The Secret Sauce To Success
Ever wondered how a small home kitchen-based enterprise could become a Rs 500-crore group. A group that has got diversified interests covering baking items and condiments. A group that has cracked its way into the $13-billion FMCG industry. SMEntreprneur met Akshay Bector to learn more about the Cremica’s growth story.
The Start-up Roots of Growth
Cremica started as a small business in the home kitchen of Mrs Rajni Bector. The popularity of her ice creams, cakes and cookies forced Mrs Bector into the food business. In 1978 with an initial investment of Rs 20,000, Mrs Bector set up an ice-cream manufacturing unit in the compound of her house in Ludhiana. Cremica has now grown to be a food empire managed by her three sons.
The growth story has been no cakewalk. Many factors have contributed to it. Mrs Bector’s husband helped by putting the business on a sound financial footing as some of the early sales were done at below cost. Today, Cremica’s products command a premium.
Things changed when Cremica became a supplier of liquid condiments, breads and other foods to the world’s largest fast food giant “McDonald’s”. This stepping stone in 1996 marked the start of new opportunities for Cremica.
Growth can be seen from the way the business looks. The third generation has now joined the business with new thoughts, and new segments are lined up for the business. What Rajni Bector started as hobby out of her backyard, her sons grew it further and took it to the level of making it a leading food supplier. Now, Cremica has entered into the $13-billion FMCG space.
Together We Grow
On hearing that McDonald’s is contemplating an India entry, Akshay Bector, as a young entrepreneur, wrote a letter to the McDonald’s head office. No reply came but once a gentleman walked into the office introducing himself as a representative from McDonald’s.
The partnership started with buns and moved on to liquid condiments. At present, Cremica holds the pole position in the McDonald’s supply chain. How did he crack the code? Akshay Bector chuckles, “I guess that was what they saw in me that I could do it. For us, making profit has to be a result of good work. Generating profits should not be the sole aim. That is not wrong, but the foundation has to be good work. We aim to constantly do something new that will delight the customer.”
When McDonald’s entered India, there was not much development taking place. The quality of oil and sugar was not all right in the Indian market. It was a uphill task for a small company like Cremica to tell the biggies that the quality was not ok. The quality available today was not available at that time. “Look after the customer, and he will look after your balance-sheet” has been Bector’s philosophy that he abides by.
The tie-up with McDonald’s was a stepping stone and a foundation. It enabled the business to become financially stable. Remembering the days, Bector says, “Having McDonald’s as a customer and as a solid partner was a very big thing to the foundation of this business. The success story of Cremica would not be completed without the tie-up with McDonald’s.”
Cremica continues to remain their leading supplier in all categories. It has recently been approached for supplying McDonald’s other products across South East Asia. With this new move, sauces will be supplied to the neighbouring countries like Sri Lanka and countries out there in the Middle East and South East Asia.
Innovation Paves the Way
Being an engineer by qualification, Akshay Bector was always driven by the idea to do new things. The tie-up with McDonald’s pushed the innovation challenge on Cremica. The business expanded to sauces and various other products. Initially, it took time to cope with the demand for innovation and the company moved into tie-ups for R&D. But Akshay Bector found that the collaboration partners did not fully rise to the challenge. When Cremica took over the R&D themselves, it proved to be the biggest changing moment of the business as they developedtheir own understanding of the product.
On how innovation paving the way, Akshay Bector says, “Perhaps customers were of the view that we would not be able to keep up with international quality standards being an Indian business unit. That was the time when relationships were formed with other companies. We were to prove them wrong. And as soon as the collaborators left, we were in a position to do what we felt right. This helped take the quality and innovation way ahead. So we were to soon become a grade-A supplier and got a very high ranking.”
From there on, growth has been built on processes. To enter into new markets, happened every year later on. A breakthrough came when Cremica was keen to address the needs of Indian population for vegetarian mayonnaise. Vegetarian mayonnaise was Cremica’s innovation done for McDonald’s. On how did it come through, Bector says, “McDonald’s had to make a vegetarian burger so this innovation had to be done. That was developed with the collaborators. Some bit of technology came from them and some came from us. The collaborators were there only for the first two-three years.” Cremica’s products were made to suit the local market.
Most of the new development work was driven largely by the expectations of Akshay Bector and his wife Geeta. So Indian cooking curries were developed almost 15 years back, and Cremica found its customers in the Middle East. So there are two Indian restaurants selling food made from curries developed by Cremica. All innovation is management driven. So Bector is in the board and now his wife Geeta has also started taking a very active role. Their son Akhilesh too has joined the business and he spear headed the Opera chips project which is a preimium potato chip produced in batches rather than in a process, using olive oil.
Serving Both B2B & B2C
From the early days, Cremica was essentially a B2B business, but today about 35 per cent of the business is B2B. The entry into the consumer market was driven by Akshay Bector’s desire to make a mark directly into the consumer’s mind. He feels it is important for your customer and yourself to validate it in the open market. “As a supplier to companies, we are always living in a sheltered environment. I was very keen that we open our business to market forces and see competition. Today, our products are appreciated in the Indian market for the quality that we do. It also enables us to go to the customer with a degree of confidence.”
The B2C segment of Cremica was started in a small way in Ludhiana, Punjab, and then in Delhi. It has been there for many years and has seen many ups and downs. B2C seems to be the new target market for Cremica as they are now targeting this segment with snack foods. In the B2B space, all leadings food chains, coffee chains or pizza outlets are among leading customers for Cremica.
Building Better Focus
For quite some time the businesses at Cremica were divided under the bakery and condiments segments. In 2006, Goldman Sachs came into the group buying 10 per cent stake in Cremica. In 2010 the Goldman Sachs stake was taken over by Motilal Oswal. It was the suggestion of the investeors to create a single entity as they felt that would create better value in the market.
Akshay Bector does not feel the experience with the investor partners have yielded much benefit to the group. He candidly admits, “In the collective arrangement, it was not working out. It was holding back projects. Various segments of the family and investors were not sharing the same ideas about the business. I do believe the business cannot bend for the sake of an investor. Investor has to be careful while investing. Business will move on a natural path of wants, desires and growth. There might be times when you do not make money. There is no guarantee.”
It was proving unwieldy for the board to take hard decisions, leaving to a negative impact on innovation. The launch of Opera Chips itself was hampered by difference of approaches. The development of the snack food business was being held up, and there was an opinion that this business should be hived off and sold. While Cremica had been in the snack food business for last two years not making too much money, but Akshay was firm on his belief of not leaving the market, which was so huge.
Cremica group bought back the shares from Motilal Oswal and is in the midst of de-merging its bakery business from the condiments business.
The demerger will enable Akshay Bector to build better focus into the business. The plan is to increase the visibility of its products across all metros and big towns.
Focus on Organic Growth
Now, after all those placements and replacements, Cremica seems to be in good shape. Akshay Bector says, “The governance system is already built into the business. We do not think we need investor to just come and help us with that process. That has already been done. If the business is sound we do not need money. If it can add mutual value to existing business for acquisition we may consider.
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