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How Rasna, a three-decade-old brand is innovating constantly to stay fresh

Apr 30 2013, 11:38   |   By Entrepreneur

Shruti Chakraborty

In 1976, Pioma Industries introduced a ready-to-drink mix product called Jaffe to the Indian market. "Jaffe came from the name Jaffa, a variety of oranges," says Piruz Khambatta, Chairman and Managing Director of the company.
"As no one really understood the term Jaffe and Indian consumers would identify with it better, the name was later changed to Rasna, which comes from the word Ras, the Hindi word for juice," he explains. This is the story behind the origin of the brand that practically defined for children a summer quencher in the '80s and '90s.

Khambatta represents the third generation of a family business that has owned and managed the company since its inception. Khambatta's grandfather had a factory that produced flavors and soft drinks, but it was his father, Areez Khambatta, who launched Rasna.

When Piruz Khambatta joined the business at the age of 18, the product was a powder concentrate and a bottle of liquid. "It wasn't made with very high fruit content initially, but we came up with new formulations and a new range of products," he says. It helped that Khambatta was a student of
biochemistry at that time. In 1977, not long after Pioma Industries' product hit the market, Coca-Cola famously—or rather infamously—withdrew from India due to regulatory hurdles. This opened up more space for Indian beverage manufacturers, including Rasna.

The brand grew consistently over the next few decades to the point that it now claims to have a 93 percent market share in the powdered soft drink concentrates segment with a large array of products. "We are the Amitabh Bachchan of our category," Khambatta says with pride.

'I love you Rasna'
In the '90s, multinational players re-entered the beverages market. Eventually companies like Coca-Cola, Kraft and others also entered the powdered soft drink concentrates segment with products like Sunfill and Tang. However, they met with limited success in the segment, despite their success in the overall soft drinks market. They were also unable to dislodge Rasna, which had its roots firmly entrenched.

Besides its first mover-like advantage, Khambatta says that the company has constantly invested in innovation and has remained focused on the category, which helped it keep others at bay. Apart from introducing products with higher fruit content and increasing focus on the health aspect of the product, Rasna also brought in a number of innovations to keep the prices low and affordable for its lower middle-class and rural customers.

"We have been the creators of the product and don't rely on third party R&D. Due to this, we know the product and can understand what the customer wants and incorporate changes with ease," Khambatta says.

A much-talked-about strength of Rasna over the years has been its focused marketing and advertising initiatives. "Distribution has been another one of our strengths," Khambatta says. The company has 700 people on its payrolls working on the distribution of Rasna's products, he informs. "We have not relied on third-party distribution, even in the smallest of towns," he says.
In 1993, Rasna began international operations and the company also has offices in the US, Dubai and Bangladesh. While the focus in India remained on soft drink concentrates, Rasna also introduced easy-to-cook and ready-to-eat foods in the international market.

Keeping it steady
Keeping a rapidly growing business within the family has its challenges and strengths, Khambatta says. The biggest advantage, he believes, is the independence he has in taking decisions. "I spend a lot of time on the field understanding consumers. I take decisions based on my intuition of what will work for the customers." The company has not raised any funds from investors and Khambatta claims he has kept the company debt-free so far, which he believes helps family-owned companies last through more generations. There is no fund-raising plan on the cards either. "We don't need private equity players at this stage. Most private equity players have their eye on short-term goals which may restrain us from growing in a comfortable manner," he says.

Khambatta explains that some of the lower-end products of the company, in terms of pricing, don't make enough money in real terms. However, since these products are targeted at rural- and lower middle-class consumers, he would prefer to keep it that way, he says, betraying more than a sliver of the do-gooder in him. And this is something he believes may not be acceptable to external investors. The challenge is on the other side of the same coin. "We thus have to be careful with our finances and have to maintain tight financial control," he says.

Bigger markets, bigger challenges
Though Rasna dominates the powdered soft drink concentrates market, Khambatta acknowledges that the company's market share is much lower when compared with the squash and soft drink segments.

"Currently, 300 crore glasses of Rasna are consumed in a year in India. We are highly preferred as a home brand, but outside consumption has been a challenge," he says, adding that the company is working on launching products for outdoor consumption. When it does, it will directly compete with ready-to-consume fruit juices and soft drinks. "Establishing that could be a challenge," Khambatta says. "In categories like juices, where we may need technology or international marketing, we will be looking at joint ventures. We are in fact talking to a few players for a joint venture," he says.

Khambatta says keeping prices low despite the growing prices of sugar and manpower has been tough as has been staying consistent in the face of changing market dynamics, referring to government policies, logistics etc.
Rachna Nath, Leader, Retail and Consumer at PricewaterhouseCoopers notes that the big challenge for the company is remaining relevant to
the youth. "Rasna is a brand that many have grown up with in India. It has its loyal customers. But with companies like Coca-Cola and Pepsi reinventing themselves constantly, it is possible that the age group that was loyal to Rasna is ageing," explains Nath.

Nath also points out that given the large customer base Rasna has in rural areas and tier II and tier III cities, the cost of getting the product out there must make economic sense for the company. "Infrastructural and supply chain related challenges are problems for the entire sector, but considering the locations of Rasna's customer base, these could be major challenges for them," she says.

The trust factor
While Khambatta is uncomfortable sharing revenue figures, he says the company grew 30 percent last year and is looking to grow at 40 percent this year. Khambatta had told news agency Press Trust of India in March 2012 that the company's revenues for the previous year stood at '350 crore. He says that since "the middle class and the bottom of the pyramid are Rasna's primary customers and that segment is growing, there is a huge scope for growth. In the next five years, it should be about 40 percent year-on-year."
Khambatta says one of the things he has followed as an entrepreneur which has helped him grow the business is self-reliance. "I trust others, but I rely on myself and keep myself up to date on all matters affecting my business—be it law, or any other aspect of the business world," he says, explaining his unconventional management theory.

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