BRICK by BRICK: Building Insurgent Brands

Creating New Categories & Enduring Brand Love

August 5, 2022
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55 Minutes
Listen Time
BRICK by BRICK: Building Insurgent Brands

Creating New Categories & Enduring Brand Love

55 Minutes
Listen Time
Creating New Categories & Enduring Brand Love
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Welcome to the third session of our series: 'BRICK by BRICK: Building Insurgent Brands' with Rohan Mirchandani, CEO & founder of Drums Food.Join us as we talk to the brightest minds across the world about building enduring consumer brands.

Transcript

HP: Good evening, everyone. Thank you for joiningus today. This is the the third episode of the BRICK by BRICK Series where wetalk to the brightest minds across the world on buildinginsurgent brands in a fundamentallystrong manner of BRICK by BRICK. The topicfor today is creating new categories and enduring customer love. We havewith us Rohan Mirchandani, co-founder andCEO of epigamia the brand thatcreated and owns the Greek yogurtcategory.

This should be a very interesting conversationas you know, especially in thecurrent environment, you know, if I even think ofour portfolio, there are a lot of brands foundersthat were digitallyfirst, you know who are consideringexpanding into the offline channel and you know,the online unit economics is comingunder stress, founderstry and push hard in the online channel. Soit should be good very good conversation with respectto the offline Channel and what it takesto to build that out as well.

Rohan, let's startoff with with the founding moment. Youwere an NRI and had absolutely noconnection to to greek yogurt. The oddswere like completely stacked up against you. Sohow did you identify Greek yogurtas the category you wanted to go afterand what gave you the conviction thatyou could pull that off.

RM:Yeah first again, thanks very for for havingme; obviously very excited to be part of anything DSGCPdoes. So I'm very much a memberof the family and always will be. I'll try togive a short answer even though there's a verylong story but I'll try to go as fast as I can.

So my sort of exposure to Indiastarted back when I was in B school. Right before B school, I had comeon a, like you rightfully stated, NRI visit.We used to come every December with my family to visitMumbai. I'd come for a wedding. I hatewhen the NRIs come now because they clog the traffic butthat's a different story for a different day. And Ihad met a local chef andsome other folks and startedmy foray into India and FNB bybeing an investor.

I invested in an ice creambrand called Hokey Pokey with some of you may be familiar with which wassort of the beginning of Drums Food. Again there was novision there was no business plan. It was purely a passion drivenside hustle side project. I hadno intent or desire to be in India. I just sort of invested avery small sum of money into an ice cream parlor, whichwas India's first Cold Stone concept thatyou mixed on the stone. Some of you may remember it. We launchedin Bandra and then I was back in theUnited States. I just came for a very short stint to launch it and then thought Iwould do this, you know over the weekends and and I wentto B School in these school. Istarted my career in banking and the intent was to sort ofgo back into Finance after B school. I wouldtake a call every maybe Saturday or Sunday to seewhat's going on in this maybe once or twice a month.

InB school, I took a class called marketing tothe Indian consumer where I came to India in2011 December and thatwas a bigpivotal point in my career and for Drums Food, I guess and Icame for two reasons. Actually one I came to take the class and secondI came tolook at what's happening with this ice cream parlor, which wasn't really making anymoney. It was a QSRconcept. I think we were very early at its time. So Itook this class andone of the guests lectures was a gentleman namedShripad Nadkarni, another one was who's today thehead of the CEO of Reliance retail and bothof them just sort of, you know talked about the next10 or 15 years. Shripadtalked about the next 25 years in India and how I rememberhim saying brands would be born that wouldstand the test of time andit was the beginning of modern trade just startingin India and and the sort ofconvergence of new brands andorganizing this very unorganisedmarket that existed and I hadthat eureka momentand I realized that there was something much bigger here.

The larger calling wasto build a consumer brand and and obviously wehad the ice cream business. Terribleunit economics but it was fantastic from abrand perspective way. It had a cult following; people were really comingout there.

So I reached out to Shripad then. Isaid Hey listen, you know, class ends everyone,rushes the guest speaker. So I rushed upthere and grabbed his business card. I sent him an email, went back to Philadelphia and saidHey listen, it was a fantastic lecture. Really love whatyou said, we've got this little ice cream parlor that's in Bandra, you know, if you're ever heard of it, so heresponded saying, of course I've heard of it. It's a fantastic product.If you don't mind me saying it's just a terrible terrible brand.So we ended up Skyping; back then Skypewas a big thing and I sort ofexplained to him. I said, I was really moved by what you said so he saidcome out.

Come to India and let's talk; meet me. SoI came. I skipped spring break my second year of Bschool, which is a big deal, by the way, and ended upcoming to Mumbai meeting him and hesaid look, I think you've got something, you know special in termsof what you know the space you're in but we look at the larger category. Secondly, he said I would love to help you but Iwill not and I'm not gonna be a consultant. I'mgonna be too expensive and I've just soldmy company to Publicis. So I'd love to be an investor if that'ssomething we could work on and third I'll only doany of this and be involved if you move to India and dothis full-time.

And so that was a big decision. It tookme some time to sort of figure that out and then in January2013 against sort of everybody's advicesaid you're out of your mind, you're gonna go to India with abusiness school degree to work on an ice creamparlor, you know made no sense, but I said, I think I have to do this for myself.So January 2013, I moved I took aone-way ticket and then I'll quickly sort of tell youthe story how it became to Greek yogurt.

So we had about three parlors when I moved and andI spent all my time in the parlors. I realized that the key,sort of, you know, insight I wouldget is from actually talking to people and consumers andone of the challenges we had being a premium ice cream brand ispeople, you know, we're not consuming us ona daily basis. The frequency was very low it was maybe twice a week ormaybe just two or three times a month. So Istarted, literally the first few months I lived andworked in our ice cream parlor, you know in Bandra. Literally spent all my time there having conversations speakingto consumers trying to understand what was sort ofmotivating them to not consume myself frequently.

A lot of the insights that we got was it's acheat meal, you know, we come here to celebrate and werealize, you know by being just to purelycheat meal celebration brand we hadto change focus; obviously fmcg was on the cards. Wejust sort of reshift our thinking but one of the things we realizethat premium segment, there's a lot of conversation going around healthier eating and healthier lifestyles and youknow, there's conversations around protein andjust sort of more, you know, clean food,clean eating and there weren't many options available. Andthat's where sort of just unlocked that value interms of a problem statement that there just weren't many options for healthy snacking and this came from three four months at the parlor talking to people. One of the thoughts for the business was to venture into a larger, you know, sort of category not just Ice Cream and Dairy and that's where you know looking at our supply chain and you know coming with with my co-founder Chef developing dairy sourcing, fruit sourcing. We decided that Greek yogurt, will be an excellent sort of product to launch given everything we've done and everything we've learned from consumers.

I also happen to be one of the first Chobani consumers when I was an undergrad on campus. So I was a huge fan of the brand and what they did, so culminating and all of this in 2015 we launched Epigamia. So 2015 was sort of the soft launch, in 2016 was the hard launch.

HP: Interesting and it's very interesting that you mentioned, you thought about a larger category whereas, you know, we consider epigamia as sort of a category creation story and you know, there are a lot of Founders in the portfolio and outside that are creating new categories in the country. So, you know when you started out, how did you think about you know, what the addressable Market could be and how big it could become because Greek yogurt was was non-existent when you started.

RM: Yeah, I mean forget even yogurt in its category. It wasn't was was insignificant. And obviously we were told by pretty much every VC that you know, the categories too small, whatever that means. I think the reality for us when you look at the category and market sizing, etc.

Number one. It was to look at the larger parent that we fall under so the larger parent we fell under was dairy, right? And today we're and by Dairy, I don't mean just milk dairy even today plant-based dairy is part of the larger parent, which is dairy. So we don't sell milk, you know nor will we probably will never sell just plain fresh milk. We have a lot of value added milk categories like almond milk and milkshake and we can talk about that later. But for us the idea was we fall in this larger parent and what that means. Let me sort of define what that means.

HP: Interesting and it's very interesting that you mentioned, you thought about a larger category whereas, you know, we consider epigamia as sort of a category creation story and you know, there are a lot of Founders in the portfolio and outside that are creating new categories in the country. So, you know when you started out, how did you think about you know, what the addressable Market could be and how big it could become because Greek yogurt was was non-existent when you started.

RM: Yeah, I mean forget even yogurt in its category. It wasn't was was insignificant. And obviously we were told by pretty much every VC that you know, the categories too small, whatever that means. I think the reality for us when you look at the category and market sizing, etc.

Number one. It was to look at the larger parent that we fall under so the larger parent we fell under was dairy, right? And today we're and by Dairy, I don't mean just milk dairy even today plant-based dairy is part of the larger parent, which is dairy. So we don't sell milk, you know nor will we probably will never sell just plain fresh milk. We have a lot of value added milk categories like almond milk and milkshake and we can talk about that later. But for us the idea was we fall in this larger parent and what that means. Let me sort of define what that means.

It means is the product profile was not new to consumers, right? So in essence the category was brand new. But if you look at Greek yogurt, it's you know, nothing more than you know, taking the plain old Gujarati shrikhand, removing the nuts lowering the sugar and you get Greek yogurt, right? If you look at our smoothies that we do they're nothing but Punjabi thick lassis flavored, you know, contemporized, modernized and and sort of made into the products that we have. So if you look at sort of our category, our sort of product portfolio, these aren't things that are sort of new if I may right.

So what do I mean my new, you know, if I look at something like an avocado it's something very new to the Indian palette, you know, it's something and by the way, there's a goodconsumption of avocado today, but it's something that consumers, you know, the Indian palette is not seeing. It's something new, so fermented dairy, if I may, is not necessarily new. The subcategory I would define that we play in was new was revolutionary. I think I could take the liberty of saying that if you look at it in that context that's where we were able to sort of look at, you know, defining what we thought were going to be our consumers who would sort of be the first early adopters and then who followed suit.

If I still remember when we were doing our trials for our mango Greek yogurt, I had to give it to some of our premium Hokey Pokey parlor consumers, but I also you know, we gave it to so many people including my help at home including my driver and all of them absolutely love the product.

Had I tried giving them avocado, they would have spit it out. So, and, not because of anything else. I remember my help at home saying it. Like she looked at me like what's so special about this product to come up with and that's where I think you know, something to think about when you think of larger categories, you know, what's the relevance that that you can create from a product perspective so that you know, so that consumers are just not it's not completely new. You can create the brand experience the sort of consumer experience but some relativity when it comes to what you know consumers want and I think that's where we were somewhat able to crack the code.

HP: Got it understood and you know, the other interesting thing was you know, you already had incumbents like Nestle, Amul and you know, you would price your product at a premium to to these incumbents. So, you know, if you were to go back and think through your first set of super users given it's an offline brand maybe your first hundred stores that eventually became super users. How did you get those early in roads? I was just saying what would your advice be for? You know founders that are looking for those, you know initial set of stores in the offline channel, that could become power users.

RM: So if I look at if I look at pricing we were very clear that you know, when we started we were Greek yogurt. Greek yogurt was three times the protein or regular yogurt, you know two and a half times the protein of an egg one egg. And so we really wanted to hone in and and demonstrate that this was a premium product now, unfortunately it comes in a cup. You have to scoop it out. So on the shelf it was put into the the dairy section along with the other yogurts and maybe some yogurt beverages that were out there. Um, but we really wanted to signal to the market that this was far superior product. And of course margins also had to make sense right unit economics have to make sense. So we were actually priced if I'm not mistaken almost 50 to 60% premium to whatever other products are out there.

Now some of the competition, you know at that time were either supply chain folks who just had excess milk, milk cooperatives with excess milk and we're just trying to do every product under the Sun so they weren't focused on on product there. It was just more supply chain, you know value addition game for them or they just thought they knew the Indian market.

But they were really focused on thinking that they were foreign brands and as long as they put their products on the shelf they would sell. So I think in some sense we got lucky because those are the only two strategies in the market. No one really focused on the product itself. And therefore, you know, if you looked at sort of our pricing strategy one our signal to the market, but two, I'm a huge believer and I think DSGCP is as well that India still is very much a value market. So if there's a value proposition to be had consumers will sort of go out there.

I think the story of Audi is a great one, you know Audi has a car has done so well in the Indian market in the premium super it luxury segment has gone head-to-head with the BMW, Mercedes. I mean every year the numbers change and if you look at the fundamentals of the vehicle, I mean, it's probably the best sort of engineering possible out there and people are willing to pay a premium, you know, because you don't want the service the car that often etc. There was some articles that came out about this a few years ago.

It wasn't just a plain yogurt. If you were trying to make it at home to deconstruct the Greek yogurt, you take milk you you ferment it, you make dahi at home-- you strain it. By the time you've strained it's two or three cups of Dahi for one Greek yogurt. Then you add fresh mangoes, fresh chocolate, and at the end of the day you were paying more to make it at home than you would to buy it from us. And that's where we believe we have had the signalling early on in our social media.


We talked about this; what it takes and that's where I think we were able to win early early on in terms of the pricing strategy. Later on it became really about generating trials. So we had to work on how to generate trials because our repeat rate was very high but early on that that sort of signalling helped and then for us the low-hanging consumers the part to the question, we're the health nuts, right?

We're the one the gym goers luckily for us. We did have a little bit of Advantage we had this database of ice cream consumers. It would only come once a month or every six months and we sort of, you know qualified them as saying they like ice cream but they don't want to eat it that often.

So we really reached out to them initially our offline sort of work. We work a lot with dietitians. We sponsored dietitian events. And then we did a lot of fitness events. We did work a lot with gyms and yoga studios to do sampling. We're really really honed in on who are early adopters would be and again this won't be the same for everybody but we knew exactly that there would be some sort of the fitness nuts and then from there we sort of focused in on where did they purchase? So obviously the easy answer was Nature's Basket, but that's a tough one, right? Because you have to pay your slotting fees and today they literally charge you an arm and leg to launch.

We also identified probably 50-60 super premium, you know independent GT stores in Mumbai. So that's how we started off. I think in our first year, in our distribution was maybe 150-200 stores, which is nothing but that's how we sort of started off in our first cohort of stores.

HP: And you know, as I said, there are a bunch of founders that are you know, trying to create new categories Etc. knowing what you know now, what would your advice be for these founders? You know what to focus on in the first, you know, maybe two years of that journey.

RM: Yeah, so I mean, I know it's very cliche but honestly living and dying by your consumer is end-all be all right. I'll give you some specific examples. I won't just leave it at a cliche statement. You know, I think what ends up happening is a couple of things one is we always solve for our own problems. We don't know if that problem is is everyone's problem or at least a larger cohort problem. So that's the first thing, that's really important to sort of understand. We loved our ice cream. We thought it was great. I still think it's one of the best ice creams ever made back then you know when we were sort of figuring out was it really a problem that we were trying to solve right? And we thought it was, but something we learned and then finally when we got the insights for yogurt, we found that there was something here, something missing that consumers really wanted.

What I mean by end all and be all in terms of living and dying where your consumer is even today, you know, whatever scale we're at. Instantly having conversations, you know, and literally what I mean by that is senior leadership on the phone hammering it out, talking to actual consumers that are paying rupees; not just your family and friends. Actually having those conversations and what you're hearing, you know is is this price really an issue, is there really too much sugar, is sugar really a concern? Is there something else? these are all and I'm obviously being very specific to food but this cuts across everything. is this really something that you're you're solving for? And then also when you're starting out, like as I mentioned, our journey sort of how we launched wasn't just saying let's go attack stores and launch you can go and find the fanciest and best store and the ones that do phenomenal numbers for others and put your products in those stores.

But how are they going to turn right? How are consumers gonna know they're there?

So the best way to start out is actually finding and especially for some of the D2C guys. I think you guys have a brilliant footprint starting out by seeing where your consumers are where they purchasing and going to those stores first, even if you have five or six consumers that are purchasing in a store it's enough to get those people to start talking about it. Word of Mouth spreads really fast as we know.

So honing in on where your consumers are where they purchase and looking at those cohort of stores first rather than going with assumptions that you know where our competitors are or where that where we think the premium stores are at least for the first two or three four or 500 stores. You know, I would I would really really hone in on where your consumers are having those conversations and my conversations. I mean literally picking up the phone and calling them, you know offering them a freebie to have a conversation with you and really understanding what their day looks like. You know, now people are back at work do they shop on the way home do their mothers shop for them, do their wives shop for them, their husbands shop for them, who does the purchasing and then really finding out how does it reach their home their household?

So these are things that are super important. We spend a lot of time on this early on and then identified where our first cohorts where and then once you have your first cohorts, you know, sampling etc. spending time in those stores building the footprint and expanding from there. So that would be sort of my very simple advice,


HP: And if I may add the other, you know recommendation that we always have for Founders, you know that our own category creation journeys is to focus on business sustainability as well because when the market opens up is anybody's guess, but just being there and having the staying power and shows that you're there to win the market whenever you know, you hit the inflection point.

This actually brings me to the next section that I wanted to cover, which is around sustainable business building and best practices in the offline channel. So, you know, just talking about fundamentals in the offline channel.

Can you talk us through the the metrics that you monitor? What what does your dashboard look like in terms of metrics that you monitor on a daily weekly and monthly basis.

RM: it's not rocket science. I mean, it's offline. I mean, others have been doing it for a while. I think we sort of you know tend to look at the data which is important for us. But you know basic sort of I'd say four, you know buckets of sort of metrics that we look at right?

So for us distribution metrics are very important and by distribution, I mean not just expanding distribution, but even within the distribution, you know throughputs within the store. So we're up to about 22 or 23,000 distribution points today, which is you know, far from our our goal of maybe a hundred fifty thousand that we're still, you know aiming towards. it's a little tougher for us because we're a cold chain product.

So, you know, it's not it's not it's a little more difficult for us to just sort of spray and then move on from there. So we have to sort of fundamentally develop distributors and make sure our supply chain is intact and make sure there's no compromising.

For us, you know just for distribution metrics. We've got the sort of straightforward sales executive productivity; this throughputs per store volume and our vehicle throughput. Because it's cold chain how many, you know, drops are our vehicles doing? how often are distributors servicing the stores? we change probably every every month or two months, depending on the stores performance. What portfolio should be in that store should it have for example, not every one of our stores has our plant-based products, right? It's a subset of our distribution. And then at what point do we want to try some of the premium products and some of the stores that have been faring well, so, you know, these are some of those those metrics in.

In terms of supply chain metrics, fill rates. In terms of working capital, looking at sort of days outstanding and then the distributor Roi. So for us distributer Roi is an interesting one and could be interesting for some of the folks on the call.

When we started our journey, you know, a lot of folks will tell you that, you know, it's probably makes a lot of sense to go direct first and I mean by direct I don't mean direct to consumer folks on here do something even one that's one layer up. We were sort of d2s, direct to stores which was a big big thing. You know, we were the the new ones that did this. I think ID was probably the first to start and then we did it as well ID fresh and and what was interesting for us why I love to tell you that it was it was some revolutionary model that we came up with. We frankly could not for the life of us get a distributor to carry our products. I mean I have sat in you know in in offices with my hands-folded begging distributors to try to carry our product and they said, you know, Danone has failed.

Miserably, you know, we have no interest in carrying your product. So we were literally forced to create our own coaching company because we really believed in what we were doing and then once we got scale

We realized that it made more sense now to sort of move to distributors because of working capital because of unit economics profitability, you know, a distributor carrying multiple products. We are only carrying our own so for us distributor economics becomes very important again, not something new, you know, most the offline guys do this but something we track very carefully because the last thing we want is for them to be disinterested and not reach the service levels. We need them to in terms of supply chain coaching integrity Etc.So I know I've rambled a couple of metrics here, but these are sort of the the baseline metrics that we follow.


HP: could you give some guidance, it obviously varies by category, in terms of what's like the whole standard when it comes to store throughput etc. What are the benchmarks that that you use internally?

RM: I think I think it's it's unfair to sort of categorize ours as others because again really category led. Um, so for example, salesforce productivity you want to be hitting 25 to 30 stores a day and then you're looking at a subset depending on which the store profiles. How many bills are they cutting how many, you know sort of orders in the making I mean, obviously you want 100% but you know, there's some leeway. So 80-90 percent depending on the beat that they're going on. I think that number should be probably higher if you're purely and offline like a large shelf life, no cold chain category player. It could be very different in terms of build cuts because for us we need one to two bill cuts a week not even want to do two to three actually because our shelf life is low. I remember back in our ice cream days. We didn't need more than one or two. Because you had 12 month shopping, and then for us we're all looking at freshness. So I think a lot of these sort of variables play in terms of our productivity, our throughputs are very high.

I don't have the exact numbers because again our distribution expansion is still unsteady, we can't just blitz into and another 20,000 stores overnight. We have to slowly and surely build these up. So our throughputs have to be good in order for us to keep expanding. So, if you look at ours, will probably tend to be higher than the most especially in the stores that we're in. We also have been lifestyle products. So, you know people aren't celebrating with Greek yogurt during Diwali and Christmas or when they score well on an exam. This is more of daily consumption product. But we will tend to be higher than other categories.


HP: Just talking about these metrics and you touched upon working capital as well, which is an important consideration and the offline channel. Do you have recommendations on you know any tools software that has helped you as you scale.


RM: We always used Salesforce automation from day one. I mean back then it was again when we started using it in sort of 15-16 with ice cream. I think it's not really about the option. It's about how you execute. So making sure that you're really on top of your game. I highly encourage the early folks starting out. Please do your own sales. Don't leave it to your Distributors. If you're going direct great. If not, right now let the Distributors do fulfillment and sort of supply chain for you. And obviously we'll talk about working capital in a second. I really encourage you to do your own sales even now we do our own sales

and I think for a long time we will it's really important to own that store had that relationship yourself and then more important most importantly collect the data, right? If you're doing your own sales, you can collect data getting third party data honestly is not going to be accurate and it's gonna be too late until you can do your analysis so really having that data early.

Also coming back to the working capital question; honestly when we started out, our days outstanding were like 95 days. Early on whether you like it or not-- you're new, retailers are not going to give you up front payment maybe the first bill you cut sure, but replenishment wise if you want to push they're not gonna do it. S

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