Sunday, August 30, 2009

Why do we need an Automatic Packaging Machine?

Right now we manually fill coconut oil in pouches and seal it. But with increasing demand for oil in pouches and my instinct to relook at everything we do. I thought of using an Automatic machine to pack oil in pouches. That machine is also called as F.F.S machine or Form Fill and Seal machine. Given a roll of plastic sheet, it Forms the shape of pouch, Fills it with exact quantity of oil and Seals the pouch within a matter of 2-3 seconds. I don’t claim the idea to be a stroke of genius as every big oil mill does it. But ours is a small unit and here are my reasons to still go for it -
1. Low manual labour – This is the biggest reason as lack of labour force is the biggest constraint for everybody (homes, farms and industries) in Dakshina Kannada. Manual packaging requires 8 man hours to pack 200 pouches. Automatic machine completely eliminates them. Still little work is required by somebody to just watch the machine operation and feed the inputs (oil and pouch roll) from time to time.
2. Excellent finishing – The finishing of the packets are so perfect that it gives a premium look for the product. This type of finishing helps in charging a higher price or selling more or lowering selling costs.
3. Less leakage – In manual case, there are a little chance that oil leaks even after good packaging. This leads to obvious loss of oil and presence of oil on surface of other packets. More importantly this leads to strain in trade relationships. We lost relationships with at least 3 retailers because of this and failing to acknowledge it as our problem.
4. Accurate measurement – In manual case, there is a variation in measurement of oil filled into the packet. The quantity filled is generally higher as anything lower would lead to rejection by sensitive customers. This variation can cost us maybe 2-3% of the value. Automatic machine would bring this variation down to less than 1%.
5. High speed – Even for slightly viscous liquids like coconut oil, automatic machines pack at 500 pouches per hour. The corresponding figure is 25 for manual packing. During peak season we had to pack about 2000 pouches a week. 80 man hours or 2 people need to work 5 days @ 8 hrs per day on packing. Automatic machine does it in just 4 hours flat! Because of not being able to pack in time, we had lost a few orders last year.
6. Lesser material cost – Material required for Automatic sealing is Low Density multilayered polyethylene film, that for manual is laminated 3-side sealed pouch. In manual case, because the pouch has to be sealed on 3 sides by material supplier, it costs about 35 paise more per pouch. So, automatic machine saves 35 paise per pouch.
7. Long term investment for growth – Benefit of automatic machine only increases with increased volume of packing. For the volume of packing we are currently dealing, it can be managed with a semi-automatic machine. But for the consumer demand for pouches and our growth plans it is better to invest now. It clears of this constraint that of packaging and enables us to tackle other growth constraints.

But the following are the drawbacks
1. High investment – The machine alone would cost 3-4 lakhs. The accessories like Compressor, Stabiliser, Cooler, Storage Tank and Pipeline would cost about 1-2 lakhs. Total investment of about 5 lakhs. Assuming that the machine lasts 10 years, rate of interest is 15% EMI comes to about 8,000 or Annual cash outflow of about 1 lakh. If we pack 50,000 pouches a year, machine cost is 2 Rs per pouch.
2. Risk of failure – This will be the first time we will be installing a machine of this nature. With multiple components involved and lack of experience there is a possibility of failure. If the machine fails there is no manual packaging backup as the material is not suitable for it.
3. Maintenance Cost – Any temporary failure will need a supplier company technician to repair. His charges per day are 1000 and charges for AC train to and fro and lodging.
I have anyway decided to purchase one and posted about 100 enquiries by searching on web and on B2B trade directories. I got about 15 responses within 3 days. I have tough task of now selecting a good machine for less price.

Saturday, August 22, 2009

My love for bicycles

To say that I love bicycles is an understatement. I am passionate about it, I am obsessed with it. It has been my best companion for 8 years. More ever, it is healthy, environment friendly, inexpensive and low maintenance. By they way, I just bought a new Hercules AXN DX cycle from Bharat Cycle Centre, Puttur for Rs. 3275. I am very excited about it.

To talk a bit about my history with cycles,
My first cycle
During my 7th standard, I was pestering my dad to get me a new cycle. My dad relented and said he will buy me one if I score more than 90% in mid-term exam. I normally scored about 85%. For this exam I worked hard and managed to score 89.17%, still 5 marks short of landmark 90%. Anyway my dad considered it only as a motivation for me to do well in exams. And he didn’t deny me a cycle for not crossing the mark. So, I got my own cycle Hercules Town N Trek for Rs. 1500 from Imperial cycle centre, Puttur.
I used to roam around every nook and corner of Puttur with my neighbour friend Sadananda. Used to go to Swimming pool at Parpunja 8 kms away along Mysore Road, go to Balnad (our ancestral home) again a village 8 kms away. I went to Philomena high school and college using this cycle except during rainy season. It was great fun.

During my 3rd semester of Engineering, Avinash and I decided to go to an expensive gym for 3 months. Gym was about 2 kms far, Avinash had a bike and there was no problem. But 15-20 days later Avinash started showing his talent (that is laziness ;-)) and he stopped coming. I was determined, didn’t want to waste the gym fees and continuity. Avinash suggested me, “Look, our super senior Manjunath just completed his course and has thrown his cycle. So, why don’t you repair it and use it?” It was lying just outside my room at ground floor, I took it and the repair cost me 200/-.
I used it well for 3 years, went around beautiful University Campus, Kukkarahalli lake, Mysore city and everywhere. Since it was not the one I bought, I left it at the same place after I left the hostel.

I was on an onsite assignment at Japan for 5 months. My living apartment then was 6 kms from office. Monthly local train pass costs 5000 yens. I had to walk half a kilometre each from apartment to railway station and railway station to office. I didn’t like the routine. Also I wanted to cover as many places as possible over there. I didn’t waste any time and bought a new cycle for 15,000 yens, returned it to the same shop for 5,000 yens. Money was not a problem. People on overseas assignments are paid extremely well. It was that well paid period that changed me from being a thrifty spender to a spend thrift now!

I have been at Bangalore and Mumbai for long periods of time. But I didn't have cycle there as they were dusty and busy cities. It wouldn't be a pleasure there to go on a cycle at all.

I need to go to our office/retail outlet, shops for research, roam around for time pass, to ice-cream shop and so on. A cycle is very handy now again. It was easy to own a cycle during teenage and abroad. But now it isn’t easy considering the social stigma attached. If somebody goes by cycle it means he is not well to do. In our family, even my younger brother has his own car apart from my dad’s car. Society asks many questions, assume things their own way. I still bought one, because I thought, if somebody thinks negatively I should give a damn to him, for others who think positively there is no problem. My dad isn’t happy that I bought but I think he will get used to it over time.

Tuesday, August 11, 2009

List of Brand Names

The following are the initial list of names I came up with over last couple of days. Believe me, it is a very hard exercise. It is not my cup of tea, still essential. The challenge is in finding a common name which can be trademarked. Needs to be thought of from all 360 degrees customers's view. Naming could well be make or break for the brand.
Sanskrit – kairava, amala, prayata, vivikta, hamsa, jalaja, shuchi, sputam, sphatika, vajra, anagha, heera, hiya, mrinala, amiya, amoha, hita
Pure in English – crystal, diamond, lucid, limpid, lucent,
Glorify - Vastava, hallow, anoint, vital, vestal, revel, extol, wallow, rever, laksha
Edible - Delish, aliment, victual, comest, savour, nourish, sapid, esculent, khaadya
Different - Madike, kogile, kokila, tuluva, barsa, ananya, peacock, punarvasu, magnet, cocoon, compass, native

I have now sought help from Prof. Shreesha Kumar, a Sanskrit Professor and a wise man. His knowledge and opinion about this world is amazing. He was the man behind the brand name bindu for mineral water.

The list of other coconut oil brands are
Puttur Market
Aravind, Ishwara, Jeep, Kalpataru, Karavali, Mahalasa, Mangala,
Navami, P D S, Pooja, Prestige, Quality, Ranga
Soorya, Theertha, Train, Uttam, Vikram

Bangalore Market
Parachute, Vatika, Penguin, KPL Shudhi, KLF Nirmal, VVD Gold, Safal
Kera, Sahakari, Laxmi, Arun, Krishna, KV Prabhu, Prakash

International Market
Cocovida, Tropical Traditions, Nutiva, Kokonut Pacific, Tropicai, Kalau

Photo Album of all the coconut oil brands in Puttur
Also see HUL's Home care portfolio here.

Sunday, August 09, 2009

Brand Naming Criteria

Our present brand name is Santhosh, but it was never advertised and very few know it. A survey among 14 retailers at Puttur who sell our oil showed that only 8 of them or 57% of them know that our brand name is "Santhosh". They have always identified us as Sri Rama.

So, I thought of re-branding as "Sri Rama". It would also give some equity to our corporate name "Sri Rama Industries" and vice-versa. Also remove any confusion in the minds of the consumers about the source of the product. But the name is so generic, a look at our local business directory revealed about 12 business that have name SriRama and spelling variations. A search in the trademark registry showed that the name is already registered even for the business category to which we belong. Since we want to go the branded way, using a brand name that cannot be trademarked or used is not a good idea.

I am looking for a new name to brand our coconut oil product. The name should ideally represent any or combination of the following meanings :-
pure, clear, natural, health, quality, edible, tradition, different, sacred

Important criteria in which the names are evaluated with their weightage are
Trademarkeable - It is a must and there is no compromise on that - 1000
1. Simple - Easy to spell, easy to pronounce - 10
2. Memorable - A familiar name will be easy to remember - 3
3. Appropriate - Represents the meaning of the brand - 5
4. Pleasant Association - It should evoke positive emotions while a person hears it. There should not be any negative meaning in another country, language, culture, religion - 10
5. Appealing - The name should appeal to our target audience i.e. Tulu Nadu - 10
6. Extendable - It should be not be restricted to just coconut oil, but to say food products and other businesses - 10

For each name, for each criteria rating will be given as Bad, Neutral and Good. The multiplying factors being -1, 0 and 1 respectively.

Saturday, August 08, 2009

Brand Vision

To spread the benefits of coconut to people
People - Consumers, Suppliers and Society
Consumer Benefits - Health - Coconut Oil extracted by least amount of processing to retain maximum benefits of coconut
Supplier Benefits - Give best price for their yield, make it convenient for them to supply and provide education and inputs to improve their yield
Society Benefits - Health, Wealth, Tradition and Environment

The vision for most companies revolves around the consumer rather than product. But we base it on the product because Coconut is a truly great timeless product and its applications gives us enough scope to grow. Hailing from Coastal Karnataka we have a natural competitive advantage for coconuts.

Target Market
People of Coastal Karnataka (Tulu Nadu) origin
35-60 year old
middle income
Cooking purpose

There is no major brand selling coconut oil as a cooking oil and this market needs one.

Brand Characteristics
Pure, Clear, Transparent, colourless
Natural, Cold pressed, as good as coconut
Healthy, good for everything, edible

Unique Value Proposition
Our coconut oil has crystal clear appearance, this is done by cold pressed method to retain all the natural qualities of coconut to make it ideal for cooking.

Thursday, August 06, 2009

Customers vs Competition, Open up or Hide information

In the strategic triangle or 3C model, Customer and Competition are 2 important vertices (Cs) to the main C Corporation. So, the corporation must base its strategies on the customer in reference to that of the competitor. But too often the company fears competition so often that they loose sight of the customers. Sridhar Vembu has a very interesting take regarding this.

Why I am concerned about this is to decide how much I should disclose about our business. Whether I should open up to Customers or hide from Competitors?

Why companies hide information
1. There is nothing good to show. Showing shows only weakness.
2. It takes effort to identify and display useful information on website and marketing communications.
3. To hide secrets from competitors.
4. To keep its card close to chest while negotiations with partners/customers

It is a major cultural difference between Indian and Silicon Valey businesses.
None of the Indian FMCG companies or its honcho’s blog. This is all the official information available on a 600 crore brand parachute. Some Annual Reports of Indian public companies are so Generic that it is difficult to understand what business they do even after a careful reading of whole report. On the other hand we have a company like Zoho which is very open even when it is a privately held company.

I presently believe that companies must focus on customers and let not competition come in way of serving customers. So, if opening up is good for the customers, companies must do it.
After all letting the competitors know what we are doing doesn't mean they would execute that. If it is good and they can't do anything about it, it will only humble them. Some of the well known things like making quality product, earning customer's trust, building strong brands are the most difficult things to do.

I like competition that is healthy. But mostly it is not. It is price competition where they reduce prices by reducing quality, adulteration, reducing quantity, giving poor service and avoiding taxes. In edible Coconut Oil industry it is time the competitors ally themselves to thwart a bigger threat of refined oil and imported oil substitutes.

New phase of this blog's life

This blog now enters a new phase of its blog's life as I have. It has been lifeless for last 4 months. Except for my post on Korigad Trek which has been attracting traffic from search engines during this rainy season. Till now the blog was about my personal experiences/opinion on topics within my comfort zone i.e. Cricket, Travelling, Technology and General Business. From now on I intend to write about my Business that I will be managing as a professional. It could be about the hard decisions, experiences with customers/stake holders, my tactics/strategies/philosophies, industry insights and problems.

For starters, I am working on my family's coconut oil business at Puttur that my dad started 2 decades ago. My dad will continue running the business as he has been. My brother has been helping him for last 3 years. My role will be to bring in modern best practices to help grow the business. Expecting that my fancy degrees(B.E & MBA), professional exposures and outlooks of having lived outside this town for last 10 years would help bring in fresh perspectives. The coconut oil that comes out of our factory is of very good quality and are well received by our customers. Thanks to the skilled, committed and loyal employees and my dad's hard work, perseverance and perfectionist attitude. It has survived and flourished through tough price competition, uncooperative retailers and major inroads made by cheap refined oils.

I had told few of my friends that I will update them about the business and seek their opinion during decision making. Through this blog I can sort of crowd source. My clarity on issues will improve when I write down that too with the intention of sharing with people.

As regards this blog I have 2 options
  1. Start a new official blog and link it with business website. It will be read by my Business partners/stakeholders. It should be more in the lines of PR. Here I cannot be so casual and personal. Still it is important to give life to the official website and update both current and potential stakeholders.
  2. Add posts to current personal blog. This lets me connect with my well wishers, write with more freedom as all opinions are that of the person and not that of its employer. I can classify these posts from other personal posts through labels (my business)
I hope to take both the options.