Bank­ing on Na­chos

Hit­ting the magic spot be­tween chips and nam­keen.

The Brand Reporter - - FRONT PAGE - By Sh­weta Mulki sh­

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. ■

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