A line of colourful packs sits on the shelves of the office of Ashvini Hiran, chief operating officer of Tata Chemicals’ consumer products business. The packs contain Tata i-Shakti dals, a milestone product that marks a new Tata entry into the food staples sector. In December 2010 Tata Chemicals started selling a range of packaged dals (split pulses) — toor/arhar (pigeonpea), chana (chickpea), moong (mungbean) and urad (urad bean) — as a national food brand.
i-Shakti stands for enablement or empowerment, says Mr Hiran, an apt name for the protein-rich seeds that enhance the nutritional value of a typical Indian meal. In other ways too, the i-Shakti story represents a very significant chapter in the Tata Chemicals saga. For one, pulses are the latest entrants in the company’s consumer products division. Under this broad categorisation fall its several salt brands, including the iconic Tata Salt and the popular i-Shakti solar refined salt, food additives such as cooking soda, and the innovative Tata Swach water purifier.
The pulses business will in fact create a new and synergistic revenue stream for the company. For decades Tata Chemicals had focused on its inorganic chemicals business (it is the second largest soda ash manufacturer in the world and sells chemicals as industrial inputs). Today, Tata Chemicals has three distinct business verticals, what it calls its LIFE businesses, where LIFE stands for living essentials (consumer products), industry essentials (chemicals) and farming essentials(farm inputs). The pulses business in fact straddles two business verticals — consumer products and farm-based products.
Second, i-Shakti is the newest consumer brand from the Tata stable to grab retail and mind space in the Indian market. Tata Chemicals sells as much as 200,000 tonnes of i-Shakti salt every year, in fact it is the second largest salt brand in the country, next only to Tata Salt. Both brands put together give Tata Chemicals a 62 per cent share of the national branded salt segment. The strong brand salience built by i-Shakti salt in the retail space has led to the i-Shakti brand being extended to cooking soda (originally called Tata Samunder) and now to pulses; i-Shakti dals will in fact become the image driver and communication anchor for the brand.
Third, with the launch of pulses, the Tata exposure to the FMCG food business has broadened. For years now, the Tatas have focused on branding salt, tea and coffee. But in the last few years, the Tata share of the food retail space has steadily increased to encompass water (Himalayan), ready-to-drink beverages (Tetley) and fresh produce (through Khet Se and Star Bazaar). The launch of i-shakti pulses opens new avenues within the branded staples and foods market for the Tata group.
And lastly, though perhaps the most significant, i-Shakti pulses are the culmination of a Tata vision, strategy and programme to build up India’s food production capability and thus increase the average Indian’s consumption of proteins.
A balanced meal
About a year ago, R Gopalakrishnan, in his role as vice chairman of Tata Chemicals, and director of Tata Sons, pointed out that though pulses are a core ingredient of most Indian meals, India’s production of pulses falls short by as much as 3-4 million tonnes every year. The balance is made up through imports from countries such as Canada and Myanmar. By 2014, the demand is expected to double and the supply gap will increase even further. The reason for India’s poor production of pulses is low farm yields — due mainly to low quality of seeds used for cultivation, poor irrigation and lack of proper pest management.
The shortfall has led to retail prices rising steadily to peak at an average level of about Rs90 per kg in 2010, practically doubling over the last three or four years. Yet for India’s mostly vegetarian populace, the high protein content of pulses makes it a must-eat health food. Explains Mr Gopalakrishnan, “Through the i-Shakti initiative we aim to work towards creating a healthier future for our country.”
A collaborative recipe
Tata Chemicals has entered into the mostly unorganised market for pulses (there are a few regional level players) with a unique business model where it has partnered with subsidiary company and crop protection chemicals major Rallis India. Rallis is mainly responsible for farmer engagement and overseeing production while Tata Chemicals handles the procurement, packaging, pricing, distribution, marketing and retail stages. Together the two companies have created a supply chain that runs literally from ‘farm to fork’.
Where Tata Chemicals adds value is in the quality of the product. The company buys unpolished pulses from large farmers, mandis (wholesale markets) and mills and then oversees the laser / colour sorting and packaging process so that i-Shakti dals are farm-fresh, unadulterated and hygienically processed. According to managing director R Mukundan, the mission is “to not only increase production of pulses in India and help bridge the existing gap between demand and supply of pulses in the country, but to also provide better quality and hygienic pulses for the Indian household.”
Through strategic leveraging, Tata Chemicals has managed to put i-Shakti on shop shelves in a very short span of time. The product was first tested and retailed in Tamil Nadu, a state in southern India, in May 2010; the phased national launch started in December the same year. By June-July 2011, after the company achieves threshold distribution levels, marketing for the brand will be notched up aggressively.
One of the biggest challenges in the pulses business is in getting regulatory clearances and licences from government bodies such as Agriculture Product Marketing Committee and the Pulses Storage Control Order that limits the quantity of pulses that can be stored at any point of time (meant to prevent hoarding practices). As of now, Tata Chemicals has got the go-ahead in only two states — Tamil Nadu and Maharashtra, a state in western India — but Mr Hiran is confident of winning over several others. “We want to be present in at least 12-13 states. With higher volumes, we will be able to derive economies of scale,” he explains.
The second challenge is getting the pricing right — both the procurement price Tata Chemicals pays the farmers and the mills from where it sources the pulses, and the retail price that consumers will be willing to accept. Getting this balancing act right is a complex task as it involves judging the fluctuations in the commodity market price of pulses, getting the right weather breaks, predicting yields of pulses crops in the next season, and so on. “It’s a new business and we’re on the learning curve. The business is working capital intensive and margins are thin. Pulses are a traded commodity; prices fluctuate which makes managing the supply chain critical,” says Mr Hiran.
As of now, Tata Chemicals is selling less than 1,000 tonnes, but expects to grow the business to touch about 300,000 tonnes within the next five years. What’s more, the company’s plans for i-Shakti are to develop it into a complete food brand. There’s a new menu being drawn up at Tata Chemicals and pulses are just the appetiser. Bon appétit!