The 1980s were a watershed for Delhi Flour Mills. The mill was set up in 1916 by British founders and transferred to Indian owners at the time of Independence. But it was not until the 1980s that the company began to diversify. On a suggestion by one of its Italian machine suppliers, it ventured into packaged snacks. There was little demand for such products at the time. That did not deter the company and, in 1984, it launched CRAX corn rings.
"We had to struggle a lot to establish the concept of packaged snacks," says Mohit Jain, Managing Director of DFM Foods, the snack food company spun off from the flour mill in 1993.
Today, the company makes packaged snacks under three main brands - CRAX corn rings, Natkhat wheat puffs, and CRAX Namkeens - at its two plants in Greater Noida and Ghaziabad, on the outskirts of Delhi.
Corn rings remain its top product, contributing 75 per cent to total sales. It sells its products across north, west and central India. "We hope to cover all of east zone by 2014," says Jain. "We want to get into South India, too. In the coming two to three years, we should be national."
Over the years, several big companies such as ITC and PepsiCo have entered the packaged snacks market. But DFM is still growing at a fast clip despite the competition. Its sales have expanded at a compound annual growth rate (CAGR) of 53 per cent in the past three years, from Rs 72 crore in 2009/10 to Rs 169 crore in 2011/12. Net profit grew at a CAGR of 57 per cent during the same period to Rs 10.4 crore in the last fiscal year.
The reason for the rapid growth in recent years is the company's focus on marketing and advertising, says Rohan Jain, Executive Director and elder son of Mohit Jain. DFM spends as much as a fifth of its revenue on marketing.
Activities include adding a surprise gift for kids - their most important target - inside the packs. Last year, DFM also tied up with distributors of the animation movie Ice Age 4 to promote its products.
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What are the biggest challenges for SMEs? "Organisational development is a big challenge," says Mohit Jain. "Meeting the demands of the market is another challenge."
Rohan Jain chips in. "You should delegate your managerial powers, but you should not lose control," he says. "You should put the resources in place first. Otherwise, you will stumble. Build the capacity first and then expand."
That is an intelligent piece of advice for all SMEs.