YOUNG SCIONS

‘I found the technology aspect very fascinating, and I was
sure that post-engineering, I could add value to the business
in this arena’ – Indraneel Chitale

Corporate Citizen: Tell us about the initial journey of Chitale Group…

Indraneel Chitale: I am a fourth-generation entrepreneur. Our parent company, B.G Chitale, was named after my great grandfather who started the business. He was an entrepreneur who settled in a tiny village called Limb in Satara district, where he was running a small dairy business in the 1930s. However, due to two back-to-back epidemics, one of which saw many animals die, he could not sustain it. He then decided to move out. While he was on the train wondering what to do next, a passenger suggested that he should look at a village called Bhilawadi in Sangli district. The village is on the banks of the Krishna River making it lucrative for anyone who wanted to pursue agriculture, due to the availability of water throughout the year. He followed his suggestion and realised that it could indeed be a good place to settle down. He moved in with his four children and started a dairy business there.

The biggest advantage of Bhilawadi was that it had a railway station, since British times, which facilitated the transportation of his product to Mumbai. We were at that time a B2B supplier to many of the players in Mumbai, selling dairy products. My great grandfather soon realised that volumes were picking up but he was unable to get good control on the market from faraway Bhilawadi. More so, because there were no telecommunication facilities in those times. Therefore, he recalled his elder son Raghunathrao Chitale, who was working at a Surat mill and asked him to relocate to Mumbai where he became the physical presence of the brand.

However, he observed that Mumbai had a lot of floating population but not enough settled population, which was a necessity for the milk business, to get repeat clients. He and my great grandfather then decided to move to Pune, where they assumed that the cost of living would be lesser as well as they would find many more stationary customers. That was also around the same time when my grandfather’s younger brother Narsinh Chitale, popularly known as Rajabhau Chitale also decided to join the business. This was in the early 1940s.

Soon, they realised that there were no defined measures as to what would be a good or bad sample of milk in the B2B market. They would suffer losses if the clients rejected their products and refused to pay. Since the business was based on a gentleman’s agreement and not by any legal contract, it seemed challenging to carry on. They thought it would make better sense to directly sell to consumers and that is how Chitale Bandhu Mithaiwale was established. Their two younger brothers, Parshuram and Dattatray Chitale by the mid-1950s, joined the two brothers. Of the four brothers, Parshuram Chitale, aged 87 years is still with us today.

"In the 1970s, we got the first-ever pouch-packaging machine in the country. Until then, milk was sold in glass bottles, which was not very hygienic and there was a lot of breakages. The plastic pouches essentially changed the way the business grew as it led to the growth of volumes"

A happy family: Indraneel with his wife Amita and sons,
Aanvik and Yug

CC: So, how did the business grow in Pune?

Since day one, we did not have a customer base that was wide enough to sell the milk that we produced, so we had to do something about the unsold product because there were no preservation technologies at that time. That’s how we started converting the unsold milk into khava, and then into mithai. Eventually, these two lines of businesses developed, and in the 1970s, we got the first-ever pouch-packaging machine in the country. Until then, milk was sold in glass bottles, which was not very hygienic and there was a lot of breakages. The plastic pouches essentially changed the way the business grew as it led to the growth of volumes. Thanks to the License Raj, the plastic pouch machine itself took two-and-a-half years to be delivered due to various government permits. We had to also get the capacities aligned, as at that time no one was familiar with such a machine. This was a pivotal transformation for the Chitale Group, as the turnover increased substantially. Bakarwadi was shown to Rajabhau by a cook (halwai) who was employed by Chitale Bandhu as a Gujarati delicacy. It was then modified by the brothers to a Maharashtrian iteration that we see today.

Until then, the retail business of milk and sweetmeats was growing but it was relatively just a two-store operation through our outlets in Bajirao Road and Deccan Gymkhana in Pune. However, with the Bakarwadi’s success, the business received a further boost. We started working on automating Bakarwadis in the late 1980s, the only way to meet the exponential demand. My grandfather and my father were both involved in that project, and in 1992, we got the first automated Bakarwadi machine. That machine is still operational and we have three more such machines now.

CC: How many Bakarwadis do you make a day?

We make about 1,200 kg per hour and by the end of this financial year, we will be able to hit 2000 kg per hour. Pre-automation, we were only able to do about 300 kg a day; today, we produce about 15 tons a day, thanks to automation.

CC: Tell us about your childhood.

In my early childhood days, my grandfather would take me along with him to the factory and the store to show me how things work. This helped me in getting exposure to the business at a very young age. At the same time, there was no family pressure to join the business or any talk about what we would do on a strategic level. As I grew up, I was quite firm that I wanted to pursue Engineering; my father and my uncle, Vishwas Chitale, who was the key technology person of that generation, encouraged me. We introduced several innovations at that time such as the RFID billing activity that you see in our store, the RFID tagging of the cattle, procuring computers and automation into the process. Now, we have truly integrated sophisticated technology into our system but my uncle laid the foundation. That was an inspiration for me. I found the technology aspect very fascinating and I was sure that post-engineering, I could add value to the business in this arena. The family also created an avenue where I could do that.

CC: When did you get into the business full-time?

I graduated in 2011, and a year later, in 2012, I got into the business full-time. Before that, I interned with a German company called Gea Foods, which manufactures food processing equipment. Thereafter, I spent some time in Germany and Netherlands before joining in 2012.

"What I would like to see is how can Maharashtrians as a community celebrate entrepreneurship more. Unfortunately, the number of people in the ecosystem who are Maharashtrians is lesser"

The manufacturing plant of Chitale Bandhu Mithaiwale at Ranje, Pune

CC: How did the exposure abroad help you?

I got a lot of interesting exposure abroad. The packaged food business in Europe had already matured unlike in India, where we are now seeing a boom in packaged food; they were a decade ahead of us. That was interesting because we realised we could work more on enhancing our packaging and distribution business, rather than just having a store and distributing milk as our two avenues. Thanks to that exposure, it was easy to adapt to those technologies. The projects that I had worked on in Europe were predominantly on the meat side but then, I was lucky to be a part of a couple of negotiations about poultry and forms of meat processing across the world. I also interacted with different nationalities and work cultures and got an insight into how projects of R&D are handled. Most of the operations in our factories are all special purpose machines, which have been customised for us by manufacturers.

CC: How did you adapt this technology to enhance the Chitale enterprise?

The store business had limitations in scaling up since we couldn’t make everything fresh all of the time and sell it and give that level of quality assurance to the customer. The products need to be packaged and by a strange coincidence, even before the Covid pandemic struck, we were contemplating if consumers will even come to the store in the future.

CC: How could you envision this?

A part of it could be because of our generation having spent some time abroad, where people do not need to visit stores to get products. We predicted that this change would come to India too. This was a good growth engine because we ended up democratising our product. Now we have close to two lakh stores across the country in 11 states, which keep our products. This generates around 40% of the Group’s revenue, which is as much as the milk business. This increased our outreach and we were able to double our business in the first five years. The double growth repeated in 2011-2015, and then in 2015-2018 and again, we would be doubling now. We have been compounding at a fast rate and while doing that, we have been able to be agile with our capex, and still managing to be debt-free.

CC: Tell us about the latest innovation in automation.

The key part about packaging is that the product that goes inside has to be extremely sound in microbiology. When you are doing things manually, a human error comes up sometimes, and there will be a variation. That’s why we had to automate the product and process first and get a very streamlined input into the packaging. If there were 10 people making mango barfis, we could do all of this in one batch and automate that. This would make it microbiologically more consistent and ensure that this is translated into packaging in the least amount of time. We first experimented with the modak in 2013. It was a good success and this year alone, we have sold 50 tonnes of them. This would not have been possible had we not used packaging. It helped us achieve economies of scale.

Due to the consistency achieved by automation, customers did not have any reason to complain. We modified imported equipment for our local products. For example, the mango barfi is produced on a line, which was used to make cookies abroad. The cooking process technology of the barfis is from Italy, the machines are from Japan and for the kaju katli, the entire process was designed and exported by a German company.

CC: What about the special chivda, your very popular snack?

The chivda being a fried product has a naturally longer shelf life and is easier to package. That is why we focussed on the automation of the mithai processes first since they contain fat, which tends to degrade faster.

"We modified imported equipment for our local products. For example, the mango barfi is produced on a line, which was used to make cookies abroad. The cooking process technology of the barfis is from Italy, the machines are from Japan and for the kaju katli, the entire process was designed and exported by a German company"

CC: Could you tell us about the software that runs the sales and marketing of your business?

Yes. We have put in cloud-based software where all our sales teams have a mobile device, connected to our main system. The system has a database of all the retailers. So, whenever a salesman reaches the store where he has to deliver, it is geo-tagged. We thus, get the data that the store exists there in real-time and also details of who placed the order. For the nitty-gritties of the present sales and enhancing them, the Artificial Intelligence (AI) in the app also helps. This also helps our distributers to know what they should be carrying in the inventory. On an average, a FMCG distributer does about 10-12 rotations of stock through a year. Our distributors end up doing 30 stocks in a year because we service them speedily as all of this is visible through our supply chain management software at my warehouse level. In the FMCG business, shelf life is critical. If you sell a product, which is closer to expiry, the consumer may not buy. We ensure with data process and AI, how we can shelf the freshest product in the shortest amount of time to the retailer so that consumers can enjoy that. The technology has been built around that.

CC: Do you have franchises?

All our stores across Maharashtra are franchises. In Pune, we have 23 franchises. Our main job is manufacturing and supply chain. We make the product and make it available to the express store, as we call them. The franchise owner facilitates the store sale. We have been now growing the express store business which is all about packaged products.

CC: What is the meaning of ‘express’ store?

Express Store is a small compact store. The future of retail does not need much more space unlike what we have in Pune now. A 300 sq. ft. space is all you need to achieve a good kind of sales for which we ensure that we promptly supply the repeated products. We are trying to open 75 such stores across Maharashtra over the next year. Thanks to technology, my sales team can do a live tracking and today, let’s say at the Thane Express Store, we sold 26 packets of motichur ladu instead of 20 packets, the system will throw an alert.

CC: Your mango barfi travels overseas and yet retains its freshness. How?

Our mango barfi has real mango pulp in it but being a fruit which is highly acidic, it helps the product last much longer. Even when I used to live abroad, I used to take non-packaged mango barfi and keep it there for a month and in that cool weather, it used to last even longer.

"For the start, we made son papdi with real fruits with western flavours. Traditionally, our flavours for it are Kesar, Mango and Orange. For the international market, we made Blueberry and Cranberry son papdi. For this, we import Blueberry from Canada to get that authentic taste. That was a runaway success"

CC: Tell us about your overseas business.

We were exporting to the USA and the Middle East only, until three to four years ago. Our target audience was the Indians who had moved there. We pondered as to whether we could make products that are versatile which would appeal not just to the Indian consumer but to locals of that country.

If a supermarket in the USA or UK, which has an Indian section, wants to sell our products, are we firstly compliant with their import regulations? Secondly, is our packaging, data and all presentation up to mark to be noticed on an international stage? Thirdly, are we making products, which are universally appealing? With this in mind, we started doing a lot of R&D. For the start, we made son papdi with real fruits with western flavours. Traditionally, our flavours for it are Kesar, Mango and Orange. For the international market, we made Blueberry and Cranberry son papdi. For this, we import Blueberry from Canada to get that authentic taste. That was a runaway success.

We have now made products and presented them well, with the right language and the right labelling. We have a legal team that is able to adhere to compliances for multiple countries. Australia and the UK, both have different regulations for dairy products. UAE and Singapore are relatively easy because they have been open channels for distribution for a long time. Africa is a different land where every country has a different philosophy of presentation. Some are English governed, while others are French governed. Therefore, the presentation language itself changes. All of that required building a team. Now we are more compliant than any other manufacturers of the country, who try to sell their products there. That is why our business is grown.

CC: What are your views on the food marketing enterprise in India and how has it transformed over the years?

The percolation in the market has improved for sure. It is a lot much deeper than it used to be. Many brands now stand a good chance of not just enjoying open markets but getting deeper in the rural markets because the purchase power parity has increased there. Along with the e-commerce, you are not restricted to geography at all. We can sell our products anywhere; it is now up to the brands how they want to sell their product and where they want to make it available. I think the situation in the country will keep improving as the GDP improves and there is more purchasing power in the hands of the consumers. Also, everybody will end up chasing nutrition.

CC: How did you get into e-commerce?

We started with e-commerce in 2016 but it was a very small chunk of business. We never bothered really developing it beyond a point. It would see seasonal peaks, between Ganesh Festival and Diwali, when the global demand would go up and that’s why websites were preferred. It was just before the pandemic that we put in a group level policy that we need to fix our e-commerce business. We had to build the right data structure and scalable infrastructure for the website and because if there is a sudden surge we need to have that infra to handle that. We also needed to put in place where the supply chain and last-mile delivery is also working. We built all of it and then the pandemic happened. We were lucky because whatever we built was better than expected.

CC: So it boomed through your website or through amazon...

In general, across the avenues. Now, we have definitely crossed the sales of our express stores. We are now closer to bigger express stores in terms of daily sales. It is akin to having one more store itself and it is doing well. There are still some challenges in the last-mile delivery because the infrastructure is still improving. Covid-19 has not been kind enough in terms of regulations and red zones, which are restricted. Sometimes we get an order but we do not know whether we would be allowed to service or not. So that increases the service cost. But the kind of investments that are happening and the way startups are tackling down the last-mile delivery solutions, we only see it as an increasing factor.

CC: So what is your percentage of sales in your big stores, express stores and online?

Big stores would be about 60%, the express stores would be about 35% and e-commerce would be in the range of 5%.

"There has never been a good time to be an entrepreneur and thanks to e-commerce and social media, the time to build brands is overnight, compared to our family, which took 80 years and is still a work in progress"

CC: What was the impact of the Covid-19 pandemic on the business? Any strategies that you have adopted?

We had envisaged even before the pandemic that store businesses will eventually suffer because of traffic congestions and the changing habit of people who preferred to buy from home or make it available for them in their basket when they go to a grocery store. Since 2014-2015, we have been building that business. We observed that the grocery and distribution business shot up and people were buying products much more than they would before. However, the store business suffered. Similarly, in the milk business we saw a drop because the restaurants, the chaiwalas and offices were shut. But we were able to compensate for that with the growth in the distribution chain and export chain business.

CC: Maharashtrians are still not known to take to entrepreneurship. What is your opinion about this?

I do not agree that Maharashtrians are risk-averse. What I would like to see is how can Maharashtrians as a community celebrate entrepreneurship more. Unfortunately, the ecosystem or the number of people in the ecosystem who are Maharashtrians is lesser. Therefore, the support system is much lesser. If you see other communities, they have the infrastructure where anyone who enters newly, will have people who are ready to give them business. Only, they have to work hard for it. Unfortunately, the numbers are small in Maharashtra, so people helping newcomers is relatively less. All Maharashtrians should think about how this community can be built in a much more organic manner and how can that become a supportive mechanism for new entrepreneurs.

CC: What is your advice to young entrepreneurs?

There has never been a good time to be an entrepreneur and thanks to e-commerce and social media, the time to build brands is overnight, compared to our family, which took 80 years and is still a work in progress. Because the way prosperity has changed in the generations, youngsters now have an ecosystem where parental support is much better than what would have been the case in my father’s generation. Since the ecosystem is supportive, there should not be any reason not to take a risk and become entrepreneurs. You might fail and you might learn out of it.

Secondly, the consumption story in India itself is big. We have 1.3 billion people in the country who are only supposed to get better in terms of economics. That means, they will have more power to purchase. Now the choice is about how to sell and how to make most of the numbers. If you see the current stock market boom or the influx of foreign capital coming into the country, it is because India is a consumption story, which is why they are betting so heavily on it. We also have a stable democracy at this point in time, which is a big strength that China does not enjoy. Make the most of the system and while you do that, it is essential that you do not part your equity for growth. Many times, we have seen that equity is traded for growth valuation. But that’s not how you build enterprises that last as big enterprises will buy you out. In order to be successful, all young entrepreneurs need to see long-term.

CC: What is your opinion about startups in India?

It is amazing how they are disrupting everything. Disruption creates value. I am looking forward to it. We as a family are investing in startups as well. We see that there is a big potential to harness. It is just how good their business models are.

CC: What do you think about Zomato, which got such a big IPO response?

I have a contradictory view of it. I probably have a very old philosophy-at the end of the day there is a business you are trying to run. If you are not generating profit at all, then it is not the right business. What they are betting on is the idea that they will create a habit and that in turn will make them profitable. That is bringing them valuation.

However, Zomato has made a bigger loss post listing. Now that lockdown is opening up, more people are going out and would probably order less. They argue that they have captured 10 per cent of the population. There is an 80 per cent population that could be serviceable and that number itself with that kind of funding might just change the spectrum. We have to see whether it stands the test of time. Secondly, what we need to see is that eventually is it just a hedge fund or a private equity running the business or is it the founders who are able to take a call? One co-founder has already quit recently. If founders are scaling at the cost of equity, that is the problem, but eventually, what founders envisage and what the bankers envisage would be two different things.

"As a family, we are extremely health conscious. My grandfather did work out until his last day. I make sure that I work out every day. Mostly, it is weight-training or cardio activities such as trekking or swimming"

CC: How do you keep yourself fit with all these sweets around?

That is an occupational hazard. As a family though, we are extremely health conscious. My grandfather did work out until his last day. I make sure that I work out every day. Mostly, it is weight-training or cardio activities such as trekking or swimming. Thankfully, there are a few hills around Pune so I make the most of them. Today, fitness and diet consciousness has become a trend. Keeping this in mind, we have launched M Square brand which stands for Mindful and Mouthful-the entire product portfolio is about health. It has no added sugar and is vegan-friendly. The other one is Binge which will have an array of snacks priced at `10-20 and is meant to fill your stomach. Similarly, we are now developing products that are keto-friendly, gluten-free, allergen-free to keep up with the changing eating habits of people.

CC: Tell us about your passion for music and biking.

I think I inherited that from my grandmother and my father. Both of them have been active performers in music. I got exposed to Indian classical music at a very young age. I started learning tabla as early as I can remember. I also play keyboards and drums. My two-and-a-half-year-old son too has started enjoying playing the tabla.

I was interested in motorcycles since I was a kid. I got my first bike after college. When I was in Europe, I had a colleague who had gone for installation to Saudi Arabia and there was nobody to take care of his bike. He gave it to me and I had a chance to ride it around Europe for some time and that just changed the way I looked at biking. Ever since then I have been riding adventure and race bikes across the country and continents also. This year it has minimised due to the pandemic.

CC: Tell us about your family.

I am married and my wife is an engineer. We both met at VIT and got to know each other. She works with her father who is into the business of electronics and programming. They make software, which is based on electronics and work with the defence. She did her masters in the UK and returned in 2013. After that, we got married in 2015. We have two boys. One is two-and-a-half and the other one is six months old. We also have two dogs.

CC: What is the philosophy of life that you live by?

My father and I always had an argument. He believes that we should work with such perfection that there are no complaints but I felt we should be happy if do better than what we did yesterday. We were able to reach a truce on that-let us chase excellence rather than perfection. It resonates with me.

Iconic Tastemaker

Disruption creates value. We as a family are investing in startups as well. We see that there is a big potential to harness. It is just how good their business models are of wanting to contribute or be involved in whatever way possible