Arumugham Mahendran to take on Nestle, Cadbury with his start-up

The headquarters of Global Consumer Products Pvt Ltd (GCPL) is located in a new, yet-to-be-finished multi-storied complex in an old, central part of Bangalore. The office location is an apt metaphor for the ambitions of the company's founder, Arumugham Mahendran, an old hand in the fast-moving consumer goods industry who is building a new FMCG company from scratch.

Mahendran has impressive credentials over a three-decade-long career in the FMCG sector. He started Transelektra Domestic Products Ltd, which popularised the Good Knight and Hit brand of pest-control products, before selling it to Godrej Group and running it for them. He led the Godrej Group's joint venture with the US consumer goods company Sara Lee, the maker of Bryl creams and Kiwi polishes. He helped set up Aadhaar Retailing, a JV between Future Ventures and Godrej Agrovet, and was also on its board. And he ran Godrej Consumer Products Ltd from July 2010 till June 2013, during which period its revenues tripled to Rs 6,000 crore, mainly from integrating some other Godrej group companies but also from organic growth.

Clearly, Mahendran knows how to build and grow FMCG brands. And that's what he enjoys the most, especially when the brands are his own babies. "I have never believed in working for somebody," he says. "Even when I led several companies in the Godrej Group, it was always as a partner and never as an employee. So in that sense I have always been an entrepreneur, an 'intrapreneur' maybe, having stakes in all the companies I have helped build and run. Building brands, scaling brands is what excites me."

Mahendran, a qualified chartered accountant, set up GCPL six months after leaving Godrej Consumer. His great track record soon attracted global investors. Goldman Sachs and Mitsui Global Investment put in $50 million (Rs 315 crore) in GCPL in early 2014. While doing market research and planning the company's product portfolio over the next year, Mahendran built a team to lead the company. Anuradha Narasimhan, a Britannia veteran, was brought in as head of sales and marketing, Kamal Kumar Aggarwal was hired from Ferrero to head human resources and finance, while Ajay Kumar came from Cadbury to head R&D.

But why did Mahendran part ways with the Godrej Group? In fact, his decision to quit Godrej Consumer had surprised many at the time. He insists it was not that his relations with the Godrej Group had soured and points out that he remains on the board of group company Godrej Nature's Basket Ltd. The reason does not lie with Godrej Consumer but with Godrej Hershey Ltd, a joint venture of the Indian conglomerate and one of the world's best-known chocolate makers. Mahendran led this JV from May 2003 to October 2012 and played a key role in either buying or building the JV's local brands like Nutrine chocolates, Jumpin juices, and Sofit energy drinks. While running the JV, Mahendran felt frustrated that Hershey wasn't introducing its best-known brands like Hershey's Chocolate bars, Almond Joy , Mounds, Drops, Bliss, Kisses, and Nuggets into the country. "I felt that Hershey's at that point wasn't showing adequate urgency in bringing their brands into the fast-growing Indian market," he says.

So when Hershey decided to buy out Godrej in September 2012, Mahendran made up his mind to enter the segment independently, with chocolates being the first segment GCPL entered. It launched the LuvIt brand in May this year. "The chocolate market in India is estimated at Rs 7,000 crore and is growing at a healthy 20 per cent a year," he says, justifying the decision to enter the segment.

Launched only in South India for now, LuvIt has nine variants and 14 stock keeping units (SKUs in industry parlance) and is aimed at the 'masspremium segment' targeting the 15 to 30 years old. With alluring names like Dairy Rich, ChocWich, Caramelicious, Crazypops and Chocopops, LuvIt products are priced between Rs 5 and Rs 45. But LuvIt will have to compete with established market giants like Mondelez's Cadbury, Nestle's KitKat, Ferrero Rocher and Amul. Mahendran remains unfazed. "The market is so big and growing at such a pace, that there is room for everybody. I am confident of taking our share," he says. Mahendran says because of his past relationships with both conventional and modern trade, LuvIt has been rolled out by 150 distributors. "Our aim is to stabilise this first in South India, before launching it across the country over the next six to 12 months."

But taking on established giants such as Nestle and Cadbury won't be easy. Jessie Paul, who runs marketing advisory firm Paul Writer Strategic Advisory, points out that food and beverages is a growing sector in India, and so is a good space to invest in. "Most new successful launches, however, have been those that have an Indian twist like MTR, Maiyas, Hector Beverages (Paperboat), and even ITC Food's Bingo," he says. Paul adds that GCPL's advertising has positioned the LuvIt chocolate brand towards young adults rather than kids, and the celeb endorsement has helped it gain visibility. "Chocolate requires limited shelf space and is an easy impulse purchase, which is why perhaps they chose it as their first product. [But] I am not able to identify a differentiator for the product in terms of positioning, pricing or distribution. Once the beverages business kicks off, they will have a large enough portfolio of snacks to fight for distribution."

Mahendran, however, sounds confident that the product will prove to be the differentiator and says that GCPL has already built a good distribution network. To keep costs low, GCPL also has pursued an asset-light model where it works with partners for manufacturing and focuses its attention on distribution and brand building. "However, we have helped source the best global technology for our manufacturing partners," says Mahendran.

After chocolates, GCPL is now readying a portfolio of products to unveil over the next few quarters. It is planning to launch fruit juices (concentrate, nectar and pulp), packaged drinking water, flavoured milk, health drinks, ready-to-eat/cook products including noodles, and a variety of snacks. It is already selling packaged drinking water in Chennai and parts of Andhra Pradesh under 'Cherio' brand, and will slowly roll it out elsewhere. Mahendran says all beverages of the group will be sold under the 'Cherio' brand.

GCPL is aiming at a turnover of Rs 1,250 crore by 2020. The company is also open at making acquisitions to accelerate growth. "If there are some brands that fit into areas we want to be in, we will be the first bidders," he says. The targets, no doubt, are ambitious, and it remains to be seen whether Mahendran can pull off the difficult task of building another bouquet of successful brands. The odds seem to be in his favour. "What I do best is build great teams, help build brands."