A Management research project Proposal On Bakery and Confectionery industry with special focus on Biscuit products

Submitted To: Dr. Rohit Trivedi Submitted By: Chintan Mehta Rajan N. Mehta Kunjan Shah Ajaypalsinh R. Zala (60) (61) (82) (99)

V.M Patel Institute of Management Ganpat University, Kherva

Objective of study

To know the brief idea about the bakery food industry. To make the comparative study of different biscuit manufacturers. To analyse the competitive structure of biscuit industry. To judge the performances of various biscuit manufacturers. To get idea about the phase of life cycle of biscuit industry.

Methodology

Secondary data :

History of bakery products & confectionery industry. History of biscuit products. Overview of the biscuit products. About major players in the biscuit industry Financial statements of major biscuit manufacturers in India.

Bakery and Confectionery industry

Introduction
The estimate made by the Ministry of Food Processing Industries (1998), the total market of bakery product, bread and biscuit is estimated at 1.5mn ton and 1.1mn ton respectively. The cake market is estimated at 0.4mn ton. The organized segment of the biscuit market is estimated to be 0.44mn tons whereas the unorganized sector accounts for the balance 0.66mn tons. Bread market is estimated to be growing at around 7% pa in volume terms, whereas the biscuit market in the recent years has witnessed a little higher growth at around 8-10% pa. Within the biscuit category, cream and specialty biscuits are growing at faster pace at 20% pa, while the popular segment is growing.

Besides the industrial areas in leading metropolis the bakery product & confectionery are carried on small- scale basis also at household level. Whereas, the confectionery industry has developed remarkably with the international brand mingling with the domestic market toffees, chocolates etc. produced at large scale in important industrial regions of the country. Growth promotional activities

in 1977- 78 Government reserved the confectionery bread and biscuit manufacturing for small scale and restricted entry of large producers. During the last 2 decades, small and unorganized players shared the growth in the industry. Currently, there are an estimated 2 million bakeries across the country engaged in production of bread, biscuits and other products The Indian confectionery market is segmented into sugar-boiled confectionery, chocolates, mints and chewing gums. Sugar-boiled confectionery, consisting of hard boiled candy, toffees and other sugar-based candies, is the largest of the segments and valued at around Rs 2,000 crore.

The confectionery industry has a current capacity of 85, 000 tonnes, the market is growing at the rate of 10-15% per annum. The estimated annual production of bakery products in India is in excess of 3 million tonnes, of which bread accounts for nearly 50% and biscuits 37% in volume terms in the organized sector. The bakery sector in India is one of largest segments of the food processing industries; annual turnover in value terms is approximately $ 900 million.

Types
Chocolates, hard-boiled sweets, chewing gum and other products are a major growth area. The bakery industry includes basic baked products like breads, biscuits, cakes, pastries, rusks, buns, rolls etc.

HISTORY OF BISCUITS

Sweet or salty. Soft or crunchy. Simple or exotic. Everybody loves munching on biscuits, but do they know how biscuits began?

The history of biscuits can be traced back to a recipe created by the Roman chef Apicius, in which "a thick paste of fine wheat flour was boiled and spread out on a plate. When it had dried and hardened it was cut up and then fried until crisp, then served with honey and pepper."

The word 'Biscuit' is derived from the Latin words 'Bis' (meaning 'twice') and 'Coctus' (meaning cooked or baked). The word 'Biscotti' is also the generic term for cookies in Italian. Back then, biscuits were unleavened, hard and thin wafers which, because of their low water content, were ideal food to store. As people started to explore the globe, biscuits became

the ideal traveling food since they stayed fresh for long periods. The seafaring age, thus, witnessed the boom of biscuits when these were sealed in airtight containers to last for months at a time. Hard track biscuits (earliest version of the biscotti and present-day crackers) were part of the staple diet of English and American sailors for many centuries. In fact, the countries which led this seafaring charge, such as those in Western Europe, are the ones where biscuits are most

popular even today. Biscotti is said to have been a favorite of Christopher Columbus who discovered America!

Making good biscuits is quite an art, and history bears testimony to that. During the 17th and 18th Centuries in Europe, baking was a carefully controlled profession, managed through a series of 'guilds' or professional associations. To become a baker, one had to complete years of apprenticeship - working through the ranks of apprentice, journeyman, and finally master baker. Not only this, the amount and quality of biscuits baked were also carefully monitored.

The English, Scotch and Dutch immigrants originally brought the first cookies to the United States and they were called teacakes. They were often flavoured with nothing more than the finest butter, sometimes with the addition of a few drops of rose water. Cookies in America were also called by such names as "jumbles", "plunkets" and "cry babies".

As technology improved during the Industrial Revolution in the 19th century, the price of sugar and flour dropped. Chemical leavening agents, such as baking soda, became available and a profusion of cookie recipes occurred. This led to the development of manufactured cookies.

Interestingly, as time has passed and despite more varieties becoming available, the essential ingredients of biscuits haven't changed - like 'soft' wheat flour (which contains less protein than the flour used to bake bread) sugar, and fats, such as butter and oil. Today, though they are known by different names the world over, people agree on one thing - nothing beats the biscuit!

Some interesting facts on the origin of other forms of biscuits:

The recipe for oval shaped cookies (that are also known as boudoir biscuits, sponge biscuits, sponge fingers, Naples biscuits and Savoy biscuits) has changed little in 900 years and dates back to the house of Savoy in the 11th century France. Peter the Great of Russia seems to have enjoyed an oval-shaped cookie called "lady fingers" when visiting Louis XV of France.

The macaroon - a small round cookie with crisp crust and a soft interior - seems to have originated in an Italian monastery in 1792 during the French Revolution.

SPRING-uhr-lee, have been traditional Christmas cookies in Austria and Bavaria for centuries. They are made from a simple egg, flour and sugar dough and are usually rectangular in shape. These cookies are made with a leavening agent called ammonium carbonate and baking ammonia.

 The inspiration for fortune cookies dates back to the 12th & 13th Centuries, when Chinese soldiers slipped rice paper messages into moon cakes to help co-ordinate their defence against, Mongolian invaders.

BISCUIT INDUSTRY IN INDIA - AN OVERVIEW

Biscuit industry in India in the organized sector produces around 60% of the total production, the balance 40% being contributed by the unorganized bakeries. The industry consists of two large scale manufacturers, around 50 medium scale brands and small scale units ranging up to 2500 units in the country, as at 2000-01. The unorganized sector is estimated to have approximately 30,000 small & tiny bakeries across the country. The annual turnover of the organized sector of the biscuit manufacturers (as at 2001-02) is Rs. 4,350 crores. In terms of volume biscuit production by the organized segment in 2001-02 is estimated at 1.30 million tonnes. The major Brands of biscuits are - Britannia, Parle Bakeman, Priya Gold,Elite,Cremica, Dukes, Anupam, Horlicks, Craze, Nezone, besides various regional/State brands.

 Biscuit industry which was till then reserved in the SSI Sector, was unreserved in 1997-98, in accordance with the Govt. Policy, based on the recommendations of the Abid Hussain Committee. The annual production of biscuit in the organized sector, continues to be predominantly in the small and medium sale sector before and after de-reservation. The annual production was around 7.4 Lakh tonnes in 1997-98 in the next five years, biscuit production witnessed an annual growth of 10% to 12%, up to 1999-00. The annual Growth showed a decline of 3.5% in 2000-01, mainly due to 100% hike in Central Excise Duty (from 9% to 16%). Production in the year 2001-02 increased very marginally by 2.75% where in 2002-03 the growth is around 3%. The Union Budget for 2003-04 granted 50% reduction in the rate of Excise Duty on Biscuit i.e. from 16% to 8%. The Federation's estimate for the current year indicates a growth of approximately 8% to 9%. However the average utilization of installed capacity by biscuit manufacturers in the country has been a dismal 60% over the last decade up to 2001-02. Though dereservation resulted in a few MNCs, i.e. Sara Lee, Kellogs SmithKline Beecham, Heinz etc entering the biscuit industry in India, most of them, with the exception of SmithKline Beecham (Horlicks Biscuits), have ceased production in the country.

 On the other hand, import of biscuits, especially in the high price segment has started from 1998-99, but however, the quantum of imports has not so far increased alarmingly and has remained at around 3.75% of the consumption of biscuits in the country in the year 2001-02. However, recent imports from china industries cheaper verities of biscuit, needs to be examined with cautions, especially in the context of the price as the low margin based domestic industry, which is operating at 60 % of the total installed capital. Exports of biscuits from India have been to the extent of 5.5% of the total production. Exports are expected to grow only in the year 2003-04 and beyond. Biscuit is a hygienically packaged nutritious snack food available at very competitive prices, volumes and different tastes. According to the NCAER Study, biscuit is predominantly consumed by people from the lower strata of society, particularly children in both rural and urban areas with an average monthly income of Rs. 750.00. Biscuit (Based Glucose Marie Cream Crackers Milk Others 8%. 10% 13% 12% can he on broadly categorized productions into the of following segments:

2000-01) 44% 13%

. FBMI ( Federation of Biscuit Manufacturers of India ) is an association of all the biscuit manufacturers of India. Major players include Britannia, Parle, ITC, Priyagold, Windsor etc. In recognition of industry's obligations towards the community, being a part of it, biscuit manufacturers supply biscuits to the social welfare agencies in all States for the benefit of school children, senior citizens and other needy sections of the society. FBMI ( Federation of Biscuit Manufacturers of India ) Members have always responded positively to our appeal as also by the Government, to rush truck loads of biscuits to the people affected by earthquakes, floods, famine etc. These members have also participated in supplying biscuits to the people of war ravaged Afghanistan and presently to the Iraqi people, under the aegis of the UN.

 As regards the consumption pattern is concerned. surveys and estimates by industry from time to time indicate the average consumption scenario in the four Zones have been more or less close to each other, as below: 1. 2. 3. 4. Northern States: Southern States: Western States: Eastern States: 28% 24% 25% 23%

Consumption of Biscuits

23%

28%

25% 24%

Though India is considered as the third largest producer of Biscuits after USA and China, the per capita consumption of biscuits in our country is only 2.1 Kg., compared to more than 10 kg in the USA, UK and West European countries and above 4.25 kg in south cast Asian countries, Le. Singapore, Hong Kong, Thailand, Indonesia etc. China has a per capita consumption of 1.90 kg, while in the case of Japan it is estimated at 7.5 kg. In view of the meager per capita consumption even as penetration of biscuits manufactured by the organised sector, into rural areas in India, has been very good during the last 10 years, as also in the metro and other cities, small towns etc. However, in spite of this, the industry has not been able to utilize about half of their installed capacities. Biscuit is a comparatively low margin food product in the PMCG (Packaged Mass Consumption Goods) sector. The commodity is also price sensitive, as a consequence of which, even when the Excise Duty was doubled on biscuits in 2000-01 biscuit manufacturers, including the major brands, were not able hike MRPs to the extend of the steep increase in the

Duty. Taxation, both Central Excise Duty as also State Sales Tax, other miscellaneous levies i.e. turnover tax, local area tax, mandi taxes, purchase tax, Octroi etc., has been a major deterrent in the growth of the biscuit industry. The CII Study Report has identified Biscuit as one of the products that should treated as "Merit Good for the purpose of liberal tax policy both by the Centre and States. Besides lack of technology upgradation in manufacturing, packaging etc has also been a factor affecting our industry, along with inadequate financial credit and support particularly for the medium and small scale biscuit units. On the other hand, the Government of India has identified food processing industries as a priority area to be encouraged for growth and development and created the Ministry of Food Processing Industries (which was till then a Dept in the Ministry of Agriculture), headed by an Ministry of State with Independent charge. Biscuit manufacturing as well as other bakery products like Bread etc are agro based industries, with the major inputs - wheat flour/atta sugar, milk vanaspati/vegetable oil etc all being agriculture produces. Industries such as Biscuit are also languishing as they are not able to achieve their potentials for higher production, in the absence of the concrete food Processing Industry Policy. FBMI in close coordination with other organizations and apex Chambers, initiated to urge the Govt of India to formulate a comprehensive Policy Document, for smooth growth and harmonious development of the industry. The Food Processing Industry Policy, which has been evolved as a result of various workshops, deliberations and representations by a large cross section of food processing industries, is yet to be finalized. It is hoped that the Ministry of Food Processing Industries, GOI would initiate action for implementation of the Policy expeditiously. According to the production figures of members available upto the calendar year 2003, the total production was 625000 tonnes as against 475000 tonnes in the previous year. The production of biscuit for the last 11 years is as under:

1993
1995 1997

167750
202567 362000

1994
1996 1998

180526
222371 400000

1999 2001 2003

425000 465000 -

2000 2002

450000 475000 625000

Note: the production of members of FBMI consist of 50% (approx.) of the total production of biscuit in the organized sector.

Industry Profile
1. 2.

Segments: The organized and unorganized sectors of the biscuit industry is in the proportion Of 60%:40% ratio.

Export of Biscuit is estimated to be around 15% of the annual production during the year 2007-08. Import of biscuits into India has not shown any significant growth during the last two years and has not affected production/sales by the Indian Biscuit industry . Marketing : Wholesale and Retail marketing in the Biscuit industry is carried out with a network of C & F Agencies (for States and specific Districts), Dealers / Wholesalers and Retail shops.
4. Biscuit Industry, especially the Small & Medium Sector, consisting of around 150

units(besides three Large Industries), are facing erosion in their profitability and competitive capability, due to imposition of Value Added Tax (VAT) by the State Governments @ 12.5% on Biscuits, compared to VAT oat 4% levied on other similar food products.
5. 6. Taxation: On behalf of the industry, IBMA has been pursing the issue with the Chief

Ministers/Finance Ministers of all States and also with the Chairman of the Empowered Committee on VAT, seeking reduction in the rate of VAT on biscuit to 4%. IBMA estimates annual growth in the range of 15% to 20% during the next five years, in the event of reduction in the rate of VAT on Biscuits to 4%. 7. Per capita consumption of Biscuits in the country is only 1.8 kg, as compared to 2.5 kg to 5.5 kg in South eastern countries and European countries & USA respectively.
9. Main Categories of Biscuits are broadly as under:

Glucose, Marie. Sweet, Salty. Cream, & Milk

10. Popular Brands of Biscuits in the country are, Britannia, Parle, Priyagold, Anmol,

Biskfarm, Dukes, Cremica, Priya, Veeramani, Bonn, Bhagwati, Raja, Champion,Sobisco,Madhabi, Nezone, Windsor, Cookieman, Sufeast, Ankit, Shangrila, Nalanda, etc.

Booming with biscuit The enormous Rs. 6000-crore Indian biscuit market will soon have a new entrant. UKs premier biscuit company, United Biscuits, is looking at entering this profitable market by tying up with local firms. United Biscuits is the worlds third largest biscuit firm, and is currently exploring manufacturing, marketing and distribution options in emerging markets like India. It is little wonder that UB has identified India as a strong market to explore, considering India is the worlds second largest manufacturer of biscuits, after USA. Access to this huge market is said to be ultra profitable for several international food brands, and UB is going with the flow.

Delhi Retail Shop The biscuit industry in India is presently growing at the rate of 13% per annum. Despite the potential and the fast growth rate of the industry, penetration is known to be a difficult affair. Several companies have failed to fit the bill when it comes to consumer tastes, and among these have been giants like Hindustan Lever. The industry is primarily held by top players like Britannia and Parle. In terms of value, Britannia leads the market with 37 per cent market share, followed by Parles 31.3 per cent.

However, a new competitor on the scene ITCs Sunfeast has slowly been transforming the industry with its foray in 2003. With its focus on bringing new and innovative products to consumers, ITC steadily gained a considerable market share which currently stands at 6.3 per cent. Apart from good products and aggressive marketing, ITC has the advantage of well-built distribution channels, thanks to its tobacco business. However, Sunfeast still has a long way to go as it continues to battle it out with the industrys big two. In this scenario, it would be interesting to see how well a massive European brand like United Biscuits would fare and who it would tie up with. Talks are presently on with several firms in India including Parle. UB is said to be eager to tap into the high-margin health segment of biscuits such as its McVities brand. This would be a good idea in a country which is increasingly becoming health conscious, particularly the urban population of India.

BISCUIT INDUSTRY IN INDIA-STATISTIC

1. Annual Growth: The biscuit industry in India witnessed annual growth as below:2003-04 - 15% 2004-05 - 14% 2005-06 - 14% 2006-07 - 13% 2007-08 - 15% 2008-09 - 17% (April June)While the growth rate has been stagnating during last 4 years, it has picked up momentum during the 2007-08 and the first quarter of 2008-09 mainly on account of exemption from Central Excise Duty on biscuits with MRP up to Rs.100/per kg, as per Union Budget for 2007-08. 2. Annual Production: The organized biscuit manufacturing industrys annual production figures are given below: (In Lakh Metric Tonnes) 2003-04 - 11.00 2004-05 - 12.54 2005-06 - 14.29 2006-07 - 16.14 2007-08 - 17.14 3. Rural-urban penetration of Biscuit: Urban Market :75% to 85% Rural Market : 50% to 65% HIKE IN COST OF PRDUCTION : Biscuit Industry especially the Small & Medium Sector, consisting of around 150 units are facing erosion in their profitability and competitive capability, due to :a) Steep hike in cost of production on account of increase in prices of major raw materials,

i.e. Wheat Flour Veg. Oil, Sugar, Milk, Packaging Materials, Fuel. Wages,etc.Recent increase in prices of Petrol/Diesel in May 2008 has further resulted n cost push. Detailed Comparative Chart showing adverse impact on Biscuit Industry is given below: 4. HIKE IN PRICES OF RAW MATERIALS S.NO 1 2 3 4 5 6 7 8 9

Raw Martial Maida Sugar Parmoline Oil S.M.P Butter Laminate F.O HM Bag Carbon Box Per Kg

Jan 08 12.23 15.09 52.99 122.00 118.94 200.00 26.63 91.92 25.00

May 08 12.00 16.00 57.00 127.00 130.00 230.00 35.00 105.00 28.00

The above rates are excluding VAT & other Taxes as well as Cost escalation due to increase prices of Laminate, hike in prices of Petrol/ Diesel, Revision of wages S.No 1 2 3 4 5 6 7 Cost per KG Glucose 85 gm Crunchy bite 150 gm Golmol 150 gm Butter 250 gm 2 in 1 75 gm Milk Cream 75 gm Marie 17 gm Jan 08 31.08 30.18 34.06 41.59 39.01 46.38 40.37 May 08 31.73 32.40 34.26 43.82 41.06 47.28 41.21 Difference in In Rs %age 0.65 2.09 2.22 0.20 2.23 2.05 0.90 0.84 7.36 0.59 5.36 5.26 1.94 2.08

5. Pattern of Biscuit Consumption(On Zonal basis) in the country are as below: Northern Zone - 25% Western Zone - 23% Southern Zone - 24% East and North East Zone - 28%

(Including N.East) The per capital consumption as well as pattern of consumption in the four regions, as shown above, will also increase considerably, in case the industrys plea for reduction in the rate of Value Added Tax (VAT) from 12.5% to 4% is acceded to

India Major Biscuit Brands

With lots of enquiries and searches for major brands of biscuit in India, we checked from market and their portals to list few of them . Find few major brands of biscuit in India .The Majors brands are from Britannia , Parle , ITC foods , Surya Foods Britannias Good Day,Tiger,Marie Gold,50- 50,Choco -chips,Choco - nuts,Little Heart,Nutri Choice,Bourbon Nice Time,Pure Magic,Milk Bikis,Jim -Jam,Cream Treats,Time Pass,Digestive Parles Parle G ,krack Jack,Monaco,Hide n Seek,Magix,Kreames,20 -20,Nimkin,Chox,Digestive,Marie, Milk Shakti ITC FOODS (SUNFEAST) Milky magic,Marie,Golden Bakery,Dark Fantasy,Glucose,Dream Cream,Snacky,Sweet n Salt,Nice,Vita,Special Surya Foods ( PRIYA GOLD ) Butter Bite,Classic cream,Kids Cream,Bourbon,Marie Lite,Big Boss ,Magic Gold,CNC,Cheese Cracker,Snacks Zig Zag,Don,Coconut Crunch,Cheez Bit,Chat Patta

Market share
Britannia [Get Quote] relaunched its Glucose-D biscuit as Tiger in 1995 and boasts of 17-18 per cent share. parle enjoys 70% market share in glucose biscuit category followed by Britannia Tiger (17-18%) and ITC's sunfeast (8-9%).

Brands of major biscuit manufacturers:

Parle Parle Krackjack Magix Parle cream Butter cookies Marie Choice Milk Shakti Hide & Seek Fun Center Sun Feast Sunfeast fit kit Golden bacs Sunfeast benne vita Sunfeast Milky Magic Sunfeast multigrain Dark fantasy Britania Tiger 50-50 Pure Magic Cream TreT Good Day Greetings Little Heart Marie Gold Milk Biscuit Priya Gold Don CNS Classic Cream Butter Bite Marie lite Big Boss Kids Cream

Sixer Golden Roles Monaco Bites -

Nice Time -

Chees Crackers Coconut Crunch

References

http://derosi.com/2009/04/29/booming-with-biscuits-%E2%80%93-united-biscuits-considersindia-foray/ http://www.biscuitfederation.org/indus_profile.htm http://bakerybazar.blogspot.com/search/label/Major%20biscuit%20brands%20of%20India http://business.mapsofindia.com/india-industry/biscuits.html http://www.ibmabiscuits.in/industry-statistics.html