An evening with Mr. Arjun Ranga: The journey of Cycle Pure Agarbattis

On Friday, August 27, we had a fascinating session by Mr. Arjun Ranga, CEO of Mysore based N Ranga Rao and Sons Pvt Ltd, famous for its Cycle brand Agarbattis (Incense sticks). Mr.Ranga did his engineering at Jayachamarajendra College of engineering, Mysore and his MBA from Thunderbird. He belongs to the third generation of the family which owns the business and took charge as CEO of one of the group companies, N Ranga Rao and Sons in 2005.

About the NR group

Over the years, the Cycle brand has grown in size and stature. Cycle agarbathis are exported to some 75 countries. From a small operation, it has grown into a Rs 1000 crore business. The group has also diversified into other areas and today consists of the following companies:

• N Ranga Rao and Sons ( Fragrance and prayer products)
• Rangsons Aerospace Pvt Ltd ( Technology for aerospace and defense)
• Natural and Essential Oils Pvt Ltd (Floral and herbal extracts)
• Vyoda Pvt Ltd ( Solar powered irrigation solutions)
• Graylinx Pvt Ltd (IOT and AI devices)
• Rangsons Healthcare solutions ( Neurocare centers)

As it has grown in scale and scope, the group has upheld traditional family values while professionalizing the management and building a strong and talented team.

The NR group is also committed to outreach. The NR Foundation set up in 1985 by the second generation of owners provides various educational and skill development opportunities to the poor, underprivileged and downtrodden. Project Unnati supports the children and grandchildren of the shop floor workforce employed by the NR Group. Project Prerepana provides vocational training for long term employment. Cycle Stree supports women and creates meaningful employment opportunities in fields like bamboo splitting and agarbathi rolling and packing. The Ranga Rao Memorial School for the differently enabled takes care of visually impaired girl children. The NR Centre for community development provides various vocational training programs for the needy.

The NR Group is committed to a set of core values:

• Commitment to and relationship with stakeholders
• Differentiation through innovation
• Family business values combined with professional management
• Ethical and collaborative growth- Taking everyone along
• Transparency in all operations and conduct
• Social responsibility

In all its facilities, the NR Group maintains the best possible Occupational, Health and Safety standards. The group follows international guidelines for indoor air management and is committed to ethical and sustainable production practices.

About the founder

The founder Mr. N Ranga Rao (Mr. Arjun Ranga’s grandfather, after whom the group is named) lost his father when he was only 10. He had to support his widowed mother and his grandmother. The young Ranga Rao undertook various entrepreneurial ventures to make money even as he studied. He learnt typewriting and even watch repairing (multi skilling in those days) to supplement his income.

At the age of 36, when he had a family to look after, he quit his salaried job. He trusted his instinct, took a great deal of risk, and plunged into business. Mr. Ranga Rao belonged to a small village in Madurai and had to move to Mysore to pursue his dream. He launched the Mysore Products and General Trading Company in 1948. The Cycle brand was born soon after. Among the first products were Cycle Ratna and Cycle Sugandha Mallika.

Mr. Ranga Rao was a remarkable man. Not only did he dare to dream but he also had the determination to succeed. In the early years, he lived in the factory with his wife to make sure things were being done properly. He believed in global benchmarks and in learning from the best businesses.

A man of integrity, Mr. Ranga Rao drew a clear distinction between personal and business expenses. So much so that he would even pay for the tea served to him in office. Thanks to these ethical practices, his company survived even as many others who had started with him, folded up.

Mr. Ranga Rao put the company on a firm pedestal with a series of innovations. He realized that the core competence in the agarbathi industry was fragrance. So, he set up a fragrance creation lab.

He also realized the importance of branding. After thinking through, he arrived at the cycle as his brand name. A cycle is something which is easy to visualize for all people, poor and rich, and whichever religion or part of the country they belong to. The cycle represents purity and simplicity. For many, the cycle also represents hope and freedom. Today, Cycle Pure Agarbathis stand for quality and purity.

Mr. Ranga Rao realized that the tin packaging made up close to 60% of the total costs. Seeing that this was not creating any value for customers, he developed much cheaper cardboard packaging.

Mr. Ranga Rao also believed in strong processes. He prepared an SOP manual for his sales staff that is useful even today. His vision statement written in beautiful handwriting is a treasure, to say the least. Mr. Ranga Rao also believed in giving back to society.

In 1953, Mr. Ranga Rao got a gold medal at the Mysore Dussehra exhibition. By the end of his tenure, he had successfully built his business and was able to provide financial security to all his seven children.

The transparency, ethical practices, and financial discipline Mr. Ranga Rao fostered, have stood the company in good stead. Over the years, the company has excelled in taking new ideas to the market quickly, being able to adapt to change and embrace technology. And as the group has grown, the core values of the founder have never been forgotten.

Q&A

On his own evolution as a leader

Mr. Arjun Ranga believes his greatest strength is the ability to trust and empower people. It is people who make a company. It is important that people understand what the brand stands for and the purpose of the company. The vision should be shared with the people, and they must be encouraged to think of the larger goals.

Mr. Ranga has sought to combine family values with professional management. A great believer in technology, Mr. Ranga understood the importance of data and analytics more than 25 years back.

On some key industry drivers

Many of the processes have been automated. Yet, certain activities like packaging are difficult to automate. Some ----- women across the country work in this industry. Thus, behind the scenes, quite a bit is happening. Women are employed because the agarbathi sticks must be carefully handled and this needs dexterity. Women have been working in this industry for a long time. In fact, work from home has been the norm from way back in 1956 and this has suited women well. Quality must be good as an agarbathi cannot stop burning in the middle of a prayer.

The industry is fragmented. So local players have a big presence. There are limited economies of scale. So it is important to keep the costs under control with a lean supply chain. Many MNCs who have entered the business struggle to keep costs under control. The family managed firms have an advantage here.

On the exports market

The Cycle brand is exported to some 75 countries. Indian agarbathies are exported to some 160 countries. Indian companies have successfully competed with rivals from other countries like China and Thailand and today have a 90% share of the global market.

Looking back, Mr. Ranga feels that 9/11 was a turning point for the incense industry. Following the terrorist attacks, there was a great deal of insecurity. People were looking for answers and turned inwards. Vegetarianism, mediation, and yoga took off. This provided a big opportunity for incense exports as incenses are commonly associated with prayers and spirituality. With their aromatic properties, incense sticks created a clean, divine environment where people could pray. The eastern culture began to be embraced by many people in the west.

Unlike most other family businesses, where only the owners travel abroad, in case of the NR group, there is a large and capable team which does most of the travel. Mr. Ranga travels abroad only occasionally to meet customers and strengthen the relationship.

Mr. Ranga explained that each market is different, and a one size fits all approach does not work. The kind of fragrance preferred, mild, strong, etc. varies across countries. That is why there are as many as 2000 SKUs for the overseas market (compared to 350 in the domestic market.) There are also important cultural differences as Mr. Ranga explained with interesting examples.

In his first overseas trip to Turkey, Mr. Ranga’s father took him to a spice market where he saw a small shop owner using the Cycle brand agarbathi. Only then he realized that in Turkey, spices and incenses go together!

During his first trip to Egypt, Mr. Ranga learnt that relationship is business in middle east countries. He found that his potential partner just did not want to talk business. He wanted to spend time having lunch, dinner, and cruising along the Nile. When Mr. Ranga reminded him that there was only one hour left for his return flight and they must quickly discuss business, his partner responded: “You like me. I like you. The business is already done.”

In Japan, the local partner did not discuss business for one and a half of days. Then very quickly, the order was signed.

In contrast, in the US, people are more matter of fact and explicit. It is important to come to the point quickly.

In Brazil during an exhibition, a young customer said he was happy with the smell and fragrance. But he wanted to know for what purpose he should use the agarbathi. That is when Mr. Ranga understood, that in Brazil people want to use different agarbathis for different occasions such as exam, work, etc. He also realized that market research is needed to align the fragrance with the occasion.

On geopolitical changes and trade wars

Many countries like Sri Lanka have imposed large non-tariff barriers. Going forward, we cannot rule out trade wars. Many countries have started to look inwards in recent times. The only way out is to be globally competitive. The Atmanirbhar initiative is a great opportunity. But it should be interpreted in the right way. It is not about making everything in India. It is about becoming world class in whatever we make.

On imports

We should try to build on the resources available in the country. We should not try to discover something that does not exist. We should leverage Indian minds, Indian technology and import where needed. When we import something, we should be able to add value.

On the use of technology

Technology plays a very important role in Mr. Ranga’s business. Some 12 billion agarbathis are sold every year through 4000 distributors, 700,000 retail outlets (15,00,000 outlets if indirect outlets are included. Online sales are not very important as the unit price of agarbathis is low and the shipping costs are high.) Then there are the 75 countries to which the agarbathis are exported. So, a great deal of data is generated. To collect and analyse this data and use it for demand planning and understanding customers, technology is needed.

Mr. Ranga explained that the first step in digital transformation is digitization, the conversion of paper into digital documents. Then comes digitalization, i.e., automation of processes. Digital transformation is the final stage when tools such as AI/ML facilitate data-based decision making. The NR Group is currently in the digitalization stage.

On Diversification

We could argue that a business must remain focused. But we could equally argue that if we can create value, we can enter any business. The NR group believes that more than the domain expertise, what matters is expertise in running the business. One can always attract talented professionals with the required domain expertise.

In case of the NR group, the family members are there to back the decisions taken. It is true that strategic decisions such as diversification affect some 30,000 employees. But it is equally true that they will stand by the management when a decision is taken.

The NR Group is planning to move from the puja rooms of customers to their living rooms. Iris home fragrance, room fresheners and car fresheners are good examples.

On the use of bamboos in making agarbattis

Bamboo Tulda is best suited for making agarbhattis. Till recently bamboos were not deregulated. Only wild harvesting was possible. But bamboo cultivation was deregulated about 2 years back. So, the industry is in a nascent stage. The National Bamboo Commission is doing a lot for the sector. Agarbhattis are at the lower end of the value chain. Higher value-added products from bamboos include tiles, furniture, and toys. The NR group is working closely with the Karnataka government.

On innovations and regulation

Regulatory changes create opportunities for innovation. When GST was introduced, agarbathis moved from zero excise duty to 5% category. The NR Group embraced distributed manufacturing and moved closer to the market. In Brazil, the government moved agarbattis from religious to cosmetic category. There was need for new registration, compliance, lab testing and packaging. It is always challenging to adapt to changing regulations but, in the challenge, also lie opportunities.

Managing through the pandemic

Mr. Ranga was travelling overseas in February 2020 and was aware of what was happening in Korea and Taiwan. He realized that a lockdown was inevitable in India. Accordingly, he convened a management committee meeting and started preparations for working from home. That included moving computers form offices to homes. He also borrowed money from the banks to maintain enough liquidity to pay salaries. On March 20, when the lockdown was introduced, the people were ready to work from home. Every employee was provided Covid insurance and some imprest money. The company supported migrant workers, contributed generously to the PM Cares Fund, and distributed hand sanitizers and masks among the community.

On handing over the baton to the next generation

Mr. Ranga believes it is his responsibility to show the opportunities to the next generation. It is important to sustain and perpetuate the business. For this to happen, the business must not be heavily dependent on a few people. Some 450,000 – 500,000 people work in the industry of whom 75-80% are women. It is important to take care of all these people.

We thank Dr. Vedpuriswar for bringing out the highlights in the form of this note