💎 The Gold Mine Called Yellow Diamond
While most of us may equate chips and snacks with Lays and Kurkure, a homegrown brand has been quietly gaining market share. Here is its story.
What do Ben 10, Chota Bheem and Salman Khan have in common?
They all feature on the packaging of Yellow Diamond, a brand owned by home grown snacks manufacturer Prataap Snacks.
Now, you may not have heard of Prataap Snacks but the company is super popular. It created a lot of buzz when its IPO in September 2017 was oversubscribed 47 times!
So, what's behind its success?
🤫 The Secret to Prataap Snacks' Success
A lot of Indian snack manufacturers made it big by making traditional sweets and namkeens – think Haldiram’s, Bikaji, Bikanervala, or Gopal Namkeen. But Yellow Diamond, started by Amit Kumat in 2004, took a different approach. It started off with cheese balls and later started making chips. Why cheese balls?
You see, the company's founder Amit Kumat saw how popular these cheese balls were in bigger cities and realised that he could replicate them and sell them in Tier-2, Tier-3 cities like Indore, which the bigger snack brands had failed to penetrate.
And to do so, they had to appeal to the mentality of the Tier-2, Tier-3 consumer.
These consumers wanted more bang for their buck. So, brands like Lays, which offer more air than chips, didn't really become popular with them.
That's why when Yellow Diamond launched it resorted to increasing the quantity in its Rs. 5 packets to undercut their competition. In fact, even in their latest Annual Report, their ‘value for money’ positioning features as a key part of their strategy.
But appealing to customers alone cannot make a successful business. So, Yellow Diamond still faced a lot of challenges like finding retailers and distributors, setting up supply chain channels and so on. However, the company's founder was ready to deal with them. You see, it wasn't his first rodeo.
After returning from the Louisiana State University, Kumar came back to Indore and worked in marketing & distribution at Vardhan Namkeen. Keen to start out on his own, he failed thrice and lost all his money. But fourth time's the charm and he partnered with his brother Apoorva Kumat, and Arvind Mehta to launch Prakash Snacks (this brand was later incorporated into Prataap Snacks) , and its flagship brand Yellow Diamond.
Along with Indore, the new brand also decided to sell its wares in Delhi. But sending the products from Indore to Delhi would cost a bomb. To bring down this cost Kumat applied his street smarts: He saw that trucks carrying cars from Delhi to Indore were going back empty, and made use of this unused capacity to transport cheaply to Delhi.
In 2007, Prataap Snacks was set up, and Prakash Snacks merged with this new company. Thereon, Prataap started its steady rise – moving into Haryana, then Maharashtra, and later Assam.
🏅 Major Milestones
Prataap also acquired Avadh – a namkeen brand with a presence in Gujarat. In 2011, Sequoia invested $30 million in the company. Post this, the company started manufacturing salty snack rings, which didn't work in Delhi but became a super hit in the North East, opening up another major marker for the company. Prataap also became a large toy manufacturer – it puts toys in each of its rings packets. In 2016, it onboarded Salman Khan as its brand ambassador.
From struggling to find retailers and distributors in Delhi in 2004, to now boasting a revenue of Rs. 13,966.2 million, 5,200 distributors and 2.2 million retail touchpoints, the brand has come a long way. (Annual Reports 2022)
While it does sound like smooth sailing, this was hardly the case. Distribution can make or break a brand, and Prataap’s monumental efforts in making it one of its core strengths today cannot be understated. Prataap’s first venture into sweet snacks also failed. Retailers often hung these sweet packets outside in the hot sun, leading to these snacks spoiling fast. It's now venturing into the sweet snack space again with its brand Rich Feasts. Most recently, Covid has taken the wind from its sales, as both revenue and margins came under pressure.
This duress is on account of the fact that Prataap relies on Rs. 5 price point for a large part of its sales. The low price point allowed penetration into small towns and villages, and made packets an impulse buy. But with schools, and retail outlets shut during Covid, sales tanked.
To improve sales, Prataap Snacks is now focusing on sweets snack under its Rich Feast brand, and on higher price points in the namkeen segment.
Prataap Snacks had outlined key points in its business strategy in its FY21 report that ought to serve it well:
Using third party manufacturing to keep itself asset light and save money flexible. This also helps reduce capital expenditure (money that a company has to spend to set up new factories) and helps makes distribution easy because the company just finds third-party manufacturers in markets that it needs to supply to.
Continuing to offer value for money products
Optimising its network of distributors to improve logistics, trimming costs, and
Including higher margin sweet snacks in its portfolio.
These pointers have already helped grow Prataap Snacks' revenue by 19% in FY22.
And though, Prataap Snacks has a pretty small all-India market share, it is working pretty well in small pockets of the country. The company is a perfect example of a homegrown brand that dared to fight global giants and survived.
Written by Shanmukham SK, edited by Team ReadOn.
P.S. If you also want to contribute and write for ReadOn, email us at team@readon.in.
⚡In a line: Prataap Snacks has managed to achieve what very few do: take on global giants in a competition and survive.
💡Quick question: Would you like us to cover more such regional brands and their success/failure stories?
Share this with your friends via WhatsApp or Twitter and help us grow! See you tomorrow :)
You can also listen to our stories. Catch it on Spotify, Apple Podcast, Amazon Music, Google Podcasts, Gaana or Jio Saavn.
If you are coming here for the very first time: Don’t forget to join us on WhatsApp to get daily updates! 👇
Yes please cover more stories on regional and small brands. Business related aspects.