Onjus - Squeezed Out

Introduction Contd...

Meanwhile, the competition in the market had heightened with the launch of PepsiCo's Tropicana. Further, ETL's textile division, which was making losses⁴ (Refer Table I), owed around Rs.870 million to Financial Institutions (FIs) that asked the company to pledge the Onjus and Life⁵ brands against the loans.

To avoid the impending closure of its textile division, ETL channeled the cash flows from the food business into the textile business. This didn't go down well with the FIs and they decided against investing in the foods business, leading to the shutdown of both the divisions in early 2001.

Background

ETL, then called as Enkay Synthetics, was started as a textile company in the early 1980s. The company was involved in making, bleaching, and dyeing of polyester yarn.

During 1988-89, with competition becoming fierce in textiles, Tulsidas Goyal (Goyal), Managing Director of the company identified agro-processing as a focus area.

In 1990, Goyal set up a plant in Vapi in Gujarat state, to process guavas, mangoes and bananas into puree and concentrates.

Enkay Synthetics was merged with the fruit-processing unit and renamed as Enkay Texofoods Ltd.

The company was successful in the export markets (Europe and the Middle East), and some of its clients were Nestle, Unilever, Pepsi, Coke and Heinz.

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4] The textile division was making losses from 1993-94 due to increasing prices of raw materials and excess
production of polyester yarn. The excess production was mainly because of the new 100% EOU started in 1996.
The new unit, located at Kherdi, a Union Territory of Dadra & Nager Haveli, was set up to cater to the highly
quality-conscious markets of North America, Europe and the Middle East.

5] Life was a mango nectar launched in 1998.

Case Details

Case Code : BSTR011
Themes: Brand Management
Case Length : 9 Pages
Period : 1997-2001
Organization : Enkay Texofood Ltd
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Food, Beverages and Tobacco

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