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Jun, 01 2009

Baskin Robbins - Growth despite challenges

It was in 1990`s when the Indian economy became liberalised. It encouraged the inflow of foreign direct investment (FDI) in India.

It was in 1990`s when the Indian economy became liberalised. It encouraged the inflow of foreign direct investment (FDI) in India. Subsequent to this, many international brands made an entry to this lucrative market to set up their strong foothold to get the instantaneous recognition. Many of the brands got success after the foray while others had to go through hard times to settle in India. The reasons could be many but the matter of interest is to identify - what went wrong with the brands that entered India and how did they manage to triumph over challenges in their way? To clear all doubts, we had selected Baskin Robbins, a popular brand of USA which had been in the country for more than a decade. Soon after its entry, it became difficult for the company to proceed further in establishing its grip at first in India. After all initial hitches, some alterations were made in the brand to take it to the pillar of success.

India entry

Baskin Robbins was founded by brother in laws Burt Baskin and Irv Robbins in California, USA in 1945. By opening its first store at the Mumbai suburb of Juhu, Baskin Robbins made its entry into India as a joint venture with the Ghai Group in 1993.

Challenges - After the launch

After the initial heydays of the brand launch, the business faced a lot of challenges in expanding operations given that it was perceived as a highly priced premium product and not easily accepted by the masses. Ice cream consumption has traditionally been very low in India – the per capita consumption of Ice-cream in India is one of the lowest globally. These factors did make business expansion a challenge and the fact that there was no single premium ice cream existing at that time straight away, and as a result lot of customers tagged Baskin Robbins as expensive.

To elucidate his point Pankaj Chaturvedi, CEO, Baskin Robbins says, “I don`t think making profits in the 11th year should be read as mistakes. Even today, a lot of international brands (food and otherwise) are not close to even breaking, even despite being in India for over a decade. I think; it is more a learning curve which every business has to face – ours took 11 years – sure along the way, we have taken a lot of decisions - some right and some wrong but no single decision can be said to have turned the fortunes overnight.” He further says, “What is important is that as a brand, we believed in the potential of the business in India and stuck to it through thick and thin, and today we are in the enviable position of having a profitable business with strong growth.” The company`s belief in the potential of the country never wavered - the leap off point came in 2004 when the company turned the corner for the first time and since then it never looked back.

Franchising – best way to grow

In 1994, Baskin Robbins started franchising. It follows a franchising model where ever it goes. To diminish the risk of brand failure in India, Baskin Robbins took some measures to save the business. The company took the most important decision to scale back the store sizes of its franchise model to ensure that the franchisees could run a compact profitable model not hamstrung by high rentals. This resulted in having more successful franchisees which is the bedrock of any franchising business.

Revamping brand image

Baskin Robbins took a call in 2001 to really ramp up its institutional business in order to de-risk the model by having diversified streams of revenue. This step helped the company in getting through some tough times in the initial period of restructuring started after Pankaj Chaturvedi took over the business reins in 2001. The company took the important decision to completely revamp the brand image in India in the same year. The step was necessary as it infused a new life into the brand and an excitement in the consumer market. The initial period was spent in understanding the business, its opportunities and threats, strengths and weaknesses and identifying gaps. The key focus lay on ensuring franchisee profitability which to an extent had been missing in the past couple of years. This was done through a slew of measures including resizing stores, relocating some low-performance stores, helping franchisees to revamp their stores through incentives, etc.

Key to sustain business

Baskin Robbins has over 3500 outlets in USA. While in India, the company currently have 350 + outlets. By 2009, Baskin Robbins is planning to open 80 – 100 stores. In the end, Chaturvedi suggests that there is no secret recipe to success – the only way is to be ready to accept mistakes, embrace change and not be overtly reactive. It is important to have patience and ability to sustain through hard times.

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