The financial markets generate a lot of number on a per second basis. There are people who have made it a profession to convert this information into trends, buy-sell signals, charts and pivot tables. Over the last 18 years of financial journalism, I have realised that every number has a story to tell. And these numbers as a trend normally never lie. I am forever looking for these trends.
November 9, 2014, was a day of reckoning—of sorts—for two companies. On that day, Burger King launched its first outlet in India, at Select Citywalk Mall in Saket, New Delhi. It was also the day when Gwalior-based ColdEx Logistics put itself to test to see whether it could realise its ambition of transforming itself from a simple transport company in the cold chain business to one that provided integrated solutions to quick service restaurants (QSRs).
Hours before Burger King opened its doors, Sandeep Dey went through the drill at the Saket restaurant one last time. The fast food brand’s chief supply chain officer had prepped for the rush of customers who he knew would be curious about Burger King’s signature item, the Whopper. What he could not predict was whether Delhiites would take to the menu. The reality outperformed even his wildest expectations: That day, the store sold 2,500 Whoppers.
However, at no point was Dey worried that he would run out of food. Along with ColdEx, he had planned the launch down to its last detail. The cold storage chain had a carriage inventory, in three vehicles stationed at the mall’s parking lot, that was five times the sales potential of the Saket restaurant. Dey recalls spending the better part of November 9 shuffling between the vehicles and the restaurant to keep a check on the depleting inventory. “I was able to ensure that the restaurant got a continuous supply of products from the trucks. The credit for this goes to Gaurav Jain (managing director, ColdEx Logistics) and his team. It was their idea to install the trucks in the parking lot, extending our storage capacity. The company provided the service at no extra cost,” says Dey. And over the next three days, as customers whetted their appetite and curiosity, the trucks became the outlet’s extended cold storage.
For 42-year-old Jain, the success of the launch is a very sweet victory. “We wanted to showcase our focus on the customer. Burger King was the first client who gave us a chance to provide an end-to-end solution at a national scale,” says Jain.
Not that it has faced a dearth of clients previously. Since 2007, ColdEx has bagged some of the biggest customers in the business, and provided logistical support and distribution services to well-known international brands operating in India, including Subway, Domino’s Pizza, Starbucks and KFC. But with Burger King, Jain has upped his game.
For the fast food chain, ColdEx oversees vendor development, projections, menu development and manages inventory at distribution centres responsible for storing and supplying the required products. It is the burger chain’s sole distribution partner across India. Since its launch, Burger King has opened 10 restaurants over 52 days in Delhi and Mumbai, and ColdEx has worked with Dey and his team from day one. It has contributed to all aspects of the supply chain management schedule. Most importantly, ColdEx put together a distribution blueprint for Burger King in less than two months.
When Forbes India profiled the company in its February 17, 2012 issue (The Ice Candy Man and How He Built ColdEx), it was one of the leading cold storage transport players in the market. It carried goods for confectionery makers, QSRs and even pharmaceutical companies where products need to be transported in sub-zero degree temperatures. In 2012, the company had a turnover of Rs 106 crore. Today, it has a top-line of about Rs 200 crore, and has seen its sales grow at 35 percent annually in the last five years.
What has changed in the last three years? Jain has been enhancing ColdEx’s business model—and in no small measure. By investing in warehouses and IT systems, and managing every link in the supply chain—from storage to transport—the company is well on its way to becoming a leading integrated solutions provider in the country.
India’s temperature-controlled logistics industry is estimated at Rs 12,000-15,000 crore and is poised to grow at a minimum 20 percent year-on-year over the next three to five years, say industry experts. One of the drivers of this is the increase in the consumption of perishable goods that are sensitive to temperature. This growth isn’t limited to QSRs, but also pharmaceuticals, fruits and the confectionery industry. ColdEx has a presence in all these sectors: Its clients include Nestlé India, Hershey India, Amul, Kwality Wall’s and pharmaceutical company GlaxoSmithKline.
ColdEx grew out of Swastik Roadlines Pvt Ltd, a trucking company that Jain’s father started nearly three decades ago. Jain joined it in 1999, and over the years transformed it from a dry logistics to a cold chain business. (Swastik Roadlines started operating under the brand name ColdEx Logistics from 2007.)
Jain would like to see ColdEx become the go-to logistics company in the QSR sector, and has mapped out a growth plan for the next five years, one that could easily propel it into a Rs 700-crore business. “I plan to create a plug and play model in the cold chain logistics business, which I can then sell to any QSR that wants to set up shop in the Indian market,” he says. He describes his ‘plug and play’ model as a readymade integrated logistics product that even a new entrant can use with ease.
In less than a year, Nair has shifted ColdEx’s business model and helped realise Jain’s vision. When he joined as CEO, it was primarily a transport company, and moved products from suppliers to warehouses, distribution centres and retail outlets. “We decided to become a one-stop shop for the supply chain needs of all our clients. They had many vendors, but we convinced them that we would give them one integrated solution,” says Nair. By tailoring solutions, ColdEx was able to provide an end-to-end support for inventory management.
By 2014, ColdEx got its first big client for integrated services in the QSR sector: Yum! Brands, which operates KFC, Pizza Hut and Taco Bell in India. For KFC, ColdEx manages daily pickups from 80 vendors and delivers frozen goods to six Yum! Brands distribution centres in a -18°C environment. Every year, its fleet of trucks moves about Rs 250 crore worth of stock for the company, and clocks a total distance of 27 lakh km. In 2012, ColdEx invested in a call centre to track its vehicles 24/7.
“We used to deal with around 50 transporters, but with ColdEx, we work with only one logistics supply chain company. It gave end-to-end visibility and saw to it that supply was continuously available. I think costs went down by around 15 percent,” says Rajesh Shetty, director (distribution and planning) at Yum! Brands (India).
The success of a logistics and distribution company is said to be dependent on the quality of processes it follows, but Jain attributes his success to two more ingredients: Talented personnel and cutting-edge technology. “You need to put the right people on the right job, give them the right tools, and then everything works well,” says Jain. “Empowering employees is very important.”
His willingness to trust his employees sets ColdEx apart from its competitors. Once, the staff at the Burger King outlet at Korum Mall in Thane, Mumbai’s central suburb, realised that they would run out of their current stock of fries by 4 pm. But the ColdEx vehicle travelling from a Panvel warehouse was stuck in traffic and would take another six hours to reach. Rather than hoping for the best, the area manager at Coldex, Prakash Nair, arranged for a car to meet the trucks midway. He stocked the car with 30 minutes’ requirement of fries and rushed them to the Korum outlet as a stop-gap measure.
“These are decisions that will not be taken by other companies. Even if they did it, we would have to bear the cost. ColdEx did it at no extra cost. It’s quite possible that ColdEx allows its employees on the ground to make quick decisions,” says Dey. “You need to make decisions quickly, and this can only be done by an empowered staff.”
A satisfied client means that Jain is happy, but he’s also looking for ways to cross the final hurdle, or what he calls meeting the last-mile consumer.
While its revenue is based on a business-to-business model, ColdEx wants to reach the end customer (the people who eat the burgers and fries) as part of its integrated services. Nair and Jain have already figured out how to reach malls and city centres—where their QSR clients have outlets—in record time.
But that’s not enough for Jain, who aims to reach the home of consumers who want their burgers hot and their cold drinks, well, cold. He wants his vehicles on a city’s narrow lanes and inner roads where the end customer or retail shop is located. If ColdEx can crack this last link in the supply chain, it can target ecommerce companies and offer a separate service to fast food chains.
The management at ColdEx has observed that the movement of food products from distributors to retailers is not a cost-effective process, especially in the case of ice-creams and yogurt. Many QSRs don’t even offer home delivery of ice-cream-based desserts. The company wants to use its existing cold storage technology and convert them into boxes for two-wheelers. This, says Jain, will keep the products in a temperature-controlled environment. “It is cost efficient and product compliant.”
So far, ColdEx has been conducting trial runs for fast-moving consumer goods companies like Groupe Danone and Britannia Industries Ltd in Delhi and Mumbai. In the trials, the FMCGs’ products are transported from distributors to consumers via two-wheelers. It currently has 10 scooters, but the plan is to invest in 400 scooters in the coming year and eventually finetune a business model.
“I will take my time to get this last mile right,” says Jain, who feels that this is the most difficult link of the entire cold chain logistics. And as usual, his biggest bet will be on the people who are on the ground dealing with customers. “The last mile is crucial. But we believe that this will be the final move to deliver complete end-to-end supply chain logistics,” says Jain.
When Forbes India spoke to Jain three years ago, he had said he was in no hurry to grow, and was looking to consolidate what had been built. But 2015 is about growth, and ColdEx is shedding the last vestige of its former trucking business to become a heavyweight in the cold chain business.