MTR Foods Ltd.

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MTR Foods Ltd.

2971, First Floor, Esturi Tower
K.R. Road, B.S.K Second Stage
Bangalore, 560 070
India
Telephone: (91) 80-676023
Fax:(91) 80-6760227
Web site: http://www.mtrfoods.com

Private Company
Incorporated: 1924 as Mavalli Tiffin Rooms
Sales: $26 million (2002 est.)
NAIC: 311991 Perishable Prepared Food Manufacturing

MTR Foods Ltd. is one of India’s leading purveyors of packaged foods. Its products include a variety of vegetarian snack foods and chips, ready-to-eat meals, and partially precooked meals, emphasizing the cuisine of southern India. Other products include pickles, vermicelli, and over 30 varieties of ice cream and ice cream cones. The company is one of only a few that sell packaged food nationwide. MTR Foods also exports canned foods to the United States in an arrangement with the grocery chain Kroger and sells spices in the United Kingdom through the British company Centura Foods. MTR products are also available in Australia, Singapore, Malaysia, and other Asian countries. In 2002, MTR Foods began opening franchised fast-food restaurants across India that served its vegetarian specialties. These are called MTR Super Shops. J.P. Morgan Partners owns a 28-percent share of MTR Foods. Another 14 percent of the company is owned by Magnus Capital Corporation, a venture capital group based in Mauritius. Chairman and company director Sadananda Maiya owns the remainder. MTR operates seven manufacturing facilities. The company is the first Indian processed food company to pass strict global food safety and hygiene standards, preparing the way for MTR’s penetration into a broader export market in the 2000s.

Roots in a Popular Restaurant

MTR Foods Ltd. began as a single restaurant in Bangalore called Mavalli Tiffin Rooms. Tiffin is a word traced to colonial rule in India and refers to a light meal or lunch. Mavalli Tiffin Rooms opened in 1924 and was run by members of the Maiya family. The restaurant soon established itself as one of the city’s hottest eating spots. It was a modest restaurant where diners paid a single price to a cashier in front and then sat down to a five-course vegetarian meal. The restaurant did not serve alcohol and took only cash. MTR, as the restaurant was known, had a reputation for savory food and high standards of hygiene. It became a favorite with politicians and movie stars, yet the restaurant showed no favoritism, and the VIP’s waited in line like everybody else. The restaurant, which still exists but is not part of MTR Foods Ltd., also became a favorite dining spot for tourists in Bangalore. In 1951, MTR was one of the first Indian restaurants to introduce steam sterilization, furthering its reputation for cleanliness. The popular eatery later branched into catering.

Change was forced on the restaurant in 1975 during the State of Emergency declared by Prime Minister Indira Gandhi. Gandhi’s rules for the emergency required every restaurant to conform to prices set by the government. The Maiya family felt unable to abide by the government price list. The prices were so low that the restaurant would have had to cut the quality of the food it offered. MTR had made its reputation on hygiene and cleanliness, and the owners felt that compromising the quality of the food they offered would have been disastrous. Rather than following that course, the family shut the restaurant. Its workers, many of whom had been with the restaurant for years, were suddenly unemployed. The Maiya family accommodated a few of them by offering them places in a small grocery store attached to the restaurant. At this point, Sadananda Maiya got the idea to expand the grocery by offering a bigger line of products under the MTR brand name.

Maiya was an electrical engineer by training, and he was able to bring together his skills with both food and technology to launch MTR Foods Ltd. He set the restaurant’s former employees to work packaging a mix for the popular breakfast or snack pancake called rava idli. The MTR brand rava idli mix proved a good seller, and when the restaurant reopened after the State of Emergency was lifted in 1977, Maiya continued to manufacture the mix and ventured into other packaged foods as well. His company became MTR Foods Ltd., while the restaurant continued in the hands of other Maiya family members. MTR Foods began putting out other dry food mixes, as well as spices, special spice mixtures, and then pickles. The packaged food company built on the restaurant’s reputation for purity.

A Dominant Regional Player in the 1980s

At first MTR Foods sold its packaged food through the MTR restaurant grocery. As the food mixes gained a following, the company persuaded other retailers in Bangalore to carry its products. Through the early 1980s, MTR distributed exclusively in Bangalore, selling at various department stores and major groceries. In 1983, MTR decided to press into other southern cities. It sent distributors to Madras, Hyderabad, and Vijayawada to introduce its products. The next year, the company made a major technical innovation. It began packaging its foods in what was called a polyester poly standy pack, the first of its kind in India. This was a high-quality plastic bag with a pyramidal base which enabled it to stand upright. The upright bags greatly increased the brand’s visibility on store shelves.

Through the next ten years, MTR Foods worked on bolstering its reputation in southern India. It faced a slew of small competitors in a highly fragmented market. The only big food companies operating across India were Hindustan Lever Ltd., a subsidiary of Unilever, and the Swiss food giant Nestlé. The company consolidated its position in southern India and expanded its manufacturing facilities in and around Bangalore. MTR claimed to have leading market share in several product categories. Overall, however, the Indian packaged food market was still small. MTR was in a sense a pioneer, offering ready-to-eat food when such products were still a novelty and not entirely a necessity. In India, most food was cooked from scratch at home, and women had not yet started entering the workforce in significant numbers. MTR worked its way into being a respectably sized regional player in the 1980s, while the whole packaged foods market in India was valued at only around $30 million.

Big Changes in the 1990s

MTR began a push to become a more prominent company in the early 1990s. Beginning in 1993, the company increased the number of products it offered and actively sought out new markets. It pushed into more cities in southern India, where it eventually gained leading market share in every region that enjoyed a predominantly vegetarian cuisine. Market opportunities also increased in Bangalore, which had become the so-called Silicon Valley of India, the center of the country’s booming information technology industry. MTR began providing lunches to workers at several prominent technology firms. By the end of the 1990s, Sadananda Maiya estimated that about 80 percent of Bangalore’s high-tech workers were MTR consumers. Overall, the convenience food market in India was growing. As income levels rose and more women were holding jobs outside the home, packaged food boomed. The category was expected to triple in sales by the early years of the new century. MTR changed its structure in 1994 in order to accommodate future growth. The firm was broken into two divisions, one for its main food lines, spices, and vermicelli, and another to specialize in chips and other snacks. MTR also launched an export division. Sales at MTR grew as much as 40 percent annually in the late 1990s, and MTR planned to spread into more markets. Successful in southern India, MTR began penetrating into northern markets by 1998.

MTR launched a new product in 1998 in order to gain a nationwide following. This was its Softy ice cream cone. The ice cream market had long been dominated by big food companies, most prominently Hindustan Lever. MTR’s new cone was an immediate hit. The company was able to price its ice cream competitively against Hindustan Lever and still maintain a high profit margin. In some cases, MTR was able to retail its frozen treats for half what Hindustan Lever charged. The company quickly expanded its ice cream portfolio, bringing out several sizes of packaged hard ice cream, some of which it sold to five-star hotels. MTR’s reputation for purity evidently helped it pick up new customers.

The company also expanded its line of snack foods such as chips and fries. In addition, it brought out a new line of ready-to-eat meals based on North Indian recipes and entered an arrangement with another company to help with distribution in northern India. MTR also continued to upgrade its packaging technology. The company used a method that had been developed by India’s defense department and eventually began supplying ready-to-eat food to the Indian Army. Its new packaging was called the retort pouch. The retort pouch was first developed in the 1970s and kept food safe with no refrigeration. The consumer simply dropped the unopened pouch in boiling water for a few minutes to heat the food. MTR’s packaged meals were thus extremely easy to prepare and left virtually no cooking mess. The company brought 11 new prepared meals in retort pouches into the northern Indian market and debuted a smaller line of southern cuisine in the new packaging.

Key Dates:

1924:: Mavalli Tiffin Rooms restaurant opens.
1975:: Sadananda Maiya, a member of the founding family of the restaurant, branches into packaged food and founds MTR Foods Ltd.
1983:: MTR begins its push into a wider regional market.
1994:: The firm is reorganized and embarks on nationwide distribution.
2002:: Super Shop restaurant chain debuts.

By the late 1990s, MTR also had plans to bring out a line of frozen food. The company proceeded slowly, because a distribution network for frozen food did not exist nationwide. Nonetheless, the company was thinking ahead, hoping to score big in the export market with frozen meals. By that time, the company was exporting some of its products to Australia, Singapore, and other Asian and Pacific countries. MTR saw great potential in exports and worked assiduously both to become a truly national presence in India and then a leading brand abroad. In 2002, the company received ISO 9002 certification, meaning it met globally recognized standards for food safety and hygiene. It also qualified under a similar global food safety program, the Hazard Analysis Critical Central Point. With these certifications, MTR had surmounted major barriers to export. It was able to get its foods into the United States through an arrangement with the grocery chain Kroger and began exporting cooking sauces to England. The company contemplated European markets as well, with a possible first venture in France.

The Vegetarian McDonald’s

MTR Foods had made great strides since 1983, when it set it sights beyond Bangalore to become a major regional company. By 2001, the company still did 90 percent of its domestic business in its stronghold in southern India, yet the company fully expected to have half its sales earned in northern India within just a few more years. It had distribution in some 500 Indian towns and cities in that year and planned to reach over 800 locales by 2002. The company was also beginning to set foot in a global market that promised even greater sales. At the beginning of the 2000s, MTR took steps to ready itself for further growth. In 2000, the company raised cash by selling a 20 percent stake in itself to an investment group in Mauritius, Magnus Capital. Magnus was primarily run by Indian immigrants in Singapore. Chairman Maiya hired a new chief executive for MTR in 2001, bagging the former head of the beverage division of Hindustan Lever, Jayaraman Suresh. In 2002, Magnus Capital reduced its stake in MTR to 14 percent, and J.P. Morgan Partners, a division of J.P. Morgan Chase, paid $4 million for a 28 percent stake in the firm. This new infusion of cash was to fund MTR’s most ambitious plan yet—to open a string of fast-food vegetarian restaurants. The company opened its first MTR Super Shop in Bangalore in 2002, with ten more planned for other Indian cities. The Super Shop was a combination restaurant/store that featured MTR brand ready-to-eat meals customers could buy and take home and a restaurant area where hot food was served. According to a profile in Business Line (March 22, 2001), the Super Shops were to be a “vegetarian replica of McDonald’s.” The company seemed to be completing a circle, from a modest restaurant to a packaged food manufacturer to a chain of franchised quick eating joints.

Revenue at MTR rose rapidly as its expansion rolled onwards. Sales stood at just under $9 million in fiscal 2001 and were expected to hit $26 million in fiscal 2002. Maiya and new CEO Suresh expected revenue to grow even more, passing $100 million by the middle of the decade if things went as planned. Exports were to account for 20 percent of revenue. This lavish growth did not seem unrealistic. The company had come far already and was now on the brink of even greater market penetration both inside India and abroad. MTR contemplated a public stock offering in 2003.