|Ajaay Gupta, Managing Director, Capital Foods|
Since there are no other branded organised players in the market, we have to devise innovative marketing tools to expand the size, says Mr Gupta. The company has also launched portion packs of its sauces.
These pouches are sold to restaurants to be given with their takeaway orders. This is more of a sampling and advertising exercise to convince consumers that they now have a chance to upgrade to better quality ingredients that would give them a taste of restaurant food at home, says Mr Gupta.
Capital Foods happened largely by default. It was while setting up a distribution network for American Dry Fruits (ADF Ltd) in North America and Europe for its ethnic Indian foods range, that the idea hit Ajaay Gupta to conduct a study on the changes in eating habits in India. The study revealed that the demand for Chinese food in the country had grown phenomenally over the last decade. In Mumbai alone, it had grown from just 3-4 restaurants post 1986-87 to nearly 10,000 roadside outlets in the mid-1990s. The reason why Chinese cuisine worked in India was two-fold. First, it was cheap and secondly, it adapts itself very well to various tastes, says Mr Gupta.
The research conducted by an agency AIMS, revealed that the demand for Chinese ethnic foods items were worth over Rs 150 crore, with no organised player in the market. Mr Gupta tried to convince ADF Ltd to get into Chinese food items. ADF, a leading player in Indian ethnic foods in markets like UK, Middle East and America, remained unfazed and chose to concentrate on Indian foods.
Mr Gupta who was tired of advertising and devising marketing tools for clients around the same time, decided to grab the opportunity himself. Initially, his marketing background brought with it a mental block to get into manufacturing and he toyed with the idea of outsourcing products. Our search shocked us as we found that the most authentic of the Kolkata labels were literally produced next to the gutters at China Town, says Mr Gupta. The decision to get into manufacturing followed and by end 1996, a manufacturing unit was set up in Nashik at the cost of Rs 2.5 crore. Chings Secret, the first organised Chinese brand was launched in the country alongwith a sizeable mass media campaign.
Since the Ching Dynasty in China was known for its culinary expertise, the brand name Chings Secret was a natural derivation. Says Mr Gupta: We are in the business of elevating the experience of food consumption by integrating international foods for the Indian populace. To put it simply, Capital Foods is in the business of global food culture. What Mr Gupta considers to be the companys greatest strength is its R&D department that continuously experiments with a range of recipes in Chinese as well as in other ethnic foods that are likely to become a part of the Indian lifestyle. The Chings Secret range of Chinese food ingredients like sauces, pastes, soups and noodles are developed from the documented and practioners secrets of original Chinese chefs. Today Chings Secret contributes to nearly 80 per cent of the Rs 14 crore turnover.
By 1998, when the company nearly solved its initial problems with distribution, Capital Foods felt the need to add to its product profile and explored a range of other international food items which witnessed a growing demand. In late 2000, the company launched Smith & Jones, a range of pastes, baked beans and sweet corn kernels. Our marketing background taught us to quickly step into the consumers shoes whenever it came to developing products, says Mr Gupta. Today, Smith & Jones that is sold through the same distribution route as Chings Secret, contributes to 20 per cent of the turnover. However, the companys R&D has already developed a number of products catering to Mexican and European cuisine that can be offered under this brand. We will extend the line only when we feel that there is enough demand in the market, says he. The company is also a contract manufacturer of noodles for the Knorr brand of soups from HLL and it makes salsa for SM Foods Limited.
Notwithstanding a decent campaign supporting the product launch in 1996, Capital Foods faltered heavily when it came to understanding the Indian retail distribution network. Our background in distribution in the western markets made us take the Indian markets too much for granted. We did not understand the intricacies of the distribution system back home, says Mr Gupta. The company initially targetted 300 cities and over 1.2 lakh retail outlets across the country. In utter ignorance we failed to realise what it takes to spread yourself so thin, says Mr Gupta. Transportation costs alone was making such a move unviable. The company learnt from its mistakes and today it talks about selling to about 79 to 80 cities and across 45,000 outlets across India. The company adopted a hub and spoke strategy whereby it would distribute its products to limited towns from where it would percolate further through the wholesale route. We got it right this time. The more we control our distribution, the better it works for us, says Mr Gupta.
What continues to trouble the company even now is that for its Chings Secret range, the company competes with unorganised local players almost in every market that it operates. They can offer Rs 10 on a Rs 25 MRP as they pass off jaggery water as soy sauce, says Mr Gupta. The company has consciously not tried to reach the eastern and northeastern states where a plethora of small backroom operators dominate the market. Even in cities like Mumbai, which alone contributes to over 25 per cent of the companys turnover, it has no competition from any national player.
With Smith & Jones, the issues are different. Here its products like ginger and garlic pastes etc compete with the Daburs Homemade brand. Capital Foods follow the USFDA standard which demands less fibre in its ginger, garlic pastes and hence it is positioned at the premium end of the market though its prices match that of Daburs. We cannot even compete with Daburs volumes so we choose to be a niche player, says Mr Gupta.
The company which has been growing at the rate of 35 per cent expects the growth rate to escalate further. This is likely to be possible largely because last year the company tied up with US-based Raja Foods, a leading player of Indian ethnic foods in North America, to supply a range of chutneys and sauces which will be sold under the popular Swad brand in the US markets. The products launched before Diwali have been well received and has prompted the company to chalk out plans to launch a range of ready-to-cook sauces like Kadhai, Makhni, Jalfrezi etc by February this year. This will be followed by a range of barbeque sauces in June.
The company also plans to extend the Chings Secret range of products for the Indian market with ready to eat products like Chilly Paneer and Vegetable Manchurian in retort pouches. The company is also working on the modalities to take the Chings Secret brand to Indians in markets like Dubai, Sharjah, Kuwait and Australia. The extensions in Smith & Jones will be a Pizza sauce that will hit Mumbai by the end of February.
Due to a substantial increase in sales from international trading our turnover is likely to go up by nearly hundred percent next year, says Mr Gupta and adds that the money the company makes from these markets will be spent to grow the local market and the Chings brand.
The recipe for growth is well documented. What remains to be seen is how well it is cooked and served.