seek is a snacky biscuit people eat on irregular basis not daily use biscuit like ParleG.
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We understood that why they didn't changed price but how they are growing ?
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So the answer is Capex Intelligence.
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Parle has total 10 factories located at places like Mumbai, Rajasthan, Karnataka.
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Interestingly, this factories are at less than 60 km distance from cities.
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So Parle's transportation cost is always less than it's competitors.
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And so ParleG is available in every city at same rate.
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Parle didn't setup their factory far from cities but did Contract Manufacturing.
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Today more than 125 contract manufacturers produce and supply ParleG to small cities.
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That is why you get ParleG at same rate in cities as well as village.
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But if Parle didn't took care of this thing then they would have became bankrupt today.
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The thing was Frugal Buying.
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Profits are booked while Buying.
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I Repeat.
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The Profits are booked while Buying.
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Big investors are rich today b'coz they invested in company's stocks or ideas when the price was less.
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Profits are not booked while selling but while buying anything.
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India's population is increasing rapidly and in future too.
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So it's simple idea that if Population increases food consumption also increase.
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If food consumption is increasing then FMCG companies will also grow.
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Based on this simple idea, you can invest at right time and book profit.
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But the problem is we have idea but no investment expertise.
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In this situation you can use smallcase.
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If you believe that FMCG sector will grow then you can invest in FMCG tracker which is a basket of top FMCG stocks.
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It means that you are now not investing in company but in that sector.
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But I would recommend you one thing.
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Link in Description you can download the app.
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If you don't want to invest then read about FMCG and Electric Mobility sector's blogpost.
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So you can get important insights about this sectors which will help you.
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In fact after downloading app, you can its news section where you get insights about market.
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Similarly Parle books its profit not while selling but while buying raw materials.
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Centre of sources requires high transportation charges and petrol/diesel price increases
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So Parle formed a strong Sourcing Network which provides standarized raw materials to factories.
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Their production cost goes so low that they can easily survive the market.
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If you would ever visit Parle factory you will hardly find any wastage.
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On 110 ton production 1% wastage is done which keeps their cost in control.
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A 100 g packet which used to come of 5 Rs now 55 g packet comes of 5 Rs.
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They didn't increased price but decreased quantity.
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But hardly any profit comes from their sales.
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The question is if they don't make profit then why they sell ?
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The reason is Sales Driver.
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ParleG is not profit making but a driver product.
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Despite getting low margins they didn't stopped selling ParleG.
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ParleG's brand equity is 10 times more than other brands as it is used in every house.
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Hide&Seek, Monaco, KrackJack are also Parle products.
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And Parle's actual profit comes from these products.
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But the irony is a customer goes to buy ParleG but when he sees this products he also buys it.
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And this is where the profits are.
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Not only this from Melody, Poppins, MangoBite Parle earns good revenue from this toffees.
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And most importantly, what are those business lessons we can learn and implement in our business?
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1) Always try to reduce dependency on everything
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In business we unknowingly sometimes get over dependent on some things.
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It can be Product, Manpower or Technology.
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That's why never be over dependent on everything.
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Parle's signature product is ParleG biscuit
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But they built brands like Monaco, Hide&Seek, KrackJack, Melody, Poppins, MangoBite.
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So they are never dependent on ParleG.
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This brings us on 2nd business lesson
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2) Focus on controllable Factors
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In business many things are uncontrollable.
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You cannot control petrol/diesel prices but you can use smart methods to reduce transportation cost.
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Inflation was not controllable but to control cost and give product in 5 Rs is controllable for Parle.
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This brings us to 3rd business lesson.
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3) Brand equity is more valuable than profits
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Profits are a by product of value creation.
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I Repeat!
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Profits are a by product of value creation.
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Rather than profit, building brand equity should be focussed.
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B'coz if no brand then people will stop buying your product.
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Parle made ParleG a brand and despite less margins they are selling it.
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Do you know Royal Enfield was just 6 months far from bankruptcy?
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But a 26 year old boy saved it from failing and made it Market Leader.
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But How ???
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You will know after watching right side video.
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