The Hindu Business Line : Has MTR got its recipe right?

From a local food haunt, MTR over the years has evolved into a total meals solutions provider. Catalyst looks at how the company plans to achieve its Rs 500 crore target by the year 2006.

A BIRTHDAY bash is on at the first floor café of Namma MTR. A group of college youngsters roar heartily while the cake is cut. Just a five-minute walk away from the outlet is the newly-built headquarters of MTR Foods Ltd. The plush interiors reflect the process of a corporate makeover that is aimed at transforming a neighbourhood eatery - Mavalli Tiffin Room- into a leading packaged foods company.

J. Suresh, CEO and Executive Director, MTR Foods, says that the retail outlets attract the youth in sizeable numbers. "The demographic profile of our consumers has decisively turned younger in the last six to 12 months," he says. It is significant for MTR, which is in the midst of an ambitious growth plan.

J. Suresh, CEO, MTR.

MTR Foods is eyeing Rs 500 crore in sales by 2006. The company closed 2002-03 at Rs 100 crore, up from Rs 87 crore in the previous year. The owner-promoter, P. Sadananda Maiya, brought in Suresh from Hindustan Lever Ltd to mould the business into a professionally run "total meals solutions provider". Can Maiya and Suresh match their ambition with achievements on the ground? And how is MTR, a legendary name among the local culinary enthusiasts, transitioning itself in the traditional Indian foods business?

The Chief Executive shows a quiet self-belief, a trait which he shares with promoter Maiya. Started in 1924 as a small, localised restaurant business, MTR's gastronomic journey has been part of Bangalore's folklore. A Chief Minister once stood in a queue to have a go at its masala dosa. Its popularity soared on the back of high quality tasty food made from pure ingredients in hygienic settings.

The decisive moment came when the government declared a Emergency in 1976 and asked well-known restaurants, including MTR, to lower the prices. Maiya was forced to down shutters after finding it unviable to run the business. To save the jobs during the time it was closed, MTR started selling spices and roasted flour mixes. That was the beginning of its entry into the convenience and instant food business and in a sense, a turning point.

Soon, MTR started retailing instant food mixes such as rava idli, khara bath, rasam, sambar and dosa mix. Encouraged by the response, MTR increased production and moved into a modern industrial plant on the outskirts of the city. Over the next few years, additions were made to the range of offerings, placing it on the road to becoming a large processed foods company. MTR now offers packaged foods in 11 different ranges - spices, instant mixes, ready-to-eat foods, vermicelli, ready-to-cook gravies, range of frozen products, papads, pickles, chips, snacks and ice creams.

With a range of products that offer complete meal solutions to the entire family, Suresh is pushing the company for a big leap. "This year is crucial. We are hoping to do roughly Rs 135 to Rs 140 crore business during this financial year," he says when asked on how the company is poised to achieve the Rs 500 crore target. Suresh is focused on aligning the business with a marketing drive aimed at unplugging the potential that exists for its varied packaged food categories. The marketing push, already set in motion, would look at contemporarising the brand and boosting the distribution network, critical for the convenience foods industry.

The brand contemporarising effort started with the company roping in a strategic design house, Ray + Keshavan, to deliver a modern facelift to the logo and the product packs. "Convenience food products attracts a lot of impulse purchase and the new pack is aimed at facilitating it," says R+K's Sujata Keshavan Guha. The company is in the midst of attempts to extend the rejigged brand feel to most of its operations including the retail outlets. Another significant element in this drive is the retailing initiative which has been kicked off in Bangalore.

The company has opened three Namma (it means `our' in Kannada) MTR outlets at Banashankari, Residency Road and at Commercial Street and taken up space for food courts with the Food World chain in Malleswaram, Rajajinagar and Sadashivanagar. The ambience is jazzed up with the food courts serving dosas in wraps and stuffed vadas (called `fundas') in attractive takeaway bags. "The dosas in wraps or vadas stuffed with curries makes it more convenient. The customers won't have to dip it in chutney or curry which makes it less messy," Suresh says.

"We are still in an experimental stage and will take a decision on retail expansion in six months' time," he adds. However, he thinks the brand's outside visibility has improved in the last six months. It has booked enough shelf space in large format retail chains. For instance, Food World now stocks up to 120 SKUs at any given time. The visibility factor perhaps enabled the company to attract youngster to the fold and receive media attention as the emerging McDonald's in the Indian foods business.

Even as the brand gets modern, MTR is also stepping up its distribution reach. In the south, which is its stronghold, especially in Karnataka, Andhra Pradesh and Tamil Nadu, the brand is present in over 60,000 outlets. The company claims its products are available across 15,000 outlets in the West, 10,500 in the North and in roughly 8,000 shops in the East. MTR today has 700 stockists with the number of serviced towns going up to 800 from 550 during the last few months.

The company's aim is to be present in all above five lakh population towns in markets outside South. Presently, about 18 per cent of its domestic revenues come from markets outside South. The widening distribution and the point of presence is aided by the introduction of low-priced, smaller pack sizes - particularly in spices and mixes - which is expected to drive the penetration into semi-urban and rural markets.

The industry watchers say MTR's progress hinges on how fast certain segments of the processed foods industry evolve. Take, for instance, the ready-to-eat category. Suresh admits that this segment would have to serve up Rs 150 crore in revenues for the company to reach the target of Rs 500 crore. Currently, the total ready-to-eat foods market (outside snacking) is just about Rs 10 crore, he adds. "We have seen it doubling in recent months. Its contribution to our overall business has moved up from three to five per cent during the last three months," Suresh explains. This segment till recently had two recognised names, MTR and Tasty Bite, which has eked out a reasonable presence in the West and in northern markets like Rajasthan. The entry of corporations like ITC (under the Kitchens of India brand) could help the segment to grow faster, analysts pointed out.

MTR's other sizable revenue streams include instant mixes, vermicelli, spices and ice-creams. Among these, mixes and vermicelli (it is the second largest player after Bambino) has the potential to rake in revenues nationally. Suresh says instant mixers present interesting opportunities especially as the current market penetration level remains abysmally low. In MTR's home turf of Karnataka, it is estimated at 16 per cent. In context, some analysts have questioned the company's wisdom of trying to develop its own national distribution, more so in the wake of a challenging target ahead. They say it might be wiser to strike a distribution alliance with an FMCG major.

Suresh says developing its own distribution would serve the company and the brand well in the long run, even if it means investing more. He adds that the business presently has enough resources to take the company up to a Rs 200 crore turnover (Maiya family diluted 28 per cent stake to JP Morgan Chase). After that, he is hoping that the internal accruals would take it forward.

Meanwhile, the company says it is prudent enough not to splash money in trying to take the spices and ice-cream businesses national as it involves complex logistics issues and taking on well-entrenched brands. The entry into frozen foods, which could be a big draw with the food services sector opening up in the coming days, and its plans to tap the export market extensively are the other crucial areas where the company must get the act right, analysts said.

MTR recently became the first Indian processed foods company to be awarded the Hazard Analysis Critical Central Point certification - a rigorous global standard of food safety and hygiene. The certifications make it much easier to sell overseas and MTR has been busy sewing up tie-ups in the mainstream US market and European markets such as the UK and France. By 2006, Suresh says, export revues could touch Rs 100 crore, which is 20 per cent of the projected turnover.

So has MTR got its recipe right?

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