The journey of HOAC Foods: vision, challenges and milestones – Insights from Chairman – Yashwant Thakur.
Watch the full interview here:
Chirag Gala: Hello, and welcome to SmallCap Spotlight. Today we will be talking to the management of HOAC Food Ltd, an FMCG brand based out of Delhi NCR. With us today is the chairman, Mr. Yashwant Thakur. Sir, welcome to the show.
Tell the viewers, what was your inspiration to start HOAC Food? What was your initial thought while starting this company?
Yashwant Thakur: So basically, we belong to MP Madhya Pradesh. And the famous wheat there is called MP Sharbati. So when we came to Delhi, we did not get the quality of MP Sharbati here. Or we did not get that wheat and that flour. So that’s why we started a normal store.
That we should launch this flour in the Delhi NCR region called MP Sharbati. So we started it with 2 to 3 products. Our MP Sharbati flour and secondly our MP Desi flour. And third is our multigrain. A very good response has come. Made a demandable product for us.
And with this, we have our other SKUs. Meaning our spices segment. Whole spices or our powder form of spices.
Our oil has come in it. So basically, right now we have covered 163 SKUs from that store. When one store started giving good revenue. Then we opened another store in the second area. Then we opened the third store. This is how we have increased it. And right now we are selling through franchisees. Or through our own retail stores. And this journey has been going on since then.
Chirag Gala: When you started this company, you must have had a vision. How did this vision evolve over the years? What challenges did you face? And what milestones did you achieve?
Yashwant Thakur: Basically, when HOAC started. So normally we didn’t have a big vision. That we will reach our IPO. But we had a vision that we have to provide pure and fresh products. In our Delhi NCR region.
So we were taking this. Then when our store’s demand started increasing. I mean, I started getting calls from franchisees.
That we need a franchisee. Or we also planned to open more outlets. So this plan changed a bit.
That we have to bring our brand in the FMCG segment. So after that, we added more SKUs in it. So that we can see it as an FMCG brand.
So the challenge was. That is a normal FMCG segment company. They have a problem with working capital.
So because of the issue of working capital. We took business loans in it. The major issue was funding.
Because we had to set up a factory. So for the factory setup, we needed a lot of funds. So for working capital, we took business loans.
After that, we tried in other segments for funding. Thirdly, we got a lot of relief. When our IPO came.
You must have seen our announcements. We have opened more stores. Around 5 to 6 stores this year.
And apart from the factory that was running. We have opened another factory in the Gurgaon region. So we got a lot of help from this. We faced a major challenge of funding and working capital.
Chirag Gala: During our research, we noticed that you have done a collaboration with CountryDelight. Which is for the supply of MP Sharbati Aata. Sir, how will this deal affect your order book? And how will it impact your revenue percentage?
Yashwant Thakur: So there was a big reason behind joining CountryDelight. We are not on any B2B platform yet.
We don’t do business to business transactions. Wherever we have to work. We work through our own franchise or exclusive outlets.
So CountryDelight and our region were the same. They also had to give fresh products to their customers. They were going to deal with fresh Aata.
They had to launch their fresh Aata. So we were solving this problem. So for this, we got an approach from CountryDelight.
That they want our floor. So we made a deal with them. That we will keep our franchise model.
The franchise that we are sharing today. We will share it with CountryDelight. And we will start this.
To maintain your product quality. Do you follow any processes or measures? So the biggest and main USP of HOAC is. Our quality.
Quality is not compromised by HOAC. Every brand says that they are giving quality. But HOAC does it with a standardization.
That we have our raw material. We don’t take it directly from the vendors. We directly consume it.
For example, chili. For chili, Guntur is famous. So we directly procure it from Guntur.
For turmeric, Salem is famous. So we directly procure it from Salem. For coriander, we procure it from MP.
From Gujarat, we procure Jeera. And from MP, we procure wheat from MP itself. I am from Madhya Pradesh.
So we are able to maintain quality because of raw material. And with this. We sell these things through our exclusive outlet.
So we are a little different from the market. So with this, quality is our main factor. To maintain our standards.
Secondly, the machines we are using. The quality checkup of our 3 stage raw material. There are 3 points.
How to buy raw material. How to clean it. And the raw material goes through 3-4 processes.
So with these quality standards. We are able to segregate ourselves from the market. That we are giving you something different from the market. Or we are giving quality products.
Chirag Gala: In the FMCG sector, customizing is very challenging. Because a lot of products are standardized between companies. How are you addressing this problem? And how are you offering customization?
Yashwant Thakur: Firstly, we have separated ourselves from being standardized between brands. We open our own retail outlets. We open our own retail exclusive outlets.
So we are developing our own brand. And in this, we have customized. You must have seen my brand name, Hari Om Aata.
So in this, we have set up a customization machine for the customization process. We have set up a customization machine in all my retail stores. Now if any customer orders from us.
So there is a lot of demand these days. People mix it in their flour. One thing is that the multi-grain SOP is different.
But people also customize their flour. For example, if someone has to put half a kilo of chickpea, soy, millet or corn in 10 kilos of wheat. So how will they do it? So for this, we have made a whole process through our mobile application or website.
We get an order and we customize it. And customization is only for flour or healthy flours. Rest, all our spices or other types of pulses or rice or grains or oils.
All these things are not customized. This thing is customized from the factory and goes to the stores.
Chirag Gala: You recently launched VegRoots. So how will this launch impact the business?
Yashwant Thakur: So the reason behind starting VegRoots was to increase our average cart value. We have only launched 3 items in VegRoots. Potato, onion and garlic.
So these 3 products are the fastest-growing products in the market. The margin of VegRoots is 35-40%. With this, we are going to increase the drive in VegRoots.
So that our average cart value will increase. And the company will benefit a lot from this.
Chirag Gala: Sir, can you give some highlights about your store presence? Do you have any upcoming expansion plan or growth plan that will affect your store or revenue?
Yashwant Thakur: So store presence, our area where we work, So basically our upper middle class and higher class stores are situated.
We have malls and shopping plazas where our stores are open. And in the future expansion plan, Every year, we have opened 5 retail running stores. So we are planning to open 25-30 stores in the next 2-3 years.
So we are going to launch our B2B segment with stores. The process is going on very fast. We have hired our national sales manager and general manager for B2B segments.
We are going to deliver our product to the general trades stores. And this will help us a lot in sales. And we will be able to show ourselves as a brand at the pan India level.
Your company outlets, their revenue is reducing. In fact, the franchise is increasing. Is there any specific reason behind this? So basically, the revenue from the company outlet is not reducing.
The company has reduced its stores. The company is not opening its stores. Because there is a big reason behind it.
We will not be able to open our stores and expand as soon as possible. There are a lot of problems with this. There is staff management, cash management, stock management.
And there are a lot of fixed costs. That’s why we introduced a new model, our franchisee model. We are moving forward with the franchisee model.
Right now, we have 10-11 franchisee outlets. This makes it easier for us to scale.
Chirag Gala: Do you have any new product launches that are focusing on increasing your average cart value?
Yashwant Thakur: We have a lot of product launches. In the past, we started with a normal flour. After that, we added our healthy flour to increase the average cart value. At that time, if our flour had a cart value of Rs.
400, if we added spices and healthy flour, it became a cart value of Rs. 600. After that, we added oil. It became a cart value of Rs.600, Rs. 750, Rs. 700.
We are increasing our SQs every year. That’s why we are increasing it so that our customers get everything at one place. Get everything in-house.
Secondly, our products are better than the margins. And because our SQs have increased, our average cart value has increased. And with this, our revenue will increase a lot.
In the coming months, we are focusing on tea leaves, soya chunks, peanut oil, black mustard oil, macaroni, and papad. We are focusing on marginal products so that our pet margin increases.
Chirag Gala: Does your company have a plan to expand its distribution network in India or internationally?
Yashwant Thakur: Yes, I told you a while ago that we are launching our B2B channel. This is in the process. We will launch B2B through the distribution channel. And secondly, we are planning to start exporting this work.
So we want to do it at an international level.
Chirag Gala: In India, the FMCG sector is growing very fast, especially in rural areas. There must be some trends that will influence the business in the future. What do you think these trends could be?
Yashwant Thakur: Sir, if you look at my segment, we look at the HYC segment. And keeping in mind the FMCG industry, FMCG has evolved a lot in terms of quality business. Whichever brand will give quality products.
Or if we talk about after COVID, everyone has shifted to quality. Everyone wants fresh and quality products. So I have benefited a lot from these trends.
And in the future, the journey of the FMCG industry is coming. It is fresh and quality. And the third is our presence.
Now we are growing in tier 1 cities. Along with this, we will also go to tier 2, tier 3, and rural areas. And we will distribute our quality product.
Chirag Gala: Where do you see your business in the next 5 to 10 years? Will it match your vision or will it grow better?
Yashwant Thakur: Sir, my company and all our directors and MPs have a dream. That our company has become an FMCG company. But we are in the top 50 list.
In the top 10 list, we are an FMCG company. Secondly, we can give good returns to all our stakeholders. Thirdly, we can provide quality and fresh products to everyone.
Chirag Gala: Alright sir, thank you so much for joining in. It was definitely an insightful conversation. For more such insights, stay tuned to SmallCap Spotlight. And do not forget to subscribe and hit the bell icon.