bread case study

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VIKALPA VOLUME 37 NO 2 APRIL - JUNE 2012 135

Case Analysis I

Azhar KazmiProfessor of ManagementKing Fahd University of Petroleum & MineralsDhahran (Saudi Arabia)

e-mail: [email protected]

The Harvest Gold case study is an engaging story of entrepreneurship of a

gritty young couple who seems to know which side of ones bread is butt-

ered. The Case offers insight into the trials and tribulations of setting up a

manufacturing unit, selling its products, and trying to make the venture successful

in the face of formidable teething troubles. Imbued more or less with a sense of a

clear direction, the Hasan-Siddiqui couple make and sell the daily bread a ubiqui-

tous article of consumption present on the breakfast tables of a growing population

of Indians living in the bustling metropolis of the national capital and its environs.

The Anatomy of Food as a Product

Food is an intensely personal article of consumption unlike so many other things

consumers buy and use. It is actually consumed making it an integral part of ones

existence. Unlike clothes or gadgets, food is different as a product of consumption,

making consumer behaviour complex to understand and predict. Food tastes and

preferences are unique to a culture and tradition. To the experts, the sociology of

food covers a gamut of issues related to social, cultural, psychological, and political

aspects of food production, distribution, and consumption.

Culture plays a crucial role in determining food patterns of a country or region.

Each country has a national pattern of food system; each sub-culture has its ownlocal food and nutrition patterns. Furthermore, a global food culture has an impact

on the developing countries in gradually adapting a more universal food consump-

tion system. Some of the food patterns get adopted from developing to developed

countries too. It is in this likely context that the omnipresent double-roti became a

part of the Indian breakfast and snack menu while the curry started titillating the

palates of Europeans and Americans.

Packaged or branded bread is not an Indian innovation. It has European origins

with process innovations such as slicing, packaging, accelerated fermentation or ad-

The current issue of Vikalpa

has published a Case titled,

Harvest Gold: Delhis

No.1 Bread. This Diag-

noses features analyses of

the Case by Azhar Kazmi,

Srabanti Mukherjee, and

Akram A Khan.

presents analyses of themanagement case by

academicians and practitioners

D I A G N O S E S

Harvest Gold: Delhis No.1 Bread

Noria Farooqui


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vances in storage and distribution resulting in indus-

trial bread making becoming a highly automated pro-

cess. Such bread has gradually entered the Indian

markets making itself an essential part of the cuisine.

Fragemented Industry

Bakery industry in India, as most places elsewhere, isbasically a fragmented industry with a majority of manu-

facturers in the unorganized sector spread all over the

country. With just two large and 25 medium and 1,800

small manufacturers, the fragmented industry structure

makes competition diffused with no single manufacturer

able to set the direction of industry. While the govern-

ment regulation of keeping bread manufacturing con-

fined to small scale sector is a major factor in making it

a fragmented industry, other factors such as short shelf-

life of the product, dispersed markets with varying de-

mand patterns, lack of cold-chain infrastructure, and low

technology requirements tend to keep it fragmented.

Fragmented industries generally have commodity-type

products and low entry barriers. Additionally, low tech-

nology does not limit the entry of new competitors. Low

investments also make it easier for manufacturers to exit

with relative ease. The low entry and exit barriers encou-

rage the entry of new competitors into the industry whe-

never profits are high. The entry of new competitors

leads to excess capacity in the industry and they begin

competing on price to utilize their capacity and to main-

tain their market shares. As a result, such industries of-

ten experience boom-and-bust cycles and price wars. In

such a situation, everyones profits are hurt and some

manufacturers leave they are either acquired by other

competitors, or are forced out of the market. All this

constant motion creates a flux within the industry mak-

ing it difficult to define its structure as well as the state

of competition.

It is in such a dynamic industry that Harvest Gold en-

ters as a bread manufacturer that is set to make its mark

as a product of impeccable quality backed by efficient

distribution. Early years of the company demonstrate

how difficult it was for the entrepreneurs to enter into a

market that was dominated by two big manufacturers

but who were lately doddering due to their own prob-

lems. The Delhi market offers a niche for Harvest Gold

to enter. But things were not easy as the case narrative

demonstrates.

Differentiated Product

The cacophony of a fragmented industry makes it diffi-

cult for a single or few manufacturers to make their pres-

ence felt. Differentiation is imperative in a state of

commotion that arises in order to be noticed and coun-

ted. Small manufacturers have the advantage of being

flexible with simple organizational structures enablingthem to be responsive to market trends and keeping their

overheads low to offer products at lower price. Big

manufactures may enjoy economy of scale but are

bogged down with bureaucratic structures and slow

response to markets.

Harvest Gold entered the Delhi market with an inher-

ent advantage of being a newcomer led by sprightly

owners eager to innovate and experiment and learn

through their mistakes. Modern Foods and Britannia

were engaged in mutually destructive competition de-spite having been granted the special statutory permis-

sion to retain their large scale operations, when in

general bread-making was restricted to small manufac-

turers.

The crucial aspect of the Companys initial success seems

to have been serendipity rather than any long-term plan-

ning. They happened to be there at the right time and

the right place. This advantage was not going to remain

for long as the laws of economics brook no vacuum in a

market where demand is partially unsatisfied. So, theearly success of Harvest Gold can largely be attributed

to their entrepreneurial actions in setting up their manu-

facturing unit with a distribution network backed by

effective advertising. These were underpinned by suc-

cessful efforts at differentiating their product in a crow-

ded market in a highly fragmented industry.

The differentiation of Harvest Gold rests primarily on

creating a perception of superior quality in the minds of

consumers. The brand positioning is consistent with the

product being targeted at the Delhi consumers. The ad-vertising is loud and cheeky, keeping in mind the Delhi

culture of a potpourri of Punjabi effervescence and

Haryanvirusticism and with a sprinkling of the pan-In-

dian milieu of the rising middle class that is not averse

to showing off its newly attained affluence.

Technological Imperatives

Baking technology is a long established traditional pro-

cess. The skills of bread-making have ancient origins and

DIAGNOSES


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have passed through generations resulting in their be-

ing widespread in the population. The basic principle

of cooking by dry heat in an oven has changed little since

the time Egyptians might have started using it. Tradi-

tionally, the dough was heated over open fires and hot

stones. This progressed to ovens of various shapes and

sizes and simple static ovens were designed and used.

Heat may be derived from a variety of energy sources,

ranging from burning animal dung cake, coconut husk

or firewood to heating by electricity or gas.

The issue of quality of manufactured bread is somewhat

dicey. The primary reason is that the main ingredient,

wheat, is a natural, agricultural commodity with incon-

sistent quality. Such inconsistency seeps through the

manufacturing process; so, selection of good quality

wheat is a crucial element of the bread manufacturing

process. Harvest Gold is located favourably with regardto this crucial input. Its manufacturing unit at Bhiwadi

near Delhi is in proximity to the granaries of India, viz,

Punjab, Haryana, and Uttar Pradesh. It has a fairly well-

established network of supply of wheat and its other

forms such as flour and bran. Over a period of more

than 17 years, Harvest Gold has developed the capabil-

ity to deal with the technical issues of testing input qual-

ity as well as making in-process quality control checks

of dough and semi-processed bread. It also claims to con-

form to the standards of the American Institute of Bak-

ers. Packaging at Harvest Gold was an innovation tostart with but was swiftly imitated by the rival manu-

facturers making it ineffective as a basis for differentia-

tion indicating the fragile nature of using technological

aspects as the basis for differentiation.

The significant point of technological capability is that

there is little scope for creating differentiation as the tech-

nology is widespread, well-known, unpatented, and

tried and tested. Any minor improvement is unlikely to

have a significant impact on the quality of the manufac-

tured bread with the accompanying risk of them being

easily imitable. For bread manufacturers, thus, the tech-

nology factor is a given with maintenance of high stand-

ards being an imperative yielding no noteworthy

benefits in terms of differentiation.

From the customers perspective, quality of bread could

be more of a perceptual matter rather than having any

firm technical basis. What the consumers expect is a

bread of adequate volume, attractive shape and colour,

and a crumb that is finely and evenly distributed and

soft enough to chew but firm enough to slice. Such qual-

ity characteristics can only be achieved through a mix

of cautious choice of ingredients and stringent control

of the manufacturing process, protective packaging, and

hassle-free, efficient transportation. Harvest Gold seems

to satisfy all these parameters to provide high quality

bread to its customers. Yet, there does not seem to be

any significant addition to the value of the bread as a

product as all these conditions could easily be provided

by the rival manufacturers resulting in no significant

competitive advantage to Harvest Gold.

Critical Success Factors

Price, availability, and quality could be considered as

the three critical success factors in the bread industry in

India

Price: The price of bread is a critical success factor as it

as an item of daily consumption with frequent repeat

purchase. Unit price is an important consideration for

customers who can decide to buy bread at low, medium

or premium price depending on their expectation of the

quality of bread. For the market segment that Harvest

Gold primarily caters to, the flagship product is the pre-

mium white bread that could be priced competitively,

yet a notch above the market price to benefit from price-

related quality consciousness among consumers. Qual-

ity-based differentiation also makes it possible to avoid

price-based competition. Yet there are severe limits to

price increases as the product is an item of frequent, re-

peat purchase consumed daily. It would be safe to as-

sume that the market segment that Harvest Gold caters

to is in a position to tolerate minor increase in prices in

gradual stages as the Indian consumer is attuned to price

increment in items of daily consumption. Differentia-

tion also makes it feasible for Harvest Gold to charge a

higher-than-market-price especially in relation to the

price of artisanal bread where the moderate margins forthe small manufacturers may be a matter of survival for

them and they would not like to challenge Harvest Gold

on the basis of price.

Availability: Availability of bread during morning and

late afternoon hours on the store shelves is a critical suc-

cess factor in the bread manufacturing industry as con-

sumers cannot wait or postpone their purchases. Harvest

Gold has achieved considerable success in this critical


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factor through a combination of self-owned transport

vehicles, innovations in packaging and handling, and

cost-effective, efficient distribution. In fact, if we look

back, it was this hurdle that Harvest Gold was able to

cross in its initial years and which the big boys of the

industry were not able to handle leaving the market open

for forays by an energetic newbie such as Harvest Gold.

The market space that Harvest Gold captured by mak-

ing its bread available to consumers ensured success for

several years demonstrating the power of availability

as a critical success factor in the bread manufacturing

industry. Does availability constitute a unique differen-

tiation factor for Harvest Gold? Maybe, it does but even

if it does, it might not be a source of enduring competi-

tive advantage owing to the ephemeral nature of distri-

bution advantages.

Quality:The perceived quality of bread as experiencedby the consumer by visual observation and taste is a criti-

cal success factor. A loaf of bread that does not look at-

tractive, or taste good, nor has a pleasing aroma is unlike-

ly to be purchased. Freshness as a product attribute of

bread is an extremely crucial factor in creating the per-

ception of good quality. Harvest Gold seems to have

made considerable effort on the quality front. It has suc-

cessfully internalized the technicalities of the manufac-

turing process, learned to source its raw material

requirements efficiently and wisely, managed to main-

tain the quality of its equipment and processes, and keptthe packaging with unique and catchy design to be both

attractive as well as functional. Consumer concerns

about egg being used in the manufacturing process have

to be addressed more forcefully as they indicate a lurk-

ing suspicion about how Harvest Gold manages to make

such flawless white bread. It has to educate the consum-

ers on this aspect so that this misplaced suspicion does

not hurt its quality perception. Overall, it would be safe

to assume that perceived quality (as opposed to real

quality that is difficult for consumers to measure) seems

to be the differentiating factor for Harvest Gold and the

basis of its competitive advantage.

This brings us to the question of core competencies of

Harvest Gold. An analysis of the three critical success

factors shows that the core competency of Harvest Gold

may lie in the unique way in which it is able to combine

price (cost control) and availability (own trucks) with

heavy emphasis on creating a positive perception of

quality (cheeky advertising). Most of its rivals in the

Delhi and NCR may be able to compete either on price,

availability, or quality, but they may not really be able

to understand or imitate the unique ways in which Har-

vest Gold is able to integrate these three factors.

Managerial Behaviour

The sequence of events in the Case amply demonstratesthe incremental nature of managerial behaviour. The top

management consisting of the entrepreneur-couple

make the management of the organization top-driven

and top-led. The initial years of such entrepreneur-led

organizations are difficult and challenging. There are

problems occurring everywhere all the time and there

is a lot of fire-fighting going on. This may be essential as

the top management is itself in a learning mode. They

are learning to deal with new situations, new problems,

and new challenges. With a mix of failures and successes,

the organization moves on through an incremental pro-cess of decision-making.

Typically, the top management in Harvest Gold inform

the employees of a new product they would be intro-

ducing. They dont seem to discuss or confer. Naturally,

the contribution from the rank and file would be mea-

gre. For instance, the confabulations with the ad agency

are typically limited to the top bosses and the ad agency

boss. This is a typical way that organizations in the en-

trepreneur mode run. But then, there cannot be a per-

petual entrepreneurial mode as the next stage is of stabi-lity where delegation of authority is needed for the top

management to focus on strategic tasks rather than in-

volve themselves in day-to-day routine tasks. But old

habits die hard. The top management has got into the

habit of playing a hands-on role which is difficult to get

out of. There may not be a second line of management

to take over. And, even if there were, the top manage-

ment does not have the confidence of letting go. The

second line is content with taking orders and implement-

ing them rather than taking initiative a role they seem

to have become comfortable with. This scenario related

to organizational growth and life cycles may well be

playing out inside Harvest Gold.

While the entrepreneurial mode may suffice for several

years, it becomes a millstone around the neck when the

organization has to move on and tackle different strate-

gies. This tendency may also be a severe limitation on

Harvest Gold taking on other businesses whether in the

related or unrelated lines.

DIAGNOSES


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SWOT Factors

Table 1 presents the strengths, weaknesses, opportuni-

ties, and threats for Harvest Gold circa 2012. The Com-

pany has several positives working in its favour. Brand

positioning seems to be its forte with clear market seg-

mentation making up the ingredients of a successful

marketing strategy. This is backed by efficient distribu-tion and targeted, catchy advertising.

Notably, several of its strengths reside in the marketing

function. Weaknesses primarily may be due to limita-

tions on corporate experience as well as limitations of

small size. Opportunities are in demand potential and

the wide margin of manoeuvre in terms of product va-

riety. Threats arise due to substitutes and alternate

sources of products.

Strategic Options

We now consider different feasible strategic options be-

fore Harvest Gold starting from market penetration to

diversification.

Market Penetration

There is limited scope in Delhi and NCR as Harvest Gold

already has a dominant share in these regions. Market

penetration could aim at moving sideways into other

market segments such as institutional markets or indus-

trial markets where bulk purchases may provide stabil-

ity to sales as well as higher margins on sales based on

large volumes.

Table 1: SWOT Factors for Harvest Gold

Strengths Weaknesses

Favourable location in terms of both supply sources Top-driven management used to operating inas well as markets entrepreneurial mode

Quality of bread: Good quality equipment, careful Corporate experience limited to one industry and oneselection of ingredients product in a limited geographical region

Distribution and logistics: Own transportation Failure in selling mineral water indicating limited ability of Market segmentation: limited to Delhi and National management to foray into related or unrelated areas of

Capital Region business Brand positioning: Sharply focused on Delhi residents Fatigue due to continual fire-fighting dealing with routine Identifiable packaging acting as preserver as well as problems

silent salesperson Small size limiting growth

Cheeky and loud advertising garnering attention Stringent quality control methods Dependable asset quality; plant and equipment in

good working condition

Opportunities Threats

Low bread consumption in India leading to high market Lots of substitutes for breadpotential Most inputs natural so quality variations beyond control

Rising population of Delhi and NCR likely to reach Low-tech product so easily imitable23 million by 2021 Perishable product; limited shelf life

Lifestyle changes of middle-class population favouring Delhi government insistent on use of CNG inbread consumption transport vehicles

Multiple uses of bread as a product: breakfast item; Alternate production sources: artisanal bread, in-storefood item; used for making other food items such as supermarket bakeries,

bread pakora; bread halwa; etc. Negative customer perception of bread as stale dough Multiple ways of bread usage: meal solution, on-the-go packed into plastics

meal, desk lunch, ceremonial / party food, etc. Bread manufacturing limited to small-scale production; Growing demand for variants of bread including brown, investment limited to INR 30 million

bran, whole-wheat, wholemeal, etc. Customers doubts on ingredients including eggs orundesirable fat; some customers conscious of excessivecarbohydrates

Emerging trends of reducing amount of processed foodconsumption; seeking food items with no or lesseradditives; rising preference for organic products


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Market Development

Harvest Gold already covers Delhi and NCR with some

supplies going to a few places in the neighbouring states.

The short shelf-life of the product prevents it from be-

ing transported to distant places. So, market develop-

ment could only be possible by enabling means of

strategy implementation such as franchising and con-tract manufacturing. These options seem to be under

active consideration of the management as the case nar-

rative reveals. Legal ramifications for these options

would need to be examined before their actual choice.

Both these options pose some risks for Harvest Gold such

as loss of control, loss of insider technical knowledge,

potential conflict in relationship management, and like-

lihood of legal hassles arising from differing interpreta-

tions of partnership conditions.

a) Franchising:Typically, franchising is good for busi-ness when expansion is desired without capital infu-

sion with the added advantage of continual revenue

streams in terms of royalty, fees, or commission. Fran-

chising capitalizes on brand strength. Franchisees on

their part look to an established brand, technology

support, production system, and training and exper-

tise transfer. The question to examine here is: Why

would a prospective investor buy a Harvest Gold

franchise? As we saw in the preceding analysis, tech-

nology is not an attractive giveaway in bread manu-

facturing; so, brand name could be of value. But, is

the brand name of Harvest Gold of value outside the

region in which it presently operates? For instance,

why would someone take a franchisee in distant Goa

or Andhra Pradesh? There is no obvious benefit. Pro-

spective investors in bread manufacturing may typi-

cally be small entrepreneurs themselves on a lookout

for a favourable deal and so the offer from Harvest

Gold may not really be attractive to them.

b) Contract manufacturing:To Harvest Gold, the attrac-

tiveness of contract manufacturing lies in its abilityto offer geographical growth without high invest-

ment building up a network of manufacturing part-

ners willing to share risks. Why would a business

entity take up contract manufacturing for Harvest

Gold? It could do so if it had spare manufacturing

capacity that could well be utilized to make some

money or even setting up additional capacity if long-

term contracts were ensured. For Harvest Gold, how-

ever, a strategic issue is whether it could be sharing

its core competence of its integrated usage of pric-

ing, availability, and quality. If it happens, then con-

tract manufacturing is not advisable as handing over

or sharing core competence is not a wise business

decision. It would be feasible only if it does no harm

to its core competence.

Overall, neither franchising nor contract manufacturingmight be a feasible strategic option for Harvest Gold. In

fact, any strategy that requires geographical expansion

might not bring in much benefit to Harvest Gold as it

would result in loss of management control a situa-

tion the top management may not be comfortable with.

Product Development

Bread has many variants and Harvest Gold has the po-

tential advantage of extending its brand name to those

variants in its existing markets. The existing products

of Harvest Gold include white, sandwich, brown bread;

burger and sweet buns, Bombaypav; kulcha; pizza base

and milk rusk. There is scope for focusing on the grow-

ing market segment of the health-conscious consumers

who would go for multigrain, whole wheat bread. Then

there is potential in other bread variants that may have

a shorter or longer shelf life such as: biscuits, cakes,

breakfast cereals, other breads such as French bread,

ginger bread, shortbread, fruit bread, rolls, muffins, etc.

The list is long as natures bounty of wheat and other

grains has a wide range of application. Harvest Goldalready has plans to offer semi-cooked roti the most

popular wheat product consumed by most Indians in

large numbers. In fact, there need not be hesitation in

going ahead with this product as it has a large market

potential. Lifestyle changes, and working women, view-

ing semi-cooked rotias convenience food, etc., are fac-

tors that support its introduction in the markets.

Pancakes, pita, naan, tortilla and the likes are popular

products worldwide and so semi-cooked roticould be a

good product to consider for introduction.

Related Diversification

Another feasible strategic option for Harvest Gold could

be related to diversification where it could look to prod-

ucts that could use its expertise expanding its business

into other consumable items. This could happen in two

ways: first, related diversification into areas where its

individual expertise in entrepreneurial mode of operat-

ing, mastering bread manufacturing, devising an effi-

DIAGNOSES


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cient distribution system, and using natural inputs to

manufacture packaged, branded products, could be ap-

plied. Secondly, it could try related diversification into

areas that could benefit from its core competence of in-

tegrated pricing, availability and quality competencies.

This could be a challenging area but has the promise of

high potential. A big advantage of related diversifica-

tion strategic options is that Harvest Gold could con-

tinue operating in its familiar geographic region without

taking undue risk of geographical expansion.

Unrelated diversification strategies are not recom-

mended for Harvest Gold as its size does not permit un-

necessary risk that such strategies entail. The constraints

of top management too limit moving into uncharted ter-

ritory.

Implementation Issues

Depending on its strategic options, Harvest Gold would

have to consider its implementation aspects. Market

penetration and market development could be carried

out through its existing company but product develop-

ment and related diversification could involve separate

companies. This would have the additional benefit of

bypassing the investment limit on bread manufactur-

ing.

Organizational restructuring would become necessary

when the scale of expansion is substantial. It is likelythat the personnel ratios would have to be recast with

managerial and supervisory staff increasing in numbers

in proportion to the workers. This would be necessary

to broaden the base of management expertise. Associ-

ated with restructuring would be the issues of higher

level of delegation of authority, empowerment of mana-

gerial and supervisory staff, and provision of employee

training.

Expansion plans would have to consider the financial

implications. It is likely that the company has enough

surpluses with profitable operations over several pastyears to invest. Debt sources in the form of bank loans

could be another source of financing. Franchising and

contract manufacturing may partly obviate the need for

financing but as discussed above, the disadvantages may

outweigh the benefits.

Functional policy changes in the area of production,

marketing, and human resource management would

have to be in line with the strategic option chosen. For

instance, if Harvest Gold opts for contract manufactur-

ing or franchising, then organizational arrangements formanaging these activities would have to be made within

the existing structure of Harvest Gold. Concomitant

changes in functional policies would have to be made;

for instance, recruitment and selection of experts for

managing and coordinating contract manufacturing and

franchising would be required. Use of computerized

information system would greatly benefit any expan-

sion plan.

In general, implementation would benefit any strategy

that involves piggybacking on the existing brand name,using distribution expertise requiring logistics and trans-

port of consumable products on a daily basis, and sell-

ing consumable products backed by effective adver-

tising.

Case Analysis II

Srabanti MukherjeeVisiting Assistant ProfessorIndian Institute of Management Indoree-mail: [email protected]

The environment-friendly Harvest Gold, which is awell-known bread brand in Delhi NCR region, wasabout to add semi-cooked chapatisin their ever-challeng-

ing product mix. Along with the launch of this new prod-

uct, the company was also looking for a nation-wide

branding of their bread brand while focusing on their

unique selling propositions, viz., quality and green. Al-

though green stands for environment-friendliness, Har-

vest Gold used the word to ensure its customers that

their product was completely vegie. However, given

the high food-sensitivity of the Indian consumers espe-

cially the men, nationwide branding and distribution of


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such highly perishable product like bread was never an

easy task. Moreover, since the shelf-life of bread is maxi-

mum seventy-two hours, the Government had made it

mandatory to print the manufacturing and expiry date

on the packet. Therefore, to ensure freshness of the bread,

the logistics system had to achieve a lightning speed.

Nonetheless, as the Commonwealth Games were draw-

ing closer, the environmental laws of the Delhi Govern-

ment had become very stringent. They had announced

that only CNG fitted trucks could carry Harvest prod-

ucts. But, given the limited number of CNG fuel sta-

tions, the trucks had to wait in long queues which in

turn appeared to be a potential threat as far as supply

was concerned. Secondly, since bread was a fast-mov-

ing consumer good contributing to the routinized re-

sponse need of the consumer, if supply was not adequate

and timely, there was always a threat of brand substitu-

tion at the retailer level. Thirdly, in terms of nationwidedistribution, the company was supposed to face a com-

petition from Britannia and in particular, the FMCG gi-

ant, Hindustan Unilever Limited. The seller of Modern

bread, HUL, undoubtedly had a huge nationwide pres-

ence and an established distribution network. Fourthly,

though the innovative mixture of conventional (humor-

ous advertisements in Delhi Times) and non-conventional

(painting the name of Harvest in the trucks) modes of

promotion of Harvest Gold worked well in the NCR

region, in order to ensure nationwide distribution and

branding, the company required a proper understand-

ing of diversities of taste and preferences across India.

According to the Case, many initiatives of this company

had failed earlier, which indicates either a lack of un-

derstanding of feasibility or consumers mindsets. Fi-

nally, given the investment ceiling of Rs 30 million in

the reserved sector like bread, Harvest may have to opt

for franchising and contract manufacturing while main-

taining their focus on their USP quality.

Therefore, looking forward to nationwide distribution,

the company needs a careful analysis of a viable busi-

ness model which would ensure an appropriate mix of

product (quality and taste), price (cost containment),

place (especially logistics), and promotion.

Context

In the early nineties, the Indian bread market was mostly

dominated by Brtiannia and Modern. But the high per-

ishability 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 real-

ized 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 Companys 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 diver-

sified from only white bread to sandwich bread, Bom-

bay 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 promo-

tional strategy with the trucks painted with Harvest Gold

and humorous promotional messages appearing in the

Delhi Timesonly 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 neighbour-

ing areas like Agra, Ferozabad, Bharatpur, and Alwar.

As compared to Harvests one plant, one city, one prod-

uct, PERFECT was already having a competitive ad-

vantage of two additional modern plants and was

therefore, capable of capturing 45 per cent of Delhis

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 bis-

cuits division and Modern Foods, even after its merger

with the FMCG giant, HUL, was crippled with lack of

distribution network, low quality standards, high pro-

duction cost, unmanageable workforce, trade union

DIAGNOSES


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problems, and some other political issues. According to

HULs 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 with-out 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 in-

gredient 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 wheat and subsequently increase in the

price of wheat flour (as wheat constituted 55% of the

total ingredients of wheat flour). Moreover, low ex-port duty of wheat encouraged the producers to ex-

port 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 Cor-

poration of India procured and stored huge amount

of wheat every year for rainy days. This also resulted

in artificial shortage of wheat and subsequent in-

crease in its price. Finally, the risk of global warming

(due to the possibility of damage of crops) and fluc-

tuations 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 companys

plastic crates (each create carried bread worth of Rs200) were handled so carelessly that serious cracks

and breakages at the edges were common phenom-

ena. 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 StringentFood Security Norms

Since the Food Safety and Standards Act, 2006 was en-

acted, 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, andimproving overall customer education about food stand-

ards. Therefore, for the purpose of franchising and con-

tract 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. Keep-

ing 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 fuel-

ling 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 distri-

bution for Harvest.

Moreover, bread is subject to quality loss with increas-

ing exposure to sunlight and heat. Therefore, the retail-

ers had to be educated regarding the storage of the

products. Now, if Harvest had to go national, they nee-

ded 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 pack-

aging (displaying the quality and texture of bread) and

humorous print advertisements in Delhi Timeson Fri-

days. Nonetheless, as far as nationwide branding wasconcerned, these steps did not appear to be sufficient.

First,Harvest wanted to focus on quality and freshness

through its innovative packaging strategy with cello-

phane wrappers and clearly printed product details with

red marks. However, this low-cost packaging innova-

tion was soon plagiarized by local manufacturers with

similar look and texture and even logos of Harvest. Gra-

dually, these local bread brands flooded the retail shelves.


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144

Secondly, while Taab was quite sure about her brands

taste and quality, no product-related attributes were

used in promotion to build up the brands 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, cre-

ating a distinctive brand personality was the call for the

day.

Conclusion and Recommendations

Keeping the above scenario into consideration, franchi-

see and contract manufacturing seems to be a good op-

tion. 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 re-

tain 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 pro-

curement 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 keep-

ing in mind the diet-conscious modern populace, Har-

vest 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 todesign 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, logis-

tics and distribution), and innovative promotional mes-

sages, highlighting the significant unique selling propo-

sitions of the brand.

Case Analysis III

Akram A KhanAssociateProfessorDepartment of Agricultural Economics and Business ManagementAligarh Muslim [email protected]

This case on Harvest Gold can be analysed from dif-ferent angles. It opens with an entrepreneurs di-lemma of going national and leaves an impression ofthorough monitoring of supply chain which is an inte-

gral part of decision-making for any food and beverage

company. The pros and cons of the CNG norms in the

capital city, Delhi and the growing demand for inte-

grated marketing communication are among the chal-

lenging issues that need to be addressed. The fact that

the company wants to focus on manufacturing bread

indicates that it is satisfied with the single-product busi-

ness and would like to add value to it by introducing

new variants in the product from time to time so as to

keep the customers of different age groups happy and

also by putting up well-designed witty advertisementsin the newspaper.

The various areas that are discussed in the Case can be

analysed one by one starting with the Indian bread in-

dustry. It gives a clear picture to the budding entrepre-

neurs, who would otherwise want to be more into the

service industry as this business is of low margin and

high volume with fixed cost and high initial investments.

They may take lessons from Harvest Gold on how to

DIAGNOSES


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accept challenges and give competition to big brands

like Britannia and Modern and enjoy the largest share

in the market. The author subtly gives an account of the

entrepreneurial nature of the firm and the success it gets

within five years.

Building Competitive Edge through Distinction

Procurement is handled by the Purchase Department

various strategies are adopted to procure the right raw

material. The operations and value addition at each stage

make their bread a differentiated product. Manufactur-

ing or production is the key component of this business

and it is the quality of bread that is of prime importance

to successfully stay in the business. The use of alveo

graph is not only the deciding factor but it also tests the

flour on the floor which is expected to be consistent if

Harvest Gold decides to go national. In that case, it will

have to centralize the operations to some extent and

strictly monitor quality. It would be a wise step to un-

dertake an in-depth study of what went wrong with the

big bread-manufacturing companies so as to avoid those

strategies.

The Case also talks about the various strategies the en-

trepreneurs have developed and implemented. They

want to and are doing wonders with one product in one

city and plan to extend it across the nation. They are

working on their core competencies thereby gaining

sustainable competitive advantage. The major empha-

sis is on the distribution strategies which are the decid-

ing factors and the tools and techniques for achieving

the objectives. In order to have countrywide presence,

their major effort shall be on the supply chain and logis-

tics for which they have been rehearsing day and night

in Delhi by adhering to the CNG norms.

The Case throws light on the role of wheat industry,

sugar industry and many others as major contributors

to the success of bread or bakery industry. It also high-lights the need for government support both at the state

and central levels for such entrepreneurs by developing

SEZs or AEZs. The study on macroeconomic indicators

like world wheat production, wheat production in In-

dia, wheat consumption, pricing of wheat, climatic con-

ditions like El Nino, prices of by-products, effects of

WTO, and export import, etc., may not only help them

in bread manufacturing but also in starting related busi-

ness in future.

Business Strategy and the Marketing Mix

The decision to stay with only one product is really an

important subject of discussion because there is a possi-

bility of green pasture in biscuit manufacturing for the

company. It may also be seen as the differentiating fac-

tor; it works on its core competencies each time new vari-

ants are introduced.

The pricing strategy of Harvest Gold is to gain cost lead-

ership because it is a mass product with very little dif-

ference from its competitors. However, it is noted that it

does offer premium pricing for some of its variants.

The packaging strategy of Harvest Gold brought lau-

rels to the company because it pioneered in the trans-

parent packaging giving the customer the confidence

while buying the bread; and, with this first mover strat-

egy, it became a household name within no time. Thebread also claims to be vegetarian in nature and to sup-

port it, a green mark was introduced on their packag-

ing.

As far as the companys choice of media or media strat-

egy is concerned, it is important to note that with mini-

mum communication effort, it has got the maximum

benefit at a time when the whole world of business is

running after integrated marketing communication.

Harvest Gold wants an internet presence to match with

the current times. It may not require aggressive adver-tising; but brand recall does play a significant role. It

follows a sharp creative advertising strategy to catch the

attention of the Delhi people. The Hindi slangs it uses

are imaginative and strong, leaving a lasting impression

in the minds of the people. But the company will have

to decide whether for national presence, it would want

to retain the same content as used in the Delhi region or

try accepted conventional methods.

Facing the Challenges

Coming back to the issue of gaining national presence,

it seems to be a major task the owners will have to take

a country tour to meet different suppliers of the raw

materials especially maida. The different qualities of

wheat produced due to the different soil textures may

make it really difficult for them to identify the appro-

priate flour for attaining the accurate bread manufac-

turing standards. Not only wheat but even sugar, fat

and other ingredients would need the right suppliers.


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146

Keeping in mind the response which Britannia and

Modern received for having national presence, the dif-

ficulties faced by them, and the restructuring efforts

made by them, Harvest Gold will have to develop sus-

tainable strategies and particularly adopt suitable meth-

ods for stringent cost control. The typical SWOT and

DIAGNOSES

PEST analysis, market research and many research tools

will have to be conducted to finally launch the product

in every corner of the country. Besides this, it would

also be a challenging step for the entrepreneurs to get

familiar with tastes and preferences of people from dif-

ferent cultures and communities.

bread case study

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