A-One Starch Products Limited Marketing Planning for Liquid Glucose
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A-One Starch Products Limited (B):Marketing Planning for Liquid GlucoseIn July 1996, Mr S C Jain, Senior Executive, Marketing was considering preparing a marketingplan for Gluco-One for the period 1996-97. Gluco One was the brand of liquid glucoseproduced and marketed by A-One Starch. Planning for Gluco-One had become important asthe brand accounted for 18 to 20 per cent of the companys total sales but its growth in sales,growth in price realization, and contribution per tonne had fluctuated depending on themarket conditions.Company BackgroundA-One Starch Products Limited, known in the industry as A-One, was established in the latethirties in Western India. A-One was a member of a large business group. Initially, A-Onewas set up for manufacturing starch used in the textile industry in which the group had astrong presence. However, over time, the company had added facilities to manufacture starchand its derivatives to meet the needs of paper, confectionery, chemical and other industries aswell.The company was started with a maize grinding capacity of one metric tonne of (corn wetmilling capacity) per day. In 1996, its wet milling capacity was greater than 100,000 tonnes peryear. Over the years, several products were added to the companys product line. In 1996, theproduct line included, besides different types of starches, Corn Syrup, Dextrose, AnhydrousDextrose, and Sorbitol.The company increased its sales from `437 million in 1992-93 to `654 million in 1994-95. Itsprofit after tax was `2.66 million and `7.45 million in 1993 and 1995 respectively (See Exhibit 1for key financial data).Although A-One did not have a high market share, according to awidely respected industry source, in 1993, A-One was “more or less leader in the industry fortheir technology and product quality”.Role of Liquid Glucose in A-One StarchLiquid glucose, called glucose syrup in Europe and corn syrup in USA was produced at AOneStarch from starch produced in the wet milling of maize. The starch was also used formanufacturing dextrose and its derivatives. The production of liquid glucose was restricted by(i) the capacity of processing starch for liquid glucose and(ii) the managerial decision on quantity of starch diverted for liquid glucose.Indian Institute of ManagementAhmedabad IIMA/MAR0317(B)This document is authorized for use only in Indian Institute of Management Rohtaks Executive Education; eMDP-SCM III course by Prof. SK Pandey from Jul 11, 2019 to Dec 31, 2019.2 of 13IIMA/MAR0317(B)Exhibit 2 describes the process of converting corn into different products: starch and itsderivatives. Liquid glucose had a sweet taste. It was used as a doctoring agent, for theprevention of crystallisation of sugar, and also as a palatable carrier for active ingredients in
pharmaceutical syrups.Gluco-One was an important product in A-Ones product portfolio. During the last four years,the share of liquid glucose sale in the total sales of A-One varied between 18% and 20%. AOnehad a capacity to manufacture 16,000 tonnes of liquid glucose per year. The actualutilization of the capacity varied between 8,000 tonnes to 12,000 tonnes per year. The averageprice/tonne realized by A-One varied between `8602 in 1991-92 and `8766 in 1993-94.However, during 1994-95, price realization/tonne increased to `10,200, an increase of 16% inone year. This sharp increase in price realization was due to short supply, as two producers ofliquid glucose had closed down. Liquid glucose contributed 20% to the total revenue of A-Onein 1992-93. The share of liquid glucose in total sales dropped to 18% in 1993-94 and in 1994-95it increased to 19%. Table 1 gives the share of liquid glucose sales in A-Ones total sales andprice realization from liquid glucose during 1991-92 to 1994-95.Table 1Liquid Glucose: Sales, Average Price Realization,Growth in Sales Volume and Average PriceYear Sales(Tonnes)Growth inSales(%)Liquid Glucose Sales As% of TotalSalesAveragePrice/Tonne(`)Growth in PriceRealization(%)1991-92 8000 – 19 8602 -1992-93 10000 25 20 8708 1.21993-94 12000 12 18 8766 0.71994-95 11500 -4 19 10200 16.4Source: Company recordsLiquid Glucose IndustryLiquid Glucose is the first derivative of starch. In India, starch was produced from corn as wellas tapioca. It was produced by units in both – the organized and the unorganized sectors.Almost all units in the organized sector produced liquid glucose from starch manufactured bythem. However, some units in the organized sector and some (about 15) in the unorganizedsector produced liquid glucose from bought-out starch. Most of the tapioca starch basedglucose units were in the South, as the tapioca starch producing units were located there.There were about 27 units in the organized sector with capacities varying from 4,460 tonnes to18,000 tonnes per year. The total capacity for glucose production in 1996 was about 277,000tonnes per year. The South zone led in terms of production capacity followed by the West andthe North. The East zone had no production unit (See Exhibit 3).Production of liquid glucose was dependent on the relative prices of maize and tapioca starchwhich were significantly influenced by maize and tapioca prices. Increased tapioca prices ledto the stoppage of liquid glucose production from tapioca starch. Also, a decrease in tapiocaprices led to an increase in the production of liquid glucose. This was because tapioca starchunits, which were all small and in the unorganized sector, stopped functioning when tapioca