Hector Beverages (Paper Boat) - India's answer to Coca Cola?

This article is dated October 2015. Images sourced from company website and news portals.

Paper Boat drinks has caught India's attention in a big way. Incorporated as Hector Beverages in 2011, the company started with Tzinga, an energy drink as a low cost alternative to Redbull. Started by Neeraj Kakkar, Suhas Misra, James Nuttall and Neeraj Biyani with a seed capital of Rs 2.5 crores, the company has transformed itself from a desi energy drink maker to a nutritious memory drinks seller over the last 4 years. After seeing success with Tzinga, the company started making products like the Aamras, capturing average Indian's attention with its quality product packaged in a memories. The marketing of the products has been built around memories like gully cricket, lazing in the backyards, golgappe walas, helping the consumer relive those memories as they savour the drink. The Narayan Murthy seed funded company has been producing wonderful numbers over the years. In 2014, it was already selling over 1.5 million packs of Paper boat drinks every month, an unprecedented number for a company competing with giants like Coke and Pepsi. Today, the company is talking of 7-8 million packs a month, meaning revenues of Rs 25 crores a month, or aiming to hit a market with sales of ~Rs 300 crores per annum, implying their ambition to garner nearly 20% market share in the drinks market dominated by the giant Pepsi and Coke, a high ambition indeed. 

Perhaps, the biggest advantage for Paperboat is that they do not compete in the cola segment. Several companies tried that before and couldn't get better of either Pepsi or Coke. Instead, Paperboat gives consumers an alternative to the colas. Everyone knows the ill effects of consuming colas regularly. Instead, when you are provided with a healthy drink associated with some memory, you'd rather grab it. At Rs 30, most would like to consume an Aamras in lieu of Maaza or Slice. India's beverage market is estimated to be about Rs 1800 crores. However, the fortified functional non-carbonated drinks market in India is projected to cross Rs 1,000 crore by end-2015, by industry estimates. This is much less than the carbonated drinks market of Rs 10,000 crore. What impresses most about Hector is that they are already making profits, meaning they aren't a startup anymore and are in serious business.

The company's plan to introduce the ethnic drinks into the urban markets was an instant hit. In the process, they have been able to bring several traditional drinks within the reach of all Indians. Kakkar, an alumni of Wharton Business school, has on several occasions spoken about how he got ideas of these traditional drinks. One of the incidents that I loved the most was how he saw a guy drinking sattu (a traditional Bhojpuri drink consisting of a mixture of ground pulses and cereals) and that helped him design a drink.

Paper Boat’s arsenal has aamras, aampanna, jaljeera, kokum, jamun, kala khatta, imli ka amlana, anar, chilled rasam, ginger lemon tea, tulsi tea, and golgappe ka pani. One of the biggest challenges that the company faces in the process of manufacturing natural drinks is the hot Indian climate which negatively affects the products as they risk a change the chemical composition. To the best extent possible, the company depends on nature-identical flavoring.

There are some ingredients that are common to all, like acidity regulators (vitamin C, found naturally in all citrus plants) and stabilizers (pectin, a binding agent found exclusively in plant cells), which again are natural when it comes to Paper Boat. The company has adapted several food processing technologies related with high pressure, aseptic and heat to Indian conditions in order to increase the shelf lives without adding preservatives. One of the most interesting aspects of the packaging is that they are made of a four-part laminate. The two outer layers are a blend of proprietary polypropylene and polyethylene. This makes the pack withstand extremes in pressure and heat while at the same time being easy to print upon. This is the one time you can actually judge something by its cover.

The company targets mostly metropolitan cities and other up-and-coming cultural melting pots, with major focus on consumers aged between 25 and 40 years. They also sell products on their e-commerce portal, www.shoppaperboat.com, as well on websites like Paytm. Paper Boat also sells internationally and they sell the same quality of its products everywhere, irrespective of geographical boundaries.

Paper Boat is manufactured in the company’s flagship plants at Manesar in Haryana and Mandideep in Madhya Pradesh, and a 3rd plant is coming up at Mysore.The company intends to have about 25 products in its arsenal by the end of 2015, a big plan. 

In March 2011, Narayana Murthy’s VC firm Catamaran and Bangalore-based Footprint Ventures had invested Rs 6 crores in Hector Beverages. In May 2013, Hector Beverages raised a second round of funding of $ 8 million from Sequoia Capital in which existing investors also took part. The Paper Boat brand was launched in August 2013. It started with two variants – ‘Jaljeera’ and ‘Aamras’ — and has now evolved to seven.

Paper Boats brand has had a brilliant initial run, as more and more people are discovering it. It is perhaps one of the best examples of innovation in India. Neeraj speaks of how he got the idea of launcing ‘Golgappe ka paani’ as a drink from often hearing his mother and wife say to paani-puriwallahs, ‘bhaiya, thoda paani aur dena’, after their fill of golgappe or paani-puri. The brand has a distinct visual and brand identity surrounding typical Indian childhood memories. He also quotes how they got this idea of making "Aam Panna", relating it to Suhas’s mother’s homemade ‘Aam Panna’ which was always in demand.

The name Paper Boat also takes us back to our childhood memories when we would make paper boats in the monsoons, perhaps our first sense of accomplishment, and also perhaps our first sense of loss too, when it would drown. It is an experience that taught us about staying afloat under harsh circumstances. A paper boat implies a lot of firsts. But it also signifies a different world, with different priorities. Maybe it tells us that no matter who we are, where we live or what we’ve done in our life, we will always remember how to make a paper boat, right?

Some words of advice from the founders to entrepreneurs.
  1. Keep at it. No matter what happens.
  2. Read ‘Lean Startup’ by Eric Ries.
  3. Adapting to your environment is the key.
  4. Everything which is unbranded but consumed today, presents an opportunity to start something. At some stage it will become branded.
  5. If you could make people taste memories, you should.
One of the biggest challenges of making these traditional beverages on a commercial scale is the lack of suppliers to provide quality ingredients. The company is now working with agriculture universities and farmers to procure produce of international quality. 

As an example, the Aamras contains 45% mango pulp, sugar, water, spices and condiments, citric acid, antioxidant and nature-identical flavoring substances. This is any day better than the closest competitors being Maaza and Slice

Some of the positive reactions listed by Simply tadka are
  1. Easy to serve and sip.
  2. Fresh and flavourful in taste, good for upcoming summer season.
  3. Easy to carry in travelling and eco-friendly packaging.
  4. No preservatives and completely healthy drinks.
  5. Product is very economical as per quality and quantity from the both aspects.

It is exciting to read and know about a company like Hector that has kicked off in India and aiming to capture the world markets in a segment that is dominated by global brands and many big fishes couldn't do much to stay afloat in this market. What is more inspiring is that the company is making profits and the results are evident. Lets hope they grow big and wish Mr Kakkar and his team the very best.