The Shocking Rise of Pulse Candy: From 0 to 100 Crores? | Business Case study

hi everybody this tiny candy has taken India by storm and it's called the pulse candy ever since it's launch in 2015 the one riy candy has taken India by storm commanding a 16% market share this one rupee candy has changed the Dynamics of the 6,000 CR rup hard ball confectionary Market the product was an instant hit clocking in 100 cres in sales within just one year sh KH fan pul While most people look at Pulse as just another candy it is actually a revolutionary product that shook the entire candy industry of India it was so revolutionary that they hit 100 crores in Revenue in just 8 months 300 crores in 2 years and again while most people think it is easy for a candy to survive in India you have to understand that pulse was up against industry giants like mango bite and alp and these are brands that have been dominating India's candy market for decades in fact you would be shocked to know that 90% of all new brands in the candy Market fail within the first year itself so the question is why did the makers of pulse choose to enter such a Cutthroat Market where 90% of the brands fail how on Earth did pulse beat mango bite and alpil to become a legend in the Indian candy space and most importantly what are the lessons that we need to learn from the rise of pulse candy before we move on I would like to thank our education partners of today's episode which is Adobe Acrobat in today's fast-paced work environment managing digital documents is a daily necessity we often need to create edit and quickly share well formatted professional documents in various file formats including PDFs sharing sensitive information requesting digital signatures or reviewing lengthy PDFs can often feel very stressful especially when we do not have the right digital or online tools at our disposal but what if there is a powerful trusted and secured all-in-one solution for your document needs well this is why ladies and gentlemen Adobe Acrobat can help you out it is the world's first PDF solution built by the company that invented the PDF with Adobe you can create and edit PDFs collaborate seamlessly eign documents and collect signatures everything can be done in one app with acrobat you have instant access to essential PDF tools across desktops mobile devices and even web you can easily edit create share organize and eign PDFs on the go acrobat simplifies document management saving you time and effort while ensuring your file stay secure it is trusted by millions worldwide for a good reason it is reliable userfriendly and integrates with tools like Microsoft Office and Adobe scan so if you find this useful check out adobe's freeo ous online tools or start your 7-Day free trial with the link in the description and now on to the episode Cho let's start with the first question why is the candy Market of India so difficult to crack and like I said before 90% of the brands that enter the Indian market fail within the first year itself in fact in 2009 just 6 years before pulse launched 70 Brands entered the market of India and you know how many survived just seven and the rest completely vanished so let's take a quick overview of the market and then try to understand why is it so difficult to crack this is a breakdown of India's 40,000 CR confessionary Market as in the sweet treat Market of India here if you see 48% belongs to something called hard boiled candies and here's where you have hardboiled candies like alpil and mango bite and these products have a hard and solid texture then 20% belongs to gums 14% belongs to EES 133% belongs to cough candies 4% belongs to Lollipops and then we have 1% for jellies so pulse Falls in this category of hardboiled candies so it is a huge Market of almost 20,000 cror but the question over here is why is this market so hard to crack well there are three reasons firstly this Market has a very low barrier to entry so if you want to start a candy business in India today all you need is sugar water some flavor and packaging that's it you can enter the hard boy candy market today and all these ingredients are super cheap plus hardboiled candies have a very high shelf life and they do not need Refrigeration at all whereas if you look at other products like chocolates or Eaves you need cocoa which barely grows in India and after you make chocolates they will melt quickly so you will need cold storage and cold transportation and lastly even the store that will sell your chocolates needs to have a refrigeration system all of this makes HBC a much easier Market to enter than chocolates then then there is cost if you look at these numbers well you can get 1 kilo of sugar for just 50 rupees 1 kilo of cocoa will cost you 650 R even a gum base for chewing gum will cost you 350 rup per kilo so do you see the difference in raw material is huge and HBC happens to be the cheapest one of all and because of such a low barrier to entry the moment some brand launches a great product copycats emerge in the Market within a few weeks and pulse is the perfect example within a few months of its success 50 to 60 Regional players try to copy pulse and even some national Brands launch their own versions this is what makes it very difficult for a hardboiled candy brand to survive in India the second reason is the lack of brand loyalty in simple words if people ask for a happent but they get an orbit they are fine similarly people might ask for Mentos but if they get Center fresh they are fine because in India people do not care about the brand they care about the flavor thirdly India's Regional taste preferences are just all over the place in India there are four categories while North India loves coffee and mixed flavors East India cannot get enough of orange lemon and mango while the West is all about strawberries down south people absolutely love caramel and mint so as a candy brand if you want to launch pan India you cannot just launch a single product with a single flavor and expect to conquer all of India each each region has its own unique taste and you'll have to cater to each of these tastes if you want to maintain your foothold in the market and finally the biggest challenge is inflexible pricing and bad unit economics to tell you about it in India hardboiled candies are sold at a super low price of 0. 5 rupes to 1 rupes sounds cheap right but here's the tricky part even at these prices companies cannot raise prices even when their raw material prices increase and this is what what we call as price rigidity let me give you an example if Coco prices shoot up by 40% you can easily increase the price of a 50 rupe chocolate bar to 60 rup no big deal at all but if sugar prices shoot up by 40% can you increase the price of a 1 rup candy to 1. 4 rupees not at all right you'll have to increase the price to 2 rupees and nobody's going to pay double for the exact same candy and when this happens what will happen people will immediately shift to your copy gats because they are willing to sell their candy at 1 rupee and here's where scale becomes very very important and even if you achieve scale and you generate a profit of 10% a small wave in the market can kill your profits for example if you look at this chart the price of sugar in India has shot up by 40% so if you selling a candy at 0.

5 rupees with a 0. 05 rupees profit margin which is a 10% net margin this increase in cost of sugar will kill your margin completely the shocking fact is that this Market is so tough that in spite of existing for decades Melody has not hit a revenue Mark of 100 crores in India this is the reason why hardboiled candy Market in spite of having a low barrier to entry it is a battlefield and most businesses crash and burn within the first year itself so if the market was so scary so brutal and so dangerous how on Earth did pulse candy become such a big success so quickly well the first thing that DS group did was not rush to the Market in fact in 2013 they set up a dedicated R&D team and spent two long years just to find what would be a unique product in the market that would Stand Out Among the other candies by default so here's what they did firstly the pulse team cracked the code by identifying India's diverse Regional taste preferences and they double down on the right flavor segment to Target in the cluttered HBC market now like we saw in this chart North India loves coffee and mixed flavors while East India cannot get enough of all orange lemon and mango the West is all about strawberries and down south it is all about caramel and mint but here's where the pulse team found a jackpot they identified that raw mango and mango together they hold nearly 50% of the HBC market share and this turns out to be a winning flavor category but this category was followed by caramel at 20% orange at 16% and other flavors making up the remaining 14% then the research team went further and found that people all across age groups loved a sweet and tangy combo as seen in the table and then came the next Insight they saw that raw mango was something that everybody in India had grown up with from Kashmir to kyya Kumari it is one of the most versatile fruits in the country raw mango is so versatile that in North India we make am Ki Chutney and am AAR out of it in South India we make manga sadum and manga pidi out of it in East India we make am kundi and armo K out of it and in West India we make Kino Russ and amakata Ma out of it this is when the DS group made a strategic move to go with katcha mango as the core flavor and then they solved for the next big problem which was brand loyalty here's where they built upon the Insight that India doesn't care about candy brands India cares about candy flavors and like I said before if you ask for a happent and you get orbit you are fine because the mint flavor matters and not the brand this is the reason why no brand has been able to break this tradition of flavor or brand loyalty in India but you know what guys somehow the pulse team was determined to change it during the two years of research and development the pulse team analyzed the product consumption cycle of various candies in the market and they found a secret this secret lay in something called sensory specific Sati sounds technical right but it is actually quite simple If You observe the consumption cycle of a c candy when you have the first bite of candy it is always the best bite and as you continue the same flavor gets repetitive leading to a boring experience take a look at this chart from Paul's research team it shows that with most candies the flavor hits hard initially but it quickly starts fading away eventually the consumers are left with a dull repetitive experience so imagine that you're eating a kacha mango candy at first boom that raw mango flavor hits your taste buds like a fresh bite of Green Mango but as soon as you keep eating the candy gets smaller and smaller and The Taste starts weakening and the excitement eventually starts fading away and before you know it you're just chewing the candy just to finish it this is exactly where the pulse team saw a golden opportunity they realized that they needed to create a candy that can keep the consumer hooked till the end so Raji Kumar the sharp eyed product development manager of pulse he saw a gap in the market that no one else did he saw that while everyone was stuck on the basic onedimensional flavor like mango orange and caramel he envisioned a candy that could bring multiple layers of flavor as the candy got chewed and this is how ladies and gentlemen the pulse candy was built on two insides number one raw mango was a national favorite and number two people across all age groups loved the balance of SAR and sweet so the team thought why not take raw mango flavor and Elevate the experience by adding a masala so Rajiv Kumar gave the R&D team a simple but powerful oneline brief and this brief captured the entire essence of pulse he said in Hindi that which means that the product must be so Tangy that the customer should close his eyes in Delight until then we won't have a powerful product and that is exactly what the pulse team delivered to top it all of the DS group had a secret weapon they had an incredible expertise in Masala because of their catch chart Masala brand they knew exactly the kind of Masala that they could make to make the consumer shut his eyes in delight and finally after 2 years of research and development a candy was B the team developed a product with a Tangy twist inside the candy which slowly releases in your mouth and you enjoy the taste to the end India already had a culture of more mango eating with spices with the Masala pulse candy captured that a candy that was so brilliantly layered that it could take your taste buds on a roller coaster ride so when you have this candy first you get hit with that mouthwatering Tangy katcha arm flavor and this flavor will remind you of biting into a fresh Green Mango on a hot summer day then as the mango flavor settles a light Masala flavor starts to tease your taste buds and the product was so strategically designed to continue ly release the flavor that without the product being bitten you will see the essence ooze out of the candy and then boom a bold burst of dried mango powder explodes on your tongue and it's spicy it's SAR and it's electrifying and finally just when you think that the journey is over the candy finishes with a sweet aftertaste which perfectly balances the entire flavor explosion this is how the DS group built a product that was designed for IND from Kashmir to kanyakumari from arunachal to Gujarat it wasn't just a candy it was a DIY Delight this is how ladies and gentlemen pulse became a sensation all across the world but now the question is the product is fine but how on Earth did the DS group solve the economic problem because like we saw this candy business has a 10 to 15% margin and anybody can copy a product and inflation is your biggest profit killer so the question is how did the pulse brand survive well here's why ladies and gentlemen pulse came up with a clever strategy before pulse came into the picture 86% of the candy industry was selling candies that weighed just 2 to 2. 5 g for 50 PES and some like pares kismi were even cheaper going for just 25 P each but then pulse came to the market with a one rupee price point which at the time was a very very big deal and while most people thought it was too high of a price point the DS group played on a very smart and simple Insight now number one since they were launching a new product there was no pricing in the mind of the customers number two at a 50 P price point there was no point in launching a candy because they knew that tomorrow inflation is going to kill their profits and eventually retailers will not be able to make a healthy margin and after that they will be forced to increase the price so they thought that it is better to start with a good price than pushing the prices after taking a loss and lastly they saw that 50 P coins were going out of circulation so even though inflation was a big deal the 50 P to one rupee jump will not make a difference to the customers at all but when it came to the DS group it was a huge difference of 50% in their revenue and cherry on the cake because of building Brands like Raj gandha Baba elichi and paspas the DS group also had an extensive distribution Network to sell all across India they had Distributors to distribute the candies from the tiniest pwn shops to the Kira stores to even big retail chain like dmart so pulse candy within a jfy reached 8.