What started with his kids falling ill due to jaundice, has now become a company with almost 45% market share in the RO Mineral and RO segment. Mahesh Gupta, a Delhi-based, first-generation entrepreneur, shares with us his journey from being an employee to becoming a successful businessman

Can we begin with a genesis of the Kent RO System?

To begin with, Kent RO Systems is not my first business venture. I graduated in mechanical engineering from IIT Kanpur and then did my master’s in petroleum from the Indian Institute of Petroleum, Dehradun. I joined Indian Oil after that and worked with them as a manager in their technical services department for about 10 years. In 1988, I realized that I needed to do much more than just a job. I had some brilliant ideas for petroleum products and I decided to quit Indian Oil to work on those. That was the beginning of my first venture, S.S. Engineering Industries, which was started with a meager investment of Rs 20,000. This company has been in the business of manufacturing innovative oil flow meters and oil testing kits. Even today, this company is a profitable business with an annual turnover of Rs 5 crore.

MAHESH GUPTA KENT RO SYSTEMS

Kent RO System happened in 1999 due to an incident in my family. Both my children fell sick due to jaundice, which is a water-borne disease. At that time I was not using a water purifier in my home and after this incident I started looking for one. I soon realized that none of the purifiers available back then met the standards I was looking for. So I decided to make one of my own—an RO purifier—by importing components from abroad. When I saw how well the purifier was working and how helpful it was for me, I thought of launching it out in the market.

Today, Kent RO System has a much bigger turnover at Rs 25 crore as compared to Rs 5 crore of S.S. Engineering, my first venture. Hence, more people know me as the founder of Kent RO Systems than my first company [chuckles].

How difficult was the decision to quit Indian Oil and start a business of your own?

I had the desire to do something innovative and earn a living that was much better than what I had at Indian Oil. It was a tough decision as I was doing well at Indian Oil and was progressing fast. I was the manager of technical services there, which is a position of certain prestige. People used to envy me and in fact were surprised when I decided to quit all of a sudden. My family resisted my decision too, initially, as financially there could have been a lot of risks involved with taking such a decision. I had no prior experience in doing a business, but I had dreams and I was determined to fulfill them. Looking at my passion and determination, support from my family started coming in.

When I started off, I had been working in the garage of my house. I had to take care of everything, including being the peon, typist etc all by myself. I had to let my ego dissolve at that time. I did not want to approach any of my contacts because I didn’t want anyone to feel like they were doing me favors. I knew that if my product was truly valuable I will be able to convince people I didn’t know to buy it. Once I was able to convince those people, the other people would follow. It was only after the first year that I bought a place to put up my factory.

What was your first taste of success then?

My first taste of success came when the first two pieces of my oil testing equipment were sold for Rs 5,000 to a company in Hyderabad.

Was there any failure that you learned from?

I don’t consider failures as failures, but rather as experiences that I learned from. I never regretted any of them. For instance, I don’t come from a finance background, which is really important when you are running a business. But I never looked at it as a setback. I decided to learn by experience and today I am good at finances and whatever knowledge I have has been accumulated over a period of time. Same goes for negotiation, sales etc.

What has been the biggest challenge in your entrepreneurial journey?

The biggest challenge that I have constantly faced and in fact am still facing today, is finding the right talent. It is difficult to find someone great who will be ready to work for a small company. So I had to bring my expectations down and train people to get the best work out of them. I took it up as a challenge to train them and to bring them up to the standards I was looking for.

Coming back to RO Systems, how are your products positioned in the market?

What makes Kent RO different from other water purifiers is, first, its technology. It uses a reverse osmosis process, followed by an ultraviolet process, which is followed by a system to retain essential natural minerals in the water. This product is patented. Technologically, it offers a great advantage as it removes dissolved impurities like salts and heavy metals, while retaining essential minerals. Other RO purifiers don’t retain the mineral content. Also, the UV process in Kent RO kills the bacteria that pass through the membrane. Of course, other than technology we also differentiate our products in terms of performance, servicing, branding etc.

Over the past few years, a number of competitors have come into the RO segment. I have had competition from Eureka Forbes, Whirlpool, Phillips etc, but my product still performs the best. It has an X-factor that is difficult to quantify to the public. We have the same components as other manufacturers, but it is that slight modification in the way we use these components that gives us an edge over the others.

Today, a major chunk of our business comes from household consumers. We have noticed the demand comes more from homes than offices. I created a competent marketing team that approached institutions that would be interested in ordering the product. But the problem with most of corporate purchases is that they don’t differentiate on quality and go for the lowest prices.

How did you go about launching your first product in India? What is the R&D that goes behind making of products?

The first product that we produced was a simple under-the-counter RO purifier, which was popular in foreign countries. But within two years I realized that that product would not succeed in India. First, back in 1999 very few homes in India had modern kitchens. Second, we Indians have very different cooking habits. Our kind of cooking, which includes making chapatis and frying, requires intricate cleaning of the entire kitchen. Therefore, under-the-counter RO purifiers and counter-top purifiers were not feasible in India. That is when I manufactured a purifier that could be mounted on the wall of the kitchen. This is the first time such a concept was introduced to the world. Then I kept on innovating the purifier by including UV filters and control systems. Recently, we have modified our purifier to have a computerized control system so that an alarm rings whenever you have to change the filters. I would say that innovating our product from time to time has been the mantra for our success. In my opinion, it is extremely important to spend on R&D to keep coming up with products that are different from the competition. Our R&D team keeps looking at new ideas and studying the requirements of the market and we try to create a product accordingly. To find out the needs of the market, we conduct surveys, followed by lots of debates and discussions.

How are your diversified new concept products doing in the market?

We have had many innovative products rolled out in the market, such as, Kent Ozone Vegetable & Fruit Purifier, Kent Ozone Dental Jet, Kent Purified Water Dispenser, Kent Water Softener etc. In terms of our turnover, they don’t contribute more than 2 to 3%, but it is coming from the high-end clientele where people are looking for innovative products, have disposable incomes and are not looking at expenditure, but rather at the value they are getting. These products remove insecticides and pesticides from fruits and vegetables and when people see the demonstration they consider buying it. However, such products do have a hard time gaining market acceptance.

Educating the masses is not an easy task. It has to happen by word-of-mouth. It has been ten years since we have launched the RO water purifier and yet people have a very basic knowledge of the advantages of owning one. In fact, people in small towns don’t even find the need to own a regular water purifier. When we show them the kind of impure water they are drinking they are shocked. Because of this lack of awareness, people just don’t see this product as an essential commodity yet. But that has been the trend. It took about 40 years for people to understand the necessity of owning washing machines and refrigerators in their houses in India. RO water purifiers will perhaps take some time as well before people start to think of it as a must have.

How do you deal with the Chinese onslaught in this segment?

It is true that there are lots of Chinese water purifiers that are much cheaper than my products. I would say it all boils down to quality and faith. You see, even though my products are the costliest in the market, we sell the largest quantity as well. That is because we have been able to brand it in a way that people are attracted. Apart from this, we provide good servicing to our customers. In business once a space is recognized in the market, you will see many players entering it. It is unrealistic to expecting to obtain and retain 100% share. You have no choice but to deal with such threats. How I deal with this is situation is that I innovate my products year after year. If my product offers the same features as the others, I wouldn’t be able to price it really high on just branding alone. For instance, last year we did not have a computer control system in our product, but this year we do.

Today, the onslaught is not such a threat as I am able to innovate a product that puts me in a different category altogether. It is not always about price; it is about value for money. You need to understand consumers’ need, then have a good combination of price, technology, branding etc. Then you need to have the muscle power to play the game. For instance, look what happened to Indian television manufacturers such as BPL, Onida etc. When the Koreans came in with their Samsungs and LGs, these manufacturers fell. My strategy is going for a niche market with low volumes. For the Chinese, they target high-volume products with low margins. As for multinationals from countries such as Korea, the water purifier market is too small at Rs 1,000 crore to be of great interest to them. We manufacture about 14,000 to 15,000 purifiers per month, which is a very small market for them to enter full on.

Other than conventional advertising, what other channels have you used to reach the market?

We engage in all kinds of retail activities. We do promotions in retail outlets. We advertise in print and electronic media. We send our marketing team to go and educate customers. We started in 1999 and people didn’t recognize our brand at that time. Therefore, we decided to go do some campaigning and thought about the best way to put money in the media. To get the best value for our money and attention of the consumer, we decided to get a celebrity to endorse our brand. A celebrity also gets the masses to believe in your product. We were looking for a brand ambassador who would be a housewife with a genuine appeal and also someone who wasn’t endorsing too many other brands. That is how we shortlisted Hema Malini. When she became our brand ambassador, our visibility definitely increased and we grew substantially after that.

What about your growth plans?

We have grown gradually and not overnight. For the first two to three years we were only a Delhi-based company. Then we expanded by taking the distributorship and franchisee model to Haryana, western UP, Punjab and then slowly to the whole of northern India. Later, we expanded into western India, then eastern, and now after a span of 10 years, we are finally expanding in south India. We are also looking at exporting and are finding new ways to penetrate different areas. As of now we are present in most A, B, C cities, but there is scope for much more. We need to have a presence in towns as well and need to have a stronger presence in the cities we already exist in. Quite honestly, we do not have a sales force of 6,000 people like our competitor Eureka Forbes. However, we will keep increasing the sales force and reach every nook and corner of the country. As for manufacturing units, I have two factories in Roorkee and our third factory (1 lakh square feet of covered area) will tentatively be ready by October 2009.

Any offshoot business ideas in this segment that aspiring entrepreneurs can use?

One of the areas that aspiring entrepreneurs can get into with regard to this industry is servicing. It is going to be a big business in the future. Water purifiers are like chemical plants in your home with filters and membranes that need regular servicing. Also, although the water purifier industry is considerably small, water is India is deteriorating fast and the growth of this sector is bound to happen.

We also require entrepreneurs that can educate people and sell water purifiers to consumers. So marketing as a business model could also be seen as a potential opportunity area by aspiring entrepreneurs. There is also a demand for entrepreneurs to get into component manufacturing. Even we do not do 100% of the manufacturing ourselves. We tend to outsource component manufacturing to other players.

Funding seems to be a problem area with aspiring entrepreneurs. It used to be hard to procure back in the day. Even today, many entrepreneurs fail due to lack of funds, despite having abundant angel investors, venture capitalists and bank loans for entrepreneurs etc. Most of them are unable to attain funds simply because their ideas are not innovative enough. Hence, it is extremely important to carve a niche and then have passion coupled with faith. I, for instance, have always been innovative with my products; I never really faced huge competition or problems when it comes to funding.

How has the slowdown affected your business? Do you have any strategy in place?

We saw early signs of the ongoing global slowdown last year. We noticed a fall in the number of customers approaching stores and also postponing their decision to spend on water purifiers. Our main product is in the range of Rs 14,500 and we would love to bring it down to less than Rs 10,000. However, disturbances in the ecosystem do not allow us to do that. For instance, the crude oil prices keep going haywire—it affects us. Plastic prices have gone erratic—it affects us. Advertisement tariff has gone up, while the visibility rate has gone down. There are hundreds of television channels now, but the price for 10 seconds of advertisement keeps going upwards.

So, while we grew at a rate of 100% in the previous years, we planned for a growth rate of 40% last year and were able to grow only 20%. This year again we are targeting 40%. The key strategy now is to further innovate on products. For instance, we have now come out with a low-cost water purifier (Rs 2,400). With this product targeted at the masses, we hope to achieve volumes.

Finally, how much personal time do you get?

Well, it all boils down to how passionate you are about the business. In my case, my personal life had to be sacrificed to a great extent. Fortunately, my wife and children have always been very understanding. When I do get some time away from work, I am socially very active with the Art of Living group. I like spending time with that organization’s activities. Back in home, I like to relax and sleep.

Article was earlier published in the leading business magazine.