In 1962, I graduated from MIT and returned to India to join my father’s business. He wanted me to set up a new soft drink manufacturing plant at this very place [Andheri in suburban Mumbai] that I am sitting today. As a fresh graduate, especially coming out of MIT, you believe you know a lot. But the moment I was handed over the land map and the machinery catalogues, I was all at sea. For the first couple of days I just sat and stared at the maps wondering where to begin: the concrete structure, the assembly line, the workers’ room — all suddenly appeared daunting. However, after a visit to our unit at adjacent Vile Parle, where our old soft drink plant was located, and with some guidance from my father, I got into the groove.
When the factory structure was ready, I asked the engineer where we would get operators and people to work in the factory. He said we should ask contractors to supply us people. I said, “That is a good idea but what kind of people will they supply? They will be inexperienced in the soft drinks business.” Then it struck me: why not employ the very workers who built the factory since the workers a contractor would have supplied would have been no different from these people? Why not give these poor chaps, who have toiled over eight months, a chance to be part of their own creation? They would be grateful and do a better job. Thankfully, as we absorbed almost all the workers into our factory, I was proved right.
Around the same time, my father split with his brothers on the issue of franchisees. My uncles were very conservative about the soft drinks business; they wanted everything to be under their control and nothing outside Bombay. But it would have been tough sending soft drinks in returnable glass bottles to far-off places such as Jaipur or for that matter even to Pune, which is closer to Mumbai. Hence, my father was sold on the idea of franchising. But, although we began franchising there wasn’t enough business being generated and all the plants ended up making losses. That’s when we decided to put up our own plants in Pune, Surat, Bangalore, Madras and some other places.
But the problem in running your own plants is that the manager in charge lacks any enterprising interest. He is just going through the motions. Besides, since the manager is not a local but someone sent from Bombay, he has to contend with language and local issues. We ran the plants for a while but soon realised that only local engagement would ensure success in franchising. Ultimately, we ended up selling the plants at a loss to the local franchisees. Still, the idea was not to make money out of selling the plant but to build the business and the brand. The move paid off as the local franchisees showed their entrepreneurial streak and got the business going. And so it continued for the next couple of decades.
In the 1990s, the entry of MNCs such as Pepsi and Coca-Cola began altering market dynamics. We had already lost four of our [62] bottlers to Pepsi and the impending entry of Coke made the rest fidgety. At the time, there was a craze for anything foreign and you couldn’t fault the bottlers of thinking along the same line. Their point was they could compete with one MNC, but not with both Pepsi and Coke. As a result, all the bottlers, barring a few loyalists, wanted to join Coke. In fact, had we not sold out [in 1993], our business and brands would have been wiped out and so would have been the bottlers who stayed on with us. Emotionally, it was very disturbing but you had to accept the market reality. Still, I am happy that my decision has been vindicated: our brands [under Coke] continue to thrive. It feels really good to know that even today Thums Up outsells Coca-Cola.
We were, however, bloody lucky that Bisleri was not part of the deal. This was not out of any foresight on our part, but certainly, it was a costly mistake by Coca-Cola. In fact, Coke was not interested in even Maaza because it was a carbonated beverage company while Maaza is a fruit drink. Yet it was acquired because it was produced in the same plant as Thums Up, Limca and Gold Spot and having the same bottler report to two companies would have been difficult. But since Bisleri was an independent business with an insignificant presence, it didn’t catch Coke’s attention. We had bought Bisleri back in 1967 from an Italian company because we wanted a soda brand and Parle soda would have never worked as a brand. As a brand, Parle was synonymous with biscuits; nor did it make sense selling soda under the brands of Gold Spot, Thums Up or Limca.
Aqua culture
Around the time we sold the soft drinks business, there was no ‘market’ for water. But as an entrepreneur you have to create opportunities. Those days, people travelling by trains had no access to clean potable water. The only source was tap water at stations or pot water at railway stalls. Since that also was of questionable quality, many people ended up drinking soda — after all, soda is just bottled water with gas. I wondered why we were selling so much soda at railway stations. It made sense for long-distance travellers who could have their whisky and soda over a day-long journey. But at local stations, for local travellers, it hardly made sense. For a half-hour journey, why would you need a soda? That’s when we decided to get into bottled water.
Market surveys would have shown that there was no demand for such a product. But I firmly believe that an individual’s biggest rival is nothing but his own incompetence and negative approach towards things. Stop going around to do market research to find out who is selling what or how much. Unfortunately, people in the set-up tend to be more negative. Their first reaction to anything new is: it will not happen; it cannot work. But has anyone bothered to ask the customer what he wants? The consumer is prepared to change, but he must get value. If he gets value, price is not an issue — that is why you have customers today willing to pay ₹1 lakh for an LED TV.
Today, we are the leader in bottled water and Bisleri has become synonymous with bottled water. But the irony is that when you ask for Bisleri, you may end up buying some other brand. That’s also the problem when you create a new market: the brand tends to become generic for that category. But we are also partly to blame for not doing enough to capture the magnitude and width of the market. It’s the failure of our production and distribution that we haven’t managed to capture a substantial part of a market that was largely our own creation.
Staying the course
While distribution is a huge challenge in this business, what is also critical is innovation. More than five years ago, we changed our packaging and moved from blue labels to green. Now, green is passé and we need to try something new. Then, take the 1-litre bottle — it is an outcome of circumstances as historically, that was the standard size available. Today, we are pushing 250-ml bottles because they are consumer friendly. The fastest growing category, though, is the 200-ml bottle. It began with airline bottles but we stayed off that market and instead aggressively targeted the retail segment. From retail, it fast became a hit at marriages and other functions. In short, we opened up a totally new segment.
The other realisation is that trying to do everything on your own is a tough job. Earlier, we made a conscious decision to avoid franchisees and instead opted for contract packers. But the problem is that your staff won’t take contract packers very seriously; there is little effort to engage with them to better the business. Also, if manufacturing on your own costs, say, ₹10, getting it done through a contract packer will cost ₹14. That extra ₹4 pinches and you become less aggressive about going after volumes and meanwhile, you’re competing with a local guy who does both, manufacturing and selling. Now, we have taken a conscious decision of growing the business by setting up our own plants, through franchisees and through co-packers.
Bisleri as a brand has a strong recall and a loyal following. But what pains me is that we are lazy and not recognising our loyalists and doing something for them. What kind of a relationship is it when you keep saying, “Be loyal to me but I am not going to do anything for you.” If you have created a market, you need to jolly well ensure that you are on top of your game. If you are neglectful and didn’t take care of the market, there is no point blaming others for snatching away your
market share.
Today, nobody can manufacture this product cheaper than we can. But the risk in being a market leader is that employees can get pretty smug and expect the momentum to continue on its own. I have seen many management executives, all MBAs, stuck on Excel sheets trying to make sense of the numbers. You know for a fact that you have only, say, 20% of the market. Now what? Goddammit, get off your computer and hit ground zero to set things right!
The challenge today is that there is a surfeit of information available but the quantum of action taken is zero. That is why I have come to believe either you have it in you, or you don’t. And so I keep telling my HR team, “Please stop looking at degrees. Find out what stuff the candidate is made out of.” If you have hired the wrong guy, don’t wait for six months to take a decision; take it in a week. The more you ruminate over a decision, the more challenging it will become. Frankly, our business is only about supplying crates of bottled water; we do not need MBAs but certainly we need people with passion. Today, we have hired a business head for our mineral water brand Vedica. He started off as a waiter, then become a bartender and climbed the ranks. That brings me to my mantra: “Don’t blame others for your own shortcomings. There is nothing out there that is working against you except yourself.”
