Cookie Man marches ahead
Chennai: He sampled 15 cookies at the Cookie Man's outlet at Chennai's Spencer Plaza while waiting for his sister to complete her shopping. A twinge of guilt at having freeloaded on so many, (each weighing around 12 grams) he bought a kilo out of courtesy sake and left for home.
A couple of months later he bought into the cookie company Australian Foods India Pvt Limited, an Indo-Australian joint venture.
Thirty-five year old S B P Pattabhi Rama Rao, now president, Australian Foods India Pvt Limited, recalls, "For three months after that purchase I was on tour. On my return I was surprised to hear that my father had begun eating cookies regularly and had brgun stocking them at home regularly." That made him wonder; his father, S B P V Rammohan Rao, heading the family's sugar mill Saravaraya Sugar Mills, was a man with a frugal temperament and not known to patronise premium products.
"I called John Lynch, chairman and chief cookie taster and one of the promoters of the company and later bought into the company." The other promoters are private equity firm Paracor India Investments Limited, Mauritius, and Cookie Man Pty Ltd, Australia.
Prior to becoming Cookie Man's shareholder-president, Rao headed the operations for Satyam Cinemas, a leading multiplex in Chennai. "Before that I was in the hospitality sector working at Tulip Star Hotels and The Indian Hotels Company."
More interesting is his wife's association with Cookie Man's cookies. A Bangalore person, she used to gift Cookie Man tins to her friends and relatives regularly before her marriage a year ago.
"Though ours is an arranged marriage, her friends and relatives continue to tease her, saying she used to hang around our Bangalore outlet under the pretext of buying cookies only to net me in," he laughs.
Soon after his joining the management, the company was rechristened to its current name from Cookie Man India so as to keep the brand and corporate identities distinct.
Present in ten cities (Chennai, Mumbai, Gurgaon, Noida, Kolkata, Hyderabad, Bangalore, Indore, Pune and Ahmedabad) with 18 outlets, Rao says Cookie Man will soon be in 33 cities by the end of 2008.
The cities that the company plans to enter for the first time are Jaipur, Lucknow, Ludhiana and Cochin and also surrounding around of Mumbai like Thane and Vashi.
The Rs12.5-crore turnover Australian Foods India operates three retail formats - Cookie Man Stores being the biggest format spread over between 300 and 500sq.ft where fresh cookies are baked and sold; Cookie Man Kiosks the mid-sized formats between 80 and 100sq.ft retail outlets selling pre-packed cookies and baking a limited variety and finally; the smallest 30-sq ft Cookie Man Express sales-only outlets that sell only pre-packed products.
The company has 10 Cookie Man 'mother' stores, two kiosks and eight express outlets.
Interestingly the first four largest standalone cookie stores in the world are under the Cookie Man signage in India. Internationally, the Australian brand is present in 12 countries with 108 outlets.
According to Rao the promoters will be infuse Rs3 crore equity this year taking the total capital to Rs15 crore. An additional Rs15 crore investment is planned over the next five years.
Targeting a turnover of Rs25 crore this year, Rao talks about the company's plans and prospects. Excerpts
What is your reading of the Indian cookie market?
India is largely a biscuits market whose size is estimated to be around Rs6,500 crore. The total premium cookie market (cookies that retail at Rs400 per kg) is around Rs40-50 crore.
The premium cookie market is growing and so is Australian Foods India. The segment is attracting new players like Unibic biscuits and also the biscuit manufacturers, who are expanding their product range to include cookies. The new players help in growing the market. In Bangalore, where one major cookie company is headquartered, we are growing annually at 20 per cent.
The 18 outlets you have today are far below the earlier target of 40 outlets by 2003. Why there is a delay in increasing the outlets?
Our business model is linked to malls. Our stores will succeed in high footfall areas and malls offer that. We are waiting for the completion of malls with whom we have signed up for leasing space. Some of the mall projects we have signed up got delayed which affected our plans to some extent. Our present target is to have 75 franchisee outlets in five years time.
Do your expansion plans include setting up a new commissary to the existing one in Chennai?
Our installed dough making and baking capacity is 4,000 tonne per annum (tpa), which can cater to the needs of 70 outlets. We are looking at a new kitchen in Central India over the next two years, depending on the growth of malls and our setting up stores there. We intend to set up a commissary with an annual capacity ranging between 2,000 to 3,000 tpa. Presently we transport our dough, frozen at 18 degrees, for which the shelf life is nine months.
What are your market segments?
Our target is individual as well as institutional. In the institutional segment we supply to a couple of hotels, full service airlines and also cater to the corporate gift segment. The last one is a big market for us as nearly 40 per cent of our total sales happen during Diwali and Christmas seasons.
In outlets like yours the initial purchase is largely on impulse. How many of the impulse purchasers have turned in repeat customers?
I don't have a straight number. When measured indirectly we see a large number of repeat customers. For instance in Spencer Plaza, our first store opened in 2000, the free samples given averages around 240 every day which is low since in a new store the samples will be three times that size. However the Spencer Plaza outlet does 50 tpa and the number of customers average around 1.2 lakh per year.
Are repeat purchases in the corporate gifting segment a challenge?
That is true to some extent. But corporates do not go for one product alone when it comes to gifting. They too divide their target people and distribute gifts accordingly.
In the corporate segment we have to undertake concept selling. Why not cookies instead of sweets and dry fruits during the Diwali and Christmas gifting seasons? Unlike sweets and dry fruits, we can custom design our tins. For instance we designed a blood-red heart shaped tin for a company. We are proud to say Cookie Man cookies continue to occupy the premium gift space amongst the corporates and we do get many repeat orders every year.
What is your reliance on advertising?
During the last seven years we have booked just one advertisement space. We are about exposure and not recall. For us giving free samples, placing the cookie directly in the hands of customer, is the best marketing tool.
We also hold baking competitions in schools, in which in turn creates strong product awareness and recall, not only among the students but also their parents.
Do you have any plans to set up outlets in the neighbouring countries?
Sri Lanka is on our radar. But that will happen only after we establish our presence in 20 Indian cities.
Since cookies have high fat content, do you have any plans to introduce diet cookies?
We will launch fat-free cookies. The cookies will be 97 per cent fat-free. Also we will launch a cookie for diabetics. Today we make 48 varieties of cookies. The sales mix comprises crispy and crunchy cookies that make up for 60 per cent of the sales; super cookies and choco-dipped cookies, each of which contribute 15 per cent of our volumes and cream-filled and special varieties that contribute 5 per cent to the sales.