Entrepreneurship in traditional business

1. Keeping with the times, the popular vegetable and fruit
shop logs on to e‐commerce, By P C Vinoj Kumar ,
Chennai 16 Dec 2014 Posted 27‐Oct‐2014
Back in the 1950s, two brothers aged 9 and 11
from a village near Coimbatore had to drop out
of school and work in a local fruit shop to
support the family after the death of their
father.
They made fruit juice at the shop, and sold fruits
at bus stands. The brothers, N Chinnasamy and
N Natarajan worked hard, and nurtured a dream
of setting up their own business some day.
The desire to strike out on their own was of
such intensity that from their meager earnings
they started saving a few paise everyday for
their still‐unknown business venture.
Five years later, they got jobs in a spinning mill.
The shrewd siblings were quick to seize the
opportunity the situation offered. They chose to
work in different shifts at the mill and breathe
life into their long cherished dream.
Kovai Pazhamudir Nilayam founder N Natarajan with
his son and CEO Senthil Natarajan
The brothers (then 18 and 20 years of age) opened a fruit shop in Coimbatore and took
turns running the shop during their off‐duty hours.
“The shop was named ‘Pazhamudir Nilayam’ and the year was 1965,” says Senthil Natarajan,
CEO of KPN Farm Fresh Private Limited and Natarajan’s son, tracing the history of ‘Kovai
Pazhamudir Nilayam,’ a Coimbatore based 40 outlet strong fruit and vegetable retail chain
that achieved a combined turnover of Rs.220 crore this year.
By 1983 Pazhamudir Nilayam had four shops in Coimbatore and Natarajan’s two younger
brothers too were involved in the business.
The four brothers along with their wives and children lived as a joint family in the same
house taking an equal share of the profit from the 4 shops.
That year the family divided the business with the elder brother ensuring that his younger
siblings got the shops with the higher turnovers.

2. “The youngest brother got the outlet with the highest turnover. The third brother got the
outlet with the second highest turnover, my father got the next best and his elder brother
took the shop with the lowest turnover,” says Senthil.
While the other brothers still continue in the business and operate between them 9
Pazhamudir Nilayam outlets located in different parts of Tamil Nadu, Natarajan expanded
aggressively under the banner of ‘Kovai Pazhamudir Nilayam’ starting with his second outlet
at Tiruppur in 1998.
“It was a tough decision to start an outlet in a new city.
(Tiruppur is about 50 km from Coimbatore.) Initially we
made losses of few thousand rupees daily. But we also
started gaining customers.
“Business stabilized in Tiruppur within two years and
dad was ready to move to Chennai,” recalls Senthil, who
was alarmed at the losses they were incurring in
Tiruppur and felt his father had made a wrong move.
“But dad was always confident. He would think hundred
times before starting a project. Once he takes a
decision, he will give his best and never look back,” says
Senthil, who joined the business in 2006.
They had eight outlets then, including two in Chennai,
two in Coimbatore and two in Tiruppur, and were doing
an annual turnover of about Rs.40 crore.
Senthil attributes the company’s growth to
his father’s hard work and vision
Most outlets were being run as partnership firms, with the family holding majority stakes in
each of them.
However, business has grown by leaps and bounds in the last 8 years. They have opened 32
outlets in this period, including 21 in Chennai and others in places like Trichy, Thanjavur,
Pondicherry, and Cochin (Kerala).
In a strategic move, they have also started selling dairy products, confectionaries, bread,
and grocery items in their outlets.
“There is a limit to people’s requirement for fruits and vegetables. So we thought why not
offer other things they would need anyway. By stocking more products we are adding to our
topline, and also giving customers more convenience,” says Senthil.
Non‐fruit and vegetable inventory has contributed 10 percent to their turnover, but their
aim is to increase this share to 40 percent in the next 3 to 4 years.

3. “Our primary focus will always remain on fruits and vegetables,” says Senthil, who is modest
about his role in the rapid growth of the business after his entry.
“I encouraged my dad to go for more outlets. In fact, it is my mother who is the inspiration
for all of us and the one who cheers us on. She is the most aggressive member in the
family,” he reveals.
Senthil is involved in formulating strategies, franchising, procurement of supplies,
development of ecommerce, and clearing of new projects.
In 2012, they formed KPN Farm Fresh Private Limited with 60 percent stakes in the company
and distributing the balance 40 percent shares among six partners in the existing KPN
outlets.
KPN is taking the franchise path for growth. It now has 2 franchised outlets, one in Chennai
and another in Pondicherry. “For every three franchised stores, we plan to open one outlet
of our own,” says Senthil.
They have set a target of 50 outlets in Chennai by 2016 and Senthil says they have already
received 120 franchisee requests.
The company has a warehouse in Coimbatore and one in Chennai at Nerkundram (20,000 sq
ft). Another warehouse is coming up at Vanagaram
(50,000 sq ft) on the outskirts of Chennai.
Procurement of supplies is a tricky job as it involves
perishables. Vegetables and fruits are procured from
their source market across India. Direct procurement
from farmers is just around 10 percent of the total
supplies.
Oranges are procured from Nagpur and Ganganagar,
mangoes come from Andhra Pradesh, and bulk of
vegetables from Karnataka.
From 2008, they started importing assorted fruits from
different countries. Apples come from Washington, New
York, and China, and oranges from Australia, South
Africa, and Egypt.
Other imported fruits include pears, grapes, plums, and
cherries. “40 percent of the fruits available in our outlets
Natarajan began his entrepreneurial
journey with a fruit shop in Coimbatore
that he started with his brother in 1965
are imported,” says Senthil.

4. Their cost is high mainly because the Indian government imposes heavy duty on imports to
protect the interests of domestic farmers. According to Senthil, the duty is usually 50
percent of the invoice value.
“Most fruits in India are seasonal. Through imports we ensure that customers can have all
types of fruits and vegetables round the year,” he says.
Contrary to the buzz in social media about the growing interest in organic veggies and fruits,
Senthil says only four to five of their stores have organic stock.
“Organic items account for two percent of our total turnover. Customers hesitate to pay the
premium for organic products, which are almost double the cost of the normal vegetables,”
he says, adding the organic inventory often remains unsold leading to wastage and losses.
“I feel sales would pick up when awareness increases about the health benefits of organic
food and the affordability and disposable income of people go up,” says the young
entrepreneur, who is now all focused on his pet project, an online store for fruits,
vegetables, and groceries targeting customers in Chennai.
Scheduled for launch in November, ‘I Buy Fresh.com’ will take orders online and via phone
and deliver the products within 24 hours. Special counters would also be set up at their
outlets in Chennai to take orders.
“Our USP would be to deliver fresh vegetables and fruits, which would beat the physical
shopping experience for customers. We will also deliver groceries,” says Senthil.
A fleet of 20 Tata Ace trucks and a team of 150 employees would be involved in the venture
that would include 24 delivery boys. Delivery would be free if the purchase value is above
Rs.700. Or else, a delivery charge of Rs.50 will be added to the bill.
But Senthil is clear that he would never get into the trap of competitive pricing of products.
“We are not going to under‐price products. We want to focus on quality, and on‐time
delivery. I believe in word of mouth marketing. I keep saying your product is your best
marketing tool,” says the 31‐year‐old, a software engineering graduate from PSG College of
Technology, Coimbatore.
After graduating in 2005, he took up internship at Microsoft, Hyderabad, for a year. His stint
at Microsoft gave him an exposure on how the corporate world functioned.
“I wanted to pursue a career in computers and get into our family business after some
time,” says Senthil, who started a software company in Coimbatore in 2006, but could not
develop it much after his father developed some health issues and his family wanted him to
assist him in business.

5. He still runs the software company with a team of 15 employees. “Last year we achieved a
turnover of Rs.2.5 crore. I want to grow the company,” says Senthil, who also has a
restaurant in Coimbatore.
His wife takes care of the restaurant, but since she had a baby early this year, she has taken
a break for a while. The couple has two sons, the eldest one is 3, and the second one is just
6 months old.
Despite having ambitious goals, the family swears by a safe, slow and steady rise to success.
“We are a profitable company. Two percent of our turnover is our profit. Dad never believed
in borrowing capital for growing. We depend on internal accruals for our growth,” concludes
Senthil.