Dark Truth Of Parle G Biscuits 🔥 | Why Parle G is Still Sold For Rs.5 ? | Business Case Study

Dark Truth Of Parle G Biscuits 🔥 | Why Parle G is Still Sold For Rs.5 ? | Business Case Study
Posted on 31-01-2022

You or me, maybe there's no one who had not eaten ParleG.

But have you ever thought that everything's rates have changed?

House, Bikes, Food, Petrol became costly but today also ParleG is of 5 Rs only.

The question is But Why?

ParleG's revenue in 2013 was 5000 Crs but in 2021 it reached 13000 Crs.

The question is the biscuit's price is the same then how this is possible?

So the secret is - All simple things are not easy.

Parle used some simple business strategies due to which they have 70% market share in the Gluco Business industry.

The question is what Parle did?

And most importantly what are those business lessons we can learn and implement in our business?

The story starts in 1880 when Mohanlal Dayal shifted from Surat to Mumbai started a small toffee factory with 12 of his family members.

Yes, it's true.

Many fewer people know that Parle's first product wasn't ParleG but orange candy.

India at that time was under British Governance.

And people were compelled to use their products.

Finally, in 1939, Parle launched their first biscuit.

It was named Parle Gluco Biscuit.

This biscuit had 2 qualities -

1) The biscuits were cheap so anybody could afford them.

2) Taste was so yummy that from kids to old people, everybody enjoyed it.

And then people started consuming Parle biscuits rather than British brands. And then came 1987 and from here everything was going to get changed for Parle.

In this year, many glucose biscuits got launched in the market. And every biscuit used to add Gluco in their name.

After this people started forgetting Parle Gluco as they found the Gluco word everywhere.

Parle needed to change the way of playing this game. And they changed the name from Parle Gluco to 'Parle G'.

As there were so many biscuits with the name Gluco that people were unable to differentiate them.

In 2003, ParleG became the most selling biscuit in the world. But why the same price for many years? If the biscuit price is the same then how the company is growing?

So the answer is in Consumer Utility Perception. Now listen to me very very carefully.

When we buy any product in the market we justify its cost based on its utility logic.

Ask an 18-year boy who has an iPhone why he bought iPhone?

In the majority of cases, he will give you 10 reasons but he would never tell that

He bought iPhone due to Social Status.

B'coz by telling this he can't justify iPhone's cost.

Similarly when we buy things emotionally but try to justify them logically.

Now think where Parle G is consumed.

Tea, Coffee, Milk - except these 3 things hardly ParleG is consumed anywhere.

Had you ever thought about why people don't consume Hide&Seek, Bourbour, Oreo on regular basis with them?

B'coz Utility Perception is different about those biscuits.

If we want to eat something sweet and snacky then we will eat them.

But we don't use them on daily basis with tea coffee.

In this case, most people consume ParleG.

Hide&Seek's price has changed 2 times in the last 5 years.

But no one complained about it.

Do you know why? B'coz of utility perception.

As per people, Hide&Seek is a snacky biscuit people eat on an irregular basis not daily use biscuit-like ParleG.

We understood why they didn't change the price but how they are growing?

So the answer is Capex Intelligence.

Parle has a total of 10 factories located in places like Mumbai, Rajasthan, Karnataka.

Interestingly, these factories are at less than 60 km distance from cities.

So Parle's transportation cost is always less than its competitors.

And so ParleG is available in every city at the same rate.

Parle didn't set up their factory far from cities but did Contract Manufacturing.

Today more than 125 contract manufacturers produce and supply ParleG to small cities.

That is why you get ParleG at same rate in cities as well as village.

But if Parle didn't took care of this thing then they would have became bankrupt today.

The thing was Frugal Buying.

Profits are booked while Buying.

I Repeat.

The Profits are booked while Buying.

Big investors are rich today b'coz they invested in company's stocks or ideas when the price was less.

Profits are not booked while selling but while buying anything.

India's population is increasing rapidly and in future too.

So it's simple idea that if Population increases food consumption also increase.

If food consumption is increasing then FMCG companies will also grow.

Based on this simple idea, you can invest at right time and book profit.

But the problem is we have idea but no investment expertise.

In this situation you can use smallcase.

If you believe that FMCG sector will grow then you can invest in FMCG tracker which is a basket of top FMCG stocks.

It means that you are now not investing in company but in that sector.

But I would recommend you one thing.

Link in Description you can download the app.

If you don't want to invest then read about FMCG and Electric Mobility sector's blogpost.

So you can get important insights about this sectors which will help you.

In fact after downloading app, you can its news section where you get insights about market.

Similarly Parle books its profit not while selling but while buying raw materials.

Centre of sources requires high transportation charges and petrol/diesel price increases

So Parle formed a strong Sourcing Network which provides standarized raw materials to factories.

Their production cost goes so low that they can easily survive the market.

If you would ever visit Parle factory you will hardly find any wastage.

On 110 ton production 1% wastage is done which keeps their cost in control.

A 100 g packet which used to come of 5 Rs now 55 g packet comes of 5 Rs.

They didn't increased price but decreased quantity.

But hardly any profit comes from their sales.

The question is if they don't make profit then why they sell ?

The reason is Sales Driver.

ParleG is not profit making but a driver product.

Despite getting low margins they didn't stopped selling ParleG.

ParleG's brand equity is 10 times more than other brands as it is used in every house.

Hide&Seek, Monaco, KrackJack are also Parle products.

And Parle's actual profit comes from these products.

But the irony is a customer goes to buy ParleG but when he sees this products he also buys it.

And this is where the profits are.

Not only this from Melody, Poppins, MangoBite Parle earns good revenue from this toffees.

And most importantly, what are those business lessons we can learn and implement in our business?

1) Always try to reduce dependency on everything

In business we unknowingly sometimes get over dependent on some things.

It can be Product, Manpower or Technology.

That's why never be over dependent on everything.

Parle's signature product is ParleG biscuit

But they built brands like Monaco, Hide&Seek, KrackJack, Melody, Poppins, MangoBite.

So they are never dependent on ParleG.

This brings us on 2nd business lesson

2) Focus on controllable Factors

In business many things are uncontrollable.

You cannot control petrol/diesel prices but you can use smart methods to reduce transportation cost.

Inflation was not controllable but to control cost and give product in 5 Rs is controllable for Parle.

This brings us to 3rd business lesson.

3) Brand equity is more valuable than profits

Profits are a by product of value creation.

I Repeat!

Profits are a by product of value creation.

Rather than profit, building brand equity should be focussed.

B'coz if no brand then people will stop buying your product.

Parle made ParleG a brand and despite less margins they are selling it.

Thank You