Parle Agro (India): Vision Realisation

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Author: Asha Kaul

Pub. Date: 2024
Product: Sage Business Cases
DOI: https://doi.org/10.4135/9781071945711
Keywords: India, market share, branding, industry, customers, market development, distribution
Disciplines: Consumer Behavior, Marketing, Business & Management, Entrepreneurial Strategies,
Entrepreneurship, Decision-Making, Strategic Management, Management Communication, Other
Management Specialties
Access Date: February 26, 2024
Publishing Company: Indian Institute of Management, Ahmedabad
City: London
Online ISBN: 9781071945711
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© 2024 Indian Institute of Management, Ahmedabad All Rights Reserved.

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Abstract

Nadia Chauhan took charge of Parle Agro as Chief Marketing Officer (CMO) and Joint Managing Di-
rector (JMD) in 2009 where she had been working as a brand manager for Frooti since 2003, under
the stewardship of her father, Prakash Chauhan. Under Chauhan’s leadership, Parle Agro doubled its
turnover to INR 50 billion between 2012 and 2017 following which, she proceeded to set an ambitious
target of replicating the feat in the next five years (2022) to reach annual revenues of INR 100 billion.
Within these five years, she wanted to become the dominant player in the beverage segment. The en-
try of major multi-national beverage companies in the Indian market presented a challenge for Parle
Agro to ascend to the number one position. However, changing consumer preferences for healthy fruit
drinks in different categories also provided an opportunity to experiment and expand. Reviewing the
situation in 2019, Chauhan had to decide if Parle Agro should remain committed to the INR 100 bil-
lion target, upscale or mellow it down. Further, how should the company proceed—market penetration,
product development, market development or diversification?

Case

“Should we remain committed to the target set in 2017?” was the question Nadia Chauhan, Chief Marketing
Officer (CMO) and Joint Managing Director (JMD) of Parle Agro Private Limited, posed to her senior leader-

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ship team on April 10, 2019. Prompted by the success from 2012 to 2017, when Parle Agro’s turnover had
more than doubled to INR 50 billion, Chauhan had set forth a goal of replicating this feat and touching the INR

100 billion1 revenue mark by 2022 and making the “company the country’s number one beverages player.”
Two years later, considering the changes in the industry, consumer preferences and surge of other players,
Chauhan wondered if she should remain committed, upscale or mellow the target of achieving INR 100 billion
in revenue set in 2017.

Reflecting on the company’s drivers of success, Chauhan could pin them down to revamp of sales and dis-

tribution as well as introduction of aggressive marketing strategies2 which had helped each of the company’s
flagship brands Frooti and Appy Fizz to clock an annual turnover of INR 20 billion and INR 7.50 billion, respec-
tively, in 2017. This was a major part of the aggregate turnover of the company from all its products—Frooti,
Appy, Appy Fizz and Bailley. However, between 2017 and 2019, changes in the market and competition had
taken place. Chauhan knew that achieving the goal initially set in 2017 would require improving sales, en-
hancing the distribution network, creating new products and categories, and doubling the turnover of existing
flagship brands. Many other initiatives would also have to be thought through. She was not sure whether this
could be achieved in the changed context.

Nadia Chauhan - The Third Generation of Leadership

Phase I (2003-2009)

Nadia Chauhan was the youngest daughter of Prakash Chauhan, the architect of the company, Parle Agro.
In the year 1996, when the elder two daughters of Prakash Chauhan were studying abroad, Chauhan, joined
her father for the first time in a “meeting with our advertising agency to discuss a teaser campaign for the

Frooti brand. Everyone was surprised to see a little girl walk in. I was 11 at the time.”3

She continued to spend time after school and during her holidays in the company, and gradually learned the
story of Parle Agro’s journey, from inception to her formally joining the company in 2003. She also sensed the
challenges and pressures of selling off brands which her father had experienced while running the business
which, strengthened her resolve to join the company and established an emotional connect with the business.
In this process, she imbued from the father, “the ability to dream fearlessly and then go out there and fight
for what you believe in and make it happen. To lead with your gut, with passion, with fearlessness and an

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open mind.”4 The same passion, which she had imbibed from her father, manifested in her role as a working
mother of two. With a smile she shared that she had resumed work in less than two months after giving birth
to both her children — who now accompanied her to the workplace, just as she did when she was a child.

Chauhan’s transition from founder’s daughter to brand executive of Parle Agro was gradual. While she infor-
mally learned about the company, she also experimented with her own ventures. At 13, she started baking
brownies called ‘Just Divine’ and began selling them through sales calls and visits to various clubs. In her next
venture, she went from door-to-door selling tie and dye T-shirts. These two ventures were followed by garage
sales. At the age of 18, in 2003, she formally joined her father in his business and began work as a brand

executive managing the Frooti brand. At that age, “[I was] truly driven by my father’s outlook and vision.”5
Eventually, she took over R&D, global markets, new business and the entire marketing department along with
sales.

Within a couple of years of joining the company, she launched Appy Fizz (2005) which was an instant hit
with the consumers. This was followed by N-joi (2005), Saint, Grappo Fizz and LMN (all three were launched
in 2008). However, these last four initiatives, according to Chauhan, were “… ahead of time” and had to be
aborted.

Nadia Chauhan—CMO & Joint MD

Phase II (2009–2019)

Chauhan was appointed the CMO and Joint MD in 2009. Her focus and business acumen won her many

awards and much recognition.i During her first few years in the company, she found herself reliving the words
of her father, “Our aggressive steps and actions are fuelled by innovative and disruptive thinking and we will

continue breaking boundaries to establish ourselves as strong pioneers.”6 Reflective of the philosophy was
the launch of Frooti and Appy, which were category creators and had been emulated by competitors without
the same success. The premise on which the company worked, according to Chauhan, was that, “We will not

launch a product that already exists in the market.”7

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i Some of the recent awards - Business Today’s Most Powerful Women in Business, Forbes India’s Tycoons

of Tomorrow and Impact Magazine’s Most Influential Women in 2018.

When Chauhan took over as CMO, she often found herself leading teams that were predominantly male. The
fact that she was young and a woman did not deter her. “I don’t give people a chance to treat me like a woman

and even if I am the only woman in a room of 100 men, I am just one of them.”8 She believed that she, along
with her sisters, were never given the easier path because they were women. Prakash Chauhan had always
encouraged his daughters to independently manage their struggles and be resilient.

In 2009, when Chauhan was appointed as CMO and Joint MD, the business model developed by her father
stood on four pillars: (i) Company-owned operations; (ii) Franchisee-owned operations; (iii) Backward inte-

gration into PET preforms;ii and (iv) Exports and international business. As she started getting entrenched in
the management of the business, she discovered hitherto unnoticed operational bottlenecks that hindered the
company in its onward march.

ii Parle Agro began PET preform molding in 1996 with the concept of backward integration. It was one

of the largest companies to purchase and convert PET resin into preforms. Retrieved July 25, 2020 from
https://www.parleagro.com/preforms

Immediately after taking over as CMO, Chauhan created a priority list of issues to be addressed. Her to-do
list comprised: training of personnel, proper infrastructural mapping across markets, and developing a more
dynamic and disruptive marketing strategy which would help beat competition. Most of these revolved round
the need to be heard and seen more in the market than competitors. The question was ‘how’?

She began by introducing Hippo (2009) in the Foods division, Café Cuba (2013) and changing the packaging
of Frooti (2015). “Our vision is extremely aggressive,” she stated and added, “We want to get back to being

the top beverage player in the country, which we lost after divesting.”9

With this vision and a year-on-year marketing budget of INR 2 billion beginning 2014, Chauhan set forth to
achieve her targets through innovative approaches and two core transformations: marketing and sales. She
attempted to strengthen brand relevance, enhance manufacturing capabilities, and improve sales and distri-
bution. She set the target of increasing the distribution channels from 1.5 million in 2017 to 3 million by 2025.

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With a manufacturing facility in Nepal, she was also evaluating opportunities of converting export markets (50
countries) to local manufacturing hubs.

Parle Group - Origins

Parle was founded by Mohanlal Dayal Chauhan in British India. He relocated from Gujarat to Mumbai with
the dream of learning sewing. However, the plan was shelved in favour of confectionaries business which

he started with his sons.iii Soon they began producing orange candy in the Vile Parle suburb of Mumbai.
Profoundly impacted by the Swadeshi movement, Mohanlal sent his son Narottam to Germany to learn the
art of confectionary making. Narottam returned from Germany in 1929 with newly acquired skills and the re-

quired machinery.iv The factory set up by the Chauhans in Mumbai employed 12 people and members of the

Chauhan family worked in different capacities “as engineers, managers, and confectionery makers.”10 The
name of the suburb (Vile Parle) gave the company its name.

iii Maniklal, Pitamber, Narottam, Kantilal and Jayantilal

iv Machinery cost INR 60,000

Soon the business diversified into biscuits and began producing Parle Glucose (which eventually came to
be known as Parle-G). At that point in time, Britannia, which was owned by a British company, was the only
option available. Parle-G biscuits, from an Indian company, for Indian consumers, were launched with an ad

campaign—”Freedom from British”.xi In the early 1930s, the company faced problems in importing machinery
as the government made granting of licenses restrictive and provided them only to companies manufacturing
essential items. As biscuits were not part of the commodities list, Parle was not granted an import license.

The company had to make its own machines for baking, moulding and packaging of biscuitsxii which were
introduced in the market to fill the void.

Two decades later, Parle forayed into beverages under the leadership of Jayantilal Chauhan, one of the five

sons of Mohanlal Dayal Chauhan, also known fondly as the ‘father of soft drinks’. He launched Gold Spot,v an
orange flavoured drink in 1951 and followed it by starting operations for carbonated beverages at the ‘Baroda
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Bottling Company’ in 1959. This later changed to Parle Agro. In 1971, the company produced the lemon-
flavoured drink Limca followed by the mango-flavoured Mazaa in 1974.

v The bottling factory of Parle in Andheri suburb of Mumbai was adorned with a large Gold Spot bottle atop

the building which was visible from afar and informed the stray traveler of the company bottling location.

Parle Beverages expanded its range of home-grown beverages in the Indian market, with the launch of its

cola-flavoured carbonated drink ‘Thums Up’ in 1978, which was a runaway success.vi It prompted Parle Bev-

erages to set up several bottling plant units and develop a widespread franchisee network.vii With a network

of 58 bottlers, Parle Beverages had a market share of over 80%.xiii In 1984, the original Parle Beverages was
formally split into two separate companies—Parle Bisleri (led by Ramesh Chauhan) and Parle Agro (led by
Prakash Chauhan).

vi The new cola from the house of Parle was originally planned to be called ‘Thumbs Up’, but the Chauhan

brothers finally removed the ‘b’ to make the name more unique. This change, often interpreted as a spelling
quirk, was a trademark bid as well as a move that gave the brand an identity of Indianism.

vii This was the time when Coca-Cola was forced to exit India as it was denied import licenses due to non-

compliances with the provisions of the then Foreign Exchange Regulation Act (FERA). FERA stipulated that
foreign companies should dilute their equity stake in their Indian associates to 60%. The Union Minister for
Industries, George Fernandes, wanted Coca-Cola to not only meet this provision but also share the formula
of its concentrate to Indian shareholders. The company agreed to the former but not the latter, for it was a
trade secret.

The Company

Headquartered in Vile Parle Mumbai, Parle Agro Private Limited under the aegis of its Chairman, Prakash
Chauhan, envisioned the need to create a new identity for the company while staying true to the legacy of

‘Parle’, “a name that you can trust.”14

Prakash Chauhan, an engineer by education, started with a vision to make “Parle Agro, the No. 1 beverage

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company in India”15 and philosophy of ensuring access for all customers, irrespective of age and financial
status. He pioneered a culture of innovation in every aspect of the company’s operations and went against
the industry tide of one-way packaging in returnable glass bottles (RGB) by introducing two-way packaging at
an affordable price. In 1996, he also introduced PET preforms with the intention of backward integration.

In 2002, Prakash Chauhan devised a strategy which included “major expansion drives, strategies for growth,
new product launches, research and development initiatives, extension of its distribution network, renewed

thrust on exports, marketing and advertising plans.”16 The company planned to set up its first manufacturing
unit in Sri Lanka and then move to UAE. This decision was made in response to the preference of consumers
for TetraPak fruit drinks, especially mango. He introduced various beverage products like mineral water, Frooti
(Mango drink) and Appy (Apple drink), with a distinct focus on the Indian palate and price.

By the end of 2002, expansion plans were underway for the distribution network. It was planned to add 1
million retail outlets (20-30% increase) to the existing system, so as to bring the majority of rural India within
the ambit. The manufacturing, distribution and promotion of the brands was initiated with strategically posi-
tioned franchisees spread across the country, with the support of the parent company by way of timely in-
formation and a network of stockists. For Prakash Chauhan, “Strategizing covers every aspect of business:
from new business development, product development, brand positioning to advertisements and promotional

campaign. In short, it’s a game of innovation — to be first off the mark.”17

The Non-Alcoholic Beverage Industry

The beverages market, which was valued at INR 1.14 trillion in 2019 was expected to touch INR 3.88 trillion

by 2025, with a CAGR of 23.30% during the 2020-2025 period.18 The market was split into alcoholic and
non-alcoholic segments. The non-alcoholic beverage industry comprised soft drink syrups; soft drink and wa-
ter; fruit juices; and, coffee and tea. As an aggregate group, the industry was highly fragmented with multiple
manufacturers, different modes of packaging, production processes and products. However, the soft drink in-
dustry was much more concentrated compared to the entire beverages industry.

Most of the non-alcoholic beverage companies in the early 1990s evolved from regional firms which produced
local products for the local markets. The shift happened when companies began mass production for expand-

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ing to other geographies. Further, with an improvement in packaging and processes, there was an increase in

the shelf life of the product.19 Soft drinks were classified into carbonates and non-carbonates (Exhibit 1). The
carbonated drinks were mainly Cola, orange and lemon whereas, the non-carbonated also included mango.
The concentrate segment or preparatory drink segment, which included soft drink concentrates to be dilut-
ed or mixed with water for consumption, was a sub-segment of the soft drink market. Rasna, Kissan and
Roohafza were some of the Indian brands in this segment.

In FY2018-19, the Indian non-alcoholic beverage market stood at approximately INR 625 billion with an an-
nual growth rate of around 13.4% since FY2014-15. Carbonated beverages constituted 29.81% of the non-
alcoholic beverage market. The growth rate in the carbonated soft drinks segment had slowed to 4% which
could be attributed to changing consumer preferences and increased taxes levied by the government on car-

bonated soft drinks.20 The carbonated drinks segment was expected to lose more of its sheen in the coming
years as consumers were switching from carbonated drinks with sugar to healthier substitutes as fruit drinks,
nectars and juices (Exhibit 2). A number of multi-national players, as well as small and regional firms, were

operating in the flavoured or carbonated sector.viii Multi-national companies like Coca-Cola and PepsiCo had
a strong foothold in this segment.

viii Some of the regional players in this segment were Bovonto, Jayanti Cola, Sosyo, Runner and Kashmira.

The non-carbonated sector comprised both, artificial and natural drinks. It had a large presence of national
and multi-national players. It stood at 70.19% of the total beverage segment and comprised fruit juices and

bottled water21 (Exhibit 3). Within this sector, approximately 60% belonged to the category of fruit drinks.
Mango was the most popular variant of fruit-based drinks and formed 45% of the category with an estimated
market size of INR 88 billion in FY2018-19. Other fruit drinks like lime, orange, etc. and exotic fruit drinks like
strawberry, cranberry, etc. were also available. Mixed fruit drinks and those with a combination of fruits and
vegetables were also present in this category.

The non-carbonated segment had witnessed a growth of 25%. The regulatory framework, in support of fruit
growers, urged soft drink companies to blend carbonated drinks with at least 5% juice from fruits produced
by Indian farmers. In response to this framework, the international beverage companies had stepped up their

investments in fruit-based beverages. 22 With rising urbanization and commensurate focus on health con-
cerns, it was predicted that the fruit and vegetable juices would outperform other categories in the soft drinks

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sector for the coming decade. 23

The market for bottled water was INR 160 billion with an annual growth rate of 20%.24 Low entry barriers and
increasing concerns about health and hygiene were the key drivers for growth of this segment. There were
150 bottled water brands in India from both multinational companies and national players along with local and
regional players. Bisleri was the market leader, followed by Aquafina (PepsiCo) and Kinley Water (Coca-Co-
la).

Challenges

One of the major challenges faced by companies in the non-alcoholic beverage sector related to health and
taste. How do companies deliver what they promise? Due to deficiencies in research and development and
the consequent skill and technology gap, it was difficult to meet global quality standards. Further, absence of
forward and backward connection in the food value chain, insufficient agricultural and processing framework

and incapable marketing system were some other challenges.ix The regulatory framework for this sector was

complex with as many as 40 licenses which varied across states.x Other related challenges were difficulties
in penetration and distribution in rural markets which had a major chunk of the population (67%). Provision of
chilled carbonated drinks in the rural sector also proved to be a major hurdle in the same sector.

ix Beverage Market – Trends and challenges, (May 2016) Retrieved June 17, 2020 from

http://www.fnbnews.com/Beverage/beverage-market--trends-and-challenges-38900

x Thornton, G (2014). Indian Food & Beverage Sector A new wave, CII. p. 36

Shifts in Consumer Preferences

In the 80’s and 90’s, the entry of large multi-national companies like PepsiCo and Coca-Colaxi with their slew
of offerings like Diet Coke, New Coke, Mountain Dew, etc. expanded the beverage sector in India which until
then was dominated by local and regional players. Increase in urbanisation and the growth of middle-class
population with disposable incomes also changed the tenor of the beverage sector. There was an increasing
demand for newer products.

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xi In 1993, Coca-Cola re-entered the market after a gap of 16 years. In an aggressive bid to capture the mar-

ket it acquired all the plants owned by Parle by buying off Parle’s important bottlers located in Calcutta, Pun-
jab, Maharashtra and MP. Realizing that time would be needed to rebuild infrastructure for managing the cri-
sis, Chauhan brothers sold Thums Up along with Maaza, Limca, Citra and Gold Spot to Coca-Cola. A 10-year
non-compete agreement with Coca-Cola was signed which implied that during this period Parle Agro could
not launch a new carbonated product in the market.

Growing awareness of customers and consciousness for products with ‘healthy’ and ‘natural’ positioning,
such as beverages with added nutrients, antioxidants and probiotics brought about a shift in the sector from
carbonated drinks to healthier beverage options. Heightened concerns about the role of sugar in the increas-
ing prevalence of obesity and the development of conditions such as heart disease, cancer and type 2 dia-
betes also influenced the carbonated drink makers to rethink the addition of artificial additives and caffeine as
ingredients. Bottled water, fruit juices and nectars were positioned as healthier alternatives and had garnered
a sizeable share of the urban market. Increasing consumer participation in regular exercise and sporting ac-
tivity witnessed a growth in sports drinks. Additionally, it was predicted that natural fruit and vegetable juices

would outperform other categories in the soft drinks sector for the coming decade.25

Gradually the industry moved towards adoption of ‘hyperlocal’26 strategies in product innovation and mar-
keting. Most of the regional players adopted a customer-centric approach and launched products which ap-
pealed to the hyperlocal palates. Smaller players in this segment, catering to regional markets and crafting
local soft drinks, witnessed a huge growth. Large companies such as Coca-Cola India created a local em-
phasis by focusing on traditional and natural products often utilising a locally sourced fruit. These hyperlocal
strategies helped to expand beyond the narrow ambit of urban cities to rural markets where demand was
more conservative. Additionally, these products were introduced at affordable prices for low-income groups.

Innovation in packaging became a key driver for sales in the retail beverage segment in India. TetraPak and
PET bottles in attractive shapes and sizes were the preferred trend and convenient pack sizes were intro-
duced for the consumers. Large media campaigns were introduced to capture consumer mind-space. The
growth of the beverage market in India also hinged on the advancements in packaging as it led to improved
shelf life. It was perceived that a more attractive packaging coupled with the possibility of innovative promo-
tional campaigns greatly added to the market potential for beverages.

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Competition

Beginning 1970s, Coca-Cola and PepsiCo dominated the Indian soft drinks market for almost three decades.
At the turn of the century, they were able to capture the carbonated beverage market. However, in the last
decade, domestic players like Dabur with greater knowledge about consumers, higher presence in some ge-
ographies and niche segments started vying for the market share.

The non-alcoholic beverage market in India until the 1990s was dominated by regional and domestic players
like Parle Group (Thums Up, Limca & Goldspot). In the early 1990s, the control shifted to MNC players like
PepsiCo Inc. and Coke (which re-entered the Indian market in 1993). In the initial phase the market was
dominated by PepsiCo. Soon, Coca-Cola, with its acquisition of national and international brands (Gold Spot,
Limca, Thums Up, Canada Dry and Crush) overtook PepsiCo and emerged as the leader. Similar to the glob-
al scenario, Coca-Cola and PepsiCo Inc. together accounted for approximately 50% of the carbonated-drinks
market in India. The fruit-based beverage market was dominated by Dabur and Parle Agro.

Between 2011 and 2016, the growth of the carbonate segment was sluggish and pegged at 3.9%. This slow

growth of the sector impacted the cola majors as well. Between 2014 and 2016,27 the market share of both
Coca-Cola and PepsiCo had shrunk by 3% and 1%, respectively. “Colas are not fashionable anymore. They

are considered detrimental to health and the cola majors have to understand that.”28 Other factors like in-
creased excise duty on aerated drinks in the budgets of 2015 and 2016 forced manufacturers to increase
their prices. Additionally, recommendations were made by the Chief Economic Advisor about a 40% ‘sin tax’
under the new Goods and Services Tax regime which would have a major impact on the future revenues and
business of the cola majors.

Both Coca-Cola and PepsiCo were well prepared to address all opportunities in the market. In almost all cate-
gories, Parle Agro faced pressure from these large competitors (Exhibit 4) as well as smaller regional players.
Larger players were investing heavily in new capacity. In response, Parle Agro, with its hyperlocal strategy,
had moved to smaller pack sizes, and launched still drinks in refillable glass bottles. Coca-Cola’s Maaza and
Parle Agro’s Frooti were the two leading mango brands in the juice category in India. Both brands had been
updated, as Coca-Cola and Parle Agro tried to adapt them to evolving trends. They recognised the growing
importance attributed by younger consumers to juice and packaging in the market. Coca-Cola revamped the
look and feel of Maaza’s packaging, as well as introduced the premium extension, Maaza Gold. Maaza was

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Frooti’s biggest competition. The brand had three formats and multiple variants at competitive price points. In
2019 in certain markets of Uttar Pradesh (UP), Parle Agro held more than 50% market share and was ahead
of Mazaa and in Delhi enjoyed a 53% market share. In other states like Haryana, Kerala, and Gujarat it was
on the verge of beating competition and emerging as the dominant player.

“The beverage category has opened up as consumers are willing to experience new products and are looking

for variety,” stated Chauhan29 The market trend was introduction of new variants of the same product or new
products or new categories. The three leading companies in juice, Coca-Cola, PepsiCo and Dabur, were all
focusing on ethnic flavours. While the leading player, Coca-Cola, added ethnic flavours to its Minute Maid
brand, PepsiCo extended the Slice mango juice brand into carbonates to target increasingly health-conscious
demand, and launched Sting in the energy drink segment. Coca-Cola’s launch of Colour introduced a grape
juice-based product to carbonates that targeted health-conscious consumers in the southern Indian state of
Tamil Nadu. Dabur introduced variants such as Masala Guava, Masala Pomegranate and Alphonso Mango
to the portfolio of Réal. The ethnic range of Real was introduced in 1 litre TetraPak. It was made from fruits

familiar to Indian consumers, with an added dash of masala.xii Smaller local players were also active in the
development of new products and brands. Ayurvedic players were looking to capture the traditional Indian
medicine space through the launch of soft drinks in categories such as concentrates.

xii A mixture of ground spices traditionally used in Indian cooking.

In the rapidly expanding bottled water category several companies introduced new brands. Both bottled water
and juice-based drinks were tapping into increasing consumer interest with a natural positioning, underpinned
by concerns about the impact of artificial ingredients and additives.

Product Portfolio

Parle Agro, the largest Indian beverage company, had three business verticals: beverages (fruit drinks, nec-
tars, sparkling drinks and carbonated soft drinks), packaged drinking water and PET preforms. Each of these
verticals operated independently. As part of its penetration strategy, Parle Agro had also set up a division for
beverages in the RGB format. The bulk of the company’s operations were located in India.

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The company’s beverage and water product portfolio comprised still drinks and nectars (Frooti and Appy),
sparkling fruit juice drinks and carbonates (Appy Fizz and FRIO), and packaged water (Bailley). In 2018, Parle
Agro with a turnover of INR 50 billion, ranked fourth in the water and soft drinks market in India, commanding

an aggregate 2.7% share of the soft drinks market, which was a drop of 0.3% compared to 2017.30 The top
three players were Coca-Cola, PepsiCo, and Parle Bisleri.

Frooti was launched in 1985 under the leadership of Prakash Chauhan. His focus was to grow the brand and
scale up production and distribution. In 2017, Frooti propelled itself to the number two position in the man-
go drinks category. Growing at a rate of 14%, it maintained its second position in the mango-flavoured drink
segment in 2018 in the Fruit-Flavoured Still Drink (FFSD) category with Maaza at number one position. Frooti
was also the first fruit drink to be introduced in PET bottles in India which resulted in the creation of the home
consumption segment in FFSD category. Frooti’s success turned out to be a double-edged sword for Parle
Agro—as the company was now tagged with labels like the ‘one-product company’ and ‘The Frooti Compa-
ny’.

In 1986, Prakash Chauhan launched Appy, the still apple drink in TetraPak. Paradoxically, Appy’s competitor
was Frooti. Appy, available in 200 ml TetraPak, was able to carve a niche in the category primarily through
distribution. It was the second largest category in FFSD after Mango and held a market share of 65% in the
Apple drink category. With no major players in the apple drink space, especially in the INR 10 price point, the
brand was able to leverage many consumers.

Appy Fizz was the first product launch for Chauhan in 2005 and an entry into a new category. It was po-
sitioned as a substitute for alcohol. The company was striving to build greater innovation in the carbonated
drinks category. A product of this nature had so far not been attempted in the industry and was referred to by
Chauhan as a “huge innovation” from the perspective of technology and manufacturing. It was non-synthetic
with actual fruit juice. It had no caffeine or colour added and had low gas volume. Appy Fizz held 99% market
share in the fruit and fizz category in 2019 and was the fastest growing brand for Parle Agro. Positioned as a
premium product, it was targeted to be an INR 10 billion brand by 2020. Competitors like PepsiCo and Coca-
Cola as well as local players tried to develop products in the fruit and fizz category but were not successful.

The appeal of Appy Fizz compelled Parle Agro to increase its manufacturing capabilities and bring down the
price from INR 18 to INR 15. Soon the company launched an INR 10 Stock Keeping Unit (SKU) for rural pen-
etration. The fruit + fizz category had potential for growth, according to Chauhan. Together with Appy Fizz, in
the coming years, Parle Agro wanted to grow its fruit + fizz category into INR 40 billion.
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Bailley, with a turnover of INR 20 billion in 2017, was envisioned to grow to 100 million cases year-on-year
by 2020. This was in line with the company’s attempt to expand in categories as packaged drinking water
where it faced competition from multi-national players. Chauhan in 2017 started the 3X project with a motto –
to increase the business by three times in three years. This project focussed on distribution and brand scale.
This project was considered to be the company’s ‘winning formula’ to build a massive distribution network
and scale up outlet reach to drive direct distribution aggressively. There were no advertisements for packaged
water which was now sold in smaller pack sizes, and was more affordable.

Struggling Categories: There were many launches between 2005 and 2008 such as N-joi (2005), LMN,
Saint and Grappo Fizz (2008) in response to the evolving demand trends. However, none of them were able
to gain traction. N-joi was milk based and had to be shelved as the company faced problems in sourcing and
evaluating the milk quality. LMN (nimboo paani in a bottle), targeted at adults and kids, had to be discontinued
because of product related issues. Saint (100% juice), a premium health-centric brand and Grappo Fizz also
had to be pulled off the shelves. Failure of all these beverages in quick succession had Chauhan wondering
if the market, where health-based products were still to gain popularity, was mature enough for new offerings.

Parle Agro re-entered the coffee flavoured carbonated drink sector with the launch of Cafe Cuba in 2013, at
a price point of INR 18 for 250 ml. The look of the brand was international and the communication targeted
a premium audience. However, incongruity in the distribution model had Parle Agro distributing the product
towards B and C category markets, where consumer preferences were in contrast—those who were able to
get the product did not have the (acquired) taste of coffee, and those who wanted the product did not find it
as easily. Hippo was launched in 2009, post-recession, as a healthy snack in five different flavours.

Innovation and R&D

Since inception, Parle Agro referred to innovation as its DNA—be in terms of culture, creating new categories
or building new brands within those categories. Prakash Chauhan’s view that consumer research and inno-
vation were critical for a company to beat competition was cherished and preserved by Chauhan. He himself
participated in all the R&D initiatives of the company for over two decades and believed that if the game-plan
is right, you can achieve anything.

Chauhan’s launch of products followed a similar train of thought as that of her father. She and her team trav-

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elled and spent extensive time in the market—informally observing and mingling with the target groups to
understand their preferences. Together with the target group, employees were also expected to listen to the
voices of the retailers, salespersons and other middlemen. Their collective responses were aggregated and
operationalised while creating categories or innovating products.

Packaging

Frooti: Prakash Chauhan brought the revolutionary TetraPak into the Indian market for Frooti, transforming
the local beverage industry. The paper-based packaging made it easier and safer for children, eventually
making them Frooti’s largest and most loyal consumer base. After ruling the market for over a decade, with a
near 61%, Frooti saw sales diminishing as its success invited intense competition in the fruit beverage seg-
ment with launches from Dabur, PepsiCo and Coca-Cola. A generation that had grown up drinking Frooti still
had fond memories of it but associated the drink with ‘childhood’, not youth and fun. In 2001, to rid itself of
its mostly-for-kids connotation and to cater to young adults, the company introduced a pull tab feature that
eliminated the need for a straw.

In 2003, Prakash Chauhan launched a pack called Tetra Classic Aseptic which was a triangular-shaped pack.

Paying heed to the disruption that it triggered, in 2005 Parle Agro, rolled out the ‘paanch ka do’xiii campaign,
officially launching the SKU and inspiring consumers to buy two packs at the convenient price of INR 5, also
referred to as the ‘magic price point’, advocating that one packet could be shared with a friend. The ‘samosa

pack’xiv and existing TetraPak helped increase sales for Frooti.

xiii Five (INR) for two

xiv An Indian snack made out of white flour with potato and peas filling

But even as the brand was experimenting with packaging and marketing, Nadia Chauhan believed that Frooti
was losing its relevance and magnetic appeal in a competitive environment. So, in 2005, she decided to
change Frooti’s iconic green-coloured packaging to yellow for improved visibility among rival products. It was
a calculated risk as consumer recall centred on the green colour; but the brand was also trying to break free
of its ‘kid-centric’ tag. In 2015, Nadia Chauhan made a bold move by re-launching the brand in a completely
different identity—right from its packaging and appearance to advertising and product formulation. This move
gave Frooti a boost in market share which increased from 19% to 26%.

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Appy: In 2003, the white packaging of Appy was changed to a new black pack which had champagne glasses
as graphics. The changed packaging enhanced its reach and it was successful in student heavy cities as
Vishakhapatnam and Pune.

In 2018, the packaging bifurcation for Parle Agro’s beverages portfolio was—52.14% PET, 47.76% TetraPak
and 0.1%RGB.

Marketing

Parle Agro, according to Chauhan, was a marketing company where sales and measures of achieving
economies of scale had to be understood. With a strategic focus on affordable ‘magic’ price points, coupled
with high volume packs, Parle Agro strived to build top of the mind recall with its marketing strategy through
advertising and communication across its brand portfolio (Exhibit 5).

Awareness for the brands was created through a 360-degree marketing campaign that saw new faces from
Bollywood demonstrating key traits of each brand. These young brand ambassadors brought out Frooti’s new

‘youthful’ identity. For Appy Fizz, the brand ambassadors sent across a message of mass appeal.xv In 2017,

Parle Agro, for the first time, came on board as an on-airxvi sponsor for the Indian Premier League.

xv Alia Bhat, Shahrukh Khan, Varun Dhawan, Priyanka Chopra, and Salman Khan are all Bollywood actors

with a huge fan following.

xvi “Sponsoring an on-air contest or program can grant you exposure to a new audience and align your

brand with certain causes, values, and beliefs. Instead of a traditional commercial break, your business
is branded within station programming by providing benefits (prizes) to our listeners.” Retrieved June
20, 2020 from https://leightonbroadcasting.com/radio-marketing-services/air-sponsorships-livebroad-
casts#:~:text=On%2DAir%20Sponsorship,(prizes)%20to%20our%20listeners

Distinct personalities were created for Parle Agro brands. Frooti consumers were encouraged to ‘Live the
Frooti Life’. Appy Fizz, as a brand, transformed from a ‘cool drink to hang-out with’ to a brand in which the
consumers were urged to ‘Feel the Fizz’.

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To grow the market share of the company, high growth potential markets had to be tapped. Parle Agro had
a presence in western and northern India. It decided to venture in the south with plans to “hyperlocalize” its
brands Frooti and Appy. “South as a region has had a 6% growth rate in the last few months as per Nielsen
data, while we have had a 45% growth rate down south,” Chauhan stated and continued, “South is our third-
largest contributing region but over the period of the next 12 months, I see south will become at par with the

west and probably become a challenge for the north as well.”31

Marketing efforts were ramped up in south India by bringing local brand ambassadors on board. Both Frooti
and Appy Fizz faced strong competition from Maaza, Minute Maid, Dailee and Maa which captured consumer
attention with similar price points.

Sales and Distribution (S&D)

Chauhan took on the responsibility of evolving Parle Agro’s S&D systems. Parle Agro faced an internal bottle-
neck which presented a hurdle in achieving the target of massive expansion. “It was clear we had to upgrade

our system”, 32 break out of the mould and “create something that was apt for the new vision, the new Parlé

Agro”33 opined Chauhan. Her core priorities included building a future ready S&D infrastructure, revamping
and enhancing capabilities and creating a sales team capable of leadership which also displayed confidence
in the market. At the same time, she realised that tremendous effort and financial capabilities would be re-
quired to build facilities at the infrastructure level.

One of the challenges faced was the lack of a system-oriented method of functioning—S&D was dependent
on the business head of every state. In 2013, Nadia Chauhan engaged with a leading consultant who helped
her draw up a system for Parle Agro to ensure that across the country, they operated with one set of systems
and processes that enabled the business to be driven by market opportunities, rather than just by business
head capabilities. Project Cheetah, as it was coded, ran from 2013 to 2015, and resulted in Parle Agro digi-
tising its sales systems and drawing on data to extract more from existing and new outlets. Project Cheetah
was set up to unlock significant growth potential, cost efficiency and S&D culture for Parle Agro.

Further, the focus on S&D was not in terms of growth but upgradation. Solution themes for upgradation of the
system were identified which together with the S&D strategy, focused on trade partners, people and organ-
isation, processes and systems and the visibility drive. Most of these solution themes were micro level and

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cumulatively helped Parle Agro increase its distribution reach to 1.8 million outlets across India in 2019 from
550,000 outlets a decade ago.

Between 2015 and 2017, Parle Agro enhanced its S&D capabilities to handle multiple brands and categories.
This was complemented with increasing penetration and distribution across the country and strengthening of
infrastructure as focal areas. In the same period, distribution outlets increased from 1.04 million to 1.36 million
which was a 30% growth in two years.

Chauhan also partnered with a leading global management consulting firm in 2017 to relook at the way they
evaluated sales and further strengthen S&D. Parle Agro worked closely with the team to develop solutions to
help them consolidate operations, expand reach and achieve further scalability and penetration. The compa-
ny also strengthened its availability within A category markets and outlets through intensive sales training of
on-ground work force and multiple distribution led initiatives and developments. These moves enabled them
to drive better performance of their larger sized SKUs.

The growth strategy of the company had always been to expand business and gain market share by geo-
graphic penetration—urban and rural. Significant focus was given to strengthening of sales by adopting a
trade optimisation scheme and capitalising on emerging channels. Sales were mainly to ‘on the go’ con-
sumers at transport points, coupled with sizeable volumes in traditional retail. Retail stores also sold family
packs in PET, which were consumed at home. The company had innovated in terms of breaking into new
channels for beverages, such as transport points and phone booths where its economy packs were sold.
However, the distribution increase in rural and urban India was not the same. The growth in the rural sector
was higher than in the urban sector which also had multinational players.

The company’s expansion plan also extended to its market penetration. Frooti was available at almost 1.2
million outlets and Appy Fizz at about 600,000 outlets. Parle Agro was determined to take Appy Fizz to the
level of Frooti in terms of retailing.

In a strategic long term move to scale their beverage business, Parle Agro began leveraging multiple e-com-
merce platforms to create rewarding business opportunities for itself and its partners. For this purpose, the
company collaborated with e-commerce players to strengthen its business as well as create significant busi-
ness opportunities for the e-commerce partners.

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Manufacturing Capabilities

Parle Agro undertook a revamp operation for its manufacturing plants (Exhibit 5). Between 2010 and 2017,
investments were done to build new plants and improve existing ones. Most of the factories were set up at
strategic locations in rural areas where the demand was higher than in urban areas. The company was able
to achieve economies of scale by strategically buying high volumes of raw material to cut costs and carefully
creating value for every rupee that was spent. It also built strong infrastructural capabilities to support growth.

From seven manufacturing facilities, Parle Agro expanded to 74 manufacturing units pan-India. Of these, four
were owned by franchisees. The company created a huge chain of back-end capability with state-of-the-art
technology which enhanced production capabilities and supported the front-end. The heavy investments in
19 advanced machine set-ups with raw material and minimal product wastages up to 0.01% helped the com-
pany to manufacture over 36,000 bottles (PET); 26,500 packs (Tetra Pak) and 52,000 preforms per machine
per hour in early 2019. This was an increase from 12,000 bottles (PET); 24,000 packs (Tetra Pak) and 27,000
preforms per hour in 2015. High speed machinery was installed across existing plants to increase their ca-
pacity. Latest additions were made to the machinery with advanced technology and robotics.

There was an increase in manufacturing and distribution infrastructure and capabilities between 2012 and
2017. Beginning 2016, every second year the company planned to invest between INR 1.50 to 2 billion in
building a manufacturing unit. Franchisees had increased by 141% and sales offices by 216%. From its two

plants in Sitarganj and Varanasi,xvii the company was able to fill over 95 trucks with their products on a daily
basis.

xvii Parle Agro was preparing to set up plants in Madhya Pradesh (Gwalior) and Andhra Pradesh (Vijayawa-

da) in 2020 and had been looking for land in central UP and Gujarat to do the same.

The Decision

Reflecting on what Parle Agro had achieved so far, Chauhan stated, “The organisation that we are, the brand
that we are, has phenomenally transformed from 2003 to now,” and added, “It’s become a future-ready com-
pany, a company that’s taking on some of its most powerful competitors with equal strength and force, and

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making big strides in the Indian market, not just in growing our brands, but in growing the category itself.

We’ve been leading the category growth over the past few years.”34 As of 2019, the company had over 4,500
employees, 76 state-of-the-art manufacturing facilities, over 5,000 channel partners and a network of 1.8 mil-
lion outlets. But was this sufficient for them to achieve the target they had set in 2017, Chauhan wondered.

Three years short of achieving the target, Chauhan, in consultation with her senior leadership team, once
again carefully reviewed the decision taken in 2017—should the status quo be maintained or modified? The
decision, she knew, would hinge on the evolving industry conditions, changing consumer preferences, mush-
rooming local and regional players and large competitors who were trying to change the rules of the game.
Whatever be the extraneous factors, for Chauhan to meet the target, sales would need to be enhanced which
could be through product development, market development, market penetration, or diversification.

The board was set for the next move to be played. What would be the advice of the senior leadership team to
Chauhan?

https://doi.org/10.4135/9781071945711

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