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THE TASTY BITE STORY

Case Code- MKTG015 Publication Date -2001 Tasty Bite is a company that has virtually risen from the dead." - A & M, in October 2000 THE TURNAROUND In September 1998, stock market followers were surprised when the scrip of Tasty Bite Eatables Limited (TBEL), a small Ready-to-Serve (RTS)1 food company, reached Rs 36. This was a 930% increase over its 1996 price of Rs 3.50. What was even more surprising was the fact that till September 1998, TBEL was a Board for Industrial and Financial Reconstruction (BIFR)2 case. Launched in the early 1990s, TBEL products were rejected by Indian consumers. Analysts said that the products had been launched 'ahead of their time' in the Indian markets. (TBEL products were made available in a pouch, which had to be boiled before serving.3) Moreover, the fact that the products were priced very high added to their lackluster performance. However, TBEL not only became the first Indian company to get itself de-registered from BIFR within a year, it also emerged as the largest brand in the US ethnic foods market. In 1999, the company posted its first ever profit of Rs 4.71 million. By the end of 2000, TBEL had become a $ 5 million brand in the US retail market and its products were available in 6,000 stores across the US. THE BACKGROUND TBEL was formed in 1986 by Ravi Ghai (Ghai) and Ravi Kiran Aggarwal. Ghai was also the owner of the ice-cream brand Kwality, which was the market leader with a market share of over 50%. TBEL set up a unit to process 10,000 tonnes per annum (tpa) of frozen vegetables and 5000 tpa of RTS foods at Khutbao and Bhandgoan villages of Maharashtra at a cost of Rs 55.5 million. In February 1987, TBEL brought a public issue of Rs 7.5 million. The company commenced production in February 1989 and launched its first RTS products in 1990. Following a lukewarm response in the Indian markets, in 1991, TBEL introduced its products in the Middle East, Russia, and the US. The company did not fare well in these markets either. The lack of a focussed marketing approach was considered to be the main reason for its failure. In 1992, TBEL entered into a collaboration with the beverage company Pepsi. Pepsi was interested in collaborating with TBEL because government regulations required it to generate one dollar in export sales for every dollar it earned in India. Pepsi agreed to distribute TBEL's RTS products abroad and help TBEL upgrade its facilities. In 1994, when the government abolished the export requirement norms for MNCs, Pepsi decided to walk out on TBEL, claiming that it would rather concentrate on its core business of soft drinks. In 1995, ex-Pepsi executives Ashok Vasudevan (Vasudevan) and Kartik Kilachand (Kilachand), who had been involved with TBEL earlier while they were in Pepsi, decided to market TBEL's products in the US. Their US based natural food marketing and distribution company, Preferred Brands International (PBI), acquired the exclusive marketing rights for TBEL's products. In 1995, PBI launched five TBEL products in Southern California, and later expanded the business to other parts of the country also. By the end of 1995, TBEL was in serious financial trouble due to excessive borrowings. Poor response to its products and poor capacity utilization took a heavy toll on the company's financial health. In 1996, HLL acquired the Kwality ice-cream brand and took over Grand Foods, the holding company of Kwality Frozen Foods. Grand Foods happened to be the holding company of TBEL as well, so TBEL now became an HLL company. However, TBEL continued to perform badly and by March 1997, the accumulated losses touched Rs 96 million. TBEL was declared a sick unit and referred to BIFR. Vasudevan, who had worked with HLL for about a decade before joining Pepsi, convinced HLL's management to get TBEL de-registered from BIFR by providing financial assistance. While TBEL's equity capital remained Rs 20 million, the HLL group turned its Rs 120 million unsecured loans into preference capital at a premium of Rs 19.50 per share. As a result, TBEL's net worth turned positive and the company was de-registered from BIFR. HLL began using TBEL's idle capacity to process its own products and also initiated efforts to make TBEL more market savvy to survive in the competitive markets THE TURNAROUND STORY

The second 'C' of the strategy . PBI worked very hard to offer its customers products beyond pickles. Conversion. . This in-house sourcing of raw material enabled TBEL to maintain quality standards besides reducing its dependence on others. Thus. PBI realized that the average American customer was not able to understand the products being offered and their Hindi language names did not make sense to the customers. PBI also began advertising through sweepstakes9 at the retail level and in-store demonstrations. This also helped in lowering advertising costs significantly.000-tonne cold storage facility for storing ice cream. products were renamed in English for instant identification and easy understanding. spices and papads7. As a result of this. PBI appointed Ravi Nigam (Nigam) of Britannia Industries as the President.collaboration addressed the necessity of attaining optimum utilization of TBEL plant capacities through collaborations. The company found that its potential customer's age group was between 25-54. capacity utilization of the plant reached 90% in 1998-99. The new management worked out a strategic initiative. The company thus decided to launch a wider range of products specifically targeted towards local US customers. Even with a narrower base of natural food store chains.concerned entering into conversion contracts with the National Dairy Development Board (NDDB) and the Maharashtra Agricultural Development and Fertilizer Promotion Corporation (MAFCO) for utilizing TBEL's individual quick freezing (IQF4) facility at its plant.000. as unlike mainstream food in the US. it decided to launch the Tasty Bite range in the $5 billion natural food category8 through mainstream retail chains in the US.The fourth 'C' .' 'Navratan Korma' became 'Jaipur Vegetables' and 'Alu Chole' became 'Bombay Potatoes. The company's expansion plans required a considerable amount of money. Unlike other Indian food companies. which was named the '4C approach.000 to each of the 200 stores it had shortlisted. Maharashtra.In 1997. Earlier. the company undertook a cluster analysis 5 study in various US cities and generated a demographic profile6 of the customers they needed to concentrate on. This reduced the amount of payments to be made to stores from $ 2 million to a more manageable $ 800. Indian food was not consumed in large quantities. The company also planned to expand its business globally as well as in India. HLL decided against venturing into the frozen foods business. The third 'C'. A decision to enhance the business through e-business was also taken. Payments for placing a product in just one store of a chain in US ranged between $ 5000 and $ 10. it was difficult for PBI to pay $ 10.000. Collaboration and Cultivation. After some intensive research. The company thus decided to slash the product portfolio from 25 to 8 and retained only those products that were familiar to the American consumer. products were sold in pack sizes that ranged from 200 gms to 1 Kg. TBEL employed the local farmers and trained them in hi-tech methods of cultivation for producing high quality vegetables.cultivation . The recipes were also modified to suit the western palate. PBI also modified the packaging to suit customer requirements. pulp and vegetables was leased out to HLL and Tropicana (a juice brand from Pepsi). TBEL's 2.' and so on.' for reviving the company and turning the business around The four Cs strategy divided the core business into areas that needed to be focused on: Concentration. Consequently.was reflected in the initiatives taken at Bhandgaon. The smaller pack size motivated the consumers to give the products a try. Also. The company also focussed on increasing the Americans' understanding of Indian food.conversion . By August 2001. where the company's 25-acre farm was situated. A smaller list of stores also led to a more focussed distribution strategy.000 a year. TBEL decided to invest in intensive research for its RTS products. This helped the company narrow its focus and reduce its list of stores from 200 to 80. To overcome this problem. 'Palak Paneer' became 'Kashmir Spinach. As part of "Concentration. with average earnings of $ 75. thus enhancing awareness and encouraging customers to experiment. it sold TBEL to PBI. This was replaced with a standard size of 300 gms.

TBEL began reaping the benefits of its turnaround efforts and recorded a net profit of Rs 4. TBEL began working towards repeating its export market success in the domestic market. its products were available in 27 US states through 33 leading natural food stores and mainstream supermarkets." TBEL management felt that the Indian market had become mature enough to appreciate the convenience and value of RTS foods. Tasty Bite products. This attitude was mainly attributed to the shift in the preferences of consumers and readiness of Indian consumers to experiment with food. Mumbai. Bombay Potatoes (Alu Chole) had become a common side dish for many Americans. Prepare a detailed note outlining the major components of TBEL's turnaround strategy and comment on their efficacy. TBEL was the largest brand in the category. TBEL divided the Indian market into two broad segments: the domestic segment focussing on working women. TBEL's profits increased nearly three fold to Rs 13. therefore.42 million (Refer Table I). By 2001. By 1998-99. the working woman is not guilty about eating outside food at home. Examine Pepsi's and HLL's involvement with TBEL. According to SPINS. A renewed focus on customer service was one of the key components in TBEL's turnaround. Switzerland and UK was also showing positive results FUTURE PLANS In September 2000. MTR and Amul had also entered the Rs 10 billion Indian RTS food market.' QUESTIONS FOR DISCUSSION 1. HLL. Bangalore. This also meant that a store shelf now accommodated nine packs as compared to the seven earlier." TBEL was optimistic that its earlier dismal performance in the domestic market would not be repeated. . are designed to collaborate and not compete with the new Indian woman. TBEL also started conducting research for launching RTS sweets and non-vegetarian food. airline flight kitchens and the Indian Army and Navy. showed that 73% of Indian consumers preferred to have traditional Indian meals in the RTS format rather than western food. By 2001. TBEL decided to launch the products nationally by the end of 2001. The challenge. A national study on the food and grocery sector GROFAST (Grocery and Food Advantage Study). Also. an agency that tracked the market shares and consumer preferences of natural food brands in the US.the pack size was changed to 285 gms (10 ounces) to bring it in line with American standards of measurement. The company also decided to spend 40% of its domestic revenues to launch a billion brand-building campaign during 2001-02. By the end of 2000. A TBEL source remarked. the task in India is daunting. Do you think that their fleeting interest in TBEL was disadvantageous for the company? Give reasons to support your answer. Chennai and Hyderabad without much advertisement and promotion support. but is more the manager of the household. TBEL's entry into Holland. is to first establish the category and then associate it with the brand. "In India there is a paradigm shift among women. Encouraged by the good sales reports. therefore. and the institutional segment comprising fast food restaurants. conducted by KSA Technopak.7 million. hotel chains. TBEL planned to increase its turnover to Rs 1 billion by 2003. Nigam said. TBEL launched its products in Pune. The Indian woman is no longer just a housewife. "Although Tasty Bite is the No. Dabur Foods. The company seemed to be working hard to fulfil Kilachand's vision of becoming 'the most respected food company in India. 2. 1 selling Indian food brand in the US.