Everybody is twisted in their own way and has a vice or two. For those with means, vices are cultivated and those who can’t, make do with what they get. For rich Kutchi businessmen, smoking a beedi could well be a taste or style statement, but for the aam aadmi, a beedi is the cheapest luxury he can afford. Appearances though can be deceptive and at times very. For, at the heart of the humble ‘30’ brand beedi lies an even humbler rag to riches tale of the Mangalore based Bharath Group.
Its founder, B Manjunath Pai, ran away from home when he was 15 years old. He was certain that if he stayed, he would end up bent over wood fires cooking feasts for temples and weddings, like his parents did before him. The young lad survived by working in a corner store next door to a local temple in the sleepy town of Karkala in coastal Karnataka. To sustain his ‘Houdini’ act, he graduated to selling saris, slept outside the sari shop at night and learnt to roll beedis in between customers. He then started hawking his self-rolled beedis and since they sold well, he decided to make it his main activity. All he had then, was his savings of ₹30 and that is where the brand name for his best selling beedi would come from — ‘Thirty Number’ also known as Tees Chaap in Hindi.
In 1962, the company moved its administrative office from Karkala to Mangalore for better connectivity. Today, Bharath Beedi Works has a network of 15 centres across Udupi and Mangalore. Raw material is distributed to designated contractors (who issue it to workers) from these centres, and finished beedis are collected and deposited by them. Inventory is managed smoothly to make sure there’s just 10 days’ stock of raw materials and finished goods at any given point of time. And since, the company has mastered beedi manufacturing over 82 years, it’s practically impossible for a competitor to replicate its product overnight. After all, the entire process is important: the sourcing of the tendu leaf, the right mix of tobacco, rolling it right and roasting it perfectly.
For maintaining this consistency, credit is due to the founder and then his eldest son B Ganapathi Pai, who ably took on the mantle despite personal adversity. Due to the untimely demise of his brothers in the late 70s, Pai worked shoulder to shoulder with his father until the latter passed away in 1982. After that, Pai slogged doggedly for the next two decades till his children and those of his brothers were able to join the business. Till this day, B Manjunath Pai continues to be his greatest inspiration. B Ganapathi Pai, chairman, Bharath Group reminisces, “My father taught me three things — Satya (truth), Dharma (duty), Nishtha (devotion) and that encompasses my entire management philosophy.”
Lighting up
While beedi is said to have originated in the 1890s in Madhya Pradesh, it was in Mangalore where its making was elevated to a fine art. Pai says, “Rolling a beedi is a time tested process, more like a family recipe and that is why Mangalore beedis are famous for their finish and enjoy a premium in the market.” The big jump came when competitors in Maharashtra, Madhya Pradesh and Rajasthan switched over to manufacturing Mangalore type beedis in the 70s and 80s. Without the benefit of visible differentiation, seasoned as well as inquisitive consumers turned to the beedi that gave them the best puff. From rolling 30 beedis on the founding day, the company now rolls out 60 million beedis each day, 300 days of the year.
Another interesting fact about the company is that its beedi is rolled in Mangalore but consumed largely in Gujarat, Rajasthan, Madhya Pradesh, Maharashtra, Andhra Pradesh and parts of western Uttar Pradesh through a network of more than 500 distributors. While it was a logistical nightmare to start with, it has now been converted into a distinct strength — a reach of over 100 cities and over 100,000 retail outlets -— one that the company intends to leverage going forward. Not only that; it has a near monopoly in exports having started in 1975, about 30% of its production is shipped to the Middle East, South East Asia, South Africa and Japan.
Besides its existing markets, for future growth the company is banking on breaking into adjoining areas where it has a strong base, say into eastern Madhya Pradesh, eastern Maharashtra, etc, and into new markets such as Uttarakhand where it is in talks with distributors and retailers. Since tobacco products are not allowed to advertise, retailer push is critical.
Clichéd as it may sound, the bond established over three quarters of a century between the company, its employees and the trade, holds the key. “We have always incentivised our distributors,” Pai says. “For example, if there is a price hike, the distributor is given an average month’s sales stock at the old price and it’s our policy that they must pass on 50% of the benefit down the chain.” Discreet checks are done to ensure that is indeed complied with and it is such steps that have given the company a strong foothold within the trading community. Pai adds, “As a result, most of our employees have been with us for 30-40 years and many of our distributors and suppliers have been there for generations.”
Puffing on
Though Bharath Beedi has been able to withstand competition from other national players like Mangalore Ganesh, Telephone, Desai and Pataka, it cannot afford to sit on its laurels. Rising input costs apart, the biggest challenge is the lack of a uniform minimum wage in the industry. Beedi workers in north India and West Bengal get half the wages paid in Karnataka for the same amount of work. So, if the minimum wage is ₹120 per 1,000 beedis in Karnataka, the comparative rolling cost is ₹70 in Uttar Pradesh and ₹60 in West Bengal. It is unlikely that any respite is in sight for Bharath Beedi, given that revision of minimum wage is a state issue.
The company’s worries do not end here. Besides the wage disparity, there is also the unorganised and counterfeit market to deal with. Half the total beedi market of ₹5,000 crore is catered to by manufacturers who do not pay applicable duties and under-invoice their production, which is reflected in their lower selling price. So, while Bharath’s ‘30’ brand sells 25 beedis for ₹10, its counterpart in West Bengal could be selling 25 beedis for ₹6 or ₹7. The organised market of ₹2,500 crore is further equally divided between Mangalore and non-Mangalore beedis and it is in the single brand Mangalore type beedi that ‘30’ brand stands out with a third of the market share.
Moreover, for a minimum wage paying player like Bharath Beedi, labour makes up 60-65% of cost. Transportation and raw material take up another 30-35%, leaving it with a 5-10% net margin. Reducing labour cost through mechanisation is also not possible as naturally grown tendu leaves cannot be standardised and fed through machines. In fact, manual cutting of the leaf minimises wastage (only defective sections are cut away).
While the introduction of GST will be a positive, non-uniform VAT and the current cost structure leaves the company with very little operating leeway. Pai laments. “The irony is West Bengal is the cheapest place to manufacture beedis in the country. A state which was Communist for a large part of its history is paying the lowest wage. How can I compete with someone paying half the wages?”
There’s another dimension to the labour problem. The younger generation of workers, often better educated and attracted to more lucrative jobs, is not coming into the industry, leading to a shortfall in production. Pai cautions, “While we have consciously avoided it so far, the eventual outcome would be that we will have to unwillingly migrate production to other states.”
As it is foolhardy to compete on price and it does not want to deviate from its minimum wage commitment, Bharath Beedi is focusing on brand building and maintaining quality. Finely blended non-Virginia tobacco is the heart of a beedi. So, the company has started procuring tobacco directly from farmers and processing it at Nipani, near the Karnataka-Maharashtra border. More than the cost saving, the organic farming being promoted ensures that tobacco quality remains consistent. The other positive fallout is the strengthening of the bond with the farmer as after every crop, the company buys the farmer’s output irrespective of whether the quantity and quality delivered was as agreed upon. Where possible, the company blends such tobacco bought without compromising quality, but its assured buying ensures that it gets a discount during times of shortage.
Right blend
Tobacco and tobacco-based products may have an ominous ring to them but Pai does not shy away from pointing out the collateral benefits enjoyed by the overall community. “Tobacco might be bad, but it is our annadatta (provider of food),” he says. “What is most heartening is that a major part of our workforce is women and despite working from home, they are eligible for bonus, maternity leave as well as PF benefits, unlike in the unorganised sector.” Even if the Bharath Group’s ongoing, manifold and pro-active ‘giving back to society’ activities are ignored, there are many stories of women supporting their families and enabling a higher education for their children with the wages they earn by rolling beedis. Bharath Beedi therefore has always been seen as a benevolent employer not only in its district but the entire state as well.
Bollywood stumbled upon a pining heart and unadulterated lust via Beedi Jalai Le only in 2006, but for B Manjunath Pai, the founder of Bharath Beedi Works, the fire in his belly must have burnt the brightest on July 30, 1930. The empire seeded with ₹30 that day has metamorphosed into a ₹700 crore group today, with the core business still contributing 75% of the revenues and much of the profit. Despite having diversified into printing, automobiles, bookstores, real estate and malls, its cash rich position ensures that its entire expansion is funded through internal accruals.
In its own way the number 30 has been lucky for the company. So much so that Pai says, “People in the trade associated with us go with 30 voluntarily, and all our associates consider 30 their lucky charm — their car and phone numbers invariably have 30 in them.”
The genius of B Manjunath Pai lies in the way he went about organising a work force that was scalable as the company grew. And grow it did, it is only now that scaling up has hit a roadblock due to the playing field getting more uneven. The story of the ‘30’ brand and its creator are intertwined. It’s hard to distinguish where the creator stops and the brand begins, and vice versa. The brand initially flourished due to the zeal of the founder and then due to the sheer tenacity of B Ganapathi Pai. The goodwill they generated together has not only paid back many times over but continues to sustain Bharath Beedi Works even today.
