BUSINESS SPECIAL.... Indore Inc’s Coming Outdoors

Indore Inc’s Coming Outdoors

Can Indore’s leading food companies leverage the region’s namkeen tradition and make it the snack hub of the country?

The very air is redolent with spices — the piquancy of chillies, the earthiness of coriander, the feisty notes of mint. This is where Indore’s oldest snackwallah, the 81-year-old Aakash Namkeen, fries and roasts about 40 tonnes of savoury snacks every day and fills them into 100,000 packets of varying sizes. Its plant at Kumedi village, about 12 km from the heart of Indore, has a production capacity of 1,250 tonnes a month.

Rajnish Gupta, director, Aakash Namkeen, says their 65 products — a medley of sev, mixtures, chiwda and chips — capture the taste of Indore. Even so, this is just a whiff of the namkeen city. Rajnish says around 2.5 lakh tonnes of namkeen is produced every day in the unorganised snack market of Indore.

The city has a centuries-old tradition of food. More than its historical landmarks, it is known for the Ratlami sev, garadu chat and poha that incongruously comes with jalebi. The city’s Sarafa Bazaar, a market lined with jewellery shops, transforms into a vast shack of snacks after sunset and remains vibrant until the early hours of morning. “A food lover anywhere in India knows and appreciates the unique taste of Indori snacks,” says Rajnish. “So, if my product is available in, say, Big Bazaar for sampling, the customer will stop to taste and take note of the brand name.”

Aakash Namkeen claims to have a retail presence in over 2 lakh outlets across Madhya Pradesh, Uttar Pradesh, Rajasthan, Chhattisgarh, West Bengal, Odisha and pockets of Punjab and Haryana. The company, with a revenue of ₹150 crore and year-on-year growth rate of 30% , occupies shelf space across 100 outlets of 10 modern retail chains, and exports one-ninth of its inventory to cities like Melbourne and San Francisco.

Indore’s oldest namkeen giant didn’t start off as Aakash though. When Rajnish’s great-grandfather Hari Lal Gupta launched the company in 1936, he had named it Prakash Namkeen after his youngest son. Hari Lal was one of the first businessmen to leverage the city’s fondness for snacks to establish a one-stop shop for all kinds of namkeen in Indore.

Much has changed since then. In 1992, the family business split into two entities. Rajnish’s father Ramesh Das Gupta renamed their unit Aakash Namkeen while his uncle Raj Kumar Gupta retained the original name. “Today, Indore has at least 500 factories and 4,000 retail outlets producing and selling namkeen,” says Anurag Bothra, proprietor, Om Namkeen.

Chipping In

Aakash, Prakash, Om and 10 other big and small snack companies have revelled in being the snack satraps of Indore. Yet, only one of them has been able to make it big: Prataap Snacks. According to the latest report by Nielsen, which puts Haldiram Foods, PepsiCo and Balaji Wafers as the three biggest snack players by sales in India, Indore’s Prataap Snacks has burst into the No. 5 slot.

A relatively newer company founded by Amit Kumat, Apurva Kumat and Arvind Mehta in 2003, Prataap Snacks got ₹265 crore worth of VC funding from Sequoia India over multiple investment rounds, with the first tranche coming in 2011. It eventually filed for an IPO in September 2017. The company, which sells namkeen, chips and extruded snacks, under the Salman Khan-endorsed brand name Yellow Diamond clocked ₹1,058 crore in sales in 2017 and had a successful IPO that was subscribed 47.29 times on the final day.

Scaling up has been a bottleneck for the other local heroes though. Some blame it on a lack of ambition, others reason their products cannot be fully machine-made because they require some personal touches to get the distinct taste.

Players like Om are happy being a big fish in a small pond. They munch on anecdotes. Its most popular namkeen is Income Tax Mixture after a 17-year-old incident in which a few income-tax professionals asked for a blend of five six mixtures during a visit to the shop.

Anurga Bothra’s father Dhanpat sold leftovers of this mixed mixture to customers and it became an instant hit. Anurag has recently launched a mixture of 50 varieties and called it the GST Mixture owing to its “complicated” taste. He now has eight standalone retail outlets of Om Namkeen — five in Indore and three in Kolkata — where he offers 350 varieties of farsan (salty snacks). He is willing to invest in product innovation and multiply the already large offerings but wants to focus on serving the customers of Indore better as opposed to expanding into other cities.

However, Prataap Snacks’ IPO has put Indore on the map of national snack giants, opening up the possiblility of mergers and acquisitions. There were rumours of Haldiram acquiring a majority stake in Aakash Namkeen. The two parties now confirm that they have a strategic tie-up, without divulging details. “The news of Yellow Diamond has created a lot of interest among VCs and investors trying to understand the space,” says Mohit Gupta, marketing head, Prakash Namkeen. The company is in the final stages of negotiations with potential investors, he tells us.

The organised snack market in India has been in an M&A phase. In April 2014, Lighthouse Funds invested ₹125 crore in Bikaji Foods, a Bikaner-based snack company that’s rumoured to launch its IPO soon. This was shortly after PE fund WestBridge Capital acquired 25% stake in DFM Foods, which sells snacks under the brand name Crax. The only difference between then and now is that the spotlight is on Indore snack makers.

Kamal Agrawal, executive director of Haldiram Foods, is wary of this sudden buzz in the category. “The market is saturating at some level. Investors are going to be careful in the near future,” he says. As per Euromonitor International’s latest figures, the savoury snack market in India grew at 20.9% CAGR in the last five years, but the growth forecast for the next five years (2017-22) is pegged at a considerably lower 8.6%.

Unruffled by these numbers, Rajnish is all set to leverage the partnership with Haldiram. He is quick to add: “We have our own recipes, spices, and an identity — that won’t change.” He shows a sample pack of a new offering: a penne-shaped extruded snack in a “continental” flavour. “This is for the younger generation,” he says. “Bhujia and sev are for a slightly older generation. The younger generation likes something new.”

Rajnish says there’s room for everyone to grow in the snack ecosystem. No single company has a nationwide presence, he argues. “There are so many locations, say, in Jammu & Kashmir or the Northeast where you won’t find the big snack brands. There’s room for everyone to grow. With the ₹5 packages we cater to the lowest income groups and these have done well for everyone in the category.”

Prakash Namkeen is trying to ramp up its presence across supermarkets and online marketplaces for its flagship products like Khatta Meetha Mixture, Laung Ratlami Sev and Albela Pyaaz.

Haldiram was founded in Bikaner in 1937, a year after Hira Lal Gupta set up his namkeen unit in Indore. The former became a national behemoth whereas the companies run bt Hira Lal Gupta’s descendants are still regional leaders. “Those Bikaner guys had fire in their belly: they moved, expanded and modernised at the right time. They made bhujia a national and even an international product. We still haven’t been able to do that with the Indori sev,” says Mohit of Prakash Namkeen.

Yellow Diamond’s Amit Kumat regretfully admits to this reality: “Just this morning, I was pulled up for not making sev as popular as some of the other snacks in my portfolio. We still haven’t been able to make it a big category.”

Haldiram’s Agrawal is rather bullish on Indore’s future prospects. “Not all bhujia makers from Bikaner have made it big nationwide. It’s all about individual aspirations. Some of Indore’s snack companies have grown to have a great influence on the category. The scenario is changing. You ask if Indore can be the next Bikaner of India. I say it already is one.”

BIG NIBBLE

Indore has a rich culture of food and over 10 big and small snack companies in the organised sector

The successful IPO by Prataap Snacks’ Yellow Diamond in September 2017 has increased investors’ interest in the city’s snack companies

Haldiram now has a strategic tie-up with the city’s oldest snack company Aakash Namkeen

Prakash Namkeen is currently in conversation with potential investors

While not all local players have the ambition to scale up, veterans are bullish on Indore becoming the next Bikaner of snack industry

Shephali Bhatt

ETM 18FEB18