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Monday, February 4, 2013
Hearty Mart: Endearing Success of a Small-Town Retailer
An Ahmedabad entrepreneur finds that villages want supermarkets as much as cities do
Image: Alok Brahmbhatt for Forbes India
Nadeem Jafri, Hearty Mart, Juhapura, Ahmedabad
February 2004 was not the best of times to start a business in the
Juhapura neighbourhood of Ahmedabad. Two years ago, the city had been
gripped by the worst communal riots in its history.
the bloody riots in Godhra, Juhapura swelled with refugees, pushing its
population up to about 5 lakh, making it the largest Muslim
neighbourhood in Gujarat.
In the meanwhile, Nadeem Jafri—tired
of his five-year stint at ad agency Grey Worldwide’s Mumbai office—got
an itch to start something of his own. Enamoured of a Big Bazaar outlet
in the same building as his office in Mumbai, he quit his well-paying
job and returned to Juhapura to start a supermarket. Jafri says he
considered starting a restaurant and an advertising agency, but
discarded the ideas as they would not have given enough returns to
Despite the pervading gloom over Juhapura in February
2004, Jafri opened Hearty Mart, a supermarket at Vishala Circle, on the
edge of the neighbourhood. He did not consider its vast Muslim
population to be victims and refugees, but potential customers with
aspirations like anyone else. And there was no organised retailer
catering to their needs: Although there were other superstores, such as
Reliance Fresh and Big Bazaar, in Ahmedabad, none had ventured into
“Mine was a Blue Ocean Strategy,” Jafri says,
between mouthfuls of fried rice and chicken at a Mainland China outlet
in a tony mall in the heart of Ahmedabad. The phrase refers to
uncontested markets as blue oceans. Apple is a classic blue ocean
But, unlike Apple, which created an entirely new
market, Jafri only identified an untapped one. He did not create it, but
certainly benefitted from the hesitation of others to enter it.
bet on his relatively prosperous Chilea Muslim community to support the
venture, and raised capital from friends and relatives. It helped that
his uncle Syed Mushahid Husain Jafri was the head of the sect.
Muslims—they are Shias with a Sufi tradition—hail from the northern and
central parts of Gujarat. Originally a farmer community, they have
become a dominant presence in the region’s hotel business and run about
500 restaurants, mostly along highways. They have a string of
restaurants in Ahmedabad too.
Jafri says that although no one
from the community was killed in the 2002 riots, 90 percent of their
hotels and restaurants were gutted and most of the people moved to
Juhapura. Jafri had counted on them to form his client base. Yet, after
about eight months, he was hunting for a job to support himself.
left the day-to-day running of the store to his colleagues and took up a
job selling space at Times of India and, later, returned to Grey
Worldwide. He also started teaching advertising and organised retail at
business schools such as Proton Business School, NRIBM and MICA.
Mart used every tactic in the book, such as customer loyalty programmes
and home-delivery services, to raise its bottom line, but progress was
very slow. It required sales of Rs 3.75 lakh a month to break even, and
it was proving to be a stretch.
That was when Jafri started
Hearty Mart (HM) Enterprises, a wholesale supplier to hotels, which
would become the backbone of the group. He rightly reasoned that since
his community was running hotels, it would be easy for him to get their
business. The community’s experience also helped him find people who
understood the food and grocery business.
integration paid off. Soon, HM Enterprises was throwing up cash, and its
scale was helping Jafri stock Hearty Mart at much lower costs, thus
Around this time, Jafri met Wazir Ali and
Hussain Abbas, two entrepreneurs who had started Ashish Enterprises, a
supplier to highway hotels. HM Enterprises was still focussed on
Ali and Abbas proposed a merger and Jafri accepted on
the condition that they would help build HM Enterprises into a food
company with interests in the entire farm-to-shelf value chain.
day, Hemant Trivedi, then a professor at MICA and with whom Jafri had
written a case study of Hearty Mart, wondered why he did not expand to
villages. Jafri said he did not have the capital. Trivedi, who teaches
retail business, suggested franchisees as a solution.
“Here was a business model that did not require high standards of
education or skills. An owner-franchisee would be more involved,” says
Trivedi, who is now director at the School of Petroleum Management,
Pandit Deendayal Petroleum University, Gandhinagar.
Jafri thinking. “HM Enterprises was making delivery runs to supply
highway hotels. It could deliver to franchisee stores at a marginal
cost,” Jafri says. By then, he had also set up another company, HM
Logistics, which took care of distribution.
In 2007, Jafri set
up the first franchisee store in Illol, a large village surrounded by a
number of smaller villages. Here too, connections within the Chilea
Muslim community helped. Shabbir Bhai, a manager at Ahmedabad’s Hearty
Mart, was from Illol, and he found two brothers—Mehndi and Mehmud—who
volunteered to start the franchise.
“My focus is on creating
entrepreneurs,” says Jafri, who does not solicit franchisees. “They
should feel the need in their locality and come to us. They should be
convinced about the business model.”
Hearty Mart charges a
one-time fee of Rs 15,000 from a franchisee. There is no royalty in the
first year of operation, and from the second year it is 0.5 percent of
profits. Hearty Mart franchises have two kinds of stores: The walk-in
supermarkets, and over-the-counter stores called Saral, which sell
similar merchandise but the stores are smaller in size and cater to
In Dholka, one of the oldest municipal towns
of Gujarat, Hearty Mart’s fancy tomato-red signage (called Hearty Mart
Sankalp) certainly stands out in the narrow, crowded lane.
biggest competition here is over local brands, because other kirana
stores give hefty discounts on them. So, to beat them, at times we sell
them at actual costs. But our profits come in from other branded
products that they buy,” says Sadiq Ali, a former employee of Hearty
Mart, who is now the largest shareholder in the Dholka franchise.
is the shopping centre for the 30 villages that surround it, and store
shelves are a reflection of local aspirations. They are stocked with
global brands such as L’Oreal, Johnson & Johnson, Dove, Pears, Maggi
and Sugar Free, alongside local brands and Hearty Mart’s own Chef Ki
Pasand spices and Day Break tea. Jafri created Chef Ki Pasand as a
wholesale brand that he supplies to restaurants, but it now competes
with brands such as Badshah and MDF.
Hearty Mart just opened its
12th store in Dholka, its second largest after the one in Ahmedabad. It
is housed in its own 13,000 sq ft building, constructed at a cost of
about Rs 1.25 crore. The capital for the project came from Hearty Mart,
Sadiq Ali and several employees of the company who bought small stakes.
venture in the Hearty Mart group is run by a different entrepreneur.
Typically HM Enterprises holds about 25 to 30 percent stake, and the
rest is distributed among those who run it.
Jafri says this is
what keeps them committed, and keen to develop the business. “One of the
things that Hearty Mart did was to discover the latent entrepreneurial
talent in villages, particularly within the Chilea community,” says
Munish Alagh, post-doctoral fellow at IIM Ahmedabad’s Centre for
Management of Agriculture. Alagh, who has documented the Hearty Mart
story in a case study, says one of the reasons for the community’s
success is their pragmatism and culture of service.
supermarket chains, Hearty Mart’s success also lies in its ability to
source products at low costs. The scale of purchases helps chains such
as Big Bazaar and Reliance Fresh, or international ones like Walmart and
But the size and scope of Hearty Mart stores cannot
bring in the cost advantage. HM has gotten around the problem by
integrating a wholesale supply business to the retail one.
opening of Hearty Mart at Vishala Circle in Juhapura also helped change
the perception of the area. The store became a landmark of sorts at
Vishala Circle, which, until then, was a nondescript bend on the Sarkhej
highway. “It was something that was identifiable with the rest of
Ahmedabad, and was not available in Juhapura,” says Alagh. Soon, a bus
stop for private bus operators developed near Hearty Mart and Axis Bank
opened an ATM at the store. A property developer is now building an
upmarket residential complex opposite the shop. A Mumbai-based
restaurant chain has also opened an outlet near it.
Jafri, the challenge now will be spreading to areas where the community
is not strong or present at all. There is still some way to go before
Hearty Mart can saturate northern and central Gujarat, and the region
itself may give it enough heft to become an end-to-end food company.
(Additional reporting by Alok Brahmbhatt in Ahmedabad and Dholka)
This article appeared in Forbes India Magazine of 09 November, 2012