Karan Gupta, Executive Director, Candico India Ltd.

At 26, Karan Gupta is one of the youngest Executive Directors in the country and belongs to the league of young achievers on India’s corporate landscape. When Gupta joined the family business three years ago, he had a blueprint of his vision—making Candico a truly Indian MNC. Spearheading Candico’s export division, he has successfully charted its course in African, South Asian and Middle-Eastern markets. Now, with the acquisition of a plant in Tanzania, Candico becomes the first Indian confectioner to have manufacturing facilities outside the country.

A graduate in Business Administration from the University of Michigan, Gupta graduated from Harvard University, University of California at Berkeley and London School of Economics. He is an alumnus of Lawrence School, Sanawar. Gupta has successfully provided impetus to Candico’s international division and revamped the purchase department and implemented a custom-built Supply Chain Management module for the nationwide sales force.

In a candid conversation with Malini Menon of exchange4media, Karan shares how he has led Candico into valuable partnerships with leading international players for revamping its manufacturing and marketing capabilities. He has firmly positioned Candico on an aggressive growth path with strategic acquisitions and joint ventures in international markets. Excerpts:

Q. What about your joint ventures with European partners?

We realised that if we were to have a world-class plant with world-class manufacturing facility, then what we needed were world-class inputs. Ten years ago world-class inputs were not available in India. So what we did was to buy expertise from Europe and set up JVs in the country. We set up JV with Eurobase, which is the world’s largest gum base manufacturer. This is the only tie-up Eurobase has entered into—a testimony to Candico’s quality standards, ethics and manufacturing skills. Another group company is Sancorp Curt Georgi, Germany.

Candico India’s joint venture strategy gathered speed in January 2004 with its participation in JVs in Tanzania and South Africa. These JVs have enabled us to serve both the East African and South African blocks. The company is actively scouting for opportunities to set up similar JVs in West and North Africa.

There is a large amount of customisation that is required for each market. To state a few examples, we sent our team to Africa and we asked them to study the products available in the market. Some of the smaller things that you would not notice until you study the market there is that Africans love mint candy. In India, however, people have a preference for a fairly mild mint candy. In Africa, people want strong mint candy, which I cannot sell in India. Now if you look at Dubai, retailers prefer small packs. They prefer small packs that they can distribute and so the investment on the product here is low. The Middle East market is opposite and they want large packs. Even within South Asia, there is a large amount of variation. Hence we have incorporated a lot of changes and customised the products to suit the taste of the country.

In the domestic market, we are coming up with a lot of innovations. One of the most recent product launches that we had was ‘Lacto’, where we took out a new range for candies. We have a lot of product launches lined up in the next three to four months. We have gift packs coming up for the festival season. One of the fairly new things that we are planning to enter into is speciality retailing. We believe that the Indian consumer needs to get the entire confectionary range that is available all over the world, which is difficult in price points of Re 1 and 50 paisa. So we are planning to set up retail outlets across the country in all the malls. We will have specialised retail shops, branded under Candico, which will sell all the candies of the world. This should happen before the end of this year.

We have mapped a very aggressive global strategy. Essentially, our strategy is that we want 50 per cent of our turnover coming from international operations. We have basically highlighted three areas as far as our global expansion strategy is considered. The first area is South Asia, and we have set up plants in Bangladesh, Sri Lanka and Nepal. We have already studied those markets to understand what products they need, and shortlisted the partners. Now, it’s really a question of signing the deal and sending the goods to those markets. In all these markets we have also set up manufacturing operations so that we can provide jobs in those countries and at the same time supply through local operations rather than export from India.

The second major region we are entering is the Middle East—Bahrain, Dubai, Oman and Qatar. The Middle East is flooded with Pakistani, Belgian, and Chinese products. However, there is no Indian confectionary in those markets and we wish to change that. Again, we have already shortlisted the products for those countries, developed the products specifically for those markets and included all the variations. The variations can be minor, like large candies or smaller candies in bigger packets, but sometimes the differentiation is very extensive. We should have our distribution set-up there in place by the end of this financial year.

In Africa our strategy has been far more extensive. We have looked at more than just exports. What we have done there is what generally MNCs come and do in our country. We have acquired local confectionary companies all over Africa. We acquired our first plant in Africa in Tanzania. Alongside acquiring this $ 1-million plant, we set up JVs with the previous owners of that company. The plant had a capacity of 150 tonnes a month or 1,800 tonnes a year. We increased the capacity to more than 3,900 tonnes. By the end of this year, we are expecting another 40 per cent increase in capacity. This plant is basically supplying to the Tanzanian market and next year it is expected to supply the Ugandan and the Kenyan market.

Our second plant in that continent is in South Africa in tie-up with a group called Kitkat. This is a far larger plant costing around $ 5 million. This will be a greenfield operation.

The placement service basically would be across seven South African markets and it would be exclusively Indian brands for Candico that would be sold there. This should have a huge impact in the sense that South Africa is going to host the World Cup in 2010. By then we should be considerably present there. The plant operations here would be fairly similar to that of Tanzania.

One of the reasons is that we have been able to innovate all our brands because they are primarily driven by our manufacturing capabilities. We launched the ‘Minto’ brand in the mid-90s and in this sector we have taken on a multinational head to head. In the mid-90s companies used to adopt lower pricing strategy or some other aspects to fight the MNCs, but ‘Minto’ was the first Indian brand that took on the MNC brands head on through aggressive advertising. ‘Polo’ used to be pushed as the ‘mint with a hole’. So we took them head on by saying if you don’t have a hole in your head, there is no reason why you should have it on your mint! So we have kept up this aggressive, head-to-head image even today. Our aggressive spends on satellite television channels ensure that Candico’s brands are known throughout South Asia and Middle East. Now, ‘Loco Poco’ is one of the country’s three most preferred bubble gum brands. In 2001, ‘Loco Poco’ was the first brand to enter the Indian market with tattoos. Nowadays, tattoos are an absolute standard in the bubble gum industry. In fact, there is no bubble gum brand today that can survive without tattoos. Within one year, with this strategy we became the largest selling Indian bubble gum brand. ‘Time Bomb’ is another innovation from us. This is India’s first centre-filled sour gum which chalked up tremendous sales within three months. Candico swiftly followed that up with the launch of ‘Gol Mall’—India’s first candy-gum combination.

Currently our market share is over 8 per cent. Our key brands are Eclairs, Koffi Toffi and Lacto, each own more than 20 per cent share in its category. In gum, we are the largest in the category. The only reason we have dropped is that there are some categories that we are not into. Like tablets for instance, we sold Minto to ITC and so we cannot separate the tablet market.

Every MNC that has entered the Indian confectionary market has come to us to get their products manufactured. We have contract manufactured for every major MNC that has entered this country. Apart from this, we have directly contract manufactured for individual companies abroad. So an African or UK company would ask whether we could manufacture such and such candy and ensure direct supply through the distribution network we have set up abroad.

We have done it for HLL for their milk toffee, Nestle for Polo, Splash, Toffo, Nutrine for Fruit Pop, Am Ras, Gulkand, Chuma Chuma and many others too. We have done it for ITC too and we are doing contract manufacturing for international companies as well.

I believe that in the next 20 years the strength of an organisation will not depend so much on the capability of its plants as on the brands it possesses. We would like to participate in building Candico into a global brand.

In 10 years, Candico has become a truly Indian multinational. Today, we are very happy that Candico is the only Indian MNC in the confectionary industry that has left a mark globally. We are the only company that has manufacturing plants abroad.

We began operations in 1997. It is noteworthy that we are not an Indian confectionary company that survived the MNC onslaught, but a company that entered the industry after the MNCs were already present here for five to six years. Despite that we have done considerably well and succeeded in establishing ourselves. Today, we are a Rs 125-crore company and by 2002 we were the second largest Indian confectionary company with a market share of eight per cent. We have emerged as one of the two Indian confectionaries that have been able to survive in the liberalised economy.

We have upgraded our brand ‘Lacto’ to ‘Lacto Plus’ two weeks back. ‘Lacto’ is a category that has been in India for 20 to 25 years. However, what we have done is upgraded this product and now it is a centre-filled mint candy. We have maintained the same price point of 50 paisa. So the only change for consumers would be the taste.

Emotionally yes, but financially we made the right decision. We loved that brand, it gave us a lot of credibility and we took on MNCs head-on.

One reason why we are doing so well and are able to innovate so much is our manufacturing facilities. We have a world-class integrated confectionary manufacturing facility in Nagpur spread over 15 acres. The equipment have been sourced from Togum in France, Amp Rose of UK and BWI Manesty, also of the UK. This is the very same equipment that global confectionary giants use in their finest plants. We have a capacity of 45,000 tonnes. We are in fact the only organisation in India and one of the few worldwide with the capability to manufacture the entire range of confectionary. We have candies, toffees, gums and tablets. Our factory follows the same standards as abroad. We are buying plants from abroad and setting them up here with the same stringent norms as is followed in any other country.

We have a fairly good distribution network in India as well. We have a network from Kashmir to Kanyakumari. We are available in every single market in this country. We have 24 depots, 1,500 authorised dealers and a 250-strong sales force.

No, this is not an Africa-specific strategy. This is a Third World-specific strategy. As I have already told you, we have already set up operations in South Asia and the Middle East. So Phase one of our operations is all of South Asia, all of Middle East and all of Africa. In phase two, we will start targeting the developed markets.

Yes, it is still on, but we have not recruited new members for this programme currently. This is a very interesting programme wherein we had made a plan of 12 children and we were paying them Rs 24,000 a year and all that these kids had to do was taste the confectionary. This was based on the movie ‘Willy Wonker and the Chocolate Factory’. That was the entire job; they were flown to Nagpur to taste candies. This was to incorporate direct responses and they were phenomenal in the second year—around 3 lakh.