The Tasty Bite Story

The Background Contd...

Following a lukewarm response in the Indian markets, in 1991, TBEL introduced its products in the Middle East, Russia, and the US. The company did not fare well in these markets either. The lack of a focussed marketing approach was considered to be the main reason for its failure. In 1992, TBEL entered into a collaboration with the beverage company Pepsi. Pepsi was interested in collaborating with TBEL because government regulations required it to generate one dollar in export sales for every dollar it earned in India. Pepsi agreed to distribute TBEL's RTS products abroad and help TBEL upgrade its facilities. In 1994, when the government abolished the export requirement norms for MNCs, Pepsi decided to walk out on TBEL, claiming that it would rather concentrate on its core business of soft drinks. In 1995, ex-Pepsi executives Ashok Vasudevan (Vasudevan) and Kartik Kilachand (Kilachand), who had been involved with TBEL earlier while they were in Pepsi, decided to market TBEL's products in the US. Their US based natural food marketing and distribution company, Preferred Brands International (PBI), acquired the exclusive marketing rights for TBEL's products.

In 1995, PBI launched five TBEL products in Southern California, and later expanded the business to other parts of the country also. By the end of 1995, TBEL was in serious financial trouble due to excessive borrowings. Poor response to its products and poor capacity utilization took a heavy toll on the company's financial health.

In 1996, HLL acquired the Kwality ice-cream brand and took over Grand Foods, the holding company of Kwality Frozen Foods. Grand Foods happened to be the holding company of TBEL as well, so TBEL now became an HLL company. However, TBEL continued to perform badly and by March 1997, the accumulated losses touched Rs 96 million. TBEL was declared a sick unit and referred to BIFR.

Vasudevan, who had worked with HLL for about a decade before joining Pepsi, convinced HLL's management to get TBEL de-registered from BIFR by providing financial assistance. While TBEL's equity capital remained Rs 20 million, the HLL group turned its Rs 120 million unsecured loans into preference capital at a premium of Rs 19.50 per share. As a result, TBEL's net worth turned positive and the company was de-registered from BIFR. HLL began using TBEL's idle capacity to process its own products and also initiated efforts to make TBEL more market savvy to survive in the competitive markets.

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Case Details

Case Code : MKTG015
Themes: Turnaround Strategy
Case Length : 6 Pages
Period : 1986-2001
Organization : Tasty Bite Eatables Ltd, HLL
Pub Date : 2001
Teaching Note : Available
Countries : India
Industry : Food, Beverages & Tobacco

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