A poor farmer’s son, who doesn’t even have enough money to buy seeds for his farm. He sees his family’s condition, and at the age of 15, he goes to a cinema canteen to ask for work. Now he gets work, but he didn’t know that his journey of 5000 crores is going to start from this canteen. And this boy works in the same canteen for many.
Years and starts his own business. A business that was going to compete with international brands like Pepsi. And the name of that business is Balaji Wafers. And you may not believe it, but today these same Balaji Wafers have left big brands like Lays, Bingo, Pringles, and Haldiram behind in the chips market. But now the question is, how did a 10th pass boy make such a big business?.
What were those business strategies that Balaji used to defeat his competition? And most importantly, what are those powerful business lessons that we can learn from this case study and implement in our own business? So this story begins in 1972, when the whole world was facing a terrible drought. Now this drought was the worst drought in the last 37 years in India, due to which there was no.
Farming anywhere and there was a shortage of food grains in the whole country. Now this drought does not stop here, it continues for the next 3 years. So in 1974, there was a Gujarati farmer in Jamnagar named Popat Bhai Virani. This man sells his entire farmland and the Rs 20 ,000 that he gets by selling this land, he divides this Rs 20,000 among his three sons so that.
He can start a business. Now the eldest son of the three sons was Chandu Bhai Virani, who was 15 years old at the time. He takes his two younger brothers, Bhikhu Bhai and Meghji Bhai, and comes to Rajkot from Jamnagar. Then when these three reach Rajkot, they start a business of agricultural products and farm equipment there. But that business does not even last for the next 2 years.
And in the end, the Virani brothers have to close this business and work in the canteen of Aston Cinema. Now Chandu Bhai used to get only Rs 90 a month at that time, but this was his very first start. Because in the future, Chandu Bhai saw that the wafers in the theater are very popular and the demand for this thing is increasing week by week. But the theater is not able to supply that many.
Wafers. Understanding this, he saw this gap in demand and supply as an opportunity in the market. And he thought that why not make these wafers himself and fulfill the demand in the market. And that’s what he does. In 1981, the three Virani brothers together started making potato chips themselves in a small room and started supplying them to the theater.
And when they did this, they themselves did not believe that the potato chips made by them were so great that not only did they go to the cinema canteen, but the demand for those chips started coming to the two other cinema canteens of Ajubaji. Now these three brothers started making chips and selling them in these three canteens. And for a few years, this process continued. Now slowly, as time passed, the demand for chips started.
Increasing even more. Now the year was 1989, when apart from their canteen, their chips were sold to 30 other retailers outside. So now the demand for chips started coming a lot and the business was also going very well. But there was a big challenge here. And that challenge was that they had to make all the chips by hand. And to fulfill so many demands, they were not able.
To make so many chips by hand. Now customers’ demands kept coming, but Chandu bhai could not fulfill that demand. So to solve this thing, Chandu bhai decided to install a semi-automated plant in Rajkot. In a semi-automated plant, you have to do some work by hand, but most of the work will be done by your machine. So this made Chandu bhai feel that the cost will.
Be less and he will be able to fulfill all the demands quickly. But when Chandu bhai thinks of doing this, a big challenge comes up in front of him. And that challenge is that when he goes to buy a standard potato stripping and cutting machine, he saw that the cost of this one machine is very high. So Chandu bhai did not have that much budget. So to solve this thing, he came up with a.
Very creative method. He bought multiple parts of the machine and then brought them in-house and assembled them. With the help of which, his very expensive machine was ready in just 5,000 rupees. And now with the arrival of this new machine, he was making 250 kg chips every hour. With the arrival of these machines in Chandu bhai’s factory, not only did his production increase, but the cost of.
His production also decreased a lot. And now he also started paying attention to quality and hygiene. Now everything was going well up to this point. The year comes to 1995 and Chandu bhai started earning up to 30,000 rupees per month. After which he decides that why don’t I start doing this wafer business full time. And from this, he gets the name of his business.
He named it Balaji Wafers. And in the same year, in 1995, Chandu bhai and his two brothers got their company incorporated under the name of Balaji Wafers. This means that the matter became legal. Now I know what you are thinking. Where did this name Balaji come from? Gujarati brothers have nothing to do with this name. So look, there is an incident behind this.
And that incident is something like this. At the time when all these Virani brothers used to make chips in a small room, there used to be a statue of Lord Hanuman in that room. And people also call Lord Hanuman as Balaji. So from there he got the idea that why don’t we name our company as Balaji Wafers. And in 1995, in the same year, he started increasing the product portfolio of Balaji Wafers.
Now not only did he start selling chips, but he also got entry into Namkeen and other snacks. Due to which in the year 2000, i.e. in just 5 years, Balaji’s quality wafers won the hearts of every Gujarati. And even today, 90% of the chips market in Gujarat comes under Balaji Wafers. Even the Namkeen market is controlled by Balaji Wafers. And you won’t believe it, but today, apart from India,.
He is selling his products in USA, UK, UAE, and even in Australia. In which if we talk about the financial year 2022, i.e. 2 years ago, now 2024 is going on, in 2022, his revenue had reached 5000 crores. But now you must be having a lot of questions in your mind. First of all, how did Balaji do all this? What strategies did he use?.
Secondly, when he was doing all this, what were the challenges that he tackled to become such a big company today? So to understand all this, we have to understand these 5 business strategies of Balaji Wafers very carefully. In which the first strategy is Product Diversification and Innovation. See, as Balaji Wafers was entering new markets, he was also expanding his product portfolio. Why?.
Because there is a big reason for this. And that reason is Localization. Chandu Bhai understood that he started his business in Gujarat. And here my business became a hit. Why? Because I am a Gujarati myself. And according to my Gujarati taste, I gave goods to the people of Gujarat. So my business grew very fast.
But here Chandu Bhai also knew that the people of each state have different tastes. And if I want to sell the same taste product all over the country, then it will not sell as well. For this, he started offering unique flavors according to the local taste preferences in different states. For example, there is street food in Maharashtra. People like street food more.
They prefer chaat-based flavors. So they made a chaat-based snack. In the same way, people in Rajasthan like spicy food. People eat more spicy food. So they brought more spicy snacks there. So what he did was he understood the local taste and brought changes in his product in a localized way. And then launched that product in that market. But whatever Balaji did, he couldn’t do any of it.
If he hadn’t used this other strategy. And that strategy is Investment in Technology. In the early days, the Virani brothers were making chips with their own hands. Then they were packaging it with their own hands. So they were saving money, but it took a lot of time. Because of which they had two problems. The first problem was that there was an inconsistency in.
The taste and quality of the product. Because everything was made by hand. So it wasn’t that perfect. Then the second problem was that because they were making everything by hand, So the shelf life of the product wasn’t that long. So the product should be made quickly and consumed quickly. So to eliminate this human error, Chandu understood that automation and machinery.
It is very important to take the support of these things. Otherwise, I won’t be able to make the business bigger. Investment in technology sounds like a big and expensive thing. But it doesn’t happen every time. For example, if someone tells you that you have to take your business online. You need an e-commerce website. How difficult and expensive it seems.
I used to feel the same. But when I had to do this, I tried URU. And you won’t believe it. I saved time, money, and effort. Do you know how? Let me show you. I have opened URU here. And first of all, I clicked on Start Now It’s Free.
And selected the e-commerce application. Now I want to open an online store. So I will add all the details here. For example, I want to sell clothes. And I want my sales to increase. Now look carefully. From the ready-made palette, I can choose colors. Or I can upload my own logo. In fact, with the help of AI, URU will also.
Integrate those colors. Now whatever pages and features I need, I have added them here. And look here. Shop is already selected by default. Because I am making an e-commerce store. Now it’s very easy. Here I have selected a theme. And this is in front of me.
Here I can customize everything in a very simple way. I can customize it according to my needs. I can drag and drop favorite blogs. I can change the text. I can change the color. And many more things. It is 100% customizable. Now I have added my product here. And for that, I have to go to New and.
Select the product. And I have added the product name. Now I have put my name here. Now I have to put the sale price here. And I have specified the taxes here. Now I will put the product description here. I can also add images. And that’s it. Now we are ready to start selling.
Amazing, isn’t it? And how much did I pay to do all this? Not at all. Nothing. Everything is free. Generally, everything is very complicated and expensive. But with Udoo, I personally recommend that it has become very easy. And you know what the best part is?.
Your first application on Udoo is free for a lifetime. You get unlimited forever support and hosting. And not only that, you also get a customized domain name for a year. The first thing required a lot of money and a lot of hard work. Now you can do that easily. Udoo. With the help of this platform.
I have put the link in the description and in the comment box for you. You can go there and use it. And that too for free. Now let’s come back to Balaji with technology. Look, Chandu Bhai says that machines become expensive once. But after that, I can get them to work for 24 hours. I can get them to work non-stop.
And if you want to do business, if you want to grow, then this is no less than magic. But now this is all about production. How will the sales come? How will the goods sell? That is the biggest challenge. So Balaji used this third strategy And that third strategy is customers first, profits second. Chandu Bhai always said that we never run after targets.
There are no targets in our company. Because our primary focus is how to bring more happiness to the life of our stakeholders. Our employees, distributors, retailers, customers first of all have to keep them happy. Profit will come on its own. And this is absolutely true. All the popular competitors in the chips market have the same product.
Balaji gives a better quality product to his customers at a 50% discount. Now many of you will say that if Balaji is giving a product at such a low price, then he must not be giving quality. But that is not the case. His quality stands higher than his competitors. And I am not saying this. K S Narayanan, a food and beverage expert himself comes.
And says that even today Balaji’s material cost is 78%. Which is more than 65% of the industry average. And high material cost means that the material used to make the product is of good quality. The product is of good quality. And because of these quality products Balaji’s inventory turnover is 25%. Industry average is 15-66%. High inventory turnover means that Balaji makes the product very.
Quickly and it sells very quickly. So customers want to buy his product again and again. Now I know, after hearing all this you must be wondering how is all this possible? The answer to this is hidden in Balaji’s 4th business strategy which is ultra low cost, high brand recall marketing. The company has focused from the very beginning that they will keep themselves ultra low cost. They will also do ultra low cost marketing.
They will not spend a lot of money on marketing. And whatever money other brands are spending on marketing we will invest that same money to give a high quality product to the customer at a very good price. That is why even today Balaji believes the most in word of mouth marketing. And through any traditional channel they don’t do aggressive marketing. You won’t get to see a lot of ads or banners of Balaji.
But the product, the product has power. And because the product has power the product sells very quickly. But there is one thing here that Balaji Wafers does a lot. And you will get to see that a lot. Which is called Gorilla Marketing. Gorilla Marketing is a non-conventional marketing strategy which is used by small brands or startups who don’t have a.
Lot of money for marketing. Now they have money but they don’t invest that money here in marketing. So they do aggressive marketing at a low cost. Now how does Balaji do this? Balaji didn’t spend a lot of money on ads. He didn’t do marketing here and there. He didn’t do banners. He did this first to hire a lot of people.
For a small salary of 15-20k. Now what did this do? All these people went to different retail stores and asked for Balaji’s product. But Balaji’s product is not in the market. Now the retailer is worried that so many people are asking for Balaji and he doesn’t have the product. Customers are coming and asking for Balaji. Where do I give it from?.
Let me explain this in an easy way. Suppose you are a retailer. As a retailer, you will feel that so many people are coming to buy Balaji’s product but I don’t have this product. If I had this product, I would have sold it. That’s why when Balaji did this a lot of retailers felt that Balaji’s product should be there. Balaji’s product is in demand.
This is called illusionary demand creation. Meaning you artificially created a demand. But there is a big catch here. And that catch is that your product should be there. How did this change Balaji’s game? Understand this carefully. Whenever Balaji did this, all the retailers started looking for Balaji’s product. started looking for Balaji’s product.
A few days later, Balaji’s salesman came to the retail stores. The salesman said that he came from Balaji’s company. These are the products you want. The retailer felt that there is a lot of demand. The product is being sold. Let me keep the product. Balaji’s product was powerful. As soon as the product reached the retail shelves, it.
Started selling very fast. The customers who bought the product started coming and asking for it again. But when Chandu Bhai was doing all this and putting all these strategies, he faced a big challenge. And that challenge was F2M. Factory to Market. If a customer starts buying a product, he will come to the store again and again and ask for the.
Product. But if the product is not delivered, he will stop buying the product. He will forget it. Chandu Bhai saw this problem. To solve this problem, he needed a way by which he could pick up the product from the factory and deliver it to the retail shelves very fast. This became a big problem for Balaji.
Because by doing guerrilla marketing, he created a demand for the product. But if he couldn’t fulfill this demand, his business would stop. To solve this problem, Chandu Bhai used his fifth business strategy. The name of the strategy is Collaborative Distribution Network. You can deliver your product to the customer through this network.
One is your distribution network. You can say that you have a lot of retailers and distributors and they are selling your product. But the second strategy is to use someone else’s distribution network to sell your product. This is called Collaborative Distribution Network. Balaji took this second strategy. He did this to deliver his product to his urban customers.
He already picked up big distributors. For example, he picked up Big Bazaar, Reliance Mart, Demart. All these big retail chains who have a lot of customers reached him and told him that the quality of my product is very high. You should keep my product once and pay the fees. After that, my product will be sold to you. Because all these retail chains like Demart, Big Bazaar, Reliance Mart already had a big distribution network.
They were customers. Here, he converted someone else’s customers into his customers. He covered all the big cities like Delhi, Mumbai, Kolkata, Maharashtra. But there are some cities whose population is less which are small municipalities. He made regional distributors in those small regions. He made a structured network so that they can reach there too.
Today, Balaji has more than 1225 dealers and more than 450,000 retailers. He has made a very powerful distribution network for all of them. It sounds like a small thing but the distribution network has a long-term benefit. The long-term benefit is the expansion of the product line. You made a distribution network once but by using it,.
You can continuously deliver new products to your customers which increases the overall sales of your company. Chandubhai believed in technology and used Balaji’s Salesforce software This gives them a 360-degree view of where the sales metrics are going down and where they are going up. They get the infrastructure details of the particular area, audit results, and potential growth opportunities. When a company has so many details, it can manage its raw material supply and plant operations well so that.
No raw material is wasted and the plant operations run smoothly. But Balaji has a secret which is SIC which stands for Systematic Inventory Control. They use a systematic inventory control system in their company which uses FIFO which stands for First In and First Out Let me explain how it works. In FIFO, as soon as the finished product is completed, the company dispatches it immediately.
Whether it is a raw material or a finished product, they don’t keep anything in the inventory for more than 2 days. That means, if a raw material comes and a finished product is made in 2 days, it will be in the inventory for a maximum of 2 days and it gets dispatched. So the plant operates at full efficiency and the demand of the market can be fulfilled easily.
But there is a big problem here as well. And that problem is P2R which stands for Plant to Retailer. Once the product is ready and it has come out of the plant, the next challenge is how will it reach the retailer? They use the salesforce map which not only tells them the right location but also helps in coordinating the field teams optimizes the route plans so that at least the.
Route can be covered and the goods can reach more places and helps in scheduling the visits so that all the distributors can visit the retailers regularly and talk to them and ensure that the goods reach them on time. Because no matter how much goods are made in the plant, if it doesn’t reach the retailer, then the goods won’t be sold in the market. And this is the reason why Balaji Wafers has been able to make a strong distribution network which makes it.
Easy to deliver their products to the customers. And their sales and distribution network is so efficient that its cost is only 0.5% of the company’s overall revenue which is very less than the other competitors. But despite all these things, these were the two problems that faced the company the most. The first problem was the acquisition threat and the second was the low closure legal issues. Let’s understand them one by one.
The first threat was the acquisition threat. Now in January 2014, DFM Foods, which caters to the markets of North-West Central India, Westbridge Capital Partners buys 25% of it. Two months later, Private Equity Fund 9th House acquires 12 % stake in Bikaji Foods in Rajasthan. And when all these things were happening, just 5-6 months ago, PepsiCo offered to buy Balaji Wafers for Rs 4,000 crores.
At that time, the company’s revenue was Rs 1,800 crores. This offer was quite good but the Virani family rejected it. Why? Because when Chandu Bhai asked Virani about the offer, he said that the company is like his own son. He won’t sell it. So even after getting so much money, he didn’t sell.
The company. But the market was consolidating. The other big players were acquiring more stake and capturing the market. So this was a big threat for Balaji. But Balaji dealt with it somehow. But after this, the second threat came. Low-closure legal issues. This came in 2019.
In 2019, Balaji faced a court case. PepsiCo said that Balaji’s Rumbles chips had a similar design to Lays’ Max chips. So they stole our design. You know what? Balaji Wafers were found guilty in this case. In February 2020, the High Court ordered to shut down the production and marketing of Balaji Wafers’ Rumbles chips. But Balaji played smartly.
He didn’t shut down the production of his Rumbles chips. He shut down the marketing. After that, he completely changed his Rumbles chips. He changed its taste, texture, and packaging. This brings us to the most important thing. What are the powerful business lessons that we can learn from this case study and implement in our business? The first lesson is that the customer is the ultimate God of business.
Many companies say that the customer is God and we should keep him happy. But most of the companies only say this. But Balaji is an actual example that they understood the customer is God philosophy and didn’t practice it. In fact, the company’s youngest director, Shyam Virani, says that he is the first FMCG company in India where there are no sales targets. When he was asked how do you operate machinery and.
Manpower without targets, he gave a one-word answer. Do you know what that word was? Pull. He said that we only focus on quality. And that pulls our customers. It’s simple. When customers come, demand increases. And when demand increases, production automatically increases. That’s why Balaji Wafers don’t have to spend much on.
Marketing. Even today, they spend only 2% of their total sales on marketing. Which is very less than their competitors. And this brings us to the second business lesson. Frugality is the charm of the smart. Let me explain this to you. I’ll explain it from the story of these brothers. When in 1989, the Virani brothers had to build their.
First semi-automatic plant in Rajkot, they took a loan of 50 lakhs from the bank. But when they got the money for the loan, and they had to install machinery in the plant, they collected different parts and assembled the machinery for only 5,000 rupees. They had money, but they used it very smartly. That’s why it’s said that frugality is the charm of the smart.
People say that it’s stingy and saves money. Actually, when you’re doing business, you should do this. And doing this is a very smart thing. And this brings us to the third and most important business lesson. And that lesson is one thing done again and again defeats all other things. Understand this carefully. When Chandu Bhai was asked about the company’s business expansion,.
He said that one area and one fight at a time. At one time, I’ll go to only one place, work on only one product, and fight only one fight. I won’t do anything more than one. And this is the reason, if we talk about the footprint, Balaji, Gujarat, Maharashtra, MP, and Rajasthan are in their complete dominance. But the company is building a fort here that no.
One can break. Why? Because the reason is focus at one thing at one time. India is very big, but even today, after so many years, Balaji is only available in 12 states. I don’t operate more than 11-12 states. Because they themselves are not taking entry in other states. And there is a big reason for this.
Because they themselves know that they don’t have the product, the distribution network, the thing that can win the hearts of the customers there. And they have always used this strategy. They master one state, make it a cash cow, save money from the money that comes from there, and with that money, enter a new state after a long time, after doing good research. And this is the reason, these are the business values.
On which only a 10th pass boy made a company worth more than 5000 crores. So yes, if you got to learn anything valuable from this video, then please like this video and subscribe to the channel so that you never miss such powerful videos. And if you want to take business online, then try out Udoo. I have put the link in the description and comment box.