Themes : Turnaround Strategy
Period : 1986-2001
Organization : Tasty Bite Eatables Ltd, HLL
Pub Date : 2001
Countries : India
Industry : Food, Beverages & Tobacco
The Background Contd...
In 1992, TBEL entered into a collaboration with the beverage company Pepsi. Pepsi was interested in collaborating with TBEL because government regulations required it to generate one dollar in export sales for every dollar it earned in India. Pepsi agreed to distribute TBEL's RTS products abroad and help TBEL upgrade its facilities.
In 1994, when the government abolished the export requirement norms for MNCs, Pepsi decided to walk out on TBEL, claiming that it would rather concentrate on its core business of soft drinks. In 1995, ex-Pepsi executives Ashok Vasudevan (Vasudevan) and Kartik Kilachand (Kilachand), who had been involved with TBEL earlier while they were in Pepsi, decided to market TBEL's products in the US. |
However, TBEL continued to perform badly and by March 1997, the accumulated losses touched Rs 96 million. TBEL was declared a sick unit and referred to BIFR. Vasudevan, who had worked with HLL for about a decade before joining Pepsi, convinced HLL's management to get TBEL de-registered from BIFR by providing financial assistance.
While TBEL's equity capital remained Rs 20 million, the HLL group turned its Rs 120 million unsecured loans into preference capital at a premium of Rs 19.50 per share. As a result, TBEL's net worth turned positive and the company was de-registered from BIFR. HLL began using TBEL's idle capacity to process its own products and also initiated efforts to make TBEL more market savvy to survive in the competitive markets.
In 1997, HLL decided against venturing into the frozen foods business. Consequently, it sold TBEL to PBI. PBI appointed Ravi Nigam (Nigam) of Britannia Industries as the President. The new management worked out a strategic initiative, which was named the '4C approach,' for reviving the company and turning the business around (Refer Figure I).
The four Cs strategy divided the core business into areas that needed to be focused on: Concentration, Conversion, Collaboration and Cultivation. As part of "Concentration, TBEL decided to invest in intensive research for its RTS products. The company also planned to expand its business globally as well as in India.