Banking on Nachos
Hitting the magic spot between chips and namkeen.
In 2009, Vikram Agarwal, founder and director at GreenDot Health Foods, made the most important decision in his life. He ‘resigned’ from the `100 crore Globe Capacitors Group, his 35-year-old family business and diversified into food - his passion. He studied the Indian snack market and found a gap between the ubiquitous Indian ‘namkeen’ and nachos.
As a marketer in his father’s business, Agarwal grew fond of nachos (a Mexican tortilla chip snack made from corn) on his trips to the US. In fact, Doritos - the nacho brand by Pepsico’s Frito-Lay - was such a staple that its top executive, who was responsible for launching it in 1968, had them sprinkled on his grave.
Back in India, Agarwal wanted to create premium nachos that would be sought after by discerning consumers. Pooling together seed fund from his family and a bank debt, he set up Green Dot Health Foods with an initial investment of `20 crore in 2009. The company got into a technology and machinery deal with a US supplier, as part of which they arranged a tour of the Doritos factory for Agarwal, post which he was set to create the product in India.
While sales have benefited well from in-store promotions, they’ve also had TV ads. Water Communications, helmed by Vandan Sethi, handles creative and media. While its revenue (last fiscal, `50 crore) is expected to grow 30 per cent this year, the company aims to hit `100 crore in the next two years. Industry reports peg the organised snack market at `15,000 crore. In a chat, Agarwal takes us through Cornitos’ inception-to-shelves journey. Edited Excerpts:
Back in 2009 when you started, you had a ‘corn’ issue...
Yes, getting the right kind was a challenge. Almost 80 per cent of the corn grown in India was for poultry, 10 per cent was for making starch and only 10 per cent (with high protein) was grown for human consumption. I’m not an agriculturist and it took a year to select the right type, after which we decided to grow it ourselves. Initially, we consumed 10 tonnes of corn a month, and now we consume 150 tonnes per month.
And distribution challenges?
Only A-class retailers, who knew the product, appreciated our move as existing international products were priced at `300, and we were at `7585 (large pack), thereby giving them good volumes and a better margin.
After extensive sampling across stores and a positive consumer response, the ball got rolling with distributors. But initial consumer acceptance was not quick - out of 10 who walked in, only two would know what the product was.
Was pricing a bit premium for a product that needed sampling?
Yes, at a time when potato chips were at `20, I priced my product at `25 for a similar grammage. Many people insisted that I should also stick to `20, but I was not convinced as I felt that consumers would then not shift to a new product - it needed differentiation. We were targeting young well-travelled initial adopters to shift them from their imported brand to ours and it worked.
Have global exposure and changing food habits made a difference in consumption over the years?
Earlier our TG was mainly the youth, but now we’ve seen senior citizens taking to nachos in a big way. Also, when we started off, we were placed (in modern trade stores) in the international section, labelled as a ‘nachos product’ instead of being placed next to ‘Lays’.
From 2010 onwards we were available in modern trade stores, institutions, airlines and cafes. After 5-6 years, we were seen on shelves next to Lays. We also supply to PVR theatres, but it’s served without branding there.
Now every modern trade chain has created nachos as a separate category and though there are more players, we have the maximum portfolio of flavours. Online sales started in mid2013 and we are on major grocery e-portals.
In 2012, you replaced your team and went in for re-branding. Why?
We still hadn’t broken even in 2011; at that time we existed only in metros. We wondered how long we could keep investing from our umbrella group.
I gave myself six months and first changed the entire sales team. There was miscommunication from the market, and there were wrong placements. The fresh team had strict targets, sell only to the right stores and the right TG, with a ‘We don’t want a single pack to return from any market’ mandate. In financials, we got stricter about credit. We decided to re-strategise, re-brand and work on being visible on the shelves.
You hired a brand consultant who also felt there was a market. What went into the re-branding?
For three months, Brandvak worked as an extended marketing arm for us. The packaging was changed and glossy gave way to matte-finish packs. The logo, colour scheme (now brown and yellow) and font were also changed to make it look like an international product. Packaging costs went up 30 per cent and the price of the 60g pack was raised to `35. The word “chips” was replaced by “crisps”.
We also took the product image off the packaging as we wanted the TG to look at the word ‘nacho’ and ‘crisp’ and not the picture.
While you are now exporting to 15 markets, you also entered the US - the land of your inspiration. Is there acceptance beyond diaspora segments?
In the US, we tried two channels; one, via our Indian distributor to the Indian stores and the other via an international distributor for the mainstream stores. Interestingly, the latter (Kafo, Tesco) actually started performing better than the Indian stores.
Health and nutrition and home chefs are the buzz now. How does Cornitos look at this?
Cornitos nachos are baked and shallow fried with minimal oil. The oil content, compared to potato chips, is 40 per cent lesser. The cook-athome movement has helped growth in consumption. Our product has unlimited options for home chefs to create dishes with nacho crisps.
From about 50 employees in 2009, you are now 250 and have a plant in Uttarakhand. What’s next?
We’ve invested in another line, so we have to fill that gap. We have planned market expansion and regional expansion outside India. We’ve introduced smaller packets in tier-2 cities but consumption patterns are changing and we are seeing movement of bigger packs too. We have invested in nitrogen flush packaging for better shelf life. ■