“The most important aspect that entrepreneurs are focused on is to evolve their businesses with the rapidly changing landscape, triggered by the disruptions from COVID. Given the need for complete digitization, we must look towards more collaborative, solution-oriented approach to the challenges we are facing. During these trying times, it is critical to keep your teams motivated to not lose hope and rise to this challenge,” emphasizes Dr. Varun Chaudhary, Executive Director, CG Corp Global.
How are you prepared to break the Covid chain and sustain the business?
The unprecedented spread of COVID 19 saw governments declaring a lockdown to contain the further spread of the virus across the world. Being a provider of essential goods, some FMCG brands, specially the packaged food segment, took the paramount responsibility of ensuring continuity of supply of products through the different phases of lockdown in India. The sector has clocked the most phenomenal journey through these different phases and has now started witnessing a gradual but steady movement to almost normalcy.
During the initial phase when our operations almost came to a standstill, our business priorities were very clearly defined – Safety of our employees and ensuring our products reach the people of this nation. Like all other consumer giants, we implemented ‘Work from Home’ for roles that do not require employees to be physically present at their workplace and have been driving work digitally. As for our manufacturing workforce, we deployed stringent changes in standard operating procedures. Thermal scanning has been installed in each of our factories. Awareness campaigns are being driven to sensitize our employees as all employees have been trained to adapt the required measures such as wearing masks, social distancing, regular hygiene, and sanitization.
Given that the FMCG sector is labor intensive, labor availability was a major challenge in addition to the hampered distribution & supply chain. With the restriction in movement, we were unable to increase our capacity beyond 20% capacity utilization and were in constant touch with concerned authorities in different states to push for required permission of movement for our products. During that point in time, we were strategizing solutions to the best of our ability for each of the 10 manufacturing lines we have in India and were utilizing our stocks to ensure we can meet the market demands.
The relaxations announced by the government on 20th April provided support to address the various challenges being previously faced. Companies gradually resumed manufacturing operations as currently CG Foods has been able to increase the capacity utilization to 60-65%. Most FMCG brands have swiftly studied the external and internal environment to deploy innovative strategies aligned to the new reality. New trends are being initiated to serve the changing consumer needs and operational challenges. A prominent example would be exploring new ways of distribution via non-traditional groceries e-commerce platforms, who in turn have innovated to ensure no-contact delivery to consumers at their doorstep.
With good demand for consumer staples, the FMCG business is gradually coming back to normal. The sector is focused on intently studying the changing consumer behavior, look at long-term sustainable business strategies and turn this crisis around into an opportunity.
How do you view the scenario in the post-Covid era?
With the current pandemic completely changing both the business ecosystems and the consumer behavior, various changes in the food industry are visibly setting in. I believe that the new habits formed now will endure beyond crisis, permanently changing the lens through which consumers view products and brands. The convenience foods industry will come out stronger in the post Covid era. Noodles as a market has been growing in double digits and we expect it to continue the same, if not more. It is expected that the penetration of the category will increase faster across stratums and we would like to play a key role in the same.
Certain other trends that will dominate the industry include a rise in conscious consumption, whereby consumers will be more mindful of the products they are investing in with an ever-increasing focus on health. Furthermore, there will be higher demand for affordable convenience foods in the FMCG segment. Also, with more awareness and importance given to hygiene and safety, branding will enhance customer re-assurance and build loyalty. To manage isolation and ensure safety, consumers are moving to digital platforms to shop and connect, and they will continue doing so. Moving forward, we will also see an increase in virtual workforces as it will help companies reduce their expenditure while allowing people to work from the convenience of their homes.
Besides FMCG, you have a wide & varied portfolio. How did it all start? How does such a diversified portfolio shield you amid crisis or is it otherwise?
CG Foods is the FMCG vertical of CG Corp Global. WAI WAI was first introduced in India via exports in the 1990s. We started as a packet of Ready to Eat noodles loved by boarders and travelers which can be eaten raw and went on to making our way into the homes of more than 48 countries across the globe. Wai Wai travelled through the hearts and minds of college-going students, and its growth has been enhanced through word of mouth and its unique flavor.
We opened our first international noodle operation line in India in 2006 with a unit in Sikkim, which established a convenient supply network for the region. Wai Wai became an instant and massive success in North East India. Along with factories in our foothold North East India market (in Sikkim,Guwahati, Silchar), we have also set up units in Rudrapur (Uttarakhand), Chittoor (Andhra Pradesh) and Purnea (Bihar). We recently expanded our Silchar production line and set up a new factory in Rajasthan. Prior to the pandemic, all our factories operated at 95% capacity, which is a testimony of our India growth story. Already having established ourselves as a market leader in most of the North East regions, we are now focusing on expansion in Southern and Western India to increase our market penetration.
Today, we have manufacturing plants based in Nepal, India, Serbia, Kazakhstan and Bangladesh and own 3% of the global market share in the noodle segment as we work towards becoming a leader in the segment. CG Food expansion and global growth have been continued by CAGR 12%.
CG Food Nepal is one of the largest Noodle Production Centre in the South East Asia Region. Currently, CG foods Nepal portfolio consists of more than 20 flavors of noodles, extruded snacks, potato chips, fried snacks, chocolate enrobed wafer, beer, juice, bottled water and cigarette.
Having a diverse FMCG portfolio is definitely an added advantage during this pandemic, given we have the flexibility to focus on products that are more in demand and distribute the revenues to sustain our other business.
Where do you think will be the key challenges and how will companies tackle them?
Apart from the logistical challenges faced by the FMCG sector collectively, the major shift in the consumer behavior is a critical change that needs to be strategically dealt with. Eating out will be almost non-existent for a while at-least. This will mean a rise in eating at home, which will lead to an increase in the demand for convenience food.
However, there will be a possible fatigue factor in the existing product portfolio available in the market, which will lead to the need to innovate variants, flavors, and new products. To ensure this demand is met without having the luxury of moving out in the lockdown will be a challenge. Products with a diverse range are likely to gain from this shift in consumer behavior. We have a large portfolio of noodles under the CG Foods brand in India, which caters to the diverse taste preferences of our consumers across regions.
Operating in international borders, what are the inherent challenges you see and how do you manage them?
Having manufacturing units established in multiple countries across the world is challenging in times of COVID. Managing our internal processes within the factory is not an issue given we are a mature company with predefined manufacturing protocols. The challenge in this regard is that every country has deployed different set of rules form businesses, to mitigate the spread of the pandemic. For example, in Serbia it is relatively easy to ensure continuity given they never declared a complete lockdown. Hence, in every country, the set of challenges we face for raw material procurement, labor availability and logistics is different given rise to varying impacts. We are strategizing ways to overcome the issues on a case to case basis while adopting to the changing circumstances in lieu of government directives. Our focus is on optimizing the production and distribution.
What has been your distribution strategy and how will it change now?
The food supply chain is a complex ecosystem, which requires the coordinated functioning of various elements such as the raw material suppliers, producers, transportation, storage, distribution, etc. With the unprecedented spread of COVID 19 and the stern measures being taken to curb the spread, there are innumerable ways in which this ecosystem is getting impacted.
Logistical challenges are making life difficult for most FMCG players in terms of distribution. Having said that, the situation in last 15 days is far better than the previous 45 - 50 days of the lockdown. Transportation is available, though costlier. Even within the city, there were roadblocks, restrictions on movement, grocers shop timings, etc., which is easing off quite a bit as we come to the end of the 4th lockdown period and move towards staggered phase wise lifting of the lockdown.
We, as have many others, taken the route to e-commerce. It’s a very small part of the FMCG business currently. These channels have typically been small for us till now, but we see a big opportunity in the same in the coming months/years. Amazon and Flipkart have also joined the grocery part of the business in a more serious way.
FMCG companies continue to grapple with logistical challenges as we try to meet with the market demands and resume supply of goods. There are no shortcuts here. Every factory location had its own set of challenges, which commonly involves labor availability and coordination/permissions from the local authorities. We have continually been engaging with the local authorities with lengthy internal communications to address our challenges and the situation has improved now.
What are crucial learnings that you have gained during such trying times?
Having a debt free organization has been the biggest blessing for us as I believe that debt free companies will come out of this crisis better. This pandemic has forced us to re-look at the cost structures more closely. A lot of strategizing is being dedicated on how to manage the costs more efficiently. That being said, the strength of every organization is its employee force and a crisis does tend to bring people together. Our teams have come together and displayed a sense of urgency in responding to every crisis – be it at the factories, or logistics or sales. I am so proud of the way my teams have supported each other as they unite and take complete ownership to manage the situation on an hour to hour basis. There was a strong ‘can do’ spirit and bias for action. Also, the lockdown across countries forced companies to adapt to a new method of working, which is going digital. As the world has discovered over the past few months, this method has turned out to be an effective way of operating without having to travel across countries for business.
What are the aspects that entrepreneurs need to be cautious about?
The most important aspect that entrepreneurs are focused on is to evolve their businesses with the rapidly changing landscape, triggered by the disruptions from COVID. Given the need for complete digitization, we must look towards more collaborative, solution oriented approach to the challenges we are facing. During these trying times, it is critical to keep your teams motivated to not lose hope and rise to this challenge. Also, as the governments are gradually increasing flexibility and we come to the realization that we need to live with COVID to sustain the economic machinery, we must, as business leaders, be extremely cautious of the safety protocols deployed in our companies. Also, we must focus on studying our environment to understand the changes that are underway in our employees, government legislation, customers, and business ecosystem. Our approach must be aligned to these fast moving changes to sustain and ensure business continuity.
What would be your advice to new age entrepreneurs who are worried about their future in such trying times?
The new age entrepreneurs will need to be prepared to change modules overnight. In fact, I believe, opportunities to capitalize on the rampant disruption are going to peak, whereby start-ups are going to be flooded with ideas as they lead the way. However, they will need to be agile and open to new business module evolutions. Another important aspect that needs to be focused on is brand building during this period – this is the ideal time to connect with consumers with relatable online content and offerings. This approach will go a long way in building consumer trust, impacting their purchasing behavior and thereby building a solid brand story. We are faced with a crisis that has no blueprint that will help us navigate our way through. Today, the new age entrepreneurs and seasoned businessmen as well need to adopt flexibility, resilience and courage to work together across all businesses and make this our finest hour.
Earlier we used to talk about globalization of businesses. Looking at the current scenario, companies are toiling with the idea of strong localization. What are your thoughts on this?
Even before the pandemic, our international business approach has been ‘Glocalization’, which means to think global and act local. The spread of the pandemic has more so given rise to a growing love for local products. This shift in consumer behavior is reflected both in the products they are buying and the way they are shopping. Also, with safety becoming the new luxury, home grown products instead of imported products is the logical choice dominating the market.
India, for many foreign business groups, is no less than a continent in itself with the diverse culture, complex regional preferences, climatic conditions and varied palate offerings. In this regard, CG Foods India has a very localized portfolio, whereby our flavors and offerings are customized in accordance to the preferences of a given market/region. Also, with the hon’ble PM Narendra Modi, recently having addressed the nation and encouraging increased consumption of locally manufactured products, CG Foods, as a brand, is fully aligned to the ‘Make in India’ initiative. We have a strong manufacturing footprint of 7 plants strategically spread from North to South India to cater to the local markets. On these lines, there is a fond saying that resonates with my sales teams ‘Anokha aur best, WAI WAI hai India ka taste’.
How do you foresee changes in the way supply chains are being operated?
FMCG companies continue battling supply constrains along with the struggle to meet with market demand. With our traditional supply chains being hampered, we are breaking away from the traditional routes and looking at new strategies to ensure continued supply. CG Foods is deploying new strategies to ensure uninterrupted supply of products to our consumers such as collaboration with e-commerce platforms. E-commerce platforms are emerging as a solution to directly service consumers without making them step out of homes, thereby complying with the rules of lockdown. Recognizing this, CG Foods has partnered with popular online delivery service providers of the country namely Swiggy, Bigbasket & Flipkart, to make our products easily available. We have been able to supply about 60%-65% of the average in last few weeks and are growing better by the day.
Can you cite one of the most successful business stories that hold true in current times as well?
In the current case scenario with COVID changing the way business ecosystem works, the brands that will clock successful stories are the ones that are quickly adapting to the changes and making themselves relevant. Given CG is collaborating with e-commerce platforms that are proving to be the most preferred medium for consumers, there are a few brands in this pace that are truly innovating their business approach. For example, DMart has started doorstep delivery across all their 200 stores in a noticeably short span of time. This step will help them ensure continuity of business given the uncertainty of when stores will see normalcy in consumers coming in physically to buy goods at a store.
Furthermore, another name that has impressively created a strong brand story for itself is Dunzo. The delivery App that specializes in pick up and drops has quickly adapted to the situation and started digital brand stores.