Vinita Bali on the Importance of Diversification for SMEs : Emerging India Awards 2015

Summary

In the 10th edition of the 'Emerging India' series, industry experts discuss the challenges and opportunities of SME diversification in India. Former MD of Britannia, Vinita Bali, emphasizes the importance of strengthening core business before diversifying. Muna Paya from ID Fresh Foods shares insights on the company's growth and cautious approach to diversification, focusing on fresh products without preservatives. The conversation highlights the need for SMEs to assess their financial leverage, market opportunities, and core competencies before expanding into new areas.

Takeaways

• 🌟 The 10th edition of the Emerging India series focuses on the contributions of SMEs to the Indian economy and the importance of diversification for business growth.
• 📈 Diversification can be a strategic move for SMEs to build stability against market volatility and stay competitive, but it also comes with the risk of losing focus on core business.
• 🚀 Vinita Bali, former MD of Britannia, emphasizes the importance of strengthening a company's core business before considering diversification into new segments.
• 🛑 Bali suggests that SMEs should first focus on penetrating their existing markets deeply before expanding into new areas, as most markets in India are under-marketed and underserved.
• 💡 Muna Paya from ID Fresh Foods discusses the company's growth and its strategy to diversify within the fresh food category, aligning with their brand philosophy of providing hygienic and fresh products.
• 📊 ID Fresh Foods has experienced significant growth, with a 9-10% month-on-month increase, and has strategically diversified into products like wheat Paras and mini meals while staying true to their core offerings.
• 🔍 The conversation highlights the challenges SMEs face in deciding whether to extend their current portfolio or establish a new one to meet the demands of new markets.
• 🔑 Bali advises SMEs to exhaust growth opportunities in their current product-market segment before considering diversification and to be cautious about spreading resources too thin.
• 📍 Geographic diversification is presented as a viable strategy for SMEs, especially for companies like ID Fresh Foods that have a strong brand presence in specific regions but are not yet nationwide.
• 🛍️ Direct-to-home (DTH) distribution is identified as a potential channel for growth, allowing companies to maintain the freshness of their products and cater to consumer preferences for minimal preservatives.
• 🚧 Bali concludes with advice for SMEs to define and communicate their brand DNA clearly, replicate successes in new markets, and explore product and geographic extensions that complement their core competencies.

Q & A

What is the focus of the 10th edition of the Emerging India series?

The focus is on the contributions of SMEs to the Indian economy and the discussion of issues faced by SMEs in India, particularly the need for diversification as a strategy for scaling up and expanding their businesses.

Who is Vinita Bali and what is her significance in the context of this discussion?

Vinita Bali is the former MD of Britannia and the first woman to head a major consumer goods company in India. She has played a crucial role in building major brands and is now a non-executive director of global boards, making her an industry stalwart with valuable insights on business diversification.

What is the primary advice given by Vinita Bali to SMEs in India regarding market gaps?

Vinita Bali advises SMEs to strengthen their core business if they have identified a market gap they believe they can cater to, rather than diversifying into a completely new segment with a new product.

What is the business model of ID Fresh Foods and how did it start?

ID Fresh Foods started in 2005 by PC Mustafa and his cousins, focusing on providing fresh and hygienic food products. The idea originated from the need for a hygienic alternative to the traditional method of selling batter in polythene bags.

How is ID Fresh Foods performing in terms of growth and market presence?

ID Fresh Foods is growing rapidly, with a year-on-year growth rate of around 24% in the ready-to-cook segment, and their growth rate is three times that number. They have a presence in various cities across India and are expanding in the UAE and other Gulf countries.

What is the flagship product of ID Fresh Foods and what diversification steps has the company taken?

The flagship product of ID Fresh Foods is their idly and Dosa batter. The company has diversified into other categories like wheat-based Paras, mini meals, and junior Pera, all while maintaining their brand philosophy of offering fresh products without preservatives, chemicals, or additives.

What challenges does ID Fresh Foods face in terms of product diversification?

ID Fresh Foods faces the challenge of understanding whether to extend their existing portfolio or establish a new one to address the needs of newer markets without compromising their brand philosophy of offering fresh products.

What is Muna Paya's perspective on diversification for SMEs?

Muna Paya believes that diversification should be considered by SMEs only after they have meaningfully and profitably exhausted growth opportunities in their current product market segment.

What are the key points Vinita Bali suggests for SMEs looking to diversify?

Vinita Bali suggests that SMEs should first strengthen their core business, create an enduring and sustainable business model, look at adjacencies around the core, and only consider diversification into new products or markets after serving the initial market well.

What is the potential of the value-added dairy space for a company like ID Fresh Foods, according to the discussion?

While the value-added dairy space is large and exciting, Vinita Bali questions why ID Fresh Foods would consider entering this space when there is significant room for growth in their current business, suggesting they should focus on strengthening and expanding their core offerings first.

What is the view on direct-to-home (DTH) distribution as a diversification strategy for ID Fresh Foods?

The view is that DTH could be an interesting avenue for ID Fresh Foods to explore, especially in markets where they have already established a brand, as it aligns with their promise of freshness and could cater to consumers' desire for products made recently, similar to homemade batter.