As you glance through the milestone years of The Nilkamal Group, you cannot help but be in awe of them. Since inception till now, the group has constantly added one feather after the other in its cap. We take you through the journey of the group over the years and their take on the dynamics of retail in India as we see today. Just to build on to the excitement of what you are about to read – Nilkamal happens to be the world’s largest manufacturers of chairs with an output of 1.4 million chairs every month!
The core of our business is guided by three basic principles – trust, quality and commitment towards innovation, says Hiten Parekh, executive director, Nilkamal as he shares the inception of the company which took place way back in 1934 when his grand-father Shri Vrajlal Parekh started with the manufacturing of metal buttons on a one machine factory shed which was about 2000 sq.ft. It was in 1950 that his entity got a name.
Shares Parekh, “In 1950 my grandfather bought Windsor machines to start plastics processing and the company was then christened as National Plastics.” The country had just attained its independence. The market dynamics were challenging. Parekh’s grandfather and his five sons worked closely with each other to keep the factory running. They would take turns to operate the machine when the labor in-charge would go for their lunch-breaks. Steadily the company grew and in 1964 National Plastics went full-fledged into the manufacturing of household items. Adds Parekh, “It was in 1970 that we took over a huge factory at Powai in Mumbai to boost our manufacturing of household items. We were growing from strength to strength. That is when my grandfather decided it was time to divide the responsibilities amongst his sons. The business was amicably split between the four brothers (one brother had expired in between). My father Vamanrai Parekh and my uncle Sharad Parekh decided to be together and they carried on with the operations of the Powai factory.” To avoid confusion in the market with regards to the brand name – National Plastics which was used by all the brothers, Vamanrai and Sharad decided to call their company Nilkamal. Shares Parekh, “I joined the business in 1983 and in 1984 we ventured into the manufacturing of material handling products such as crates for bread, milk, fish etc. The potential that this particular line of manufacturing offered was huge and we went deeper and deeper into it, adding innovation and improving the quality of our products.” The company also got into manufacturing of larger household products simultaneously and due to availability of spare resources, they started manufacturing chairs for VIP’s BloPast. Adds Parekh, “We had extra capacity and moulds with us for the manufacturing of chairs hence we decided to outsource our facility. In the interim we realized the potential the business of plastic chairs had and we decided to get ourselves into the business of chairs.” The company got into the business of molded furniture in 1990 and in 1991 a new plant was started at Sinnar in Maharashtra. 1991 also happened to be a landmark year with Nilkamal going Public and Hiten Parekh’s younger brother Manish Parekh joining the business too.
Spreading Across
The company was on a roll with the opening of more factories and various marketing initiatives which were niche to say the least. Manish Parekh adopted a very novel way of distribution. He shares, “I decided to design my dealer network in a very different way. As against the conventional norm we decided to have various dealers for a region instead of having a single dealer taking care of the entire region. I would personally travel the length and breadth of the country to make sure we had strong distributors and dealers in place. The concept of plastic chair was very much uncommon then as people had their reservations in having a plastic chair at home. What we did was that we approached various marriage hall decorators. I would tell them, don’t buy our chair but just keep them for free and use them and share your feedback with us. People started appreciating our product. It was light in weight, easily stackable and was easy on maintenance. Soon by word of mouth, various mandap decorators got in touch with us and started ordering our chairs in huge numbers. The trend spread throughout India. The guests at the weddings also got into appreciating our product and soon we became a household name for chairs.” The Parekh brothers kept their ears to the ground and made sure they kept pace with the changing needs of their customers. Innovation was added in designs. A lot more colors and finishes were introduced.
Creating a Niche
As the market for molded furniture grew, a lot many more players entered the market and it was time for the company to create a distinction for themselves. Efforts were put in to create a distinct brand image. An advertisement campaign was made with ad guru Prahlad Thakkar. The advertisement was an instant hit and it helped Nilkamal create a strong image for itself in the market.
As its business of molded furniture was catching momentum, the company’s business of material handling too was growing well. When Coca-Cola entered the country in the mid ’90s, Nilkamal was given the contract of manufacturing of its crates. More manufacturing plants were added and in 1999 the company signed its first Joint Venture with overseas subsidiary plant and manufacturing company in Sri-Lanka – Nilkamal Eswaran Plastics Pvt. Ltd. The responsibility of the material handling business was well shared by Manish and Hiten’s cousin Nayan Parekh and he has been playing an instrumental role in growing the business substantially. Shares Nayan Parekh, “In India, material handling witnessed a revolution by the introduction of plastic crates. This revolution was pioneered by Nilkamal. With the experience and expertise acquired from 3 decades of existence in this business, we are now the largest manufacturer of plastic crates offering a wide and an eclectic range of products.”
Expansion and Certifications
Moving ahead, in 2001, the company achieved ISO 9001-2000 certification by TUV – Germany for all of its plants and just a year after that they launched a plant and a JV subsidiary company in Bangladesh – Nilkamal Padma Plastics Pvt. Ltd. The market dynamics were changing then with the opening up of the retail industry and various new formats of retail coming into play. The Parekh family which strongly believed in maintaining a leadership position in the industry they operated in, looked around to see what more they could do. Hiten Parekh says, “I am a big fan of Jack Welsh. I had read in one of his books that when you are a big fish in a small pond, you need to see in the same line of business how can you be a small fish in a bigger pond. The bigger pond for us was the entire business of furniture and when we looked at our position here, we were just a very small fish with the manufacturing of molded furniture. That is when we decided to broaden our horizon and enter the market with ready-to-home furniture with the launch of @home which soon came into being as a mega home store retail chain.”
@home was a very prestigious and ambitious project launched by the group and all efforts were taken in selection of the locations to set the store, the ambiance and the customer service to be executed at the store and the merchandize selection. Says Manish Parekh, “During one of my visits to Thailand, I visited a factory which was into the manufacturing of ready to home furniture. Outside the factory there were 40 containers waiting to be loaded and exported to the European and American market. I was completely taken aback and thought that this was the way forward for the furniture business and that applied to India as well.” The journey into ready-to-home furniture business was met with challenges as the Indian consumer though amused by the concept wasn’t really ready to come out and spend without inhibitions. The concept of having a carpenter at home still prevails and according to Parekh brothers it will take time for the market to mature but it shall happen for sure. Says Hiten Parekh, “At @home we design our furniture taking care of the minutest of details in line with what an Indian consumer wants. We then get it manufactured in factories abroad we have partnered with. We are very confident of @home being prominent player in the ready to home furniture business in India. The market penetration no doubt is slow and challenging but then this is the way forward and we are ready to wait.”
Sharing details on the manufacturing units, Hiten Parekh say, “Occupying a massive total constructed area of 11,33,738 sq ft, all of Nilkamal’s manufacturing plants are ISO 9001/2008 Certified and practice six- Sigma manufacturing process. This extensive manufacturing infrastructure is ably supported by our wide and strong sales network, operating through 49 Regional Offices and 33 Warehouses spread across India. All the Nilkamal plants, warehouses and offices are connected to the Head Office in real time by ERP, SAP-R3.” Laying emphasis on the importance of Supply Chain Management, Hiten Parekh considers it as the backbone for success in the business they operate in. The company is joining hands with a supply chain management company to customize its supply chain operations for better efficiency.
Current Retail Dynamics
Commenting on the current retail dynamics of the country, Hiten Parekh shares, “Since retail caught momentum in India, we faced two set-backs. A major one being in 2008 and the present slow down. This has affected the morale of the industry but then it has also shown that this industry is for those who are ready to wait and grow. Today, the middle class in the country is yet to come out of its shell and start spending. They have started spending on things like movies and apparels but still not graduated to spend on good furniture, good holidays, expensive jewelry etc. But things shall change. The younger generation is different. Today, saving is not a priority and the credit card phenomena is getting common.” Adding to this, Manish Parekh says, “In India it is the chicken and egg story. What comes first? Are consumers suppose to get ready, change their lifestyle and then go shopping and then stores and brands come up or is it suppose to be vice versa? I think what is happening in India is that retailers are creating the atmosphere and infrastructure ready. May be people today are more at Food Court and less at the stores shopping but the generation is changing. I have grown in a single screen but my son will never want to go to a single screen cinema hall. Another challenge we retailers face today is that the various operating costs are at par with the international market but consumerism is not and here is the mis-match between the two.”
Post the rapid expansion of @home, the company had to take some tough decisions and close down three of their stores but it was a lesson well learnt for their future expansion. Today the group makes sure to open a store in the city with a population of more than 1 million and there are a decent number of organized retailers present. The catchment we operate in is usually to have a strong population of middle and upper class.
Besides their retail store @home, the company also has another format called Nilkamal Home Ideas. Says Manish Parekh, “Where they don’t plan to franchise @home, we are open to having franchisees for Nilkamal Home Ideas.”