Paper Boat drinks maker Hector Beverages on expansion spree

Traditional drinks maker received investment from NR Narayana Murthy's Catamaran Ventures twice between 2011 and 2013

If Infosys founder N R Narayana Murthy has to take a bet, it would probably be on Hector Beverages, that has shaken the market with traditional Indian drinks under the Paper Boat brand.

Between 2011 and 2013, Murthy has invested twice here through his Catamaran Ventures. Footprint Ventures and Sequoia Capital joined to pump in a total of about $11.5 million in Hector. The company, established by former Coca-Cola India manager Neeraj Kakkar, with friends, started the venture in 2010 with energy drink Tzinga. The idea of selling traditional drinks like aam panna (a cool mango drink), jal jeera (cumin water), other zero-calorie drinks like sattu, tulsi tea, ginger tea and kaanji, a black carrot drink, came after about two years and the first such product was rolled out in August 2013.

Just about four years of operations and Kakkar inaugurated the second manufacturing plant of Hector Beverages, on Wednesday in Mysuru (formerly Mysore). The first one is located at Manesar, near Delhi. With this, the company has the capacity to produce 10 million single-serving packs a day.

“We need to extend our retail reach as fast as possible but logically. From about 15,000 retail touch points, we are aiming to cover about 50,000 by the end of the year. The second production plant, in the southern part of the country where we have very limited reach, will support us to strengthen our distribution and supply in the southern and western parts of the country,” said Kakkar, the chief executive officer. The second plant in the southern part was a logical decision to keep distribution under control.

At present, its presence is strong in Delhi and Bengaluru.  Over the current year, it plans to cover at least 50 cities, starting with Chennai, Mumbai, Pune and Hyderabad, he added.

Paper Boat drinks, sold in sleek, single-serving flexible packs and with a price starting at Rs 30, are now available in 10 varieties. “We will be increasing this as much as possible, sticking to our core – traditional Indian drinks made from local fruits, spices, flowers and even pulses,” said Kakkar.

With about 300 employees, Hector has also started testing foreign lands, such as America, Britain, France, Canada, Australia, Netherlands, the UAE and Malaysia, essentially where people from Indian origin live. “In the UK, we have also started tapping mainstream retail and our products are available across Tesco outlets. While Indian origin people are initial targets, over a period of time the natives will also start adopting Paper Boat drinks. We will be expanding based on market response,” said Kakkar.

Hector, he added, was well-funded for now and for the immediate future. It might look for a next round of funding towards the end of this calendar year, depending on how fast the growth was, to boost presence abroad and to enhance the product range.

The fortified functional non-carbonated drinks market in India is projected to cross Rs 1,000 crore by end-2015, by industry estimates. This is much less than the carbonated drinks market of Rs 10,000 crore.

While Hector has a different product portfolio and a distinct positioning, it has competion in the segment, too. Dabur India has entered the functional drink market with aam panna. And, beverage giants PepsiCo and Coca-Cola have a presence in the non-carbonated drinks space.