Parle-G is facing rising raw material costs and needs to decide how to balance this with maintaining its image as a value-for-money product. The company tried increasing the price of its best-selling 100g packet but saw reduced sales, so rolled back the increase. Instead, Parle should promote its larger 500g and 1000g packets targeted at institutional buyers like hotels and canteens, which will provide better savings due to lower production and distribution costs. The company also needs to maintain affordability for lower-income rural consumers through smaller 38.5g and 82.5g packets priced at INR2 and INR4, while using its large retail network to promote the bigger packets. Outsourcing production could

1. Case Study
PARLE—G
Group 5

2. A flagship brand should be generating a margin of 15 to 20 per cent of revenue. A margin of less than 10 per cent is
unacceptable for Parle-G. I have to bite the bullet at some time on pricing. The concerns are several.
Mr. Kulkarnii wants to balance the rise in raw material prices by changing pricing of product Parle-G. There are 2 ways,
either to increase rate per package or reduce costs. The 100-g packet is Parle’s best-selling SKU, contributing to 50 per
cent of brand revenues every year. Company tried to balance the raw material price increase by increasing cost of this
SKU, however this reduced the sales of this SKU owing to its VFM image. Eventually company rolled back its price
increment.ItreduceditscostsbychangingpackagingandreducingquantityperSKU. Suchchangesare not goingtoserve
companyinlong-runasconsumerswouldeventuallyshifttocompetitors,giventhatITCandBritanniahave deeppockets.
 Should I make tactical moves like launching new SKUs and new price points?
Parle shouldavoidmodifying100 gm SKU. Instead,company
should start promoting larger SKUs aggressively. Market for
such 1000 gm and 500gm is more organized compared to
100gm market. These are institutional buyers such as
canteens and hotels. Parle could promote its larger SKUs as
monthlynutritional package,whichwillcompelurbanbuyers
to buy larger SKUs for monthly consumption. Larger SKUs
wouldprovidecompanybettersavings,ascostof production,
packagingand distributionwouldbe lower.One more factis
that income level of globals consumer category is going to
increase by 300% by 2025, hence pricing of product can be
modified without consumers getting away from product.
 Should I continue to tinker with the grammage?
Howerver,the companymust alwayskeepin mindthe R3 and R4 consumersin rural segment.Theyconstitute 28.6 and
19.2 percentdemandof Parle-Gbiscuits. The SKU’scanbe packedforrural marketsas INR2 andINR 4 withgrammage of
38.5 and 82.5 can be used respectively.Company has 15 million retail outlets spread across country, which can be used
as promotion channels for bigger SKUs. It should be understood that R3 and R4 wll be higly price sensitive and an SKU
above 5 and below 10 will be unattractive to this segment.
 Is there a Strategy?
Outsourcingisone of the waystoreduce prices,ifcompanyinvitesthe manufacturersforbiddingwiththeirrawmaterials
and machinery. This will also help company tap the unorganized market, which prefers fresh baked biscuits. Most
importantly, the brand shouldtrytomove awayfromitsVFMtag and promote itself asanecessarybreakfastitem,which
will compel consumers to buy in bulk volumes. Marketing strategy includes segmentation, targeting and positioning.In
segmentingthe SECclass C, D, E2, R2, R3, R4 and inthat segmentchildrentillteenagers shouldbe targeted. Thiswill also
generate loyal customer base for Parle G. The positioning of the products must be changed from VFMto healthy food,
this is important way to deal with price sensitiveness.