THE TIME'S AROUND 9 P.M., not the right hour to be out on National Highway 1D connecting Leh and Srinagar. At 3,500 metres above sea level, the wind’s chilly even though it’s August, and the road is, in parts, broken, narrow, and difficult to negotiate for even the most seasoned drivers. The crystal-clear sky, beautiful with an unusually large number of stars, an uncommon sight for city-breds, is the only solace. Our car trundles up the steep road, its headlights catching a small tea shop in Khalsee, a village about 90 kilometres from Leh. It’s a welcome sight on the desolate stretch even if it’s spartan—all it has are a couple of rickety tables and benches, and a nearly empty cupboard. The shop-owner, Zigmeet, serves us tea in little glasses and a pack of biscuits that has the familiar picture of a little girl against a yellow-and-white striped background.

It’s Parle-G, the world’s largest-selling biscuit, according to market research firm Nielsen, and as the mnemonic on its wrapper declares, if all the Parle-G biscuits consumed annually were put end to end, they would cover the Earth’s circumference 192 times. Parle-G sells more than all the biscuit brands sold in China, the fourth-largest biscuit market in the world. (India is the first and the U.S. is the second). Whether it’s a busy tea stall in Nariman Point, Mumbai, or a shop in the remotest place in India, Parle-G has a ubiquitous presence. Available in packs of every denomination between Re 1 and Rs 5 and, thereafter, in multiples of Rs 10, it’s a biscuit that the majority of India’s 1.2 billion people finds use for: as a substitute for baby food or as an energiser during a tea break on the shop floor.

Its popularity among the masses is best described by sociologist Shiv Visvanathan: “It is not a biscuit. It is a biskoot.” (The Indianised version has found its way into the vocabulary of the masses.)

Positioned as the cheapest ready-to-eat snack, Parle-G has mastered the business of foraging C.K. Prahalad’s “bottom of the pyramid”. The fortune there may elude most companies but it has helped Parle Products, the maker of Parle-G, grow into a biscuit behemoth. Of Parle Products’ more than Rs 6,000 crore sales in FY12, 60% came from Parle-G. Its popularity has helped the company build a network of nearly 5,500 wholesalers and 4 million retailers. That’s more than prepaid mobile SIM cards’ 3.3 million retailers and Coca-Cola India’s 1.3 million. Profit margins are low, a single-digit figure, compared to 15% to 20% for the other Parle biscuits. Nevertheless, it is the company’s flagship. Its brand recognition and reach, and the shelf space it occupies, are what Parle Products’ other brands, such as Hide & Seek, ride on.

Having managed to stave off its biggest rival so far, Britannia’s Tiger (a similar product) by the late 2000s, Parle-G is now gaining market share in the plain sweet biscuits segment, according to Karan Sehgal, research analyst–India, Euromonitor International. From 39.8% in 2009, its projected share in 2012 has risen to 41%. Tiger is losing share from 12.3% in 2009 to an estimated 8.2% in 2012. Sehgal says this is because Britannia is concentrating more on high-margin products. But Tiger is still a rival to watch. So is the low-cost glucose biscuit Sunfeast, from ITC which has a slew of products at comparable prices.

THERE ARE VALUABLE LESSONS in Parle-G’s success for other Indian mass-market brands—first among them, its sheer reach. “Parle [Products] has done a commendable job reaching the remotest villages in India. With this deep penetration, it has been able to compete efficiently in the volume-driven, low-priced biscuit and confectionery segments,” says Chaitra Narayan, programme manager-chemicals, materials, and foods practice, Frost & Sullivan-South Asia, Middle East and North Africa.

Launched in 1939, Parle-G has had the luxury of time to spread out. In the mid 1990s, when Britannia launched Tiger biscuits, accompanied by a high-voltage campaign, Parle responded immediately by beefing up its distributor network. The rivalry had it adhering to its pricing strategy even more firmly: For a decade, from the mid-1990s, it did not change its prices. All this drove demand and drew new distributors and retailers. To make distributors stay, Parle doesn’t offer the fattest margins or the most attractive credit schemes. That would go against its low-cost policy. Analysts say Parle Products on average gives just 8% to its distributors, as compared to Britannia’s 12%.

With 4,551 Parle-G biscuits consumed every second, the company’s endeavour has been to make certain that distributors’ stocks are replenished quickly. To make this happen, it has 100 factories manufacturing Parle-G (of which the company owns only 15) spread across the country to ensure what Mayank Shah, group product manager, Parle Products, calls “freight advantage”—the ability to keep distribution fast-paced and transportation costs low. The quick offtake keeps distributors and retailers happy—for retailers it means higher volumes and earnings. “The brisk business ensures that retailers clear payments quickly,” says Mitesh Vyas, who runs MN Corporation, which has been supplying Parle-G for nearly 25 years to 1,100 retailers in the Mumbai suburb of Mulund. In turn, Vyas settles his bills with the company on time. In the business of mass brands, every little bit goes a long way.

Subroto Chattopadhyay, chairman of The Peninsula Foundation, who, after stints in ITC and PepsiCo, is starting his own packaged foods and beverages company, believes that Parle Products understands retail issues that other food brands may overlook—it doesn’t overburden the trade with its various products. “This makes it a favourite with distributors,” says Chattopadhyay. “It takes offtake into account and manufactures accordingly.” There are subtler issues too. Vyas is more comfortable talking to Parle Products’ execs. “Other companies send MBA graduates wearing suits. They talk as if we don’t know anything. The people at Parle talk to us like we’re equals.”

An unlisted company, owned by chairman and managing director Vijay Chauhan and his family, information isn’t easy to obtain from Parle Products executives. Shah and general manager Pravin Kulkarni run the company, while Chauhan and his sons, Sharad and Anup, concern themselves with future investments, entering new categories, etc. And the Chauhans don’t interact with the media.

3500 METRES ABOVE SEA LEVEL: Tarseem Kapoor, a salesman in Ladakh, unloads biscuits at Thiskey, near Leh.
3500 METRES ABOVE SEA LEVEL: Tarseem Kapoor, a salesman in Ladakh, unloads biscuits at Thiskey, near Leh.

SOME OF THE MYSTERY around how Parle Products prices its biscuits so cheap unravels when you visit its corporate office in Vile Parle, a Mumbai suburb. There’s nothing to suggest it is the office of a company with a turnover of over a billion dollars. The building is a nondescript, boxy structure, adjacent to its factory. The dullness of the cream paint suggests a vintage of several monsoons. Until last year, employees say, the rooms resembled government offices, with files piled in ‘in’ and ‘out’ trays. The current look means cubicles for employees and wood panelling for the walls. The paperwork was reduced and the files done away with. It remains a no-frills office and everything’s strictly functional. Hiring is based on experience and aptitude, but candidates also have to fit the company’s “Indian” culture. There’s no hiring from premier B-school campuses with fat pay cheques here. Shah believes that the recruitment policy ensures employees stay longer—that translates into lower hiring and training costs.

In one corner of the office, with nothing to distract them, sits a team of eight commodity traders. Their eyes are glued to numbers flickering on their screens—the latest prices of wheat, sugar, and oil. These commodities are sourced mainly through spot buying and sometimes futures contracts, depending on the outlook. Sourcing right is essential to Parle-G’s low pricing. It’s this team that works out the economics of making four biscuits priced at Re 1 profitable. Maintaining its price points is crucial to Parle-G even if it means tightening already-squeezed margins.

Pratichee Kapoor, associate vice president, Technopak, says, “Sugar, wheat, and oil prices have doubled. Companies can reduce the weight of the packs to offset higher costs, but they can’t change price points because consumers are extremely sensitive.” Parle-G’s Rs 2 pack has seen a weight reduction from 50 gram in 2006 to 44 gram in 2007, 38.5 gram in 2009, and 32.9 gram this year, according to a study by the Richard Ivey School of Business, Canada. Shah recalls the trade expressing its irritation when the number of biscuits was reduced from eight to seven in the Rs 2 pack two years ago. “The feedback from Uttar Pradesh was that sharing seven biscuits wasn’t easy, so the pack should have eight.” But the number remained at seven because keeping the price point unchanged was even more important.

That’s why costs are an obsession. “If we have to bring down costs any more, we will have to compromise on quality. That can’t be done. But the biggest reason for our cost advantage, compared to our competitors, is the sheer economy of scale,” says Shah. That’s not the only advantage. Outsourcing most of its manufacturing keeps capital expenditure low. Also, Parle-G’s ad expenditure is limited to 2% of annual revenue. Having been around long, it can afford to focus on event-related brand-building activities, such as its awards for talented children.

Low pricing was Parle-G’s raison d’être. In the late 1930s, the Chauhan family, which ran a confectionery business (established in 1929), realised that British-manufactured biscuits were too expensive for most Indians. Their idea was to make biscuits affordable for ordinary Indians. And so, pricing isn’t a marketing gimmick like Coke and Pepsi’s Rs 5 bottle, which they launched during the “cola wars” of 2003 and then withdrew when they could no longer withstand the pricing bloodbath. Parle-G, in contrast, has always been profitable. However, being a low-margin product it accounts for only 20% of the company’s bottom line.

All through the evolution of the Parle-G brand, its taste never changed. Now, however, it has introduced a richer Gold version. While Parle Products continues to target value-conscious customers through its other brands, such as 20-20 and Kreams, Britannia is increasingly training its attention on high-margin biscuits, such as Good Day, according to Kapoor. Other food companies too are focussing on the huge urban segment, which seems to prefer a variety in flavours and healthy snacks.

And so, Parle-G looks safe from any serious competition at the moment. There aren’t any brands so far which have managed to emulate its scale of operations, wafer-thin margins, and reach. Most companies, for instance, PepsiCo’s Frito-Lay, wouldn’t even find it lucrative, says Anmol Dar, CEO of branding arbiter Superbrands India. As a market leader, Parle-G makes it tough for any new entrant—a new glucose biscuit brand has to play the game according to the rules Parle-G has laid down. When Hindustan Unilever tried to have a crack at the glucose biscuit market with its Modern brand in 2003, it was unable to strike the right balance between margins and scale, and had to exit.

THROUGH THE WEEK these days, Tarseem Kapoor, an employee of Sharma Distributors, Parle Products’ agent in Ladakh, transports biscuits from Leh to far-flung stores in Nubra Valley, near Siachen, and Changthang, near the Chinese border. The old warhorse, Parle-G, has helped him push new brands such as Top, and Parle Products’ revenue has grown 73% in the region over the last year. Tarseem Kapoor will soon start preparing for winter. Distribution becomes impossible between mid-November and mid-April, when heavy snowfall cuts the region off from the rest of the country and temperatures dip to as low as -40°C. He has to ensure there’s enough Parle-G for the population to dunk into the many cups of tea that will be drunk then. Just as millions in India do every day. 

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