Pahalwan Case

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PAHALWANS: NEED FOR A NEW MARKETING STRATEGY Jyoti Sharma and Subhadip Roy wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com. Copyright 2014, Richard Ivey School of Business Foundation Version: 2014-10-01

In early 2014, a meeting was taking place at the city office of Pahalwans1 in Jammu. Pahalwans was one of the leading sweetmeat sellers in Jammu and Kashmir and one of the owners, Sat Pal Abrol was having a discussion with Mehak Sharma, who was about to be hired by Pahalwans as an independent consultant. Pahalwans had enjoyed undisputed leadership as the top sweet seller in the city of Jammu. However, since 2010, the company had been feeling the heat of competition at different levels. The entry of domestic and foreign players in the fast food market had changed the way consumers viewed fast food. Rising disposable income and changing preferences towards multi-national corporation (MNC) food giants were driving the younger generation away from traditional Indian sweets and snacks. Coupled with this, the company was also facing competition from local and national players at the product level. Even though the sales remained good so far (see Exhibit 1), there was a threat of losing foothold in a market in which the brand had ruled for more than 50 years. Sat Pal was therefore thinking of hiring Sharma as a consultant to help with a new marketing strategy. Sharma was a graduate in business management from a reputed institute in northern India and had extensive industry experience. BACKGROUND The roots of Pahalwans went back to the early 1920s when Anant Ram Abrol used to work in a sweet shop owned by his mentor Mani Ram Pahalwan in MachhiHatta, Lahore. Anant Ram gained significant experience in the production and selling of sweets under the guidance of Pahalwan. Thus, when Anant Ram started his own business, he named it Pahalwan di Hatti2 and devised a logo with the name Pahalwans (see Exhibit 2). The first shop was opened at a popular sweet market in the city of Jammu in northern India in 1934. The products consisted of raw milk and milk-based products such as curd (yogurt), Barfi (sweets) and Rabri (sweetened concentrated milk). Though the range was limited, the products became popular because of the quality and the humble nature of Anant Ram. The consistency in quality was so well maintained that the shop received an award in 1952 by Prime Minister of the state Jenab Sheikh Mohammad Abdullah.

1 Pahalwan is the Hindi word for wrestler. 2 Hatti: a small shop. Do

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This document is authorized for educator review use only by Ghaffar Abdul, Institute of Management Sciences until September 2015. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860

9B14A055 Anant Ram devised innovative sales promotion strategies in the early days of Pahalwans such as product bundling and festive specials. However, he wished to close the business and retire in 1975. His nephew Sat Pal Abrol intervened and convinced him to continue the business. Abrol had gained sufficient experience by working with Anant Ram and was willing to take over the business. Abrol worked single-handedly with no staff in the beginning. Since the shop was well established by this time, he did not change the name after his takeover. PAHALWANS GROWS STRONGER Sat Pal faced no major hurdles in his early days of managing Pahalwans since the set-up was small with limited product range. Minor hiccups were always there, such as demand-supply management during peak season, procurement of quality raw materials, retaining qualified staff, countering competition, etc. In spite of the hiccups, the business started growing in the late 1970s and Sat Pals brothers, Yash Pal Abrol, Satish Abrol and Brij Mohan Abrol joined the business in 1978. The brothers were entrepreneurial and they started expanding the business by introducing new products at regular intervals. Each brother had separate managerial functions (manufacturing, procurement of raw materials, plant and machinery, new product line, etc.) to look after but the final decisions were taken collectively. The brothers knew that they needed to create something different to have a competitive edge and the best possible way to do that was through innovations in the product and service offerings. Thus, the company invested in the modernization of its production process. New plant and machinery features were introduced from time to time to improve the production and maintain the quality of offerings. As Sat Pal reminisced:

Initially, there was no concept of marketing as there was only one shop (other than us) present in the locality. We started the business with selling barfi (local mithai/sweet), milk and milk products. There was no competition back then but competition started once we [began] adopting new ways of selling. For example, we shifted from a traditional set up to modern sales counters, started providing coupons (lucky draw/discount), special offers on festivals, etc. However, quality was our forte and Pahalwans vision was always to ensure consistent quality.

Innovative sales promotion strategies were devised in the early days of Pahalwans such as product bundling. In 1980, during the Diwali3 festival, Pahalwans distributed coupons with every box of sweets purchased and organized a lucky draw for customers, wherein customers had chances to win gifts such as televisions, refrigerators, crockery sets, etc. The reputation built by Pahalwans helped them to receive bulk orders for sweets to be served at social functions such as marriages. As the demand grew, the company offered a number of new products (such as sund,4 dokla,5 milk chocolates, etc.). Encouraged by the success, Pahalwans decided to move into bakery items and packaged snacks, popularly known as namkeen in India. The shift was based mostly on popular demand from customers. The sweets section also witnessed a widening of variety since Pahalwans started offering specialty sweets originating from different parts of India. PRODUCT FOCUS AND GROWTH Pahalwans did not rely much on marketing in growing the business it primarily depended on word of mouth. As Sat Pal noted, We did not put much emphasis on marketing and advertising. On the contrary,

3 Prominent Indian festival that takes place in October or November every year and is celebrated with traditional lamps and fire crackers. 4 North Indian dessert treated as nutritional supplement. 5 Food item that originates from the Indian state of Gujarat. Do

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9B14A055 we always made an effort to market our products through highlighting their novelty and reinforcing quality standards. Occasionally, however, Pahalwans did advertise its products in local newspapers (Exhibit 3). The demand for Pahalwans products kept on growing and the customers were travelling long distances to visit the store. With this in mind, a new branch was opened in another part of the city in 1991.There were initial worries about the success of the store, as Sat Pal pointed out, We had delayed the opening since we were skeptical about the prospective sales. However, the sales of the new branch surpassed our expectations. Thus, Pahalwans distributed free silver coins bearing the Goddess Lakshmi6 with every box of sweets purchased during the Diwali season of 2000. In the early 2000s, Pahalwans management realized the need to diversify the product portfolio to cater to the emerging needs of the young adults who formed a significant segment of consumers. As Sat Pal opined, We knew that the young generation wanted something more than just sweets. There was a change in eating habits and thus, there was an opportunity. Thus, the company that started with milk and milk products diversified into a wide variety of sweets and Indian fast food. In 2006, Pahalwans opened its first fast food outlet (that also had a banquet hall) on the national highway (approximately 15 kilometres away from its headquarters). This outlet was designed to be similar to an established Indian fast food and sweet chain called Haldirams.7 Subsequently, Pahalwans received national news coverage in 2008, when a national news channel featured Pahalwans as a destination for a sumptuous breakfast. PAHALWANS COMMUNICATES As noted, the company had never believed in or relied on traditional advertising. As Sat Pal pointed out, We never had much faith in advertising. We knew that if our products are good and provide value for money, sales would take place. However, there were other marketing initiatives adopted by the company from time to time with mixed success. Sat Pal explained:

In 2010, an online company, mithaimate.com, approached us and made an offer for a tie up. The website was an aggregator and assured us that we would get a steady source of online orders through them. We initially accepted and for some time received some orders online also. However, it did not prove to be a fruitful venture and eventually the tie up fizzled out.

In the meantime, online retailing was making its presence felt in Jammu. So Pahalwans decided to focus on setting up a company website and a Facebook account. The website (www.pahalwans.com) was launched in 2009, but online ordering started from 2011. The website was fairly successful in generating online sales. From our website we receive approximately 20 orders per month. This includes both large (approximately 100 kilograms) and small (approximately one kilogram) orders. Day by day the online orders keep on increasing, forcing us to focus more on making online services better and effective, noted Sat Pal. The company maintained a database of its customers both in the state of Jammu and outside. This helped them to maintain good relationships and kept their customers updated about the latest offers and events at Pahalwans. PAHALWANS IN THE RING The management at Pahalwans was not afraid of competition. Sat Pal was of the view that profitability has never been an issue. We have been able to get profit throughout the life of the company. In spite of 6 Goddess Lakshmi: Indian deity symbolizing prosperity. 7 Haldirams: Indias oldest (since 1937) manufacturer, retailer and exporter of sweets and namkeen. Do

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9B14A055 having only vegetarian fare, Pahalwans had always been crowded and the demand kept increasing. However, the competitive landscape was changing rapidly with the entry of established local, national and international fast food chains. At the local level, the competition was restricted to small sweet shops that were catering to their restricted localities. However, things were different at the national and international level. At the national level, there were competitors such as Haldirams and Nathu8 who had very similar product lines as that of Pahalwans and were already well established brand names (see Exhibit 4). In addition, the competitive landscape included foreign fast food chains. Dominos, Pizza Hut, McDonalds and KFC were not directly competing with Pahalwans at the product level, but they were competing for the same wallet share as Pahalwans. These brands were successful in creating a new trend in fast food consumption. However, Sat Pal noted: Initially, we thought that the new MNCs would capture our market share [but] over a period of time, we realized that [we] have different target segments as well as timings of sale. Lastly, there was a new segment of consumers who were health conscious and deliberately opted for healthy fast food. This segment had consumers from all demographics and was increasing in size. Pahalwans was not able to attract them since sweets and fried snacks were not considered healthy by those consumers. THE FUTURE OF PAHALWANS Sat Pal felt that the food industry had not been competitive in Jammu until about 2010, but the situation was quickly changing with the entry of the MNCs. The new competitors were offering a wide variety of new packages and styles. Pahalwans was also feeling the pressure of the changing preferences of the new generation of consumers to come up with new ideas/packaging styles as well as new varieties. Keeping in mind the changing scenario, Pahalwans was planning to spread its branches across the state so that: a) It could be easily accessible to customers; and b) It could increase its market size. The location selection was obviously something that required additional thought. Possibilities included the tourist and pilgrimage destinations in the state that had steady tourist traffic except during a few winter months. Management was also pondering whether the company should open up a store in a retail mall. The growing mall culture in India had been utilized by many fast food chains that had set up their outlets in malls to cater to the culinary needs of the shoppers. However, the second and third generation of the company was yet to reach an agreement over this, as Sat Pal explained: This idea of opening outlets at different places is being deliberated by our children. However, this is still under consideration as I have reservations about it. Pahalwans had never emphasized traditional marketing practices (such as advertising), but given the MNCs focus on presentation and marketing, the company had to rethink its communication strategy. Thus one of the thoughts was also on devising a communication plan that could generate more effectiveness at low cost. At this point Sat Pal also mentioned that the company had not yet utilized the full potential of its website. The meeting had come to an end. Sat Pal had clearly communicated the issues being faced by Pahalwans but had also mentioned that its core competency was in Indian sweets and Indian fast food and the company did not want to switch to other product categories. Sharma thanked him and came out of the office in a pensive mood. She had to report back with a set of solutions for Pahalwans within a month. She knew she had a difficult month ahead. 8 Nathus: A manufacturer, retailer and exporter of Indian sweets since 1939. Do

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EXHIBIT 1: SALES TREND OF PAHALWANS

Year Sales Revenue (INR 000) Interstate Sales (INR 000)

Online Sales (INR 000)

2009-10 1,660 1,063 - 2010-11 1,959 1,423 - 2011-12 2,261 1,786 25 2012-13 2,521 2,182 05 2013-14 2,902 3,163 25

Source: Company files.

EXHIBIT 2: PAHALWANS LOGO

Source: Company files.

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EXHIBIT 3: SAMPLE NEWSPAPER AD OF PAHALWANS

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EXHIBIT 4: COMPETITIVE LANDSCAPE OF PAHALWANS

Domestic Competitors

Haldirams Haldirams Food International Limited started in 1937, in the northern Indian state of Rajasthan as a local sweet store. Subsequently, it became popular and grew to become a national chain of traditional Indian snacks and sweets. The company followed this by opening of a chain of fast food restaurants across India. The product offers were mainly suited to fit the regional tastes. In 2003, Haldirams was awarded as the top Indian brand in the ready-to-eat snack food category in the most trusted brand survey.

Nathus Nathu Sweets, a well-known name in branded sweets, started in 1936, in Delhi. It manufactured, retailed and exported sweets, namkeens, bakery items and other related products since 1939. It offered high quality goods produced using modern technology to suit contemporary tastes. Multinational Competitors

Pizza Hut Brothers Dan and Frank Carney founded Pizza Hut in 1958, in Wichita, Kansas. Pizza Hut became popular by delivering quality pizza along with side items such as pasta, garlic bread and chicken wings. It was acquired by Pepsi Foods in 1977. Subsequently, it was taken over by Yum! Brands in 1997. In 2013, it was the worlds largest pizza chain with more than 12,500 restaurants across 91 countries.

Dominos Brothers Tom and James Monaghan opened Dominos in 1960 (then called DomiNicks) in Michigan in the United States. Subsequently James sold his share and Tom became the sole owner when the name was changed to Dominos. Dominos was the second-largest pizza chain in the United States (after Pizza Hut), with more than 10,000 stores in more than 70 countries.

McDonalds McDonalds was initially founded as a barbecue restaurant by Dick and Mac McDonalds in 1940. In 1948, it was reorganized as a hamburger stand and by the late 1900s, it primarily sold hamburgers, cheeseburgers, french fries, soft drinks, etc. The company got into franchisees in the 1950s, and around the same time, acquired the famous golden arches. In response to changing consumer tastes post 2000, the company expanded its menu to include salads, fish wraps, smoothies, fruits and seasoned fries. By 2011, McDonalds was present in 119 countries around the globe. KFC KFC (Kentucky Fried Chicken) started out as a home-based food service by Colonel Harland Sanders in Corbin, Kentucky in the 1930s. The unique recipe made it a hit and Sanders used a franchise model to spread the brand across the United States. It was the worlds second-largest restaurant chain (as measured by sales) after McDonalds, with more than 14,000 outlets in more than 100 countries and territories as of January 2014. KFC was a subsidiary of Yum! Brands, a restaurant company that also owned Pizza Hut and Taco Bell. Source: www.haldirams.com/about-us/; www.nathusweets.com/about.aspx; www.pizzahut.co.uk/about-us; www.yum.com/brands/ph.asp; www.dominosbiz.com/Biz-Public-EN/Site+Content/Secondary/About+Dominos/History/; www.aboutmcdonalds.com/mcd/our_company/mcdonalds_history_timeline.html?DCSext.destination=http://www.aboutmcdonalds.com/mcd/our_company/mcd_history.html http://colonelsanders.com/history_colonelSanders.asp; and www.yum.com/brands/kfc.asp. All sites accessed August 25, 2014. Do

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