Small Business Success – Case of Sugar & Spice in Kolkata


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Small Business Success – Case of sugar & Spice in Kolkata

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Small Business Success – Case of Sugar & Spice in Kolkata

  1. 1. Small Business Success – Case of Sugar & Spice in KolkataPresent affiliation of AuthorDr. Atish Chattopadhyay, Professor of Marketing, SPJIMR, India, email: atishc@spjimr.orgIntroductionThe bakery industry in India can be categorized into the three broad segments of bread,biscuits and cake. Only 40% of the 3m tonnes bakery products industry in India is in theorganized sector, while the balance comprises of unorganized, small-scale localmanufacturers (Samant 2002).With changing consumer tastes and with the entry of multinationals post liberalization,the average Indian is expanding his palate from just bread, cake and biscuits to moresophisticated pizzas and burgers. The consumers are increasingly going for neweroptions with respect to bakery products. Recently, there has been a steady inflow ofMNC’s and other organized players in this sector, leading to increased competition. Also,the Indian market is witnessing the proliferation of bakery café chains in the form ofBarista, Café Coffee Day etc. and marketers are trying to come up with new formats as isevident in the western countries. With the expected inflow of large organized players inthe bakery industry, the sector is poised to witness increased competitionIt is, therefore necessary to study the existing marketing strategies of successful bakeryretailers and identify the success factors for future growth. The scope of the presentstudy is to explore the above with respect to ‘Sugar & Spice’ in the city of Kolkata.MethodologyTypical marketing mix of the firm was studied through case study method. The casestudy was developed based on business reports and direct informal interviews with toplevel managers/owners of the firms. The interviews were primarily aimed to understand
  2. 2. the key decision maker’s perception of the market, which is their understanding of thetarget segment and the marketing mix to cater to their target audience. Also, theinterviews attempted to understand the background and the future challenges for thefirms. Also, the existing market offerings of the firms were studied by way of shop visits,collection of product catalogs, price lists and promotional materials like advertisementsetc.Interviews were conducted for the vertical slice of the organization starting with theowner/manager and moving down to the shops/franchisees. The unit was visited andinterviews of the owner and key executives involved in the management of the firm wereconducted. Interviews were also conducted for those responsible for managing the day today operations. The shop sales personnel were also interviewed for the purpose.The interviews were unstructured and lasted from one to three hours. Typical questionswere asked which include the following broad topics.1. Target customer group.2. Marketing mix3. Understanding of the present competitive scenario and future challenges.The responses were later augmented with data from several other sources. Meetingsinvolving key marketing people, shops sales force were also observed. Insights gleanedfrom these observations often stimulated new lines of inquiry for future interviews. Inaddition, data and documents from public sources helped to clarify issues raised in theinterviews. These multiple approaches helped to ensure reliability and validity of thefindings (Jick, 1979).While developing the case study insight was generated regarding how the firm actuallydeveloped its marketing mix. This was facilitated by interviewing a variety ofstakeholders and by spending time with them on the job. At the conclusion of most of the
  3. 3. interviews and shop visits, the preliminary findings were shared. This added to theunderstanding of the marketing mix of these firms and further refinement of the findings.The first draft of this case study was also discussed with the key people of the firm likethe owner / managers. Throughout the research the practitioners gave deep insight intothe way the marketing mix was developed and the reasons for the same. The table belowshows the number of people interviewed.Distribution of People Interviewed Name Firm Personnel Franchisees/Shop Personnel Sugar & Spice 05 04Case of Sugar & Spice in KolkataMs. Supriya Roy founded SS in 1990 at her in – laws premises to satisfy her inner zeal ofdoing something on her own. At that time the bakery market of Kolkata was in a nascentstage, with limited competition. Mrs. Roy felt that the tastes and preferences of theconsumers in the city were changing rapidly. Her entrepreneurial nature motivated her totake a risk: the launching of SS.Earlier in 1986, she had founded an institute named Art “N” Craft to help women becomeself-employed. Perhaps the desire to develop other women arose from her early exposureto the feudal system of which she became a part owing to her marriage to Mr. ProsantoKumar Roy, Raja of Cossimbazar Royal Family. Though exposed to a life of leisure froman early age, an inner zeal led her to seek professional excellence and also help women toestablish themselves. After completing her post graduation she obtained a diploma inhotel management form the Catering College in Taratolla, Kolkata. All this perhapsintensified her inner determination of launching a bakery brand. Her business propositionwas simple: ensure top class quality, a value for money proposition, easy availability anda universal taste - profits would automatically follow.
  4. 4. SS was set up in the premises of her in–laws house at 1/2 Harish Mukherjee Road inSouth Kolkata. Initially SS started as a small shop selling snacks and fast food. This shopwas owned by Mrs. Roy which now happens to be the only company owned showroomof SS. From this modest beginning, SS grew into a four shop chain by the first quarter of1997 and a ten shop chain by April 1998. SS by then had achieved a turnover of INR 3million.However, Mrs. Roy was not at all satisfied with such moderate performance. Shethought, in order to remain competitive, it was essential for the brand to increase itsnumber of outlets. Thus since 1998 special stress was laid by SS on franchiseemanagement and increasing the reach. The growth in number of outlets happenedexponentially over the next few years. SS effectively leveraged the brand name builtthrough its shops to sell different packed items as well. The result is evident. Today, SSboasts of 58 outlets in Kolkata alone located at all the strategic points of the city with aturnover of around 150 million per annum (which includes its operations outsideKolkata).ProductsThe basic philosophy of business for SS is to cater the middle class segment with freshand quality products of different varieties at an affordable price.SS offers a complete range of cakes and pastries, savories, cookies and breads. It hasmade efforts for continuous product innovations and has achieved reasonable degree ofsuccess in doing so. Some of its product launches like ‘chicken singara’, ‘chickenpakora’, ‘mutton salami kabab’ which are a combination of bakery and Indian cuisinehave become very popular in the snacks category (refer to Annexure XX).In pastries, SS introduced ‘mango crown’ during the summer season to cater to theseasonal preferences of the customers. One of its major innovations happens to be in the
  5. 5. celebration cakes, where it prints figures/photographs on the cake. This has startedgaining popularity in the Kolkata market.It has recently introduced packed bakery products as a line extension strategy to be soldthrough the grocery chain apart from its showrooms. The move was aimed to leverage itsbrand name and sell related products like breads, packed cakes and biscuits. Some of theproducts which have started gaining acceptability in the market are given below:• Breads - Daily Gold, Brown Bread, Daily Slice• Packed Cakes - Love Bite, Plain Cake, Fruit Cake, Fun Cake• Biscuits - Choco AngelDistributionTill 1998, SS grew at a slow pace. The same may be attributed to its lack of skills inmanaging and expanding its network of franchised shops. Even though SS intended todevelop a franchisee management strategy, they were not so successful in doing so. Oneof the key success factors in a franchising is the profitability of the franchisees. SSfranchised shops till 1998 were more like loosely held agencies. SS did not insist onstandardized decor for its franchised shops. Also, unsold stocks from the franchisedshops were not taken back. This had a negative impact both on franchisee profitabilityand also on customer satisfaction – as franchisees often sold stale products to thecustomers to minimize their losses.Realizing that franchisee management holds the key to its expansion and future growth,SS developed a franchisee management system in 1998. Some of the salient features ofthe same and increase in number of outlets are given below:
  6. 6. Table Growth of Outlets of SS “The SS” Showrooms including those Year outside Kolkata 1998-1999 37 1999-2000 52 2000-2001 65 2001-2002 84• The franchised shops should be at least 4 km apart from each other and must be situated on junction and main hubs of the city.• Minimum floor space of 120 square feet.• Initial security deposit of INR 60000, which is refundable.• Investment in shop infrastructure like microwave oven, air conditioning and interior decoration to be borne by the franchisee.• The franchised shop has to be located at a strategic point with high footfalls.• Margin offered to the franchisee would be at a flat rate of 13.5% on the MRP.SS supports its franchisees by helping them in interior decoration and furnishing of theshop. Also, it provides promotional support by way of local promotions and festivedecorations etc.The franchisees are required to follow a clearly laid down system of ordering theirproducts every evening for the next day’s delivery. As the products are highly perishable,an accurate forecast is required to prevent losses due to unsold goods. Such forecasts aremade intuitively by the respective franchisee based on current trends and occasions (likefestivals) etc. The current policy of The SS is to take back any unsold goods from theoutlets and destroy them. The current level of such losses is 2%.The delivery is made twice a day (before 12 noon and by 4 p.m.) with the help ofcompany owned vehicles which forms part of the logistics system. The vehicles have thebrand name and the logo prominently displayed on the vehicles. Such delivery systemserves dual objectives. Firstly it makes for an efficient delivery system. The companyowns the vehicles and hence need not depend on any other party for its delivery. Thus it
  7. 7. is able to maintain its delivery schedules very well. Secondly the prominently displayedlogo and brand name serves as a very good advertisement for the brand.SS maintains strict control over its franchisees. It presently has a sales team comprisingof eleven salespersons. They visit each outlet twice a week. These visits serve as aninterface between the company and the franchisees. The former can thus maintain acontrol while the latter can relate their problems to the sales team. SS franchisees have asales target of INR 4500 per day. If an outlet comes up with sales of below INR 2500 perday on an average, then it is the duty of the sales team to find out the reasons for the sameand initiate corrective measures.The decision of line extension by SS into categories like breads, packed cakes andbiscuits as mentioned earlier prompted them to develop another channel of distribution –independent retailers and grocers. A distributors’ meet is held every month while afranchisees’ meet is organized quarterly.PricingInitially SS maintained a pricing which was slightly higher than that of other similarofferings in the market. However, SS has now realized that pricing is a key element inthe success of a brand in a fiercely competitive market. As SS targets the middle classcustomers, it has maintained the going rate pricing which a comparable with the marketleader, MN. A detailed price list of SS is provided in annexure XX.Promotion and Co-BrandingSS has collaborated with other food and beverage brands as given below:• Soft drinks and mineral water of Coke.• Ice-cream of Thackers• Snacks and chips of Lays.
  8. 8. As per the company’s guidelines a franchisee is allowed to carry these products alongwith the regular products of SS, but they cannot keep products of the competitor’s brandsor any other item outside this list. For the first ten days of operation of a new outlet, thefranchisee has to carry all these products and thereafter it is the discretion of thefranchisee to keep the products as per choice.SS advertises in the print media especially during festive seasons. Its carry bags andpacking boxes also acts as good advertisement. As mentioned earlier its delivery vansalso duals as mobile advertisements. However, its exclusive shops with prominentsignage and POP materials are its best weapon to create brand awareness.Road AheadThe SS has always aimed to feel the pulse of its customers while making any decisions.Its decision to start the business was based on the premise that the lifestyles and tastes ofthe average Bengali customer would be changing in the nineties. They made hitherto‘premium’ products available at an affordable price, thus obtaining a tremendousresponse from the customers. For example, American style fast food was a great draw inthe early 1990s.The outlets are well planned and spacious, and are located conveniently – thus they proveto be attractive to the customers seeking a quick and comfortable bite.In the late 1990s a change was perceived in the tastes of the customers. They wantedIndian curry tastes packaged in the convenient western formats. In response to this SSintroduced several new products like ‘singara’ etc. as mentioned earlier that again metwith great success. Taking the step further ahead, they introduced tasty, filling snacks in2000-01 combining eastern and western tastes.SS products today are available to customers even while traveling. It supplies products tothe international flight kitchen of Kolkata Airport, with an exclusive outlet at
  9. 9. International Airport Departure lounge. Its products are also available at the AirportHotel. SS also supplies to Indian Railways - sandwiches and patties for Calcutta RajdhaniExpress consecutively for the last two years. SS was the first to open exclusive air-conditioned outlets at various stations of Eastern & South-Eastern Railways. Theseefforts had a tremendous impact both on its bottom line as well as creating a strong brandimage.SS was the first craft baker in Kolkata to be awarded ISO 9002 certification. Also, SSreceived the President’s Award from Govt. of India for its performance as a ‘Small ScaleEnterprise’.Currently, SS showrooms are located all over Kolkata and in the districts of south Bengalviz. Barackpore, Khardah, Sreerampur, Kalyani, Naihati, Kachrapara, Chakdak,Chandannagore, Chinsura, Hindmotor, Bolpur, Bankura, Beharampur, Durgapur,Burdwan, Krishnagar, Medinipore, Kharagpore etc. It plans for further expansion withindividual manufacturing units at places like Asansol, Bhubaneswar, Guwahati, Haldia,Jalpaiguri, Jamshedpur, Ranchi.Mrs. Supriya Roy, the promoter of SS combined profitability with social responsibility bygainfully employing physically challenged individuals. Its in-plant training of physicallychallenged individuals of Bal Vihar (an organization taking care of deaf and dumbchildren), has been intensified with the aim of employing them for its upcomingJamshedpur manufacturing facility, clearly exhibiting the corporate social responsibilityof the brand.Though SS has performed well in the recent years, it will need to constantly re-inventitself to remain competitive. It is still a distant second as compared to market leader MNin its category in the Kolkata market. Also, its foray into packed items requiringdistribution to independent retail outlets would require different management skills. Howit lives up to these challenges may hold the key to its future growth and success.
  10. 10. References :Jick, Todd (1979): “Mixing Qualitative and Quantitative Methods: Triangulation inAction” Administrative Science Quarterly vol.24, pp.602-611.Key Note (2001): Market Report, Bread & Bakery Products, Barker Lynsey (ed), 16th ed,.Samant Prajakta: “Baking Profits”, Times Food Processing Journal, February – March,2002.Sarkar Manjira, “When Calcutta takes the cake” The Economic Times Calcutta, SaturdayAugust 21, 1993.
  11. 11. Annexure IBrief Profile of the Bakery chains of Kolkata 1. Jalajoga: Founded in 1955. Targeted the middle class offering quality products at an affordable price and was the market leader till early 1990s. Lost its leadership by the middle of 1990s and is presently having 80 retail shops of which 34 are in Kolkata. Its annual turnover is approximately INR 40 million. Extended its brand to ice cream, soda and recently noodles. 2. Kathleen: Started in late 1970s, emerged as a premium bakery brand by mid 1980s. Was associated with celebration cakes. Presently having 80 outlets of which 59 are in Kolkata. Sales have remained stagnant at around INR 25 million annually since 1997 even though the number of outlets has grown from 36 to 80 during this period. Extended its brand to ice cream in 1995 which had to be eventually withdrawn. 3. Kookie Jar: Started in 1988 is synonymous with exquisite craftsmanship and taste and is positioned as a luxury brand. Had one single showroom till a labor unrest and strike in 1997, when they were forced to open two franchised shops. Achieved a sale of around INR 60 million with only three shops in Kolkata. Recently have dropped their franchisees and made the products available in the supermarket chain C3. 4. Bakers Square: Started in 1997 during the closure of Kookie Jar producing similar products being a ‘Me-too’ brand. Has eight shops in Kolkata and a turnover of approximately INR 18 million annually, exploring institutional sales by supplying to hotels, clubs etc. 5. Upper Crust: Started in 1992, positioned itself as a premium brand with eleven shops located at up- market localities of Kolkata. Sales have remained stagnant at around INR 23 million. Recently supplying to organized retailers. 6. Sugar & Spice: Started in 1989 and had a turnover of INR 3 million only till 1998. Post 1998, emphasized on franchisee management and growth outside Kolkata by targeting the popular segment replicating Monginis. Presently having 58 outlets in Kolkata and a turnover of INR 150 million including its operations outside Kolkata. 7. Monginis: Started in 1992 with a single shop. Has grown from a turnover of INR 5.3 million in 1992-93 to approximately INR 150 million by 2003 with 79 shops in Kolkata. Has firmly established itself as the market leader catering to the popular segment. Its line extension into packed cakes manufactured in separate facilities is contributing around INR 150 million taking total turnover of the brand to approximately INR 300 million. More than 100 exclusive franchised shops in Kolkata by 2005.Source: Published annual report and interviews