The Company: DS Group, led by brothers Ravinder and Rajiv Kumar
The Ambition: Want to make the transition from being a tobacco company to a diversified conglomerate
The Challenge: Right now pan masala brand Rajnigandha brings in about 40 percent revenue. Need to develop more brands in FMCG. Huge competition in each of the segments.
Their Strategy: Broadening Rajnigandha brand into other products. Creating new FMCG brands and being patient in getting results.
The new corporate headquarters of the Rs 4,800-crore DS Group—a 6 lakh square feet and mostly marble office space—is swanky, glitzy and modern. Yes, it’s all that. But for Rajiv Kumar, the group’s vice chairman, and his family, the new office is also a symbol of how far they have come and where they want to go—beyond the tobacco brands that presently define them. “We want to be a conglomerate…the tobacco business is just 25 percent of our revenue today,” says Rajiv Kumar, adding that the traditional business will become even smaller in the coming years.
Undoubtedly, they have come far—philosophically, strategically and geographically. From a small corner shop in Delhi’s old and walled neighbourhood of Chandni Chowk to seven-star type premises in Noida, it has been quite a journey for the Kumars from purani Dilli. Their business was founded in 1929 when Lala Dharampal (the D in DS) set up a perfumery shop in Chandni Chowk, and later diversified into chewing tobacco. His son Satyapal (the S) would take the business to new heights by introducing chewing tobacco brands such as Baba and Tulsi as well as pan masala (a betel nut product) brand Rajnigandha.
Though the company began diversifying into non-tobacco businesses in 1987, the push became a drive from 2006 onwards. In the last eight years, Satyapal’s sons—Rajiv Kumar and elder son Ravinder Kumar, chairman of the DS Group—have set up seven new businesses ranging from hospitality to dairy. They are also firming up plans to invest in the power, steel and cement sectors. “The FMCG business [which includes confectionery, spices and beverages] will drive growth,” says Ritesh Kumar, Ravinder’s son and a director in the group.
The transformation impetus is understandable. According to Euromonitor’s October 2013 study on the smokeless tobacco industry, volumes have been reducing for the last two years, tanking by 26 percent in 2012. The slide came after governments of 26 states and five union territories in India banned the sale of gutka (a granular stimulant mainly containing tobacco). Euromonitor estimates that the segment will see a further decline of 76 percent in volumes from 2012 to 2017.
Inevitably, during the course of the interview with Forbes India, Rajiv repeatedly assured that DS’s tobacco brands have the best standards of quality control and are in the premium segment of the industry. Apart from an experiment “years ago” to enter the gutka segment, a foray that was discontinued, DS brands Tulsi and Baba are zarda products, containing only tobacco. Though their market shares have been increasing (the two put together make DS the second largest manufacturer behind Dhariwal Industries’s RMD Gutkha in the smokeless tobacco industry), Kumar realises that doing business in such an environment will remain difficult. As Devangshu Dutta of consulting firm Third Eyesight points out, “Anything to do with tobacco is seen as part of the sin economy.”
But what pains Rajiv more is the overhang of this “perception” on his leading brand Rajnigandha. “Gutka has damaged the perception of Rajnigandha,” he says. The pan masala, which Kumar brackets under mouth freshener, is expected to gross Rs 2,000 crore in revenue in FY2014, accounting for more than 40 percent of the company’s revenue. But its soaring sales aren’t indicative of an altered image with most mistaking it for a tobacco-based product.
In this context, it is not surprising that the last four major initiatives from the DS stable have been in the FMCG segment. This, Rajiv hopes, will help achieve what, as Dutta of Third Eyesight points out, ITC has tried to do over the last few decades: Reposition itself.
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(This story appears in the 02 May, 2014 issue of Forbes India. To visit our Archives, click here.)
DS group provide if the best workig culture to thier employees! Your company production speed is very weak. so i want to you say i have property,on Dec 12, 2014
Ds group provide one of the worst work culture in fmcg segment. Its distribution system is very weak. its moto is to earn money no rules and regulation is there in the company, with it present strategy the group will never position itself in top fmcg companyon Sep 4, 2014
The Ds provided the best working culture to their employees. The main attraction is the feeling of belongingness in it\'s employees. They have one of the best talents in the industry and feeling of team work is the only motto.on Jul 4, 2014
.....being an employee of D S Group I feel that Group is diversifying fast but they need to invest (trainings etc.) in manpower to motivate and attract new talent to work for the company.on May 14, 2014
It will take one full century for DS group to come any where near ITC. ITC is professionally managed where as DS group is family managed. Basically it is a gutka and tobacco company. Most of its sales are on cash basis. Hence little payment of taxes.on May 5, 2014
With degrowing non smoking tobacco market its imperative for the DS Group to diversify business. However, the positioning of the company is still a \'Tobacco Company\' and it would difficult to reposition. They have presence in Pan Shops and getting into the products that are available in MT, General Stores would be challenge (distribution).on May 2, 2014
With the degrowing non smoking tobacco market DS Group should diversify. Adding products that are not related to tobacco would be difficult for the DS Group as thier positioning is already a tobacco company. Challege would not only be repositioning but also making prouducts available beyond Pan Stores. Hence, distribution would also be bigger task on hand.on May 2, 2014