Business Opportunity in Ethnic Fast Food Industry – Goli Vadapav No.1

Introduction

The fast food industry in India has evolved with the changing lifestyles of the young Indian population. The sheer variety of gastronomic preferences across the regions, hereditary or acquired, has brought about different modules across the country. It may take some time for the local enterprise to mature to the level of international players in the field.

Many of the traditional dishes have been adapted to suit the emerging fast food outlets. The basic adaptation is to decrease the processing and serving time. For example, if we talk about a south Indian restaurant, the typical meal which is called for being served by an ever alert attendant is now offered as a Mini-Meal across the counter. In its traditional version, a plate or a banana leaf was first laid down on the floor or table. Several helpers then waited on the diner, doling out different dishes and refilling as they got over in the plate.

In the fast food version, a plate already arranged with a variety of cooked vegetables and curries along with a fixed quantity of rice and Indian flatbreads, is handed out across the counter against a prepaid coupon. The curries and bread's, vary depending on the region and local preferences. The higher priced ones may add a sweet or dessert to the combination. Refills are generally not offered.

The Challenge

Multinational fast-food restaurants may have taken over most shopping malls and local markets, as you see most of the crowd especially youth going move to the fast growing eatery chains like McDonald's, Pizza Hut and KFC's. As all the mentioned outlets serve different varieties of fast foods, are usually hit with consumers but our own Indian foods were not able to penetrate the same competition. However, one must not be surprised to find the "Desi tadka" (domestic flavour) the latest eatery that opens in your plush neighbourhood sells traditional items such as Vada-pav's, Kaati rolls, Kulfi's and Tikka's. But there is an ever existing challenge posed to this newly growing category of outlet chain and that is the road-side vendors offering the low-cost version of the same product, resulting in intruding into the niche these ethnic fast food chains are trying to create for themselves. So, these food chains at one end need to fight with the International flavours which is attracting more westernized brand-savvy youth than it ever used to and on the other hand the local road-side vendors which it need to fight with constantly when it comes to pricing and try to keep themselves efficient.

Taking on the McDonald's, Pizza Huts and KFCs in the marketplace across the country, is a bench of ethnic fast-food chains such as Jumbo King and Goli Wada Pav of Mumbai, Kaati Zone of Bangalore, Ashrafilal Kulfi and Honest Pav Bhaji of Ahmadabad.

The diversity of Indian cuisine poses logistical problems when it comes to handling. Hence it is common to serve different cuisines at different counters within the same premises. Presence of a large vegetarian population, who eschew non-vegetarian food, has given rise to outlets which exclusively serve vegetarian fast food. The other challenge in Indian context is that customers prefer to see the food getting cooked behind the serving counter; visible to them which poses a challenge to the efficient running of business. People in India prefer McDonald over Indian fast, food outlets due to the assurance in the consistency and of the taste it maintains all over India.

As it was quite visible from the success of McDonald and Subway in India that "anything between the bun sells" and the so called 'Pav' (Indian version of bun), was readily available on the streets of Mumbai, the initial challenge with Goli Vada-pav was to ensure that the product is hygienic and clean.

There were numerous challenges in front of "Goli Vada-Pav" when it started it business operations. As Vada was a perishable item and do not have a shelf life due to bacterial growth, so there were huge chances of wastage of a remaining quantity of Vada which do not get sold by the end of the day. There were also chances of pilferages of the Vada at the store level which company could never come to know. Another big challenge was the product standardization in terms of taste and food safety laws, as there was fear that as you go from one place to another the taste of the product itself is liable to change according to the local conditions, so a customer from Mumbai, lets say walk into a store of Chennai will not get the same product taste in Chennai which he tasted in Mumbai and would be expecting from a branded product. Price fluctuation of raw material and chef based operations were also some other challenges which Goli owners needed to deal with before establishing it as a brand in the market. In this way there is very less human contact with the product

History

Goli Vada-pav which has proved to be an innovation in ethnic fast food industry and was founded by Mr. S. Venkatesh Iyer and Mr. Shivadas Menon was incorporated with the idea of creating an ethnic fast food chain offering the humble good old Vada-pav in hygienic ambience at economic pricing. Goli Vada-pav identified the opportunity in Indian context and came up with its innovation in ethnic fast food. It started with the mission to provide standardised ethnic fast food in clean and hygienic conditions to mobile Indian masses at economic pricing and with the vision to create ethnic Indian brand in fast food industry, to create fast food entrepreneurs across India, to provide certified career opportunities.

Emphasising on need to create 'desi' brands, Iyer said,

"I remember my neighbour, a vice-president of Kellogg's, who quit his job after many years. He used to say that no matter what foreign food brand an Indian may use he would eat only ethnic or desi food. These things triggered our venture. A Vada-pav is a 100 per cent desi food, which can be eaten on the go...

Also, there was story behind the naming the venture 'Goli'. Nobody took Venkatesh Iyer, a finance professional, seriously when he told his friends of the plans of quitting his job and starting his own Vada-pav business. They jokingly accused him of giving them a 'goli' (a local word used for ditching). That's where Iyer's Vada-pav business got its first identity from.

The innovation made by Goli Vada-pav in its product line and the franchisee model are the key supporting factors which are aligned to the vision of the company. The management philosophy of choosing the Vada-pav as the primary product offering was the opportunity in this category seeing the popularity of Vada-pav in Mumbai and other regions of Maharashtra as equivalent to popularity of bollywood industry among Indian population and infact even people from other state were recognizing Vada-pav as a staple snack and speciality of Mumbai. The thought which added onto this factor was if they are able to reach nearly half of 100 crores population selling Vada-pav at 10 rupees, it could provide an potential of 500 crores revenue. If people eat on an average 10 Vada-pavs in an year there could be an opportunity of 5000 crore rupees from same segment and so on. "Goli" was coined as the brand name, so as to provide a feel of being an Indian brand. Also as the company initially started in Mumbai, so it picked up the Mumbai lingo "Goli". Its first store started in Kalyan, a far-off suburb of Mumbai, in Feb 2004.

Commenting on the origins of Goli Vada-pav Iyer commented that the business saw a modest start in the form of a tea shop. He added...

"It was a small outlet with around 200 square feet (sq ft) of space. We started selling Vadas and tea with other snacks like samosas. Initially, we faced many challenges, such as huge wastage, pilferage and quality issues,..."

The company success can be judged from the fact that within 10-15 months duration, it was able to expand from 10 stores to 70 stores. Company employees nearly 50-55 employees only in Head office but at the same time it has a workforce of 350 odd employees in franchisee model.

Business Model

Starting with its operations in early 2004 with the concept of single 'Quick service restaurant', it cashed in on business by adding the differentiating feature in the India's very own fast food i.e. Vada-pav with different fillings innovating the same to provide enriched experience as well as nutritional benefits of having a Vada-pav in comparison to road-side vendor. Also, the products are made in fully automated 'HACCP' certified hands free plant.

It chose Vada-pav as the sole product for its business innovation due to certain advantages like this being a finger food i.e. no plates, no spoons, no tables; no chairs required which saves the fixed asset investment in the business. Vada-pav is also a mobile food which one can eat while walking, talking, standing, travelling, shopping etc., a universal appeal to it with the type of ingredient like potato, wheat and spices and this being food for the masses. Also this was among some of the fast foods where the product is easy to prepare in a short span of time. This product is made up of potato and wheat which has a universal appeal and contains "besan" (Gram flour) and spices as the other ingredient which adds the ethnic appeal to the product. Product prices vary within the range of 10-25 rupees according to the variety of Vada-Pav offered.

Goli Vada-pav tried to bring in the consistent flavour to its product by inspiring its supply chain from the McDonald way of maintaining consistency. The filling inside the pav, better known as Goli to its customers, is centrally prepared in Mumbai and reaches half-baked to its various stores which are popularly named as "Goli Vada-pav No.1" across Maharashtra to provide the same taste to its customers wherever they might be. The Pav or the Indian bread is procured from individual city's for all the stores located in a particular city.

Goli product differentiation strategy was through the variety of Vadas it use' to make the product, in comparison to its competitors ranging from high-end food joints like McDonald's, Pizza hut etc. to low end competitors like local Vendors, Railway Platform Vendors, Desi Vada-pav, Joshi Vada-pav et al. The reason for the competition from High-end International brand was the franchisee location of the Goli stores where these players were found to be present and low end competition was the high proliferation of road-side vendors and more and more ethnic fast food chains entering into this segment due to availability of market gap.

Solution

In case of Indian food industry, it is the product which is the most important business differentiator. Whether we look into the fast selling Indian snacks brands like "Haldiram" or fast selling product "Lays" potato wafers, it is still the product, its material and the technology which goes into manufacturing the product which differentiates it and provides it a price edge above any local counterpart. Goli also thought in same direction and the first steps which Goli implemented were in the direction to improve on the product quality above all the offerings made to customer.

Company tried to do material experiments with various technologies like Ultra violet rays, Nitrogen Gas Chambers and blast chill refrigeration so as to increase the shelf life of the product but all in vain. Soon the company started loosing on funds on experimentation and they were looking for insight from someone expert in the industry. The promoters of the company approached McDonald and OSI Inc. for technology insights.

OSI is the backend company of McDonald worldwide and they are partners for supply chain for the past 40 years world-wide. OSI was established in 1928 in food business as OTTO and sons, and in 1955 it forged a partnership with McDonalds for food processing and supplies as an exclusive suppliers to McDonalds. OSI has evolved into one of the largest private food processing corporation in the world. It has presence in 33 countries worldwide. OSI Inc. is held in high regard throughout the food service industry for its manufacturing efficiency, product innovation, dedicated customer service, and commitment to food safety. OSI Inc. OSI Inc. saw the presentation and then it happened that OSI Inc. came back to Goli after couple of months and told them that they would like to go in partnership with the company. As OSI identified the potential of the business Goli Vada-pav was into at that point of time and was already having spare capacity at their plant and this gave Goli an opportunity to be their partners.

Company went into partnership with OSI Inc. and then the Vada making process (Exhibit 1) started happening in Vista Processes Foods Pvt. Ltd. 's fully automated HACCP (Hazard Analysis and Critical Control Point) certified hands free plant of Vista. Some of the advantages company achieved was increased shelf life of Vada from 1 day to 90 days when stored at -18 degrees Celsius resulting into elimination of wastage at store level, standardization of the product to a large extent, cleaner product. Along with this also came the benefit of ability to track each and every packet sent to the stores and not only it can be traced back to the batch in which it was prepared but also up to the farmer from where the raw material was sourced. Each and every packet of the Golis (i.e. Vadas) sent to the stores in the cartons in the reefer van have a batch number, manufacturing date and expiry date clearly mentioned on the packet. Golis are sent to stores all over the country in reefer vans. Pav was procured locally from the bakeries as it was not economical to manufacture and transport the pav from a central place to different parts of India and also it was something which people liked to have fresh and not something preserved for days. Company also made some innovations at store level with temperature controlled heaters and deep chillers which also reduced heavy dependency on labor. Frying was made simpler with those innovative initiatives. The major difference between a road-side vendor of Vada-pav and the company was the cleanliness the product had, appropriate packaging of the Vada-pav given to customers and the courteous behavior of nicely uniformed store employees.

Manufacturing operations

There is a automated process for every step: slicing, peeling, dicing, sealing, packing and delivering the Vada-pav. There is a quality check and control at every milestone. The Vadas are frozen at -18 degree Celsius and packed and sent to the outlets. As Vada is made in Vista plant, it involves first washing of the sourced potato to remove the foreign particles and then peeling potatoes; once potatoes are peeled they are diced into cubes, and then blanched at 100 deg Celsius and sorted and then smashed to form wet potato mash. This potato mash is mixed with 'Thecha' (a kind of chutney specially used as ingredient in Vada). Once potato mash and 'Thecha' are thoroughly mixed, patties are made according to the specified shapes and sizes. Patties are then dipped in "besan" (Gram Flour) batter which is prepared by mixing with water and soda as per recipe provided by Goli kitchen. The patties are parfried for 30 seconds and then blast frozen at -18 deg Celsius for 1 hour. Then each finished patty or better known as Vada is sorted and counted to pack in quantities of 22 each in a plastic bag. Then bags are weighed and passed through metal detector to ensure if patties have not engulfed any metallic particles during Vada making process and is good to consume by the consumers. Once ensured, these bags are packed in cartons with each carton containing 12 packets each. Again filled carton is weighed to specify same on the packed carton. After this is done, carton is sealed and stored at -18 deg Celsius in cold room. The machines which produce Vada for the company have a capacity to produce 100,000 Vadas in a single batch of production. And each packet has batch Number, manufacturing date and expiry date mentioned on it.

Sourcing and Distribution

Potatoes are sourced directly from farmers and then sent to Vista's HACCP(Hazard Analysis and Critical Control Point) certified hands free plant where it is processed to form Vadas. As per the schedule given by company, frozen Vadas packed in cartons are sent through Reefer van to 'Goli Kitchen' which is also a cold room where it is again stored till the time it is need to be sent to Goli stores across country. All the reefer vans are owned by the company itself. Pav being a fresh item and requiring moisture content can neither be stored for long time nor can be manufactured centrally like Vadas. Also, pav is not a costly part of the product as Vada is, so it is locally sourced from the bakers in the city where stores are located. For example, in case of Bangalore stores , pav is sourced from local vendors like ITC in Bangalore. In the kitchen, chefs from five-star hotels and street carts of Mumbai rub shoulders, lending Goli a uniqueness that sets it apart from its competitors.

Franchisee Operations

When company envisioned undergoing an expansion mode to reach a target of 300 stores in 3 months but it was not easy to setup a new store in Mumbai due to booming real estate prices in Mumbai. So, they came up with idea of collaborating with rented roadside "Aarey" kiosks (kiosk used to sell milk in the morning and are generally closed after couple of morning hours) to convert them into their Vada-pav stores. With this collaboration, company was able to create 150 Vada-pav kiosks in two months. The kiosk were present in most crowded locations of the city to attract high footfalls like Nariman point, Gateway of India, Balkeshwar Peddar Road etc. With financial support from ADB and ICICI Bank they were able to rejuvenate the existing stores and introduce new stores. As the company expanded its presence in Mumbai, it faced political issues from the city and financial issues inside the company. Due to these factors, company found it suitable to move its presence to tier2 cities of Maharashtra by using a franchisee model of expansion and hence quickly opened a chain of 75 stores in 18 months in Nashik, Aurangabad, Jalna, Nanded, Dhulia, Jalgaon, Ahmednagar, Latur, Beed, Jalna, Parbhani, Nagpur without needing to invest capital and manpower at the stores from company end. Infact, all the investment in architecture and interior was put up the store franchisee itself and company was only responsible for sending the standard product from its Joint Venture plant. And then, company started making its store presence in cities in southern part of India like Bangalore (Koramangala, Jayanagar), Chennai and Hyderabad which has a cosmopolitan population that likes to explore new options when it comes to eat out. At present, company has outlets in 75 different locations in the country. The franchisee usually invests in the infrastructure and machinery. Company works with franchise on the basis of Transfer price model wherein raw material is given by company to the franchisee at nominal rate.

Any person who wishes to own and operate fast food business like Goli Vada-Pav, must own an establishment in a prime commercial location, area ranging from 100 sq.ft. to 300 sq.ft. near railway station, bus depot, market, schools, colleges and coaching classes or any busy locality with high foot falls. It could take the potential franchisee upto Rs. 7 lakhs as setup and infrastructure investment. Goli Vada-Pav in turn offered the franchisee security of being a part of successful fast food chain and looks into the purchasing, manufacturing, logistics, trained manpower and marketing of the unit. The franchisee enjoys the privilege of economies of bulk purchasing and mass marketing provided by the company. The employees working in the franchisee stores are first trained by the company and are transferred from one location to another based on their expertise and requirements of particular store.

As per one of the employee working in a Pune store,

..I worked initially in Mumbai store in my Initial stages of employment but since then I have been transferred from one location in Mumbai to another and also have worked through many of the stores in Pune subsequently.

Employees are paid directly by the company and store owner has to share the profits with the company which go into the day-to-day operational expenses, manpower deployed, ingredients etc.

Marketing

When Goli started with its business operations, being a small company it didn't had cash reserves to put up on advertising and branding. So, the strategy adopted by the company was to utilize the popularity of the name "Vada-pav" and to reap benefits from the same, in the initial stages their stores' shopboards had Goli written in small font and Vada-pav in bigger font. As people started coming to Goli stores to eat Vada-pav, they in turn started recognizing the "Goli" as a brand name. Goli gave a very unique look to one of its brand element, the logo of the company. The logo has very unique color scheme wherein Red signifies the hotness of the product, white signifies the cleanliness which the company wanted to bring into the business and Green signifies the spiciness of the product. The Goli mascot, a man with a topi and mustache, symbolises the chain's 'desiness', taken with a pinch of Maharashtrian style. Goli interiors consisted of using red and white combination of tiles for the interiors of the store which people started to associate with "Goli" brand name.

As it is rightly said that a brand building starts with a PR exercise and companies do spend a lot of money to do the same but Goli again was an exception. As Vada-pav itself was a household name in Maharashtra and used to be associated with typical Mumbai food by masses all over the country, so, as soon as Goli started innovating in this category, press started taking interest in this company and it followed with a number of articles in dailies/supplements from various local and national newspapers.

Brand Goli Initiatives

To create the brand "Goli", company has always stressed upon its association with youth targeting customer segment falling in age group from 10-35 years, as a time passes, food which can be eaten by customer as and when he feels like with a small appetite. Goli also associated itself with the fun which one gets while enjoying life and association with Mumbai and bollywood. The company started engaging customers with social media by ensuring its presence over social networking sites like facebook, twitter etc. It started engaging youth with social media by ensuring its presence over social networking sites like facebook, twitter etc. Infact, to associate with all the elements related to current generation, it put up page in facebook targeting youth on facebook by creating various categories on its facebook wall like Goli gyan, Garam goli, Goli gossip, Aaj ka Goli providing them the platform to discuss and in turn identifying the brand "Goli". The company also came up with slogans like "Vada-pav+ cutting chai+aamchi Mumbai = awesomeness".

To go to the masses, on Ganesha festival "Ganesha Chaturthi", it made a huge Vadapav base over which Ganesha idol was kept and huge procession took place and it was called as "Goli Ganpati". It also made some music compositions with "Goli" as the centre of attraction and played the same at their stores so that people who come to those stores to eat Vada pav or pass by could associate with the brand name "Goli". Also, company gave CDs to Auto drivers to play it in their Auto while they are driving and played CDs in Ganpati mandals so as to spread brand awareness among the masses. It also organized rock shows where it played its music CDs and distributed prizes to the best dancers in the competition. Company also started with putting slogans like "Goli Goli Goli... Vadapav Goli" during the train schedule announcements at Mumbai local railway stations.

The owner of the company, Mr. Venketesh Iyer also started with blogging on www.Vada-pavmurmurings.wordpress.com cooking up various humorous stories which amused people and started engaging them with Goli Vada-pav.

Conclusion

Goli Vada-pav in Mumbai has the distinction of being the only kind of machine-made Vada-pav that is standardised and has a shelf life of nine months. Company on an average sells 1000-1250 Vadas per day per store. And it employs in total approximately 250-350 people at various locations all over the country. The success of the company can be counted from the fact that in one of the store in Dhulia, store sold nearly 3000-3500 Vada-pav in a single day which translated into a turnover of 50,000 rupees.

Whereas initially they spent more energy on quality, research on water content of potato, tying-up with tech firms and standardizing other processes, today, while their backend is stabilized, Goli's focus remains on marketing and expanding their reach.

Road Ahead

Today, in year 2010, the company has turned into a brand with an annual turnover of Rs 10-12 crore, with outlets over the country, selling more than 1.5 crores of Vada-pav everyday. It hopes to double the figure this fiscal. "We plan to add another 50 outlets this year. Our revenue target for the next five years is Rs 180 crore, and presence expanded to 500 outlets. We are also planning outlets overseas. Our Vadas can be shipped to any place in the world" Mr. Venkatesh said.

Goli is all set to experiment with a couple of other formats, too. "We plan to get into small kiosks of size 75 sq ft with one staff manning it and serving just one product - Vada-pav. In the next five years, we plan to set up 1,000 to 1,500 of these outlets. The other format would be large outlets in the size of 1,000 to 4,000 sq ft with a staff size of 10 to 12 manning it. These would serve 11 to 12 of the products," he said.

Venkatesh plans to add pav bhaji to the dinner menu in the coming days.

"In the mornings we have sandwiches or bread bhaji with tea as people don't prefer fried stuff. Similarly, in the evenings the pav bhaji would attract a number of people," he said.