Traditional Indian drinks brand Paper Boat launched in 2013 and has tasted success in a very short number of years—in the process carving out an entirely new segment in the beverages industry.
In this interview, Neeraj Kakkar who dreamt up the idea and Shripad Nadkarni, who converted it into a brand, talk about the brand philosophy they live by. Kakkar is the co-founder and CEO at Hector Beverages, the company behind the brand.
Nadkarni is an independent investor. He is co-founder of brand consultancy MarketGate and was marketing head of Coca-Cola India in an earlier stint. Kakkar too has worked at Coca-Cola. Edited excerpts:
How did you get the idea of Paper Boat?
Kakkar: We styled the company thinking that we will do a functional beverages (non-alcoholic beverages) revolution and at some stage we realized that the inspiration has been coming from the West, the functional beverages which have worked well there. However, what we truly liked ourselves was what is there in our history—the drinks which have been with us for centuries, where the recipes have been passed from one generation to another. We were in love with Aam-Panna and at some stage we started thinking, can we launch it as a brand in a packaged, hygienic form?
Shripad, when Neeraj came with the Idea, what gave you confidence that it can become a mega brand?
Nadkarni: Two things. One was the fact that the entire ethnic drinks category was just not present in India, till Paper Boat came. So it was a foray into a completely new category (and the opportunity to) do something pioneering there—that got me excited. The second thing was Neeraj himself. When we were in Coco-Cola together, he was one of the youngest and the brightest, which got reinforced when he came back from Wharton and met me and asked whether I could invest. We always invest in people—that’s my philosophy and that, I think, paid off.
Neeraj, normally start-ups start with an idea, but when they implement it in the marketplace many challenges come up and you have to change your strategy as you progress. Did you also have to pivot?
Kakkar: In the early stages when we went to Shripad to say that we want to launch traditional Indian beverages, he gave us two words—alive and authentic. Every single thing we have done since then—whether it is communication, packaging design, the recipe, the process which we use, the ingredients—we have used these two words.
Alive for us is contemporary, young, fashionable, cool. Authentic is innocent, pure, natural. It’s always a mix of these two things. The packaging and the stories are alive: the drinks and the ingredients are authentic. So these two words define our journey. They are two walls beyond which we could not go. So we didn’t have to pivot.
Shripad, you come from Coca-Cola. Brands like Coca-Cola spend billions of dollars in advertising to create customer preference. But a start-up is stressed for resources. What was the magic formula based on which Neeraj is able to get people to prefer his brand without spending so much money?
Nadkarni: I think brands like Paper Boat do well because they tap into something deep in the consumer’s psyche. At a mass level, the societal trend that we were tapping into was the fact that while materially Indians were improving a lot, somewhere there was a longing for simpler times. There is an authenticity of emotions as well, beyond the product. If you tap into a powerful human emotion you don’t need a lot of money, but you need consistent work and I think that is what has worked for Paper Boat.
Neeraj, you’ve worked in Coca-Cola too. Now Coca-Cola as a strategy has limited flavours in which it invests huge resources—there is a cola, a lemon, an orange. But in Paper Boat you violated what you learnt in Coca-Cola, you have a proliferation of flavours.
Kakkar: In the first couple of years when we started, it was unlearning a lot of what we had been taught. This is the thing you would learn more from technology companies.
In the traditional consumer goods company, there is always this thing about doing something and then keep perfecting it. Consumer feedback is important, but not as much. However, a technology company keeps adapting all the time. They keep taking feedback and keep improving. We, to a certain extent, learned it from a technology company to say, can we adapt, can we improve, can we change, all the time? Our recipes, the products which we put out in the market? That’s probably the difference between a new-age consumer goods company versus an old age consumer goods company.
Normally a start-up is stressed for resources, people, money, etc. So the easy way out is to outsource functions including manufacturing. But you’ve invested extensively in manufacturing.
Kakkar: When the words given to us are alive and authentic, and authentic is the keyword here—if that’s the promise you are making to your consumer, then you have to live up to it.
We have to ensure our drinks taste authentic. The ingredients, the recipe, the process...if that’s the core promise, then you have to have that in-house.
Paper Boat has a limited shelf life plus distribution is complicated in India. How did you overcome these twin nightmares?
Kakkar: We are still struggling to build our distribution. Right now we are in a fraction—5%—of the total outlets where Coke would be present. There is a long way to go. Increasing the distribution and reaching that 20X more number of outlets, would be the game plan for the next few years.
This is a challenge for a start-up company because mom and pop stores—it’s very difficult to go there, display your product and let the consumer experience it in the right (environment).
Shripad, as an expert who has cut his teeth in Coco-Cola where distribution is key to success, how do you respond to the challenge Paper Boat now offers you?
Nadkarni: Fundamentally, there has to be a very fine balance between pull and push, because beyond a point, especially for short shelf-life products, if the supply chain is not managed very, very narrowly—and I am learning this—it can be quite lethal for the business.
So yes there is no substitute for planning, planning, planning, changing, improving, learning—that cycle never ceases.
The opportunity in enormous. The brand can go everywhere in the country. The question is of managing the supply chain and also the price point with right options.
The ethnic drinks category has been created by you. How do you think a large company like Coca-Cola would be viewing a segment like Paper Boat?
Nadkarni: Often large companies tend to ignore upstarts, because they are too small. The problem arises when it reaches an inflection point and growth takes off. And then it is too late to react.
Two, often large companies cannot make a success of new categories such as these. The systems are geared towards high volume, high throughput. That is something in our favour.
Are you prepared to defend your turf when Coke and Pepsi enter it?
Kakkar: Our strength is innovation. We are faster, nimbler, we can take decisions quickly, and launch products—which we are doing—continuously. The system is designed to be innovation-friendly. I think that’s where our strength is.
What are the innovations?
Kakkar: First, it’s all these (drinks) variants. Earlier, none of these variants were made and packaged in a certain form. Packaging was an innovation. We are very proud of this cap. We think it is the best cap in the world.
We used to have the normal round cap. Then in an aircraft I saw a lady struggling to open that. And then she used her mouth to peel it. I felt really bad.
She’s my consumer and how can I let her go through this experience? Then we created this cap which can be opened with two fingers and it is user-friendly. It completes the shape (of the package) like a hat on this lady.
One thing which we are really proud of is—and this we learnt from Zara, the fashion company—introducing the small special editions which will be there on the shelf for a short time. These are festival drinks, appointment drinks. So for Holi, we launched thandai, for Ram Navmi we launch panakam, for Ramzan we launch sharbat and so on.
You make it only once or twice in a year and let it be there in the market for 15 days and move out. That creates a lot of excitement, gives consumers something new (and a feeling) that you are a part of their lives during the festivals. That as a way of doing business is pretty innovative. Nobody has done that in the normal food and beverage space.
What’s your portfolio strategy?
Kakkar: There are eight or nine core products which are your year-long, everywhere around the country kind of products, which is where we earn money. And then there are products that are in the regions. So we are launching solkadhi, which will be there primarily in the western region.
Then there are things which are launched at a particular time of the year like panakam and thandai. Certain things are launched for certain channels such as travel, which we don’t sell anywhere else.
So it is a mix. You are slicing and dicing the consumer segments in different ways and creating the smaller groups you want to serve.
All these recipes can be made in every single Indian household. So why do people come and pay you for them?
Kakkar: There are two parts to it: convenience and taste.
We get the right raw material. One of the things we are making is kanji which is traditionally made with purple carrots. Those have disappeared. Now we are the only company that is getting these carrots back to India.
We are getting the seeds from Turkey, sowing it in Ooty and then making the drink with the right ingredients which are no longer available on the shelf for the consumer to pick up.
Do you aspire for a time when Paper Boat would be available globally?
Kakkar: That’s a dream. In the end, every single time I see where it will go, I see a shelf in Sydney where there are drinks from all over the world under the Paper Boat brand name. Right now this is drinks and memories of India and someday it can be the drinks and memories of the world.
As a small company there are no resources right now by which we can think to become that. But we can always dream that one day I will have the drinks and memories of the world.
What will you have to do to make your dream fructify?
Kakkar: What we are doing is the right thing. We need to stay focused and do things which are right for the brand. Keep the authentic promise and make it alive, keep it contemporary, young, fashionable for the youth of today.
What do you think is the soul of Paper Boat that is striking a chord with everyone?
Nadkarni: The last two three times I called Neeraj, I found him once in Jalgaon, trying to find mangoes. The next time I called him he was in Los Angeles to source some anar, pomegranate. I think if authenticity is the core then that is the reason why he has set up his own manufacturing unit to protect that.
I think the relentless focus on doing whatever is right to deliver the authenticity is the spirit of Paper Boat.
Kakkar: We do not ripen our mangoes in ethylene chambers. We ripen them naturally and that takes a lot of labour. You keep turning it for 10-15 days or keep them covered so that the mangoes will ripen. All of us are focused on that. Every single person. The organization is focused on getting the best fruit for our products. This makes our products real, authentic products. And we do it for every single fruit that we take.
Rajesh Srivastava is a corporate consultant, entrepreneur and academic.
This abridged interview is part of a new series on entrepreneurs who are dismantling the old rules of business. Listen to the interview on www.foundingfuel.com.