BRICK by BRICK: Building Insurgent Brands

Cracking the Offline Code – The Veeba Story

February 1, 2023
|
60 Minutes
Listen Time
BRICK by BRICK: Building Insurgent Brands

Cracking the Offline Code – The Veeba Story

60 Minutes
Listen Time
Cracking the Offline Code – The Veeba Story
Also available on

Welcome to the eighth session of our series: 'BRICK by BRICK: Building Insurgent Brands'.Join us as we talk to the brightest minds across the world about building enduring consumer brands.

Veeba is an amazing case study of building a successful brand in a category (food) and a channel (offline) that is widely considered to be extremely difficult.

We're so excited to kickstart this year's #BrickbyBrick sessions with the 1st founder we partnered with, way back in 2012!

Viraj Bahl, in conversation with Hariharan Premkumar, will discuss the Story of Veeba and how he built an incredible brand and business in the offline space.

Tune in to hear more about:
• What should one get right in the first 2 years of offline
• Best practices in building and managing the offline sales organisation
• Balancing depth in a region and expansion to newer geographies
• New product development and product portfolio management
• Metrics to monitor offline business health

Transcript:

Hari  

Good evening, everyone. Thank you for joining us today on the first BRICK by BRICK episode of 2023. Where we talk to the brightest minds across the world on building insurgent brands, brick by brick. Today's is a very special session, we have a special founder, the first one that we backed at DSG, Viraj, founder of VRB Consumer Products. We've been part of the journey for over 10 years. And we will be discussing about the topic, which is essentially about Cracking the Offline Code. I know for a fact that a lot of digital first founders are figuring out the offline channel this year and should probably be in the list of their New Year's resolutions. So, Viraj I hope you know, we get to learn from you on the best practices in offline in this session. And thank you so much for joining us really appreciate it.

Viraj  

My pleasure. I always say this always anything for DSG. And I'm just putting a caveat, I don't know much I'm still learning. So I'll try and you know, share whatever I've learned along the way.

Hari  

We've learned a lot and just wanted to use this time to, you know, help others learn as well. And audience throughout the conversation, if you have any questions, please put them in the Q&A section, will take them towards the end of the session. So Viraj let's jump right in, we can go back to 2012. When we invested and I think that was December 2012 was when the company was incorporated. For the first four years you chose to focus on B2B and Horeca It was only after that you launch retail. So could you talk us through the reason for pursuing that strategy?

Viraj  

So you know, just before I answer that today Veeba-- 8% of our revenue comes from B2B and about 92% comes from our distribution business. When I started, Veeba at that time-- the company was called Veeba, the name change happened later. When I started Veeba, you know, I was very clear in my head that this company will one day be a distribution first organisation, I was very clear that distribution is where the money is, so to say in India. And with distribution, setting up is expensive. And, you know, it's challenging, it's expensive. I have bolded because of distribution I've grades because of distribution, honestly, distribution does this to you. So my thing was very simple that I had put a figure in my head and that figure at that time was company 100 crores plus, that is when we will enter retail not before that, because it's expensive. You know, you have to put feet on the ground, you have to put I mean, retail, how do we put it retail is what drives me, you know what the excitement of let's say Hari you go to a remote town in Kerala and you send me a picture over there Hey Viraj see I'm in Kerala in some, you know, unknown town and I saw your product. That is what gives me a lot of happiness. Even today, I have the childlike excitement when one of my friends or one of my colleagues goes to someplace where you're not expecting to see Veeba and you know, you see. So I was recently, gone somewhere beyond, you know, the mountains. And there's one small shop and that shop had, you know, 17-18 of products that that's what excites me. But yes, to answer your question, in my naivety, at that time, I thought barely B2B capture. Once I become big in B2B, I will, you know, go and capture retail. And young, cocky, stupid, whatever you call it, at that time, I realised that I thought that capturing b2b will be easy. You know, followed by two of the most toughest years of my life 2013-2014. And, at at many times, I thought, oh my God, what am I doing? You know, this is not, there's no B2B business coming. And then slowly, slowly, we got one business, you know, our first PO, I remember, but 10-11 months into the company I got from -- no 13-14 months into the company got from Domino's, 70 metric tonnes of their pizza sauce. And I remember thinking, you know, 70 metric tonnes, one month of production, now, we will survive, somehow we will survive, to put things into perspective that 70 metric tonnes is 5-10 minutes of production today, but at that time, it was, one month of production and, and it was like, wow, you know, we will now succeed. And slowly, slowly, you know, after Domino's, we got Pizza Hut, KFC and Taco Bell, Burger King. And I reached around the number of, 100 that I had set in my mind before entering retail, and that is when I decided, okay, now we're ready. Spoke to Deepak at that time -- you will be shocked to know, Deepak had a lot of time, he used to spend a lot of time with me. And, you know, I spent a lot of time in a research centre. On day one I had started working on the retail product list. We had started making the products, perfected the products, once the products were ready, did not have money to hire, you know, these graphic designers and stuff. So the first labels were actually drawn by my hand, and that is what we went out as labels, you know, in 2016-17.

Hari  

Yeah, that's when we launched retail. And you're now talking about, you know, again, just going back in time, and the first year, of retail launch, when you're about to launch retail, how did you think about, the initial targets that you set for yourself, which geographies were you you're present in? How did you go about identifying the initial products and initial set of stores? That'll be great to understand.

Viraj  

You know, I think now in hindsight, frankly, that is the biggest challenge for a company to decide where to go and what to take. I have my share of mistakes, and also Hari, it's not very easy for me to say that I had planned for this and that let me say this categorically, we were desperate. We needed money, we needed business and that is why the strategy was formed. So it was not that I was a genius to form the strategy. But now I think anybody who's listening to this my million dollar lesson is that you know, Delhi, Bombay, Bangalore is sexy everybody wants to be there, everybody wants to. When we entered in retail, I have that same thought, oh my God, you have a retailer to what margin you know how it's expensive and out of lack of money or out of desperation, we went outside first so we were a North based company at that time. And no, my understanding was, it was obvious that we will do north that was very obvious. So we start from north. And again, while I'm talking I also want to give perspective of where we are today. Today, we don't talk in number of shops that were present, in the first we're present in hundreds and thousands of shops, but today, when I talk to my sales team, our depth is now -- our discussions are more in number of towns. So, today, we are at least present in almost slightly short of 700 towns, much more than 100,000 shops. And that time the aim was not to have a national distribution footprint. The aim was not to be present in let's say 150,000 shops. At that time, the aim was that how can we do a sustainable business no matter how small it is? And because Delhi seemed expensive to me at that time -- in terms of hiring, in terms of distributor, in terms of freight everything, so I said let's try Punjab first, you know, let's try maybe Haryana first, and you know, the thing is, now, this is the biggest lesson of hindsight -- again not plan but the biggest lesson in hindsight, that retailer outside what nobody ever gave him the kind of importance they deserve. We went to them they gave us like, open arm welcome, they said yeah, please give your product and all of that. And because of that, we realise that, you know, later about a year later, we realise when we entered Delhi, the Delhi retailer was not as welcoming as the, you know, the upcountry retailer. So, whenever we went to South India, we did the same thing in South and then entered Bangalore and Chennai and Hyderabad we did the same thing in West and then entered Bombay or Ahmedabad or same thing in East. By the way East, I think we still have a long way to go East is my focus area for 2023. We have a long way to go in East I think we are only present in about 200 -- 50 towns it should be much more than that. But you know the problem that I see and I talk to a lot of startup founders and we are so entrapped by the Delhi Bombay Bangalore Pune a you know, the usual 10 that we never look beyond them and this suck you, they suck everything out of you. And by that time you're too tired. So I always say do Delhi but you know, I'm not saying go to Bicharpur and you know, I'm not saying go to Kodaikanal right now or something like that, or  Kodaikanal go to but don't go to Vellore or Madurai but in North, do Delhi but along with Delhi do the other two of the top 10. So that means do the Chandigarh and the Ludhiana also, right. Then when you go to the West don't only focus on Bombay and Pune do the Nagpur, it's a great city you know. So, one or two other cities that A, gives you proof of concept, and B, it is an easier revenue stream, easier PnL stream. Revenue obviously will be much higher from Delhi or Bombay, but the PnL is much better than the other places. This was not a planned lesson, but this was a lesson we realised one year into our journey that this is the way forward.

Hari  

got it. So, that's with respect to geography. So, you started, your suggestion is that people should start with one of the top cities and two satellite cities that are in the neighbourhood or whatever your bandwidth is. Yeah, but what about products? How did you decide on the initial products that you took to the stores? And what kind of stores were these was it modern trade or general trade?

Viraj  

you know, the product mix frankly, I was personally very, very clear that whatever we do, the brand Veeba should not come across as a me-too brand, and I was very very clear about that. So the product lists-- the you know, you have to understand that the sauce -- today Veeba probably is India's largest sauce company by volume we surely are. But at that time, you know, I was very scared of what if we look like a copycat of one of the big boys? And that really scared me always because in my mind Veeba was somewhere you know, on top and I always wanted that. So I always thought that what is not present in the retail shelf is what our entry point should be. So you know all our dressings, the low fat dressing, the low sugar dressings, that is what we entered with. Even today Hari when we've become off scale company and decided to launch ketchup. It takes a viva 75 years after independence to get India's first preservative free tomato ketchup. Now, you know some of the MNCs operating in India do give preservative ketchup to kids of US and Europe. So does that mean our kids are not good enough to get that same formulation? I understand it's expensive. I'm saying let the consumer choose give them an option of both preservative and non-preservative so whatever is you know, whatever. But even when we launched ketchup today, we launched it with a with a clear focus of not being me-too so we are going plus plus. And giving the consumer the choice of having a preservative free tomato ketchup or a sugar free tomato ketchup for that matter. I think we're the only Indian company manufacturing sugar free tomato ketchup, these kinds of things. So it was very, very clear. And Hari mate, you know, I'll be very very zero since it's most of the DSG family listening in, my biggest lesson my single biggest lesson and I swear I am going to be sharing a multimillion dollar lesson here. I don't even know if I should share or....let me share. So you know, my single biggest lesson is whenever we go to a retailer and we say 'sir, we bought a piece, you know, please give these 12 pieces.' And in in the next visit you know when it's after a week or two weeks only six gets sold. The retailer is thinking you know, like right now 50% of the stock is still there. Now, imagine a world where you go to the retailer, you give them six pieces, but next time all six have been sold or five have been sold. You know, the retailer suddenly thinks 'my God they've stocked out' if you win the retailer's confidence, and today, we have won that. The retailer trust us that will be making the right order we'll not be blocking his inventory, his space, his shelf space, unnecessarily. The biggest lesson I have learned is stock less, not more, because as founders, as young founders, we want you know what gives us -- what arouses us the most is when we go to a shelf and see this bigger face. But trust me, it's the worst thing you're doing for the brand because the retailer is seeing, you know, if you put or let's say dump 24 pieces, and seven are sold, that sends a very bad signal in the retailer's head. But if you put six and five are sold, so I'm seeing less sale -- five versus seven. But that is a much, much better signal. The only thing is you have to be a bit more patient. It takes maybe three to six months longer. But retailer only sees one thing, retailer does not see, you know, brand retailer sees shelf space, how much time is he blocking my shelf space, I will give him three months and I'll ask him to get lost. Ideally, if he sees your stock moving, and this is I think our single biggest secret sauce for a sauce company is that we realise this that the retailer wants movement. Let's put let's talk, let the six pieces get sold. We've had incidences when the retailer has asked for nine pieces and we'd say no, no. So let us give six only again but we'll see. And we've had retailers abusing me personally, I used to go shop to shop at one point in time. And here 'you guys don't know how to do business, there's a demand of 12 you only give us nine or six you know,' and we say 'sir sorry, next time we will give and blah blah, blah.' But that was the single biggest learning and we follow it till date, you know anything new that we launch. Anything new. We recently launched coconut water, touchwood, it's done really well. We have made sure that the retail demanded cape. We have made sure that the retail demands are coconut water. And it is not that the customer has picked up everything immediately, we make sure that we supply less and we make sure that the retailer demands so that I think has been my single biggest lesson or if I may say so, reason to be where we are today. No that's very interesting. And as you said very different from what we see where there's this temptation to go take up the whole shelf and build visibility all of that. Just focus on lesser supply and generating that retailer demand and carrying them along. That's very interesting. A related question, whereas again, you said you started with products, that won then the market, you know, at the beginning, so how did you win the initial set of stores? You know, was it better margins? Or what would your advice be? Veeba has never fought on money because all our honourable opposition were deep pocketed people. So, in my head was very clear that we can't fight on money, you know, there is no way we can fight on on money. I have always been very, very dilution sensitive. And so we've never raised large rounds ever. I mean, Veeba's never raised large rounds. So we've always been on a cash crunch kind of space. So never competed on margins. Yes, occasional schemes were given and I think Deepak will remember the story, one day I decided to give schemes. 8% scheme is a very commonly given scheme in retail. And I was very cockish and bullish okay, you know, cocky and bullish that this is way too raucous and everything. And our honourable opposition overnight, beat that scheme with a 16.67% scheme. And we were like wiped out, you know, so I remember going to, Deepak and Ash and I think joined the board at that time that guys, what is happening, you know, someone is actively bleeding money to kind of.... So I learned very early that there's no point fighting the money battle with the big boys. It was always on service, it was always on giving the lead. My focus has always been, Hari, how can we win the retailer. Only if we win the retailer, will we win the end customer because that is the biggest conduit so to say, between the company and the retailer. So always the focus has always been on retailer first kind of thing. Very honestly, retail is not sexier, it's a very boring, very patient, sometimes I'm so jealous, you know, of the other food companies that do these amazing DTC plans, and their websites are so cool. And you know, they're so nice, and I feel so jealous. But the thing is, retail is not sexy, retail takes time, retail takes patience, it will test you on every level. But if you succeed in GT in India, that is where the magic lies, and you can't earn money from modern trade, you can't earn money from, online, or, you know, whatever. The only place that a company earns money is GT. So I think GT deserves the patience I think, if you set out as investors, you guys should also not expect too much from the companies you invest in retail, if you ask for magic before two years. So you know, as you started by saying that many companies have their 2023 resolution of entering GT. The first time that you should expect them to start seeing positive results is 2024 June-July, That is the earliest you should expect them to, it will not get sold, you will have to pick it all back, and once you pick it, you know, it's a loss, write it off, blah, blah, blah. Environmentally handling that also is a challenge, because it's so much, how do you discard it, and all of that is also a challenge. So retail tests you, GT tests you. But to give you a perspective of our revenue, out of our revenue, roughly 70% comes from GT, 21-22% comes from modern trade and the remaining 78% comes from online, which includes our own website, which is like I'm ashamed to say next to nothing.

Hari  

I think, the message is important and it's loud and clear. Retail takes patience and and both investors and founders should should have the patience to wait it out and build it out the right way. But, for founders who are looking to win their initial set of stores, you said you didn't compete on margins, etc. What would your advice be in terms of how they should think about you know, winning the initial set of stores?

Viraj  

See winning the initial set of stores... I mean, I'm sorry but... begging and pleading, because you know, what happens is always remember in the initial set of stores, I will go myself, or you know, someone who's very senior will be going with me. What we have A is the knowledge of our product, B, the passion with which we sell our product to the retailer, no big boy company SO or SR will ever have the same passion, or the energy, or the zeal to kind of sell the product. So, we don't passion on day one itself, you know, because when we go and talk to the retailer, and we don't obviously, I mean, I know the world is brutal. And if you have to give a retailer 3% extra, 2% extra, please give by all means, but always give it in terms of schemes, never give it as a flat margin, because a flat margin can never be taken back. A scheme can always be taken back, I'll just keep counting once talking a scheme can always be taken back. And that, to me is the biggest mistake companies make because when we give, flat... So suppose Hari is a retailer, and I go to Hari and you know, let's say my normal margin to you would would have been 16% or 15%. What is the normal tendency for the retailer, okay boss you're startup 25% on, we will not give take any supplies from you. So you should, A obviously negotiate if he's asking for 25, the settlement will happen at 21, 22, 23, wherever. But that 23, if your base margin like ours, if it's 15, so the 8% should always be given in schemes. So it should always be... you know, whatever... eight plus one or twelve plus one scheme. Scheme over a period can be taken back. And obviously, that one piece, he sells it at MRP. So he gets his full 100 rupees if the MRP is 100. It never cost us 100. Right. So that also is money in our pocket. So you're giving them 100 rupees. The second thing is whatever display or whatever that you try and give to retailers, you should always try and give it in stock. So if you're giving a 2,000 rupee display, give 2,000 rupee stock. A it's more stock in the shelf, and B he has to earn his display. These are conversations that you have, more or less they agree. Some retailers I can name 10 right now who are very brutal, and they will not agree to anything. And that's the time you have to take a call that... okay, ego wins or you know, patience wins. It's okay. Let me be very honest, many times I have agreed okay sir, you're not agreeing, take 5% please keep this, like that. Try always to -- the extra margin to be in schemes. My go to weapon has always been CD, or 2% CD, at least you know what 2% CD like cash discount ensures money circulation. So you know, Hari,  in retail, it's a rule written in stone, that if you haven't gotten your money from your distribution network in 60 days, which means distributed to company or retail to distribute or whatever. If you've not got your money in 60 days, that money is not coming. So anybody who's listening in and saying that, you know, I have a 70 day outstanding from the market, you know, that money is not coming. Let's be very, very clear about that. It's not going to come.

Hari  

Right. One of the things you've also spoken about is your preference to work with smaller distributors and, avoid larger distributors as people think about distribution partners. Could you talk more on that?

Viraj  

Thank you, that's changing a bit now. We...

Hari  

Again this is for founders starting out. So it could be very different, but you can talk us through the evolution.

Viraj  

Starting out basically, my aim was always that we should be the breadwinner for the distributor, always. So if that time a distributor was doing a revenue of five lakhs a month. So five lakhs meant roughly he's going to earn 30-35,000 rupees from us. So if I wanted that guy still to be, we will never let him do other company work, we would actively stop them. Because we would say by all means do other companies work, but if you can't meet our investment, and we knew we were launching products all the time, if you can't meet our investment, we'll pull up so you would never let go. Let's say if, Hari, you launch a beverage brand tomorrow, and I have a five lakh distributor, it's very easy for you to come because you want to be in the same number of same shops as Veeba, you will come to my distributor. We always used to tell the distributor not to take Hari's work, because we want your investment only for us. If he insisted, we were very clear, by all means take Hari's work. But if you delay our investments, we are bringing in new launches, if you can't put the money for that, then we are very sorry, we'll move away. Now distributors never wanted that five lakh distributor, if we were responsible for 70-80% of his turnover, he would never want us to kind of get pissed off, so to say. And now the same thing we're doing with the 50-60 lakh distributor also. So my intention was not to go for the smallest. My intention was to be the big boy in the distributors portfolio. Because a distributor is very important, part of the whole puzzle. I know a lot of people say it's a dying breed and I don't think so at all. I think for the next 10 years, the distributor is not going. Yes, Reliance is doing some mega stuff. And yes, they will one day, you know, do replace a lot of distributors, but he's not going anywhere -- the relationships the distributors enjoys with shopkeepers. I mean, it's very difficult for a software to do that. So, I think the lesson is not to go to the smallest guy, but to be the biggest boy in the in your distributors portfolio, small or big, whatever it is.

Hari  

Right. The other question or conundrum that a lot of founders always grapple with is.. what is the right time or space at which they should expand to other geographies? We spoke about your recommendation to start with one city and to satellite markets. So, maybe you can take Veeba's example itself, you started primarily focusing on Delhi and to other towns in Punjab. So, what was the scale that you hit, what are the milestones that you hit before you decided to expand into other geographies?

Viraj  

So, my thing was very, very simple. And frankly, what I am about to say should be blindly the rule book for anybody who's entering retail right now. You know, it has to be a 10 city, 1,000 shop. So I call it proof of concept. If we can be successful in 10 cities and 1,000 shops, I mean you can debate it, 'Viraj don't be silly, it's too small and blah blah blah.' But I always say 10 cities 1,000 shops and frankly, yes, it's easier to do the top 10 Delhi, Bombay, Bangalore, Pune, Calcutta, Hyderabad Ahmedabad, Chandigarh, Ludhiana... but I'm saying 10 cities 1,000 shops. So, if you want to expand too fast then let the 10 cities be in only North and Wes. Or if you're a West based company let it be only West and South. But get this density and don't.... how do I put it... don't wait, I will only do these. The difference we did was that we went to the non metros first, but that 10 city, 1,000 shop concept, A, gives the founders so much confidence because if you succeed in only a Delhi Bombay or Bangalore you're never sure that.... India is not that, right. India's... those are only 10 cities the other 1,000 cities are the other 700 cities are not Delhi, Bombay, Bangalore. So you always have to be very, very clear that you want to make a company which is one day going to be national. And if it's going to go national then let it be a 10 city 1,000. So, 10 city 1,000 shops may let the 1,000 shops be a representation of the country as well. So which means there will be, you know 10% modern trade, 5% standalone modern trade, but the 70-80% has to be general trade. I'm not saying go to C or C minus be intelligent, you know, you should know where your product should go. But that 800-1,000 shop benchmark that is when you will know if that is being done successfully. Then, you know, it's very different from selling a tree and 100 rupee bottle of face cream or Southwest Chipotle, the Southwest report does not resemble I'm just saying of anything. It's very different to sell it. In let's say... I don't know, I don't want to take the name of any app, but any app or your own website, as opposed to selling it in general trade. It's a very different mindset. So if you're going to be an online first company, and your MRP is going to be 300 for X thing, please expect-- so Hari if you were to launch a sauce company tomorrow, and you price yourself 100 rupees over me, I will always undercut you. And yes, customers will try Hari's sauce for one time, maybe two, but then they'll say uh, if I'm giving value for money at 300 or 200, then there is no business for them to stay with you. 1 to 10% might always say okay, we like Hari's tastes better, but if I believe my sauces actually tasty we are giving value for money, there is no reason for you to ever price it over us. But yes, online first, some brands I have seen they have launched sauces, which are at a premium of almost 50 to 60% to us. Now, I think that is daft. Because when you plan that pricing, yes, you will do very well online, someone will see the sexy bottle and you know, sexy name and and but that is it, you will sell 6,000 bottles from online that particular month, bravo. But GT is a bit different. So if you have had an online presence, and you don't want to maybe be stupid enough to have a separate... not brand but separate line for GT. So there's no confusion between your MT, GT-- sorry, online GT.

Hari  

And you said to start with, 10 cities... any inputs on what is the scale that a company should get to in those markets before even thinking about other geographies.

Viraj  

Hari, my thing is profitability. A, it's not about scale. So for example, if I am selling, I don't know.... BD and you know, Munis obviously BD will have a different scale altogether than then I'm not sure.... that's the wrong question. So it is more of what is a successful-- so let's see if I get this 10...

Hari  

I'll rephrase it as more the milestones that they should hit before thinking.

Viraj  

What you need to look at is this 10 city model if it's successful, so for 10 cities, let us assume we will have roughly 30 sales offices, 2 ASMs and 1 sales manager. I am not talking about the CSO or Chief Sales Officer kind of a level guy right now. If the business coming from these 10 cities and 1,000 shops is able to sustain that. That to me is a successful end result. If it is not being able to... I say this again, I'm going to say this repeatedly that 18 months to wait.. for you to expect anything. But 18 months, by 18 months it's three shelf life so if your product shelf is six months, then at least three rotations. If your product shelf life is one year, then at least you know... give even in that scenario give 18 to 24 months. If your first product placement and let's say you got a two year shelf life, you're a personal care company, you kept in a beautiful store in -- in Delhi there's a store called Modern Bazaar, beautiful stores, you will never earn money out of that because they will ask you for... I don't know, your kidney and liver and all of that took place about it. But over there if you've kept a product and you know you've kept twelve pieces only two are sold, either the product is not right, I'm sorry, or your pricing is not right, there is no other thing. So you need to reevaluate it that time only. So 10 cities 1,000 this thing is a successful sales model, I am not expecting or even Veeba has never done it I mean that we put the entire company's prorata on that then. I'm saying to make this model successful we are, at the end of the day trying to expand our business, only if it meets the sales overhead of that.

Hari  

Fair enough, in 18 to 24 months, that's the framework. That's very interesting. Okay. Now I just want to spend some time on just the offline org structure. Don't worry, very basic questions. Because, for founders who are starting to think about venturing into offline, what would your advice be in terms of who their first critical hire should be? And what should be the target for that person and the first 18 to 24 months?

Viraj  

See the first hire now.. Joe, the sales team, I mean, sales team is like an army. So it is always important to hire. Let's see even if you're doing one city, hire four people. A, peer pressure works really well in sales. There is let's say if it's Delhi or let's say Bombay, you know, South Bombay, North Bombay, have two people in South, people in North, so that they can compare notes. There is a healthy competition between South Bombay and North Bombay. So ideally if it's one city, depending on the city, if it's let's say Bombay, the bare minimum is four sales officers and one ASM. But I kid you not that if the founder is not going to go in and dirty his hands there's no point. I don't think any founder will not do it every founder will do it you know. So, for four SOs one ASM, no senior people no RSMs, no ZSMs, no NSMs, regional sales manager, zonal heads, or national sales heads right now. You need to be the RSM because you need real time information coming to you, you definitely need to listen to your SOs because they will be the first point of feedback, they will be telling you sir whatever it is. So four people and when you've entered five cities and you have five ASMs with you know... a Bombay will need four but a Pune will need only two to begin with,  that is the time you bring in an RSM. So not before that so five cities, a guy, my strong recommendation would be to.. I am guilty of being RSM for far longer than I should have been. But five cities that you need to be the sales head definitely. Because you will be changing on a day to day basis.

Hari  

And your advice on best incentive structures for salespeople? Sales targets versus collections, etc.

Viraj  

You know, shockingly, Hari, till date Veeba doesn't have a sales incentive programme till date. Never had it. We don't have it even now. It is very strange. I think we're the only anomaly in FMCG who doesn't. Because, to me, sales incentives lead to a lot of dumping in retail. Now, you can have incentives for sales, but you cannot have incentives for... I mean, if the stock is put, let's imagine I'm a guy earning 20,000 rupees and then you come and tell me that you can earn 5,000 extra by putting in stock -- be sure I will put in stock, but is that converting into tertiary sales, is that converting into that? So that scares me to be honest. So I am a bit scared of incentives, we have not given incentives. In fact strangely, so this is a very funny story. Last month is the first time we gave sales incentive on a new product launch, in the last 9-10 years of Veeba.

Hari  

What prompted that change in thought process?

Viraj  

We were launching pasta under our second brand Earthmade, and pasta's a commodity so I wanted it wide and fast. So I said KR sales and you know one year plus shelf life. So I said sales seem good, they do, but it was only a launch incentive scheme. So it was only for the first two months and then we pulled back next one.

Hari  

Interesting because completely as you said probably the only FMCG brand do this kind of... so how do you manage to... you know sales people that are used to incentives, etc and other organisations, when you hire them.. Would be useful to double click and explain the rationale and how you manage to set expectations with the people you hire?

Viraj  

So for me, I think it's at the end of the day, what is stronger than a 2,000, or a 4,000 rupee incentive is a army feeling, it's a bond between two people, it's a bond between the organisation and the person. At the end of the day, your job is to sell. So if my job is to sell then my job is -- we might, by the way, give incentives at the senior level, for certain things, we might there might be some incentive or something like that. But at the end of the day, if your job is.. you've been hired to sell a product, you can't say 'Okay boss...' So I it does not really gel well, with my, my thought process. And the second thing is, we have a very nice, admiration programme, we have a very nice recognition programme. We have three closings in a month there, I mean, so you can imagine. So we close our month 10, 20 and 30th every month, which also means three times the amount of work for me or anybody else in the sales team, but three closings can benefit. If let's say, Hari is our SO, Hari can't come to me on 25th of any month and say boss, I screwed up, we will know that he's going up on 10th, 20th or 30th right? We get to know where he is. And then we can either pull up or do whatever we are doing so at the end of the day sales runs on targets, right. Everything is target, everything is number. I mean everything is numbered, you know 10th, 20th, 30th you have to deliver, you have to do this thing. The other thing is the word that I hate and you know it's a joke, if you want to piss off Viraj, you tell him is our sales in primary. I don't... I dislike the word. The only time I see my primary sales is because investors go through my primary sale report, so you have to give it to them. So you know, that's the only time I see the primary sales because I only and only talk in secondary sales because that's the only sales which matters.

Hari  

Got it. Very interesting. There's an interesting question from the audience. I'm just going to bring it in because it's on topic. The question is 'people struggle with hiring overall, how do you hire for offline? Is it those who hustle but don't have connects, or those with connects but don't hustle?'

Viraj  

For me, very honestly connects will come first in retail. As a founder, I look for two things: A that person should not be ashamed of asking for money, that is I think number one. Without getting into retails... Hari you are aware of what are working capital cycle is like. So, A you should not be ashamed of asking for money, that is number one. Number two, my thing earlier I used to ask a chap if you're a salesperson and let's say you know West Delhi, name the top 10 retailers, do you have their phone numbers, do you know their manager's phone numbers, things like that. If they have a pleasing personality, they know 10 shops by name in their area, I think that is important. Because if he has a pleasing personality he can go and, you know... suck up to the retailer, that's what's needed. But hustling? Hustling will put 12 bottles, 18 bottles but we don't want that, you know? And sometimes the hustlers are.... Can I take a step back and say something very off topic? I think hustle is a bad word. I think hustle, the word hustle -- you know, shows like Shark Tank made these words popular and stuff like that. A founder should not be a hustler. You can only and should only be a hustler for the first two years of your life as a founder. After that if you're a hustler, you will honestly and surely come in the way of your organisation. There is no doubt in my head, it is easier to do than getting it done. But there is only so much you can do. So being a hustler for the first year, be a hustler for the second year, maybe third year also. But after that we are organised, let people do, and stay the f- out of their way. Organise vision, look at the bigger picture. But hustling, you know this, so many founders need to hustle? I mean, you can't do everything yourself and hustling is okay for some time., and after that you have to stop hustling. And how do you hire people... Today, we are lucky a lot of people are willing to join us. We as you know, one the best Employer of the Year award, we were number one. Number two was Cadbury, number three was General Mills, in our category 2,000 to 5,000 employees. But earlier, barring sleeping with them, I have taken them out for coffee, dinner, lunch, breakfast, I have done everything to make people join us. Convinced them, backed them.

Hari  

Maybe not having an incentive structure also played a part in that. No conversation with you is complete without speaking about products, I saved it for the last so that we don't go overboard with it. So, you know, would be useful to talk about new product development, how would you encourage founders to think about new product development in terms of how far out they should plan for, and just general advice on on how to approach it.

Viraj  

I think genuinely frankly, you know, feel that the founders gut is the most important thing in product launches. I mean, who would have ever thought that product like, Southwest Chipotle is needed, or not, for that matter, Sleepy Owl coffee is needed, or Arata personal care products are needed. It is from the gut of the founder. I think my two lessons here is: A, don't be overly attached to your product. So if you see a long tail, and you need to chop it off, please do chop it off. B, I think you should know your product really well. If you don't know the product inside out, I think it's very difficult to sell the product. So even if you're not the person making it, or the brain formulating the product, you should know the product really well. It looks really weird when a founder goes for a meeting, and you know, I have this anti-aging cream, I ask what is the ingredient which helps anti-aging and you don't know the answer for that. So you should really know your product inside out before trying to sell it. And I think nothing like the founders gut, to be honest. And very honestly, I listened to every one with with such open ears, I can tell you, you don't know where a good idea comes from. And when it does, you just grab onto it and you know, make it your own one day. But I listen with a very, very open ears. And one of the important points you mentioned is also be clinical about chopping off products that don't work. So how in an offline setting, how do you go about,  determining whether to double down on a new product versus chopping it off? So basically, returns. So if the product is coming back, let's say, if our company's overall return percentage, our return percentage currently is about 3%, slightly less than 3%. I'm not saying it's good, it's high. But let's say a Delhi, or Bombay, or Pune, or our top 200 cities will give us 0.5% return, our return comes as high as 20%-25% when you open a new town new city. Because we have to test the water, we have to give it to 20 shops to see if 10 can keep it or not. So that is why I was here. You know none of our honourable opposition ever expanded the distribution, we are expanding the distribution. So because of that the new towns and the new products give us a lot of replacement. But let us say, a new product after 24 months -- that is four cycles in my case, or three to four cycles in my case is giving more than 10% replacement. More often than not, it means you need to remove it from the shelf. Very difficult thing to do. But I think, then you need to remove it.

Hari  

Right. And, you know, staying on products that didn't work, we've launched ketchup recently, but you also tried launching it long back, which didn't work. And it was a large category, it's very obvious as to why you wanted to enter that category. But what are your lessons from from that failure?

Viraj  

So, you shouldn't bite more than you can chew. So I launched ketchup long before I should have entered ketchup, I was naive. I thought you know, a little bit of success went to my head and I thought okay, let me take on the big boys. Now when we have relaunched, being a big boy today, in this industry, I'm not saying we are like a very large company or anything, but being a big boy today, even today, I'm very skeptical of the way we are launching ketchup and I'm very careful of how we launching. So at that time now, I think back I actually laugh at myself what was I even thinking you know. But horrible packaging, horrible this thing you know, so... and the price points are much higher, you can't go and take on a Maggi or Kissan and price yourself 50 rupees per bottle higher. Yes, you're Veeba you can charge 3 rupees per bottle premium because you think in your head, you're a premium brand. But I think I did everything wrong in the first launch, I am hoping not to repeat those mistakes. And, you know, the big boys are also brutal, they if they see you disturbing them, they also take... like how parents would take a slipper to your bottom, they do that also at times, you have to be ready for it. And....

Hari  

That's useful. Sorry, please complete

Viraj  

I'm saying it's a combination of the right product and also at the right time. So without taking the name of this product, we've got this amazing product line ready with us. I think when Veeba can launch that product that will be our coming of age launch, you know. Deepak has tried it and that product has been lying ready with us for the last one year or so. I'm scared of launching that product. I don't think we'll be ready for the next year or two. But if we can launch that product and if we are successful at that product, you know, then I can say 'Okay, you achieved something'. So the product, and the timing, and whether you can do justice to such a big categories are important.

Hari  

So I just saw the time so let me just jump to the audience questions. We'll take the first one that says "When you launch Veeba retail your bottle was uniquely shaped, and you had sweet onion, other dressings. Did it take time to gain market acceptance?"

Viraj  

Yeah, of course. I mean, sweet onion continues to be one of our top sellers today but yeah, took time. So at that time, what I used to do, I used to train the tasters myself who's standing in every shop and make them taste. I used to explain to them, so when they're selling let's say Maggi noodle or Bournvita, they've been consuming it, they know. So I used to train the -- we used to call them taste consultants. I used to train the taste consultants and they used to -- so I remember taking a class of these sales consultants and I was saying you do Chipotle and suddenly one guy said Chipotle? 'm not saying anything else. So that is how unknown Chipotle and sweet onion were at that time. But the sweet onion bottle continues to be the bottle that we launched it in. We did try and change it once but again market, market holders and the customer wants it in the same bottle. So it's in the same bottle. So yeah, that bottle we retain and that product is still one of our top sellers.

Hari  

Perfect. Whereas we may just overshoot by a couple of minutes, hope that's all right. Perfect. Thank you. The next one is on the right time to go big bang in ATL.

Viraj  

So you know the right time to go big bang in ATL is I think never. You need to -- again you know retail is not sexy, retail is... I have made the mistake of IPL final launch, SRK all of that. By the way, you know Moms Co, Malika, she still owes me a lunch, she's very cheap about it --  she's not giving that lunch to me. But she was launching ATL -- I hope she's listening also (chuckle). She was launching ATL and she said "you know, we are launching ATL and the revenue will jump this much, by this much, by this," but I said "no Malika it will not jump, it will take some time." So ATL will build your brand, it will not give sale the next day. It doesn't work like that. Trust me on this I can give it on a stamp paper, it doesn't work like that. What it does really well is in a cluttered market, it helps you break the clutter, Bollywood really helps but you need to be patient. So if you do a campaign in June, to expect that by July and August sales will be like this, it won't happen. But yes your Jan-Feb sales might start showing increase because when the customer goes she will -- you know at that time she's in the aisle and that time she'll remember "I saw this Veeba ad" and you know it takes time. So ATL works really well for brands like Pepsi and Coke in the summers when they're trying to grab each other's market share at a war footing. It does really well for Fevicol, but we never gone and buy Fevicol because we saw the ad, we always -- you know they keep reinforcing the brand. But ATL does not give revenue overnight and honestly I've made that mistake so please, if you can learn.

Hari  

We've seen this multiple times. So glad that you clarified that. The next one is interesting, is selling beverages more difficult than dips and sauces?

Viraj  

Normally, I mean see we just started selling beverage. We've just introduced three beverages, coconut, oat milk and almond milk. So let's leave oat and almond. Coconut water. We've recently launched India's first sugar free and 100% -- I'm very proud of this, not India first, it's a world first, organic coconut water, zero sugar, zero preservatives. Now the beauty of beverage as opposed to dip or sauce, when you open a bottle of mayonnaise, it is in your fridge for at least a month to 45 days. The sale period is so slow and some houses, a dressing bottle might even last for four months, or sometimes you actually throw the bottle to the shelf life has finished but there's still some sauce left. But the beauty in beverages is that you open the bottle, you drink it, and you're ready for your next one. So the sale is much faster. And that is the beauty of beverage. And again, I'm trying to get my hands dirty with beverage, but I'm loving the fact that you can give a shop 48 pieces today, and the shop will ask for 48 pieces tomorrow also. So that is the beauty and over there we are seeing impulse buying really helping, on the counter scheme really helping. But all the schemes are bulk purchase, so we will not give you a scheme on one bottle, but we'll give you a scheme on six bottles kind of thing.

Hari  

Right now that's an interesting take on beverages, which is widely at least the collective wisdom is it's a difficult category to crack given low gross margins, etc. But so refreshing. 

Viraj  

By the way, we are in high gross margin product, right? So we don't know anything about the low gross margin. You know, our coconut water is 65 rupees, it's expensive.

Hari  

Now that's true. The next question I think we have a QSR founder who was disappointed that you chose to walk away from QSRs, why did you choose to walk away from it?

Viraj  

No, no. By the way, not chosen to -- we are still the largest suppliers to Domino's, still the largest suppliers to Burger King. In fact, today I got an email that we are a tier one supplier from Yum now. But we are very, very, very passionate about... the only thing is what was 100% of the company's revenue in absolute terms in 2016. In absolute terms, it's still the same, as a percentage it's dropping but as the absolute term... I mean, I love QSR. The thrill of going to a Burger King and still getting my Veeba sachet, you know it still puts a smile on my face. So very, very passionate about that.

Hari  

The next question interestingly is on B2B clients, what are the various ways to retain a B2B client for beverage brands? I think it's for any category for that matter.

Viraj  

I think number one is reliability. What happens is, for any B2B brand, you have to realise that you're such a small part of the entire universe, you know, supplying a source or supplying... having been a failed restaurateur myself, you realise later that you're such a small part. And even if that part, you cannot make stress free, then shame on you, you know. So for a beverage player, or... so if I have ordered for let's say, 24 bottles of coconut water, and for that, I have to call up thrice or, have one guy or something nagging in my head. So number one is reliability. It's a given that your product and price is right, if your product and price is not right, you're never going to enter. So once you've entered the number one thing is reliability. And the number two thing is innovation. So if you are their innovation partner for anything new, because how QSR works in India is every quarter they launch a new menu. Which is their NPD department launches a new menu every quarter, that is how they -- so if you can be their innovation partner. So that is what... I mean we've launched so many beverages for so many QSR. For example our chefs would go in, if you can pitch a let's say a Valentine burger, with a Valentine beverage, with a Valentine dessert, then we'll go and pitch everything. So that dessert might have our strawberry sauce, the beverage might be a strawberry cooler, or a decadent chocolate with strawberry, and the bourbon will be a Tabasco strawberry dressing or something like that. But you know, innovation and reliability after you're in there.

Hari  

I think the other question is, your take on listing fees.

Viraj  

Hate it. Don't have a choice about it. Now, I think listing fees is something which is when they need you, without taking the chain's name, one chain gave us a listing fees of 1.7 crores, estimate. So, we went to them and said 'okay, sir, we don't have 1.7 crores to give'. This is 2017 or so, you know, so they said 'a bit unfair bye bye, you know, sorry, we can't do anything about it'. Now, the interesting thing is their store managers also have a KRA, whether they have things with the competition or nearby shops have or not. So the same chain, we listed a year later, that 1.7 crores you could negotiate it down to under 25 lakhs, and we got listed. So even, you keep at it, you keep begging them, you keep pleading with them, sir please, please, please, but at the same time, what is very important is that you become available all around their stores. And when their managers see that, your brand is available in a GT next to them or it's available, that really helps. Then, if they're kind enough, then you know, they will kind of negotiate down.

Hari  

I think the last one is a generic question on go to market for offline. I think we touched upon various aspects, but first two years of offline journey for a new brand, any pitfalls that founders should watch out for that we've not covered, so far?

Viraj  

Everything is a pitfall, it's the most difficult thing to do the first tBwo years. But I think whenever it all becomes too much now, I always say break it up, you know, break it into clusters of five shops, ten shops. But be very, very hands on for the first 18-24 months and that is the most important thing. Be in the market, see the shops, what the customer is saying, what the retailer is saying. A lot of times we focus on what the customer is saying, but not focus on what the retailer is saying. So, always listen to the retailer. Break it down, it becomes very, very difficult there. I mean, even today, sometimes I just, you know, I feel like just ripping my head apart. When will this ever stop? So what works for me is just kind of, you know, breaking it in small pockets, seeing if something is working, why is it working. Maybe I've learned something here and I can... So go to market strategy if you have the money then nothing like a combination of print and online, digital marketing print along with your retail entry. If you don't have the money, then, as much as BTL, you should have a decent budget to decorate your shelf spaces, you should have a decent budget to give these things you think are so trivial, but they all matter. A pad for the retailer, or a pen for the retailer, just know, if it's your Veeba's diary, where he's cutting, the bill he's always seeing that, you know, Veeba written over there. Small, small things... GTM strategy should have a significant 10, 20, 25% spend going towards BTL work, you know. Both retail decoration, danglers posters, you will always hear salespeople saying... because it's difficult to hang danglers and put posters, it's not easy for them. But trust me danglers and posters work. So you know, danglers, posters, display strips, shelf strips work really well. Along with that just be present.

Hari  

Present and patient, and start with focus.

Viraj  

I mean, out of all the negative things I've said, let me just add that, if you get GT right, trust me, it's the most beautiful place to be in. And I still haven't got it right, by the way.

Hari  

No, but great, thanks a lot, Virajs. Finally, my closing question for those listening. If they want to become Viraj, what do you think are the, you know, important personality traits that they should have to get?

Viraj  

I don't think I'm ready to work half as successful as to answer this question. And very, very honestly, I'm so jealous of so many of your founders. I keep you know, stalking them online to see what they're doing. So I'm learning a lot. But the my -- I'm not saying to be like that, but my biggest lesson has been very honestly, patience. I'm not a superstar, I am very clear about that. It is not about being the loudest noise on TV or panels and stuff like that. I think the brand should be bigger than me. I think patience is very, very important. It takes time to build a brand. I'm still at it after so many years. And I don't think I'm where I want it to be, I've not reached there, so still working hard. And if you can find something every day to keep yourself passionate about... because you're doing the same thing day in day out, day in day out. So boring is sexy to me. You know, boring is when you go to office and there's no fire that one day, it's a good day, right? It's so boring is sexy be at, if you're in a mentally happy place, and you go to office and you have a smile most of the day, it's a good day. If you have a frown and you're sitting like this and nobody wants to enter your office. If nobody wants to enter your office, then obviously nobody's going to give you the good or the bad, then how will you... so, so yeah.

Hari  

That was fantastic. Patience, love the emphasis on patience, that's our favourite word as well. And yeah, nothing like work that feels like play. But thank you so much. We've added another 15 minutes. So really appreciate the time, great insights, and more importantly, very tactical inputs as well. So thank you so much for that. And thanks everyone for joining in.

Viraj  

Thank you, everyone. Thanks for joining and thanks Hari.

Hari  

Thank you. Bye.

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