Being the second player in India to enter into the (then) unpopular spring mattress market in 2005, Peps India has pulled the right strings in product development, marketing and channel network to turn the tables and record healthy growth right from year one. With an estimated revenue target of Rs. 225 crore in FY16, it soon plans to launch additional products such as bed linen, pillows, pillow covers, quilts and more.K. Madhavan, Co-Founder & Managing Director, Peps Industries
In the year 2005, it took all of fifteen minutes for three entrepreneurs, K. Madhavan, G. Shankar Ram and P. Manjunath, to sign a Rs. 4 crore deal to buyout a loss making spring mattress manufacturing company in Coimbatore. Their only hunch to readily agree to the deal was their prior, two-decade long experience in the mattress industry which led them to believe that spring mattress was in for the long haul. “The only other spring mattress manufacturer at that point was a 19-year old brand up North, that couldn’t create a major dent in the market. And that thought was our starting point,” recalls Madhavan.
Year one was spent digging deeper into the segment to understand why spring mattresses didn’t make the cut with Indian customers. This research threw up several inhibitions, reservations and supposedly false health concerns associated with its usage which made customers opt for traditional coir mattress instead. “A few decades ago, people used to buy sofa cum bed sets which were made of manually arranged springs, which wouldn’t last for more than six months. They assumed any spring mattress would be of the same quality. Moreover, many believed that a hard bed would be better for the back than a soft bed,” recalls Madhavan. If this wasn’t enough, a bigger challenge in hand was, unlike when buying something like an automobile or a television, nobody really cared to understand more about what mattress they bought and why. Think about this. How many of us remember the last time we bought a new mattress? Or, how many of us know the brand of mattress we own right now?
Keeping these drawbacks in mind, in 2006, Peps Industries took its first steps into the spring mattress market, in which it currently owns a 55 per cent market share across the country.
The Right Approach
The founders realised that it wouldn’t suffice to just harp on why the spring mattresses manufactured by Peps is unlike the manually placed spring mattresses they bought earlier. Hence, they adopted a combination of a great product, a great marketing campaign, a good presence through distributors and retailers, and an efficient after-sale service to bust customer inhibitions.
Its first line of mattresses was called the Spring Koil, positioned as an affordable luxury product for the masses. It was designed to offer uncompromised quality at a price cheaper than the conventional coir mattresses. To drive its positioning, the company developed an advertising campaign titled ‘Live the Peps Life’. “The ad showcased men, women and children jumping out of their beds in the morning, driving home the point that a good night’s sleep can determine how active you are the next morning,” recalls Madhavan. In the year of launch, Peps roughly manufactured 9,000 Spring Koil mattresses, partnered with six distributors and 17 dealer networks and cashed in revenues of Rs. 4.8 crore.
“Even if your products are of the best quality, they cannot sustain in the market unless they are cost competitive and deliver value for money.”
Then, in 2007, two years after founding and a year after the launch of Spring Koil, Peps ventured into producing a line of international luxury and comfort mattresses called Restonics. “When we acquired the Coimbatore-based company, they already had a licence agreement with Restonics, a US-based mattress manufacturer. We decided to extend that licence agreement for the next 30 years, and seek support in terms of technical expertise and marketing,” shares Madhavan. Its third launch was a product called Spine Guard, an inner spring mattress with memory foam. “Often, people believe that a hard mattress is better for the back. The truth is a mattress should neither be hard nor soft. It should support the load you put on the mattress,” he opines. In the years that followed, Peps developed several other mattresses to cater to each target segment, such as Double Decker, Vivah, Grand Palais, Crystal and Organica. “The important thing is to not just be distinctly different from the other players in the market, but also to produce what the customer needs,” he says.
Keeping the distribution network intact
Today, Peps has in its kitty a network of 412 distributors, 4,700 dealers and 76 company-owned retail outlets. As channel management can be an expensive proposition, the company has developed a hub and spoke model to keep channel costs minimum. For example, it has a 7.5 acre manufacturing plant in Coimbatore, where the basic assembly of the mattress is carried out. From here, it is transported to mini plants across Delhi and Pune, where the mattress is fabricated, firmed up, and supplied to nearby regions. With the North, West and South covered, it soon plans to enter West Bengal, so that all four frontiers are covered. “Another strategy we adopted to keep costs at a minimum is to automate the manufacturing process as much as possible. We currently have only 625 employees in the organisation,” cites Madhavan.
Into the Future
For Madhavan, innovation and innovation-driven growth is one step above creating a distinct product in the market. An innovation, he believes, is the placement of sleep experts in the Peps retail outlets. “A key advantage we have today is, thanks to Internet, customers are well-informed about what they want. Hence, when they walk into a store, they are guided by the experts to make the right purchase,” he states.
Not limiting the company’s growth to just manufacturing mattresses, Madhavan and his co-founders are also looking at a horizontal expansion into allied bedroom products such as bed linens, curtains, pillow covers, quilts and pillows. “We are likely to announce the launch by this mid-financial year,” he reveals.
While Peps was one of the early players to enter the spring mattress market in 2005, it is now hemmed in by other large players such as KurlOn and Springwell, and smaller players such as Bengaluru-based Sunday. Yet, in terms of revenues, the company has recorded a healthy growth of Rs. 165 crore last year, and is currently growing at a CAGR of 38 per cent. In terms of production, it produces 1.8 lakh mattresses a year, which it hopes to increase to 2.25 lakh by the end of the current financial year. “In terms of revenues we will be touching Rs. 225 crore in FY16,” states Madhavan.
Ask the mattress man about his five-year vision for the venture and pat comes the reply, “I believe in purpose more than vision. I want to ensure that Peps stands as the foremost brand for all things related to a good night’s sleep. If I am successful in growing my new vertical, I might even get into cots and other related products.”