Rasna on a powder keg

The iconic commercials that ended with the adorable kid saying ‘I love you Rasna' have been replaced. The new set of advertisements reflects the new reality. Kids of today have different aspirations, contends Piruz Khambatta, the soft drink concentrate major's Chairman and Managing Director. He is pretty confident, armed as he is with a study on which he's spent over Rs 30 lakh, to understand what will appeal to kids, his category's drivers.

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

A visit to the local kirana store introduces us to Lalani Nimbu Pani. It's available in a single-serving sachet priced at Rs 2, and the shopkeeper insists it's a great product. After a bit of coaxing, we find - as expected - that new-kid-on-the-block Lalani allows a margin of Rs 30 on sales of Rs 100, while the established Rasna, which the retailer admits sell more, allows much lesser.

There are numerous Lalani Nimbu Panis in urban India, and countless others in what Khambatta calls the ‘real India' where growth will come from - small towns and villages.

The End of Monopoly

Rasna claims a market share of 90 per cent in the powdered soft drink concentrate market. On this number coming down from a near monopoly over the years, Khambatta says he doesn't mind - 60 per cent of a market five times bigger is better than 90 per cent of the current size, he says. Rasna claims to be growing at 20 per cent year-on-year.

“Every three or four years, I have seen some new player or the other coming in with much fanfare; I have seen a lot of local players coming in. Every time, honestly, when people have entered, we have grown more. The more the teams, the more the IPL craze. Similarly, the more the players, the more the powdered soft drink sales,” reflects Khambatta.

But Rasna is not unmindful of competition from large players. Rasna FruitPlus, including cutely packaged ‘sticks' at Rs 5 targeted at urban India (top 20 towns), was admittedly launched to coincide with the recent launch of Tang. Rasna had its product and the advertising ready - and waited, informs the CMD - for Tang to launch.

Pretty focused, when you consider that with the smaller sachets, the company wants to penetrate villages with population of even 5,000. The logic behind the cool Rasna sticks is that when the customer goes to the store, he hunts for novelties.

“When the competition is aping my present product saying I am like Rasna, at the same price, with a similar ad also (laughs), I am saying, ‘No - I am redefining the market by saying I am also the cool-to-carry single stick',” reflects Khambatta.

Fanta Funtime, according to him, ‘is a joke'. The logic behind his take is that for a carbonated soft drink brand, the key element is the aeration. “Can Rasna be aerated?” he asks. Point has to be taken, even if only in part.

Rasna is preparing to launch a new brand of non-aerated ready-to-drink product, as part of its portfolio expansion strategy.

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

“I believe there are three Indias, and different SKUs do well in each one. There is the mid-India, which to my mind is the highest growth India, which houses the small and medium towns. The fastest growing SKUs there are the Rs 5, Rs 10 and Rs 20 packs,” he notes.

In the smallest towns and rural areas, sachets of 50 paisa, Re 1 and Rs 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 Rs 10 and Rs 15 products, and the company estimates that the average income of Rasna's consuming class would be Rs 5,000 to Rs 7,000 per month.

Rasna also launched a Glucose-D product recently. It has only been launched in the East, and the company is mulling its launch in other markets. While Rasna stands for ‘fun', ‘children' and ‘flavours', a therapeutic glucose drink has a different set of propositions. “The glucose that needs to be given when someone is ill, is not Rasna. But if your kid is going to play basketball or cricket everyday, it is Rasna Glucose-D. Ninety-two per cent of the glucose sold in India is therapeutic. The challenge is to grow the flavoured glucose market. With the Rasna name, I cannot take on the therapeutic glucose market - perhaps a Horlicks can. If I stand purely for health, I can't stand for fun,” reasons Khambatta.

From Marketing-led to Distribution-led Growth

According to Khambatta, also the Chairman of the CII Task Force on Processed Food Outsourcing, and President of the All India Food Processors' Association, the ‘mismanagement of agricultural resources in this country is a big factor' in the cost of agricultural produce going up. His well articulated view is that the only way to boost agriculture in India is to get the private sector in, on the lines of Brazil and China.

His concern for the agriculture sector is matched by his ire at input costs going up. In the last three years, he estimates, Rasna's input costs have shot up by 20 to 30 per cent, while its MRPs have increased only by 10 per cent.

While margins are admittedly getting squeezed, companies have also done some cost rationalisation, contends Khambatta. Rasna's advertising budget for television advertising has come down, he says - a fact corroborated by industry watchers. At 10 per cent of revenues, it still works out to around Rs 40 crore.

“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,” he adds.

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 organised competition's challenge is to ensure that in supermarkets they get better facings than Rasna. But supermarkets are only five per cent of the market,” underlines Khambatta. Visit a few villages to understand the consumerism that is unfolding in ‘real India', he urges.

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 per cent of Rasna's sales is in foreign markets, 40 per cent 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.

‘Won't Sell a Single Share'

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.

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