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How Cornitos hit the magic spot between chips and 'namkeen'
Vikram Agarwal, creator of Cornitos, tells us why he gave up selling capacitors and banked big on nachos.
In 2009, Vikram Agarwal, currently founder and director at GreenDot Health Foods, made the most important decision in his life. He 'resigned' from the Globe Capacitors Group, his 35 year-old family business (100 crore turnover) and decided to placate his 'what next' itch, by diversifying into food - his passion. Then, he studied the Indian snack market and found a gap between the ubiquitous Indian 'namkeen' and Western potato chips - Nachos.
As the marketing guy in his father's company, he had been travelling a lot and it was on his trips to the US that he grew fond of nachos (a Mexican tortilla chip snack made from corn). In fact, Doritos - the nacho brand by Pepsico's Frito-Lay - was such a staple there, that its top executive, who was responsible for launching it in 1968, had them sprinkled on his grave.
Back in India, Agarwal wanted to create premium nachos that would be sought after by discerning consumers. Pooling together a seed fund from his family and a bank debt, he set up Green Dot Health Foods with an initial investment of Rs 20 crore in 2009. The company got into a technology and machinery deal with a US supplier, as part of which they arranged a tour of the Doritos factory for Agarwal, post which he was set to create the product in India.
Challenges like the procurement of corn and other hiccups were tackled over time, making Cornitos the most popular home-grown nachos brand in India, with rapidly growing exports in various international markets. While sales have benefited well from in-store promotions, they've also had television ads. Currently, Water Communications, helmed by Vandan Sethi, handles their creative and media. While its revenue, with last fiscal at Rs 50 crore, is poised to hit 30 percent growth this year; the company aims to hit Rs 100 crore in the next 2 years. Industry reports peg the organised snack market at 15,000 crore currently.
"I'm pleased to see students come to my factory for tours and I hope to see the youth bringing in more ideas to this space," says Agarwal. In a chat, he takes us through Cornitos' inception-to-shelves journey.
Edited Excerpts
Yes, corn was the main ingredient and getting the right kind was a challenge. Almost 80 percent of the corn grown in India was for poultry, 10 percent was for making starch and only 10 percent (with high protein) was grown for human consumption. I'm not an agriculturist and it took a year to select the right type, after which we decided to grow it ourselves via contract farming. When we started, we used to consume 10 tonnes of corn per month, and now after 9 years we consume 150 tonnes per month.
Finding the right distributors was tough. Only A-class retailers, who knew the product, appreciated our move as existing international products were priced at 300 rupees, and we were at 75-85 rupees (large pack), thereby giving them good volumes and a better margin.
After extensive sampling across stores and a positive consumer response, the ball got rolling with distributors. But the process did take time as initial consumer acceptance was not that quick - out of 10 consumers who walked in, only two would know what the product was.
Yes; at a time when potato chips were at Rs 20, I priced my product at Rs 25 for a similar grammage. Many people insisted that I should also stick to 20 rupees, but I was not convinced as I felt that consumers would then not shift to a new product - it needed differentiation, so we stuck to 25 and 75. We were targeting young well-travelled initial adopters with an objective to shift them from their imported brand to ours and it worked.
Earlier our TG was mainly the youth, but now we've seen senior citizens taking to nachos in a big way. Also, when we started off, we were placed (in modern trade stores) in the international section, labelled as a 'nachos product' instead of being placed next to 'Lays'.
Form 2010 onwards we were available in modern trade stores, institutions, airlines and cafes. After 5-6 years of our existence in this market (around 2015), we were seen on shelves next to Lays. We also supply to PVR theatres, but it's served without branding there.
In fact, now every modern trade chain has created nachos as a separate category and though there are more players, we have the maximum portfolio of flavours. Online Sales started in mid-2013 and we are available on all major grocery e-portals.
We still hadn't broken even in 2011; at that time we existed only in metros. Market feedback was not to the extent we expected and we wondered how long we could keep investing from our umbrella group. It was time to decide whether we needed to shut or sell.
I gave myself six months and first changed the entire sales team. There was miscommunication from the market, and there were wrong placements. The fresh team had strict targets, only to the right stores and the right TG, with a 'We don't want a single pack to return from any market' mandate. In financials, we got stricter about credit. In parallel, we decided to re-strategise, re-brand and work on making the product visible on the shelves.
For three months, Brandvak worked as an extended marketing arm for us. The packaging was changed and glossy gave way to matte-finish packs. The logo, colour scheme (now brown and yellow) and font were also changed to make it look like an international product. Packaging costs went up 30% and the price of the 60g pack was raised to Rs 35. The word "chips" was replaced by "crisps".
We also took the product image off the packaging as we wanted the TG to look at the word 'nacho' and 'crisp' and not the picture. When Cornitos re-launched a month before Diwali, as I felt it was the perfect time for it to be seen as a new product altogether, distributors gave us great feedback.
Internationally it's doing well because of the flavours. In the US, we tried two channels; one, via our Indian distributor to the Indian stores and the other via an international distributor for the mainstream stores. Interestingly, the latter (Kafo, Tesco) actually started performing better than the Indian stores.
Cornitos nachos are baked and shallow fried with minimal oil and are healthier within the snacking segment. The oil content, compared to potato chips, is 40 percent lesser. More and more people are willing to pay for premium products like ours.
The cook-at-home movement has actually helped growth in consumption as with our product, there are unlimited options for home chefs to create dishes with nacho crisps.
Last year we were fully booked with our one line and we've now invested in another line, so we have to fill that gap. For that we have planned market expansion and regional expansion outside India. We've introduced smaller packets in tier-2 cities but consumption patterns are changing and we are seeing movement of bigger packs too.
We've introduced tricolour veggie chips with natural extract of beetroot spinach and beans - a first for an Indian company. We've also started a roasting line of nuts, seeds and peas, and have invested in nitrogen flush packaging for better shelf life.
A look at some of Cornitos' TVCs:
