A game-changing pricing pitch

When Prabhu Gandhikumar, an engineer from Coimbatore, headed back home from the US in 2012, he had renounced his tags as a Program Manager, Portfolio and Windows Deployment Manager, and retail consultant with an MNC to join his family business established by his grandfather P R Doraiswamy in 1976. He founded TABP Snacks and Beverages and dared to play alongside existing MNC brands, carving a niche with an aspirational product for the lower socio-economic strata. Prabhu shares his journey in nurturing a cost-conscious product portfolio

“If you look at India’s per capita beverage consumption in comparison to that of the US, we are 30 to 35 times less than what a person in the US consumes. Even China, with its growing populace has five times more consumption. The big picture is that the per capita consumption of soft drinks or beverages in India remains untapped,” said Prabhu Gandhikumar, Founder and CEO, TABP Snacks and Beverages.

It was more than a gut feeling that Prabhu decided to foray into unfamiliar territory in 2016. Despite the packaged juices and beverages sector seemingly well-entrenched by MNC players, he had found a gap in the chain that did not cater to the bottom of the pyramid-socio-economic sector.

“When we stepped into the beverage market, we felt that the Rs.10 price range was under-served by the MNCs already present in the market. Our primary purpose was to start a company and provide people at the bottom of the pyramid with a good and tasty beverage option in that price segment,” said Prabhu.

TWEAKING THE ‘BOTTLE’ CONCEPT

In 2016, although MNCs in urban areas were thriving, they were equally challenged by the logistics of introducing glass-bottled beverages in the rural markets. “They could never go into the rural market because of the reverse logistics involved with glass bottles in these areas. It would not make any sense, given their overheads as they never existed in those markets, which therefore remained unexploited,” said Prabhu.

“If you look at it from outside, it looks like a huge competition but actually there is no competition. That is what we got into and started our venture,” he said.

Falling sales, rising local competitions, and changing customer preferences for MNC brands aided TABP’s findings into the 200ml Rs.10 beverage category. He sensed the opportunity and launched the company in 2018 with a bank loan of Rs.40 lakhs and a part of his savings to set up a small manufacturing plant in Coimbatore.

The company markets its mango and apple juices under the ‘Plunge’ brand name. Its product portfolio includes ‘Gullp’ in the refreshing beverages category, a range of snacks under the Tanvi- sub brand. Millet Might is TABP’s post-pandemic offering of a range of healthy millet and breakfast cereal range. It has also soft-launched its non-alcoholic beer, Thirsty Owl.

With a current gross merchandise value (GMV) close to Rs.35 crore, the company aims to earn a GMV of Rs.250-270 crores in the next five years. “We plan to expand our products to around five lakh retailers and reach the masses,” he said.

Prabhu’s US tryst honed his skills in capital allocation, negotiation, Operations Management, retail, Customer Relationship Management (CRM), team building and business development. He is leveraging these traits and carefully creating products to balance TABP’s rural and urban product offerings. An excerpt from interaction with Corporate Citizen.

Q&A

Corporate Citizen: What is the company’s USP?

Prabhu Gandhikumar: TABP’s USP is to provide value for money with tasty and nutritious products. We have been successfully targeting the Rs.10 beverage market and are looking at other categories including snacks in the Rs.20 segment.

CC: Isn’t the packaged beverage segment already cluttered?

During the inception stage in 2015, we observed that the Rs.10 beverage range was underserved by the MNCs present in the market. Our price and volume parity are based on pricing our 200ml beverage at Rs.10. However, other brands currently sell their 125 ml (smaller) packs Rs.10. Our driving force has been to manufacture an aspirational quality product that scores high on taste as well as packaging.

CC: Who are your consumers?

TABP’s target audience has always been the bottom of the pyramid segment, spread across both, the rural and urban poor. So, a person earning Rs.250-Rs.300 a day is our consumer. This socio-economic segment is a huge market that we have tapped for our non-alcoholic drinks by fulfilling appropriate quality and taste parameters.

CC: How do you ensure product quality at your price point?

We were clear about not compromising on our quality. In 2016, when we were testing small bottling arrangements, my daughter who was three years at the time would sample a drink directly from the bottling line which indicates our quality consciousness.

CC: What was the greatest challenge in staying afloat?

From the beginning, we had decided to target people from the lower-income group. Finding the product and positioning it right in the Rs.10 environment has helped us stay buoyant. We did not face many challenges as our targeted price to volume range remains underserved by the MNCs.

CC: How differentiated are your products?

Our primary product is beverages and constitutes a major chunk of our sales. We have a range of fruit juices, and fruit-based carbonated drink. We also have cumin or jeera-based drink.

The secondary line consists of our snack business. We are undertaking R&D to get the taste right with the snacks segment which is at the nascent stage. However, we have shaped up our direct to consumer (D2C) brand of cereals-‘Millet Might’ with completely different positioning. It is targeted at the A and A+ demographic segment and positioned as a pan India brand.

R&D – rising from the ashes

CC: What were the initial challenges in developing the product?

Being a newbie, the first hiccup was the lack of information on the formulation aspects and the ingredients for making the desired product. I approached the agricultural college in Coimbatore to gain more insights.

CC: How did you decide on the product pulse?

In 2015, with guidance and support from the Centre for Post Processing Technology at the Tamil Nadu Agricultural University (TNAU), Coimbatore, we experimented with fruit drinks at their small lab. Since the market is cluttered with mango juice, we were looking at the availability of different types of local fruits in South India, studied their nutritional value and zeroed in on papaya. We manufactured papaya juice in the university lab. It was a small batch of 1000 litres, filled 200 ml each in some 50-60 PET bottles and took it to the market. We had invested some Rs.50,000 for the pilot venture but the product failed miserably.

CC: What was the learning from the pilot fiasco?

We learnt that papaya although nutritious is considered a ‘hot’ fruit to consume and that it was not recommended for women. Despite being a hot fruit, mango has been positioned in a certain way that nobody bothers about its intrinsic qualities. So, based on distributor feedback, we entered the market with our mango juice, which was the most preferred drink followed by apple. The strategy uplifted our business and we began to grow.

CC: Was it easy to manoeuvre the market?

Initially, it was. As we approached multiple distributors, and people in the business, our business expanded gradually. We worked on constant feedback from our distributors and added new product variants including the carbonated fruit juices segment in 2017. But we suffered another pothole on product instability but overcame it.

CC: How did you overcome distributor feedback on product instability?

Our product underwent further R&D during August-September of 2017. In October-November, we soft-launched our drink and within the first two months in February 2018, our sales picked-up. But in March, we got complaints that the juices were going bad. We now had to figure out the discrepancies.

We realised that lemon by itself is an unstable ingredient. At the R&D testing stage, temperatures maintained are between 20-24 degree Celsius, but distributors were storing it under a tin roof, where temperatures were high at 45-50 degree Celsius. This caused the product to decay, and we had to recall our products. Because we could not afford big marketing and R&D, we gradually got our product stabilised around 2018 with ongoing market studies.

Playing the market

"The urban poor or rural consumers who previously consumed buttermilk, rose and badam milk, lassi, lemon juice at juice centres have become hygiene conscious post-Covid and there has been a shift into packaged products-helping us to tap them proactively"

Building a product and pricing pitch for lower income group

CC: What is the market reach of your beverage segment?

Currently, we are present in around 1.2 lakh retail shops spread across the five states. We also have 600+ distributors and 120+ super stockists to help us reach the masses. In the next few years, we plan to increase our distribution base to at least five lakh retailers. We seek to be present in each of the taluks in Southern India.

CC: What about financial growth?

Pre-pandemic, we were growing 200% year on year, tripling in size annually. From a Rs.40 lakh turnover in the first year, we came up to Rs.26-27 crores in four years. Most sales happen around March - May. Unfortunately, Covid heightened during our peak sales period but we grew 35%-this year we are looking at 50% growth. In a normal year if we get a full season, we expect to grow about 150% annually for the next 5-7 years.

CC: What is TABP’s positioning?

Excluding the tea and coffee segment, beverages account for an approximate Rs.35,000 crore market. Of this, Coca Cola has a market share (MS) close to Rs.11,000 crore while Pepsi holds around Rs.9000 crore. Parle and Real share another good chunk of it and players like us make the remaining segment. In comparison, we are at the nascent stage with a GMV of about Rs.35 crores. This indicates the high potential of the non-alcoholic beverage market with a 14-15% growth rate.

CC: What about the drop in consumption of carbonated drinks?

It is a misconception and most reports by business consultancies and newsfeeds primarily account for the A and A+ demographic segment which are based on supermarket sales. But ground realities differ. With the increase in disposable incomes of the lower economic rung, the Rs.10 packaged product offers them an aspirational and an affordable brand.

CC: Is health not important for the poor?

The urban poor and rural consumers who previously consumed buttermilk, rose and badam milk, lassi, lemon juice at juice centres have become hygiene conscious post-Covid and there has been a shift into packaged products-helping us to tap them proactively. A labourer is a nutritionally deficient person and does not get the energy that he expends. Following workers in coal mines, I have noticed them consume packaged beverages mid-day between their meals for an energy boost.

A balanced act

"With the increase in disposable incomes of the lower economic rung, the Rs.10 packaged product offers them an aspirational and an affordable brand"

With wife Brindha Vijaykumar who manages IT and HR Operations

CC: What is your distribution strategy?

In India, unorganised distribution channels comprising of the local kirana stores, the corner mom and pop shops and hawkers wield 70-80% of the market. We, therefore, sell our products to the super-stockists who use their distributors to reach these corner shops. Lately, bigger distribution channels have been approaching us given our recent product uptake.

CC: How have your brands fared?

Beverages make up 95% of our overall sales, especially our brands Plunge and Gullp have a good track record across five states in South India and in Odisha. Tier I market, like Chennai and Bengaluru have also seen a good uptake. We will be restricting ourselves to South India for at least the next 3-5 years as part of our vertical growth plans.

CC: Which are your promising markets?

We have a strong presence in Tamil Nadu and Karnataka with a promising growth potential across Andhra Pradesh, Odisha and Telangana. We plan to launch in Maharashtra and Goa and explore markets from Surat to Kolkata.

CC: What about production capacities?

We have a manufacturing facility at Coimbatore for all our beverages. Bottling takes place at six locations at Chengapalli, Krishnagiri, Dharmapuri, Mysuru, Chennai and Aurangabad. Our snacks are manufactured at the Coimbatore and Tiruchengode facilities. To meet the future demand, we are scouting for a third-party manufacturing unit in Odisha and northern Andhra Pradesh.

CC: How did you sustain the pandemic?

It was sustainability ‘on the go’ and was a fallout of how we had laid the foundation of TABP. We built it very frugally without much overheads which was done consciously as we had to sell a Rs.10 product. The margins expected were in paisa, and we would have to chase every single rupee. Therefore, we built the company on an asset-less model and went on to bottle our own drink. We kept as little cash burn as possible during the good days which helped during the pandemic. We were not drastically affected, despite some losses in margins. We have enough ammunition to survive.

Back to the future

CC: Are you planning to raise funds in the coming months?

We are seeking to raise funds between $1 and $1.5 million in the next 12 to 18 months to fuel our future growth engines in building and marketing our proposed Rs.20 energy drink. This will require a bit of innovation and marketing spent. We aim to change consumer behaviour by shifting tea and coffee drinkers to opt for a drink in the lines of products like Red Bull or Monster. Existing products in the category are priced at around Rs.70-Rs.50 per can (for 250ml to 350ml volumes). We are relying on family offices and angel funds for the project.

CC: Does the market need low priced energy drinks?

The current energy drinks market is targeted at clubs and party-goers who might not need the extra energy. It is the Swiggy, Ola, Uber, a taxi, or a lorry driver who drives for more than 17-18 hours and are in the real need of an energy drink. They could do with a booster drink to get their next cycle going at an affordable price. Most people are coffee drinkers but an energy drink could be refreshing in the summers and help them chill at night.

CC: Any other plans?

We are checking the viability of millet-based snack products. What happened to carbonated drinks with the A+ segment picking up healthy drink options is happening to the millet too. People want to consume healthy products as their grandmothers did and none can deny the versatility of the humble millet.