An interview with Rajesh Gandhi, MD Vadilal Industries Ltd.
Vadilal Industries Ltd has earned the reputation of being popularly acclaimed as one of the leading processed food brands of the country. While speaking to Restaurant India, Rajesh Gandhi speaks about the different retail formats the brand has been using over the years.
What is your strategy to increase penetration through modern retail formats?
With the entry of many multinational ice-cream brands in the market, it has become imperative for us to reinvent our strategy to consolidate leadership.
So far we have been able to build a very strong distribution network of 50,000 retailers, 250 SKUs, 550 distributors, 32 CNF and 250 vehicles for delivery of goods. Through the franchisee route, Vadilal has set up over 140 ‘Happinezz’ retail outlets for selling ice creams and new ones are coming up every month.
Apart from the retail chain of ice-cream under the Happinezz brand name, Vadilal also started shop- in- shop parlours. The parlour is a low investment formats that caters to the Tier II & III cities essentially. It has made our business partnership accessible to a small entrepreneur also.
We have around 24 company owned parlours and 200 franchise based parlours in Gujarat & Rajasthan. Targeting 100 percent growth every year, we plan to focus on its aggressive expansion in Uttar Pradesh, Madhya Pradesh, Haryana, etc.
What percentage of your products gets retailed in a store directly and through distributors?
Our company owned and franchised model - ‘Happinezz’ format retails almost all the ice-cream, frozen desserts, milk shakes of the country. While the traditional formats depending upon the infrastructure, space and local requirement specific to taste and preferences, retails anywhere between 25-75 percent of the product range of Vadilal.
In case of processed foods segment, by appointing many new distributors, Vadilal has extended its market reach with its strong supply chain network. Moreover, this year Vadilal aggressively entered into many big format modern trade stores to showcase presence at every hyper, super markets and cash & carry stores like Bharti-Walmart’s ‘Best Price’, Trent’s ‘Star Bazaar’, Reliance and others to name a few.
What are the challenges you faced in doing business with organised retail & how can they be effectively overcome?
Lack of an efficient cold chain infrastructure and a disturbed power supply are some of the burning issues for the ice cream industry. An efficient and effective supply chain can be built with technological assistance that will help ice cream players to expand distribution network and focus on detailed penetration in semi-rural as well as rural areas.
In the year 2013-2014, company also looks forward to expand its operations to Delhi and regions around Delhi. In the next five years, company aspires to be one of the leading frozen foods brands of India, with a special interest in modern retail. Understanding the importance of modern retail, Vadilal Quick Treat is strengthening its availability at all leading hyper markets and cash and carry formats in the areas of its presence.
Distribution definitely plays a key role in the success of our business. The company is planning to increase its reach in the existing market in terms of consolidating its presence in cash and carry format as well as the modern retail segment. Ice-cream being a cold chain product, the logistics is complex and the company is continuously expanding its cold chain distribution network through refrigerated vehicles and deep freezers.
We will increase the physical touch points with our consumers through ever expanding dealers, Fridge on Wheels (FoW) and Ice-cream parlour network.
How do you design your marketing strategies to get maximum reach?
In terms of marketing, the company ensures maximum reach through an optimum mix of ATL and BTL activities. The company utilises various communication touch points like retail, outdoor, print, TV, Internet, etc to get the brand message across. In terms of sales promotions, we are constantly engaging our trade patrons through various schemes. And we also do consumer promotional activities from time to time. Just to give an example, last year, the company has a ‘surprise gift’ available with each candy of ice trooper. This year, the company offered ‘innovative ice-cream sticks’ in the ice trooper- another first for the Indian market.
How do you manage your supply chain?
By appointing many new distributors, Vadilal has extended its market reach with its strong supply chain network. Moreover, this year we aggressively entered into many big format modern trade stores to showcase presence at every hyper, super markets and cash & carry stores like Bharti-Walmart’s ‘Best Price’, Trent’s ‘Star Bazaar’, Reliance and others to name a few.
Which kind of retail format gives you increased revenue?
Although traditional brick and mortar shops still dominates in terms of sales and more volumes, company owned formats of Happinezz gives the company better realisations and commands better margins as compared to traditional shops as it focus on premium and high end ice-cream products.
What is the ratio of profit gained by both the retailers and manufacturers?
Retailers are getting an average 20 percent gross margin and manufacturers are earning 2 to 4 percent margin of the trade.