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October 17, 2016
Rashmi
Pratap, The Hindu Businessline
Mumbai, 17 October 2016
When
Neeraj Kakkar and his team at Paper Boat decided to launch Kanji, a
tangy probiotic drink popular in Punjab and Uttar Pradesh, they were
surprised to find that the original recipe had been modified due to
unavailability of the key ingredient: purple carrot.
With orange
and red carrots having taken the Indian market by storm, farmers had
virtually stopped cultivating the variety needed to make Kanji. And the
substitute was a combination of orange carrots and beetroot.
After
an intensive search across geographies, they learnt that purple carrots
were being cultivated in southern Turkey. Hector Beverages, the parent
company of Paper Boat, imported its seeds in 2014 and began cultivating
in Udhagamandalam (formerly Ooty). Now, the first crop is ready, and
Hector Beverages is looking to add Kanji to its portfolio by this
winter.
“We want to be the reference taste for every beverage we
launch. We also believe that if there is something better-tasting than
our product, we will stop selling it,” says Kakkar, explaining why he
didn’t settle for the carrot-beetroot combination for his Kanji.
And
that is one of the pillars of the company’s disruptive business idea,
which has helped Paper Boat become the preferred drink for many despite
entering a market crowded by the Pepsis and the Cokes, as late as in
2013.
The disruption
Paperboat
created a new category of branded ethnic-flavoured drinks when it burst
on the scene, and its packaging too set it apart from the crowd.
Devangshu
Dutta, chief executive at retail consultancy Third Eyesight, says Paper
Boat’s innovative products and packaging have been a force of ‘creative
disruption’, and the company has been able to back that up with
distribution.
“Paper
Boat’s traditional Indian flavours and its differentiated packaging
give it a unique look at retail stores. The company has clearly gone
after market share and taken a penetrative approach. Whichever
geography they choose, they are going after it very aggressively. It is
clear that they want to be a deeply penetrated mainstream product,” he
says.
But making a mark wasn’t easy. Retailers were wary
of stocking the products, fearing they wouldn’t be sold. And that’s
when Paper Boat’s deployed its second disruptive strategy: a
no-questions-asked return policy. “We gave our retailers the freshest
of products and refunded them in full in case of returns,” says Kakkar.
Most
large companies, in contrast, only refund a percentage of the money.
But Paper Boat’s ‘insurance’ cover on returns ensured that its Aam
Panna, Gol Gappa and Aam Ras beverages adorned every retailer’s shelf.
The
third pillar of Paper Boat’s success has been customer-centricity: it
sources the best quality raw materials from across the country. “We
have invested in quality function. Our aim is to be better than MNCs
because being equal to them has no meaning,” says Kakkar.
Another
factor, which Kakkar believes has worked well for the brand, is its
communication strategy. “Be it communication on TV or social media, we
have followed the same distinctive tone of nostalgia and innocence.
Once you speak the same language, people remember you better.”
The
stories that the brand narrated were reminiscent of the way IndiGo
airlines lovingly created stories for its Airwiches (sandwiches on
air). Tellingly, Paper Boat beverages are served on board IndiGo,
bringing two great storytellers together at 30,000 feet.
Paper
Boat relies heavily on digital marketing, and its digital campaigns are
as funky as the brand. On Instagram, it tells its brand story using
creative doodles, videos and photographs, cleverly using two puppies
named Hector and Beverages to add fun to the storytelling.
“We are digital first and mass media second. We use the cheapest way to reach out to people,” says Kakkar.
The challenge
But
according to Harish Bijoor, CEO of the Bengaluru-based brand
consultancy that goes by his name, “Paper Boat’s communication is good,
interesting and different, but it is niche — and that is a negative.”
“Niche
marketing is good as an early entry strategy, but if a brand wants to
appeal to a slightly larger mass, which has the money, it cannot remain
niche,” he says.
Today, ethnic flavour drinks have a nearly 50
per cent share of the Rs2,000-crore juices category. Already, other
brands – Dabur Hajmola, Cocofly – are emerging, with ethnic flavours
similar to Paper Boat’s. Copy-cats typically eat into the market share
of the incumbent. Going forward, Paper Boat may have to reach out to a
larger audience in a tone familiar to them.
Dabur’s Hajmola
Yoodley is surprisingly capturing public imagination. It’s seen more on
modern trade shelves (which is not surprising, given Dabur’s FMCG
distribution strength) and is piggybacking on the familiar Hajmola
brand, which helps with customer connect.
Dutta
believes that Paper Boat’s geographic footprint can grow over time, as
has been the case with some other players. “They have an adequate
presence in certain geographies and they are not as strong in some
others just like many other FMCG brands. I think it is a matter of time
before they expand,” he adds.
Paper
Boat, meanwhile, is also keeping a close tab on costs. It replaced
tetra packs with a flexi pouch that uses just 8gm of plastic as against
25gm for a pet bottle, making it cheaper by at least 50 per cent. “Even
transportation costs go down with this packaging,” Kakkar points out.
And
profitability, he says, is not a concern. “Ours is not a cash-burn
business. We continue to invest in growth and advertising (at the cost
of profitability),” Kakkar adds.
For now, the company has
settled down to a strategy of having some year-long products like
Chilli Guava or Aam Panna and other temporary launches once a year like
Thandai during Holi, Panakam during Ram Navmi and Kanji for two months
in winter.
So far, Paper Boat seems to have got its mix right.
Its ability to continue to juice out success from its differentiated
strategies will, however, be tested over the next few years.
(With inputs from Chitra Narayanan)
(Published in The Hindu Businessline)
