Artos simply fizzles despite all odds

This is a sizzling tale of a 84-year-old local soft drink company that has been giving the multinational companies, especially Coke and Pepsi, a run for their money.

Sample this. When multinational brands hiked the price of their 300 ml brands from Rs 7 to Rs 9.50 in 1999, the local brand's sales shot up by 200 per cent in 1999-2000, thanks to its known quality and an affordable price of Rs 5 per 300 ml bottle.

The pesticide controversy may have made the soft drink giants jittery, but the only brand that is going strong with enhanced credibility and sparkling freshness is Adduri Ramachandra Raju Tonics, popularly known as Artos.

The only soft drink brand out of Andhra Pradesh, Artos is located in Ramachandrapuram, a dusty town in East Godavari and it has a history dating back to the British Raj in India.

Speaking to Business Standard, A Jagannatha Varma, managing director of Artos, said, "Though we are facing tough competition from the MNCs, our vintage brand is doing well against all odds. We have expanded our market area to cover Vizag also last year. Keeping pace with the MNCs, we have equipped ourselves with the latest technology, and at present our plant has a 100 bottle per minute capacity. Our present sales are approximately four lakh crates (one crate comprises 24 bottles) a year and the turnover is around Rs 6 crore."

The company at present employs 250 workers and has a distribution network of 85 across East and West Godavari, and Vizag districts. "Though we see no point in advertising our product, as it is already a household name in these districts, we have been putting up hoardings and posters only because of the tough competition from the MNCs," said Jagannatha Varma, adding, "To keep pace with the MNCs, we are also planning to foray into mineral water manufacturing. The cost of the machinery is estimated at around Rs 25-30 lakh. Our mineral water brand will be launched in 2005." On the expansion front, he said that the company is set to expand its operations to Vijayawada (Krishna district) by 2005, and said the company is targeting to touch Rs 10 crore turnover in the next two years.

Turn back the clock to the 1920s when the consumption of soft drinks was unheard of and a misconception prevailed that a ghost would pop out as soon as a soft drink bottle was uncorked.

Adduri Ramachandra Raju, the founder of Artos, joined as a clerk in a British contractor's team. His duty was to encash the bills approved by the district collector and pay the labourers.

One day, Ramachandra Raju saw a rotten machine lying at one corner of the collector's office. When he enquired about the machine, the office staff told him it was a soda-making machine brought by one of the collectors from London and that it was not functioning due to some mechanical defects.

Raju, who was ambitious and was innovative, immediately approached the collector and purchased the machine at a throw away price. Though he carted the machine to his house, Raju did not know how to get it repaired. He toured all the districts and enquired about the machine, but to no avail.

Finally, a foreign traveler suggested that Raju visit the Vizag Port where he could meet some sailors with technical know-how of the machine. Raju used this suggestion and got back home with a machine that was working.

He began his entrepreneurial journey with a small step in 1912 by filling soda water in soda bottles, and selling them in the local market.

Incredible as it may sound today, but no one was willing to consume the soda as they thought that there was a ghost hidden in the bottle. But Raju had the patience of a saint. Through perseverance and an uncompromising will power, he traveled miles requesting people to taste the soda.

The First World War came as a boon to Raju. In 1914, a group of British soldiers camped at Ramachandrapuram for two days. They saw Raju carrying sodas in a basket on his head, called him and gulped them, asking for more.

During the soldiers' stay, the locals observed them consuming soda and followed suit. In 1919, Raju's younger brother, Jagannatha Raju, after completing his PUC, came back to assist his brother. With a pulse of the market and pregnant with new ideas, Jagannatha Raju started marketing the sodas with a dash of sugar, colour and flavour.

Later, he established contacts with soda makers in London and imported glass bottles, sugar, CO2 gas and flavours for making aerated drinks. Thus was born AP's first soft drink in 1920 - Artos - with the tag line of "exhilarating, invigorating, aids digestion".

The industry started flourishing and sales picked up gradually. The Second World War came as a severe jolt with imports coming to a virtual halt. All the soft drink industries (Duke's from Bombay, Spencer's from Madras, Roger's from Delhi and Vincent from Madurai) had to shut down due to non-availability of raw material.

But the Raju brothers did not lose confidence. They brought oranges growing in the forests, peeled them off and extracted fruit juice concentrate.

They purchased lemons from the market and made acids; jaggery was refined and liquid sugar was made. Though the whole process was costly and tedious, the indefatigable brothers went on making soft drinks until after the war. Their sheer hardwork paid dividends.

In 1956, the business was taken over by Jagannatha Raju's sons Padmanabha Raju and Satyanarayana Raju. They modernised the operations and started using automatic equipment.

In the late 50's, many new soft drink companies came up all over the country. Coca Cola entered the Indian market in the sixties. Among the Indian brands, Parle from Bombay started putting up franchisees in Andhra Pradesh from 1968.

With MNCs implementing new marketing techniques and sales promotion, AR Raju and Brothers found it difficult to sustain their market. Added to this, was the enhanced tax structure, including central excise and sales tax, and the mounting production costs.

Since they did not want to burden the customers, they cut down on electricity charges and started producing the soft drinks manually again. However, sales came down drastically.

With the onslaught of multinationals, almost all the Indian soft drink manufacturers suffered and Artos was no different. Despite losing tax reliefs and other related benefits from the state government and having to pay taxes on par with MNCs the company according to Raju has not compromised on quality. The company was forced to hike its MRP from Rs 5 to 5.50 in 1 April 2001.

Sensing a challenge from the local brand, the MNCs slashed their 200 ml brands' price to Rs 5 in East Godavari and West Godavari districts. This was the first time such a step was taken in any part of the country. Artos followed it up and fixed its brand price at Rs 5, and is now reigning supreme in the Godavari districts.