Scaling up Parisons Tea House as a chain of cafeterias

Mr. Ganesh, General Manager at Parisons Group, was sitting with his marketing team in their

head office at Calicut, Kerala. The team was reviewing the company’s strategy in setting up

the business of Parisons newest addition to the business family- the Parisons tea house.

The Pilot has really taken off reasonably well, although there were definitely many areas

for scope for improvement.

But Mr.Ganesh would not settle for one successful tea house – he wanted to scale up very

fast. But was the existing model suitable for such a rapid scale up? Or did they need to

overhaul their strategy completely?

Parisons Group – Since 1982

Parisons is a food processing company with its head office in Kozhikode, Kerala. It

started its operations in 1982 as a small retail trading outlet. Today, it is one of the

biggest Agri- Business groups in South India with annual turnover exceeding INR

1200 Crore (See exhibit 1)

Parisons is the market leader and one of the largest manufacturers of wheat flour

(800 MT/day milling capacity) and edible oil (600 MT refining/day capacity ). It is

involved in all aspects of the food supply chain ranging from manufacturing, R&D,

services, logistics, trading and retailing. It currently has 16 production units spread

out across Kerala for 12 different product lines.

Apart from core areas of Specialty Fats, Flour Milling Edible Oils and Vanaspati,

Parisons has also diversified into Infrastructure Leasing, Rubber estates and Eco-

tourism.

The company currently has a strong B2B (with 750 traders and distributors

primarily in South India) and an emerging B2C distribution network (See exhibit 3

and 4). It has a retail channel of 120 distributors for B2C products limited to Kerala.

They cover 24,000 outlets. Parisons has an ambitious mission to provide quality,

hygienic and nutritional food products on a nation-wide scale. They have plans to

set up a retail distribution network in the adjoining states of Tamil Nadu and

Karnataka as part of their mission.

Tea House/Cafe Market Scenario

The Calicut city is known for its sumptuous cuisines ranging from Yemeni and Arabian delicacies to Sulaimani aromas in Tea. The non-vegetarian restaurants reign supreme with offerings based on fish, chicken and beef primarily. The favourite snack is banana chips. There are many traditional restaurants as well, offering the thaali/full meal on a banana leaf. Food prices are generally cheaper than rest of the country. Yet, certain popular cafes serving continental dishes have also captured the attention of the foodies. These cafes operate at much higher range than other restaurants. Cafes like Downtown and Browntown see a lot of footfall even on weekdays and operate till 12 am. The exception is the popularity of the Adam’s Tea house which is a uniquely decorated café, grabling attention across different sections. The café is often photographed by magazines and food journals, and frequented by the foreigners too. Being closer to the beach, they receive a lot of diverse footfall. Particularly the Tandoori chai, served on a shimmering earthen pot captures the imagination of many ‘insta-uploaders’! Their pricing has always been on the

higher side. Other cafes like 6th Avenue and Dr. Café are popular among they youth mostly due to their ‘urban’ offerings like salads, hookah, etc. and also for their ambience and décor. Parison’s Tea House is a new entrant among these. Despite being located in the business hub of Calicut, the café has struggled to draw its primary target segment- the students and the floating customer. On the contrary the family seems to be the popular segment interested in its offering. The menus has a value for money price offering low prices to attract the common man, and provide him/her with the best quality international food along with exotic teas at dirt cheap prices. The ambience has been kept very premium to instill the culture of not differentiating between its customers. The idea is to give the common man a feel of an international joint at affordable prices.

The Parisian Tea- House : The Business Plan

Deciding on the branding strategy would just be the first step. The team also had to

chalk out the strategy for creating awareness and build customer engagement. They

knew TV advertising was not feasible considering their limited presence and niche

and specialized nature of the product. They had recently invested in digital marketing

through Instagram, but this produced unsatisfactory results. They realized that word

of mouth would be more effective, but to create that, they would need full-proof

strategies.

With respect to pricing, the manager was confident that they have hit the nail. They

have priced their products, like burgers, which are, and beyond the reach of the

common man, at dirt cheap prices. A burger costs around Rs.60, while the special

tea costs Rs.20. Their main strength is that they never compromise on quality. This

could potentially mean that they can disrupt the café business in Calicut easily,

through their cost leadership strategy. But to the contrary, their competitors were

selling more at 3-4 times their price range.

Parisons has a distribution network for its product line – primarily in the state of

Kerala, where they serve 400 Modern Trade outlets such as supermarkets. They

have leveraged their strong supply chain to their advantage. All the products used in

the Tea House are sourced from their factories and prepared in a central kitchen. A

single chef runs the show in the café as the Chief Operating Officer. A large team

reports to him. The customers needed to place the order through one counter and

receive the food from the next. The self-service model was initiated to cut down

costs. The staff working inside would take turns in clearing the used plates. As they

had expected huge rush among the customers, they were following a crude Drive-in

Drive-out model, where the food is served in less than 3 minutes. Prepared food is

just warmed up in the oven. But they always ensured that the food is fresh enough

to be consumed.

They really believed that their Tea House would work as a hangout place for the

floating segment as well for the students, for which they opened the café at one of

the busiest junction in Calicut, the Calicut Bus terminus being 200m away. There are

several institutes and coaching centers around, along with offices and banks. The

Focus Mall is right next to the café, which receives a large footfalls. They ensured

that the customers can easily access the basement parking facilities of the building

for parking. A board displays that prominently, but not many has been availing this.

The present situation

Mr Ganesh knew that they needed to review their growth strategy. If the tea house

needed to grow into a thriving café chain across South India, the marketing

strategies needed to be sustainable. Within 6 months, he has realized that the

targeted segments are not showing results as expected. He needed to scale up on

a light or zero asset model in the likes of Oyo. But that would mean he would

require to embark on a disruptive strategy for the unorganized food market. Bringing

premium food and services for the masses is in itself a challenge if scale is not

reached, Besides, he needed to get more business out of the floating and the

student community, at least as close to 60% rather than the present 35%. The

floating segment in particular is driven towards a need based consumption behavior

and their spending is mostly not affected by recession. The family segment was

getting approximately 65% footfall, which is fair, but he knows that it is not

sustainable strategy. The family segment is very price sensitive, and they would cut

down on their disposable income as soon as the recession hits. The percentage

contribution in sales for each segment is shown below:

Target

Segment

Present

Contribution

Target

Contribution

Family 55% 35%

Student 20% 25%

Floating 20% 30%

Tea-

lovers

5% 10%

Further, for the Tea House to scale up, the consumers needed to grow more

familiar to drinking tea in cafes. The tea connoisseurs needed to be attracted to

showcase the large variety of tea that they made in the Tea House. After all, that’s

what he had meant the café to be known as. Can Parisons Tea House really be

synonymous with go-to place for tea-lovers in Calicut, and later all across Kerala?

He needs to develop a marketing strategy for that.

Additional Information

Exhibit 1: About Parisons

• 1982, Founded as trading outlet • 1992, First manufacturing unit • 1999, entering into edible oil business • 2002, sets up edible oil refining complex in Kinfra Kakkanchery, Kerala • 2003, sets up infrastructure tanks in Cochin and Beypore

• 2004, buys tea estate 4000 acre • 2005, buys rubber plantation 1800 acre • 2009, commissions 300 TPD edible oil plant in Eranakulam • 2010, starts specialty fats business • 2012 Sunflower oil production started • 2014, starts exports of wheat flour

• 2016, Starts tea export • 2017, starts bread, rusk and cake • 2017, starts cake pre mixes • 2019 , starts Parisons tea house

B2B sales 1100 crore/annum Wheat 40% Edible oil 35% Bakery fats & margarine 20% Tea 5%

B2C sales 100 crore/annum Edible oils 95% Wheat 5%

Exhibit 2: Parisons Consumer Products Portfolio

Visit for more details : http://www.parisons.com/

Exhibit 3: Operation Model of Parisian Tea House

All ingredients made from Parison’s Products:

Parison’s Tea House

Factory

Central Kitchen

Refinery

Flour

Mill

Tea Gard

en

Exhibit 4: Competition in Calicut

Visit for more details: https://www.tripadvisor.in/Restaurants-g297635-c8-Kozhikode_Kozhikode_District_Kerala.html

Exhibit 5: Parison’s Tea house

USP of Parisons Tea House – It’s located in one of the most busiest junction of Calicut city, beside Focus Mall.

Most of the ingredients used like edible oil, wheat flour, tea, cake mix, bakery fats,

etc. are made by Parisons

Prices are very low

Several varieties of Tea served

Fast service

Chef’s special menu on a daily basis

Visit for more details : http://www.parisons.com/wholesale/parisons-tea-house//

Exhibit 6: Address

ADDRESS Parisons Tea House

Parisons Square, Opposite Mofussil Bus Stand,

Rajaji Road, Calicut, Kerala – 673004

Ph: +91495 2365618, 236 5652, 236 5116

Exhibit 7: Financial Projections

Sales Volume Projections: The order of opening stores in 3 successive years have been indicated through the following table. Please note, the figures given for expected revenue per store can be used for calculating average revenue/store and gross revenue in following years.

Advertising Budget Earmarked for next 3 years

Year 1 INR 1,20,000

Year 2 INR 1,50,000

Year 3 INR 2,00,000

Exhibit 8: Pictures- Parisons Tea House