Everyone loves the David and Goliath story, which is now viewed as a metaphor for improbable victories by the weak over the strong. With changing times, there have been instances when Goliaths have become friends with Davids and helped them grow their business. The story of the collaboration of Mumbai-based Goli Vada Pav (GVP) and Vista Foods, a subsidiary of OSI Inc, which manufactures McDonald's patties around the world, is one such.
Burger and vada pav
Venkatesh Iyer and Shivdas Menon, two finance professionals, had a dream of starting a venture in the food and beverages (F&B) sector with a product that had a universal appeal. The idea clicked when they saw a 40 feet hoarding of a McDonald's burger outside CST station in Mumbai and below it a street vendor selling steaming hot vada pavs. The duo found a Bollywood twist to it - the burger between the bun was the twin brother to the vada between the pav!
Menon and Iyer saw a huge business opportunity for selling the vada pav in a hygienic manner to a very large segment that McDonald's could not because its stores have to meet certain specifications -3000 sq. ft. air conditioned space, besides seating accommodation. Due to location constraints and finance requirements, a McDonald's store cannot be opened everywhere unlike a vada pav store that requires just around 300 sq. ft. and no A/c or seating space.
Another advantage is that a vada pav is a casual consumption product with easy availability in the neighbourhoods unlike a McDonald's that has an aspirational value which reduces frequency to its stores.
Iyer and Menon decided to start a vada pav QSR chain and opened the first Goli Vada Pav store in Kalyan (a Mumbai suburb) in 2004. Entering the fast growing QSR space was easier said than done because to sell food, a perishable commodity, a strong backend is essential, which requires large investments in technology and supply chain management.
Forging friendship with Goliath
As a start-up, it wasn't possible for GVP to invest huge sums into the venture, with bankers and investors showing little or no interest. Iyer then decided to explore Vista Foods that manufactures patties for McDonald's India.
In 2007, GVP was able to forge an alliance with Vista Foods to prepare vadas at its fully automated plant. With this alliance, GVP eliminated three big challenges that stood in its way to become a national player - pilferage, standardisation and wastage.
Vadas were manufactured in an automated facility with no human contact in its preparation and transported to all GVP outlets via cold chain trucks. With the use of Vista Foods' technology, the shelf life of vadas increased from 48 hours to 9 months and owing to standardization, it tasted the same at any outlet.
From a modest beginning of a single store, GVP has become a successful franchise model - 275 outlets in 55 cities in 14 states, with a turnover of over Rs 45 crore. The company plans to further open at least 1,000 stores in 10 states including UP, Gujarat, Delhi and Tamil Nadu and also go global.
There are few things that one could learn from the success of the humble vada pav. Here they are:
1. Think big: Without getting afraid of competition, without having food industry background and by not considering other Mumbai vada pav chains as benchmark, GVP chose a path to become market leader and proved that faith and ability to think big are more important than family and professional background.
2. Explore new vistas: Iyer and Menon were ridiculed for entering southern states where idlis and dosas are favorite snacks. In Karnataka for instance, the company has more than 100 stores and Bangalore is their highest performing market, contributing to 50 percent of the total sales.
3. Innovate, innovate, innovate: One of the key reasons for GVP's success is continuous innovation. GVP could not afford the kind of fryers available with McDonald's. Instead, they designed a low-cost automated fryer, besides other innovations like a vada pav tracking system, transportation, storage and multiple varieties of vada pav at different price points.
4. Collaboration: GVP forged alliances with cold storage and logistics partners of McDonald's like Vista Foods and partnered with several local bakeries in multiple states to make pav.
5. Right co-founder: Having a co-founder with complementary skillsets plays a very important role in success of business. Iyer and Menon have complimentary skill sets and have been able to divide their responsibilities of expansion and operations properly.
Harish Pamnani is a former Senior Manager of TiE, Mumbai and is an alumnus of XLRI, Jamshedpur.
Updated Date: Sep 07, 2014 12:30:59 IST