A-One Starch Products Limited Marketing Planning for Liquid Glucose

A-One Starch Products Limited (B):

Marketing Planning for Liquid Glucose

In July 1996, Mr S C Jain, Senior Executive, Marketing was considering preparing a marketing

plan for Gluco-One for the period 1996-97. Gluco One was the brand of liquid glucose

produced and marketed by A-One Starch. Planning for Gluco-One had become important as

the brand accounted for 18 to 20 per cent of the company's total sales but its growth in sales,

growth in price realization, and contribution per tonne had fluctuated depending on the

market conditions.

Company Background

A-One Starch Products Limited, known in the industry as A-One, was established in the late

thirties in Western India. A-One was a member of a large business group. Initially, A-One

was set up for manufacturing starch used in the textile industry in which the group had a

strong presence. However, over time, the company had added facilities to manufacture starch

and its derivatives to meet the needs of paper, confectionery, chemical and other industries as

well.

The company was started with a maize grinding capacity of one metric tonne of (corn wet

milling capacity) per day. In 1996, its wet milling capacity was greater than 100,000 tonnes per

year. Over the years, several products were added to the company's product line. In 1996, the

product line included, besides different types of starches, Corn Syrup, Dextrose, Anhydrous

Dextrose, and Sorbitol.

The company increased its sales from `437 million in 1992-93 to `654 million in 1994-95. Its

profit after tax was `2.66 million and `7.45 million in 1993 and 1995 respectively (See Exhibit 1

for key financial data).Although A-One did not have a high market share, according to a

widely respected industry source, in 1993, A-One was "more or less leader in the industry for

their technology and product quality".

Role of Liquid Glucose in A-One Starch

Liquid glucose, called glucose syrup in Europe and corn syrup in USA was produced at AOne

Starch from starch produced in the wet milling of maize. The starch was also used for

manufacturing 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.

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Exhibit 2 describes the process of converting corn into different products: starch and its

derivatives. Liquid glucose had a sweet taste. It was used as a doctoring agent, for the

prevention of crystallisation of sugar, and also as a palatable carrier for active ingredients in

pharmaceutical syrups.

Gluco-One was an important product in A-One's 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%. AOne

had a capacity to manufacture 16,000 tonnes of liquid glucose per year. The actual

utilization of the capacity varied between 8,000 tonnes to 12,000 tonnes per year. The average

price/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% in

one year. This sharp increase in price realization was due to short supply, as two producers of

liquid glucose had closed down. Liquid glucose contributed 20% to the total revenue of A-One

in 1992-93. The share of liquid glucose in total sales dropped to 18% in 1993-94 and in 1994-95

it increased to 19%. Table 1 gives the share of liquid glucose sales in A-One's total sales and

price realization from liquid glucose during 1991-92 to 1994-95.

Table 1

Liquid Glucose: Sales, Average Price Realization,

Growth in Sales Volume and Average Price

Year Sales

(Tonnes)

Growth in

Sales

(%)

Liquid Glucose Sales As

% of Total

Sales

Average

Price/Tonne

(`)

Growth in Price

Realization

(%)

1991-92 8000 - 19 8602 -

1992-93 10000 25 20 8708 1.2

1993-94 12000 12 18 8766 0.7

1994-95 11500 -4 19 10200 16.4

Source: Company records

Liquid Glucose Industry

Liquid Glucose is the first derivative of starch. In India, starch was produced from corn as well

as 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 by

them. However, some units in the organized sector and some (about 15) in the unorganized

sector produced liquid glucose from bought-out starch. Most of the tapioca starch based

glucose 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 to

18,000 tonnes per year. The total capacity for glucose production in 1996 was about 277,000

tonnes per year. The South zone led in terms of production capacity followed by the West and

the 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 starch

which were significantly influenced by maize and tapioca prices. Increased tapioca prices led

to the stoppage of liquid glucose production from tapioca starch. Also, a decrease in tapioca

prices led to an increase in the production of liquid glucose. This was because tapioca starch

units, which were all small and in the unorganized sector, stopped functioning when tapioca