Old brand, Modern plans

Can Everstone overcome the challenges that previous owner HUL could not, as it tries to rebuild Brand Modern?

Three months after private equity fund Everstone completed its acquisition of Modern Foods Enterprises from HUL, the brand is in for a makeover.

With new products that cater to health conscious bread-buyers and a proposed bakery chain, the label is getting ready for a new life at 50. But can Everstone overcome the challenges that previous owner HUL could not, as it tries to rebuild Brand Modern?

“We will make it more relevant and contemporary. We feel that the brand has the ability or the potential that can be leveraged in other fresh bakery categories. While retaining the past glory, a new road map has been laid out,” said Aseem Soni, CEO Modern Foods.

Soni also wants to strengthen the brand’s pan-India presence and leverage the familiarity many Indians have with the label to develop new ventures. To do that, he will have to take on a slew of small regional brands and the battalion of unorganised bakers -- the two big factions that control the Rs 5,000 crore bread market in the country. It will also have to contend with the force of the Britannia brand that dominates several segments of the bread market today.

Beating the past

Modern started its life as a public sector unit brand. When HUL took it over in 2000, the key challenges it faced were ensuring profitability, quality and reach said a company official who preferred anonymity. He says that things began to unravel when nearly 50 per cent of Modern’s business, which came from the UP government, was pulled out for reasons he does not want to go into. To address this challenge, HUL focussed on extending the brand to affiliated segments such as rusk, cakes, muffins and others.

The challenge was ensuring quality and longevity given the perishable nature of the product. Breads have a shelf life of just five days. And it is here that the might of small regional players comes to the fore; with nimbler operations, limited quality checks and low overheads, they are able to get past the big brands.

When Modern was sold by HUL, it had six manufacturing units and over 60,000 distribution points. Everstone will have to develop and deepen the supply lines if it has to expand the brand footprint. Soni said the focus now would be on upgrading the portfolio and production systems. The company has said that it aims to grow its revenue four times in the next five years to Rs 1,000 crore from around Rs 260 crore and would look at growing both organically and inorganically.

Adding value

“Having turned around the business and built a sustainable growth model, we believe that the sale to Everstone will unlock the full potential of the Modern brand,” HUL had said at the time of the handover. Under the new team, the company is looking at products that specifically address health and fitness related issues.

Over the next year, Everstone says, it will roll out products which will be developed under a new R&D facility. Till now, the focus has been on white and brown breads largely. However given the swift strides being made in multi grain breads and other such products that cater to the ‘wellness’ segment, Modern does not want to be left behind.

It is also looking to cash in on the growing consumer need for convenience foods and has just launched ready-to-cook chappatis in Kerala. The company claims it was received well and it is selling around 60,000 chappatis a day. Next stop, Modern parathas.

The new owners of the brand believe they can leverage the strong connection that Modern has with many consumers. It reaches a million families every day according to Everstone, which translates into as many consumers willing to try new products from a trusted label. However, to really cash into this potential, the company will have to build a more robust chain between its manufacturing facilities and distribution outlets.

Soni says the brand must look at doing better where it already has a presence and explore new markets, “especially those the brand abandoned”. He says that Modern will be relaunched in these markets with a fresh product line. Its portfolio of about 400 SKUs will be expanded and non-bread segments such as cakes, health rusks and cookies will grow. In five years company says that the contribution of non-bread categories will go up to 30-35 per cent from the current 10-12 per cent.

New markets, new look

The brand is currently strongest in four southern states and in Maharastra and Kolkata. It can be found in 35 cities where it has between 35-70 per cent share of the market. The objective is to strengthen its presence in these regions with existing and new offerings.

For the new markets, or markets the brand had exited, the plan is to develop and engage in brand building initiatives. The packaging and pack graphics will also be modernised, Soni said.

Modern is also looking at changing its franchisee strategy. It wants greater control over quality and a bigger say in how the brand reaches the customer.

Image used for representational purposes only.