On a hot Monday afternoon a customer walks into the Mahalakshmi Iyengar Cake Shop on V. Market Road in Salem, Tamil Nadu, and asks for Bovonto, a soft drink. The salesman says he is out of it and offers Pepsi instead, but the man leaves. "A person who likes Bovonto will not try another drink," says the salesman.
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That customer loyalty has helped Kalimark, maker of Bovonto and other beverage brands, survive the MNC onslaught . Kalimark was set up in 1916 by P.V.S.K. Palaniappan. Over the years, it battled Spencer's, the British brand, Indian players such as Parle, and then MNCs. When Pepsi and Coke entered the market, they sold 300 ml bottles at Rs 5, while Bovonto sold for Rs 8. Kalimark maintained its price. "We did not believe in growth at the cost of profitability,'' says K.P.R. Sakthivel, a senior family member who manages business in the Chennai region. "We lacked economies of scale but had our strengths: great products, a popular brand and strong distribution."
Retail outlets pay Kalimark upfront, get no discounts, incentives or refrigerators - things that PepsiCo and Coca-Cola routinely offer. This policy means Kalimark cannot approach retail chains. "But we would rather sell 10 bottles for cash than 10 cases on credit," says K.P.D. Suresh Kumar, Sakthivel's cousin, who handles the Salem region.
Kalimark's rivals play dirty at times. "Earlier, they would take away our empty bottles. Each bottle cost Rs 12 and this affected us," says Sakthivel. Lately they have been paying advances to Preform (used to make PET bottles) makers to lock up capacity, adds Kumar.
Even so, Kalimark is a Rs 100 crore brand. "Our top and bottom line have grown 20 per cent annually for the last few years," says Sakthivel. In Tamil Nadu, Kalimark sells at over 500,000 outlets, mostly in small cities and rural areas. Daily sales are estimated at 10,000-plus cases of 24 bottles each. "We barely cater to 75 per cent of demand, so what is the point in creating more demand," says Sakthivel.
In 1993 the business was split among eight cousins. Realising this was uncompetitive, the family has come together again. It has invested Rs 15 crore in a bottling plant to build economies of scale. "Once more such units come into operation we will spread our wings in South India," says Sakthivel. He does not rule out an initial pubic offering in the future.