When Ajay Gupta, promoter of Capital Foods, decided to sell instant noodles and soups under the brand name Ching’s Secret, many thought he wouldn’t be able to digest the diversification.
For, FMCG giant Nestle India, which created the instant noodles market through Maggi, is the undisputed king in this segment. What was even more audacious was Gupta’s move to price the noodles at a 50 per cent premium over Maggi’s.
The scenario was no better in the soups segment. Apart from Nestle, Gupta’s firm had to take on the might of Hindustan Unilever, which was aggressively creating a market for its Knorr soups.
A year later, Gupta has proved his detractors wrong – and how. Capital Foods has been able to capture around 20 per cent of the market in modern self-service retail outlets across the country and in bigger stores in the top metros. The company says its soups have been able to grab around 23 per cent share in the Rs 150 crore branded instant soup market.
It’s no surprise therefore that funds have flowed in. Indvision, a private equity fund of Kishore Biyani’s Future Group, has picked up 33 per cent stake in Capital Foods.
Capital Foods however has no pretention of trying to take on Maggi. After all, it is hoping for a turnover of just Rs 80 crore from noodles in the next couple of years. In comparison, Maggi is a Rs 800 crore brand. Ching’s sells in around 85,000 stores compared to Maggi’s 900,000 stores.
So Ching’s has been positioned differently. Sensing that 90 per cent of Maggi’s sales comes from its ‘masala’-favoured pack, Ching’s went for the kill with Chinese-flavoured noodles. Gupta says he has seen people lapping up “Chinese pao bhajis” and Manchurian sweet corn in Mumbai’s Udupi restaurants.
“Our noodles cater to the unique way Indians prefer to eat Chinese. That was our opportunity ” says Gupta . That is why the company decided to launch flavours such as Manchurian, Schezwan and Hot Garlic. The packaging of the product was aimed at leveraging the Chinese “connection” through colour coding and graphics. .
Ching’s is also targeted at people in the age group of 18-25 (as against Maggi’s target group of children only) who prefer spicy flavours and look at noodles as a full meal rather than just a snack.
It was also felt that Ching’s needs to leverage the Chinese connection and one way to do that was through packaging. So the colour coding and the graphics were essentially meant to symbolize this.
All this meant the pricing was 50 per cent higher than Maggi’s. To ensure that retailers were happy, Capital Foods offered them margins which were 4-5 per cent higher than his MNC competitors. “The MNCs provide large volumes to retailers. So we had to offer retailers more to break in” says Gupta.
In the soups category where Ching’s battles with Knorr as well as Maggi, the game plan was roughly the same: create a better product and flavours that reinforce the Chinese connection.
To ensure that the vegetables in the soup taste fresher, Ching’s decided to use frozen dried vegetables rather than dehydrated ones which competition uses. Gupta says while the cost of production went up because of this, customers came back as they get a fresher taste of vegetables.
So will Ching’s become a mass-market brand and take on the big boys somewhere down the line? Gupta says that he spends only 5 per cent of his budget on advertising and promotion which is much less than the competitors who spend 5 to 7 per cent on a much larger revenue base.
But his critics say he may remain just a small niche player. Says a senior executive of an FMCG company: “It’s just another brand with some initial novelty value. The problem will be how to sustain it. Some years ago, Gold Café, a coffee brand from Indodan Industries, had shocked Nestle by taking away market share. Today it is dead and gone”.
Gupta clearly knows that. That is why he says he would like to be a niche player in these two markets.