A few days back, our Sales officer from Udupi quit within two weeks of joining because working 8 hours a day was not feasible for him. Today, I met Mr. Mahalingeshwara Bhat, Area Sales Manager at Jyothy Labs Ltd., in the Mangaluru market. He narrated his story, which inspired me to write this post. We met for hardly five minutes, but his experience gave me a lot of wisdom.
He is now 55, past his company’s retirement age. He has maintained his fitness levels to work in the market after travelling for an hour from Puttur. Working in the market, walking, and talking are physically demanding.

Jyothy Labs may be a blue-chip company with billion-dollar revenue now, but it was a small company when he joined in 1990. He is financially well off now, but his salary was 1,000 per month at the time of joining. His father was a small-time cook. He and his company stuck to each other and grew together.
He worked for 32+ years and carried the brand he worked for wherever he went. His friends used to call him Ujala Bhatru. He feels proud about it. Nowadays, employees feel ashamed to wear work uniforms outside work and don’t like to associate them with the company/brand outside work.

He was responsible for setting up the market in Gujarat in early 2000, recruiting and training sales staff, and appointing super stockists and distributors. It is far from his native place, and he hardly gets to travel back and meet family. He didn’t even see his newly born son for a couple of months. Still, he is happy about the opportunity and responsibility the company has given him. It took him figuratively and literally to places. These days, employees consider travelling beyond their office beyond their scope.
During the 2002 Gujarat riots, he was locked in a lodging for three days without food, and then the lodging owner provided food prepared at his home. He didn’t get angry with the company for the situation he was in. He understood that it was an external situation beyond his or the company’s control.

He has grown slowly and steadily within the company and its content. Being content with what we have is the actual recipe for happiness. He must have seen people much younger than him, with Engineering or MBA degrees from premier institutes, get into higher positions or draw higher salaries. He must have seen colleagues jump across companies and get short-term growth. He must have seen various types of bosses during his long career.
He still feels grateful to the company for providing his daily bread and for all the progress he has made in his life. He is very right to think that he got his bread for the effort he has put into the company’s business.
Though we cannot expect the present generation of employees to work like the earlier generation, observing how it was earlier is worthwhile.

Disclosure –
Murali M, Operations Head, is his wife’s younger brother.
Tharanatha S, ASM, reported to him 10 years back while working at Jyothy.

We are incredibly pleased to announce that Cocoguru coconut oil is now available at Reliance Retail Smart Stores! This Navarathri has been truly auspicious. Goddess Durga has showered her blessings on us. For a small local player like us, it is a big breakthrough. The result of building the brand for so many years is that Reliance has chosen Cocoguru among many coconut oil brands.

Cocoguru is a unique coconut oil brand in coastal Karnataka.

• to have a website explaining all the details about the product and the company
• to have a significant presence in e-commerce platforms like Amazon, Flipkart
• to be run by a team of professionals in an organized way
• to make roasted coconut oil for cooking use
• to focus on automation and technology in operations
• to provide purity and quality at a lower price
• to maintain hygiene and cleanliness in the workplace and thick vegetation on campus
• to provide ESI, PF, Health and Accident insurance to employees

When we started Cocoguru coconut oil, many of our well-wishers casually asked if the product was available in supermarkets like More, Big Bazaar, Reliance Fresh, etc. It is embarrassing to say no, but they got away with a few flimsy excuses, such as asking for low prices and taking a long time to make payments. Twelve years back, we explored placing our coconut oil in supermarkets in Bengaluru. We learnt that we were far from putting it there.

What it takes to get into Modern Trade
Supermarkets have limited shelf space to store various brands of products. They should optimize that space by keeping only a few of the most in-demand brands. It is the most demanded, not the least priced, and has the best trade terms. Consumers come and pick the brands they like and are less likely to choose the brands the stores push. So, a brand makes it onto the supermarket shelf when it is most liked. And that is hard and has no shortcuts. To be enjoyed by consumers, the product should be of good quality at an affordable price and consistently have attractive, strong packaging.

Challenges for local brands in supermarket chains
The trade terms for suppliers are highly one-sided and entirely in favour of the retailer. The only way for small local brands to agree to them fully is to agree to them. The supermarkets ask for hefty listing fees, display rent, deposits to sell products, and long credit periods, which can be financially daunting to the brand.

How did Reliance take an interest in Cocoguru?
Reliance opened its Smart Store at Puttur. It started with a bang because of its aggressive pricing, wide assortment and convenience. Cocoguru is a trendy brand at Puttur, but it was unavailable there. Every day, there used to be many enquiries for Cocoguru at Reliance. Many used to buy all grocery items from Reliance and coconut oil from outside wherever Cocoguru was available. The store manager repeatedly informed the centralized purchase manager. We pitched them a couple of times. But they were content with the two brands they were keeping. One is a national brand, but not favoured in this region, priced at a premium. Another is a local brand that is priced very low, unprofessional in dealings, poor in quality, and irregular in supply. So, market needs and gaps with existing suppliers made Reliance look at Cocoguru.

Wholesale vs. Market
Many times, brands go all the way to please the wholesalers by buying in bulk. But at Cocoguru, we look to please the consumers. Consumers demand Cocoguru, and retailers have no option but to stock our product. Our biggest buyer is not any wholesaler but a standalone supermarket here at Puttur. At the supermarket, consumers can freely pick the product they like without much influence from the retailer.

So, Cocoguru’s availability at Reliance Smart is a win-win situation for local consumers, the brand Cocoguru, and Reliance Retail. This should be the first of many more placements at bigger supermarket chains. Cocoguru should soon be available at Jiomart.com, and consumers will be able to get door delivery in their local area at much lower costs compared to Amazon and Flipkart.

It is no big deal to set an MRP (Maximum Retail Price). All the battles are fought between competitors regarding wholesale prices. MRP is only a maximum, retailers can sell at any rate below it. Set it a little high so retailers can sell at any desired price. It is only about printing on the package. There is no apparent consequence. Taxes are only on the selling price, not on MRP. But, we at Cocoguru look beyond the obvious, beyond only the retailer’s interest. That is in the interest of consumers. Retailers may sell at any price, but there is a paying consumer. Manufacturers may sell to wholesalers or retailers, but the brand ultimately sells to the consumers. Brands must not leave too much flexibility to retailers to dictate their prices to consumers; it must be limited.

Retailer’s interest

• Higher margins are the reasons retailers do business or sell a product. They look to maximise their returns on their efforts, i.e., sales.
• Flexibility to set price—Not all consumers are the same. They buy different quantities and need different levels of services. Retailers also have differing levels of sales and cost of operations. To manage this, the retailer should be able to get suitable margins by selling at his desired prices.
• Give discounts to consumers—Retailers like to woo consumers through discounts without sacrificing their profit margins.
• Pay commissions—There are many spice shops in tourist areas like Dharmastala and Subramanya. The shops rely on tourist operators to bring customers to their shops. In return, the driver demands a commission from the spice shop for the transaction. The margins from the transaction should sufficiently cover this commission, and still, the spice shop will be left with a handsome margin.
• Not be guilty – Retailer looks for additional margins without being guilty himself. If a consumer complains about the high price, he can always point to the MRP set by the manufacturer and pass the buck.

There is nothing wrong with protecting retailers’ interests as long as it doesn’t exploit consumers or hurt the brand and its reputation.

Consumer’s interest

• Low price—Obviously, but the reason for stating this explicitly and in the beginning is that the brand must consider this fact while setting MRP. The lower the MRP, the lower the price at which the consumer gets the product.
• Discount—The consumer feels happy with the retailer when he gets the product at a significant discount to MRP. Consumers should be mature enough to look at the absolute price rather than the discount on MRP.
• Consistent prices – The price range in which he gets the product should not vary too much depending on the place and shop from where he buys

Challenges to brand

• Price fluctuation—The cost of raw materials keeps changing, especially when they are commodities. This results in changes in wholesale prices and MRPs. To better serve the market, every player in the supply chain needs to maintain some stock. Changes in MRPs create confusion in the stock supplied and billing rate.
• Variations in nature of the market – Different markets have different consumption patterns and costs of retail operations, and hence, the cost of supply
• Favour retailers – To a brand, the consumer is the end, but retailers must reach the consumer. If retailers are unsatisfied, they will only supply to those consumers who ask for the brand and sell whatever they like to others. When the brand doesn’t enjoy sufficient pull, it can ill afford to ignore retailers.

Conclusion

Different MRPs – Coconut oil is used for cooking in coastal Karnataka, so per capita consumption is higher. The cost of retail operations is low as the towns are more minor. The supply cost is also low as they are closer to our factory. So, we have kept a lower MRP here. Price sensitivity is very high. Coconut oil is used only for hair and skin in the rest of Karnataka, so per capita consumption is low. The cost of retail operations is high in big cities like Bengaluru due to high rentals. The cost of supply is high as they are far away from the factory. So, we have a higher MRP there. Price sensitivity is lower.

Minimum mark up Cocoguru is no ordinary manufacturer, we are a brand that care for the consumers. So, we look to protect interests of consumers even at the cost of being not too favourable to retailers. So, we keep a tight MRP that is a maximum of 25% mark up to wholesale price.