Hector Beverages
Pvt Ltd.
''Hector Beverages is a foolish idea."This was a common saying
at the time of launch of Hector Beverages. It was not that industry
stalwarts were being very critical of this new entrepreneurial
venture, it was because when they look at Hector Beverages they saw
a new entrant, in an unproven space, out to take on giants with the
deepest of pockets (any guesses on what Coke spend on advertising,
or Pepsi gives to MSD? Or how much does Red Bull's Formula 1 team
cost?) And the company goes on and calls itself Hector, who lost to
Achilles.SUBMITTED BYAkshay Sharma: 13PGDM075Aman Bajaj:
13PGDM076Anurika Arora: 13PGDM079Nikhil Arora: 13PGDM099Rachita
Churiwal: 13PGDM105
Table of ContentsIndustry Analysis3Company Analysis3Vision of
Hector3Products Profile4Customer Analysis4Competitor
Analysis5Porters Five Forces Analysis7Firms Resources8Porters Value
chain Analysis9Analysis of competencies:14Cost effectiveness14More
Healthful14Environmentally conscious brand15Informed use of social
media marketing15Sales and Distribution
Channel16References20Exhibits21
Industry Analysis
''Hector Beverages is a foolish idea."This was a common saying
at the time of launch of Hector Beverages. It was not that industry
stalwarts were being very critical of this new entrepreneurial
venture, it was because when they look at Hector Beverages they saw
a new entrant, in an unproven space, out to take on giants with the
deepest of pockets (any guesses on what Coke spend on advertising,
or Pepsi gives to MSD? Or how much does Red Bull's Formula 1 team
cost?) And the company goes on and calls itself Hector, who lost to
Achilles.But that, people, is the trip: the audacity of the
underdog. The company decided to take the big guys on. It decided
to not be cowed down by the big players who make their fortune
selling sweetened, fizzy water. And they also knew that Achilles
does not have the most powerful heels. As a result Hector Beverages
was born.
Company Analysis
Hector Beverages Pvt. Ltd. is an FMCG company in the functional
beverage industry. The company commenced its business in 2008 and
launched its first energy drink Tzinga in2011. The company was
launched by three former Coca-Cola India executives, Kakkar, Suhas
Mishra and Neeraj Biyani, and former Dow Chemicals employee James
Nutall. The company has been growing ever since and Tzinga is now
available all across the country. It has now entered the non-energy
drink segment by launching its beverage Paper Boat. Paper Boat has
been placed in Bangalore, Mumbai, Gurgaon and is now in the process
of being launched in the entire country.The Company has its
Headquarter in Gurgaon, Haryana. It entered the market with its
energy drink Tzinga in April 2011. During its first phase, the
drink was launched in Bangalore, Mumbai and Delhi, but has now a
pan India presence (except Bihar, Jharkhand and Chhatisgarh). The
company has also entered the market in the non-energy drink
segment, with its beverage Paper Boat. The drink has currently been
launched in two variants, viz. Aamras and Jaljeera. Paper Boat as a
drink has its roots in the ethnic Indian culture aiming at bringing
back the taste and the natural flavors that were available in the
earlier times. Paper Boat was launched in March 2013 in Bangalore
and is now in the process of being placed all across the
country.
Vision of Hector
The companys vision, as available in its website
(www.hectorbeverages.com) is as follows:
Audacity: For obvious reasons .a new business is anyway tough.
The fact that we would be taking on the Beverage Behemoths makes it
even more exciting. We love thinking big and are in it because we
want to ask the big boys to "bring it on".Rooting for the underdog:
The underdog cant but try harder. As the bona-fide underdog in the
beverage market we have a vested interest in rooting for the
underdog.Integrity: All irreverence aside, we are committed to the
greater common good and unwaveringly so.
Products Profile
Hector Beverages is an FMCG company in the functional beverage
segment. A functional beverage is one which apart from satisfying
the thirst of an individual performs some additional function in
the body. This category includes the following:Sports Drinks These
are beverages whose stated purpose is to help athletes replace
water, electrolytes and gain energy after training or
competition.Energy Drinks These are beverages which mainly contain
caffeine and there purpose is to enhance the mental and physical
performance of an individual.RTD Tea / Coffee These beverages keeps
an individual active, however, there effect on the individual does
not last for long.
The segment that we have focused for our study is the energy
drink segment that is why our entire project will revolve around
Tzinga the first energy drink made by Hector Beverages. Tzinga is
the first beverage launched by the company in the energy drink
segment.
Customer Analysis
Tzinga being competitively priced at Rs.25 is targeted for those
who cannot afford an energy drink at Rs.95. It therefore does not
consider drinks like Red Bull and Burn as its competitor. The
target group includes the following:Students Students, be it school
(class 10, 11 and 12) or graduation or post-graduation are expected
to study long hours at a stretch to ensure high grades. Since the
students cannot usually afford an energy drink costing Rs.95 on a
daily basis, Tzinga provides them the desired alternative.Office
Goers (First Jobbers) Tzinga majorly focuses on the first jobbers
because of its price point. It is easily affordable for them and
helps them increase productivity in their work hours.Taxi Drivers
Taxi drivers are required to drive for long hours and thus are
important customers of energy drinks.Athletes Athletes require
energy drink to practice for long hours and boost their
performance. Since, they are in a position to afford expensive
drinks, Tzinga caters to the taste buds of the athletes by being
available as a fruit based drink that is not bitter in
taste.Competitor Analysis
The market for soft drinks in India is quite huge. Although
share of Energy drinks segment in which Hector Beverages operates
is very small ( 0.01% roughly (as in 2011). However this segment is
growing rapidly.
The market size of energy drinks in India is more than INR700
crore (2013) as per Euromonitor. As per a report by Frost &
Sullivan (Industry consultant,) the market size is expected to grow
at the rate of 25 per cent CAGR between 2012 and 2015. While the
global energy drinks market, (as per Technopak), grew 14 to 15 per
cent in 2011.
Source: Mintel
Some of the major competitors for Hector Beverages in this
segment include Red Bull, Cloud 9 of Goldwin Health Pvt. Ltd.,
Power Horse Energy Drinks and Burn of Coca Cola.Red BullThe brand
came into existence in 1984. Red Bull can be called as a pioneer in
the energy drink category worldwide. Red Bull came in India in 2003
and has created a category of energy drinks in the Indian market.It
is the market leader in India (62.1%) and is the toughest
competitor for any company in the energy drinks segment. Red Bull
has build up a strong brand name, distribution channel and has
global expertise in producing and marketing energy drinks.Major
WeaknessLack of innovation The Company has had a similar product
portfolio for quite some time while there are a lot of competitors
in the market and they have their own USP which may leave Red Bull
behind.Cloud 9 The brand was created by Goldwin Healthcare Pvt Ltd
in 2008. It was the third major entrant in the energy drinks market
in India. Cloud 9 is the market challenger in the market with
12-15% market share. Cloud 9 is available in more than 80,000
outlets, 30,000 wine shops and in the country. In April - 2012,
Goldwin Healthcare Pvt. Ltd. has won the The 2011 Frost &
Sullivan Product Excellence Award of the Year in the Indian Energy
Drinks Market category which shows the strength of the brands image
among the industry critics. All these factors make in a strong
contender in the energy drinks segment.Power HousePOWER HORSE
Energy Drinks GmbH was launched in 1994. It was thus one of the
pioneers among energy drinks globally. POWER HORSE is available in
more than 50 countries around the world. It entered India in 2003
and was the second major entrant into the market at that time. The
companys market share in the segment declined from 22% to 4%
between 2011 and 2012 as per a Mintel Report. Although the reason
for such decline cannot be known with certainty, but if we analyse
the market share pattern for various companies in the sector, it
can be said that most of this share was taken up by the new
entrants in the market.Burn Coca-Cola India Pvt Ltd has also marked
its presence in the Indian energy drinks market with Burn. Although
Burn does not command a significant share in the market, the
financial and marketing strength of Coca-Cola makes it an eminent
potential threat for all the existing players in the energy drinks
market. Coke has priced this product (INR120) above the price Red
BULL .Major WeaknessBurn is one of the late entrants in the
market.Porters Five Forces Analysis
Bargaining power of buyers: The customers for Hector are the
following: Retailers The product is placed at all retail and
departmental stores where consumers can access it. Therefore, no
retailer can have high bargaining power.Chain Store Chain stores
include Big Bazaar, Needs, Easy Day, etc. As these outlets buy in
bulk, they have medium bargaining power.Corporates Tuck shops
inside corporates do buy in large quantities. However, the product
is placed in a large number of corporate offices. Therefore, a
single tuck shop owner does not have high bargaining power.Thus, as
a mix of all the consumers, bargaining power of buyers is
Medium.
Bargaining power of suppliers: The basic pre-mix of the drink is
supplied by just one company which is the sole producer. Thus
supplier of this material has High bargaining power.
Competitive Rivalry: There are a number of existing rivals in
the industry like Red Bull, Burn and Monster. However, the huge
price differential that exists between Tzinga and the other energy
drinks reduces the power of the rivals.Thus, on the whole
competitive rivalry for Tzinga is Low.
Availability of Substitute: In India, consumers generally
consider sports drinks and carbonated beverages as substitutes for
energy drinks. However, functionally, energy drinks serve a
different purpose, but the consumers need to be educated about it.
Once the consumers are aware of difference in functionality, there
would be no substitutes for energy drinks.Therefore, currently, the
availability of substitutes for the energy drinks is Low to
Medium.
Threat of new entrants: India is considered to be an unexploited
market for energy drinks. The energy drink segment has high growth
potential that can be attractive for competitors to enter the
market.Thus, Threat of new entrant is High
Firms Resources
Tangible Resources:
Physical: The company has manufacturing plant at Manesar in
Gurgaon and Hosur near Bangalore. The company has around 10,000
outlets and an employee strength of 100-200
FinancialsAlthough, the companys promoters have declared that
they will not disclose any financials, some of the financials can
be inferred from various news articles about the company.
The company has raised about INR50 crore as its owners
capital
Its monthly sales have reportedly reached close to 1.5million
units per month implying an estimated annual revenue of roughly
INR45 crore.
The company is still to become profitable OR cash positive.
So all the profitability ratios including EPS Net Profit margin
etc. may be assumed to be negative.
There is no substantial information about debt raised by the
company so, various Leverage ratios like Debt-Equity Ratio of the
company cannot be estimated.
IntangibleTechnology : They have launched their product Tzinga
at just Rs 20 which is much less than their competitors. The secret
to their cost cutting is inimitable and non transferable at
presentReputation : The brand is called PowerWater and its
functionality is that it is micronutrient-enriched flavored water.
Its an affordable energy drink developed after 14 months of
research, six months of which was done in Europe. Tzinga is at
least 60 per cent cheaper than competitive brands like Gatorade and
Red It has sound expertise of health issues and innovations in
flexible packaging. It has worked around the price factor through a
new packaging (pouch with a spout) that lets Tzinga retail at Rs.20
for a 200-ml pack. They build close relationships with all
retailers, who stock Tzinga products. Today, the drink reaches over
7,000 outlets through 15 distributors.Culture : A lean model with
lots of independence given to individuals which gives a sense of
responsibility and belongingness to employees working in the
company.Knowledge: Hector and Beverages have rich myriad of
knowledge within founders of the company ,Neeraj Kakkar , James
Nuttall and Suhas Mishra. Neeraj has done his MBA from MDI Gurgaon
and then went on for his second MBA to Wharton university where he
met James Nuttall. Subhash has done his MBA from premier college of
India, IIM Calcutta. While Neeraj has rich experience of eight
years in coke, James is considered to be packaging geek (Innovative
packaging is one of the core competencies of Hector &
Beverages). Suhas too is known for his work in Nokia and Coca Cola
have immense corporate experience in rural
business.HumanSkills/know how: They are skilled in creating cost
effective energy drinks with innovative packaging designs which are
user friendlyCapacity for communication and collaboration: A highly
collaborative atmosphere exists in the organisation. There is two
way communication and the organisational structure is lean and have
less hierarchy. Porters Value chain AnalysisIn the previous section
we have identified the various resources of the company and with
the help of the Porters Value chain we can map these activities
under functional heads. The value chain framework can be used as
powerful analysis tool for the strategic planning and to form a
successful product for an organization, it is important to add
value in each activity that the product goes through during the
life cycle.Classification of Porter's value chain activitiesPorter
classified the generic value added activities into two classes.
These activities are: primary activities which are classified as
product and market related activities and support activities that
are related to infrastructure, technology, procurement, and human
resource management.Primary activities can be classified into
product related and market related activities which are described
below
Product related activities:The activities that the organization
performs to add value to the products and services itself. The
activities are classified as:
Inbound logistics:For the production and development activities,
organizations need inputs as goods which are received from the
suppliers. Inbound logistics refer to all these activities relating
to receiving goods from the suppliers. Hector Beverages maintains
good relationship with its suppliers and invests heavily in
optimizing Transportation scheduling. However the basic pre-mix of
the Tzinga drink is supplied by just one company which is the sole
producer of this material and so Hector is highly dependent on this
supplier for goods.
Operations: These include the production process, development
activities, testing, packaging, maintenance, and all other
activities that transform the inputs into finished product. Mr
James Nuttall ,Head Product Development ,Hector Beverages has used
his packaging expertise to develop flexible DOY Pack Packaging for
the products. This type of packaging preserves the temperature of
the drink and the products dont require refrigeration in
winters.
Services:Organization offers the services after the products
and/or services have been sold. Hector Beverages provides a good
buying experience and effective after Sales Services. Initially
launched in Delhi , Bangalore and Mumbai. Now it has Pan India
presence
Market related activities:The activities that the organization
performs to transfer the finished products or services to the
customers. The activities are classified as:Outbound Logistics: The
finished products are developed using the product related
activities. Hector Beverages deals in the following forms of trade:
General Trade It includes all retailers, restaurants/ dhabas, gyms,
pan shops and similar stores.Modern Trade This includes all chains
of departmental/ hypermarket stores like Big Bazaar, Easy Day, Le
Marche, etc.At-Work and Institutional Sales This includes tuck
shops/ cafetarias inside corporate offices.
The company follows both direct and indirect distribution
channels.Indirect Channel
Direct Channel
Marketing and Sales:These activities include the advertising,
channel selection, product promotion, selling, product pricing,
retail management, etc. Hector Beverages indulges in the following
forms of advertisement and sales
strategy.DanglersPostersBuntingsPackshotsTV AdvertisementProper
Placement of Product atRetail OutletsCollege CanteensCorporate
OfficesMetro stationsModern tradeSupport activities:The activities
that the organization performs to assist the primary activities to
gain the competitive advantage. The activities are classified
as:
Procurement: This involves the activity of purchasing inputs to
transform these into finished products and services. The value is
added by acquiring the products at the best price, at the right
time, and in the desired place with the desired quality and
quantity. The key ingredients of Aamras is Mango and Jaljeera are
majorly water and spices which are also abundantly available and
low prices. Therefore Hector Beverages enjoys easy availability and
Low Prices of Raw materials
Technology Management:This is very important in todays
technological driven environment. Technology can be used in
production to reduce cost, to develop new products, increase
customer service facility, build up cost effective process, etc. It
supports the value chain activities such as research and
development, process automation, process design, etc. Hector
Beverages is still in a nascent stage in the Technology domain and
is yet to implement Digital marketing, Data Modelling, Simulation
tools which are being used extensively by other field players.
Hector Beverages is a young and upcoming Beverages company that
has recently secured VC funding from some of Indias leading
investment funds. As a young company, they have limited IT
resources but they still need robust Enterprise solutions that are
easily scalable as the company grows.
The company has used 4MoX for a mobile-based SFA solution that
could run on any of their employees phones and where the entire
sales and inventory data could be stored in the cloud. This
pay-as-you-go solution not only helped drastically reduce their IT
expenditure, it also provided a scalable and future-proof solution.
The employees can access their daily routes on their phones and
enter inventory and sales data by store. Similarly anybody from
mgmt can log in to a secure site and track inventory and sales data
in real-time - by store, region and by sales representative. This
has become a strategic asset for the company in itself.
Human Resource Management:The key roles of HR are to support the
attainment of the overall strategic business plan and the
objectives. As a strategic business partner HR designs the work
positions by hiring, recognition, reward, appraisal systems,
carrier planning, and employee development. Hector Beverages has a
highly qualified top management team and is on the lookout for next
generation management Professionals. Being a startup, it provides
its employees great learning experience and employee friendly
practices.
Infrastructure:This includes the planning management, legal
framework, financing, accounting, public affairs, quality
management, general management, etc. These are required to perform
the value added activities efficiently to drive the organization
forward to meet the strategic plan and the objectives. Hector
beverages recently raised $8 million for setting up a new plant in
Hosur, Bangalore. It has an existing plant in Manesar, Haryana and
headquarters in Gurgaon, Haryana, International Headquarters in
Philadelphia , USA
Analysis of competencies:
Hector beverages teams' strategy relies on founders'
differentiated capability inGeneral management Merchandising
PackagingDistribution.
Cost effectiveness
With a price point of Rs 25 which is achieved due to better
technologies applied in manufacturing and packaging Tzinga is able
to reach to most of its target customers. Its price point has an on
average Rs. 60 difference and hence has a competitive advantage of
penetrating more in the students,drivers and sports enthusiasts
segment.
More Healthful
Tzinga competes on the added natural herbs like Ginseng and
Gaurana that serve the similar purpose of caffeine but are not
harmful to health.Environmentally conscious brandWith the use of
special packaging as mentioned the company uses less than 50
percent of plastic used in a pet bottle of same quantity and adds
much less of the plastic to environmental waste. It also helps in
conserving energy and healthful benefits of liquids.
Informed use of social media marketing
Tzinga is going the right way in using social media to get a
brand recall and targeted promotion. With the progress it has been
making it is being said that constant efforts in this direction
will lead tzinga to a greater market share.Establishing competitive
advantage:
Scarcity: The intangible resource of a cost effective and
healthy brand that Hector Beverages have created is scarce. They
have achieved this through months of research. They have introduced
flexible DOY Pack packaging which preserves the temperature of the
liquid. This is a very innovative characteristic of Hector products
and is not yet available in any other brands
Relevance: This resource is relevant as people in India are cost
sensitive and mostly look for value for money. Also the healthy
brand image appeals to the ever growing health conscious citizens
of India. According to health and wellness trends in India report
by International Market Bureau, 80% of Indians agree that health
considerations significantly influence their choice of food and
drinks. The DOY pack packaging further cuts down the refrigeration
cost at the end of the retailer.
Sustaining competitive advantage:
Transferability: Four years into the market, other players with
big pockets have not been able to buy Hector Beverages secret
formula for providing the energy drinks at such low cost and the
secret behind their out of the box packaging. Hence we can say that
the threat of transferability is low.
Imitability: Cost effectiveness is core to their processes and
flexible packaging is an innovative endeavour of James Nuttall.
This intellectual capital will. be difficult to imitate at the end
of the established players.
Sales and Distribution Channel
In order to provide for the market in the best possible way,
sales and distribution team workswith various distribution
channels. These represent a means of reaching the final
consumer.Hector Beverages deals in the following forms of
trade:General Trade It includes all retailers, restaurants/ dhabas,
gyms, pan shops and similar stores.Modern Trade This includes all
chains of departmental/ hypermarket stores like Big Bazaar, Easy
Day, Le Marche, etc.At-Work and Institutional Sales This includes
tuck shops/ cafetarias inside corporate offices.
The company follows both direct and indirect distribution
channels.Indirect ChannelThe indirect channel works with the help
of a distributor. The following approach is used:Distributor is
required to keep a 10 days stock with him to ensure he does not
fall short of the requisite orders.The Sales Executive (employed by
the company) takes the orders from the outlets and provides the
daily order report to the distributor.The distributor delivers the
order the next day and collects cash from the retailer.
Direct Channel
Existing Distribution Channel Strategies The retailer and
distribution margin is about double than that provided by Coca-Cola
or Pepsi.Still, the investment to be made by the retailer is quite
moderate as compared to similar quantities of other products. With
an MRP of Rs.25, the beverages are available to the retailer at
affordable rates. Also, the company does not force the retailer to
buy cartons of any particular variant. The stock is supplied based
only on the requirements of the retailer.In case the stock expires,
it is taken back by the company and destroyed. The retailer is
given the fresh stock in exchange.The product is door delivered at
the address of the distributor and hence he does not have to bear
any extra off-loading or freight charges.Any damage during the
transit of the product from the manufacturer to the distributor is
taken back by the company
Future Distribution Channel StrategiesIntensive Distribution
ChannelCompany should sell through as many outlets as possible so
that the consumers encounter the product virtually everywhere they
go, supermarkets, stores, gas stations. It can easily become the
recipient of product loyalty if a customer knows that no matter
where they go they will be able to find what they want, one brand
in the product of Tzinga. It should have a PAN- India presence with
stores containing Tzinga all over India.Benefits for Retailers/
DistributorsThe cash and carry policy of the company act as a major
deterrent as it expects the distributors to make advance payments
to the company for the stock ordered and the retailers are not
given goods on credit. Hector should adopt a liberal credit policy
and give more incentives to Retailers and distributors.
Current StrategyBest Cost Provider Strategy: Hector Beverages
combines a strategic emphasis on low cost with a strategic emphasis
on differentiation.Focus on the Low Cost: Hector beverages have
aggressively priced their product as compared to the competition in
the energy drink market like Redbull, Cloud 9. Redbull which
controls almost fourth-fifth of Indian energy drink market cost
about Rs 95 for 250ml, in comparison Tzinga caost only Rs 25.Highly
Differentiated products: Hector beverages has differentiated its
products on a no. of basisUnique packaging: Tzinga comes in a
Flexible DOY packagingDifferent Indian Flavors like Tropical Trip,
Lemon, Mint andMango-Strawberry.
Recommendations/Future Strategies
Approval from regulatory bodies: Project it as Healthy energy
brandIndians are becoming more health conscious and aware of the
side effects of energy drink. More inclined towards healthy
drinks.It has been found out by Food Safety and Standards Authority
(FSSA) that energy drinks is detrimental for health of pregnant
ladies and kids. Hence Hector Beverages should write appropriate
message on their pack indicating the same, It is harmful for
pregnant ladies and kids. This will project Tzinga as health
conscious drink and improve its brand image.
Better inventory Management: To deal with erratic demands, we
need to make our inventory flexible, use multi period inventory
model (checking demand frequently and varying the reorder point and
reorder level accordingly) This can be done only when Hector
maintains good relationship with its suppliers.
Association with sports: Sports offers loyalty, entertainment,
passion, and reaches out to all demographics, creating an
environment with no boundaries. Aligning with a sports is an
excellent method of increasing brand awareness. Tzinga has never
associated itself with any sports event which can be used to create
positive PR and raise awareness of the organization as a whole. It
can target various youth oriented sporting events like IPL, Hockey
Indian League etc.
Distribution Channel CoverageIncrease Reach and
Visibility:Intensive Distribution ChannelCompany should sell
through as many outlets as possible so that the consumers encounter
the product virtually everywhere they go, supermarkets, stores, gas
stations. It can easily become the recipient of product loyalty if
a customer knows that no matter where they go they will be able to
find what they want one brand in the product of Tzinga. It should
have a PAN- India presence with stores containing Tzinga all over
India.
Youth Oriented brand : They should associate themselves with
festivals of colleges and other events that attract youth such as
auto expo, trade fairs, music concerts etc.
Funding
The company must try to become cash positive from operations to
finance growth since raising funds for the years to come may not be
that easy (in the absence of promising results).
If possible, it should try to return some benefits in form of
dividends to its investors in order to build confidence for future
fundraising
Any investment must be scrutinised on risk-return parameters
before taking a final decision on it.
Referenceshttp://articles.timesofindia.indiatimes.com/2012-06-20/bangalore/32336914_1_beverages-market-tzinga-manufacturing-plant
http://www.thehindubusinessline.com/companies/article3324829.ecehttp://articles.economictimes.indiatimes.com/2013-05-20/news/39392705_1_neeraj-kakkar-indian-energy-drinks-market-goldwin-healthcare
http://www.managementexchange.com/hack/mapping-porter%E2%80%99s-value-chain-activities-business-functional-units
http://competitionjunkies.wordpress.com/2013/01/14/taking-the-bull-by-its-horns/http://businesstoday.intoday.in/story/challenges-ahead-for-newcomers-in-energy-drinks-market/1/199794.htmlhttp://site.securities.com/php/search/search?pc=IN&sv=EMIS&query_entry=advanced&search_mode=1&sort_by=date&dtyp=&keyword=%22power+horse*%22&keyword_exact=&keyword_any=&keyword_all=&keyword_none=&display=1&range=all&fromdate=&todate=&title=1&abstract=1&prod%5B%5D=IN&lang%5B%5D=en&scop%5B%5D=25&rpp=25&refresh-filters=auto
Exhibits
Source: Press Search
Source: Press Search
