Neeraj Kakkar: Revenge of the Boatman

Neeraj Kakkar’s eyes bear the sparkle of a man who has hit upon something that’s more than just a ‘thing’. It’s the look of an entrepreneur possessed of an idea that captivates him more and more the more he thinks about it, one that relies on love at first relish, liberates recessed buds of taste, and makes waves in ways everyone would welcome. And if this sounds a little gushy, put it down to his folksy enthusiasm. It’s contagious. “It wasn’t a plan, it was as if all of a sudden a need arose in our life,” says Kakkar, the 40-year-old CEO of Hector Beverages Pvt Ltd, a Gurgaon- based company that has people raving about its Paper Boat range of desi drinks. “Three of us were sitting in our South City office, one of those houses there, in one of the outer rooms. There was one guy who used to sit at a roundtable and another guy on a bean bag most of the time. I used to bring my lunch; James [Nuttall]—he’s an American—used to get dabbewaala lunch; and Suhas [Misra], his mom used to send this steel flask with his lunch, and it used to come almost everyday with aam panna in it. All of us used to fight for that aam panna. Everything else would be eaten, we used to share and all, but aam panna was this major fight.”

Hector, named not after a Trojan warrior but in memory of a dear dog, had already been around as a company for a couple of years, set up by Kakkar, Nuttall, Misra and Neeraj Biyani, and it had only been a few months since their launch of Tzinga, an energy drink whose mild success had them in ‘endless chat’ mode about India’s beverage industry. It was cheaper than Red Bull, lots of college kids had taken to it, and maybe there were other needs out there to address.

The sudden need that Kakkar speaks of, however, arose as a simple question. “In September 2011, James’ parents were visiting India for the first time, and he wanted to give them a good Indian experience… he asked us where he could get good aam panna from. We told him, ‘Roots is a restaurant here in Gurgaon, they make it once in a while. There are a couple of others.’ So we looked around, actually went there and found that most of them were making it from sharbat, which is a flavour-led thing. It was not original. It tasted so different from what Suhas’ mom used to make. So we went to his house and asked his mom if we could have the recipe. And it’s a tough thing; you know, getting raw mangoes and making aam panna is a tedious task. So that day, Suhas’ mom had to make it for us. She made one litre of it and sent it across. But the half a day we spent searching for aam panna is the reason Paper Boat exists.”

“That’s when lightning struck us all,” he says, “We realised that raw mango ale is not available anywhere in a ready-to-drink format.”

And that’s what sprang Paper Boat into what could one day be the world’s biggest grab-a-drink market, a business dominated right now by Coca-Cola, the MNC for which Kakkar worked before doing an MBA at Wharton and returning with a dream of starting a company that would last no less long. Hector had got a big chunk of its startup money from NR Narayana Murthy’s investment firm Catamaran and Bangalore- based Footprint Ventures for a project to sell ‘functional beverages’, which were on the ascent globally, but that sweet-n- sour wonder in a steel flask made it swerve almost overnight to a deliciously desi challenge. The way Kakkar tells it, it sounds almost Pavlovian.

Lots of more investment has come in since, with Sequoia chipping in two years ago and a sum of some Rs 180 crore raised just last month in its latest round of private equity funding from a clutch of investors that now includes Sofina and Hillhouse Capital. They evidently like what they see unfolding. From two flavours—Jaljeera and Aam Panna—launched in August 2013, Paper Boat now has a dozen varieties selling in cute little ‘doy’ packs at 15,000 outlets across the country. Even with a couple of plants—at Manesar in Haryana and Mysore in Karnataka—working at peak capacity to turn out 10 million units a month, it can hardly keep up with demand for its best sellers. A company that began with about 150 people now has over 800 busybodies. While Kakkar does not disclose a sales figure, Hector is estimated to have sold drinks worth Rs 24 crore in 2014-15.

All in all, Paper Boat looks set to float its own sweet way to success.

Its goodness, Kakkar says, does not have to be explained. One look, and people get it. On this, he has learnt a thing or two from failure five years ago, back in what he calls their ‘dabbling’ phase. Since India was famously protein deficient, Hector’s first product was a protein drink called Frissia. “We had to go and tell people, ‘You know, you have protein deficiency’,” he parodies, “… nobody wants to hear that.”

Frissia fizzled out fast, withdrawn in six months. “Aam Panna and all are the purest form of functional beverages,” says Kakkar, “Everybody knows what they do.”

The little buds of my tongue erupt in tangy sweet delight. It’s Kokum, my first ever taste of Paper Boat, all 250 ml of the dark potion poured till its last drop out of a squish pack crying out to be turned over. I do, and to my surprise, out peers a cheeky message: ‘In a different universe where up is down, this is where you drink from’. Amused, I grab another pack to draw up close. This one features a purple bird on a toadstool, making me think of Kalila the Crow. It’s a pack of Jamun Kala Khatta, a sensual drink of teekha jamun pulp with a dash of lemon. ‘Kala khatta, where’s the noun?’ asks a speech bubble, ‘Who’s the adjective? The taste of a colour, the colour of a taste? Wait, it could be neither…’

‘Life is still beautiful’ is the brand’s campaign theme, credit for which goes to Karishma Lintas, whose creative proposals had Kakkar and his team “bowled over”. Hector has been working closely with the ad agency for almost a year now. The brand’s target buyer, as defined, is the 28-year-old who’s just about getting health conscious, old enough for wistful memories of childhood, those lost days of innocence, but young enough to demand novelty and fun. At heart, however, the brand’s appeal is as defiant of age as its offerings are. It’s for the post-globalisation consumer in a way, globalised enough to be exposed to all the world has to offer, but also ready to liberate his or her palate of an industrial mould. In that, it appeals to the ageing naturopath as well as the teenager whose curiosity goes beyond the discovery that Kokum is not exactly Sanskrit for ‘Coke’.

“Kokum is a phenomenal superfruit,” says Kakkar, a medicinal marvel whose revival he considers part of a rescue mission. “The diversity of cultures in this country has given us unique drinks, recipes of which have been passed down for centuries,” he says, “We are here to find a way of sharing these gastronomical gems with the world.”

The aam panna search led him back not just to his own childhood memories— and of his beloved kanji, a mildly fermented drink of purple carrots—but all the way back to ancient India. It was a research project. He read all sorts of books, some of which he had to get translated into English. “The question was, ‘Who made aam panna for the first time?’ And we found a lot of references to a lot of drinks. Jamun, for example, finds its first mention in 500 BCE—the earliest any written record is available for anything. It was a wild berry, still is, and that drink was called raga.”

“So there were all these drinks, not called aam panna or jaljeera or whatever, but there were these drinks 2,500 years ago,” he continues, “And then more came along with the Mughal Empire, which changed the culinary habits of the country quite a bit, and then… also what was happening in the South, with drinks coming in from Sri Lanka. Aam panna, we found, is not actually aam panna, it’s the culmination of events that took place over thousands of years, with some improvement or the other made generation after generation. Someone would’ve said, ‘Iss mein thoda cumin daal doh, taste achcha hoyega (try a little cumin). Somebody said, ‘Aam ko zyaada ubaalo…(boil the mangoes more).’ It’s evolution, how these came to be.”

It set minds whirring. “The question for us was, ‘Why are these not available today?’ ‘Why has kanji disappeared from my life? I want to drink it, I love it, it has a great taste, there’s no healthier drink— it’s a natural probiotic, it’s all of that—and has so many other benefits.’ The reason it wasn’t there was that in the last 30 odd years, hygiene had become far more important in our lives. So all those roadside vendors who used to make it, they started disappearing.” There’s a moment of silence. “Growing up, a pushcart used to come. It used to have those matkaas in red cloth, and that mirch-neebu tied up there. And then we started moving away from these drinks and packaged beverages came along. But it’s not that we wanted to move from aam panna to carbonated, we just wanted to move from un- hygienic to hygienic. So we said, ‘Let’s put these drinks back in people’s lives.’ Otherwise, they’d just disappear.”

And these drinks, their research revealed, had already been filtered finely for goodness down the generations. “You see, there were thousands of them once, and some 10 or 12 survived. These were the good ones. And there was a reason for each and every one of these. It was not only about taste. It was like, ‘Garmi ke liye yeh drink hai, sardi ke liye yeh…’ One was a cooler, another was a digestive, and so on.” Each of these, he says, was therapeutic in some way.

Many of them are vanishing, he sighs. In the South, a Ram Navami festival drink called pannikam, for example. “It’s got so much history in that drink, it’s not funny.” And in the West, a Konkani drink of coconut milk with garlic and kokum called sol kadhi. “It’s a brilliant drink, but takes hours and hours of hard work—and very few people make it now.”

The mass production of desi classics was another voyage of discovery. It took all the technology and expertise Kakkar could summon. For Aam Panna, just arranging the raw inputs took 18 months, and then trying to use machinery designed to process only ripe pulpy mangoes was yet another challenge (‘zyaada ubaalo’ did the trick). Launched last year, it has swiftly become Paper Boat’s top seller. Aam Ras and Jaljeera were relatively easy, but Jamun Kala Khatta and Kokum had no supply chain of raw material to count on either. “We had a jamun tree growing up, and it was an easy tree to climb, and I have so many memories— picking jamuns, falling down, getting your hand fractured, all of that,” says Kakkar, recalling his boyhood back in Assandh, 25 km from Panipat, with wistful glee. “There are no wild-berry farms. People pluck them wild, get them in baskets and sell them along the roadside.” After combing the country for inputs, Hector now gets its supplies from 18 states. It gets jamun from Muzzafarpur in Bihar, Jalgaon, Nasik and Aurangabad in Maharashtra, and has recently allied with an NGO that works with Tribals in Dewas, MP, and a similar one near Ooty to get this season’s crop right off the jungle trees. Meanwhile, he made a special effort to reach out to farmers there for kanji. “I spent a year chasing our purple carrots, and guess what, Kanji is now in testing phase…. I’m very clear, if I don’t make it, the drink will die. It’s gone.”

According to Kakkar, Hector’s plants are equipped to meet pharma-level standards of quality and hygiene. But what makes the difference is the passion of the people at work, he adds, citing Charlie’s chocolate factory from Roald Dahl’s classic story for comparison. “Think of little-big Oompa Loompas trying to make the best drinks in this country,” he says. Their attention to detail is evident in the first grasp of a pack, itself an innovation that stands out. Doy packs are “lighter and more compact, making them easily transportable”, says Kakkar. “That way they even cause fewer emissions for the same volume of drinks.” At an affordable Rs 35 for a 250-ml serving, the brand also has cost efficiency on its side. “Larger companies have scale advantages, we don’t,” says Kakkar, “Coke, for example, is a high gross margin product. We work on lower gross margins. Also, our overheads are lower. It’s a leaner structure.”

What does he make of the beverage company he spent his pre-MBA career with? “Cola-Cola is a great company,” he replies, “It teaches you a lot. I love that company. They’ve not just survived for 130 years, they’re still the most prominent player in a certain category. And the reason is that it’s a great operations company, one that has learnt from its mistakes over so many years and perfected everything: the way they produce, go to market, talk to consumers, build a brand…” Hector, he hopes, will also be a company that can sustain itself from century to century. Even if it’s only a niche player. Nuttall and Misra left in 2013, the former to return to his family in the US and the latter to pursue higher studies, but his one-time Coke colleague (and co-Neeraj) Biyani is still his sales whiz.

Does Hector have an IPO on its mind? “We don’t want to go public,” says Kakkar, “we have a good set of investors.” Whether Hector is making money or not, he won’t say. “We are not the quintessential technology startup, selling in losses for the early phase,” he offers, “We’re not selling in surplus and we’re not selling in losses, but obviously at times we spend more than what the usual business demands because we want to expand—on advertisements, on people, on increasing the distribution network.” To gain reach, the company recently tied up with Indo Nissin Foods Ltd, and Paper Boat should soon be selling at six times as many outlets.

How far could the company go? Kakkar hasn’t really thought about limits, he says. “But I can say every single day, I have been more bullish than yesterday. I have not thought of how big it could become, but I do not see a barrier.”

While Tzinga had to be taken off shop shelves earlier this year on an FSSAI ruling (reworked, it’ll soon be ready for relaunch), regulation has not got in the way of Paper Boat. If two of its flavours haven’t worked out, it’s for other reasons. The first was a chana drink with so many variations that no ‘authentic’ recipe could be found for it. The other was chilled Rasam, for which Kakkar still holds out hope. “In south India, people said ‘Rasam is supposed to be had hot, not chilled’ and all that. But the idea was, well, like in Japan, where tea is a very cultural product, somebody in the 1920s would have tried iced tea for the first time and now they drink it all the time. So if tea can be had iced, why not rasam?”

Well, why not? It’s a spirit that speaks of almost everything Hector does, be it the way it packages drinks or how it has a Labrador by that name at its Bangalore office as a mascot. “We don’t see ourselves as a traditional company,” says Kakkar, “We see ourselves as a very contemporary company.”

Paper Boat’s Rasam has a veritable spice buzz, and though it’s no patch on Golgappe Ka Pani, its pack could charm anyone anywhere. Is Paper Boat then an elaborate ploy to blend one region’s tastes with another’s?

That, says Kakkar with a big smile, is part of the fun. “By taking goodness from one part of the country to the other, we’re bringing one region closer to another. It’s quite something.” And he has that gleam in his eyes again.

carbonated beveragesCEOHector BeveragesIndian drinksNeeraj BiyaniNeeraj KakkarPaper BoatRed Bull