Haldiram's Group - : Introduction

Over a period spanning six and a half decades, the Haldiram's Group (Haldiram's) had emerged as
a household name for ready-to-eat snack foods in India. It had come a long way since its relatively
humble beginning in 1937 as a small time sweet shop in Bikaner, in the Rajasthan state of India.
In 2001, the turnover of the Haldiram's was Rs 4 billion.

The group had presence not only in India but in several countries all over the world. Till the early
1990s, Haldiram's comprised of three units, one each in Kolkata, Nagpur and New Delhi. The
Agarwals family that owned Haldiram's were always conscious of the need to satisfy customers in
order to grow their business.

The company offered a wide variety of traditional Indian sweets and snacks at competitive prices
that appealed to people belonging to different age groups. Haldiram's had many 'firsts' to its
credit. It was the first company in India to brand 'namkeens3'. The group also pioneered new ways
of packaging namkeens.
Its packaging techniques increased the shelf life of namkeens from less than a week to more than
six months. It was also one of the first companies in India to open a restaurant in New Delhi
offering traditional Indian snack food items such as "panipuri," "chatpapri," and so on, which
catered to the needs of hygiene conscious non-resident Indians and other foreign customers. Since
the very beginning, the brand 'Haldiram's' had been renowned for its quality products.

The company employed the best available technology in all its manufacturing facilities in India.
Given the increasing popularity of Haldiram's products, the group planned to expand its
operations. However, some analysts felt that Haldiram's still had to overcome some hurdles. The
company faced tough competition not only from sweets and snack food vendors in the unorganized
market but also from domestic and international competitors like SM Foods, Bakeman's Industries
Ltd, Frito Lay India Ltd.(Frito Lay) and Britannia Industries Ltd.

Introduction Contd...
Moreover, the group had to overcome internal problems as well. In the early 1990s, because of
the conflict within the Agarwals family, Haldiram's witnessed an informal split between its three
units as they started operating separately offering similar products and sharing the same brand
name. In 1999, after a court verdict these units started operating as three different companies
with clearly defined territories. This split had resulted in aggressive competition among themselves
for a higher share of domestic and international markets.

Background Note
In 1937, Ganga Bishen Agarwal, (popularly known as Haldiram), opened a small sweet shop in
Bikaner, a small district in Rajasthan. Bikaner had a large number of sweet shops selling sweets
as well as namkeens. 'Bhujia sev,' a salty snack prepared by Ganga Bishen, was very popular
among the residents of Bikaner and was also purchased by tourists coming to Bikaner. In 1941,
the name 'Haldiram's Bhujiawala' was used for the first time.

In 1950, Prabhu Shankar Agarwal (Prabhu), along with his father Rameshwar Lal Agarwal (son of
Ganga Bishen), expanded the business by establishing a small manufacturing unit for sweets and
namkeens in Kolkata. The success of this unit motivated Prabhu to upgrade its machinery to
improve the quality of its products. As demand for Haldiram's products increased, it was decided
to scale up the company's manufacturing and distribution activities. In 1970, a large
manufacturing unit was set up in Nagpur in the state of Maharashtra (India).
In 1983, a retail outlet was set up in New Delhi. The outlet became very popular not only among
the Delhiites but also among tourists visiting Delhi. Haldiram's was able to achieve significant
growth during the 1980s and 1990s. In 1992, a manufacturing unit with a retail outlet attached to
it was set up in the outskirts of Delhi. A year later, Haldiram's syrups and crushes were
successfully launched in the Indian market.

In 1995, a restaurant was opened in New Delhi. In 1997, realizing the potential of namkeens, the
company set up a manufacturing unit in Delhi exclusively for making namkeens. To add potato
products to its existing product portfolio, machinery was imported from the US. Haldiram's
maintained high quality standards at every stage of the production process. All its food items were
prepared and packaged in a very hygienic environment.
In the mid 1990s, Haldiram's added bakery items, dairy products, sharbats and ice creams to its
portfolio. At the beginning of the 21st century, Haldiram's products reached millions of consumers
not only in India, but also in several other countries, including the US, Canada, UK, UAE, Australia,
New Zealand, Sri Lanka, Nepal, Japan and Thailand.

Analysts felt that the growing popularity of Haldiram's products could be attributed to its constant
focus on all the elements of the marketing mix. An article posted on the website
apeda.com4 quoted some of the company's strengths, "To sustain in the competitive market,
Haldiram's has endeavored stress on its product quality, packaging, shelf life, competitive price
with a special emphasis on consumers satisfaction and its lingering taste is amongst the best
available in the world."

The Marketing Mix

Products
Haldiram's offered a wide range of products to its customers. The product range included
namkeens, sweets, sharbats5, bakery items, dairy products, papad6 and ice-creams (See Exhibit I
for details of product range). However, namkeens remained the main focus area for the group
contributing close to 60% of its total revenues. By specializing in the manufacturing of namkeens,
the company seemed to have created a niche market.
Haldiram's sought to customize its products to suit the tastes and preferences of customers from
different parts of India. It launched products, which catered to the tastes of people belonging to
specific regions. For example, it launched 'Murukkus,' a South Indian snack, and 'Chennai Mixture'
for south Indian customers.

Similarly, Haldiram's launched 'Bhelpuri,' keeping in mind customers residing in western India.
The company offered certain products such as 'Nazarana,' 'Panchratan,' and 'Premium' only during
the festival season in gift packs. These measures helped Haldiram's compete effectively in a
market that was flooded with a variety of snack items in different shapes, sizes and flavors.

Pricing
Haldiram's offered its products at competitive prices in order to penetrate the huge unorganized
market of namkeens and sweets. The company's pricing strategy took into consideration the price
conscious nature of consumers in India.
Haldiram's launched namkeens in small packets of 30 grams, priced as low as Rs.5. The company
also launched namkeens in five different packs with prices varying according to their weights
(Refer Table I). The prices also varied on the basis of the type of namkeens and the raw materials
used to manufacture it. The cost of metallized packing7 also had an impact on the price, especially
in the case of snack foods. The company revised the prices of its products upwards only when
there was a steep increase in the raw material costs or additional taxes were imposed.

Place
Haldiram's developed a strong distribution network to ensure the widest possible reach for its
products in India as well as overseas. From the manufacturing unit, the company's finished goods
were passed on to carrying and forwarding (C&F) agents. C&F agents passed on the products to
distributors, who shipped them to retail outlets. While the Delhi unit of Haldiram's had 25 C&F
agents and 700 distributors in India, the Nagpur unit had 25 C&F agents and 375 distributors.
Haldiram's also had 35 sole distributors in the international market. The Delhi and Nagpur units
together catered to 0.6 million retail outlets in India. C&F agents received a commission of around
5%, while distributors earned margins ranging from 8% to 10%. The retail outlets earned margins
ranging from 14% to 30%. At the retail outlet level, margins varied according to the weight of
packs sold.

Retailers earned more margins ranging from 25% to 30% by selling 30 gms pouches (priced at
Rs.5) compared to the packs of higher weights. Apart from the exclusive showrooms owned by
Haldiram's, the company offered its products through retail outlets such as supermarkets, sweet
shops, provision stores, bakeries and ice cream parlors. The products were also available in public
places such as railway stations and bus stations that accounted for a sizeable amount of its sales.
Haldiram's products enjoyed phenomenal goodwill and stockists competed with each other to stock
its products. Moreover, sweet shops and bakeries stocked Haldiram's products despite the fact that
the company's products were competing with their own products. Haldiram's also offered its
products through the Internet. The company tied up with indiatimes.com, a website owned by the
Times of India group8 to sell its products over the Internet. Haldiram's products could be ordered
through a host of other websites in India and abroad.
Giftstoindia.com, giftssmashhits.com, tohfatoindia.com and channelindia.com enabled people
residing abroad to send Haldiram's gift packs to specified locations in India. Region-specific
websites enabled people to send gifts to specified regions. These include indiamart.com (Delhi
and surrounding areas), mumbaiflowersgifts.com (Mumbai), and chennaiflowersgifts.com
(Chennai and other parts of Tamilnadu). These websites competed on issues such as delivery
time, which varied between 48 hrs to one week, delivery charges (some websites offered free
delivery of products) and value added services (like sending personal messages along with the
gift packs).

Promotion
Haldiram's product promotion had been low key until competition intensified in the snack foods
market. The company tied with 'Profile Advertising'9 for promoting its products. Consequently,
attractive posters, brochures and mailers were designed to enhance the visibility of the
Haldiram's brand.
Different varieties of posters were designed to appeal to the masses. The punch line for Haldiram's
products was, 'Always in good taste.' Advertisements depicting the entire range of Haldiram's
sweets and namkeens were published in the print media (magazines and newspapers). These
advertisements had captions such as 'millions of tongues can't go wrong,' 'What are you waiting
for, Diwali?' and 'Keeping your taste buds on their toes.'

To increase the visibility of the Haldiram's brand, the company placed its hoardings in high traffic
areas such as train stations and bus stations. Posters were designed for display on public transport
vehicles such as buses, and hoardings, focused on individual products were developed. Captions
such as 'yeh corn hain' (this is corn), 'chota samosa - big mazaa' (small samosa10 - big
entertainment), 'yeh Kashmiri mix khoob jamega' (this namkeen item will gel well) and 'oozing
with taste' (for Rasgoolas) promoted individual products.
For those customers who wanted to know more about Haldiram's products, special brochures were
designed which described the products and gave information about the ingredients used to make
it. Mailers were also sent to loyal customers and important corporate clients as a token of
appreciation for their patronage. Packaging was an important aspect of Haldiram's product
promotion.

Since namkeens were impulse purchase items, attractive packaging in different colors influenced
purchases. Haldiram's used the latest technology (food items were packed in nitrogen filled
pouches) to increase the shelf life of its products. While the normal shelf life of similar products
was under a week, the shelf life of Haldiram's products was about six months. The company
projected the shelf life of its products as its unique selling proposition.

Promotion Contd...
Posters highlighting the shelf life of its products carried the caption 'six months on the shelf and
six seconds in your mouth.' During festival season, Haldiram's products were sold in attractive
looking special gift packs. The showrooms and retail outlets of Haldiram's gave importance to point
of purchase (POP) displays. Haldiram's snacks were displayed on special racks, usually outside
retail outlets. The showrooms had sign boards displaying mouth-watering delicacies with captions
such as 'Chinese Delight,' Simply South,' 'The King of all Chats11.'
Posters containing a brief account of the history of Haldiram's, along with pictures of its products,
were also on display at these showrooms. Haldiram's also diversified into the restaurant business
to cash in on its brand image. The company established restaurants in Nagpur and Delhi.

The restaurant at Nagpur devised an innovative strategy to increase its business: It facilitated
people who were traveling by train through Nagpur station to order food from places where
stockists of Haldiram's Nagpur unit were located. The customers could order for lunch/dinner by
sending a demand draft (DD) or cheque to the Nagpur unit or giving the same to specified local
distributors belonging to the Nagpur unit.

Along with the DD/cheque, customers had to provide information such as the name of the train,
its likely time of arrival at Nagpur, their names and coach and seat numbers. Haldiram's
restaurants in Delhi also used innovative ways to attract customers. The restaurant located at
Mathura road had special play area for children.
To cater to NRI's and foreign tourists, who hesitated to consume snack foods sold by the roadside
vendors since it was not prepared in a hygienic manner, the Haldiram's restaurant located in South
Delhi used specially purified water to make snack foods including pani puri and chat papri 12. These
promotional strategies helped Haldiram's to compete effectively with local restaurant chains such
as Nathus, Bikanerwala and Agarwals and with western fast food chains such as McDonald's and
Pizza Hut.

Positioning
The above initiatives helped Haldiram's to uniquely position its brand. Haldiram's also gained an
edge over its competitors by minimizing promotion costs. Appreciating the company's efforts at
building brand, an analyst said, "Haldiram once was just another sweet maker but it has moved
into trained brands first by improving the product quality and packaging. Through its clever
products and brilliant distribution it had moved into the star category of brands."13
Haldiram's earned recognition both in India and abroad. The Nagpur unit of Haldiram's was
conferred the International Food Award by the Trofeo International Alimentacion of Barcelona 14,
Spain for having maintained high standards in quality and hygiene, at its manufacturing unit. The
Delhi unit was awarded the Keshalkar Memorial Award by the All India Food Preservers Association
in the mid 1980s in recognition of its efforts for popularizing ethnic Indian foods in India and
abroad.

In 1994, the unit was awarded the International Award for Food & Beverages by the Trade Leaders
Club in Barcelona, Spain. The unit also received the Brand Equity Award15 in 1998. Manoharlal
Agarwal, who played a key role in the success of the Delhi unit, was included in the eighth edition
of Distinguished Leadership by the Board of Registrars of The American Biographical Institute 16.
Haldiram's was also admitted as the member of Snack Food Association, US17

The Road Ahead

In the financial year 2001-2002, the combined turnover of all three units of Haldiram's was
estimated at Rs. 4 billion. The company targeted a growth of 15% for the financial year 2002-
2003. Analysts felt that, given the competition in the industry, Haldiram's needed to develop new
initiatives achieve this growth.
The competition in the ready-to-eat snack foods market in India was intensifying. Frito Lay India
Ltd. (Frito Lay), one of Haldiram's major competitors, was expanding its market share. Instead of
directly competing with the market leader Haldiram's, the company launched innovative products
in the market and backed them with heavy publicity.

Frito Lay's product range consisted of a mixture of traditional Indian and western flavors which
appealed to younger and older generations. Its products included Leher Namkeens, Leher Kurkure
(snack sticks), Lays (flavored Chips), Cheetos (snack balls), Uncle Chips and Nutyumz (nut
snacks).

Frito-Lay was the first company to launch small 35 gm packs namkeens priced at Rs. 5 and also
the first company in the organized sector to launch Aloo Bhujia18. Another competitor, SM Foods,
introduced a range of innovative products. The company launched India's first non-wafer chips in
1988. SM offered products under two main brands - Peppy and Piknik.
Under Peppy, it had sub brands such as Cheese Balls, Ringos, Hi Protein Crispies, Potato Rackets,
Hearts, Veggie Treat, Mixtures and Minerette. Under Piknik, it had Protein Pin, Junior and Corn
Puffs. Haldiram's also faced tough competition from domestic players such as Britannia Industries
Ltd., Bikanerwala Foods and ITC.

In addition, FMCG major HLL had also announced plans to enter the snack food market. Analysts
felt that Haldiram's lagged behind competitors in offering snack foods targeted at children, who
were always eager to try new flavors in every product category. They felt that the company
concentrated too much on traditional Indian items such as Bhujia Sev and Moong Dal.
Haldiram's had in fact, taken steps to fill the gaps in its portfolio. Rajendra Agarwal, the owner of
the Nagpur unit said, "We want to expand our market by introducing snacks that will appeal to
younger people. There will be no growth in the traditional snacks category."19 The unit planned to
launch products such as flavored ready-to-eat popcorn and a product similar to Leher Kurkure.
Though Haldiram's had increased its focus on advertising and promotion in the last couple of
years, still more initiatives in this direction were necessary. Frito Lay's expenditure on product
promotion was much higher. With successful ad campaigns such as "control nahin hotha" (it is
irresistible) for the Leher brand of namkeens, the company made sure that it attracted the
attention of viewers.

According to media reports, Haldiram's lagged behind competitors in the area of customer service.
A report in Deccan Herald that Prabhu Shankar Agarwal, the owner of the Kolkata unit, was
arrested on charges of manhandling customers only reiterated this opinion. The report also
mentioned that few of the company's restaurants did not possess the minimum requirements, such
as sufficient seating arrangements and adequate parking lots.
Haldiram's also had to deal with problems created by spurious products. Some companies claiming
to be close associates of the original Haldiram's of Bikaner used the Haldiram's brand name in
their products. For example the 'Haldiram Madanlal' company claimed that its proprietor, Anil
Kumar Agarwal, belonged to the Haldiram's family of Bikaner.

The manufacture of spurious products threatened to dilute the Haldiram's brand image apart from
affecting the sales. According to some analysts, many of the problems facing Haldiram's arose due
to an informal split between its three units in the early 1990s.

The split occurred when Prabhu Shankar Agarwal, who was heading the Kolkata unit of Haldiram's,
filed a complaint in the court against the Delhi and Nagpur units, alleging breach of contract when
they opened a sweet shop in New Delhi in 1991. This led to a bitter court battle for many years.
The court delivered a final verdict in 1999, when Haldiram's units were formally split as three
separate companies with specific business territories.
The consequences of the split were a matter of concern. Though on paper, the three companies
had clearly defined boundaries within which they should operate, in practice, they did not stay
within their boundaries. They penetrated each other's territories and competed among themselves
for a larger share of the snacks market. Analysts felt that competitors would take advantage of
this split.

Since the scope for increasing market share in India was limited, these companies began to
compete aggressively in international markets. They used the internet, not only to market their
products but also compete with each other. Each company claimed that its products were superior
to those of the others in terms of quality.
For instance, an advertisement in 'haldiramusa.com', a web portal that sold the products of the
Delhi company in the US, read, "Our items come specially packed from the Original Haldiram's of
Delhi offering superior taste and superior quality, the only Haldiram approved by the US FDA (Food
and Drug Administration). Try the Delhi stuff and you will never touch the Nagpur Haldiram
packets that most grocery stores store." Analysts were of the opinion that the internal rivalry
among its own companies may lead to dilution of Haldiram's brand equity.