Principles of Marketing Case Study

GREEN CHILLYZ: REDEFINING MARKET BOUND

• Write in continuous prose i.e. do not differentiate between questions while answering. Your response to this assignment should not exceed 3 pages, double spaced, font size 12, Times New Roman.

• Generic statements will earn no marks. Use marketing terminology and provide examples wherever appropriate.

• Use only the information available in the case.

1. The case demonstrates a changing geodemographic structure in Bhubaneswar between the late 1990s and mid-2000. Discuss the impact of these changes on fast food consumption habits. How would you establish that GCZ has used market, not product, orientation?
2. Does GCZ demonstrate marketing myopia? Support your answer.
3. GCZ has redefined the boundaries of the fast-food business by adopting a reconstructionist view of strategy and introducing biryani as a fast food item. Do you agree with this statement? Justify your answer.
4. The Rao brothers have expressed a goal of becoming a successful multinational enterprise in the future. Based on the facts in the case, what is the likelihood that they will succeed in this endeavor? Justify your answer with evidence

Ivey Publishing GREEN CHILLYZ: REDEFINING MARKET BOUNDARIES Subrat Sarangi wrote this case solely to provide material for class discussion. The author does not intend to illustrafe either effective or ineffective handling of a managenal situation. The authors may had disguised certain names and other identifying information to protect confidentiality This publication may not be transmitted. photocopied, digitized, or otherwise reproduced in any form or by any means without the pernission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction nights organization. To order copies or request permission to reproduce materials. contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, NBG ONT; (f) 519.681.3208: (e) cases@ivey.ca: www.iveycases.com. Copyright 2017. Richard /vey School of Business Foundation Version: 2017-05-17 It was the summer of May 2016 in the temple city of Bhubaneswar on the castern coast of India. Three brothers Keshav, Javaprasad, and Tejeswar Rao and their six outlet managers had gathered at the head office of Green ChillyZ (GCZ) on Lewis Road, Bhubaneswar. The eldest brother and managing director. Keshav, sct the meeting to discuss and plan the company's 19th anniversary celebrations on July 23, 2016, The goal was to set plans that could be made public, announcing anniversary celebrations in the markets of Bhubaneswar. Berhampur, Cuttack, and Bengaluru. The two younger brothers, Jayaprasad and Tejeswar, and the managers were barcly able to contain their excitement. Their minds were flooded with ideas for everything from the menu, to loyalty programs. to pan-India expansion plans. If there was one fast food joint that had redefined the food business in the state of Odisha. it was GCZ, given the way GCZ had established itself as the market leader and achieved the highest turnover grossed by any fast food restaurant in the state. I low had GCZ penetrated the fast food business with its well-defined market structure and boundaries in consumption patterns, menu spread, and buying behaviour? The three brothers had created a disruption and redefined the evening snacks market space in a vibrant and growing town. What was their secret recipe for success, and what cnabled them to reach this position after 19 years of struggle and hard work? How could the brothers continue with their approach to be even more successful in this market? DOWN MEMORY LANE: A MODEST BEGINNING The Rao brothers came from a very modest background. Their father died when the eldest brother, Keshav, was still young. Being responsible for his family, Keshav was unable to pursue higher education. Work was difficult to find in the family's home town of Berhampur, a commercial town in the southern part of Odisha. making it difficult for Keshav to cam a living for his entire family. In search of better prospects, the three brothers set off for the young and emerging city of Bhubaneswar in 1997. In 1999, the brothers took the first step to what would become a lcading fast food chain. The two years between 1997 and 1999 were arduous yet inspiring, and draining but enlightening, on their joumey to be entrepreneurs, but in January 1999, the brothers finally secured a licence from the Orissa State Poultry Page 2 9B17A026 Products Co-operative Marketing Federation Ltd. (OPOLFED), a state-level apex poultry marketing organization (sce Exhibit 1). The licence was for an outlet of about 50 squarc fuct right in the Master Canteen Squarc of Bhubaneswar, adjoining the main railway station, OPOLFED granted the licence for an outlet that was supposed to be marketing poultry products (such as eggs and dressed chicken) to consumers al a reasonable price. The outlet was also cxpxeted to gencrale employincnt opportunities for educated, unemployed youth Although the Rao brothers were from a business family, this was their first foray into the food business. Nonetheless, they trusted their instincts, and on July 23, 1999, the brothers opened their first outlet in Bhubaneswar, under the name OPOLFED. It was the beginning of a great success story in the fast food business. THE INITIAL YEARS: EVOLUTION OF BHUBANESWAR In 1999, Bhubaneswar was a young and fast-growing metropolitan cily, with a population in excess of 600.000. the city grew at a rate of 59.75 per cent between 1991 and 2001 (see Exhibit 2). The city was best known as a tourist destination due to its temples and caves from the period of the Mauryan Empire, and as a yalcway to the holy town of Puri; however, the city was also becoming a destination for the booming information technology (IT) industry. Infosys Limited was the first IT giant to enter the city. In 1997. Infosys set up an office barcly three kilometros (km) from the Master Canteen Square that housed the brothers' OPOL.FED outlet. Other notable companies soon followed and also established a presence in the city, including ESSPL in 1998. and Versatile IT Services Pvt. Ltd. in 1999. The Orissa Information Technology Society had been founded in 1997 by industry and academia to facilitate growth of IT in the state. but the society was not the only proponent of growth in Bhubaneswar. In the carly and mid-1990s, Odisha had state and central goverment lcchnical colleges spread across the state, but just one govinment college was located in Bhubaneswar, along with the state's only private graduate technical college. The education sector was evolving quickly then to keep pace with the booming dot-com and IT services sector, IT professionals were needed for employment in companics such as Wipro Limited, Tata Consultancy Services Limited, Infosys, and IBM Corporation. In particular, technical graduates were needed for deployment to projects in Europe and the United States. Bhubaneswar was an ideal location for an educational hub in Eastern India. Kolkata was still struggling with frequent closures of institutions there due to student and political unrest, and the states of Jharkhand and Chattisgarh did not yet exist.' Bihar, one of the other castem states, had its own share of issues and concerns that prevented it from providing an environment with the needed ambience for technical education Lo prosper, and for companies to visit and recruit employees, Bhubaneswar's location on the main train route between Chennai and Howrah and its decent overnight travel options to major locations in neighbouring states also made the city a sweet spot for prospective students. Thus. Bhubaneswar emerged as an educational hub in the late 1990s, meeting the aspirations of thousands who wanted to be a part of the vibrant IT services industry and become global citizens. KIIT University, which began humbly in the carly 1990s as Kalinga Institute of Infondation Technology, became a fully-fledged technical institute in 1997, along with the Institute of Technical Education and Research. The two institutes pioneered technical education in Eastern India, after which many other "The IT panies to Work for in Bhubaneswar," Discover Bhubaneswar. April 10. 2012, accessed ober 5, 2016, ntp://mybhubaneswar.com/it-companies-bhubaneswar. 2 The states of Jharkhand and Chattisgarh were created in late 2000; Swaminathan S. Anklesaria Aiyar, "The Economic Case for Creating Small States." Swartinomics, December 20, 2009, accessed November 6, 2016, http://swaminomics.org/the- economic-case-for-creating-small-states. Page 3 9B17A026 technical and professional institutions opened in Bhubaneswar. By 2016, the city boasted more than 70 lcchnical colleges, headquarters for at least cight universities (both govement and privale), and several notable central government institutes. This small town, previously noted only for hosting the state secretariat, had transformed itself into an IT and educational centre. as anticipated in the state's "Vision 2020" goal of Transfonning the temple cily into an international-level knowledge hub modelled around the San Francisco Bay Arca and Boston's Hub. This was the environment in which the Rao brothers would pursue their dream to redefine the fast food business in Bhubaneswar. A FOOT INSIDE THE DOOR: UNDERSTANDING THE DYNAMICS OF THE FAST FOOD BUSINESS The brothers used their own financial resources for the initial investments in the business, combined with some assistance from their immediate family. They opened their outlet with a modest investment of 25.000.- As entrepreneurs, the Rao brothers handled the outlet themselves: the eldest brother managed the cash and the other wo look orders and managed the kitchen, They hired only one clcancr, 'The three brothers worked constantly to stabilizc thcir venture, which had to cvolve in terms of offerings and varicty in food in the fast food market of Bhubaneswar. They restricted their menu to evening snack items that were prevalent and popular among the floating population in the station area and appealing to people from the surrounding areas. The popular fast food items included egg rolls, noodles, and pakodas. Although there was compctition from other OPOLFED outlets in the vicinity and from roadside stalls set on pushcalts in the evenings, the Rao brothers differentiated their business by offering dishes that appealed to the customers' palates. Over time, they developed a loyal customer base. With the brothers working in the outlet, they overheard discussions among their regular customers. More than half of their customers included young technical college students. IT professionals, and other students who had come to Bhubaneswar from different parts of Odisha and adjoining states to prepare for competitive examinations, mainly in engineering, medicine, and banking. This segment of young college students and professionals became the brothers target for their fast food business Astute marketing skills and an understanding of consumer behaviour gave the Rao brothers an idea: if they wanted a sustainable competitive advantage, their menu needed to be a bit different from the competing fast food outlets in the vicinity. They realized they could grow if they were able to seize this opportunity The idea involved more than just catering to the current needs of their customers: they needed to redefine the boundaries of the fast food business by providing customer- and market-oriented offerings that other fleet-footed players would be unable to match, BIRYAN! AS A FAST FOOD ITEM: THE GAME CHANGER Fast food outlets started their preparatory work for the kitchen by 4:30p.m. Customers would begin arriving between 5:30 and 6:00p.m. on week days, and usually slightly later on a weekend. The peak business times for fast food outlets were between 6:30 and 7:30p.m. During the winter months, when it would get dark by 5:30, business timings would start about 30 minutes earlier. Competition for the Rao brothers was not only from the fast food outlets selling similar ilcms, but also from the small restaurants and roadside stalls that offered snac items, such as samosas, bondas, cutlets, dosas, and "Higher Education in (Odisha],"World eBook Library, accessed December 1, 2016, www.worldllibrary.in/artides higher_education_in_orissa. * * = INR = Indian rupee: all currency amounts are in unless otherwise specified. Page 4 9B17A026 to a great extent, traditional pani-puris. The entrepreneurs quickly realized that competition was any thing that could sell as an evening snack to be consumed beforc dinner, They had also observed that their loyal customers, which included the young crowd, were always talking about their evening dinner, which they would have in a couple of hours. The Rao brothers understood that while fast food joints and roadside stalls inct the crowd's snack demand, there was still the unaddressed dinner mcal-a much greater opportunity in the offing. Was this the opportunity for them? Could their outlet become a one-stop shop for the hungry oftice- going professionals, college students, or married couples heading home from a long day's work? It was cvident to the brothers that if they wanted their venture to take off, they had to be game changers. The brothers observed and discussed the nuances of the fast food business, not just among themselves, but also with their staff About half of their customers were young students and working professionals in the age group of 18 to 27 years. Their consumption habits were different from those of the traditional and middle-aged consumer group. The brothers concluded that biryani' would fulfil the demand gap of an carly dinner or takcout incal for this set of buyers. After six months of obscrving and thinking, the brothers took the first step. They changed the name of their outlet to "Green Park" in early 2000. and added an indigenous biryani dish to their menu. To begin, the brothers cooked two to three kilograms (kg) of rice daily for biryani. However, their initial euphoria was deflated; their customers were not ready to even ihink about biryani in early evening hours when they were accustomed to cating noodles, egg rolls, samosas, or pani-puri. For the first 12 to 15 months, the losses were immense; the brothers could hardy sell four to five plates of biryani a day. In addition, Mondays. Thursdays, and Saturdays were complete non-perfonners for biryani because those days of the week were considered to be vegetarian davs; even the younger crowd was unable to shake this convention. However, this was not to be a permanent situation. The evolving business environment in Bhubaneswar and the inflow of younger people from the nighbouring status of Jharkhand, Chattisgarh, West Bengal, and Bihar in scarch of jobs and higher education were changing the geodemographic makeup of Bhubaneswar. Consumption patterns were changing. After 2000, sales at Green Park started picking up in addition to demand for the standard evening snack items. demand for biryani increased. Typical customers were groups of IT professionals returning home from their offices and students stepping out of classes, stopping at the glittering and upbeat Master Canteen Square that was completely lighted in the evening. These customers would order a roll or half-plate of noodles as an evening snack and biryani as a takeout meal for dinner. Green Park was becoming a one-stop shop for evening snacks and dinner. The brothers sct their prices based on a typical combined budget for snacks and dinner of *50100 per customer. They also kept their prices at least 20 per cent lower than those of fine dining restaurants in the city By financial year (FY) 2004/05, the Rao brothers cooked about 20 kg of rice for biryani on a daily basis, and on most days (especially Wednesdays, Fridays, and Sundays), they would run out before 8:30p,10, They added soups, kebabs, and tandoori items to their menu, which were targeted at those who were loyal biryani eaters and came only for biryani (not for snacks and biryani). While they waited for their biryani, customers would sip a hot soup or have a hot kebab or tandoori pice as an appetizer, The kebabs and tandoori items also gained favour as snack items among the younger generation, who had seemingly grown tired of the deep-fried foods that were offered by other fast food outlets. The entrepreneurs also considered the portions they offered. adding smaller portions for every item on the menu. Biryani was a South Asian mixed rice dish made with spices, rice, and meat. Ingredients varied by region and according to the type of meal used. Page 5 9B17A026 TRANSITION FROM "GREEN PARK TO "GREEN CHILLYZ" RESTAURANT CHAIN By positioning biryani as a fast food itein, Green Park had redefined the boundaries of the fast food business in Bhubaneswar and made a name for itself as a biryani specialist. By FY 2006/07, the company had a strong and loyal customer base that included both the younger set and families. Sales growth had been good: 20 per cent between 1999 and 2003, which increased to about 30 per ont between 2004 and 2010. Revenue carned from biryani sales alonewhich had been ineagre at about 500 per day during FY 1999:00 changed the fortunes of the Rao brothers significantly over the next decade (see Exhibit 3). The gross profit margin as share of revenue averaged about 15-20 per cent. By 2010, with more outlets added the biryani sales alone accounted for 100 kg of rice per outlet, especially on Sundays. Wednesdays, and Fridays. By 2016, the entrepreneurs proudly reported that their current sales of biryani amounted to almost 200 kg of rice per outlet per day on the days that were lypically considered non-vegetarian, In FY 2006/07, the brothers rechristened Green Park as "Green ChillyZ as part of a re-branding exercise (see Exhibits 4 and 5). Over the next few years, GCZ's popularity among biryani lovers in Bhubaneswar began lo spread to other parts of the state and India. By 2016, GCZ had a chain of nine outlets, six of which were in Bhubaneswar, onc in Cuttack (the largest commercial town of Odisha, about 25 km from Bhubaneswar), onc in Berhampur (a comincrcial town in the southem part of Odisha, bordering Andhra Pradesh), and one in Bengaluru (at Koramangala, the heart of food chains and mails). Refurring to the brothers jouincy of expansion and their future plans, Keshav slated, "We have a passion for the Indian way of life and want to share it with people, no matter where they're from. (It is just good food for cveryone." The brothers had drafted plans to expand to other parts of the state, including Balasore, Jajpur, and Angul. The plans also included expanding GCZ's presence outside of the stalc, nol just in Bengaluru, where they already had an outlet, but to other cities as well, such as Pune, Mumbai, and New Delhi. The brothers were always watching for franchisce applications While the brothers had successfully expanded the presence of their GCZ brand, they had experienced a couple of failures as well. They had opened a full-fledged multi-cuisine restaurant in Rourkela (an industrial town in the western part of Odisha) but had to close it due to issues in managing the business. In addition, the brothers realized that the customer base in Rourkela was mainly composed of middle- to upper-aged people with fixed routines, rather than young, mobile office-goers. The brothers then had to foreclose franchisee outlet in Aligul (an industrial town about 100 km from Bhubaneswar) because the franchise owner would not co-operatc. In Bhubaneswar, the brothers were forced to close an outlet in Bapuji Nagar (an lipscale mixed commercial and residential arca) because of parking problems, they also had to shifl . their first outlet at Master Canteen Square by about 50 metres due to the same problem. These failures made the brothers cautious about selecting locations for geographical expansion. In 2016, they used robust market research when choosing places for expansion a THE KEYS TO SUCCESS GCZ succeeded as a fast food brand by creating a niche market for itself in biryani and tandoori items in Bhubaneswar, winning several awards along the wayan outcome of the company's customer and market- contric approach. From a small OPOLFED stall in 1999 to a chain of outlets in 2016, GCZ transformed the snacks and fast food business by providing options for hungry college students and young IT professionals looking for somcthing quick, filling, and tasty that would meet their iceds the night Page 6 9B17A026 The Rao brothers managed the GCZ outlets. The youngest brother looked after the operations in Bengaluru and dealt with GCZ's promotion and inedia activities. The other two brothers handled the outlets in Bhubaneswar and other parts of Odisha. The structure was very simple, with the brothers Icading from the front of the outlet with two managers, each with distinct responsibilities. Each cutlet had a head chef and two assistant chefs, and depending on the location, a tcam of four to five wailers and chancrs For smooth opcrations and management, GCZ invested about 31 billion in the latest technology for clectronic billing and an outlet operations management system. Using live video feed, the brothers could view operations in all outlets (both in Odisha and Bengaluru) from their head office at Lewis Road, Bhubaneswar. Labour and procurement had been the other key ingredients to GCZ's success. The brothers took great care when hiring chefs for their outlets. The process of selection included a personal interview to determine whal the applicant needed so GCZ could design a compensation structure that would reduce attrition. The interview was followed by a demonstration of the applicant's culinary skills, after which offers were made. Before they were assigned jobs in the kitchen, the chefs were trained in using GCZ's propriclary recipes, ensuring quality and taste were standardized across outlets. GCZ had managed to avoid poaching of its staff and kept its allrition rate lo 10-15 per cent, which was inuch lower than the industry average of 25-30 per cent in addition to providing an attractive salary package, the brothers ensured that GCZ staff had accommodations, food. soft loans to meet personal exigencies, and, from time to time, bonuses and incentives. With well-trained staff who slayed with the outlets, GCZ provided consistent quality and laste for its customers, adding to the company's success Purchasing the rice and masalas for biryani and tandoori dishes was also critical. The Rao brothers went to great lengths to keep their source of masalas secret, even from GCZ's chefs. The brothers handled the sourcing themselves. They procured the masalas (especially the dry spices) from South India, where the available quality was unmatchable. The brothers fimly believed that their masalas gave GCZ a clear advantage over other biryani makers in Bhubaneswar, especially BJ's Tandoor Delights (BJ's). GCZ's closest competitor. Similarly, the brothers searched across Indiaincluding Hyderabad, Chennai, and Lucknow-lo find their source for the long-grain basnati ric that GCZ used. In FY 2007/08, they finally settled on a source in Delhi. The rice was procured through a trader from Delhi and a monthly consignment was delivered to Bhubaneswar. GCZ refined its menu to meet the changing tastes and needs of customers in its target markets segments. By 2016, the menu was significantly different from the one offered in 2008. The brothers had added a number of items, such as tikkas, kebabs, parathas, and different biryanis (eg., tangri and kebab biryani) (see Exhibit 5). These were GCZ innovations, but they were subsequently copied and offered by competitors like BJ's, Mughlai Roast, and other roadside stalls GCZ also served a special chili-based sauce, which had a large fan following and was a crowd puller for kebabs and pakodas. As GC7. continued grow.it constantly looked at adding new items and making changes so that its food items did not become predictable and customers stayed engaged Over the years, GCZ earned respect and accolades in the form of awards from prestigious bodies. yovertiment entities, and trade associations. Some of the nolablc awards that the company recived included the "Rotary Interface Best Food" award in 2011, "TIE Entrepreneur of the Year" in 2013. the "Jhatpat Fast Food Centre RED FM 93.5" award in 2013. and the Youth Entrepreneur Interview Times" award in 2014. Suill looking to grow and succeed further, the three Rao brothers envisioned becoming a multinational enterprise with outlets in Europe, the Middle East, and the United States, making GCZ a global brand. Page 7 9B17A026 EXHIBIT 1: OPOLFED'S MAJOR ACTIVITIES Organization of Primary and Women Poultry Co-operative Societies Supply of inputs to poultry farmers Marketing of eggs, packet eggs, dressed chicken meat, poultry feed, etc. Supply of poultry products to consumers at reasonable rates Supply of eggs to school children in different districts of the state under the Midday Meal Scheme Self-employment opportunities for educated but unemployed youth Implementation of Odisha Women Poultry Project (OWPP) in Khurda and Angul districts Source: OPOLFED, accessed September 22, 2016, www.opoled.com/index.php. ROS EXHIBIT 2: POPULATION OF BHUBANESWAR Year Population Growth Rate (%) 107.80 87.74 59.75 1981 1991 2001 2011" 2021 2031* Density (persons per square km) 2.359 3.299 3,500 Note: * = predicted population. Source: Created by the case author, based on "Chapter 4: Social & Economic Aspects," Odisha Government, accessed October 3, 2016, www.odisha.gov.in/forest_environment/pdfChap_4.pdf EXHIBIT 3: GREEN CHILLYZ REVENUE CONTRIBUTION FROM BIRYANI Period (fiscal year) 2000/01 2002/03 2004/05 2008/09 2015/16 Revenue Contribution (per day per outlet) 500-1,000 10,000 25,000-35,000 45,000-55,000 100,000120,000 Source: Created by the case author based on company sources, Done Ivey Publishing GREEN CHILLYZ: REDEFINING MARKET BOUNDARIES Subrat Sarangi wrote this case solely to provide material for class discussion. The author does not intend to illustrafe either effective or ineffective handling of a managenal situation. The authors may had disguised certain names and other identifying information to protect confidentiality This publication may not be transmitted. photocopied, digitized, or otherwise reproduced in any form or by any means without the pernission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction nights organization. To order copies or request permission to reproduce materials. contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, NBG ONT; (f) 519.681.3208: (e) cases@ivey.ca: www.iveycases.com. Copyright 2017. Richard /vey School of Business Foundation Version: 2017-05-17 It was the summer of May 2016 in the temple city of Bhubaneswar on the castern coast of India. Three brothers Keshav, Javaprasad, and Tejeswar Rao and their six outlet managers had gathered at the head office of Green ChillyZ (GCZ) on Lewis Road, Bhubaneswar. The eldest brother and managing director. Keshav, sct the meeting to discuss and plan the company's 19th anniversary celebrations on July 23, 2016, The goal was to set plans that could be made public, announcing anniversary celebrations in the markets of Bhubaneswar. Berhampur, Cuttack, and Bengaluru. The two younger brothers, Jayaprasad and Tejeswar, and the managers were barcly able to contain their excitement. Their minds were flooded with ideas for everything from the menu, to loyalty programs. to pan-India expansion plans. If there was one fast food joint that had redefined the food business in the state of Odisha. it was GCZ, given the way GCZ had established itself as the market leader and achieved the highest turnover grossed by any fast food restaurant in the state. I low had GCZ penetrated the fast food business with its well-defined market structure and boundaries in consumption patterns, menu spread, and buying behaviour? The three brothers had created a disruption and redefined the evening snacks market space in a vibrant and growing town. What was their secret recipe for success, and what cnabled them to reach this position after 19 years of struggle and hard work? How could the brothers continue with their approach to be even more successful in this market? DOWN MEMORY LANE: A MODEST BEGINNING The Rao brothers came from a very modest background. Their father died when the eldest brother, Keshav, was still young. Being responsible for his family, Keshav was unable to pursue higher education. Work was difficult to find in the family's home town of Berhampur, a commercial town in the southern part of Odisha. making it difficult for Keshav to cam a living for his entire family. In search of better prospects, the three brothers set off for the young and emerging city of Bhubaneswar in 1997. In 1999, the brothers took the first step to what would become a lcading fast food chain. The two years between 1997 and 1999 were arduous yet inspiring, and draining but enlightening, on their joumey to be entrepreneurs, but in January 1999, the brothers finally secured a licence from the Orissa State Poultry Page 2 9B17A026 Products Co-operative Marketing Federation Ltd. (OPOLFED), a state-level apex poultry marketing organization (sce Exhibit 1). The licence was for an outlet of about 50 squarc fuct right in the Master Canteen Squarc of Bhubaneswar, adjoining the main railway station, OPOLFED granted the licence for an outlet that was supposed to be marketing poultry products (such as eggs and dressed chicken) to consumers al a reasonable price. The outlet was also cxpxeted to gencrale employincnt opportunities for educated, unemployed youth Although the Rao brothers were from a business family, this was their first foray into the food business. Nonetheless, they trusted their instincts, and on July 23, 1999, the brothers opened their first outlet in Bhubaneswar, under the name OPOLFED. It was the beginning of a great success story in the fast food business. THE INITIAL YEARS: EVOLUTION OF BHUBANESWAR In 1999, Bhubaneswar was a young and fast-growing metropolitan cily, with a population in excess of 600.000. the city grew at a rate of 59.75 per cent between 1991 and 2001 (see Exhibit 2). The city was best known as a tourist destination due to its temples and caves from the period of the Mauryan Empire, and as a yalcway to the holy town of Puri; however, the city was also becoming a destination for the booming information technology (IT) industry. Infosys Limited was the first IT giant to enter the city. In 1997. Infosys set up an office barcly three kilometros (km) from the Master Canteen Square that housed the brothers' OPOL.FED outlet. Other notable companies soon followed and also established a presence in the city, including ESSPL in 1998. and Versatile IT Services Pvt. Ltd. in 1999. The Orissa Information Technology Society had been founded in 1997 by industry and academia to facilitate growth of IT in the state. but the society was not the only proponent of growth in Bhubaneswar. In the carly and mid-1990s, Odisha had state and central goverment lcchnical colleges spread across the state, but just one govinment college was located in Bhubaneswar, along with the state's only private graduate technical college. The education sector was evolving quickly then to keep pace with the booming dot-com and IT services sector, IT professionals were needed for employment in companics such as Wipro Limited, Tata Consultancy Services Limited, Infosys, and IBM Corporation. In particular, technical graduates were needed for deployment to projects in Europe and the United States. Bhubaneswar was an ideal location for an educational hub in Eastern India. Kolkata was still struggling with frequent closures of institutions there due to student and political unrest, and the states of Jharkhand and Chattisgarh did not yet exist.' Bihar, one of the other castem states, had its own share of issues and concerns that prevented it from providing an environment with the needed ambience for technical education Lo prosper, and for companies to visit and recruit employees, Bhubaneswar's location on the main train route between Chennai and Howrah and its decent overnight travel options to major locations in neighbouring states also made the city a sweet spot for prospective students. Thus. Bhubaneswar emerged as an educational hub in the late 1990s, meeting the aspirations of thousands who wanted to be a part of the vibrant IT services industry and become global citizens. KIIT University, which began humbly in the carly 1990s as Kalinga Institute of Infondation Technology, became a fully-fledged technical institute in 1997, along with the Institute of Technical Education and Research. The two institutes pioneered technical education in Eastern India, after which many other "The IT panies to Work for in Bhubaneswar," Discover Bhubaneswar. April 10. 2012, accessed ober 5, 2016, ntp://mybhubaneswar.com/it-companies-bhubaneswar. 2 The states of Jharkhand and Chattisgarh were created in late 2000; Swaminathan S. Anklesaria Aiyar, "The Economic Case for Creating Small States." Swartinomics, December 20, 2009, accessed November 6, 2016, http://swaminomics.org/the- economic-case-for-creating-small-states. Page 3 9B17A026 technical and professional institutions opened in Bhubaneswar. By 2016, the city boasted more than 70 lcchnical colleges, headquarters for at least cight universities (both govement and privale), and several notable central government institutes. This small town, previously noted only for hosting the state secretariat, had transformed itself into an IT and educational centre. as anticipated in the state's "Vision 2020" goal of Transfonning the temple cily into an international-level knowledge hub modelled around the San Francisco Bay Arca and Boston's Hub. This was the environment in which the Rao brothers would pursue their dream to redefine the fast food business in Bhubaneswar. A FOOT INSIDE THE DOOR: UNDERSTANDING THE DYNAMICS OF THE FAST FOOD BUSINESS The brothers used their own financial resources for the initial investments in the business, combined with some assistance from their immediate family. They opened their outlet with a modest investment of 25.000.- As entrepreneurs, the Rao brothers handled the outlet themselves: the eldest brother managed the cash and the other wo look orders and managed the kitchen, They hired only one clcancr, 'The three brothers worked constantly to stabilizc thcir venture, which had to cvolve in terms of offerings and varicty in food in the fast food market of Bhubaneswar. They restricted their menu to evening snack items that were prevalent and popular among the floating population in the station area and appealing to people from the surrounding areas. The popular fast food items included egg rolls, noodles, and pakodas. Although there was compctition from other OPOLFED outlets in the vicinity and from roadside stalls set on pushcalts in the evenings, the Rao brothers differentiated their business by offering dishes that appealed to the customers' palates. Over time, they developed a loyal customer base. With the brothers working in the outlet, they overheard discussions among their regular customers. More than half of their customers included young technical college students. IT professionals, and other students who had come to Bhubaneswar from different parts of Odisha and adjoining states to prepare for competitive examinations, mainly in engineering, medicine, and banking. This segment of young college students and professionals became the brothers target for their fast food business Astute marketing skills and an understanding of consumer behaviour gave the Rao brothers an idea: if they wanted a sustainable competitive advantage, their menu needed to be a bit different from the competing fast food outlets in the vicinity. They realized they could grow if they were able to seize this opportunity The idea involved more than just catering to the current needs of their customers: they needed to redefine the boundaries of the fast food business by providing customer- and market-oriented offerings that other fleet-footed players would be unable to match, BIRYAN! AS A FAST FOOD ITEM: THE GAME CHANGER Fast food outlets started their preparatory work for the kitchen by 4:30p.m. Customers would begin arriving between 5:30 and 6:00p.m. on week days, and usually slightly later on a weekend. The peak business times for fast food outlets were between 6:30 and 7:30p.m. During the winter months, when it would get dark by 5:30, business timings would start about 30 minutes earlier. Competition for the Rao brothers was not only from the fast food outlets selling similar ilcms, but also from the small restaurants and roadside stalls that offered snac items, such as samosas, bondas, cutlets, dosas, and "Higher Education in (Odisha],"World eBook Library, accessed December 1, 2016, www.worldllibrary.in/artides higher_education_in_orissa. * * = INR = Indian rupee: all currency amounts are in unless otherwise specified. Page 4 9B17A026 to a great extent, traditional pani-puris. The entrepreneurs quickly realized that competition was any thing that could sell as an evening snack to be consumed beforc dinner, They had also observed that their loyal customers, which included the young crowd, were always talking about their evening dinner, which they would have in a couple of hours. The Rao brothers understood that while fast food joints and roadside stalls inct the crowd's snack demand, there was still the unaddressed dinner mcal-a much greater opportunity in the offing. Was this the opportunity for them? Could their outlet become a one-stop shop for the hungry oftice- going professionals, college students, or married couples heading home from a long day's work? It was cvident to the brothers that if they wanted their venture to take off, they had to be game changers. The brothers observed and discussed the nuances of the fast food business, not just among themselves, but also with their staff About half of their customers were young students and working professionals in the age group of 18 to 27 years. Their consumption habits were different from those of the traditional and middle-aged consumer group. The brothers concluded that biryani' would fulfil the demand gap of an carly dinner or takcout incal for this set of buyers. After six months of obscrving and thinking, the brothers took the first step. They changed the name of their outlet to "Green Park" in early 2000. and added an indigenous biryani dish to their menu. To begin, the brothers cooked two to three kilograms (kg) of rice daily for biryani. However, their initial euphoria was deflated; their customers were not ready to even ihink about biryani in early evening hours when they were accustomed to cating noodles, egg rolls, samosas, or pani-puri. For the first 12 to 15 months, the losses were immense; the brothers could hardy sell four to five plates of biryani a day. In addition, Mondays. Thursdays, and Saturdays were complete non-perfonners for biryani because those days of the week were considered to be vegetarian davs; even the younger crowd was unable to shake this convention. However, this was not to be a permanent situation. The evolving business environment in Bhubaneswar and the inflow of younger people from the nighbouring status of Jharkhand, Chattisgarh, West Bengal, and Bihar in scarch of jobs and higher education were changing the geodemographic makeup of Bhubaneswar. Consumption patterns were changing. After 2000, sales at Green Park started picking up in addition to demand for the standard evening snack items. demand for biryani increased. Typical customers were groups of IT professionals returning home from their offices and students stepping out of classes, stopping at the glittering and upbeat Master Canteen Square that was completely lighted in the evening. These customers would order a roll or half-plate of noodles as an evening snack and biryani as a takeout meal for dinner. Green Park was becoming a one-stop shop for evening snacks and dinner. The brothers sct their prices based on a typical combined budget for snacks and dinner of *50100 per customer. They also kept their prices at least 20 per cent lower than those of fine dining restaurants in the city By financial year (FY) 2004/05, the Rao brothers cooked about 20 kg of rice for biryani on a daily basis, and on most days (especially Wednesdays, Fridays, and Sundays), they would run out before 8:30p,10, They added soups, kebabs, and tandoori items to their menu, which were targeted at those who were loyal biryani eaters and came only for biryani (not for snacks and biryani). While they waited for their biryani, customers would sip a hot soup or have a hot kebab or tandoori pice as an appetizer, The kebabs and tandoori items also gained favour as snack items among the younger generation, who had seemingly grown tired of the deep-fried foods that were offered by other fast food outlets. The entrepreneurs also considered the portions they offered. adding smaller portions for every item on the menu. Biryani was a South Asian mixed rice dish made with spices, rice, and meat. Ingredients varied by region and according to the type of meal used. Page 5 9B17A026 TRANSITION FROM "GREEN PARK TO "GREEN CHILLYZ" RESTAURANT CHAIN By positioning biryani as a fast food itein, Green Park had redefined the boundaries of the fast food business in Bhubaneswar and made a name for itself as a biryani specialist. By FY 2006/07, the company had a strong and loyal customer base that included both the younger set and families. Sales growth had been good: 20 per cent between 1999 and 2003, which increased to about 30 per ont between 2004 and 2010. Revenue carned from biryani sales alonewhich had been ineagre at about 500 per day during FY 1999:00 changed the fortunes of the Rao brothers significantly over the next decade (see Exhibit 3). The gross profit margin as share of revenue averaged about 15-20 per cent. By 2010, with more outlets added the biryani sales alone accounted for 100 kg of rice per outlet, especially on Sundays. Wednesdays, and Fridays. By 2016, the entrepreneurs proudly reported that their current sales of biryani amounted to almost 200 kg of rice per outlet per day on the days that were lypically considered non-vegetarian, In FY 2006/07, the brothers rechristened Green Park as "Green ChillyZ as part of a re-branding exercise (see Exhibits 4 and 5). Over the next few years, GCZ's popularity among biryani lovers in Bhubaneswar began lo spread to other parts of the state and India. By 2016, GCZ had a chain of nine outlets, six of which were in Bhubaneswar, onc in Cuttack (the largest commercial town of Odisha, about 25 km from Bhubaneswar), onc in Berhampur (a comincrcial town in the southem part of Odisha, bordering Andhra Pradesh), and one in Bengaluru (at Koramangala, the heart of food chains and mails). Refurring to the brothers jouincy of expansion and their future plans, Keshav slated, "We have a passion for the Indian way of life and want to share it with people, no matter where they're from. (It is just good food for cveryone." The brothers had drafted plans to expand to other parts of the state, including Balasore, Jajpur, and Angul. The plans also included expanding GCZ's presence outside of the stalc, nol just in Bengaluru, where they already had an outlet, but to other cities as well, such as Pune, Mumbai, and New Delhi. The brothers were always watching for franchisce applications While the brothers had successfully expanded the presence of their GCZ brand, they had experienced a couple of failures as well. They had opened a full-fledged multi-cuisine restaurant in Rourkela (an industrial town in the western part of Odisha) but had to close it due to issues in managing the business. In addition, the brothers realized that the customer base in Rourkela was mainly composed of middle- to upper-aged people with fixed routines, rather than young, mobile office-goers. The brothers then had to foreclose franchisee outlet in Aligul (an industrial town about 100 km from Bhubaneswar) because the franchise owner would not co-operatc. In Bhubaneswar, the brothers were forced to close an outlet in Bapuji Nagar (an lipscale mixed commercial and residential arca) because of parking problems, they also had to shifl . their first outlet at Master Canteen Square by about 50 metres due to the same problem. These failures made the brothers cautious about selecting locations for geographical expansion. In 2016, they used robust market research when choosing places for expansion a THE KEYS TO SUCCESS GCZ succeeded as a fast food brand by creating a niche market for itself in biryani and tandoori items in Bhubaneswar, winning several awards along the wayan outcome of the company's customer and market- contric approach. From a small OPOLFED stall in 1999 to a chain of outlets in 2016, GCZ transformed the snacks and fast food business by providing options for hungry college students and young IT professionals looking for somcthing quick, filling, and tasty that would meet their iceds the night Page 6 9B17A026 The Rao brothers managed the GCZ outlets. The youngest brother looked after the operations in Bengaluru and dealt with GCZ's promotion and inedia activities. The other two brothers handled the outlets in Bhubaneswar and other parts of Odisha. The structure was very simple, with the brothers Icading from the front of the outlet with two managers, each with distinct responsibilities. Each cutlet had a head chef and two assistant chefs, and depending on the location, a tcam of four to five wailers and chancrs For smooth opcrations and management, GCZ invested about 31 billion in the latest technology for clectronic billing and an outlet operations management system. Using live video feed, the brothers could view operations in all outlets (both in Odisha and Bengaluru) from their head office at Lewis Road, Bhubaneswar. Labour and procurement had been the other key ingredients to GCZ's success. The brothers took great care when hiring chefs for their outlets. The process of selection included a personal interview to determine whal the applicant needed so GCZ could design a compensation structure that would reduce attrition. The interview was followed by a demonstration of the applicant's culinary skills, after which offers were made. Before they were assigned jobs in the kitchen, the chefs were trained in using GCZ's propriclary recipes, ensuring quality and taste were standardized across outlets. GCZ had managed to avoid poaching of its staff and kept its allrition rate lo 10-15 per cent, which was inuch lower than the industry average of 25-30 per cent in addition to providing an attractive salary package, the brothers ensured that GCZ staff had accommodations, food. soft loans to meet personal exigencies, and, from time to time, bonuses and incentives. With well-trained staff who slayed with the outlets, GCZ provided consistent quality and laste for its customers, adding to the company's success Purchasing the rice and masalas for biryani and tandoori dishes was also critical. The Rao brothers went to great lengths to keep their source of masalas secret, even from GCZ's chefs. The brothers handled the sourcing themselves. They procured the masalas (especially the dry spices) from South India, where the available quality was unmatchable. The brothers fimly believed that their masalas gave GCZ a clear advantage over other biryani makers in Bhubaneswar, especially BJ's Tandoor Delights (BJ's). GCZ's closest competitor. Similarly, the brothers searched across Indiaincluding Hyderabad, Chennai, and Lucknow-lo find their source for the long-grain basnati ric that GCZ used. In FY 2007/08, they finally settled on a source in Delhi. The rice was procured through a trader from Delhi and a monthly consignment was delivered to Bhubaneswar. GCZ refined its menu to meet the changing tastes and needs of customers in its target markets segments. By 2016, the menu was significantly different from the one offered in 2008. The brothers had added a number of items, such as tikkas, kebabs, parathas, and different biryanis (eg., tangri and kebab biryani) (see Exhibit 5). These were GCZ innovations, but they were subsequently copied and offered by competitors like BJ's, Mughlai Roast, and other roadside stalls GCZ also served a special chili-based sauce, which had a large fan following and was a crowd puller for kebabs and pakodas. As GC7. continued grow.it constantly looked at adding new items and making changes so that its food items did not become predictable and customers stayed engaged Over the years, GCZ earned respect and accolades in the form of awards from prestigious bodies. yovertiment entities, and trade associations. Some of the nolablc awards that the company recived included the "Rotary Interface Best Food" award in 2011, "TIE Entrepreneur of the Year" in 2013. the "Jhatpat Fast Food Centre RED FM 93.5" award in 2013. and the Youth Entrepreneur Interview Times" award in 2014. Suill looking to grow and succeed further, the three Rao brothers envisioned becoming a multinational enterprise with outlets in Europe, the Middle East, and the United States, making GCZ a global brand. Page 7 9B17A026 EXHIBIT 1: OPOLFED'S MAJOR ACTIVITIES Organization of Primary and Women Poultry Co-operative Societies Supply of inputs to poultry farmers Marketing of eggs, packet eggs, dressed chicken meat, poultry feed, etc. Supply of poultry products to consumers at reasonable rates Supply of eggs to school children in different districts of the state under the Midday Meal Scheme Self-employment opportunities for educated but unemployed youth Implementation of Odisha Women Poultry Project (OWPP) in Khurda and Angul districts Source: OPOLFED, accessed September 22, 2016, www.opoled.com/index.php. ROS EXHIBIT 2: POPULATION OF BHUBANESWAR Year Population Growth Rate (%) 107.80 87.74 59.75 1981 1991 2001 2011" 2021 2031* Density (persons per square km) 2.359 3.299 3,500 Note: * = predicted population. Source: Created by the case author, based on "Chapter 4: Social & Economic Aspects," Odisha Government, accessed October 3, 2016, www.odisha.gov.in/forest_environment/pdfChap_4.pdf EXHIBIT 3: GREEN CHILLYZ REVENUE CONTRIBUTION FROM BIRYANI Period (fiscal year) 2000/01 2002/03 2004/05 2008/09 2015/16 Revenue Contribution (per day per outlet) 500-1,000 10,000 25,000-35,000 45,000-55,000 100,000120,000 Source: Created by the case author based on company sources, Done