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Switz Foods Private Limited

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SWITZ FOODS PRIVATE LIMITED

It was 9 a.m. Alok Dey, General Manager of Switz Foods Private Limited (SFPL), was in his favourite office chair sipping a cup of hot coffee. But the chair was no longer comfortable for he saw a competitor outlet open on his way to the office. The words of last evening from his finance manager, Sarkar, echoed in his ears:
Thegrowth in profits for this year (2004-05) will be less than expected. This is the first time in the last five years we are not able to meet our numbers!

Thoughts began to flow as to how the company had grown over the years. SFPL had been the best in cakes and bakery business. His team had delivered the right product, in the right quantity, at the right time and with optimal cost. But Dey knew thatthe times ahead would be hard with increasing competition from domestic players and global heavy weights. He was deliberating on how to meet the newer challenges. Two possible solutions emerged. The first was to reduce cost by decreasing the uncertainties in the system, and the second was to increase volumes by entering new markets. “Monginis, The Cake Shop” was the name by which Kolkatans knew.SFPL was jointly owned by T.F. Khorakiwala and Arnab Basu. It manufactured and distributed savouries, pastries, cakes, birthday gateaux, cookies, breads and other bakery items. Products were divided into two categories: 1) pastries and cakes and 2) savouries. As a craft bakery, Monginis needed manual skills to give the desired shapes to its hot selling cakes. The products reached the customersthrough franchisee outlets all over the city. Switz paid royalty to Monginis Foods Limited, Mumbai, for using the brand name. The bakery industry in Kolkata was highly competitive. Monginis led the market followed by Sugar & Spice. Other players were Kathleen, Flurys, Upper Crust, Cakes ‘N’ Bakes, Hot Breads, Ambrosia, Modern Bakery and Kookie Jar (Exhibit 1 gives market share of dominant players).Kookie Jar, Upper Crust and Flurys catered to upper segment and the rest to middle and lower segments.

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SFPL was an entrepreneurial organization. This was evident in its innovative ways of doing business right from inception: • It was one of the first organizations to cover the whole of Kolkata under a single distribution network. • It was the firstorganization in the industry to start selling savouries through franchisee network at the time when savouries were sold through sweetmeat shops in Kolkata. • The policy of taking back the leftovers at the end of the day with no extra cost to the franchisee ensured high sales and ensured fresh products to the customer. • It realized the importance of having a sound distribution network for perishablecommodities. It accordingly invested heavily in logistics. • The organization adopted latest technologies to keep pace with the changing environment. It deployed latest machines and automated the production process. HISTORY Khorakiwalas bought a small chain of bakery—Monginis—in Goa in 1978. It became a big brand name in the bakery business 20 years later. The business was moved to the lucrative marketin Mumbai. Cakes were perceived as western food; hence the growth in the initial years did not meet expectations. Khorakiwalas were looking for avenues to expand the business. Saudi Arabia was seen as a good proposition as they had familial ties there. It was also a lucrative market. They established Al Mintakh Sweets and Pastries in collaboration with a local partner. The business flourished, andmore units were opened in Oman and U.A.E. The whole group was named as Switz Corporate with presence in more than 10 countries and head office in Dubai. Meanwhile, Mumbai business also picked up. Monginis started a chain of retail outlets in Mumbai in various parts of the city.

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SFPL was part of Switz India Limited, which was a part of Switz Corporate...