Short Takes: Sweet Success — Can You Build an Ice Cream Unicorn in India?

Darius Teter: Hi, this is Darius. Before we start, I want to let you know that applications for the Stanford Seed Transformation Program are now open through May 15. I don’t generally talk a lot about our programs on this show, because I don’t want it to sound like a big ad.

But if you’re listening to this, it means you probably want to grow your own business, and that’s exactly what the STP is designed to do. We’ll have some more details about the program at the end of the episode, so if you’re interested in applying, stay tuned.

Now, onto the show.

Gaurav Khemani: The challenges of a small and a medium business are very different from a large one. Chalk and cheese — I mean, you cannot compare the two. A small business has to worry about recruitment, has to worry about retention.

In a lot of cases, it’s about day-to-day survival, as well. Cash flow management. Whereas in larger businesses, a lot of these things you take for granted. Whereas when you’re running a medium-sized business, you’re managing the entire business, and that’s a different mindset.

Darius Teter: Welcome to Grit & Growth from Stanford Seed, the show where Africa and South Asia’s intrepid entrepreneurs share their trials and triumphs.

Our next season is almost here. The first full episode of season three of Grit & Growth launches on April 4. So today, we’re concluding our short-take series with the story of Gaurav Khemani.

Gaurav left his successful international corporate career to come home to India and sell ice cream. But he wasn’t prepared for the unique challenges of running a small business. And when COVID lockdowns and power outages left his inventory melting on the shelf, he had to readjust.

We’ll hear how Gaurav adopted the CEO mindset and set an incredible goal to turn a regional family business into a billion-dollar company. Here’s Gaurav Khemani.

Gaurav Khemani: So my name is Gaurav Khemani. I’m the MD [managing director] of Prestige Ice Creams, the company that owns the brand Rollick. We are based out of Kolkata and we are present all over east India.

Darius Teter: So you’re the number one ice cream brand in eastern —

Gaurav Khemani: Not yet. Not yet, but I aspire to be the number one ice cream brand. Definitely.

Ever since I was young, my dream was to be the CEO of a billion-dollar company, and that’s what I intend to make this company of mine.

Darius Teter: … A billion-dollar company?

Gaurav Khemani: A billion-dollar company. We are already a million-dollar company, so …

Darius Teter: You’re almost there.

Gaurav Khemani: Yeah. About a few more years.

Darius Teter: Gaurav wasn’t always an entrepreneur. Before he had his own business, he worked for major companies selling something a little bit different than ice cream.

Gaurav Khemani: So, bulk of my career was in the Middle East where I was working for a retail company in which I managed a cosmetics chain for them, a lingerie chain, and a children’s toys chain.

And I also ended up launching a menswear brand for them, as well, in the Middle East. So four different product categories.

Darius Teter: I’m really curious — were there a lot of men managing lingerie brands?

Gaurav Khemani: Well, the Middle East in particular, yes. Because women were not a big part of the workforce in the Middle East, so there were a lot of men. But the product manager of the lingerie brand in the Middle East always joked that the products are designed more for men than they are for women.

So that’s why we have men managing it.

Darius Teter: That’s really wild. They say that fishing lures are designed to catch fishermen, not fish, right?

Gaurav Khemani: Correct.

Darius Teter: They’re so gorgeous, in feathers and all that stuff. So why did you decide to get into ice cream?

Gaurav Khemani: Well, for me, I was out of the country. I was out of India for 14 years. This brand was up for sale, and I’ve always worked for other people, and the entrepreneurial itch came in when I was 35.

My father-in-law, incidentally, had started this business, and due to his health, he was looking at selling it. I was his sounding board on selling the business. And when I realized the amount of money that he wanted for this business, I negotiated a son-in-law discount, and I bought it off him.

And I moved back to India to realize my entrepreneurial dream. I’ve always wanted to own something for myself, and this was a perfect opportunity.

Darius Teter: Gaurav had plenty of experience and education in big enterprises, but he found that small and medium- size businesses actually present completely different challenges.

Gaurav Khemani: I have an MBA from INSEAD, as well. I was 27 at the time. But a lot of education is about the frame of mind that you go in with. So when I went to INSEAD, I was working with this retail company in the Middle East. I’d taken a sabbatical and went there.

And for me, it was all about managing large businesses. So when I graduated from INSEAD, I knew that I wanted to manage a business, which if anybody had offered me a business less than a hundred million dollars at that point in time, I would’ve, like, that’s not me. I am from INSEAD, and this is what … it’s too small for me.

Whereas the challenges of a small and a medium business are very different from a large one. Chalk and cheese — you cannot compare the two. And I think a typical MBA program focuses more on larger businesses as opposed to the small and medium business space.

Darius Teter: Yeah, so you’re figuring out where you fit in, in a group of C-suite executives.

Gaurav Khemani: Correct.

Darius Teter: Or something like that.

Gaurav Khemani: Absolutely. Whereas a small business has to worry about recruitment, has to worry about retention. I’m sure all businesses have to worry, but at our level, it’s just very, very different.

The challenges that a small business faces are very different to that of a large business. In a lot of cases it’s about day-to-day survival as well, cash flow management. Whereas in larger businesses, a lot of these things you take for granted. And typically with an MBA, they call you specialized, right?

Typically, MBAs specialize in either finance or marketing, etc., because you are going to go into a department that does that. Whereas when you’re running a medium-sized business, you’re managing the entire business, and that’s a different mindset altogether.

Darius Teter: Right. You’re a CEO?

Gaurav Khemani: I am the CEO, yes.

Darius Teter: That’s the difference.

To bridge the gap between his training and this new reality, Gaurav enrolled in the Seed Transformation Program.

Gaurav Khemani: What I loved about the Seed Transformation Program was that they gave us so many practical models to think through your business. Like the BMC, the Business Model Canvas, in which the whole organization’s strategy comes onto one page.

And it is very powerful. I went through 17 iterations of my BMC before I was satisfied with the final one. It just blew me out of how we could fit in the entire direction of the business on a single page. So that was a great takeaway for me.

The other was the PARC model: people, architecture, routines, and cultures. It’s very easy to change people. It’s relatively easy to change the architecture of the business. But what I learned there was it’s the routines and the culture which actually have a much more long-term impact on the business, and that’s where the attention needs to be as opposed to the people and the architecture at my stage of the organization today.

Darius Teter: So, what’s been your hardest day so far as the owner of this business?

Gaurav Khemani: The day we shut down for COVID. That, I would say, was the single hardest day because it happened right at the beginning of our summer season in ‘20. We had the highest inventory levels because we were just getting into summer and we really didn’t know what was coming next.

Darius Teter: So, the country goes in a lockdown. You’re sitting on a massive inventory of ice cream. What happens?

Gaurav Khemani: If you ask me now, we never could have thought that it would last as long as it did. And the icing on the cake, when the country shut down in March, and in May, we had the biggest hurricane in Bengal, and we had a power outage for eight days in our factory.

We had to spend a lot of money keeping it running. But as they say, what doesn’t kill you makes you stronger. And I think we actually have come out of COVID a lot stronger than what we went into. There were tough days.

We were used to selling in lakhs a day, and we were going in our building complex, selling door-to-door, a few hundred rupees a day. Even that would make us really happy.

Darius Teter: How big was your team at that time?

Gaurav Khemani: In total, we were responsible for about 150 people in the organization. We also had to downsize. We had to shut down operations in a couple of states that we had entered.

But the best part of it was how the team came together. We figured out the whole digital piece. We started having daily meetings with our teams. We would encourage each other.

I started sporting a mustache as well during the period, which I took off. It was a lot of anxiety.

Darius Teter: What do you do to take care of yourself?

Gaurav Khemani: Personally?

Darius Teter: Yeah.

Gaurav Khemani: So I have a very strict routine. I’m in bed at nine every day. I’m up at four. So the first three hours of the day are dedicated for myself. So I read, I journal, and then either run for an hour or I hit the gym for an hour.

Darius Teter: Do you have small children?

Gaurav Khemani: I now have a five-month-old daughter.

Darius Teter: Okay. Good luck with the plan.

Gaurav Khemani: Well, luckily, my wife plays the best supporting role ever. She makes sure I get the sleep. And I usually am back home by 6:00, 6:30. So I get a good two and a half, three hours with the family to wind down and go to bed.

Darius Teter: Well, we may all think that ice cream is absolutely essential. The Indian government did not.

COVID lockdowns posed a huge threat to Gaurav’s business, but it also gave him a valuable opportunity to slow down and reassess his strategy.

Gaurav Khemani: We had to really question the business. I mean, pre-COVID, we were growing at 25 to 30 percent year-on-year. Our average CAGR [compound annual growth rate] for five years was about 27 percent.

Darius Teter: Really? Wow.

Gaurav Khemani: Yeah. So we just didn’t have the time to sit back and think, we were just managing that massive growth that we were going. And COVID gave us an opportunity to step back and just think about our business, think about costs that had crept into the business.

Because every penny counted at that point in time, so we actually had a great time taking out the cost and really evaluating the business, looking at it from different sides.

And I think it was a blessing in disguise.

Darius Teter: What’s the serviceable obtainable market for consumer ice cream in India?

Gaurav Khemani: The total market size of ice cream in India today is 15,000 crores. So over $2 billion.

Darius Teter: Over $2 billion?

Gaurav Khemani: Over $2 billion is the market today. And by the time I get to be making this a billion-dollar, the market should have expanded to about four or five, because we are growing at a CAGR of about 15, 16 percent.

Darius Teter: So what’s going on with Indian demand for ice cream? It’s becoming a more popular consumer product or …

Gaurav Khemani: Absolutely. For example, in the U.S., the average person in the U.S. consumes about 20 liters of ice cream a year. Whereas in India, we only consume about 200 milliliters of ice cream.

Darius Teter: 200 milliliters. That’s one cone.

Gaurav Khemani: That’s one cone. But a large part of the population don’t eat ice cream today. That’s because of accessibility, electricity …

Darius Teter: Supply chain.

Gaurav Khemani: Supply chain.

Darius Teter: Yeah, yeah.

Gaurav Khemani: But also India has a lot of its own desserts.

Darius Teter: Fabulous stuff.

Gaurav Khemani: Right. Yeah. We have fabulous desserts of our own. But, slowly but steadily, people are moving towards ice cream. The product itself, with a six-month to 12-month shelf life, helps us get there.

Whereas the traditional Indian sweet, the shelf life could be as low as two days or a week, so we’re getting there.

Darius Teter: So in your ideal world, you’re a billion-dollar company that controls 20 to 25 percent of consumer demand?

Gaurav Khemani: Yeah. I do see this market consolidating in the near future, because there are too many companies and very, very soon, economies of scale will make sure that we buy each other out.

Darius Teter: Okay. So one path to growth is acquisition?

Gaurav Khemani: That’s correct, yes.

Darius Teter: So what’s the secret to making a million-dollar ice cream company into a billion-dollar ice cream company?

Gaurav Khemani: I think a lot of it would be discipline. We all talk about strategy, we all talk about marketing and the sexiness that comes with that, but I think it’s the day-to-day operations, making sure the machines are running properly, the deliveries are getting done on time, good customer service, product innovation.

But it’s the day-to-day management of things — execution.

Darius Teter: Gaurav’s commitment to self-improvement is admirable. The guy gets up at 4:00 AM every morning. It’s a great reminder of the power of discipline, for a business and as an entrepreneur.

It helps you stay grounded during uncertain times and keeps you progressing towards those big goals, like a billion-dollar business. Of course, not everyone’s appetite for discipline is the same.

I think people might be intimidated by you.

Gaurav Khemani: Why would that be?

Darius Teter: Anyone who wakes up at 4:00 AM and spends three hours on self-improvement is damn scary. Just going to be totally blunt with you.

Gaurav Khemani: Okay.

Darius Teter: It’s intimidating.

Gaurav Khemani: That’s my secret.

Darius Teter: It’s intimidating because the rest of us are trying to drag our ass out of bed at 8.

I want to thank Gaurav Khemani for sharing his story, and we’ll be back next time with season three of Grit & Growth.

But before I go, I’m personally inviting our listeners who are established entrepreneurs based in Africa or South Asia, and have revenues in excess of $300,000, to apply for the Seed Transformation Program.

As you may know, I’m not just a podcast host, I am also the executive director of Stanford Seed. Seed is an institute based at the Stanford Graduate School of Business, which, by the way, is why we get such incredible Stanford faculty as our guests.

We partner with entrepreneurs in Africa and South Asia to help them build thriving businesses. The Seed Transformation Program brings Stanford to you. It’s based in Africa and South Asia. It’s also heavily subsidized by philanthropic contributions, and we offer scholarships.

To be clear, this is not a Stanford MBA. It’s a hands-on program for you and your management team, with tools that you can apply to your business immediately, and ongoing support from Stanford business advisers. If you’re listening to this podcast on a regular basis and you own a business, I already know that you are a growth-minded individual, and that’s exactly who we’re looking for.

So give us a visit at stanfordseed.co/grit to learn more. That’s stanfordseed.co/grit. The deadline to apply for the 2024 cohort is this May 15, 2023.

This has been Grit & Growth, with the Stanford Graduate School of Business, and I’m your host, Darius Teter. If you like this episode, leave us a review on your podcast app.

Erika Amoako-Agyei and VeAnne Virgin researched and developed content for this episode.

Kendra Gladych is our production coordinator, and our executive producer is Tiffany Steeves, with writing and production from Andrew Ganem and sound design and mixing by Alex Bennett at Lower Street Media.

Thanks for joining us. We’ll see you next time.