Secret Diary of Varun Berry, MD, Britannia Industries | Biography Part- 2 | Outlook Business
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Photographs by Soumik Kar

Secret Diary Of A CEO 2017

“It’s important to keep learning without altering your inherent personality”
Secret Diary Of Varun Berry Part-2

V Keshavdev

Varun Berry, MD, Britannia Industries

trying times in vietnam

All lessons I learnt during my early days were building blocks in my career. From Gujarat they took me back to Delhi where I was head of sales. It was a staff role that I didn’t enjoy at all. I don’t think I am made for staff roles but I put my best into it. Suman was observing me and realised that I was not best utilised there. So, they sent me to the south, which was a fairly large market at that point of time.

After two and a half years in the South, I was sent to Vietnam. The economy was just about opening up as the international embargo had been lifted. Pepsico had this Vietnamese guy called Try who was the head of the bottling division. But he did not know the business and was put under my training when I was in the south. It was difficult training Try because he was a very demanding guy who didn’t want to dirty his hands. But we did what we could to give him as much knowledge as required, but people knew that he wouldn’t be able to run the business on his own. 

So, PepsiCo told Try that they will have to send a guy whom he would shadow for a few years after which he could head the business. He agreed and suggested that I be sent to Vietnam since he had trained under me.

Micky yong

For around two and a half years, I was sorting out issues. He was a local guy with a huge ego. I was supposed to carry him along and at the same time implement a plan. Since he didn’t understand the business as well as I did, it got a little difficult and frustrating at times. But I recruited two really good guys, one from PepsiCo India and the other from Coca-Cola. When they were in place, I was confident that Try would be able to manage the business well. Without them it would have been very difficult for him. But the move from Vietnam to Philippines was like jumping from the frying pan into the fire.

The business in Philippines was on a boil. Pepsi had done a promotion, dropping prices to 5 pesos as volumes had been going down for some time. The bottler, Micky Yong, couldn’t buy glass because there was no cash. While there was growth, the business started to nosedive and the bottler ended up bleeding. The business had already raked up losses of $25 million. Micky wanted to close down the business as he could no longer sustain the loss. He told the HQ: “You give me the money. Why should I sustain the loss?”  The wheels were starting to come off and that’s the time they told me to go there.

So, when I landed up in the Philippines it was a complete mess. We had started raising prices but volumes were falling off and the losses were piling up. Yong, an aggressive Chinese guy, didn’t want to see me and, understandably, didn’t like PepsiCo at all. It was a bad situation for us to be in. I had to make several trips to New York where I had to make presentations on how we can deal with the situation and what we need to do. My point was simple. You are only as good as your bottler. While Pepsi was making a profit of $10 million, the bottler was making a loss of $25-30 million. 

the 349 campaign

So, I convinced PepsiCo to reduce the price of the concentrate from 18% of revenues to 8% of revenues which could instantaneously help the bottler break-even. But PepsiCo was worried about its own profitability, but I assured the management that we would break even. I had a plan in mind. I went to the bottler and told him we will reduce the concentrate price but that would mean an additional stake for us in the joint venture. So, we took an extra 10% equity in the joint venture, increasing our overall stake from 30% to 40%. We told them we are not taking the additional equity immediately. We just wanted the rights. They agreed and we reduced the price. In a couple of months, the bottler broke even and started become profitable. It was a win-win situation.

By that time I had done a recce of the place and understood the market. It was then that I discovered that the previous experience with PepsiCo wasn’t a great one. In 1992, Pepsi had ran a promotion called ‘The Number Fever’. Every crown of their best-selling drinks—Pepsi, Mountain Dew and 7 Up — would have a three-digit number and a cash prize ranging from 1000 pesos to 1 million imprinted on them. The grand prize was to be given to one lucky winner who had the winning number which was to be announced at the end of the promotion. Sales shot by 40%. More prizes were added and by the end of two months almost 31 million had taken part in the promotion. It was time to announce the winner and that’s when things started to unravel for Pepsi. 349 was selected as the winning number and the only glitch was there was not one but thousands of Filipinos who had that number. Pepsi had given the marketing firm handling the campaign some numbers not to consider and 349 was one of them. Of course, the marketing firm misses seeing the memo. Pepsi went back on their word on a technicality saying the security codes on most of the caps were wrong. The $2 million campaign eventually went on to cost $10 million, but the damage was done. People started to boycott Pepsi. Delivery vans were torched and homemade bombs hurled at their factories. I realised that there was no way for Pepsi to come back in this market because there was so much bad blood that had been created.

The only way I thought we can move things up was to look at other carbonated beverages that didn’t put the brand upfront like Mountain Dew. It seemed like a brand that could resonate with the Filipinos. I felt all the non-carbonated beverages would also do well there but non-carbonated beverages needed an investment of $10 million dollars which was a pretty large sum back in 2003.

So I went back to the bottler. This time I told him we will give up the rights to the additional 10% equity but, in return, he will have to make an investment on behalf of PepsiCo. My logic was simple. We were giving up our 10% equity and that’s money on the table for the bottler. All he had to, in return, was to invest in a non-carbonated line. It was an attractive proposition but it came with a request — the bottler didn’t want to be in the business for the long haul and wanted PepsiCo to create an exit route by letting the company go public. I didn’t know if the headoffice would allow the bottlers to go public but I took a bet and told him PepsiCo will let you go public. I had multiple discussions with the HO and told them to give the bottlers an exit clause if they wanted. I told the bottler that if he didn’t want to be in the business, we would get him out and if any other bottler wanted to come in his place, we were fine with it. Yong made the investment and then our journey completely changed.

Business deal

The investment of $10 million was also going to be used for a PET line. We hadn’t introduced PET bottles in the market yet.  So, we went ahead with a PET line along with non-carbonated beverages. It was not that the 10 million dollars were required for the non-carb line, it was also required for the PET line, we didn’t even have PET in that market so we put the PET line along with non-carbonated beverages.

We launched a whole range of new products - Tropicana Twister, Lipton ice tea, and an energy drink called Sting. We managed to get a 95% share in the sports drink market with Gatorade.  Our trajectory completely changed. From a loss of $25 million dollars, we made a profit of around $20 million. Things went on smoothly for the next two years. It was almost seven and a half years since I moved to the Philippines. The bottler came back to me and they reminded me of my promise to get them an exit. Another round of negotiations began. I went back to New York. We looked for another bottler who could replace him but no one was interested given Pepsi’s history. Two good years weren’t enough to erase the years of distrust. The only option was to go public. Indra Nooyi finally agreed. The bottler made a lot of money when the company went public. The business was doing well and the bottler was happy with the money he had made. All this didn’t go unnoticed. Suddenly a horde of bottlers wanted to be part of the company; the Korean bottler Lotte was one of them. We got Lotte to buy the entire business of the bottler and today it is one of the most successful businesses in Asia.

***
Varun Berry bridging the gulfI was fast turning out to be the clean-up guy. From Philippines I went to Dubai which was another nightmarish business. The late Saad Abdul Latif, who was the-then AMEA president for PepsiCo, was impressed by what he had seen in the Philippines on a visit and wanted me to handle a juice and dairy joint venture with a company called Almarai. It was a painful business. We had acquired two businesses: one in Egypt and the other in Jordan. The Jordan acquisition was a poor $120 million deal -- the existing promoter family was still in the business and there were other issues. Over the next three years, it was all about setting the house in order, getting the right culture, gaining the trust of the people, and building the right team. I got the taste of a completely different business for three years and came back to India as head of Frito-Lay in 2010.

when th chips were downFrito-Lay was a troubled business because, although it was a very strong brand, it had lost market share from 45% to 26%. I was a bit shocked at why people were not able to perceive the problem. It was a value issue. We were giving 14 grams for #5… near empty bags with few chips at the bottom, while the competition was giving away 22-24 grams. There was a huge debate about keeping Lehar separate. My point was that you were not leveraging your brand. There is only a certain premium that you can charge…14 to 24 is a huge difference. You can’t charge that kind of a premium in a market that has over 2,500 competitors. The recommendation from my boss and the HQ was to offer chips, Kurkure and all value packs under a separate Lehar brand and keep building a premium brand. My point was even if it was a strong brand you should think of how to bring the cost down, how to build competitiveness, and how to build an innovation pipeline. It was like banging your head against the wall just to get the snacks food brand Doritos to India. For a $70 billon company, to worry over what will happen if they invest $6 million for a Doritos line was a bit too much. The view was let’s do more research [on the feasibililty]; and that was it for me. Though I did manage to get growth going [in the foods business], I wasn’t able to craft the entire strategy because of differences of opinion. 

keeping the faithIt was exactly the same situation at Britannia, but we were able to turn the tide. At Britannia, for the past four years, we haven’t lost market share even for a single year because we built competitiveness, we tightened costs, and we built innovation. So, if they [PepsiCo] are watching what I am doing today, they will realise what they could have done as well.

Brands are a property which are the most difficult to create, and if you are working in a company where you have got a solid brand then you can create magic. Britannia is a solid brand. There is no doubt about it, but you can’t have the name on the door to endorse the cheapest products, so we changed that strategy. We brought Tiger into the value portfolio, but there’s still a lot more work to do. I think fundamentally from a marketing point of view, the properties were very solid. Of course, there will always be a lot of tweaking to be done. It is still too wide a portfolio and you have got to get on the side where your heavy horses are; that’s what we have been doing.

***
With Nusli I had a fabulous free flowing conversation the first time around. I found him to be a very charming and sharp guy. When I asked Nusli what were the rules of engagement at Britannia, he very clearly said that he wanted to be in the loop on any tough decision. It’s difficult to judge what a person is about in one meeting, hence, during my initial years at Britannia I had long meetings with Nusli. Most of that has changed today. At a recent board meeting, when one of the directors asked Nusli if he would be spending more time on Britannia, the answer was a quick “no”. He turned to me and said, “Ask Varun, I spend exactly one day a month and I don’t want to spend more time than that. I just need my update.” That way, he has been very good to me. There is a world of difference between a multinational and an Indian company. The most obvious thing to me relates to decision making. For instance, we are getting into a joint venture with a company, which has been knocking at the doors of multinationals for the longest time. They actually work together in many countries and it has just not worked out here. It took me just two meetings with them and then they met Nusli in London to close it. The shareholders agreement was also wrapped up in a day. Which multinational would work that way? I like the way capital decisions take place instantly, which is almost impossible in an MNC. It’s hard to forget how the folks at Frito, ten years before my time, were trying to get the Doritos line into India. It’s still not here. There are just too many levels of decision making involved in an MNC starting from the country manager to the super regional head and beyond. It’s not that we don’t take time when things are not clear but it’s nothing compared with an MNC.

***
come on upAt Britannia it took me exactly two months to sort things out. The first month was about identifying the issues and ways to resolve them. While there were disagreements, I was clear about moving from wholesale to a retail distribution model. My objective was to create bandwidth in distribution but the fear was wholesale would kill us if costs were cut. To me, it all boils down to the ability of a salesman to sell. There was huge cost-cutting and today the team understands that what was done was necessary. In fact, the mindset has changed so much that there is no discussion on a point like keeping a limit on overheads. We are completely aligned in the way we think and you don’t need to have a high-profile team. Except my R&D head, almost all the people I work with are from within Britannia. My people were two or three levels below the job they do today. Sure, there is pressure on me since I have to ensure the guy makes the cut but in doing so, it boosts morale and cuts costs. Others in the organisation think they too stand a chance to get the big break.

So, you can fault me for not having a very high-profile team, but there is really no end to that. If there is a tussle between quality of mind and years of experience or one between a guy who can execute and the one who can present, my choice is very clear. I would go for quality of mind and the one who can execute well. A fancy presenter does not help anyone. 

While it is important to spend time with the team, it is critical that there is mutual trust. Getting scolded or berated does not matter as long as it is directed in the course that you have started for yourself. If a team member is not aligned to your vision and lacks the passion, a handshake is the best option. 

A common vision requires a collaborative approach with people you are working with. Having trust and faith is critical and if that has to happen, some hard decisions have to be taken. It’s not about negotiations; it’s about relationships; it’s about building relationships and getting people to trust you. It can happen in a conversation, it can happen in a friendship, it can happen in a business relationship. If you have a joint venture, the guy should trust you completely, if you have an employee, he should have a lot of trust in you. But there also has to be a reason for me to trust you, it is not that I blindly trust anybody. The reasons are always built over a period of time.

The second part is you are what you are. I believe the folks who are in business today are nowhere close to any of the guys with whom I have worked in the past. Ravi was all about strategy; Micky was cerebral, while Suman had raw passion. But the flip side to working with such highly driven individuals is that one gets easily influenced in the formative years. When you work with a certain kind of a person, you want to be like him. 

So, when I was working with Micky I wanted to be like him. When I was working with Suman, I wanted to be like him. But I realised that it doesn’t work. You have to find your own balance. When you start aping such personalities, you obviously end up rubbing a few people on the wrong side. Some of my team members with whom I had worked like Harshad Jain, who now handles the radio business for Hindustan Times, still tells me, ”You made my life miserable by calling me on Sundays!” One has to find the right balance in life and nurture your own personality. It doesn’t happen overnight and I was probably 40 when I realised that I need to find that balance. 

I believe there is a very thin line between getting inspired and blindly aping. Never try to be someone else. It’s always important to keep learning without altering your inherent personality. You cannot be the person you are if you try to change too much.

Finally, God lies in the details. You must dig deep and find the nuances in everything. You must figure out what is required to be done, get into the details and then move forward. If you try to be superficial you will not get anywhere.

***
Varun Berry's best friend anuIf I look back, the place where I am today wouldn’t have been possible without the support of Anu. She has taken care of the kids during my absence. Our two boys are now 25 and 21. The older one is with Citibank after passing out of Cornell, while the younger one is at Berkley. He too will join Citibank as a trader. We are friends and I give them advice if they want it. We are a close-knit family.

Two years ago, Anu told me that with the kids having grown up, it was time for her to do something on her own. She now has her hands full with a start-up in Bangalore called Urban Zing Refreshments that sells cold pressed juices under the brand, Rejoov. That’s the closest I have come to selling vegetables — something I keep ribbing my dad to this day.

This is the second of a two-part series. You can read part one here.

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