Harvest Gold case studyBy

Abhishek jainGirija bihaniNitya misra

HARVEST GOLD: ORIGINS

• Adil Hassan was a chemical engineer from IIT Delhi, who switched to making bread with an investment of Rs. 10 million.

• They hit upon the idea of bread-making when they failed to find fresh and decent bread in Delhi.

• Adil Hassan and Taab Siddiqui commissioned their plant as Harvest Gold Foods India Pvt. Ltd. and commenced production in June 1993, at its state-of-the-art facility at Bhiwadi, Rajasthan (installed capacity: 75,000 loaves of 800 gm each a day) with a premium range of Harvest Gold white bread in 400 gm (Price Rs 7 a loaf) and 800 gm (Rs 13).

Initial success• The product was an instant hit with a

Rs. 400 million turnover in just five years.

• They further diversified into related products like hamburger buns, pizza base, etc.

• Earlier there was a domination of two manufacturers —Modern and Britannia.

• Demand was high and supply inadequate; hence whatever was produced was sold.

Market scenario• Bread was sold in wax papers. • People used to stand in queue for hours for delivery vans to get

their loaves of Britannia and Modern breads. • Other competitors like Taaza and Bakemans were not so popular. • every state had its own local brand. • Short shelf life of bread made it difficult for big players to

distribute bread at distant places. • From 1995-96 up to 1998-99, Britannia bread market share

witnessed a fall due to the stiff competition from Modern Foods. • Still Britannia could manage to regain its shape due to the

takeover of Modern Foods and the time spent in its restructuring. • Again that could not last long and Britannia faced some problem

in its distribution of bread. • This particular crisis was the reason behind Harvest Gold’s

success as the market leaders were fighting with their destinies.

Turning point

• Harvest Gold did not have any distributor for its bread at that time; so, it approached the distributors of Britannia and Modern.

• These distributors agreed to keep a stock of Harvest Gold bread and sell it whenever there was a demand for it.

• It also approached the Nirulas for keeping its bread on their counters. But everything took a turn when customer response turned out to be overwhelming.

Preceding 2 years

• Within a span of two years, Harvest Gold had a turnover of more than Rs. 1.2 billion with one plant, one city, and one product.

• Its only plant was in Bhiwadi from where all its products were distributed.

• What was most remarkable was the company’s distribution system – the trucks were painted with Harvest Gold’s name and logo— a true example of mobile branding.

• This was a case of a local player taking on a big brand and emerging as the market leader within a span of just one to two years of launch.

Product line and market share

• Normal white bread, sandwich bread, Bombay pav, burger bun, brown bread, kulcha, pizza base, sweet bun and milk rusk, daliya (Porridge) bread, garlic bread, multi-grain bread and atta (wheat flour).

• Acquired 80 per cent of the bread market in Delhi and NCR and headed a Rs. 1.2 billion business that employed 800 people and supplied 2, 50,000 loaves per day.

• Each 380 gm loaf was priced at Rs 11 and 800 gms at Rs 20 in Delhi. For other states, there was an addition of Rs 1 or 2 per loaf.

Size of the Indian Bread Industry

Unorganised sector• Growth rate: 6 per cent• contributed around 55per

cent of the total bread production.

• consisted of an estimated 75,000 bread bakers mostly located in the residential areas of cities and towns.

• Thirty-five per cent of the total production came from the small scale sector with about 1,500-1,800 units in operation.

Organized sector• Growth rate: 8 per cent. • contributed around 45 per

cent of total bread production.

• consisted of around 1,800 small scale bread manufactures around the country, besides 25medium scale manufacturers and 2 large scale industries

packaging• Highly perishable item, having a shelf-life of a

maximum of 72 hours.• Government norms: mandatory to stamp the date

and time of manufacture and expiry on the packet. • They introduced transparent sheets where

consumer could have a look at the product without opening the pack.

• At a time when the competitors were using wax paper for packaging, Harvest Gold started using a clear, cellophane wrap with a signature red base.

• Then, the expected happened — tangy dollops of plagiarism pervaded the bread market.

Need for Branding

• Soon, shop shelves were stocked with cellophane-wrapped bread-brands with logos, packaging, and even names having the same touch and feel as Harvest Gold.

• Taab Siddiqui and her team were confident that they still did not taste like their bread. But they felt the need to create a brand in the minds of the consumers.

• By the end of 1997, it became clear that to stand apart from the nationwide bin of wannabes — Honey Dew Gold (Delhi), Taaza Gold (Faridabad), Golden Harvest (Calcutta), Spenser-Gold (Goa), Everest Gold (Chandigarh), etc. —Harvest Gold would have to knead out a unique brand strategy for generating consumer pull.

Marketing• Used funny tone and

consumer understandable language.

• The campaign comprised weekly 80cc and 60cc print ads that were similar in look and feel, and used a limerick to parody or comment on an everyday issue, be it Bill Gates or the Delhi winter.

• The advertisement even made a dig at itself: “Bakwaas Advertising. First Class Bread.” Humour worked in this case because it used the lowest common denominator ; so, it was almost like the voice of the consumer .

Sales projections

• In 1998, Harvest Gold Foods India Private limited launched Rs. 2.7 million advertising campaign with an aim to become the toast of the country’s bread basket.

• With the sales restricted to Delhi and its environs, growth in the nineties had risen by a hearty 65 to 70 per cent a year, and the sales were projected to touch a buttery Rs. 500 million in 1997-98.

• To avoid cheaper harvest gold substitutes from cutting their customers, the company had to ensure that the consumers began demanding Harvest Gold by name.

Steps in advertising• The Harvest Gold advertisement appeared in a fixed position, on

the back page of Delhi Times, and only on Friday’s — when the readership peaked — for a full 52 weeks .

• Both the agency and the client wanted the bread to come alive in a funny, exciting, smart, and sexy manner.

• They would have ads such as “Milk content ki no information, softness ka no mention, I said “Chaddo na, bread khao. Why create tension?’’ But when you go to pick up bread, ik gaal must be saaf and clear That Harvest Gold is what you buy. Not just any bread, my dear.”

• It mentioned the product details on each of its bread packets –“Harvest Gold Industries Private Limited proudly present, HARVEST GOLD, a fine quality white bread baked in a state-of-the-art plant with quality testing conforming to the American Institute of Baking standards. Harvest Gold is brought to you in an international quality pack to ensure freshness and hygiene.” for food safety and standards.)

• Even their customer care number and email ID were mentioned on the packets of their product to entertain feedback from the customers.

Distribution…• The marketing system was based on strong retail-wholesale distribution

network and being a highly price sensitive low margin food product with very small shelf life.

• Harvest gold success largely depends on excellent distribution system enabling fresh delivery of various items. The best thing about harvest gold is its small size which facilitated smooth distribution of its products.

• In earlier days the owners of harvest gold were recalling the days when they use to sell on traffic signals, in order to increase sales. Those were there tough times.

• The latest fast moving professional practices which emphasis on bakeries.• A long term strategy was created that affected everything in supply chain

from the profitability of individual products , through bread room operations even to examining running cost of individual delivery vehicles.

Continued…

• There are two slots of distributing morning and evening. The bread were sold in morning slot from 8 to 10 and evening slot was from 4 to 7. defective breads were exchanged.

• Various supply chain workshops were held to identify problems eg: stock item profitability, cost of transferring product b/w plants and consolidate orders, distribution channel such as retail, industrial, food services, profitability of different customer types.

• Empty shelves means lower sales so they try to keep there shelves always fully loaded. So supplying enough bread to fill shelves was a critical tactic in overall strategy.

Handling and logistics…• Harvest gold used trucks and tempos for transportation, and in case of

smaller deliveries to retail shops the producer uses small bicycles and tempos. Temperature should be maintained in the tempos

• The Bhiwadi plant was the only plant and the product was distributed from there.

• The products were loaded in trucks and unloaded at various depots in Delhi. • From the depots, the products were carried by the outsourced trucks to the

various corners of the city as per the demand of the customers. • The retailers of the suburbs in Delhi demanded 400 gms of the white bread

the most whereas the retailers in the posh localities like Vasant Vihar, Vasant Kunj, Greater Kailash, Defence Colony, and demanded different variants of Harvest Gold bread.

• The mode of revenue collection was cash on delivery from the retailers by these outsourced truckmen.

Challenges in handling crate• The breads were packed in plastic crates each of which was around 1-2 kgs; each

person carried 3-4 such crates on his shoulder. • While unloading, the person freely removed the load which on impact with the

ground caused serious cracks after several falls. • One crate full of breads weighed around 6-7 kgs; four crates weighed around 24-

28 kgs and would cost around Rs 200. Breakages were common at the edges.• Around 50,000-60,000 crates were circulated everyday in the market in a cycle.

Breads needed to be delivered within 3-4 hours. Therefore, crates were handled roughly. They were stacked inside a truck and transported to various markets.

• Normally, no empty space was left in the trucks. Usually one person on the truck (3.5-4 ft. high) handed over the crates to two persons on the ground who carried them to the shops on the shoulder.

• These crates were dropped from the shoulders (4-4.5 ft. high) usually on the concrete floor and hence the impact damaged the crates.

Crate design• The company organized a design

competition among the students of the Indian Institute of Technology (Delhi) to develop a creative technology innovation so that the crate could be carried at a lower height thus reducing the impact level, while not compromising on the quantities carried and also increase the trays’ resistance to cracking on falling on the ground.

• A presentation/video with reference to the design statement was shown to the participants who were told that the original crate must remain the same

Competitors…• Among the competitors of harvest gold was the company manufacturing

premium bread under the brand name”perfect” which figured in most of the premium stores and virtually all the 5 star joints in Delhi.

• Another competitor was modern foods which was located in busy Lawrence road industrial area . It had 40% of market share in india’s bread market.

• The MFIL merged with HUL in sep 2006 , and 392 employees of MFIL from initial strength of 2042 were now HUL employees

• HUL turned away from MFIL as it doesnot have its own distribution network, it lacked quality standards, and grabbled with trade union troubles and high production costs.

Continued…• The Modern bread brand was available in a wide variety of white

sandwich bread, brown bread, Atta (wheat flour) Shakti Bread and Modern 7 Must Multigrain Bread in more than 50 towns across the country, including major metros.

• “Modern Foods is contributing to both the top-line and bottomline of our foods business,” said Prasad Pradhan, a spokesperson for HUL.

• Insiders say, however, that HUL was struggling with the Modern brand. From 13 units, including those in key markets of Delhi, Jaipur, Indore, Ranchi, Kochi, Kanpur, Kolkata and Chandigarh, it now had only six operational units and brand franchisee arrangements with others across the country.

Business Model

• They couldn’t invest much because of investment ceiling of Rs 30 million in the reserved sector of bread manufacturing.

• Hence, considered franchising its brand and technology across the country as the ultimate future option for the national presence.

Challenges

• There were two major challenges faced by the company in going national:

a) managing the distribution of fresh bread.b) fulfilling the need for a good quality product

involving low cost techniques that the customers could trust.

Importance of Brand Image• Having a quality brand image is not only important for larger businesses, but smaller

businesses as well. • Establishing a brand and your business’ image is one of the best ways to get consumers to

connect and engage with your business.• A brand is more than the company logo; it is everything your business is about, from the

mission statement to the culture. • Having a positive brand image helps your customers understand what your business is all

about and know what they can expect from you, your product or your service.• Once your business’ brand is established and consistently implemented by all involved with

your company, recognition for your brand (and business) will grow. • A well-developed brand image will help your business be perceived as reliable, experienced

and consumer-focused. This consistency will encourage consumers to make a connection with your business and engage with you, and brand loyalty will begin to flourish.

• Brand loyalty is often times the reason consumers choose one product or service over another, and the reason your business will be their first choice.

• The lifetime value of loyal consumers is far higher than non-loyal. Creating brand-loyal customers should be the goal for any small business.