Even as its energy drink, Tzinga, sells 1.5 million packs per month, Hector Beverages is set for a national launch of its second beverage brand, Paper Boat, that presents traditional, Indian flavours
DIVYA M. CHANDRAMOULI
By their own admission, the founders of Hector Beverages (Hector) have been foolishly brave in entering the beverage segment, where they compete with international giants. Yet, in due course, their strategy of offering a quality energy drink, Tzinga, at an affordable price point (Rs. 25 for 200 ml) has paid rich dividends as the company sells over 1.5 million packs per month. “At present, we are the second-most preferred drink in several cities such as Bengaluru, Goa, NCR and more,” states Neeraj Kakkar, co-founder and CEO, Hector. The sales volumes that Tzinga has done in the past year have allowed the company to broaden its reach and take its product to the top 40 cities in the country.
When we last spoke to Kakkar (July 2012), he shared the company’s distribution target of reaching one lakh outlets in the next 18 months. “We aren’t at one lakh outlets as yet, the number is closer to 60,000,” says Kakkar while adding that in the next fiscal, he definitely sees Tzinga’s distribution hitting the one lakh mark. Sensing its potential to take the fight to the leading brand in its segment, Red Bull, Sequoia Capital has backed Hector. In May this year, the company closed its second round of funding of US $ 8 million, where Sequoia Capital led the round with an investment of US $ 5 million and existing investors, Catamaran Ventures and Footprint Ventures, contributed the rest. Apart from leveraging the investor’s network, Kakkar explains that having access to the FMCG companies on Sequoia Capital’s portfolio has helped Hector understand consumer behaviour better.
Floating a new brand
While Hector has a clear understanding of where it wants to go with Tzinga, it has also been testing the waters to launch a second beverage brand, Paper Boat, with a focus on Indian flavours. Currently, the company is conducting a test run with two flavour variants, aamras and jaljeera, at close to 200 outlets in each of the cities it distributes Tzinga in. Hector also has a partnership with Indigo Airlines to distribute its Paper Boat brand on the airline. “We have received very positive responses to Paper Boat and are looking at a national launch by the end of this year,” says Kakkar. With a tagline that reads ‘drinks and memories’, the flavours of Paper Boat are meant to take its drinkers on a happy trip down memory lane.
With Tzinga, our focus was on the youth, with Paper Boat we are looking at a 30 plus target audience.
For Hector, a key difference between Tzinga and Paper Boat is the target audience. “With Tzinga, our focus was on the youth, with Paper Boat we are looking at a 30 plus target audience,” explains Kakkar. Interestingly, Hector has conceptualised several sampling activities for Paper Boat, including one where it asks prospective consumers to make a paper boat and if the consumer is successful, the company makes a donation on his / her behalf to an NGO that supports children’s education.
Ramping up production
As a company, Hector invests heavily in technology. Over the last year, it has streamlined its supply chain function, with the help of technology that has interlinked all functions, from production to sales. “Each of our sales representatives carries a tablet and records all the information available at each retail outlet, including stock tracking, order processing and more. Anyone can access this information and make decisions based on it; for example, a production manager at the plant knows how much stock has moved at any given retail outlet and can accordingly figure out how much we need to produce,” explains Kakkar. Importantly, the use of technology has helped eliminate the middle layer, namely the supervisor and allowed the company’s sales representatives to focus on building capacity. Kakkar reasons, “When somebody logs in to our technology, we can tell if he / she is working and there is no need for anybody to play supervisor.”
As it continues to rely on its technology to improve its business efficiencies, Hector is also looking at commencing production at a second plant in Mysore, Karnataka. “We are looking to start operations at our second plant in the next fiscal year. This plant will have an enhanced production capacity of upto 600 packets per minute but we plan to begin with manufacturing 220 packets per minute,” shares Kakkar. At present, Hector’s first manufacturing plant in Manesar (close to Gurgaon) produces between 100 and 120 packets per minute.
Hector, which has laid low on marketing till now, also has a television campaign in the pipeline, for both its brands. “While a good part of our second round of funds will be used in increasing production capacity, we are also looking at increasing our marketing spends,” says Kakkar. He believes that March is the best time for the launch of a campaign as it is the onset of the Indian summer.
As for the future, Hector is clear in its vision for Tzinga. “Over the next six to 12 months, we would like to concentrate on strengthening our presence in the cities we currently distribute in,” says Kakkar. On Paper Boat, he remains optimistic that the beverage will be well-received across the nation. As this interview nears its end, Kakkar candidly shares that Hector’s current growth rate is high, but that is relative to its base being small. Over the last fiscal, the company’s annual growth rate has nearly doubled and Kakkar is confident that the company will do as well in the next fiscal. In his journey with Hector so far, if there is one thing he regrets, it is that in the first year-and-a-half, the company was not fast enough in taking its product offering to its target audience. “Our product had a lot of life and we probably should have tried to grow faster,” he says. Upon that reflection, he talks of the future, “We are going to launch variants for both brands and be aggressive in our marketing strategy. We are certainly looking at being the dominant player in this segment.”
|Then (July 2012)||Now (September 2013)|
|Established Tzinga as a functional beverage brand across India||Looking to consolidate Tzinga’s position in current markets, planning a national launch of Paper Boat, an Indian flavour focused beverage|
|Production plant in Manesar (capacity of 100 to 120 bottles per minute)||Plan to operate second production plant in Mysore (capacity of 220 bottles per minute)|
|First round of investment from Catamaran Ventures, Footprint Ventures||Second round of investment to the tune of US $ 8 million from Sequoia Capital (US $ 5 million), Catamaran Ventures, Footprint Ventures|
|Team strength of about 200||Team strength has increased to over 275|