Corporate File

The growing appetite of Balaji Wafers

Rutam Vora | Updated on April 15, 2021

Savouring success: Balaji’s growth camefrom understanding local tastes well

Wafer kings: Chandubhai Virani, Chairman and founder, and (left) Keyur Virani, Director, Balaji Wafers

The Rajkot-based snacks major is now loading its plate with instant noodles and more

It has been an unlikely Goliath in the chips and snacks business, giving stiff competition to the likes of Pepsico and Haldiram and fending off the American giant’s acquisitive eyes. Now, Rajkot-based Balaji Wafers wants to grab a slice of the instant noodles and peanut bars market.

Riding on an impressive growth rate of over 20 per cent in the last few years, Balaji, which clocked a turnover of almost ₹2,400 crore in fiscal 2020, is now loading its plate with diverse new offerings.

The company set up by the Virani brothers, who literally started off by frying chips in their backyard and say they think with their gut and heart, is betting that the new segments will unlock future growth.

Instant noodles brand Gippi has already been launched. The R&D for wafer biscuit and rolls is underway, while jaggery-mixed peanut bars will be launched within two months.

“The Covid-19 period gave impressive growth for packaged food players like us, as people were stocking up packaged snacks and namkeen. But this surge is now tapering off as consumption is returning to normal. So, for us, the next growth drivers will be new categories in noodles, peanut bars and wafer biscuits,” says Keyur Virani, Director, Balaji Wafers. the next gen member of the family.

Munching more

Is Balaji biting more than it can chew? After all, instant noodles is a very crowded place. But Virani says they have a strategy in place. “We plan to differentiate ourselves by offering local tastes to the consumers. It is still a learning curve for us and will take some time for us to expand our reach,” Virani says.

Currently, Balaji sells about 500 tonnes of instant noodles (wheat flour) per month, against the installed capacity of over 1,000 tonnes. “We are planning to expand our SKUs (stock-keeping unit) with wider product range. But in the next 1-1.5 years, we are planning to reach our full capacity,” he adds.

For the chips major, India’s nearly ₹9,500-crore instant noodles segment could be a decisive strategic move by taking it head-on with established multinationals including Nestle India (Maggi), Indo Nissin (Top Ramen), CG Foods India (Wai Wai), ITC (Yippee), HUL (Knorr) and Patanjali among others.

Similarly, foraying into the wafer biscuit space, where Dukes and Pickwick dominate, would mean a taste of new things for the company. Protein bars are another new turf for it.

On Balaji’s ambitions to bat on the big boys’ pitch, Anuj Kapoor, Assistant Professor — Marketing at Indian Institute of Management, Ahmedabad (IIM-A), comments that being regional is actually a strength for the company.

“They are selling globally known food items with Indian tastes. They know the local taste and that’s how they have an advantage of staying a local player. Externally they are local, but internally their plants are run like an MNC,” says Kapoor.

He feels that though noodles, wafer biscuits and rolls may not be local items, they have become part of the Indian palate.

From farm to factory

Started in 1974 by Chandubhai Virani, who became the Chairman, and his two brothers, Bhikhubhai and Kanubhai, Balaji Wafers has become a storied legend in India’s entrepreneurial landscape, given the chutzpah displayed by the homegrown enterprise against the MNCs.

The Viranis, sons of a farmer, actually first forayed into the farm equipment business. When that failed, they began working in a cinema hall canteen in Rajkot. But their ambition could not be held back. From frying chips manually and selling it fresh to foraying into packaged snacks was a natural next step. The label ‘Balaji’ Wafers soon became ubiquitous on the shelves of highway food joints and snacks parlours across Saurashtra.

The first automated chips manufacturing facility — all of 1,000 sq m — was set up in the Aji-GIDC industrial estate in 1990. Today, Balaji Wafers has over 51 varieties of chips and namkeen products. It is present across Gujarat, Rajasthan, Madhya Pradesh, Maharashtra, Goa, parts of Karnataka and Uttar Pradesh.

Balaji is eyeing 22 per cent growth this year to touch ₹3,000 crore by March 2021. “We are growing at a faster pace than the industry average. We had expected 25 per cent growth over last year, but supply disruptions during Covid-19 lockdown somewhat hampered the growth,” says Keyur Virani.

Margins have also taken a hit due to escalating raw material prices and logistics cost including freight. “We have been a highly profitable company with EBITDA margins of 12-13 per cent. But, due to cost escalations, margins may be hit by 7-8 per cent this year,” he says.

However, Virani says that while in some categories they might see no-profit-no-loss, the overall margins for this fiscal will still be 5-6 per cent. “This isn’t bad either, as we don’t have any financial stress,” he adds.

The company has no long-term debt on its books. It plans to set up a manufacturing facility in Uttar Pradesh to expand in North India, for which it is seeking investments of ₹300-400 crore in a mix of internal accruals and external debt.

“Our UP plant is expected to be ready within 3-4 years and, once it starts generating revenues, we may think of setting up a plant in Karnataka. Till then we are catering to all markets through our existing plants in Rajkot, Valsad and Indore,” he says.

But isn’t the national foray a bit late?

IIM-A’s Kapoor begs to differ. “It doesn’t matter. They have a good regional equity, and figuring out the core of a market is not a big barrier for them.”

Kapoor, however, cautions that Balaji may need to segregate its product offerings based on the age group it is targeting. “In order to chart a new growth path with new product offerings and segments, Balaji will have to be patient. They have exhibited patience during their early years. Now, it will help them again to make inroads into the MNC-dominated space,” Kapoor says.

Published on March 14, 2021

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