KCPL Case

1.
Describe about the company KCPL including: Technology and Operation in 1987,
Induction of Family Members, Brand MKG, Competition, and KCPL's
Performance?
Kanpur Confectionaries Private Limited (KCPL), founded by Mohan Kumar Gupta, is a

biscuit manufacturing company that started in 1945 in Jaipur. Mohan Kumar was a keen
learner as earlier he used to work in a candy unit and then started his own business with
the dealership of candies under the brand name 'MKG' at the age of 28 years.
After gaining some experience and insight into the market, he set up his production unit
in Jaipur in 1946. As competition in the sector increased, net profit margins fell. KCPL
could not compete on costs as its costs were higher than those of its competitors. Mohan
shifted his candy-making unit to Kanpur where he can manufacture candies at a little low
cost and target new market. He invested in advertisement smartly, in vernacular
newspapers and hoardings. Also with a good dealership network in Bihar and MP, he
was able to make KCPL the market leader in his region.
Mohan Kumar was a visionary too as he could see growth in biscuits demand 15% p.a.
and attractive margins this product has. Also, sugar was the common raw material for
both candies and biscuits. So he decided to invest his surplus from the candy business to
enter into biscuit's business. The business grew fast but limited raw materials didn't allow
it to flourish. But still, they managed to be the number 2 players in the biscuit market in
the northern region with an extended range of cream, salt, and Marie biscuits. Prince
Biscuits was the market leader with 130 MT sales followed by KCPL with 110 MT sales
followed by International Biscuits with 100 MT sales. In the year 1980-81, their turnover
was INR 20 million (growth of 15% compared to last year) and in the year 1983-84, it
was INR 30 million. The installed production capacity was 240 tonnes per month and
their average monthly production was 120 MT.
Biscuit making involved the preparation of dough by mixing flour, sugar, sugar syrup,
vegetable oil, and certain preservative chemicals in a given proportion; molding the
dough into various shapes and sizes; and baking the pieces to get ready-to-eat biscuits. It
was the proportion of ingredients used in making its biscuit dough that enabled a
company to develop a secret formula. Qualities of the material were checked in the
laboratory for impurities. Biscuits were manually packed in a packet of 100gms. The
production was dependent on both casual and permanent workers, while the salary for
permanent workers was INR 2.75 lakh per year, and wages for casual labor was INR 50
per day. Due to high absenteeism, the production varied from 2 MT per day to 6 MT per
day.
In due course, the top management of KCPL was also changed. In 1982, Mohan Kumar,
who had six sons, handed over the leadership of KCPL to his eldest son, Alok Kumar,
who has a degree in commerce. Alok looked after the finance and liaison functions,
Vivek, his second son, joined the company in 1965 after graduating with a degree in
mechanical engineering, was in charge of human resource management and
manufacturing and Sanjay the youngest was responsible for marketing, logistics, and
administration. Mohan's other three sons had their own trading business. The decision
making was done in a meeting held on fifth oof every month for business operations and
performance. The management principles followed by the family were:
Respect the laws of the land.
Do not exploit labor.
Run the business on ethical lines.
Treat the consumer as the king.
Do not evade taxes.
"MKG" was a popular brand in the northern region and the main consumers were
middle-class families in urban and semi-urban areas. In 1986-87. Talking about the
competition, initially, only 2 players, APL and International Biscuits Limited dominated
the industry. There were several units in the unorganized sector by 1980. Seeing a
growing competition, KCPL was in dilemma between 2 types of players- those who
competed on price and those who competed on scale and image. By1986-87 the sales
declined and KCPL incurred loss and eventually, family members decided to shut down
the candy line in 1985.
2. What do you understand by the arrangement with Pearson

KCPL joined hands with Pearson and jointly launched "Good health" biscuits. These
biscuits were seen as a high priced product without any value-added benefits and
customers preferred A-one biscuits for which the price was lesser as well. This indicated
that this collaboration was not a success.
3. Explain the offer of APL and the proposal
On September 8, 1987, APL came up with an offer of expanding its supplying capacity
by contracting manufacturing units (CMU). The offer had various main points:
 APL Offered to supply the pre-printed packaging material carrying APL's name.
 Inspection of KCPL's production processes and recommendation changes in
processes and equipment.
 APL would post two quality control officers at KCPL's plant to facilitate KCPL's
adherence to quality procedures.
 The initial contract was to be for 3 years.
 APL will supply its secret ingredient but KCPL would be required to buy the
other ingredients such as sugar, flour, and vegetable oil from one of the APL's
authorized suppliers.
The proposal had both advantages and disadvantages with needed to be analyzed.
4. Suggest the various options available to KCPL and provide both merits and demerits of
each option
Option 1
KCPL can accept the offer from APL and become its Contract manufacturing unit.
Advantages:
Contract Capacity of manufacturing can be increased if KCPL meets expectations of
quality and production.
KCPL can improve and evolve the production procedure with technical help that is been
provided by APL.
KCPL can avoid marketing, brand building, and distribution expenses and minimizing
business risks.
It would also help KCPL to utilize the surplus capacity.
Disadvantages:
KCPL will lose its independence and cannot take their own decisions.
KCPL might not be able to concentrate on strengthening the MKG brand build over the
years, as the family name was dependent on the success of the biscuit line.
The family image will be destroyed.
Option 2:
KCPL can reject the offer and continue with production of MKG and Good health
biscuits for Pearson
Advantages:
Pearson can increase the production from 50 to 100 MT which will eventually increase
the profit margin.
Disadvantages:
Since Pearson biscuit is not doing well in the market so the probability to increase
production is less.
MKG is also running in loss
Option 3:
Increase production by decreasing the absenteeism and optimum use of installed
capacity.

Advantages:
If workers work efficiently it will increase the productivity leading to the company will
run in profits by decreasing the cost per tonne in production
Disadvantages:
Labors may ask for higher wages and the company has to become strict which may break
the family principle of no exploitation of labor.
5. You are Alok Kumar Gupta - What decision will you take and why
As it said a company is known by its workforce who can do wonders for an organization
even with limited resources. Optimum utilization of the increased capacity can lead to a
full potential which will bring down the cost per unit. This option can recover losses and
is controlled by the company. Also, KCPL should focus on mass consumers, here the
profits and risks are low. KCPL needs to make good relations with the institutes and take
them into confidence that they will provide good quality at a lower price while keeping
profit margin less initially as the production increases. Gradually the cost per unit will be
down increasing the profit margin. There's a huge scope of increasing the market share
here.

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1.

Kanpur Confectionaries Private Limited (KCPL), founded by Mohan Kumar Gupta, is a

2. What do you understand by the arrangement with Pearson

3. Explain the offer of APL and the proposal

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