Harvest Gold: Delhi’s No.

1 Bread
CASE STUDY REVIEW

Group 3 South Campus | FMS (Exec) 2018-2020

S013- Anita Chaudhary S018-Ashish Chawla

S014- Anuj Kumar S019-Ashish Kumar
S015- Anuj Kumar S020-Ashish Yadav
S016-Anuj Kumar Jha S021- Ashutosh Singhal
S017-Anupam Singh S022- Audhesh Tiwari
CONTEXT
In the early nineties, the Indian bread market was mostly dominated by Britannia
and Modern. But the high perishability of bread posed a serious challenge in terms
of distribution in the far-flung areas. Adil Hassan and his wife Taab Siddiqui, on
returning to their country realized that fresh and tasty bread was hardly available
in the Delhi NCR region. Though of late Harvest Gold has opted for several
diversified products, given the fact that 82 per cent of the bakery market was then
dominated by bread and biscuits, the Company’s flagship product was white
bread. The bread industry at that time was growing at the rate of six per cent while
the organized sector looked even more promising with an eight per cent growth
rate. After the initial teething trouble of distribution, the brand was performing well
in the Delhi NCR following a ‘one plant, one city and one product’ cult. It gradually
diversified from only white bread to sandwich bread, Bombay pav, burger bun,
brown bread, kulcha, pizza base, sweet bun and milk rusk, daliya bread, garlic
bread, etc., and made a strong foothold in the Delhi NCR region. Nonetheless,
given that the bread was a short-shelved product and the bread industry had a
thin margin, high efficiency in terms of cost control and distribution was a necessity.
Secondly, the taste and preference patterns of the different parts of India were
never very similar. Therefore, it was time to relook into the existing promotional
strategy with the trucks painted with Harvest Gold and humorous promotional
messages appearing in the Delhi Times only on Fridays.

COMPETITIVE SCENARIO
The company was facing a tough competition from the PERFECT bread from Seeta
Food Products Pvt. Ltd., which was in a massive expansion mode and covered not
only the Delhi NCR region, but also the neighboring areas like Agra, Ferozabad,
Bharatpur, and Alwar. As compared to Harvest’s ‘one plant, one city, one
product’, PERFECT was already having a competitive advantage of two additional
modern plants and was therefore, capable of capturing 45 per cent of Delhi’s
market share in the premium bread category. Nonetheless, Harvest seemed to be
definitely better off than their other two major national level competitors. To
elucidate, Britannia was more interested in its biscuits division and Modern Foods,
even after its merger with the FMCG giant, HUL, was crippled with lack of
distribution network, low quality standards, high production cost, unmanageable
workforce, trade union problems, and some other political issues. According to
HUL’s insiders, from 13 production plants of Modern, now only 6 are in operation.

ISSUES IN COST CONTROL

Although Harvest was trying hard to reduce the cost by downsizing some steps in the
production process without compromising with the quality, the following issues posed real
challenge in terms of cost control of Harvest:

a) The rising price of wheat flour which is the key ingredient of bread was enough to raise
the eyebrows of Taab Siddiqui. First, India being both the second largest producer and
consumer of wheat was not self-sufficient in terms of production which called for import of

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wheat and subsequently increase in the price of wheat flour (as wheat constituted 55% of
the total ingredients of wheat flour). Moreover, low export duty of wheat encouraged the
producers to export more of it and this resulted in short supply and increasing price of
wheat domestically. Secondly, like any other agri-product, wheat production was also
subjected to seasonal variation, which in turn led to price adjustments across the seasons.
Thirdly, the millers quoted more price of wheat flour as and when the price of by-products
fell. Fourthly, the Food Corporation of India procured and stored huge amount of wheat
every year for rainy days. This also resulted in artificial shortage of wheat and subsequent
increase in its price. Finally, the risk of global warming (due to the possibility of damage of
crops) and fluctuations in import might have also posed future threats of short supply and
increase in price of wheat to some extent.

b) The second important component of cost control was ensuring efficient logistics and
minimizing losses in material handling. It was reported that already, while circulating in the
Delhi NCR region, the company’s plastic crates (each create carried bread worth of Rs
200) were handled so carelessly that serious cracks and breakages at the edges were
common phenomena. Apart from mishandling of crates due to acute time-pressure, the
crates were stacked inside the truck with no free space. From this, the damage caused to
the loaves wrapped by thin cellophanes could be well interpreted.

ISSUES IN DISTRIBUTION AND STRINGENT FOOD SECURITY NORMS

Since the Food Safety and Standards Act, 2006 was enacted, it was mandatory for the
food manufacturers to abide by their stringent procedures and guidelines. They were also
engaged in collating and collecting the dates of consumption, expiry date of the food
products, and improving overall customer education about food standards. Therefore, for
the purpose of franchising and contract manufacturing, the Company needed to be extra
cautious in terms of quality and food security standards. Now, given that the Harvest is
planning to go national and the fact that bread is a low involvement product, it has to be
ensured that it occupies adequate retail shelf space at any given point of time across the
nation. Keeping into consideration the high perishability of bread, fast recycling was
absolutely necessary. On the other hand, government specification enforcing mandatory
use of CNG trucks for bread transportation was acting as a speed-breaker in the delivery
system as CNG fueling units were very less in number and the trucks had to wait in long
queues for refilling fuels. This paradox posed a harsh challenge of ensuring competent
distribution for Harvest. Moreover, bread is subject to quality loss with increasing exposure
to sunlight and heat. Therefore, the retailers had to be educated regarding the storage of
the products. Now, if Harvest had to go national, they needed to train the retailers across
the length and breadth of the country, which again was not an easy task.

ISSUES AND CHALLENGES IN BRAND BUILDING

Harvest Gold was no doubt a well-known bread brand in Delhi NCR, thanks to their visual
cues (painting of brand name, logo, etc., on the trucks), cellophane packaging
(displaying the quality and texture of bread) and humorous print advertisements in Delhi
Times on Fridays. Nonetheless, as far as nationwide branding was concerned, these steps
did not appear to be sufficient. First, Harvest wanted to focus on quality and freshness

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through its innovative packaging strategy with cellophane wrappers and clearly printed
product details with red marks. However, this low-cost packaging innovation was soon
plagiarized by local manufacturers with similar look and texture and even logos of Harvest.
Gradually, these local bread brands flooded the retail shelves Secondly, while Taab was
quite sure about her brand’s taste and quality, no product-related attributes were used in
promotion to build up the brand’s personality. Although the advertisements caught public
attention, given the strong presence of the wannabes like Taaza Gold, Golden Harvest,
etc., converting this attention into purchase intention at the national level was a
challenge. Moreover, as the Case suggests, these high-cost and the so-called high-impact
advertisements with cartoons and parodies appeared to be quite silly to the customers.
Further, as most of the brands talked about quality, creating a distinctive brand personality
was the call for the day.

CONCLUSION AND RECOMMENDATIONS

Keeping the above scenario into consideration, franchisee and contract manufacturing
seems to be a good option.

Firstly, this will provide the advantage of localized production and distribution. The speed
of distribution and recycling would get magnified and cost can be brought down.
Alternatively, better quality crates can be used to minimize the material handling loss and
retain the quality of bread. Nonetheless, to assure quality standards specified by the Food
Safety and Security Act, 2006, special monitoring and care is required in case of contract
manufacturing.

Secondly, throughout the year, proper planning of procurement of raw materials

(especially wheat) is required so that the firm is not subject to seasonal price rise or artificial
short supplies.

Thirdly, as the company assumes quality to be its key competitive advantage over the
competitors, the focus of its promotional messages has to be on the quality related
attributes of the brand and not on silly cartoons and comics. These humorous
advertisements may temporarily attract the eyeballs of the audience, but keeping in mind
the diet-conscious modern populace, Harvest should emphasize on the nutritional values
of the brand to build its own cult in this low-margin industry. Some careful measures to
protect the packages from imitations also call for special attention. The Company may
take an initiative to arrange competitions amongst engineering students (which they have
already done to design better crates) to come out with some advanced packaging
alternatives.

Thus, to build up a nation-wide brand, Harvest Gold needs to tread a careful path of
innovative packaging, cost containment (through efficient procurement, logistics and
distribution), and innovative promotional messages, highlighting the significant unique
selling propositions of the brand.

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