Haldiram’s: Road Aheadby Udit Jain on June 14, 2007
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 Bhujia .
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.” 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.