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Venky's plans veg foray
Govindkrishna Seshan | January 04, 2006
This is a company that's cuckoo over all things poultry. The Rs 1,300-crore (Rs 13 billion) Venkateshwara Hatcheries is the largest fully integrated poultry group in Asia and markets processed chicken, poultry feed, egg powder... even poultry vaccines.
A few months ago, though, the Pune-based group hatched a new plot: it decided to jump into the biscuits and atta business. Will the idea fly?
B Venkatesh Rao certainly thinks so. The managing director of Uttara Foods and Feeds -- the subsidiary that's forayed into wheat products -- declares he wants to fill the dining table with Venky's products. "We already have the non-vegetarian half, now we want to corner the vegetarian half," he says.
In March 2004, Uttara Foods and Feeds launched Uttara atta in Maharashtra, Gujarat, Karnataka and Madhya Pradesh. The company is processing 200 metric tonnes of wheat daily and says the atta business is already worth over Rs 10 crore (Rs 100 million).
Buoyed by that success, in April 2005, Uttara Foods invested Rs 6 crore (Rs 60 million) in a new business division at Ranjangaon, near Pune. Last month, the first bakery product -- Venky's Glucose Plus biscuits -- was launched.
Venky's clearly doesn't believe in keeping all its eggs in one basket. The flour business is only one extension of the company's portfolio - it has added interests in the entertainment business (subsidiary Balaji Entertainment co-produced Bollywood hit Dus), launched Venky's Rock wines and is now considering an entry into the lifestyle products business. "There are no stoppages as long as you are an honest businessman," shrugs Rao.
Of course, the numbers need to back you up and Rao says the decision to launch atta and biscuits was meticulously researched. Besides, he adds, subsequent studies prove the reasoning was sound. Uttara Foods executives quote a June 2005 ACNielsen report, according to which biscuits and packaged atta are among the fastest growing categories in the FMCG market, with growth rates of 12 per cent and 9.2 per cent, respectively.
For their part, industry observers don't see any inconsistency in the unrelated diversification. "Venky's extension into biscuits and atta is logical since the company is manufacturing staples and gets to use its experience and network in supply chain, warehousing and distribution of Venky's products to now sell atta and biscuits," points out management consultant Namita Jain, who runs the Delhi-based Abhinām Business Management Consultants.
The company, however, has other plans. The current supply chain network isn't up to the task Uttara plans to set before it - a pan-Indian presence across all income categories. Instead, a new distribution network - complete with five new warehouses, 63 distributors, 12,000 retailers and 150 newly-hired people to increase its distribution network - is being set up.
Still, Uttara has begun small - so far, it's only covered 70 per cent of the retail outlets in Maharashtra. "We need specialised retailers who are experienced in handling FMCG products," points out Rao.
The new network will come in handy for Uttara's next round of expansion, too. The company now plans to launch olive oil and pasta, both under the Venky's brand. Already, the biscuits are branded Venky's, while the atta's tagline reads "from the house of Venky's". All products from Uttara Foods will carry Rao's signature as an assurance of quality.
Will that be enough? It hardly needs telling that the segregation of vegetarian and non-vegetarian foods in India borders on fanaticism. Can a company that is almost synonymous with non-vegetarian foods successfully market products like atta and biscuits?
"It depends on what Venky's the brand stands for - good taste or good chicken," says M G Parmeshwaran, executive director, FCB-Ulka advertising, and author of Building Brand Value.
"In India, it is a peculiar situation," he adds. "Most non-vegetarians eat meat just about once a week. And a pure vegetarian will not even enter a restaurant that serves non-vegetarian food."
Abhinām Consultants' Jain echoes a similar thought, "That these products need to be marketed to consumers with two different consumption habits is an issue." she says. "In India consumers have very strong sensibilities when it comes to vegetarianism."
Rao's not worried. "Venky's has always stood for quality food and good service," he says. Besides, he's done his homework. In March 2005, the company hired a well-known advertising agency to study consumer perceptions on the Venky's brand.
The findings: more than half the people polled (vegetarian and non-veggies) associate Venky's with chicken. But, importantly, almost as many vegetarians - 47 per cent, to be precise - are willing to try a vegetarian product from the House of Venky's.
Besides, points out Rao, the vegetarian preparations are being kept strictly separate from the poultry business - the biscuits plant at Ranjangaon and the atta mill at Ketkale are almost 100 km away from the chicken-processing unit at Baur village (all in Maharashtra).
Even if the veg/non-veg issue is resolved, it still won't be easy for Venky's to break into the atta and biscuits markets. "Brand loyalty is very high in biscuits, and even higher in the glucose segment," warns Sunil Alagh, former managing director and CEO of Britannia Industries and present chairman of SKA Advisors.
The Rs 4,500-crore (Rs 45 billion) Indian biscuits market is already packed, and competition is intense. So much so that even a giant like Hindustan Lever conceded defeat and exited the industry last year. Venky's is counting on generating interest through its new variants - milk and honey, milk and wheat, and milk and malt.Venky's marketing strategy centres on establishing a presence in the nearby markets first. Gujarat, Andhra Pradesh and Goa. The company has budgeted Rs 1 crore (Rs 10 million) each for the biscuits and atta ventures, which it will spend on advertisements in regional newspapers, leaflets, hoardings and sampling campaigns.