Would never consider selling brand Bisleri: Ramesh Chauhan

One of India's feistiest entrepreneurs, Ramesh Chauhan, Chairman, Bisleri International, was once called the soft drinks king of India. The brands he helped build - Thums Up and Maaza continue to be leaders in the cola and soft drink segment 20 years after he sold them to the Coca-Cola Company. Today, Ramesh Chauhan could well be called the "water king" of India. His brand Bisleri commands a reported 60% share of the market and continues to battle with multinational brands.

After having sold his brands like Thums-Up and Limca to global giant Coca Cola, Chauhan declared that he would never even consider selling the brand Bisleri. Giving his view on FDI in retail, Chauhan believes it will not have any effect on the economy as opposed to general opinion that FDI will help the economy to grow fast.

Below is the edited transcript of Chauhan's exclusive interview on CNBC-TV18.

Q: The debate over FDI again is raging; this time over FDI in retail. What are your thoughts?

A: I am not too sure whether that the debate is really necessary is occupying too much space. FDI, whether it comes or not, we are supposed to be a country of traders. From there, we have moved on to industrialists and manufacturers and exporters. Now, the retail business is being done by Big Bazaar and many other companies. So, I don't know. I am completely indifferent whether they come or don't.

Q: Is it harmful, is it good? Let's take your example. You fought to keep FDI out of your sector, you couldn't keep them out, they came in, they paid you handsomely for your brands. You used that money; you have built up an entirely new business and have done very well. So, isn't there space for everybody in this country, enough for the market?

A: I am indifferent. I have not applied my mind to it. The issue which people are making which I totally disagree with that FDI will help the economy to grow fast. I said - FDI in retail is not going to have any effect, in my opinion. What is preventing presently - our industrial growth is the ineffectiveness of the government in implementing the existing laws.

Q: Are you saying if they allow interest rate movement, if they allow coal chains to be set up across the country - you don't need foreigners come and do it, Indian companies can do it?

A: I am saying not only that. I think they are talking about too many big things. If you talk about the smaller things - the irritations which millions of small entrepreneurs are facing - the license raj and the permit raj were supposed to have gone with the industrial licensing going away and the import licensing go away. But the amount of licenses and permits required to put up a simple thing like a water factory is something like 29-30. Do you require so many licenses? After all, you will still find problems. So, implementation is a bigger problem.

Q: Let's get back to your business. You sold your brands to Coca-Cola about 19 years ago. When you sold the brands, you and your wife cried at that signing ceremony. How difficult was it to sell your brand?

A: Very difficult.

Q: And you did cry?

A: Of course. It is not easy to cry.

Q: But you are still attached to the brand. Is it a matter of pride that Thums Up and Maaza are still the largest selling brands in the category or is it a matter of regret that you sold them?

A: There is no regret at all about selling. There is, of course, great pride. I feel sorry that Limca has been left behind. I think Limca can beat both 7UP and Sprite combined. Limca has got a good amount of value which has been built up over the years. It had sort of a first mover advantage.

Q: But to be fair to Coke, haven't they promoted it?

A: But you see, Thums Up, Limca and Maaza were not advertised or promoted for the first seven years. Then they woke up and started advertising Thums Up. Maaza - they started advertising something like 12-15 years later. Now, let's accept that for a consumer product like ours - advertising is the key.

Q: When you sold your brand you said some of the reasons you sold was because you didn't have the money to battle with Coke and the other was most of your bottling was other than maybe four or five you didn't own most of your bottlers?

A: Yes, four were ours and the others said that we can battle Pepsi but Pepsi and Coke combined, if you have to battle it will be very difficult.

Q: So money was an issue?

A: Not money, this was the time of liberalization so the love and glamour of everything foreign was out of proportion. That is where people were insecure whether Thums Up will be able to stand up to Coke and Pepsi. Now you can say that they have proven wrong but at that time that was a feeling and one would have to accept it.

Q: Those lessons that you learnt from there, how did you translate that into your Bisleri business?

A: Yes, because now all the major plants are owned by us. 80% of our plants are what we call a co-packer meaning contract packer where they only manufacture and give it to us. So, we can save on freight.

Q: So that's manufactured by somebody else and you brand it?

A: Not just brand it, we brand it and sell it. In the case of franchise, it's their branding and they sell it and we get the royalty. Here, the sale is in our hand.

Q: You bought the brand Bisleri in 1966. It wasn't till the mid 90s after you sold your other brands and we waited a few years till you really gave it a push. Why did you wait so long?

A: To be very honest, we bought Bisleri not as a mineral water brand.

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Q: As a soda?

A: As a soda. Now, we had Thums Up, Limca, Goldspot but we had no brand for a soda and we were doing Parle soda. Now, Parle soda doesn't sound right, Parle means biscuit. How can a biscuit soda be there? So that branding was not a sensible one. So, we were in search of a brand for a soda. Bisleri was bought and we looked after Bisleri.

Actually, mineral water was completely out of vision. It's only after we sold to Coca Cola in 1993 – that I said I am not interested in being a bottler, I like to build brands so let's build a brand Bisleri. So we started investing money in building the brand.

Q: Were you surprised with the response that Indian market or the demand that the Indian market had for packaged water?

A: No, I will tell you one thing, there is no such thing like a demand.

Q: You created the demand?

A: Yes, you have to create demand.

Q: But a little demand has to exist?

A: No, I am not surprised and I can tell you today that water business, we have not even touched it as yet. It can grow 100 times.

Q: If you say the demand for that is so large, now water is product where multinationals have a large mind-space outside. Pepsi and Coke sell water. So how much is the brand worth today?
 
A: These are all meaningless exercises.

Q: Not even a buyer came and told you that I want to buy? Would you sell?

A: No, I will not talk.

Q: That's what you told me about 20 years ago when I asked you whether you would be selling Thums Up and Limca.

A: No it was not selling. It was a logical outcome of all these bottlers wanting to go to Coca-Cola. If there was, the question of selling the brand would not be there.

Q: So you are saying you are insulated from that now and you would not want to even consider selling Bisleri?

A: No.

Q: Is money an issue; there have been reports that you will go for an IPO, you always deny it but is an IPO ever in the cards or you don't need that kind of money because you are talking about a huge potential which is not being tapped?

A: I don't like to say it because of a large sum of money with Merrill Lynch and we have zero warrant. Now, you tell me what will an IPO give me? So, money is not an issue, the issue is man power who is capable of managing and pushing the business ahead.

Q: How have you worked on succession? I am not talking just about family succession; I am also talking about role succession in the business?

A: We have seven directors in the company who are actually operating and running the show. We have a good HR person to develop the organization more aggressively than what we are getting now. Unfortunately, people come and people have got very wrong notions of management and sorry to sound like an old fashioned person, but they are too locked into computers and just looking at numbers. What the numbers mean and what should we be doing - that kind of vision is missing.

Q: There is a board in your office which read, we don't pay you for your brains, we reward you for using them. So, how many of the employees do you reward today because they are obviously using their brains?

A: Unfortunately, in our case, there is no hi-tech, no great R&D to be done. It's just sheer brute force, getting goods across and I can proudly say that each and every person in the country knows the brand Bisleri very well.

Q: You have got to make it available?

A: Yes make it available. Unfortunately, not being made available has made it into some sort of a generic brand, now how to make that generic into non-generic and make it into a brand, brand is the key.

Q: So, why are you unhappy with the fact that when people say Bisleri, they mean bottled mineral water?

A: Because in the name of Bisleri, somebody else is getting the revenue and I am not getting the revenue.

Q: But isn't your market expanding anyway?

A: Yes, it is expanding, but the point is that at some stage the brand must become a brand. The name must become a brand.

Q: Since you have got a brand which is so popular that it is generic, since you have got such a large distribution network, does it ever tempt you that you can leverage all that and launch something else? Not just water, be it carbonated water, be it more juices, even other consumer products?

A: That is something which is going on for some time. But my worry is, we will lose focus on expanding the brand Bisleri, where the return on investment, investment means expense, will be much greater. If you feel that your brand or the category is now saturated and you have filled up the market then you go because many times people want to diversify as a defense mechanism. If we are targeting on a 50% growth this year, that would require a lot of man power. Money is not an issue, it requires a lot of man power and man power which is convinced that, yes, we can grow.

Everyone will say, sir we can't grow at this rate. What about next year? Next year, we will worry about next year, let's worry about this year.

Q: How difficult you find to attract man power especially given that you are competing for man power with companies like Coke, Pepsi, Hindustan Lever?

A: We have people from Coke and Pepsi coming in, but I don't see that drive in them. They again get buried in systems and processes.

Q: What makes Bisleri an attractive company to work for? What do your people who stay back say, why did they stay here, why don't they go out and take up a job in fancier branded companies?

A: I don't know, I think Bisleri is fancy enough. People are reluctant to leave except when they are looking at more experience in another field. We sell water at Rs 4 a litre, the big jar 20 litre. Rs 4 per kilo it becomes. Even scrap and junk sells at Rs 10-12 a kilo. To transport at Rs 4 per kilo to all parts of India, it's not a very rewarding thing.

Q: You moved up the value scale by introducing Vedica?

A: Vedica is still small.

Q: Is that more to just be in mind-space?

A: It is more for first-mover advantage into that category.

Q: But you have Himalaya already there.

A: Himalaya is dying.

Q: Why do you say that? It has been bought by a large industrial group.

A: Nobody understands Himalaya; they have no clue what to do with Himalaya.

Q: How is succession going to be planned in your company? What are the lessons you learnt from your own family where all your brothers went different ways. So, there was no question of fighting over individual companies. What lessons have you learnt from that and how you will implement that here?

A: Working on it. Succession is important; there is no question about it. But more important is to build that base of management because it has taken me 50 years of experience to build up to this level of working. Now for somebody to take up that thing so fast is going to take time.

Q: Just to go back to the numbers that you spoke about a while ago. You grew 50% last year, is that your normal rate of growth?

A: No, for this year it is 50%, last year we grew by 36%.

Q: Is that normal rate of growth - 36-40%, 50%?

A: Yes.