How Baroda-based Puzzle Snacks is tapping rural markets faster than Lays, Haldirams, and Kurkure
Started in 2012, Abhinav Gupta's Expedite Foods recorded a Rs 8.5 crore turnover last year. It currently employs around 50 people and buys around 90 percent of its ingredients and material from MSMEs in the region.
The snacking options available to an urban Indian consumer are endless. He/she can choose between namkeen items (such as chaats), chips, biscuits, chocolates, and more. As a result, large brands such as Lays, Kurkure, Uncle Chips (all under PepsiCo), Haldirams, and others have been targeting these urban consumers.
But Baroda-based entrepreneur Abhinav Gupta's focus is on rural India. His F&B company Expedite Foods and its flagship brand Puzzle Snacks are aiming to bring packaged snacks to the largely unorganised, cost-conscious markets in districts in Madhya Pradesh, Gujarat, Rajasthan, and Maharashtra.
“A lot of snacks that we take for granted in urban India are not easily available for over 60 percent of people in rural India. People in rural India are often dependant on either the local brands or whatever the local kirana store has,” he says.
He understands that rural areas are still relatively untapped by branded snack companies. According to him, the larger players compete more in an urban setup. But Baroda-based Expedite Foods and Puzzle wants to make the most of India’s six lakh villages, he says.
To appeal to these low-cost markets, Puzzle sells snacks such as salted peanuts, samosas, fried pasta, papads, and more, in packets costing Rs 5 each.
“Our entire distribution model is around the villages and tehsils (districts). This shows our distribution prowess and becomes a key differentiator,” Abhinav adds.
Started in 2012, Expedite Foods has gone on to record a Rs 8.5 crore turnover last year. It currently employs around 50 people, including contract workers. Further, it buys around 90 percent of its ingredients and material from MSMEs in the region.
In an exclusive interaction with SMBStory, Brands of India award winner and Expedite Foods Founder Abhinav Gupta explains how the snack brand is targeting rural markets.
SMBStory: How did you identify rural areas as your preferred market?
Abhinav Gupta: Before becoming an entrepreneur, I was a sales manager in a German company. I was handling sales and distribution. Using this experience to conduct research to launch my own businesses, I noticed that snacks are usually sold in two ways in rural India.
One, either a local shop or halwai makes the snacks and sells that batch for three or four days. Second, a kirana store sells the snacks out of a jar and onto a newspaper. In both cases, the consumer doesn’t get the product fresh, and hygiene is always an issue.
Further, the raw material’s hygiene is also questionable. Thus, I decided to start a company that would bring regional snacks in a nitrogen-flushed, Rs 5 packet to all these districts.
SMBS: With this research in hand, how did you start Expedite Foods?
AG: Some savings from my job plus a loan from my cousin helped me start Expedite Foods and Puzzles in a 600 sq ft rented premises. We also took smaller loans from the bank. As we grew initially, we realised that we had to move out to a larger place.
We bought land near Baroda in 2015 and constructed a facility on it. Thanks to the larger space, we could upgrade the machinery and improve the production process. We shifted into this factory in 2016, and this is a milestone we would like to remember.
We also paid the cousin back and now we are a bootstrapped company doing a healthy topline. In the next few months, we intend to raise the first series of investments.
SMBS: How are you reaching your target audience?
AG: 95 percent of our branding is through Facebook, which is used extensively by our target audience. With the advent of cheaper data and penetration of smartphones in rural India, a lot of our consumers connect with us through our Facebook page.
On the products side, we have developed special snacks by keeping the tastes preferences of rural consumers in mind. We also have a strong pipeline of products in R&D, which will help differentiate ourselves even further.
This way, our target audience becomes no longer dependent on the substandard snacks that are available in shops in villages. With Puzzle snacks, we are bringing them a wider range of products to choose from, just for Rs 5.
SMBS: What are the major challenges you have faced?
AG: Running a business in the F&B sector is a marathon. One can survive through an uncompromising and consistent quality, and a solid distribution network. Since we are focussing on rural India, things are not simple. It takes time to penetrate into villages and new districts. Thus, we require a large sales team to grow quickly and also decrease the go-to market time.
Ensuring consistency in manufacturing and delivery is another challenge. We have had to appoint new distributors in each town a couple of times. We also had to replace personnel in production and put systems in place.
SMBS: How do you manage critical areas such as supplier management, cash flow management, and capital management?
AG: One learns along the way that the best way is to communicate. Be upfront with your suppliers, customers and employees. Always answer the phone and talk to the supplier.
I see a lot of people who won’t answer the phone calls of the suppliers when the call is about payments. But they would be following up with the suppliers when they want raw material. This kind of a relationship doesn’t work for a long time.
SMBS: What is the way forward for Expedite Foods and Puzzle snacks?
AG: Madhya Pradesh, Gujarat, Rajasthan and Maharashtra have more than 150 districts and a huge potential. For the next three to four years, we intend to focus on them and make a brand for ourselves. With investments going into the sales team, we not only will dig deeper into these states but also enter newer districts of these states.
SMBS: Why do you work with MSMEs in procuring ingredients?
AG: As an MSME, we understand the hard work which goes into making the business. We want to help fellow entrepreneurs who have taken the plunge and are trying to make a name for themselves. There’s a huge opportunity in food sector but entrepreneurs have to be in it for the long haul.
A lot has been done for MSMEs in the last five years and I hope the trend remains. But access to capital for MSMEs is still a concern as all the banks want more than or equal to 100 percent collateral of the loan amount.