How Hector Beverages' Paper Boat is making waves in a cluttered soft drinks market

Setting Sail

Paper Boat started with two variants in August 2013: aam panna and jaljeera; these were followed by aamras, kalakhatta, kokum, golgappe ka pani and imli. Another five variants will be launched next month and five more will occupy the shelves early next year. Kakkar and his team have mapped the traditional beverages of all states and plan to roll out a lot more variants after firmly establishing at least 25.

Aam panna and jaljeera sound logical. But golgappe ka pani? “There is a story behind it,” says Kakkar, adding that there is little in common between his mother and wife. “The only common trait is they have golgappas at a stall and both have a plea: ‘bhaiya thoda aur pani dena’,” he says bursting into laughter.

“This is phenomenal — how two women who have nothing much in common behave in such a similar manner!” Are there more stories? Indeed, there are. “Paper Boat is all about stories and memories,” says Kakkar, who quit his job at Coca-Cola when he was 33 and went abroad to pursue an MBA.

His father was quite upset and Kakkar’s in-laws thought their daughter’s future was doomed. “My father didn’t speak to me for about a year,” he says.

It was only when Kakkar showed his father a picture along with Infosys co-founder NR Narayana Murthy that he started talking. In March 2011, Murthy’s venture capital firm Catamaran and Bangalore-based Footprint Ventures invested Rs 6 crore in Hector Beverages.

Josh Bornstein, managing partner at Footprint Ventures, was completely sold on Hector and was convinced that Kakkar and his friends were on the right path with Tzinga.

“We knew India would be more interested in a fortified functional drink than carbonated stuff,” he says. “And how many people make aam panna at home,” he asks, adding there is a huge pent-up demand for ethnic beverages.

The Right Anchor

VT Bharadwaj, managing director at Sequoia Capital, found the idea of traditional drinks so captivating that he wanted to become a part of the Paper Boat story. Hector raised $8 million in a second round of funding in May 2013 from Sequoia. The existing investors also took part in the funding.

“I said OMG when I heard their Paper Boat plan,” recalls Bharadwaj. “We have had ample examples of regional food but nobody ever thought of drinks which could make waves in the beverage market.”

According to industry estimates, the fortified functional drink market (non-carbonated) is set to touch Rs 1,080 crore next year. Though it is still roughly just a tenth of the Rs 10,000 crore carbonated soft drinks market, analysts say the speed at which people are moving towards healthier beverage options augurs well for Paper Boat.

Cola drinks is a depleting category in India and across the world, says Saurabh Uboweja, CEO of Brands of Desire, a brand consultancy. Paper Boat will make a space for itself as an alternative to colas, he adds. “For Coke and Pepsi, Paper Boat would be a logical target brand to buy out at some stage to strengthen their increasingly diversified product portfolio.”

Emotional Hook

Paper Boat’s founders know a thing or two about the cola giants, or at least one of them. After all, three of them — Kakkar, Misra and Biyani — have honed their skills at Coke. Taking on colas looks highly unlikely at the moment, says Bornstein of Footprint Ventures. Paper Boat has barely scratched the surface and has to do a lot in terms of product distribution and innovations, he adds.

“But I would never say that it will never take on colas.” One thing is for sure: colas will certainly feel the chill. At Rs 30 for 250 ml and Rs 120 for one litre, Paper Boat’s aamras is pitched against Coke’s Maaza, Pepsi’s Slice and Parle Agro’s Frooti. And the USP of Paper Boat in this crowded category is not pricing but emotional connect.

Ashita Aggarwal Sharma, head of marketing at SP Jain Institute of Management & Research, reckons that the differentiator of “emotional benefit” is a masterstroke at a time when most in the category are battling on the functional platform of freshness, taste and variety.


“Savouring mango drinks, relishing jaljeera and kokum drinks during hot summer months are memories we all cherish from childhood...not many FMCG products have a story to tell,” she adds.

To be sure, Kakkar has filled his boat with thousands of stories. And one that he’s keen to narrate revolves around two variants that will hit the market next month: sattu, a traditional drink from Bihar, and aamras.

The sales and marketing heads of Paper Boat are both from Jharkhand. The common thread in their lives is the amount of sattu they have consumed in their salad days — and the complete disappearance of it now.

“When we decided to make sattu, Neeraj [Biyani] went around Patna and found some good recipes around the railway station and the Hanuman Mandir area,” recounts Kakkar, who recently rolled out free delivery of Paper Boat in 12 cities. The target is to reach 70 cities by the end of October.

Low and High Tide

Is it difficult to get hold of authentic recipes? “Absolutely,” he says, adding that the biggest challenge is sourcing traditional ingredients. Kakkar realized this quite early in his venture.

While most suppliers were not ready to promise a steady stream of ingredients, the ones that they got hold of didn’t assure quality. Take, for instance, jamun kalakhatta. Kakkar and his team struggled for eight months to get hold of high quality jamuns.

It was a similar case with mangoes. “Producers were more than willing to supply us artificially-ripened mangoes,” he says. But that was not acceptable. Kakkar had to wait for more than two years to get a regular supply of green mango pulp.

However, if the challenge of putting in place a system to get regular sourcing was surmounted, another problem cropped up — retailers in upscale markets in the metros were reluctant to stock Paper Boat because they didn’t consider it premium enough.

That’s when the founders hit upon the idea of making a splash with a series of front page advertisement in leading newspapers.

“This helped change perception and Paper Boat got a place on the shelves,” recalls Kakkar. Paper Boat is now available in over 25,000 retail outlets, including coffee chain Barista, and aboard airlines like IndiGo and Jet Airways.

In spite of all these efforts, marketing experts believe that the brand has to work a lot on its distribution network. Word of mouth definitely helps, but building volumes and market share won’t be a walk in the park.

The Paper Boat founders would also be aware that ‘pushing’ the product — with a string of ads and a hope that the brand will be stamped on viewers’ minds — is an expensive exercise.

A ‘pull’ strategy, on the other hand, with point-ofsale activations and strategic placements of the product, is also an imperative. Kakkar is aware of the magnitude of the task ahead.

“Still a lot has to be done and we are getting our act together,” he confesses. For the moment, he is just glad he has set sail, and is “living his dream”.