CASE 8

Rasna’s Piruz Khambatta: The Homegrown Powdered Beverage King

This case study is based on our video interview of Piruz Khambatta, Chairman and Managing Director (CMD), Rasna Pvt. Ltd.

SYNOPSIS

Rasna Pvt. Ltd. is one of the most awarded and respected family-owned business houses and one of the largest manufacturer and exporter of beverage and processed food in India. Rasna created a category of soft drink concentrate in the beverage category and continues to dominate the segment with a 90 percent market share. Today, the company has the largest capacity in Asia to make powder concentrate with seven facilities spread across the country. For over three decades it has been successful in decimating the MNC biggies in the powdered beverages sector.

Rasna’s Unique Distribution Strategy: Rasna has a significantly large distribution network consisting of 35 depots, 2,500 stockists, 1.8 million retail outlets and a sales force of over 700 across the country. Rasna’s strong and proactive marketing and sales setup around the globe helps millions of its consumers experience the flavour of satisfaction. Rasna’s products are available in more than 40 countries worldwide.

Today Brand Rasna is setting its sights much higher than before. It has finally bid goodbye to its childhood and ‘I love you Rasna’ era. With its new TV campaign, Rasna hopes to appeal to a more youthful audience. The question remains: Will Rasna succeed in repositioning its brand image?

INDIAN BEVERAGE INDUSTRY

With consumers becoming increasingly aware of the different beverages available, the need to innovate and provide healthy solutions is growing. This is visible in the growth rates that juice drinks have seen vis-à-vis carbonated beverages. The overall ready to drink (RTD) market, including carbonated drinks, is around ₹15,000 crore. The fruit beverages market is estimated to be around ₹5,000 crore. While the RTD juice-based market, at about ₹2,500 crore, is just about one-fourth the size of the ₹10,000–11,000 crore carbonated beverage market, the growth in this segment is nearly double the latter, at 25–30 percent a year. Carbonated beverages have been growing at 15–20 percent a year (see Figure 8.1).

RASNA’S PHILOSOPHY

Rasna’s philosophy rests on producing and marketing the best of products and developing long-term relations with the consumer; the company’s strength in the area of manufacturing, research and development, marketing and distribution is well recognized across the world. The company holds steadfastly to its commitment to excellence, a commitment to being one of the largest soft drink concentrate manufacturing companies in the world (see Figure 8.2).

It is a family owned ISO 9002 and HACCP Certified Company.

It has also been awarded with The International Taste and Quality Institute (ITQI) award, and a host of other awards and accolades. The company has also been ranked 17 in top 100 most trusted brands by The Economic Times Brand Equity Survey – 2013.

INTRODUCING PIRUZ KHAMBATTA

Piruz Khambatta has been associated with the Rasna brand since 1997. Khambatta’s accomplishments are due to his diligence in developing innovative concepts, such as the pioneering ‘Relish a gain’ corporate strategy, the introduction of the revolutionary Rasna ‘Ekka Do’ (cited as the single biggest attempt by a company of this category to grow the market). Khambatta has been conferred Asia Pacific Entrepreneurship award (2009), instituted by the prestigious Enterprise Asia (a premier Asian NGO with governing board comprising of past and present ministers of Asian countries).

Khambatta also has a bachelors degree in Biochemistry and also in Law.

THE STORY BEHIND RASNA

In 1976, Pioma Industries introduced a ready to drink mix product called ‘Jaffe’ to the Indian market. ‘Jaffe came from the name Jaffa, a variety of oranges,’ says Piruz Khambatta.

‘As no one really understood the term “Jaffe” and the Indian consumers would not identify with it, the name was later changed to “Rasna”, which comes from the word ras, the Hindi equivalent of juice,’ he explains. This is the story behind the origin of the brand that practically defined for children a summer quencher in the ‘80s and ‘90s.

Khambatta represents the third generation of a family business that has owned and managed the company since its inception. Khambatta’s grandfather had a factory that produced flavors and soft drinks, but it was his father, Areez Khambatta, who launched Rasna.

When Piruz Khambatta joined the business at the age of 18, the product was a powder concentrate and a bottle of liquid. ‘It wasn’t made with very high fruit content initially, but we came up with new formulations and a new range of products,’ he says. It helped that Khambatta was a student of biochemistry at that time. In 1977, not long after Pioma Industries’ product hit the market, Coca-Cola withdrew from India due to regulatory hurdles. This opened up more space for Indian beverage manufacturers, including Rasna.

The brand grew consistently over the next few decades to the point that it now claims to have a 93 percent market share in the powdered soft drink concentrates segment with a large array of products. ‘We are the Amitabh Bachchan of our category,’ Khambatta says with pride.

Rasna’s Product Offerings

• Powdered Soft Drink—FRUITPLUS: Orange, Mango, Pineapple and Guava
• Soft Drink Concentrate—FruitFun: Orange, Mango, Lemon, Cola Cola, Kala Khatta, Shahi Gulab and Pineapple
• Squash: Orange, Mango, Pineapple and Grape
• Glucose
• Ekka Do (2 for ₹ 1): Orange and Mango
• Ju-C—Ready to drink fruit beverage: Apple, Mango, Mixed and Orange

RASNA’S CORPORATE ORGNISATION STRUCTURE

RASNA’S SUCCESSFUL FIRST MOVER STRATEGY TO WARD OFF THE MULTINATIONALS

In the ‘90s, multinational players re-entered the beverages market. Eventually companies like Coca-Cola, Kraft and others also entered the powdered soft drink concentrates segment with products like Sunfill and Tang. However, they met with limited success in the segment, despite their success in the overall soft drinks market. They were also unable to dislodge Rasna, which had its roots firmly entrenched.

Besides its first mover-like advantage, Khambatta says that the company has constantly invested in innovation and has remained focused on the category, which helped it keep others at bay. Apart from introducing products with higher fruit content and increasing focus on the health aspect of the product, Rasna also brought in a number of innovations to keep the prices low and affordable for its lower middle-class and rural customers.

A much-talked-about strength of Rasna over the years has been its focused marketing and advertising initiatives. ‘Distribution has been another one of our strengths,’ Khambatta says. The company has 700 people on its payrolls working on the distribution of Rasna’s products, he informs. ‘We have not relied on third-party distribution, even in the smallest of towns,’ he says.

In 1993, Rasna began international operations and the company also has offices in the US, Dubai and Bangladesh. While the focus in India remained on soft drink concentrates, Rasna also introduced easy to cook and ready to eat products in the international market.

Highlights of Rasna’s Unique Advertising Strategy

The soft drink concentrate company recognizes it has competition in the category, but is far from being daunted by it.

Leaders in Advertising

• ‘I Love You Rasna’ is one of the most popular slogans.
• Used a child protagonist to influence the Indian consumers.
• Featured many celebrities from the field of entertainment and sports, such as Hrithik Roshan, Karishma Kapoor, Paresh Rawal, Anupam Kher, Genelia D’Souza, Kapil Dev and Vivian Richards (see Figure 8.4).
• Received several awards from the advertising fraternity from its day of launch.

Rasna: The Market Leader

• Consistently at the top with a market share of 93 percent.
• Multinational brands from General Foods, Coca Cola, Unilever, and International Best Foods have not been able to match the Rasna brand.
• Rasna’s competitive strategy has forced the MNC brands to withdraw from the market.

The Strategy of Adaptive Advertising

The iconic commercials that ended with the adorable kid saying ‘I love you Rasna’ have been replaced with a new set of advertisements that reflect the new reality. ‘Today, kids have different aspirations,’ contends Piruz Khambatta. He is pretty confident, armed as he is with a study on which he’s spent over ₹ 30 lakh, to understand what will appeal to kids, his category’s drivers.

Kids have turned naughtier, and competition in the ₹ 450–500 crore market has become sharper and multi-pronged. If Fanta makes a comeback along with Funtime, then Tang is also available in sachets of ₹ 4. At the other end is what Khambatta acknowledges as competition: water and sherbets. All the way between the Tangs and the sherbets of the world are innumerable regional brands of all hues.

The Strategy of Unique Pricing and Innovation Strategy

Khambatta states, ‘At Rasna, based on what the customer wants we have made our products juicier and fruitier and with more vitamins, glucose, calcium, and so on. I believe that as we have to dress with the times, so also, products too have to keep pace with the times. I could proudly say that most of our products have kept pace with the changing times and most importantly, the heart of Rasna is the value-for-money proposition that we offer our consumers. People consume Rasna because they find it value-for-money. Even today after so many years, we still remain one of the most value-for-money soft-drink companies in India. At ₹ 2 nobody can give you as much vitamins and calcium in a juice, which is just as fresh as freshly squeezed juice. In fact, I think the biggest challenge is to keep the price-point at ₹ 2 itself. My products have been priced at ₹ 1, ₹ 2 and ₹ 10 for the past ten years and they haven’t changed as yet despite the slowdown and rising inflation. That is the strength of our strategy and the direction that we want to take as a company.’

RASNA’S FOCUS ON THE BOTTOM OF THE PYRAMID

Having products from a 50 paisa one-glass pack to a bottle of ₹ 85 (for 20 glasses) to the sticks at ₹ 5 allows Rasna to cater to different markets.

‘I believe there are three Indias, and the different stock keeping units (SKUs) do well in each one. There is the mid-India, which to my mind is the highest growth India. It houses the small and medium towns. The fastest growing SKUs there are the ₹ 5, ₹ 10 and ₹ 20 packs,’ he notes.

In the smallest towns and rural areas, sachets of 50 paisa, ₹ 1 and ₹ 2 are the predictable growth drivers, while larger Fruit Plus moves fastest in supermarkets and urban areas. The biggest market for Rasna is in the ₹ 10 and ₹ 15 products, and the company estimates that the average income of Rasna’s consumer class would be ₹5,000 to ₹ 7,000 per month.

Rasna’s Unique Distribution Strategy: Its Own Sales Force

‘Marketing cannot be TV-driven now; it has to be more distribution-driven for mass companies like us. Even if you’re on TV, if you’re not in the market it’s of no use. It has to be a good mix of both. The sheer power of advertising used to sell brands once. That is just not possible today. You need people on the ground,’ Khambatta says.

Rasna has stockists in 2,500 locations and a sales force of 700 people, ensuring reach through 1.8 lakh retail outlets. Studies are on to figure what the target numbers for sales and reach should be. Growth will admittedly come with Rasna entering more towns and villages.

‘Even in the smallest towns, people know Rasna. Our biggest challenge is to ensure that a case of Rasna goes to the smallest town. My organized competition’s challenge is to ensure that in supermarkets they get better facings than Rasna. But supermarkets are only five percent of the market,’ underlines Khambatta.‘Visit a few villages to understand the consumerism that is unfolding in“realIndia”,’heurges.(See Figure 8.5 for a better understanding of its retail structure)

35 DEPOTS ACROSS THE COUNTRY

RASNA’S UNIQUE BRANDING STRATEGY

Transformation of Mother Brand Rasna

The New Rasna advertising campaign transforms the earlier slogan ‘I Love You Rasna’ to its new slogan ‘Life Mein Thoda Rasna Milao’. (please see Annexure No. 1 for the TV campaign in colour).

The Economic Times Brand Equity survey ranking India’s top 100 trusted brands ranked Rasna No. 65 in 2011, No. 38 in 2012 and No. 17 in 2013. There was a quantum leap for Brand Rasna from No. 65 in 2011 to No. 17 in 2013.

‘The Brand Rasna needs to be redefined to fulfill the expectations of the new generation of Indians. We now choose to define Brand Rasna as a Brand providing moments of active delight for passionate people who live life to the fullest. This finds expression in our new slogan—‘Love Life—Love Rasna’, says Piruz Khambatta.

For the transformation of mother brand Rasna from the slogan, ‘I Love You Rasna’ to ‘Life Mein Thoda Rasna Milao’ (please see Annexure No. 2 for the 3 slides showing the new Rasna logo).

Secret of Rasna’s Success

‘We’ve been the market leader for more than 20 years (see Figure 8.7). To be a market leader you’ve got to have three facets: the need to have a good product, a good distribution chain and a good marketing practice. All these three cannot exist without proper customer insight and knowledge. For example, earlier people wanted soft-drinks, today they want fruit drinks. Earlier, people were looking at drinks only for enjoyment but today they are looking at drinks for the nourishing value that it can bring. There were days when it was believed ‘deeper the colour better the drink’, if it was dark, it was good. But today the reverse is true. Today, if it is dark that means you have put more colour in and as a result the consumer doesn’t want to pursue such drinks.’

The question that arises is: how do you create a new product, how do you do proper marketing, how do you do proper distribution without customer feedback and knowledge? It is the duty of the top management (decision makers) to be in touch with the customer and know what the customer’s requirements are. It is about doing research in a way that is interpreted correctly. Most companies should be able to read the data themselves, collect the data and find out the problematic areas. All this has to be done in record time as well, as most of the times when the issues are identified and sorted out the trends have changed. So management has to push for research and have it done in quick and record time. ‘At Rasna, we have never believed that we compete with a cola or a juice company; our actual competition is with water. That’s because the price-point is starting from ₹ 1 a glass to ₹ 5 a glass while competition starts from ₹ 5 a glass.’

New Trends in the Soft Drinks Market

On the trend of moving towards ‘healthy’, he admits there was a perception powdered drinks were unhealthy, but is quick to add that the communication to tell consumers that Rasna powder is ‘healthier, fruitier, and tastier’ has worked. ‘It took 30 to 40 years for America to shift from chips to less-oily chips to good-oil chips to baked products. India is still on the journey,’ notes Khambatta.

‘Most markets in the world are so saturated that the only way out is to move to value-added products. In India, the market is still so unsaturated that there is scope to sell the basic soft drink. India still has a lot of people who have not started drinking soft drinks, eating chips, are not into packed namkeens. Why are all the branded oils making a fortune? People are moving from loose oil to branded oil,’ he points out.

‘While 30 percent of Rasna’s sales is in foreign markets, 40 percent of domestic consumption is estimated to be by kids. And there is a bigger opportunity to grow kids’ consumption,’ he says, ‘with older Indians reducing consumption of beverages in general.’

LAUNCH OF RASNA JU-C IN THE READY TO DRINK BEVERAGE SEGMENT

Rasna introduced the world’s first fruit drink powder: Fruit Plus. It promises numerous health benefits and contains 21 vitamins, minerals, glucose and calcium. The versatile Indian cricketer, Virender Sehwag, was the new brand ambassador, who appeared in the TV commercial of the product.

It is reformulated in such a way that the drink will be cherished by all age groups. The kids will enjoy the great taste of Rasna which is healthy, fruity, pulpier, thicker and natural.

In addition to existing popular flavours—orange, mango and nimbu pani—Rasna Fruit Plus is also available in two more unique flavours—watermelon and guava.

Actor Karishma Kapoor and Khambatta’s daughter, Avan Khambatta, became the brand ambassadors of Rasna JU-C adding to its strong powder concentrate portfolio.

Ju-C will be available across the country in four tempting flavours (Mango, Apple, Orange and Mixed). The beverage will be available in a very convenient and preferred format of 250 ml bottle and priced at ₹18/-; the 1-litre bottle is priced at ₹ 65 for mango and ₹ 75 for apple, orange and mixed.

At the launch Piruz Khambatta said, ‘Rasna has come a long way in the soft beverage category ever since it was started several decades ag.o Not only has the company understood the requirements of the Indian consumer, it has, at all times made efforts to offer the best possible value proposition in keeping with the Indian mindset of ‘value for money’. Rasna Ju-C is a brand new and innovative addition to our existing portfolio and is sure to fulfill the need gaps for consumers, based on their tastes and preferences. The introduction of the new category signifies our acknowledgement that we have developed an innovative product and believe in offering the best products to our customers; products that are enriched with natural taste, more nutritional value and a variety of flavours albeit at very competitive prices.’

Khambatta further added, ‘The Indian beverage industry is at the cusp of a revolution, fuelled by changing lifestyles, a growing middle class, rapid urbanization and increased disposable income. For a kid, when thirst needs to be quenched, energy needs a quick boost and nothing can beat glass of chilled Rasna drink. Our philosophy is simple ‘innovate and be a leader on product platform.’’

RASNA’S INTERNATIONAL OPERATIONS

Having commenced international operations in 1993, Rasna is currently marketing its diverse product range in a majority of the world markets including USA, Canada, Europe and Russia to name a few. Over the last 10 years, Rasna has successfully spread its wings with its Exports Division, offering the extremely successful soft drink concentrates, instant drink powders and ethnic range of products to the global markets (see Figure 8.8).

Rasna: A Family Company Growing from Strength to Strength

A defiant sense of pride and ownership comes through when you ask Khambatta if he would consider selling the company. To this, he retorts that Indian companies that have sold out or sold brands have done so for less than their worth. Some because they could not fight the MNCs, and others because their products became irrelevant, he contends.

‘People who are selling out are selling cheap. The current valuations are not reflecting the real potential of India. People have sent feelers for Rasna, but we are not interested. We won’t sell a single share. We are not interested in that money. We believe our best years are going to come now, when consumerism in real India has just started,’ asserts the man who loves his Rasna.

Keeping a rapidly growing business within the family has its challenges and strengths. The biggest advantage, he believes, is the independence he has in taking decisions. ‘I spend a lot of time on the field understanding consumers. I take decisions based on my intuition of what will work for the customers.’ The company has not raised any funds from investors and Khambatta claims he has kept the company debt-free so far, which he believes helps family-owned companies last through more generations. There is no fund-raising plan on the cards either. ‘We don’t need private equity players at this stage. Most private equity players have their eye on short-term goals which may restrain us from growing in a comfortable manner,’ he says.

Bigger Challenges Ahead

Though Rasna dominates the powdered soft drink concentrates market, Khambatta acknowledges that the company’s market share is much lower when compared with the squash and soft drink segments.

‘Currently, 300 crore glasses of Rasna are consumed in a year in India. We are highly preferred as a home brand, but outside consumption has been a challenge,’ he says, adding that the company is working on launching products for outdoor consumption. When it does, it will directly compete with ready-to-consume fruit juices and soft drinks. ‘Establishing that could be a challenge,’ Khambatta says. ‘In categories like juices, where we may need technology or international marketing, we will be looking at joint ventures. We are in fact talking to a few players for a joint venture,’ he says.

Khambatta says keeping prices low despite the growing prices of sugar and manpower has been tough as has been staying consistent in the face of changing market dynamics, referring to government policies, logistics etc.

Piruz Khambatta says that since the middle class and the bottom of the pyramid are Rasna’s primary customers and that segment is growing, there is a huge scope for growth. In the next five years, it should be about 40 percent year-on-year.

Khambatta says one of the things he has followed as an entrepreneur, which has helped him grow the business is self-reliance. ‘I trust others, but I rely on myself and keep myself up to date on all matters affecting my business be it law, or any other aspect of the business world,’ he says, explaining his unconventional management theory.

CASE UPDATE

Brand Rasna is now setting its sights a little higher than before. The brand has finally bid goodbye to its childhood and the ‘I Love You Rasna’ era. The youthful imagery, peppy tone and exuberant visuals of the new TV commercial, with the funky tagline—‘Life Main Rasna Milaofy’—gives it an identity that Khambatta hopes will appeal to a youthful audience.

The aim of Rasna’s new advertising campaign and its TV commercials is to capture some slices of life—a boy proposing to a girl, a husband trying to woo his wife and family members taking Rasna to a loved one in hospital. (please see Annexure No. 1 for clips of the latest TV commercials).

‘We want to get out of ‘kiddy’ drink, ‘party’ drink space,’ says Khambatta, adding ‘it’s a bold move by Rasna, the market leader, to expand base and grow’. We are reinventing the strategy, he adds. ‘The campaign is aimed at converting the consumers of Maaza and Slice to Rasna—whether be it our powdered drink or ready-to-drink beverage’. ‘The narratives in the above TV serials string together a variety of life situations where Rasna can add colour and zing’.

While Rasna as a brand has a strong nostalgic value, these still revolve around it being the preferred drink for childhood birthday parties or after play sessions with friends. ‘Now we are moving on’, says Khambatta. From celebration, we want Rasna to be an ultimate joy for every little thing in life, he adds.

‘The new Rasna campaign puts it in a different mindspace. It’s no longer a drink that moms would make’. The challenge for the brand, apart from making the transition, would be to differentiate itself meaningfully from every one of the other beverage brands, be it fruit extracts or colas, for all of them seem to be focusing on the same set of consumers.

QUESTIONS FOR DISCUSSION

1. Comment on Rasna’s unique distribution strategy.
2. Do you think Rasna’s change in positioning itself to attract the youth rather than the kids will be successful?
3. What are Rasna’s strengths as a family owned and family managed company?
4. Critically evaluate Rasna’s foray into the ready-to-drink market with the launch of Ju-C.
5. What were the main features of Rasna’s first mover strategy to sucessfully ward off the MNC’s like Coke, Pepsi, Unilever, Kraft, International best foods and others.
6. What are the highlights of Rasna’s adaptive advertising strategy.?
7. Comment on Rasna’s pricing and innovation strategy and its focus on the bottom of the pyramid.
8. How successful has Rasna been in the global market?
9. What are the main features of Rasna’s new re-branding strategy?
10. What is Piruz Khambatta’s success mantra?