Mr. Rajesh R. Gandhi, Managing Director, Vadilal Industries Ltd., is the son of the founder Chairman, Mr. Ramchandra R. Gandhi. Over the last couple of decades, he has worked with his father to make Vadilal a name to reckon with in the Indian ice cream and processed foods sector. Mr. Rajesh R. Gandhi is a commerce graduate, having vast experience in the ice-cream and processed food business. He has successfully managed the onslaught from big players like Hindustan Unilever and GCMMF’s Amul and retained Vadilal’s position amongst the top three ice cream players in the country. Mr. Rajesh R. Gandhi is an active member of CII-Gujarat and has for several years been the chairman of the food processing committee at this leading industries association in Gujarat. He has also been the main force behind taking Vadilal’s frozen foods to countries across the world.
From a small outlet in Ahmedabad over 80 years back, Vadilal Industries Ltd. has today emerged as India’s second largest ice cream player. The company is also one of the largest processed food players in India with significant exports of frozen vegetables, mango pulp, mango milk shake, ready-to-eat snacks, curries and breads. Vadilal’s aim is to become an Indian MNC in ice creams and frozen foods, and to provide products and services at an affordable price without compromising on quality. Vadilal Industries has been doing well because of its strong brand identity, good product quality, timely supply and extensive reach. A major success factor has been its ability to cater to different market segments through multiple product ranges. Vadilal has the largest range of ice creams in the country with 150 plus flavours. Through the franchisee route, Vadilal has set up over 140 ‘Happinezz’ retail outlets for selling ice creams.
Speaking with Hemant P. Maradia ofIIFL, Mr. Rajesh R. Gandhi says, “Our market share is 20% as of now and we will try and scale this up by another 8-10%.” You recently launched new brands in the premium segment. What is the rationale behind the new launches? What is the game plan that you are working with? It is always good to differentiate yourself from the rest of the competitors. We believe in this firmly and that is our USP.
Out of the three new products ‘Badabite’ is based on extrusion-based technology. Hardly any ice cream maker in the country has launched this product in India. We have taken this bold step of launching this product at premium prices.
‘Badabite’ candies will have fewer over-runs (air insertion), better texture and will be creamier.
‘Flingo’ is a product with different types of center insertions. We had received feedback that typically all cones have just plain ice creams in the center. ‘Flingo’ will come in different flavours such as chocolate fudge, raspberry ripple and strawberry ripple.
‘Gourmet’ is a super premium ice cream. It will be introduced with a high-end packaging called ‘in mould labeling’ technology. In the ‘Gourmet’ category we are offering two flavours initially and three more will follow soon.
We’ve tried to make premium products with reduced over-runs and top quality ingredients.
We felt this is the right time to launch premium ice cream products, as people are looking at new varieties and are willing to pay a premium for them.
We are currently running “Happinezz” ice cream parlours where we sell premium products.
‘Badabite’ and ‘Flingo’ are youth oriented brands whereas ‘Gourmet’ is targeted more towards the young family segment.
How much market share are you planning to grab? Our market share is 20% as of now and we will try and scale this up by another 8-10%.
What kind of mix are you targeting for your products? We cater to all types of consumers with our different product categories. That has been our strength for years.
The mid-level range of ice cream products account for 10% of our total sales while the regular ice cream products make up for another 30%. The frozen desert range accounts for 50-60%.
We want to associate the Vadilal brand with the youth and hence premium products will continue to be a major thrust area going forward. The recent launches have been announced keeping in mind this new strategy.
Going forward, the share of premium products will increase? Yes, very true.
How much money have you spent on the new machines, launch and the various marketing activities? In the last two years, we have invested Rs. 800mn in our manufacturing facilities.
From April this year, the company’s total production capacity has been enhanced to 325,000 litres per day from 225,000 litres a day earlier.
Vadilal Industries has two ice cream production facilities – one at Pundhra in Gandhinagar district, Gujarat and the other one at Bareilly in Uttar Pradesh.
Our major investments have gone into the impulse products where value-addition is higher and brand attachment is also higher.
We are also aggressively targeting the youth with a number of new TV commercials. Our focus will be on increasing sales to the impulse category.
Over the next couple of months Vadilal will spend around Rs. 70mn on all modes of advertising to promote the new premium line of products.
Are you employing indigenous technology or have you acquired it from someone? We have not purchased the technology. We have only bought the equipment and then we are adding our own in-house recipes. We have brought in the extrusion lines for the new premium range of products. We use our own technology. We have an in-house R&D division that takes care of the development of products.
How many retailers do you have? We are present across India through 550 distributors. We are aiming to increase this number to 750 in the next few months. They will all launch the new products.
It is too premature to talk about fresh expansion. Let this season pass. By the end of June we will know the exact position.
How have you managed to keep the prices so competitive? The new product range is premium with competitive prices. We have a large base and clearly No.2 in the country. We do large volumes. Our overheads are under control due to the economies of scale.
How do you tackle the unorganized or local players in various regions of the nation? The Indian ice cream industry is pegged at Rs. 25bn. This includes all kinds of players. The organised and unorganised players will co-exist going forward as well.
The organised players focus on consistency, quality and food safety. These are the most important aspects of business for us as well.
Product innovation is another of our strengths. This gives us an edge over the unorganised players who are not process driven like us.
Milk prices have been rising steadily. How are you dealing with this problem? We have increased prices by 10% this year. We hiked prices in February and in April.
How many Happinezz retail stores do you have? How many do you plan to add in the next few years? We have around 150 Happinezz branded stores. Out of that 15 are managed by the company while the rest are franchisee outlets.
These stores are in Gujarat, Rajasthan and some parts of Uttar Pradesh. Gradually, we are planning to spread to other parts of the nation.
We plan to take this number to 500 over the next three years. We feel this is possible because we have all range of products available with us.
What is the payback time for recovering investment? Two to three years as investments are not very high in these stores.
Are you in talks to sell out to any MNC? No. These reports have been coming for the last 20 years. These are mostly media rumours. We are running this business for more than 70 years now. We have grown to this position from a one shop brand. We are confident of our strengths. We have several years of experience and understanding of the business.
What is the debt? The absolute debt is Rs. 1.3bn.
But, for future expansion we will go for equity as we are reasonably leveraged now. We have not finalised any plan for fresh fund raising.
Tell us about your branded mango milkshake business? Vadilal’s two decades old brand ‘Garden Fresh Kerino Ras’ recently spread its wings to Mumbai and Rajasthan besides non-resident Gujaratis globally.
The company is also one of the leading players in the branded mango pulp market nationally.
Vadilal is active in the sale of mango pulp under the brand names of ‘Alphonso Mango Pulp’, ‘Kesar Mango pulp’ and ‘Totapuri Mango Pulp’ across India.
Vadilal exports frozen mango pulp and mango milk shake to USA, Canada, Australia, New Zealand, UK, Germany, Netherlands, Saudi Arabia, Kuwait, Oman and Dubai.
Vadilal processes around 10,000 tonnes of mangoes and exports around 5,000 tonnes of mango pulp. We are focusing on increasing sales through more organised retail chains.
Vadilal has carved a niche market for its Aamras and mango pulp products since 1991. We have our own state-of-the-art manufacturing unit at Dharampur (South Gujarat) which is well-equipped with all modern laboratory and microbiological testing facilities.
We are in the process of expanding our mango processing capacities from 100 tonnes to 150 tonnes per day at an investment of Rs. 100mn due to increase in demand.