--By Gaurav Aryal

 

Laxmi Group’s initial capital was Rs 100 invested in a hand-operated-machine to produce candies. Two brothers of the Shrestha family from Pokhara were government employees before they decided to change their career path and start-up a business of their own. One of them, Ajad Shrestha, had pondered on moving to Terai while the other brother decided not to leave Pokhara. During one of their visits to Butwal to explore new possibilities they came across a person who suggested them a business idea. 

 

As suggested the two brothers established a confectionary factory in Pokhara that produced toffees and candies with a hand-operated-machine. Anjan Shrestha, Executive Director of Laxmi Group shares that the move then was driven by a necessity for a different career. Initial products of the venture were sold under the name of Muga Mithai and Laxmi Sweets.

 

Having their business based in Pokhara, neighbouring towns and areas like Damauli and Syangja were emerging as a market for confectioneries. Shrestha brothers did not restrict themselves from exploring prospects that surrounded them. To cater to the growing demand, the company automated the confectionary production by installing automatic machine in 1976. With the increased production capacity, the company also decided to penetrate into the nation’s capital, Kathmandu. Shrestha says that the move was largely successful and the taste of success gave confidence to his father and uncle to diversify their business portfolio.

 

Broadening the Horizon

The confectionary industry where the family had some experience and gained expertise over the years was further expanded in the first phase. Shrestha says that four factories were established in different places. “We had very little capital. So, we started each factory with small investment and gradually moved up the ladder,” he recalls. All those factories were consolidated under the Sujal Foods Pvt Ltd in the mid 1990s.

 

“Sujal Foods changed the dynamism of the Nepali confectionary industry,” says Shrestha. Chocofun wafer produced by the company was that remarkable product that changed the market. He adds that the true value for money offered by the company to its customers helped the company gain its presence in the market. “We have adhered to the principle of giving value for the money since we started out business. We believe consumers must get what they pay for,” believes Shrestha. The confectionary business of the group has around 60 per cent market share of the total confectionary market of Nepal, according to Shrestha.

 

Moreover, it was not only the success that inspired the growth of the group. The economic sanction imposed by the government of India in Nepal in 1989 created a shortage of packaging materials and wrappers for the company. Shrestha recalls that the existing stock of packaging materials was enough only for two months. So, the company was forced to close down for a while. Eventually, a decision was made to establish packaging material factory. This factory now produces wrappers, polythene-shopping bags, PET bottles, jars among others.

 

Dairy Acquisition

According to Shrestha, by 2004, the company had gained momentum in confectionary manufacturing. This new status of the company further encouraged diversifying the portfolio. The company acquired the Pokhara unit of Dairy Development Corporation (DDC), after a long haul of ten years in the privatisation. The family had an internal understanding that they will never venture into tobacco and alcohol production business. So, dairy was an appropriate industry for the group. When the company was eventually privatised in 2004, the group did not only have a new company in its portfolio but also a number of challenges.

 

One of the biggest challenges was to keep the sales high even after rebranding the DDC into Safal. “Changing the DDC brand that was on top of the mind of consumers into Safal was challenging,” recalls Shrestha. As a rebranding campaign, one week prior to the launching of Safal brand, the company used shopping bags with Safal name printed on it. The company had mobilised a sales team one week before the company was handed over. Shrestha says that such move helped in creating the curiosity andtransforming the brand. He claims that sales of Safal milk equalled the sales of DDC within a week. At present, the Safal milk has over 60 per cent market share in Pokhara and five per cent in Kathmandu. Shrestha says that the company will increase the market presence in Kathmandu to 20 per cent within a year. It was launched in Kathmandu, last year.

 

Looking at the excess milk production during the flush season and practice of milk holiday, the company decided to establish a powdered milk factory. Shrestha says that the factory was established feeling that it is their responsibility to address the problem of dairy farmers whose milk is wasted during milk holiday. However, immediately after the factory was established the company realised that the problem of milk holiday was not in existence to the extent it was expected to be. So, he says that the factory is currently operating below its installed capacity.

 

In the trading business, the group came up with the distributorship of Hyundai Motors for Nepal in 2009. Laxmi InterContinental Pvt Ltd is expanding its distributor network across the country with an aim to offer uniform service from any sales point across the country. Showrooms with such look and feel are being set-up in Banepa, Birtamode, Biratnagar, Narayangarh, Butwal and Dhangadhi.

 

Tourism Diversification

The group is now willing to venture into the tourism and agro industry. The group had submitted a proposal to the government in 2011 to develop a cable car line from Basundhara Park to Shanti Stupa in Pokhara. The group had plans to consolidate the project along with amusement park and a resort. However, the project is not being developed due to a pending litigation at the court. Shrestha expects that this project would increase tourist flow and hence revenue collection in Pokhara. He hopes that that the case will soon be sorted out and project will be started. 

 

The group has plans to establish hotels in Pokhara and Kathmandu. Shrestha reveals that these projects may begin services in 2016 as the group is presently conceptualising these projects. He explains that this is the sector in which Nepal has originality and competitive edgewhile forwarding it 

as motivating factor for their groups involvement into the sector. 

 

Management Transformation

The group is not only expanding its business portfolio but also bringing changes in its management structure. The group, as of now is being managed as a family owned business. But, it is planning to hand over the responsibility of leading the group to professional managers. Presently, the members of Shrestha family are looking after various companies according to their expertise and experience in the respective fields. To expedite the transformation, the group is hiring managers, empowering and mentoring them. Shrestha expects that in three to four years, the leadership will be handed over to professional managers and the investors of the group will remain only in monitoring and supervision positions.