Monginis keeps up with changing affordability

Monginis keeps up with changing affordability

By Subir Roy, Business Standard, Kolkata,
August 28, 2013

Monginis does offer higher-value baked items but as a brand it does not seek to position itself as premium.

The numerous Monginis cake shops that dot Kolkata are distinctive in a number of ways. First, the brand straddles two defining aspects of the city's personality - a liking for bits of western lifestyle inherited from its colonial past and a need for what is affordable given its present economic condition. Hence, the attempt to position Monginis as a "modernized bhadralok brand, more Bengali than international or premium".

Second, behind the facade the business is organised in an unusual way. The brand Monginis is owned by a section of the Mumbai based Khorakiwala clan (other sections run businesses like Wockhardt and Akbarallys) and is used by the business in eastern India for a fee. So ironically, the brand is rather strong where it is not owned by those who run it. Conversely, a customer can pick up a Monginis product in say, western India, only to realise that it is not what he is used to in eastern India.

Monginis' business in eastern India is run through two separate operations -- industrial (long-life products) and retail (the fresh stuff you get in the shops). While Taizoon Khorakiwala is the majority partner, Arnab Basu (the two are long-term associates) is the director who set up the business in eastern India in 1991. Today, Monginis in eastern India has a turnover of above Rs 300 crore, up from Rs 8 crore in 1997 when Khorakiwala came in.

The two operations together employ around 2,000 and, as Khorakiwala puts it, "earn an EBIT margin in the high teens. We used to be much cheaper but believe in protecting our margins." Adds Basu, "We don't make the same margin in all products and a large selling item which earns a low margin can be great for the brand" and even pull in the high-value-high margin clientele.

In the bakery business in eastern India, Monginis claims a market share of 40 per cent in the retail segment and a quarter in the industrial segment. Among brands popular with the middle class, Monginis shares the same space as Kathleen's and Sugar & Spice. Khorakiwala and Basu have another, somewhat novel, way of describing their market share. "We pay as much taxes as the other bakery players in the state put together and there was a time when we paid nearly all the taxes coming from the bakery business in the state." Khorakiwala has a thing about paying taxes and claims it makes as much business sense as maintaining multiple books of accounts has its own costs. "We are very un-Indian in some ways."

What sets Monjinis apart in eastern India is the value-for-money, fresh bakery products it delivers to the customer. "Our pricing is similar to our competitors but in retail, with 140 outlets and three factories serving Kolkata, we score on freshness as we deliver twice a day and take back unsolds. We offer good value for money and score on quality. We are a middle-class bakery serving first-class products and we, the owners, consume and serve our own products at internal functions and meetings. We are the Marutis of the bakery world," asserts Khorakiwala. Basu says, "Our USP is value for money and we want to keep it that way."

Monginis' pursuit of its brand attributes, while making money is best illustrated by the story of its Rs-3 cupcake. It was introduced in 2000 and still sells at that price but a lot has happened in between. Thirteen years ago, most of the equivalent local products were priced at Rs 2.50 and Monginis actually offered a far-better packaged product with a longer shelf life which was costlier and aspirational. With it, Monginis introduced the unique format of the single-serve packed cake, which was Khorakiwala's idea.

In a few years' time there were many competitors offering the same 35-gm product, a margin war started and the Rs-3 cake became a commodity. To preserve margins, Monginis made it first into a 25-gm product, which is now 20 gm. Realising that the cupcake was essentially an entry-point for customers, in 2006, it came up with the Rs-5 cupcake with cream injection and thereafter, the Rs-7 'choco delight' cupcake. Today the Rs 5-7 range sells 300,000 pieces daily and the Rs-3 cake 30,000. To the customer with rising incomes, the equivalent of the the Rs 3 cupcake of 13 years ago is a Rs 5-7 cupcake, capturing the crux of Monginis' success over the years.

It also offers higher value pastries and cakes in competition with the boutique chains, products which it feels are no less in terms of quality, but as a brand it does not seek to position itself next to them. Monginis' higher value cookies, branded as "Fresh Bakes" sell more in a retail chain like Spencer's than in Monginis' own shops. Looking into the future, Basu says they are trying to set up a cold chain -- from manufacturing to shop shelf -- for pastries, gateau and other fresh-cream stuff.

How does Monginis manage to deliver good value while making good money? Here is paraphrasing what Khorakiwala said over a long freewheeling conversation: "We have a good team at the top which has been with us for 20 years. So we have retained the knowledge base which would not have happened if there was high turnover. There is a lot of integrity in our organisation and also a culture of trusting. Our suppliers are our partners and we don't like to change them too often.

"We buy the best equipment, never economise on it. This gives us better yield. We also design some of our own machinery which costs a fraction of similar imported ones. We have carefully located the manufacturing facilities to facilitate delivery and now put GPS sensors on all our delivery vans to track them and were the first to introduce refrigerated vans.

"As for our employees, we have never had a strike. We trust our workers, recruit them locally from around our factories, give them security. Indians are some of the easiest people to deal with. They are so exploited that if you treat them with respect they will return that respect. At the plants, industrial relations is handled by not very high level officials. There was one instance when some local politicians tried to implicate us in an environmental issue. It is the workers who chased them away."

With some of their historic low-cost products no longer being promoted, and with both costs and consumer incomes rising, I point to the phenomenon I have personally observed. The upper-middle-class people like to tuck into a Monginis product in the privacy of their homes but at a birthday party where guests ask where the cake is from, it does not do to say that it is Monginis. So where does the brand go from here?

It has the desired effect. Khorakiwala gets irritated. "We are dynamic, not boring. We keep monitoring consumer trends and the pricing ambiance. But we do not care for the chatterati, its upper-class values. Monginis represents my personality and ethos -- quality at affordable prices. People think it is an oxymoron. But it is the essence of good business. The brand will never travel up-market."





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