October 9, 2021 1:35:47 pm
By T Nanda Kumar
Heard of Ibaco? In the small town of Kollam in south Kerala, it is the preferred destination for young ice-cream lovers. The town, like many others in south India, boasts of international brands like Baskin Robbins, London Dairy, etc. Ibaco is a brand owned by Hatsun Agro Product (HAP), a Rs 5,500-crore company known for Arokya milk and Arun Ice Creams.
Harish Damodaran (national rural affairs and agriculture editor, The Indian Express, and currently on sabbatical as senior fellow at the Centre for Policy Research) brings to us the fascinating story of RG Chandramogan, the man behind Hatsun, and his journey from an investment of
Rs 13,000 and three ice cream carts to becoming the largest private dairy company in India — a journey that took him five decades, countless mistakes and a fierce determination to succeed.
Chandramogan, whom I’ve met, is from Virudhunagar, a district in southern Tamil Nadu, a place known for enterprising people. He has a Kamaraj-esque countenance (the late K Kamaraj, veteran Congress leader, hailed from Virudhunagar) — simple, almost frugal, clear-headed, focussed and not afraid of failures. The book describes the journey of Hatsun Agro, mostly told by the promoter himself, but substantiated by facts and figures where required. There are interesting bits which throw light on the character of the person and, in the process, provide valuable lessons to the reader. Sample a few: His first lesson from his grandmother was that “water is like gold, not a drop should be wasted.” In water-scarce Virudhunagar, this was a valuable lesson for a boy of six. Thrift is part of his DNA. This explains the fact that the first refrigerator for his house came 12 years into the ice-cream business and his own house came after almost 30 years in the company. But he did not hesitate to invest Rs 105 crore in Active Bulk Coolers, a technology developed by two techies from MIT, the US, or Rs 115 crore in “Ekomilk” analysers and rooftop solar systems in his purchase centres. Nor did he hesitate to engage the services of Al Ries, an international brand consultant for $ 60,000 for three days!
The real strength of the company seems to be its ability to learn from mistakes. As Harish puts it, learning from mistakes has been hard-wired into the company’s DNA — something large companies looking for “haircuts” before National Company Law Tribunal would be loath to admit!
There are more lessons to be learnt from the story, mostly from the mistakes it made. Read the portion on how adding rural retail outlets to milk collection centres failed! There are more such instances which could become excellent case studies in top management institutions.
A few lessons, in my view, carry the Dr Verghese Kurien (man behind India’s White Revolution) stamp. Creating value for consumers and adherence to quality are two of them. The decision to buy all milk directly from producers (most private dairies depend on intermediaries), investing in fodder development in association with Tamil Nadu Agricultural University to reduce cost for farmers (read the interesting part on crude protein requirements for milch animals), investing in the integrity of the cold chain right from the collection point (farmers should be able to pour the milk into a cold chain, preferably within the hour), are leaves out of Kurien’s book. For a private company, this required great courage and conviction. Chandramogan has an interesting name for such decisions: “economic moats against competition”. His commitment to quality and consumer delight comes through, when he asserts that the company pays rent and electricity charges of all their retail outlets to ensure that the franchisee has no incentive to switch off power at night (probably a lesson from Mother Dairy’s practices). There are valuable lessons for those wanting to enter a competitive market. Conventional marketing theory will suggest a price point entry: not Hatsun. Arokya (meaning health in Tamil) was positioned as Nalarappal (4.5 per cent fat milk) at a higher price to take on the established 3 per cent (fat) milk of Aavin (Tamil Nadu Dairy Co-op). The story of Arun ice cream taking on brands like Kwality is another study in strategic marketing!
The book also reveals how policies under the Milk and Milk Product Order (MMPO) almost thwarted private sector efforts at getting a registration in the 2000s. But for an intelligent secretary in the department of animal husbandry (late Nishikant Sinha) who overruled the objections of the lower bureaucracy, there would have been no Hatsun and no story! Had there been no MMPO, more Hatsuns would have come up in many parts of India!
A fascinating story, full of facts and anecdotes (my advice, skip the place names and some of the numbers), this is a book in true Harish Damodaran style and a must read for budding entrepreneurs, agri-professionals, business schools and those who want to stay long-term in business!
(The writer is former chairman, National Dairy Development Board, and former secretary, agriculture and food, Government of India)
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