UNIVERSITY OF MUMBAI PROJECT ON GROWTH STORY OF JUMBO KING (STRATEGIC MANAGEMENT) MASTER OF COMMERCE (MANAGEMENT) SEMESTER-II 2014-15 In Partial Fulfilment of the Requirement under Semester Based Credit and Grading System for Post Graduates (PG) Programme under Faculty of Commerce SUBMITTED BY KARNA VORA ROLL NO. : 31 PROJECT GUIDE Dr. Poonam Kakkad KPB Hinduja College of Commerce, 315 New Charni Road, Mumbai-400004
CERTIFICATE This is to certify that Mr. Karna Vora of M.Com Management Semester-II [2014-2015] has successfully completed the project on “Growth Story of Jumbo King” under the guidance of Dr. Poonam Kakkad. Project Guide
M.Com (Strategic Management) SEMESTER-II
GROWTH STORY OF JUMBO KING
SUBMITTED BY KARNA VORA ROLL NO. : 31
ACKNOWLEDGMENT Every project big or small is successful largely due to the effort of a number of wonderful people who have always given their valuable advice or lent a helping hand. I sincerely appreciate the inspiration; support and guidance of all those people who have been instrumental in making this project a success. With great pleasure I thank Dr. Poonam Kakkad , Professor of KPB Hinduja College of Commerce for being an inspiration in the completion of this project. I thank her for the invaluable help provided during the completion of this project. I also thank her for providing me guidance and numerous suggestions throughout the entire duration of the project. Last but not the least I place a deep sense of gratitude to my family members and my friends who have been constant source of inspiration during the preparation of this project work.
DECLARATION I, Mr. Karna Vora of M.Com Management Semester-II (2014-15), hereby declare that I have completed the project on Growth Story of Jumbo King. The information submitted is true and original to the best of my knowledge.
TABLE OF CONTENTS CHAPTER
OBJECTIVES OF THE STUDY
REVIEW OF LITERATURE
STORY OF JUMBO KING
INTERVIEW AND FUTURE OF JUMBO KING
FUTURE OF JUMBO KING
INTRODUCTION Jumbo King is a chain of fast food restaurants based primarily in Mumbai, specialising in the Maharashtrian regional dish vada pav. Established in 2001 by husband and wife Dheeraj and Reeta Gupta, the company was inspired by the fast food business model of McDonald's and Burger King. Jumbo King Foods Pvt. Ltd is a franchisee-based company that operates across many areas of India. From its beginnings in Malad, a suburb of Mumbai, it has spread across the whole Mumbai Metropolitan Region (MMR), as well as Bangalore, Aurangabad and Gujarat. 1.2
OBJECTIVES OF THE STUDY
To understand the growth story of Jumbo King.
Collection of data Secondary data: This information is been collected from Secondary source such as Reference Book and e-data. 1.4
Review of Literature
CHAPTER 2 LITERATURE REVIEW DHEERAJ GUPTA After I completed my MBA in hotel management in 1998, I decided to start my own venture. The idea was to establish a sweets manufacturing and distribution business. My parents were very supportive and offered to fund it, but I opted to take a bank loan instead. I was looking to model my business on the lines of chocolate companies in terms of manufacturing, packaging and distribution. I leased space, purchased equipment and moulds, and employed 10 people to kick-start the business. It didn't take off. The market, it seemed, was not ready to entertain such a concept. But I was not willing to give up. I borrowed more money to invest in the venture. Still, it continued to bleed. Within two years, I lost around Rs 50 lakh. In addition to bank loans, I owed money to friends and relatives. It was time to do a rethink. When I was doing research for my sweets business, I learnt a lot of interesting things. What caught my attention, in particular, was how successful food chains such as McDonalds, Dominos and Subway primarily focused on one product — burger, pizza, sandwiches — and, yet, had a huge customer base. I decided to do something similar. Vada pav is a spicy Maharashtrian snack. It is quite popular in Mumbai. I found that there were hundreds of vendors selling the snack on the city streets. The market was huge but unorganised. I decided to get into the vada pav snacks business. I somehow managed to raise around Rs 2 lakh to start the business. I leased space for an outlet just outside Malad railway station, north Mumbai, and employed four people. The idea was to outsource the manufacturing of the patties to a vendor for a small fee. We would fry them in the store and concentrate on sales. There was a lot of wastage in the vada pav business. By cutting wastage and, thus, cutting costs, I had the option of reducing selling prices. Or, I could offer a large-sized vada pav and keep the prices intact. I decided to go for the second option. We began offering vada pavs 20% larger than those being sold in the market. Appropriately, we decided to name them Jumbo King. It clicked. We started making money from day one. Opening day — August 23, 2001 — saw sales worth Rs
5,000. We did a lot of innovation with our product and its presentation. Hygiene was a priority. The staff wore kitchen gloves and sold the vada pav properly wrapped — just like a McDonalds burger. The customers loved this. We made it a point to thank every customer for providing us the business. Soon, through word of mouth publicity, our business began to grow. We concentrated on selling just one kind of vada pavs. In the first year, our turnover touched Rs 40 lakh. I repaid the debt from my earlier venture. In 2003, we launched our second outlet at Kandivili — another north Mumbai suburb. By 2005, we had five outlets in Mumbai. Around that time, we started receiving franchise-related queries. In 2006, we decided to set up our presence in Surat, Gujarat. But, we lacked a sound supply chain and had to shut down the outlet. Our manufacturing base was in Mumbai. This meant either starting a new manufacturing base at Surat, or transporting patties from Mumbai. From a cost and quality perspective, neither was feasible. We started looking at options to help sort out this problem. In 2007, I met a manufacturer who was providing ready-to-fry food options to a leading multinational food brand. They would manufacture the patty and freeze it at sub -18° C. The patties would then be transported by a freezer van to various outlets. This sorted out our biggest problem. We started expanding our presence via franchises and, by 2009, had 38 outlets. Meanwhile, we closed down most of the company managed outlets to concentrate on expansion via franchises. In the same year, we introduced several Jumbo King vada pav variants. Today, we are present in 12 cities and have 65 outlets. We have a staff of 15 that manage operations across the country. We recently sold our 100 millionth Jumbo King vada pav. We aim to set up at least 500 outlets in the next five years. But there are several issues that need to be resolved. We have a centralised kitchen in Pune from which frozen patties are transported to outlets across the country. We cannot set up centres where the cold storage facility is not present. We have around 200-250 franchise-related queries with us, but we are very cautious in handing them out. It is a question of brand image. We are hoping that infrastructure-related problems will be resolved in the next five years. Last year, we crossed a turnover of Rs 25 crore and are hopeful of revenues of Rs 45 crore in 2014-15.
CHAPTER 3 3.1 HISTORY An earlier franchisee of Burger King, the Guptas, on their visit to London, realised that fast food could also work in India. Vada pav was the their first idea, as the food had to be portable. In 2001 the Guptas opened their first restaurant at Malad, with an initial investment of 200000 (US$3,100), which they borrowed from his family. The outlet was initially named Chaat Factory (Snack Factory), and vada pav was sold at 5, despite street vendors selling the same product for 2. The name was later changed to Jumbo King. Gupta faced opposition from his family, who thought he was wasting his MBA by selling vada pavs. Vada pav is a popular vegetarian dish native to the Indian state of Maharashtra, although it has been losing its reputation in past few years. The places where the food is now cooked and sold are often polluted, and it is considered a "poor man's food". The people of Mumbai and Thane consume about 18–lakh (1.8–2 million) units of vada pav, with stiff competition mainly from the unhygienic street vendors in the city. In contrast, Jumbo King cooks and sells the food in hygienic conditions. As of 2010, the chain had 30 outlets in Mumbai, selling an average of 40,000 vada pavs everyday, priced between 8 and 16 apiece. Timeline
2001: First outlet of the chain at Malad in Mumbai was opened on 23 August 2001. 2007: Received Award for New Concept Franchising and Award as Innovative Franchisee model.
Two outlets were opened in Ahmedabad on 17 August 2007.
2011: First outlet in Bangalore at Koramangala.
A Jumbo King vada pav consists of a batata vada (a spicy deep-fried potato patty) in a pav (bread roll), similar in size and shape to a Quarter Pounder. Jumbo King is considered Mumbai's first branded vada pav, and is the largest selling brand. The pav used by Jumbo King was designed by Salim Malik, who dropped out of college to help run his father's bakery. Thanks to work with Jumbo King, their bakery has become the largest dealer of pavs in Borivli. They offer Lassi, a popular and traditional yogurt-based drink of the Indian subcontinent, as well as Pepsi products.
3.2 STORY OF JUMBO KING If you live in Maharashtra, then don’t forget to pick up your daily dose of vadapav today. Even better thing to do is to buy a vadapav for someone who inspires you or someone you take for granted. While yes, I love my street food, especially vadapavs, today you should all bite into this humble food, because Jumboking is celebrating its 13thFounders Day, also known as the Vadapav Day. This celebration that the brand is having today has a very interesting story of entrepreneurship behind it.Jumboking was founded by Dheeraj Gupta, a third-generation entrepreneur from his family. Dheeraj’s family has been in the hotel and catering business and also had their sweet shops. Therefore on completing his MBA from Symbiosis, Pune, Dheeraj decided he will export sweets to markets with heavy India population, like Dubai. However, this attempt at exporting sweets didn’t work out well and Dheeraj had to shut shop. His second entrepreneurial outing was with streetfood and he opened an outlet in suburban Mumbai, in Malad under the name of Chaat Factory. As business grew, Dheeraj realized the best selling item on their menu was vadapav and decided to do a more thorough job with this particular food product. Thus began the journey of Jumboking. “The experience is like when you get married and you don’t know what all is going to come. You have to keep making improvements, adjustments and you will learn, marriage in the first five years is different, after children its different and keeps changing. There is no formula. Every husband and wife figure out a way,” and that has been the theory Dheeraj has also followed in business. Coming from a business family, even when he graduated in 2000 from B-school, “working outside was never an option” for Dheeraj. The business family background was an additional motivation and he plunged in headlong. Jumboking opened its first outlet in 2001 and priced the vadapav at a premium of Rs 5 when the roadside offering was being sold at Rs 2. “People were very curious to try a vadapav in the shop, but they did come,” says Dheeraj. Being hygienic was their first differentiation. Soon there were flavours and variety — cheese vadapav, butter vadapav, schezwan vadapav — that they started
offering. Sales started picking up and the company continued to constantly innovate as it chugged along. One of the earliest things Jumboking did was to open franchise stores in Tier 1 -2 cities, in areas where there were high footfalls – like outside a railway station. 200-300 sq. ft. stores that fit well with the locations, and the customer base was the crowd rushing to catch that 5.45 local back home, or take the 9.15 train to rush for that meeting. However it was not always that the close to station, near to heavy footfall formula work. Dheeraj shares with us the instance of a store they opened near Masjid Bunder railway station. “We got a great location, below the foot over bridge, it was that bang on a location. But over there we would not do any sales – and you suddenly loose confidence on your brand, product, sales etc. that you are proud of. And at the same place about 50 metres away, there was another vadapav guy doing brisk business and it is like rubbing it in,” reminisces Dheeraj. So deeper digging told them that the reason for poor sales despite a great location was the crowd that came to Masjid Bunder station. “We realized there is not a single office or college, the only people going there was factory and mill workers. And for them the Re 1 price difference between a Jumbo King and the other guy on the road was a big deal. Also when you have this nice clean store, where a guy gives you vadapav and says thank you, they were getting intimidated,” says Dheeraj. The learning therefore was not all crowded station locations work. His next lesson in entrepreneurship was about the type of stores. After starting with the franchise model, in 2007 Jumboking embarked on its journey of having company owned stores. “We got a small first round of VC investment into the company. So people were telling us you should put up company owned stores, you will make more money and grow faster, so for next three years we were buying out franchisees and putting up company owned stores. But having done both, Jumboking could have had a Rs 200 crore turnover, had we not taken the company owned model. It slowed us down big time, as it took a lot of management time,” says Dheeraj. One of the things however that Dheeraj was very clear on, right from day one was he will not dilute the brand. So over the last 12 years, Jumboking has stayed core to its food product, viz vadapav. They have innovated and built variety around the core, but not yet gone into a totally new product line. “For the first 15 years, McDonald’s only had burger, fries and Coke on their menu and nothing else. Even after 5-6 years after they went public, they only had these 2-3 things on the menu. They lavished all the attention on that one product to ensure there is no surprise when people goto eat that product. At the same time the idea was to build large volumes around that product, so that they can afford automation, modern technology and give it at a price which is affordable to the company,” says Dheeraj. Inspirations for the journey
Dheeraj is a big fan of McDonald’s and has no qualms in admitting he is trying to recreate a similar brand with Jumboking. “If you look at the brands around you, almost 90% of them originate from the US and it’s not a coincidence, they understand about branding, which Japan never did. Even Akio Morita had to go and settle in the US, to build Sony the brand,” reasons Dheeraj. Ray Kroc’s biography has been a bible of sorts for Dheeraj. Today Jumboking has products ranging from Rs 10 – Rs 75, but all are different types of vadapavs. Recently the brand added samosa to its menu in the form of Jumbosa, which has the food item in a different look and avatar, but the taste remains the same. Jumkoking’s manufacturing plants today have the capability to churn out 1.5 tons of patties an hour and only because they are able to mass produce the product, they are able to pass it on to the customer, says Dheeraj. He admits there are many other food categories out there, but just like a specialist doctor will always earn more than a general physician, Dheeraj is convinced specialization is the key. An avid reader, Dheeraj draws his inspiration from a lot of books he reads, some of which include ‘Death of Advertising & Rise of PR’ by Jack Trout and ‘Focus’ by Al Ries. We ask him how he finds the time to read so much and he has an interesting explanation. “It was probably the need to understand marketing from a book at Rs 200, rather than spending Rs 2 crore with an advertising/marketing agency, that made me read,” he laughs. Tough life of an entrepreneur Today Jumboking is growing well and the brand has presence across nine cities in India – Mumbai, Thane, Bangalore, Aurangabad, Mysore, Delhi, Amravati, Indore and Raipur. But things were difficult in the beginning, and Dheeraj says it is important to be patient. “When I finished MBA, all my batchmates were getting fancy placements, hefty pay packets. Some were saying, you have done MBA and are competing with roadside vendors,” recollects Dheeraj. Entrepreneurship needs a lot of perseverance, people all around you are making money, getting increments, where as you are just living a dream, that you and maybe your spouse believes in and no one else. “You don’t have anyone else believing in it. Because you want to do something different, no one has done before. First 3 years is a very lonely time, where you are defying everything that has been done. People said McDonalds can do it, but vadapav mein nahi ho sakta. That is the environment you are operating in. Staff tells you, sir how about adding samosa for variety,” recollects Dheeraj. His constant partner and companion throughout his journey has been his wife Reeta Gupta, who Dheeraj admits has been a pillar of support. Reeta is also a management graduate from Symbiosis, and has been instrumental in building the Jumboking brand. Therefore from marketing the brand, to its positioning and the associations they have done, Reeta has played an
important role. She continues to be involved with the brand, but today is also an independent communications consultant. Jumboking started making money from Day 1, but all of that was put back into the business to grow it. To get new machines, build better efficiencies. “As an entrepreneur, 2008-09 was the time where you open the newspapers and everyday you would read Reliance is acquiring 5000 square feet of retail space, Spencer is opening 500 stores, McDonald’s is opening 100 stores. As an entrepreneur it is very intimidating that I only have 10 stores. So are we not ambitious enough, you get into the rut of announcing big things,” shared Dheeraj. And one such audacious ambition did get Jumkoking into a financial mess. However when projections and calculations didn’t work out, they also had to cut staff and back track on some of their plans. The team therefore at Jumboking have been different at different points in time — the team from 3-10 store was different, from 11-50 was a different team, the 100 store team will be different. “You have to learn more and become more efficient as a team. I keep telling my team, this is where we will be in the next 3 years, please get up and start growing,” says Dheeraj. As they celebrate vadapav day, Dheeraj very proudly shares that they sold the 95th million vadapav earlier this month on August 15 and looking forward to touching 100 million by coming January. Just like taking up a job was never an option for Dheeraj when he finished his MBA, he believes there are no shortcuts either to success. His favourite line that keeps him motivated therefore is: Success comes to those who believe in it the most, and believe in it the longest. TIPS BY DHEERAJ GUPTA
If you don't have the money to advertise, don't waste your money on single advertisements in newspapers. That won't work. Instead, give something back to your customers. At Jumboking, our first main marketing initiative was to hand out railway passes to our customers. Location hunting is crucial. We focused on railway lines -- one each on the east and west. We have perfected this strategy to a science.
We decided to focus on a single product instead of offering a range of snacks. We passed up on samosas to improve our cost-efficiency on the vada paav.
Dream big, don't be afraid. Get a team in place that will be able to share your dream. Share your business plan with a mentor. I was lucky to meet a mentor who asked to me
wind up my sweets business. On that dull day, when you think of winding up, you need that one person who will say 'let's keep going'. Do not hanker after aggressive growth on an annual basis. This results in disappointment when you don't meet your goals.
3.3 INTERVIEW WITH DHEERAJ GUPTA
It all started when he went to London to sell self-owned Indian sweets. Dheeraj Gupta, today the MD of Jumbo King, carefully observed Burger King’s franchise business pattern and thought to apply a similar model here. “Vada Pav was the obvious food choice as Mumbaikars love it!” Gupta exclaimed. With an aim to serve Indian burger (Vada Pav) in hygienic and organised manner, Gupta started Jumbo King Pvt. Ltd – a dedicated Vada Pav chain company in August 2001. Today, Jumbo King has about 45 outlets (self-owned & franchise) across Mumbai, Ahmedabad and Baroda. In an exclusive interview Dheeraj Gupta talk about his current and future steps to
make “Vada Pav” a globally popular food. Excerpts: It’s almost a decade since you started Jumbo King. How has been the journey so far? Till date the journey is impressive and fruitful. Initially there were lots of objections, as I had priced the Vada Pav at Rs 5 whereas small competitors sold it for as little as Rs 2-3 in the market. Our selling proposition was hygiene. We experimented with two outlets outside a railway station. From ordinary ones, we started offering Vada Pav with cheese, flat patties, round bread, and toasted bread. The prices of Vada Pav have gone up from Rs 5 to Rs 8-10 minimum. Did this affect your turnover? Not really. Convenience foods sector in India is very price sensitive. When we increased our prices, volume tends to decrease but annual sales turnover registered a healthy growth. How many outlets do you have outside Mumbai. Any plan to take Vada Pav abroad? Outside Mumbai, Jumbo King has its outlets in Gujarat. At present, we have nine Jumbo King outlets in Ahmedabad and Baroda. Our Franchisee relations team is in talk with keen franchisees. We have chalked out drastic expansion plans in Gujarat and Mumbai. We also aim to reach 100 outlets in the coming 2-3 years in Mumbai. After 100 stores we may seek to foray into international markets.
Who are your competitors? What is your USP? In Mumbai there are over 20,000 local Vada Pav sellers. People who eat at Jumbo King will not choose other Vada Pav and vice versa. We attract newer customers and develop faith among existing customers through hygiene and quality service. So far, we have been winning customer trust and hopefully we will groom Jumbo King in a better way. We give clear instructions to our vendors to buy masala (ingredients) and oil from certified companies. We also have authorised raw material supplier for all our outlets. What is your annual turnover, market share and growth rate? Currently, we have only 38 outlets in Mumbai and Thane area (20 self-owned and 18 franchises). If we compare this numbers with 20,000 Vada Pav sellers then we have only about 2% market
share. Vada Pav in Mumbai is a big business. During recession we too faced a setback like other organised players, but the pre and post-recession period registered 50% growth rate per year. What are the terms for franchising Jumbo King? The minimum requirement is 300sq.ft shop/outlet at a prime location, investment of Rs 12 lakh which will provide back-end service, training, maintenance, control, marketing and system upgradation for the vendor. We also offer certain sites for the investors. Currently, our franchisee relations team is negotiating for 10-12 locations in Mumbai. Two or three people can jointly open a franchise store. How many Vada Pav varieties do you offer? Are you planning to add a few more? Basically, Jumbo King has four Vada Pav recipes, namely Butter, Cheese, Grill and Brown Bread. Further we add flavours and offer about 16 varieties of Vada Pav. For instance, butter range offers Butter Jumbo King, Butter Grill Jumbo King, Butter Cholle Jumbo King and Butter Schezwan Jumbo King. Our new recipe would be Paneer Jumbo King. In the coming 2-3 months we would be adding new range of Vada Pav in the menu. Apart from Vada Pav you have been selling many other products. Tell us something about food aligned products? Along with Vada Pav we offer soft drink beverage range. After eating something, Indians have a habit of drinking something. So we started selling lassi, soft drinks like Pepsi and other optional beverages. Urban cities are rapidly catching up with western lifestyle. Do you think this will change/hamper Vada Pav eating habits of Mumbaikars? Though our metros are trending towards western culture, I don’t think our metro citizens will opt for western eating format/culture. Today, people are looking for healthy, warm food. With Jumbo King we have done much more to serve traditional Vada Pav in hygienic and tasty way. Our sophisticated technology, centralised kitchens at Malad, and bakeries at Vasai and Thane have helped us bring uniqueness in our products. I am sure that many in the coming generation will go in for healthy, tasty and traditional food like Jumbo King.
FUTURE OF JUMBO KING Dheeraj Gupta is planning to cover Gujurat and Maharashtra by 2008 completely. Then on the basis of how it works outside the city of Mumbai only then will he decide about going any further .Every city in India is different from the other, like in Chennai the vada pav is available for 20 rupees, and in Delhi it’s available for approximately Rs 10 to 15. However Surat, Pune, and the rest of Mahrashtra are pretty much familiar with vada pav. The pricing pattern in the rest of Maharashtra is similar to what is prevalent in Mumbai. Outside Maharashtra we will have to customise and price our product accordingly .As of now we are not planning to diversify into another product category for sure. If another product category comes up it will be in a different brand name for example dabheli, it would be a dabheli flavored Jumbo King as Jumbo King means vada pav. Hence it becomes a dabheli flavored vada pav.We are also planning to come up with chaat stores but that’s just a thought yet because we are unable to fulfill the volumes in vada pav to even imagine of getting into another product
CONCLUSION By Reeta Gupta I come from a very conservative Marwari setup where women are not allowed to work I am theonly workingwoman in my entire family. It is not at all easy; initially I think people do not even believe that you truly want to work. According to them it’s a craze, which will eventually phaseout. But I feel you believe in yourself and have the confidence to convince them that workingand being independent really means a lot to you. On the other hand if they are convinced aboutyour passion and fervor then they will support and encourage you. They have to really believethat you are adding a lot of value and making the family proud when you are out in the field. Oneshould not give up hope; if women want they should start work with two hours a day then extendit to three hours slowly increasing your work time to nearly a full day.Initially I used to return home at 3 pm but these days I work full day, therefore you have to makeit a step-bystep process. You cannot suddenly wake up one morning and take a decision that Iwant to work
the whole day that does not really work well. In addition to this the work you doshould not be an excuse for avoiding the responsibilities you have at home. One should fulfill allof those, even if it is at 11 pm in the night because your work is considered, as the selfish part of you and what you do for the rest of the people in your family is the unselfish side. So you have to balance between both of them.