Known primarily as a B2B player, the company hopes to rake in higher revenues through B2C sales, from its current 40%
Veeba Foods, the makers of sauces and condiments, has been fortifying its retail presence lately. Known primarily as a B2B player, the company hopes to rake in higher revenues through B2C sales, from its current 40%. Viraj Bahl tells Devika Singh about Veeba’s focus on general trade stores and its delayed, but essential, e-commerce push.
You have been growing your retail presence in the past year. Are you now shifting focus to B2C?
We have added about 20,000-25,000 general stores in the last one year. We are focussing on metros as well as smaller towns such as Madurai, Jalandhar and Amritsar. Even though the return on investments in these towns is not as high as in the metros, it is still good. Currently, 50% of our sales comes from the top 10 cities; the rest is contributed by the remaining 380 cities. While this is highly skewed, we have increased our national footprint only in the last one year. We do plan to go deeper.
People mostly associate younger companies with modern trade, but, we believe the opportunity is massive in general trade, even though we are present across modern trade stores. General trade contributes 85-90% of our business; the rest comes from modern trade, and e-commerce contributes less than 1%.
Most young companies don’t try to tap general trade as it is challenging and expensive to build a distribution network. However, we are trying to build a traditional retail company.
What about the B2B business?
B2B is still growing in absolute numbers; around 60% of our revenue comes from here. We will continue to focus on it along with retail. We are tying up with QSR chains for product development. When they add new recipes to their menu, they approach us to help with the ingredients. So we develop products and supply to them. This brings in about 5% of our B2B revenue every quarter.
Have you stayed away from tapping e-commerce deliberately?
Although we are present across e-commerce marketplaces, we have not been doing enough to push sales on this channel. As a company, we need to get our act together on e-commerce. Initially, when we wanted to be present everywhere, offline was our focus for acquiring new customers. The thought was that these customers would go shop online for convenience once they have used our products two or three times. But now, we plan to acquire customers on digital, too. A year from now, we hope to get 3-5% of our sales from e-commerce channels.
In 2019, almost 80% of our marketing budget was spent on ATL because of our mass media campaign for V-Nourish, and the rest on BTL and digital. But that’s going to change in 2020. We will spend only 20% on ATL, and the rest on digital and BTL. Our YouTube channel, where we air recipe videos, already has a huge following; we plan to tap that. Instagram is another platform that we will focus on.
What are the challenges involved in entering new markets?
The biggest challenge in India is distribution. When you go to a new city, distributors don’t know you, and hence don’t want to pay you money in advance. In some places, we have had to extend credit, because otherwise they were not willing to work with us. We are also hiring local sales people now, so that the distributors know we are a serious player.
Your new offering V-Nourish jostles for shelf space with brands such as Horlicks, Bournvita and Complan. How do you plan to tackle that?
We are not competing with these brands; ours is a much more evolved nutritional product and costs twice as much as these products. Our product is for more discerning parents who are aware of nutrition. We are just getting started, and hence have put zero revenue pressure on V-Nourish.
We are treading carefully by introducing it only to 100 towns out of the 400 that we are present in. We are going to doctors and pediatricians, and trying to convince them about the product. It is being retailed through top general trade stores, A class pharmacies and e-commerce channels. This category is valued at Rs 8,000 crore and our goal is to get 5% share in a year.