How Parlé Agro is doubling the fizz

Few fast-moving consumer goods (FMCG) companies have seen the kind of dizzying success with the launch of a brand as Parlé Agro has with its carbonated fruit drink, Appy Fizz, which not only created the segment itself but also dominates it with a growth rate of 70% and a compound annual growth rate (CAGR) of 36% over the past four years. The company, which has doubled its turnover to ₹5,000 crore over the past five years, plans to replicate this feat and hit the ₹10,000-crore figure by 2022, riding on the back of Appy Fizz and its other power brand, Frooti.

Pushing this aggressive growth strategy is 33-year-old Nadia Chauhan, joint managing director and chief marketing officer of Parlé Agro, who, along with older sister and CEO Schauna, 43, is aiming to significantly widen the distribution and penetration of these two power brands. The sisters are jointly at No. 26 in this year’s Fortune India Most Powerful Women in business list.

In an interview with Fortune India, Nadia Chauhan explains how Parlé Agro built on the success of Appy Fizz and Frooti, and the road ahead for the company. Edited excerpts:

Consumer spending has slowed down, and cars and durables are under stress. India doesn’t consume a lot, there’s much to be done, but to expand in a measured yet profitable way seems difficult for a variety of reasons. How do you see this market as an important FMCG player?

Actually, we are operating to a very different rhythm altogether, and that has been the case for the last few years now. If I have to look at, say, the last five years, we have doubled the turnover and are on the verge of doing it once again. There have been a lot of factors that have driven it. If we look at the fruit-based beverage segment where we operate, over the past 8-10 years, there’s been this massive shift owing to growing health concerns from synthetic-based beverages to those that are fruit-based or natural. But of course, the shift is gradual and there’s a long way to go. But that movement started quite a while ago.

About five years ago, when we looked internally, one of the things we saw is that while the vision to grow far more than what we were was very much there, and the market environment was right for us and the brands, the pricing, and the response we were getting were fantastic, there was something that was creating an internal bottleneck that was not allowing us to create that massive expansion which we were looking to drive. So that’s when we actually started reinventing a little bit, and went down to our foundation block and our S&D [sales and distribution] system itself. The S&D network, which was primarily built on what we had during our soft drink days, still operated based on those systems. There was a need, with the aggressive goals we were chasing, to really break out of that mould and create something that was apt for the new vision, the new Parlé Agro. Over the last few years, our distribution has grown multifold. At that point of time we may have been at around 300,000-400,000 outlets; today we are at more than 1.8 million outlets all over the country.

This is over a five-year period?

Yes, less than five years perhaps. Like I said, our business turnover has doubled. We had grown to quite an extent and to double [turnover] to where it is now has been a fantastic journey, which itself comes with its challenges.

So today your business turnover is at around ₹5,000 crore. And this includes franchisees?

Yes, our total business.

And the target is ₹10,000 crore by 2022...

Absolutely double. While it always sounds ridiculous at the beginning, we’ve seen this exact journey already happen twice before. From 2003 to now, we’ve gone from almost ₹250 crore to ₹5,000 crore. And that’s happened with the doubling of the business twice. So that is one aspect. [In] the entire category in which we operate, the fruit-based beverages category with brands like Frooti, we’ve been leading growth now for the last few years, which is where you see the market share gains the way they have been.

Your dependence on Frooti, though, has declined because of Appy Fizz...

Yes, Appy Fizz is a story by itself. It was launched in 2005. We had a non-compete with Coke [Parlé Agro sold its brands Thums Up, Limca, and Gold Spot to Coke in 1993] for a certain amount of time and then we could get into carbonated [drinks]. The idea was not to do it with another cola. So that’s when we innovated and launched Appy Fizz. It’s a category we’ve created. The apple category in the packaged format wasn’t there. It was a huge innovation from a technology and manufacturing perspective, and took its time to settle down. Today it’s probably India’s fastest-growing beverage brand.

At the time, say, seven or 10 years ago when you were a Frooti-centric company, was Frooti 70% of your business then?

Around 2003 onwards, you could say it was around 90%. Today it would be about 60%- 65%, with Appy Fizz gaining hugely. Appy Fizz is going to cross the ₹1,000-crore mark anytime now. The vision is to further expand this category. Appy Fizz was the first sparkling fruit drink brand in India. It’s only eight or 10 years after its launch that it got a defined category in the regulatory system as a sparkling fruit-based beverage. The category didn’t exist earlier, and we have held dominance in this space since the time of its launch, while every major company and every small company has launched a product that’s similar. Immediately after we launched, Coke and Pepsi both had their own sparkling fruit-based brands that they tried after us. Pepsi did it under Mirinda and Coke also did it. Dabur also did it, but that lasted six months I think. And of course a whole host of local brands—there are probably a hundred products that have got exactly our branding and copied the bottle design. It’s a great sign. It shows the success of the brand and the category when local products start following. It was initially started as a product which focussed on the top segment of the retail outlets; we had launched it at a premium, it was our first time back in the carbonated space so we had to be cautious as well. But today, in terms of the kind of penetration, it’s in urban, rural... like I said it’s the country’s fastest growing brand. There are probably very few brands in the beverage category that have seen this kind of growth.

And now it’s Salman Khan’s brand too...

It is (laughs). When we brought him on board, the whole idea was, because we were looking at such large-scale expansion for the brand in terms of distribution, we needed to break that barrier of having anyone look at it as a very niche product to having much greater acceptance. So he was the best icon for that. He was a great fit and he’d just come off Thums Up. Even the other associations we had taken on for the brand, like Bigg Boss [the popular television reality show], were aimed at creating a greater mass appeal for the brand. In fact, the consumers have made it a mass drink now; we are just supporting it and it has just spread like wildfire. It’s the first of its kind and continues to hold more than 98%-99% market share. Nobody’s even come close to this success. I would say there’s probably no other new beverage brand that’s come close to this size of success, not just in this category.

What is the kind of marketing spend which you now have?

Overall, we’re spending almost ₹200 crore a year, and Frooti and Appy Fizz take up about half and half of that.

You intend to continue with that?

We intend to keep that; it’s a growing investment as well because there are certain markets which needed a greater localised input like the South which has got its own nuances and its own film industry. So the relatability to just Bollywood stars is not enough if you want to create that level of penetration. So we have Allu Arjun and Junior NTR there. We have Alia [Bhatt] and Varun [Dhawan] on Frooti, Allu is on Frooti, and we have Junior NTR and Salman on Appy Fizz.

When you positioned Appy Fizz as a premium product, and then learnt that it has mass appeal, what did you learn? You’re such a focussed FMCG company and have very few products...

I think it was a focussed approach. Initially when we started, since it was the first of its kind including on the technology side, and to be able to create a fruit drink with carbonation, there were lots of sensitivities attached. So we consciously wanted to keep it urban focussed, and keep it for the top tier. Even in terms of the outlets we targeted, these were the top 20% of the outlets initially and we were at a premium.

I think it was a very good decision in that sense because the time that it took for us to even prepare the consumers into understanding what this product is, as well as in terms of stabilising the entire manufacturing and distribution for a carbonated drink like this, entails a lot of shift in mindset even internally. I think that was a great decision because we gradually built this success versus expecting it to be something humungous on day one, and then [the product] collapsing.

When you realised Appy Fizz has got such mass appeal, what did it do to your plans?

It did nothing bad. It only worked absolutely in our favour because we started picking up signs. For example, the initial signs were that every market that was a cola-dominated market was showing signs of Appy Fizz doing almost as well, or better than, even Frooti. Signs like these were indications of where to invest in capacities and where the markets are going to be larger. So, as we picked up signs of the acceptance widening, we were already gradually, constantly investing in expansion. It’s only when we were fully equipped from a manufacturing perspective that we decided to take the big leap and brought down the pricing. That’s when we decided we’re going to go aggressive and we initially introduced a ₹15 price point which earlier was at ₹18 and just ₹3 makes a massive difference. So at ₹15 we went into massive scale expansion. Last year we further introduced a new SKU [stock keeping unit] which again is an innovation of its own kind, which is a ₹10 price point. So the level of expansion we’re driving now with ₹10 [price point] is even further.

So when we’ve gone from operating in the non-carbonated fruit drink segment from a 300,000 outlet base to a 1.8 million outlet base; when you now look at the larger carbonated soft drinks distribution opportunity, that’s going up to about 3.5 million outlets. With the ₹10 SKU, that’s what we’re gunning for. That’s where we see the greater contribution to doubling of turnover coming from—the carbonated soft drinks space itself.

What you’re also saying is that a lot of the doubling of-turnover game plan will be powered by Appy Fizz.

A large part of it, yes. Will Frooti also be able to ride this expansion from 1.8 million to 3.5 million outlets? Absolutely. Because Frooti has been growing consistently over the last few years, and with the expansion of distribution it will also benefit. When you’ve got just one brand to drive that level of penetration, as you get more into rural and upcountry, you need better RoIs [returns on investment] because your distribution system is a lot more complex. Now we’ve got two power brands. So the ability to create a richer distribution network is that much easier.

(This interview was originally published in the November 2019 issue of the magazine.)