Introduction

Over a period spanning six and a half decades, the Haldiram's Group
(Haldiram's) had emerged as a household name for ready-to-eat snack foods in
India. It had come a long way since its relatively humble beginning in 1937 as a
small time sweet shop in Bikaner, in the Rajasthan state of India. In 2001, the
turnover of the Haldiram's was Rs 4 billion. The group had presence not only in
India but in several countries all over the world. Till the early 1990s, Haldiram's
comprised of three units, one each in Kolkata, Nagpur and New Delhi. The
Agarwals family that owned Haldiram's were always conscious of the need to
satisfy customers in order to grow their business. The company offered a wide
variety of traditional Indian sweets and snacks at competitive prices that
appealed to people belonging to different age groups. Haldiram's had many
'firsts' to its credit. It was the first company in India to brand 'namkeens. It was
also one of the first companies in India to open a restaurant in New Delhi offering
traditional Indian snack food items such as "panipuri," "chatpapri," and so on,
which catered to the needs of hygiene conscious non-resident Indians and other
foreign customers. Since the very beginning, the brand 'Haldiram's' had been
renowned for its quality products. The company employed the best available
technology in all its manufacturing facilities in India. Given the increasing
popularity of Haldiram's products, the group planned to expand its operations.
However, the given case reveals that Haldiram still had to overcome some
hurdles. The company faced tough competition not only from sweets and snack
food vendors in the unorganized market but also from domestic and international
competitors like SM Foods, Bakeman's Industries Ltd, Frito Lay India Ltd.(Frito
Lay) and Britannia Industries Ltd. Moreover, the group had to overcome internal
problems as well.

In the early 1990s, because of the conflict within the Agarwals family, Haldiram's
witnessed an informal split between its three units as they started operating
separately offering similar products and sharing the same brand name. In 1999,
after a court verdict these units started operating as three different companies
with clearly defined territories. This split had resulted in aggressive competition
among themselves for a higher share of domestic and international markets.

Background Note
In 1937, Ganga Bishen Agarwal, (popularly known as Haldiram), opened a small
sweet shop in Bikaner, a small district in Rajasthan. Bikaner had a large number
of sweet shops selling sweets as well as namkeens. 'Bhujia sev,' a salty snack
prepared by Ganga Bishen, was very popular among the residents of Bikaner and
was also purchased by tourists coming to Bikaner. In 1941, the name 'Haldiram's
Bhujiawala' was used for the first time. In 1950, Prabhu Shankar Agarwal
(Prabhu), along with his father Rameshwar Lal Agarwal (son of Ganga Bishen),
expanded the business by establishing a small manufacturing unit for sweets
and namkeens in Kolkata. The success of this unit motivated Prabhu to upgrade
its machinery to improve the quality of its products. As demand for Haldiram's
products increased, it was decided to scale up the company's manufacturing and
distribution activities. In 1970, a large manufacturing unit was set up in Nagpur
in the state of Maharashtra (India). In 1983, a retail outlet was set up in New
Delhi. The outlet became very popular not only in the Delhi but also among
tourists visiting Delhi. Haldiram's was able to achieve significant growth during
the 1980s and 1990s. In 1992, a manufacturing unit with a retail outlet attached
to it was set up in the outskirts of Delhi. A year later, Haldiram's syrups and
crushes were successfully launched in the Indian market. In 1995, a restaurant
was opened in New Delhi. In 1997, after realizing the potential of namkeens, the
company set up a manufacturing unit in Delhi exclusively for making namkeens.
To add potato products to its existing product portfolio, machinery was imported
from the US. Haldiram's maintained high quality standards at every stage of the
production process. All its food items were prepared and packaged in a very
hygienic environment. In the mid-1990s, Haldiram's added bakery items, dairy
products, sharbats and ice creams to its portfolio. At the beginning of the 21st
century, Haldiram's products reached millions of consumers not only in India, but
also in several other countries, including the US, Canada, UK, UAE, Australia,
New Zealand, Sri Lanka, Nepal, Japan and Thailand.

Issues in the case

Haldiram was certainly doing well and the company was growing at a significant
clip. But the issue was that given the ever expanding ambition of the group
founders.

Haldirams informal split among three units as each of them began to

function independently working on same products.
After the popularization of its bhujia Agarwal came to use the name,
Haldirams Bhujia Wala in 1941.
The intense competition with unorganised manufacturer forced the
company to think about new strategies that will help them to sell products
at little higher than unorganised ones.
Another issue is the presence of spurious products. Some companies
claiming to be associates of the original Haldirams of Bikaner used the
companys well recognised brand name in their product. Not only did this
impact sales but there was also the dander that the lack of quality
standards for these products impacted the companys reputation.

Marketing Mix
Products

Haldiram's offered a wide range of products to its customers. The product range
included namkeens, sweets, sharbats, bakery items, dairy products, papad6 and
ice-creams However, namkeens remained the main focus area for the group
contributing close to 60% of its total revenues. By specializing in the
manufacturing of namkeens, the company seemed to have created a niche
market.
Haldiram's sought to customize its products to suit the tastes and preferences of
customers from different parts of India. It launched products, which catered to
the tastes of people belonging to specific regions. For example, it launched
'Murukkus,' a South Indian snack, and 'Chennai Mixture' for south Indian
customers. Similarly, Haldiram's launched 'Bhelpuri,' keeping in mind customers
residing in western India. The company offered certain products such as
'Nazarana,' 'Panchratan,' and 'Premium' only during the festival season in gift
packs. These measures helped Haldiram's compete effectively in a market that
was flooded with a variety of snack items in different shapes, sizes and flavors.

Pricing

Haldiram's offered its products at competitive prices in order to penetrate the

huge unorganized market of namkeens and sweets. The company's pricing
strategy took into consideration the price conscious nature of consumers in India.
Haldiram's launched namkeens in small packets of 30 grams, priced as low as
Rs.5. The company also launched namkeens in five different packs with prices
varying according to their weights. The prices also varied on the basis of the type
of namkeens and the raw materials used to manufacture it. The cost of
metallized packing also had an impact on the price, especially in the case of
snack foods. The company revised the prices of its products upwards only when
there was a steep increase in the raw material costs or additional taxes were
imposed.

Place

Haldiram's developed a strong distribution network to ensure the widest

possible reach for its products in India as well as overseas. From the
manufacturing unit, the company's finished goods were passed on to carrying
and forwarding (C&F) agents. C&F agents passed on the products to distributors,
who shipped them to retail outlets. While the Delhi unit of Haldiram's had 25 C&F
agents and 700 distributors in India, the Nagpur unit had 25 C&F agents and 375
distributors. Haldiram's also had 35 sole distributors in the international market.
The Delhi and Nagpur units together catered to 0.6 million retail outlets in India.
C&F agents received a commission of around 5%, while distributors earned
margins ranging from 8% to 10%. The retail outlets earned margins ranging from
14% to 30%. At the retail outlet level, margins varied according to the weight of
packs sold. Retailers earned more margins ranging from 25% to 30% by selling
30 gms pouches (priced at Rs.5) compared to the packs of higher weights. Apart
from the exclusive showrooms owned by Haldiram's, the company offered its
products through retail outlets such as supermarkets, sweet shops, provision
stores, bakeries and ice cream parlours. The products were also available in
public places such as railway stations and bus stations that accounted for a
sizeable amount of its sales. Haldiram's products enjoyed phenomenal goodwill
and stockists competed with each other to stock its products. Moreover, sweet
shops and bakeries stocked Haldiram's products despite the fact that the
company's products were competing with their own products. Haldiram's also
offered its products through the Internet. The company tied up with
indiatimes.com, a website owned by the Times of India group to sell its products
over the Internet. Haldiram's products could be ordered through a host of other
websites in India and abroad. Giftstoindia.com, giftssmashhits.com,
tohfatoindia.com and channelindia.com enabled people residing abroad to send
Haldiram's gift packs to specified locations in India. Region-specific websites
enabled people to send gifts to specified regions. These include indiamart.com
(Delhi and surrounding areas), mumbaiflowersgifts.com (Mumbai), and
chennaiflowersgifts.com (Chennai and other parts of Tamilnadu). These websites
competed on issues such as delivery time, which varied between 48 hrs. to one
week, delivery charges (some websites offered free delivery of products) and
value added services (like sending personal messages along with the gift packs).

Promotion

Haldiram's product promotion had been low key until competition intensified in
the snack foods market. The company tied with 'Profile Advertising' for promoting
its products. Consequently, attractive posters, brochures and mailers were
designed to enhance the visibility of the Haldiram's brand. Different varieties of
posters were designed to appeal to the masses. The punch line for Haldiram's
products was, 'Always in good taste.' Advertisements depicting the entire range
of Haldiram's sweets and namkeens were published in the print media
(magazines and newspapers). These advertisements had captions such as
'millions of tongues can't go wrong,' 'What are you waiting for, Diwali?' and
'Keeping your taste buds on their toes.' To increase the visibility of the Haldiram's
brand, the company placed its hoardings in high traffic areas such as train
stations and bus stations. Posters were designed for display on public transport
vehicles such as buses, and hoardings, focused on individual products were
developed. Captions such as 'yeh corn hain' (this is corn), 'chota samosa - big
mazaa' (small samosa10- big entertainment), 'yeh Kashmiri mix khoob jamega'
(this namkeen item will gel well) and 'oozing with taste' (for Rasgoolas) promoted
individual products. For those customers who wanted to know more about
Haldiram's products, special brochures were designed which described the
products and gave information about the ingredients used to make it. Mailers
were also sent to loyal customers and important corporate clients as a token of
appreciation for their patronage. Packaging was an important aspect of
Haldiram's product promotion. Since namkeens were impulse purchase items,
attractive packaging in different colours influenced purchases. Haldiram's used
the latest technology (food items were packed in nitrogen filled pouches) to
increase the shelf life of its products. While the normal shelf life of similar
products was under a week, the shelf life of Haldiram's products was about six
months. The company projected the shelf life of its products as its unique selling
proposition. Posters highlighting the shelf life of its products carried the caption
'six months on the shelf and six seconds in your mouth.' During festival season,
Haldiram's products were sold in attractive looking special gift packs. The
showrooms and retail outlets of Haldiram's gave importance to point of purchase
(POP) displays. Haldiram's snacks were displayed on special racks, usually
outside retail outlets. The showrooms had sign boards displaying mouth-watering
delicacies with captions such as 'Chinese Delight,' Simply South,' 'The King of all
Chats11.' Posters containing a brief account of the history of Haldiram's, along
with pictures of its products, were also on display at these showrooms.
Haldiram's also diversified into the restaurant business to cash in on its brand
image. The company established restaurants in Nagpur and Delhi. The restaurant
at Nagpur devised an innovative strategy to increase its business: It facilitated
people who were traveling by train through Nagpur station to order food from
places where stockists of Haldiram's Nagpur unit were located. The customers
could order for lunch/dinner by sending a demand draft (DD) or cheque to the
Nagpur unit or giving the same to specified local distributors belonging to the
Nagpur unit. Along with the DD/cheque, customers had to provide information
such as the name of the train, its likely time of arrival at Nagpur, their names
and coach and seat numbers. Haldiram's restaurants in Delhi also used
innovative ways to attract customers. The restaurant located at Mathura road
had special play area for children. To cater to NRI's and foreign tourists, who
hesitated to consume snack foods sold by the roadside vendors since it was not
prepared in a hygienic manner, the Haldiram's restaurant located in South Delhi
used specially purified water to make snack foods including pani puri and chat
papri. These promotional strategies helped Haldiram's to compete effectively
with local restaurant chains such as Nathus, Bikanerwala and Agarwals and with
western fast food chains such as McDonald's and Pizza Hut.

Packaging

Packaging is an important aspect of Haldirams product strategy; this is quite a

natural for a company in the packaged food business. Haldiram used superior
technology to keep the food items fresh and to ensure a long shelf life. This was
done by packaging the food items in nitrogen and keeping the pouches airtight.
Haldiram was competing with the number of unorganised players. Whereas the
large companies could not compete on the price, packaging was certainly a
differentiating thing for the company. The normal shelf life of the similar product
from unorganised sector was typically less than a single week. On the other hand
the shelf life of Haldirams product was as long as more than six months.

During the festival season as well, Haldirams were sold in specially packaged
premium gift packs. The company knew the importance of point of purchase
displays. To ensure maximum visibility, Haldirams products were kept in special
racks outside the retail store. This means that the companys product were both
the first and last thing that consumer saw when they entered or left the retail
outlet.

Expansion

In the financial year 2001-2002, the combined turnover of all three units of
Haldiram's was estimated at Rs. 4 billion. The company targeted a growth of 15%
for the financial year 2002-2003. Analysts felt that, given the competition in the
industry, Haldiram's needed to develop new initiatives achieve this growth. The
competition in the ready-to-eat snack foods market in India was intensifying.
Frito Lay India Ltd. (Frito Lay), one of Haldiram's major competitors, was
expanding its market share. Instead of directly competing with the market leader
Haldiram's, the company launched innovative products in the market and backed
them with heavy publicity. Frito Lay's product range consisted of a mixture of
traditional Indian and western flavors which appealed to younger and older
generations. Its products included Leher Namkeens, Leher Kurkure (snack sticks),
Lays (flavoured Chips), Cheetos (snack balls), Uncle Chips and Nutyumz (nut
snacks). Frito-Lay was the first company to launch small 35 gm. packs namkeens
priced at Rs. 5 and also the first company in the organized sector to launch Aloo
Bhujia. Another competitor, SM Foods, introduced a range of innovative products.
The company launched India's first non-wafer chips in 1988. SM offered products
under two main brands - Peppy and Piknik. Under Peppy, it had sub brands such
as Cheese Balls, Ringos, Hi Protein Crispies, Potato Rackets, Hearts, Veggie Treat,
Mixtures and Minerette. Under Piknik, it had Protein Pin, Junior and Corn Puffs.
Haldiram's also faced tough competition from domestic players such as Britannia
Industries Ltd., Bikanerwala Foods and ITC. In addition, FMCG major HLL had also
announced plans to enter the snack food market. Analysts felt that Haldiram's
lagged behind competitors in offering snack foods targeted at children, who were
always eager to try new flavors in every product category. They felt that the
company concentrated too much on traditional Indian items such as Bhujia Sev
and Moong Dal. Haldiram's had in fact, taken steps to fill the gaps in its portfolio.
Rajendra Agarwal, the owner of the Nagpur unit said, "We want to expand our
market by introducing snacks that will appeal to younger people. There will be no
growth in the traditional snacks category." The unit planned to launch products
such as flavoured ready-to-eat popcorn and a product similar to Leher Kurkure.
Though Haldiram's had increased its focus on advertising and promotion in the
last couple of years, still more initiatives in this direction were necessary. Frito
Lay's expenditure on product promotion was much higher. With successful ad
campaigns such as "control nahin hotha" (it is irresistible) for the Leher brand of
namkeens, the company made sure that it attracted the attention of viewers.
According to media reports, Haldiram's lagged behind competitors in the area of
customer service. A report in Deccan Herald that Prabhu Shankar Agarwal, the
owner of the Kolkata unit, was arrested on charges of manhandling customers
only reiterated this opinion. The report also mentioned that few of the company's
restaurants did not possess the minimum requirements, such as sufficient
seating arrangements and adequate parking lots. Haldiram's also had to deal
with problems created by spurious products. Some companies claiming to be
close associates of the original Haldiram's of Bikaner used the Haldiram's brand
name in their products. For example the 'Haldiram Madanlal' company claimed
that its proprietor, Anil Kumar Agarwal, belonged to the Haldiram's family of
Bikaner. The manufacture of spurious products threatened to dilute the
Haldiram's brand image apart from affecting the sales. According to some
analysts, many of the problems facing Haldiram's arose due to an informal split
between its three units in the early 1990s. The split occurred when Prabhu
Shankar Agarwal, who was heading the Kolkata unit of Haldiram's, filed a
complaint in the court against the Delhi and Nagpur units, alleging breach of
contract when they opened a sweet shop in New Delhi in 1991. This led to a
bitter court battle for many years. The court delivered a final verdict in 1999,
when Haldiram's units were formally split as three separate companies with
specific business territories. The consequences of the split were a matter of
concern. Though on paper, the three companies had clearly defined boundaries
within which they should operate, in practice, they did not stay within their
boundaries. They penetrated each other's territories and competed among
themselves for a larger share of the snacks market. Analysts felt that
competitors would take advantage of this split. Since the scope for increasing
market share in India was limited, these companies began to compete
aggressively in international markets. They used the internet, not only to market
their products but also compete with each other. Each company claimed that its
products were superior to those of the others in terms of quality. For instance, an
advertisement in 'haldiramusa.com', a web portal that sold the products of the
Delhi company in the US, read, "Our items come specially packed from the
Original Haldiram's of Delhi offering superior taste and superior quality, the only
Haldiram approved by the US FDA (Food and Drug Administration). Try the Delhi
stuff and you will never touch the Nagpur Haldiram packets that most grocery
stores store." Analysts were of the opinion that the internal rivalry among its own
companies may lead to dilution of Haldiram's brand equity.