The makers of Paper Boat ethnic drinks and Top Ramen noodles on Wednesday announced a distribution tie-up for tier-II cities and rural pockets of India.
Under the partnership, Hector Beverages, which makes Paper Boat, will launch 200ml packs of its four most popular drinks—Aam Panna, Aam Ras, Jaljeera and Jamun Kala Khatta—which will be sold exclusively by Indo Nissin Foods.
Paper Boat drinks are currently available in Mumbai, the national capital region (NCR) centred on Delhi, Pune, Hyderabad, Kolkata, Bengaluru, Chennai and Lucknow.
Indo Nissin has close to 200,000 retail outlets across 200 cities.
The deal comes at a time when Hector Beverages, started in 2010 by former Coca-Cola employees Neeraj Kakkar and Neeraj Biyani, is looking to sell its drinks in over four dozen more cities and towns in a year.
The firms did not disclose the other terms of the partnership.
“We are excited to partner with a global leader such as Indo Nissin, whose distribution network will aid us in creating a national presence," Kakkar, chief executive officer of Hector Beverages, said. “This strategic partnership is aimed at giving consumers more access and options to buy the brand, which is something that every firm strives for."
Kakkar also praised Indo Nissin’s market knowledge and distribution network.
Indo Nissin has been distributing on its own in India since 2008 and is customizing its products to Indian tastes.
Hector Beverages is backed by Sequoia Capital, Footprint Ventures and N.R. Narayana Murthy’s Catamaran Ventures.
“We feel that there is a tremendous cultural fit between the two companies. We are innovators in the instant noodles category. Paper Boat is an innovator in the traditional beverages category," said Gautam Sharma, managing director, Indo Nissin Foods. “Moreover, the distribution channel being explored is quite in tandem. We already have a strong hold in distribution and good penetration, and Paper Boat intends to go the same way."
It remains to be seen whether the shoppers in smaller cities will pay a premium for Paper Boat drinks, especially since many of these drinks are made at home, an analyst said.
V.S. Kannan Sitaram, operating partner at Indian Equity Partners, which invests in consumer companies, said it makes sense for Hector to make use of the distribution network of Indo Nissin, though he did not see any obvious gain for the latter.
“For people in the rural markets or small towns, having a carbonated beverage is very aspirational as opposed to a drink such as a rasam, which would have no aspirational value. However, looking at the next level of towns (after the major metros), there is a large market to tap," he said.