Crack this case and win Rs 25,000!

Dr Srini R Srinivasan, KJ Somaiya Institute of Management Studies & Research

The Tata Consultancy Services-Smart Manager Case Contest is the oldest and most prestigious
competition of its kind in India. Apart from a one-year free subscription to The Smart
Manager, India's first world-class management magazine, winners from the 'manager' and
'student' categories stand to win cash prizes of Rs 25,000 each.
All you have to do is read the case, see the question you have to answer on the last slide, click on
The Smart Manager logo below, and post your solutions by September 9, 2010. All the best!

TCS Smart Manager Case Contest # 47

Last date for submission : 9 September 2010

sweet salvation
by Dr. Srini. R. Srinivasan

Bal Pendharkar pushed aside his laptop and strode to the French-style window of
his plush cabin. In the distance, he could see the pale blue sea crashing against the
virgin white sand of Shejvi’s palm-fringed beach. Alas, the beauty of his
surroundings didn’t help soothe his frayed nerves...
Ram Pendharkar, his brother and director of Pendharkar Dairy, had just emailed
him a copy of the India Food Report 2010, and the findings were dismal. Their arch
rivals—Delhiwallah’s—had once again outwitted them to emerge as leader in the
organized sweets and snacks market. This wasn’t the first time they had done it
either. What’s more, the report hinted that they’d also managed to grab a significant
chunk of the global market for sweets and snacks.
Pacing up and down his cabin, Bal wondered as to what it was that consistently kept
their competitors ahead of them. He could see, in his mind’s eye, the Pendharkar
Group’s entire career graph as it meandered in front of him.
From humble beginnings which saw chivda, chaklee (snacks) and amba barfee
(sweets) being prepared by hand by the womenfolk of the Pendharkar family from
the confines of their homes, Pendharkar Bros had metamorphosed into a household
name not just in and around Shejvi but across its native state Maharashtra. Shejvi, of
course, remained the principal manufacturing unit, with two automated
manufacturing lines devoted to the manufacture of Pendharkar Bros’ famous
chivda.
The inspiration behind venturing into the food business had come from Bal’s
grandfather, the late Dattatraya Pendharkar, who started a dairy business
(Pendharkar Dairy) in Kolhapur in the 1930s, almost single-handedly. And it was his
eldest son and Bal’s father, the late Vinayak Pendharkar, who started Pendharkar
Bros in Shejvi in 1950. Public demand dictated that another shop be opened, and
soon enough, another shop was indeed opened in a prime city location.

While the products remained the same: chivda, chaklee (snacks) and amba barfee
(sweets), great care was taken to ensure quality, hygiene, and above all, fair pricing.
Needless to say, people flocked to these shops in droves, and before they could
fathom the gravity of the situation, the Pendharkars realized there was no way they
could meet the growing demand for their products; not with the existing scale of
operations at least.
What followed were a couple of desperate measures including increasing the
production of chivda and introducing a random chit system to contain demand.
However when all tricks failed, Bal and his father found themselves travelling
extensively to a host of food and beverage exhibitions in England and the US. At one
such exhibition in Los Angeles, they chanced upon a machine that efficiently
churned out cream donuts, a favourite breakfast food with the Americans. Bal’s
father was quick to cash in on the opportunity, and after much deliberation,
convinced one of the suppliers to visit their factory in India to design a similar
machine which would ease the manufacture of their main product – chivda. That’s
how automation entered the hitherto simple lexicon of the Pendharkars, albeit at a
steep price of Rs10mn, definitely a huge investment in the 1980s. And if at all the
Pendharkars thought they could reach breakeven point within a year, the machine
helped them reach their goal for it produced a good 350kg of chivda per hour,
sufficient to meet the inflated customer demand.
With further expansion came newer, more complex challenges. One such challenge
came in 1995, when Pendharkar Bros decided to streamline their transactions and
billing process. The result was the implementation of the then unknown RFID
system. The way this system worked was that customers were given RFID plastic
cards on entering the shop. Small machines were kept at every counter and the cards
were fed with the prices of various items bought. Finally, the cards had to be
redeemed at the cash counter by paying up the total amount for all purchases. The
nineties were also the time of the dot com boom and the freeing up of the Indian
economy from the shackles of protectionist policies, among other things. It came as
no surprise then that these innovations created a great deal of curiosity and demand
around the products of Pendharkar Bros.
All along, Pendharkar Bros had looked toward Pendharkar Dairy, not only as a
source of inspiration for their business but also as a very real source for all of their
dairy supplies. Till 2005, the dairy operated 10 physical servers across two data
centers in a town nearly 500km from Kolhapur. This was proving to be costly
besides posing a major risk to operations. Meanwhile, Bal’s brother Ram discovered
that while it took about six to seven hours to fully restore a corrupted server, using
VMware High Availability brought down the time taken to a mere ten minutes. So,
in 2005, they decided to implement VMware server virtualization, and within a span
of two years, were able to bring down the number of physical servers to just three,
that too operating out of only one data center. The adoption of IT further benefited
their business. It reduced server hardware acquisition costs by 50% and software
acquisition costs by 75%. Server deployment times were reduced from three weeks
to just three hours. Making do with only three physical servers and one data center
translated into a 50% reduction in power, cooling and real estate.
A sharp sound interrupted Bal’s quiet reverie—it was his mobile phone. Even as he
floated aimlessly toward the phone, it stopped ringing. Once again, his thoughts
drifted to the Pendharkar story—to the present.

Having started almost as a cottage enterprise, Pendharkar Bros had now reached a
stage where they were operating out of three manufacturing concerns: one in Shejvi;
another in Chiplun, under the name Annapoorna Sweets and Snacks Pvt. Ltd; and
the third, by the name Shreeram Food Industries, in Pawas.
Each manufacturing unit was equipped with state-of-the-art machinery for the
production of sweets and snacks. Special machines had been imported from Japan
for the manufacture of sweets. Meanwhile, the Shejvi unit exclusively manufactured
Pendharkar Bros’ monopoly product—chivda. All their dairy supplies were
procured in-house from Pendharkar Dairy, which produced up to 200,000 litres of
milk per day, along with milk-based products such as cream, butter and yoghurt.
And the focus continued to be quality with the entire business activity HACCP
(Hazard Analysis Critical Control Points) certified.

Apart from the manufacturing units, Shejvi was now home to two modern outlets,
selling nearly 56 different varieties of sweets and 31 varieties of snacks. The shops
forecasted demand for the next day by 5pm, and accordingly, at 5am the next day,
sweets and snacks were delivered to them. A fleet of 13 small and medium vehicles
took care of transportation in and around Shejvi.

Being a family-owned and managed business, the Pendharkar’s took minimal

recourse to advertising, save for word-of-mouth publicity and the local newspaper.
New product development usually happened from home, and these new products
were introduced into the system only after customers and other family members
tested them. Distribution-wise, there were ten franchisees in Shejvi, helped along by
a wide network of authorized agents and distributors across India. Thanks to their
tie-ups with various corporate and non-corporate entities, Pendharkar Bros were
now counted amongst the major suppliers of sweets and snacks within the country.
Slowly but surely, they were also paving the way toward becoming a major exporter
of these products abroad. In fact, exports had already started to countries such as the
US, Singapore and Israel.

By themselves, Pendharkar Bros were but a part of the larger and prestigious
Pendharkar Group, which had interests in various sectors including food, dairy,
agro and digital. Indeed, the Pendharkar Group comprised several companies, ie
Pendharkar Dairy, Pendharkar Foods, Pendharkar Agro Industries Pvt Ltd,
Pendharkar Digitals and of course, Pendharkar Bros. While each of these businesses
had their own production, marketing and distribution networks, the internal
synergies were put to collective use from time to time so as to improve efficiency of
business on the whole. To put it in statistical terms, the current turnover of the
Pendharkar Group was approximately $5bn; with $4bn from the dairy business,
where profit margins are only about 2 per cent, and $1bn from the sweets business,
where profit margins are 12 to 15 per cent.

Once again, Bal’s mobile phone rang, breaking his train of thought. It was his son,
Ameya, calling to brief him about their recently-launched advertising campaign.
“What was it that their competitors were getting right, which they obviously weren’t
getting right?” the question kept nagging him. Delhiwallah’s—their competitors—
were well known for their aggressive marketing strategy and extensive distribution
network. Other rivals like Khavaiya’s possessed many quality-control laboratories.
Additionally, rumor had it that Indian dairy major, Milky Way, was planning to
enter the country’s already crowded $500mn sweets and snacks market. And just a
few days ago, global retail giant, Big Buy, had announced similar such plans.

Bal was perplexed, to say the least. He was at a loss for direction. Past strategies
were obviously not bearing fruit. It was time for change, but how, and in what
direction? He would call an urgent meeting of the Pendharkar family to discuss the
way forward, he wondered aloud…

your question:
Having reached the present level, what do you think the Pendharkars need to do to
counter competition, especially the onslaught of new brand labels? Should they
aggressively focus on expansion and on increasing their advertising spend?

Click here to submit your analysis

 or mail your analysis to [email protected]

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Work on
by nishant tyagi (View MyPage) on Aug 18, 2010 12:51 PM

Marketing strategy: Adopt an aggressive strategy my endorsing known National celebrity or regional celebrities, come
up with jingles or slogan that has a mass appeal
Distibution Channel: Work on distribution channel as the existing one is good they can improvise on it
Decrease profit margin: can compromise a little on profit margin of sweets to counter new labels
Acquisition: Can look for labels not doing good and can acquire their units in different parts of the country.
Introduce regional flavours
Can come up with smaller packets to increase sales in villages or even cities for eg: shampoos come in smaller
sache for lower price.
As Foreigners are health concious can come up with lower Fat, low sugar funda for exports and also for local sales
within India.

Go for new thing

by Ravi Bajaj (View MyPage) on Aug 17, 2010 08:43 PM

We have many religions in our country and their taste and living style differ from each other. They should prepare and
distribute the sweets considering this instead of one common product for all. They must go for survey before this to
understand the choice and taste of people. They can add some extra flavors in the sweets or namkeen to attract
more people without increasing the price range. For example- adding juice of Imli to namkeen can give different &
good taste which can attract the people more.

Common men like to buy the sweets from local shop, so they should be informed by advertisement about company’s
products, price range and quality.

Other things, my friends have already advised in their suggestions.

counter competition
by helma jayakumar (View MyPage) on Aug 17, 2010 02:29 PM

sir,
The competition can be effectively tackled by either or all of the following ways -

1)advertising using a genuine celebrity and also who has a genuine name amoung the public since the product is
already of a good quality.
This has a tremendous impact on the public.

2)Innovation like health factor to be included in the product while advertising. Like sweets made of no fat at all or
savouries made with very very little salt, use of soya powder while makihng sweets to counter sugar ill effects etc..

3)expansion done by taking over related companies provided finance is availabe.

4)Selling quality product at a lesser price than the competitor by lowering the cost of production and the same being
advertised can also be done to counter competition.

jayakumar
pendaris
by sarfaraz (View MyPage) on Aug 17, 2010 02:07 PM

the biggest question -competition

they cannot win by money because they do not have it -not more than megamart(bigway) so price war is not the
answer

the only way is good PR with customers and quality

quality is linked to good treatment of employees PR with employees

Pendharkars
by Placers Guwahati (View MyPage) on Aug 17, 2010 01:31 PM

The pendharkars' seems to have 80 years of experience in production, we need not ask for more. Now the issue here
to be addressed lies in the food council report itself. Global market share and Organized distribution. Aggression in
export policy and strengthening the distribution network needs attention. Going global and pan India would require
variety in product range/taste. Distribution and presence can be achieved by going the franchisee model. This does
gives wider distribution as well as much greater presence. And last but not the least they need to check the location
of the food council headquarters if it’s in Delhi. As topping the charts seem to be the Delhi wallas. They could well
have an office in Delhi to have sweeter relations with the Sweets bosses for their guidance.

Re:sweet slavation
by Sudershan Shukla (View MyPage) on Aug 17, 2010 12:54 PM

focus on your strong hold which is of course the chivda but do not let the light on the other products shed
away.advertise more with proof of authenticity of the products.make sure you spell out the word hygiene in your ad
campaigns, cause that will really hit the spot with the present generation.try to get few more hygiene certifications
from local and national agencies strengthening trust of fellow Indians.

Rs.25000 is cheap for an answer ...:-)

by Tom Dick (View MyPage) on Aug 17, 2010 12:11 PM

If you want to strengthen the position of a $5bn company, first thing is to offer a better reward!!!. Every product has a
USP. Identify it, position if properly. Increase the visibility of the product, brag about hygiene and pure ingredients
used in the manufacturing process. Train the sales staff properly. Makre them feel proud to sell the product. NO need
to undersell competitors. A slightly higher price will create the impression that the product surely is superior to its
competitors. Think about improving export with high visibility packages and advertisement.As a lay person, I feel , the
company should look at things from the customers point of view.

Dips
by my dips (View MyPage) on Aug 17, 2010 10:52 AM

Dear Sir
I went thru the article. In business there are going to b competitors at all satge. 2 rework one should have complete
study on competitor products offered. End of the day what sells is product. Marketing is idea to support the sales.In
all business 4p\'s are always important. Pls donot losen your strength of chivda which has been ur best seller. Run a
product survery with ur competitors product. U vill get ur ans.
On other aspect u need to strengthen and focus more with your fanchises or ur associates in different parts of
country. Then u can have joint MKTG campaign which will lower ur marketing cost. Shell off some incentive schemes
for your franchises to increase awareness and sales. Your strong supply chain and product quality will surely beat the
competiors. Pls keep one to one touch with your SAles team and franchises. Ur other products are variables which
can keep on changing as per regional taste but not at the cost of ur main product line.
E.g KFC offered veg meals with their main course product.