SONIC BIOCHEM EXTRACTIONS

LIMITED: Succeeding By Innovation

Girish K. Agrawal
Rinku Joshi
 What is the Case about?
• India based Matlani Group
• Under threat of competiton from MNC’s sold business
• Ventured into new businesses, under a non-compete
clause
• Turnover expected to reach Rs. 3 billion
• Case describes
– Growth path
– Skills and resources used by Group
– advantages, challenges and constraints faced
 Before SBEL
• Group started with SEPL-manufactured mosquito repellant
mats
• Plant set up in Pithampur; achieved turnover of Rs. 371
million and 25% market share
• Sumitomo licensed technology to another firm and captured
50% share
• Opening up of economy led to attempts at monopolizing by
Sara Lee and Godrej
• Forced to sell the business, left with factory, machinery and
workforce; also retained the top executives for future
ventures
 Entry into New ventures
• Construction business of Rs. 50 million-continues
till date
• NBFC with outlay of Rs. 140 million- withdrew
reason being shrinking margins
• Consumer products manufacturing for hygiene
care with outlay of Rs. 10 million- the venture
didn’t work out too
• SBEL and set up a solvent extraction refinery in
Mandsour with 100 tons/day of refining capacity
 Sonic Biochem Extractions Limited (SBEL)
• Long term plan to manufacture value added products derived from
Soya bean
• Currently manufactured Soya Oil and de-oiled cake(DOC)-low
margin business
• Products being commodities exposed to price fluctuations hence
business not stable
• Old marketing team was replaced with experiences personnel
because of failure
• It was then decided to focus on higher end extracts aimed at
industrial markets
• Remodeling of Mandsour plant with investment totaling up to Rs.
140 million
 When did problems start for SBEL
• Products being industrial product quality meeting with
buyer approval was time consuming and a blind alley
process
• Tough marketing challenge as soyabean is not a staple
food
• Period of 1999-2004 had low sales and asset utilization,
high interest costs and burgeoning losses
• Sale of business was not an option
• Proposed bankers to reschedule debt while they infused
capital to fund losses but they persisted with the product
 Product development and certifications
processes
• Started with getting available technical people
and gather information from trade and
specialists
• Developed the product in in-house lab
• Feedback taken from buyers and help taken
from consultants abroad
• Worked intensely with educational and
research institutions
 Advantages of the process SEBL followed

• Generated scalable knowledge which helped to

develop new uses so a new industry could be
tapped
• Involvement of people from the firm with
researchers helped in convincing the customer of
product benefits as greater knowledge generated
• Above interaction promoted application oriented
research
• Helpful in generating technology at lower cost
 Breakthroughs
• Convincing of a large national bread
manufacturer only after success of trial run
which translated in net gain for buyer
• Arabic firm bought SBEL’s product when the
firm ran out of supply which made it realize
the obvious benefits and now SBEL is a regular
supplier
 Technology Development
• Setup a R&D lab recognized by Department of
Scientific and Industrial Research
• Continuous interaction with researchers , post
graduate students and marketing people of the
firm
• Instances include developing a drier based on
knowledge gained from repair
• Technology development efforts approved and
rewarded under Government schemes
 Human Resources
• Retained some of the key people from SEPL which
consisted of personnel from marketing, product
development, manufacturing and finance
• Marketing team replaced as team could not make
success of either hygiene or consumer products of
Soyabean
• Focus on upgrading skills of all personnel and 15% of
annual performance evaluation was devoted to new
skills learnt by employees throughout the company
 ISSUES FOR DISCUSSION
• Matlani’s decision to invest in several
businesses in 1995
– Risk diversification(because of past experiences)
– High availability of capital(Rs. 300 million)
– Opening up of economy led to new opportunities
– Government incentives in terms of subsidies and
tax reliefs
– Managerial hubris
 ISSUES FOR DISCUSSION
• Strategic options in 1999 for SBEL for survival
and growth
– Volume game
– Advanced value added products: strategy finally
adopted
 ISSUES FOR DISCUSSION
• Amount of risk a firm can endure when
pursuing unique strategy which breaks
industry boundaries
– Can assume risk till loss accumulation doesn’t eat
into reserves and surpluses
– Can assume a major amount of risk as Matlani had
a very innovative technology
 ISSUES FOR DISCUSSION
• What industry boundary Matlani breaks
– Volume games break
– Foray into international markets
– Non-GMO international certification of ‘CERT ID’
from UK
 Alternatives in 2004
• Invest more in the traditional business by
increasing capacity
• Sell under private label for the retail players
• Import technology for value products