Thread by @stockifi_Invest

From multiple business failures to becoming India’s sixth-largest packaged snack maker

A Mega-Thread on the story of Prataap Snacks

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(This is not a stock recommendation)

1) Prataap Snacks known for its brand Yellow Diamond was founded by Indore-based entrepreneur Amit Kumat.

2) Amit was from a middle-class family and his father owned a wholesale cloth shop.

3) Initially, Amit bought a sick chip factory in Indore and started making chips under the Hello Chip brand which failed.

4) The cheese ball business was his second shot at making snacks, after which he dabbled in a few other businesses like SAP training institute.

5) By 1999, all his business ventures had failed, and he was saddled with liabilities.

6) He not only suffered a financial setback, but he also lost respect among his peers in the Indore market.

7) The idea of going back to the snacks business came when Amit Kumat started Prakash Snacks with his brother, Apoorva Kumat, and his brother’s classmate, Arvind Mehta.

8) Initially, all three of them focused on selling cheese balls.

9) They began by persuading their family to contribute Rs 15 lakh, promising to reimburse the money if the business failed.

10) Selling cheeseballs made them a tidy profit of Rs 22 lakh in the first year, which more than quadrupled to Rs 1 crore the following year.

11) They then invested the money in a second-hand, 40-year-old chip line, which people doubted would work at all.

12) Knowing all the major companies, Amit realized that their reach in cities like Indore was limited.

13) "I was interested in the snacks business because I was familiar with all of the major brands."

14)They outsourced production to local contract manufacturers in the beginning so they could focus on creating a strong distribution network due to a lack of manufacturing space.

15)"As a businessperson, I would recommend anyone entering the business of food brands that it is best to test a market out before going national," Amit says.

16)When they first approached a distributor in Mumbai, he was adamant about the brand's validity and agreed to pick up 50 boxes with the caveat that he would only work with them if the packets sold out in the first month.

17) Call it luck or market acceptance, but all the boxes were sold out. The same distributor now generates 10% of the company's revenue.

18) Between 2006 and 2010, the market saw the birth of brands like Haldiram's and Balaji Wafers, two of the most well-known names today.

19) Despite having only 4% of the Indian snacks market, PRATAAP Snacking is one of the largest brands in the Rs 20,000-crore snacks business.

20) Several global firms have made bids to buy the company's facilities, but the company has declined.

21) Amit is well-versed in every facet of his business, from knowing the names of his top 30 distributors to keeping track of his brands' performance.

22)He visits his retail outlets once a week to understand exactly how his products are doing.

23) The company is not using data analytics yet, but it’s the retail outlets he gets most information from.

25)It is definitely old school in the time of data analytics, but understanding the pulse of the market is, perhaps, what has helped Prataap Snacks grow so fast.

26)It might not be harnessing technology like its bigger counterparts, but the snack maker has always been on point in terms of innovation.

27)They started with chips, then they entered extruded snacks, and then namkeen, now they are starting with Yum-Pie and nachos.

28) They keep entering new categories, which helps them grow their top line and their margins.

29) Prataap Snacks is located conveniently in Indore in the center of the potato-producing Malwa region, which offers it more than just raw material.

30) Indore is a consumption market, which means trucks loaded with goods come to the city, and they often have to go back empty. That allows them to leverage the “reverse logistics” and get a better freight rate.

31)Prataap Snacks started out by giving more value to consumers. So, when Frito-Lay was offering 22 grams in a Rs 5 pack, Prataap Snacks offered 30 grams for the same amount, which has helped the company grow at around 20% to 25% in the past five-six years.

32) Their pricing strategy pushed several multi-national companies to also offer value packs in an effort to stay ahead in the market.

33) Owing to urbanization and growing income, the snack market and the overall packaged food industry in India have immense growth potential.

34)A Credit Suisse report says the total branded packaged foods market will grow from $40 billion to $200 billion over the next decade.

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