A New Recipe For Nirula’s
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Image: Madhu Kapparath for Forbes India
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amir Kuckreja first turned around a business at the age of 16. Admittedly, it was not a big business. It was Tuck Shop, the cafeteria at Dehradun-based Doon School where Kuckreja studied.
The cafeteria, run by students, was not doing very well. “The head master asked if I would like to take control,” recounts Kuckreja.
The then tenth standard boy from Kolkata was more than eager. He had been spending his summer vacations in Delhi, watching his two maternal uncles run Nirula’s, the family’s fast food business that was set up by his maternal grandfather. Now he had a chance to run his own shop. Kuckreja ‘rationalised’ the prices and revamped the menu. “Within a year and half, Tuck Shop turned profitable,” says Kuckreja as he recounts his first business assignment. He was rewarded with School Colours for ‘extraordinary service.’
Almost three decades on, Kuckreja will finish five years of another turnaround act in July this year. Here, Kuckreja has not only rationalised prices and revamped menus but has also handed out pink slips, overhauled management, streamlined operations and repositioned, ironically, the very business where he learned his ropes. However, while it has been no less than a rescue act to save Nirula’s, Kuckreja’s work is only half done.
In 2006, when Malaysia’s Navis Capital bought out the Nirula brothers for Rs. 100 crore and asked Kuckreja to take over as a co-shareholder and managing director, the home grown restaurant chain was a ‘tired brand’, as the private equity fund’s co-founder Nicholas Bloy terms it. Though Nirula’s had introduced Delhiites to pizzas and burgers, and made ice creams that reached iconic status, it was losing market share to chains like McDonald’s and Domino’s Pizza. It was also a diluted brand with its bloated menu that confused consumers rather than helped them choose.
Much has changed since then, largely driven by Kuckreja, for whom it was a “childhood dream come true” to head Nirula’s. The chain now runs 85 outlets compared to less than 40 in 2006. More importantly, 85 percent of the present outlets are profitable as against less than half then. The menu has been shortened by 25 percent. More significantly for Nirula’s majority shareholder Navis Capital, the company has turned profitable. While the privately held company refused to share details, sources close to Nirula’s said its revenues now top Rs. 100 crore (from less than Rs. 40 crore in 2006) with profit margin percentages in single digits.
Ingredients for Success
Kuckreja still has miles to go. The 44-year-old who started off in Nirula’s as a teenager washing dishes and cleaning tables says, “We have stabilised operations and are now embarking on a pan-India expansion. This year, we are opening an outlet every week and will add 50 new ones by the end of 2011. We have grown by a Compound Annual Growth Rate of 20 percent in the last five years and target 25 percent growth annually in the next five.” That will see Nirula’s spreading its wings to 500 outlets across 20 cities in India, apart from going overseas to five countries. Other than the family restaurants, express outlets and ice cream kiosks, Nirula’s will also have “enhanced dining” outlets that sell liquor. “We want to make Nirula’s the dominant Indian QSR [quick service restaurant] chain in India and abroad,” says Kuckreja.
Back in Malaysia, Navis’ Bloy will be keeping close watch. The private equity fund has a maximum stay period of 10 years for an investment and wants to complete that term in Nirula’s. In the past, Navis has briefly entertained suitors for Nirula’s but now prefers to wait for better valuation. “In another 18 to 36 months we will be entering the exit period for Nirula’s and will start looking out for buyers,” says Bloy. And by then, he would like Nirula’s to attain profit margins of 15 to 18 percent from the single digits now.
Kuckreja’s peers are also curious to know the way ahead. “Nirula’s is a brand that is in transition,” says Niren Chaudhary, Kuckreja’s friend from St. Stephen’s College days. Chaudhary is managing director of Yum Restaurants, India, which owns Pizza Hut and KFC. “Its challenge is to stay relevant to the changing expectations of the consumers. Samir has a tremendous entrepreneurial spirit and is well positioned to do that,” adds Chaudhary.
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I am Professor of Operations and chair Bimtech Center for Case Development, at Birla Institute of Management Technology. I am keen to develop a management case on Nirulas. Will Niruls clear the manuscript for publication? It is purely academic excercise for teaching students undergoing management post graduation programes.
Alternatively , please advice whom should I approach at Nirulas.
Thanks
G D Sardana
