Kochouseph Chittilappilly on Starting V-Guard


#1

Kochouseph Chittilappilly is an entrepreneur we admire. He is one of the foremost industrialists in Kerala, and his businesses (V-Guard and Wonderla Holidays) are now well known across the country. While his skills in building businesses are uncommon (he has started three so far, the latest one at the age of 60), what really makes him stand apart is his humanity. Mr. Buffett’s words on Peter Kiewit (“He made major deposits in society’s bank . . . but his withdrawals have been few.”) could as easily have been applicable to him.

While preparing a case study on him, we came across his channel on Youtube. There are a series of autobiographical interviews in Malayalam in this channel. We thought it would be interesting to our members (majority of whom we are sure don’t know Malayalam) to read the English translation of the same. Transcribed below is ‘Episode 8’ of the autobiographical series.

The context: Mr. Chittilappilly had started V-Guard, the electrical appliance business, in the mid-1970s. The interview transcribed below details some of his recollections just after he began the business.

Episode 8

For some time, V Guard was run in the rented shed that we bought in the beginning. However, I heard that right next to our shed, there was a building with decent facilities available for sale. And so, I told this to my father. Around that time, my father understood that I won’t return to the village and there was no point in keeping the farmland for me. So, he began selling our land gradually and gave a portion of the proceeds to me. I used those funds to buy the plot and the building. The building was a better one as it was more spacious. I got the shed renovated and shifted the business to this new shed.

Sheela, my wife, also had a good amount in her name in the bank. I decided to use that along with some more money given by my father to buy a plot to make a home for my family. So I bought 20 cents of land (cent is unit of area, 100 cents to an acre) in Kaloor (Kaloor is now a major hub in Kochi, a major city in the state of Kerala). Prices of land were very cheap then. At that time, I paid just Rs. 2,800 ($40) per cent to buy the plot then. Soon, I decided to build a home there. So within two to two-and-a-half years of starting my business, we had a small home that we could call our own for our family. And then, my first son Arun was born.

Now, I had a home to call my own, a factory shed to call my own and I also got a telephone connection for the factory. (Getting a telephone connection was a big deal in those times in India). Thus, gradually, things were falling in place in life. After we started living in our home for a year or so, Sheela became pregnant again with our second son Mithun. So at that time I decided to buy a car and bought a second-hand Premier Padmini for an amount of Rs. 25,000 then.

So by that stage – by the time Mithun was born – V Guard had a good dealer network throughout Kerala. I also had a separate employee to get the orders from the customers and ensure the dealers got their goods on time. Dealers then had huge bargaining power. They would not agree to our terms and used to dictate their terms to us. It was the way it was as we were quite small still. They used to pay us only after they sold our goods; there were a few who would not pay us even after they sold our goods. We used to provide higher commission for sales as compared to our competing brands which were much larger than us. But more than all this, I believe the camaraderie that I had with them, the personal relationship that I developed with them, the regular conversation that happened between me and them, the vists to their business place – all led to their increased belief in my reliability. It also helped that V-Guard Stabilizers had no complaints for a long time. And also, as I said previously, they needed to pay me only after they sold the goods and enjoyed higher margin. So, slowly and steadily, the dealers themselves started pushing more of V Guard products in the market and relegating the erstwhile dominant brands like Keltron and Nelco to the sidelines. It was at this juncture that we did an advertisement for the first time. We did our first colour advertisement in ‘Vanitha’ (a famous regional magazine).

It was gradually that V-Guard grew over time. I remember that when we did our advertisement in ‘Vanitha’ we had to book a space for half-a-page well in advance; otherwise we would lose the opportunity. The magazine never used to give me ad space during festival season like Christmas or Onam (regional festival) as those were already booked by the larger businesses then. During those times there were quite a few private financing companies who gave grand advertisements. I still remember an old magazine agent telling me that so-and-so finance company had booked three pages and its competitor had booked two. At that time, I could afford only half-a-page. But when I look back now, none of those entities exist. Those companies all were fly-by-night operators who were running Ponzi schemes to swindle money from customers. I remember, there were ads promising 36% interest to customers to take money from customers and then disappearing.

I believe today that if an institution has to grow or has to survive for years into the future, it should maintain trust in the society, it should produce quality products and work hard consistently for a long period.

Thus V-Guard was gradually and steadily growing. A friend of mine - a V Guard dealer – was a member of a Rotary Club. He invited me to become a member of the Rotary Club and so I joined the Rotary Club. They have a tradition at the club where a new member had to give a speech within a couple of months of joining. The meetings in the Rotary Club are in English and the new members are expected to speak about their journey in English. I practiced a lot and spoke in English in the meeting I attended. But once I returned home I felt my public speaking was not good enough. I was unable to speak in public as I wanted to. I had seen many orators who could convey their ideas with ease and who made an impact.

I decided I also wanted to be a good public speaker and so I joined a few public speaking courses and personality development programmes. I had a strong belief that if my business had to grow, the pre-requisite was that I had to learn and become better. Without improving ourselves, we cannot make the business or institution we run better. If one is running a dealer conference or a meeting with a group, he / she needs to have the skill to speak confidently in front of them. And so for public speaking, personality development, and all this I attended many, many courses. At one point, I was crazy about such courses. If I hear about any good course, I would go and join it. Sheela was quite irritated with it. Our kids were 4 years and 2 years, and I used to go for courses, evening classes and what not. I remember I had attended a course in the evening and returned home at 10 pm. By the time I returned the kids were already sleeping. Once Sheela asked, “Why do you have so many courses to attend? Many of my relatives are businessmen too. But they do not go for courses.” I did not respond to her because the way I saw it was this – I absolutely could not build a strong long-lasting institution if I did not keep improving myself. I was stubborn in wanting to improve myself as much as possible.

I also recall that I was quite weak in Accounting and Finance. I heard that the Chamber of Commerce in Kochi was conducting a class on Accounting for small merchants. The class, conducted by a Chartered Accountant, started at 6am and finished at 9am. The timing was so merchants could open their shops after class. I used to wake up early in the morning and go attend the class and then go to the factory. Some days there was a course in the evenings too. Thus, I attended different kinds of courses and I believe, that is the reason why I have had the success I have had.

If I were to speak about Marketing, in the initial stages, I personally used to go visit the various dealers and develop a relationship with them. Later I hired representatives and they visited the dealers. The representatives interacted with the dealers, and the dealers in turn interacted with the customers. I see this as a chain – Manufacturer -> Marketing Manager -> Distributor-> Dealer -> Customer. We have to be very careful in maintaining the strength of the links to ensure the success of a business. Everyone in the link should be happy, and that is something I always insist on. The dealer should be happy, the customer should be happy, the staff should be happy, the raw material supplier should be happy – only then will there be a sustainable long term growth in business. If any of the links become unhappy, then it will be broken, jeopardizing the whole chain. And so I keep repeating this – we should care for our raw material suppliers, our staff, dealer / distributors. And most important of all is the customer. Customers are the reason for our existence, and the reason for our survival. So, anything which makes a customer unhappy or angry cannot be sustained. You might be able to fool the customer for some time, but I believe strongly that it is impossible to fool customers for any extended period of time.

So the business was growing slowly and steadily; the dealer numbers were increasing, and so concurrently I was increasing the number of representatives. I am reminded of a funny incident at this moment. Around this time, a representative who was looking after the Kozhikode/Kannur (districts in Kerala) resigned. There was a Marketing Manager then. So I decided to meet a dealer there with this manager. While we used to interact over the phone, it was the first time I was meeting this particular dealer. I was pretty young at this time. But the Marketing manager was quite familiar with the dealer and had a good relationship with him. The dealer was complaining to the Marketing Manager, “Why is the staff in your organization changing so frequently? Only recently there was a new guy, and now again you have brought along someone new.” I had given my visiting card to the dealer which had my designation as ‘Proprietor’ but the dealer had omitted to read it. Immediately the Marketing Manager corrected the dealer by informing him that I was the proprietor. The dealer was quite embarrassed. Most dealers expected me to be much older than I was.

As years passed by, I found my confidence in myself and my abilities increasing. I was already quite confident as a person. I am a person who is not afraid of retaliating when there is cause. Whenever I see what I believe to be an injustice, I will retaliate. I was always that way. I would like to share a small example here. In the early years, we used to procure many spare parts from Mumbai. Initially the quality of the parts was very good, and we used to pay the supplier on time. The terms were quite tough. As we were a small player then, we had to pay them in advance and only then would they dispatch the goods. Once the goods they sent were of very poor quality and so I discussed with them and returned the goods back to them. But after I sent the goods back, neither did they replace with better quality goods, nor did they return my advance. This was quite unfair and I understood that I had been duped. Later he stopped responding to my correspondence. So I decided to use a different tactic. After some time, I wrote to him that my firm had become much bigger and I need larger supplies. I also suggested that we let bygones be bygones and start doing business again. I requested him to come down to Kochi so that we could talk terms.

He fell for that and came to my factory. Well, in my factory, I am the king. Once he reached my office I asked him to be seated and left the room to talk to a few of my employees. I told my employees that I intended to keep the supplier here and not allow him to leave. I also told them to interfere if and when required. I went back to the room and had a nice conversation with him initially. Then suddenly, I became dead serious and told him I had no intention of letting him go. I made it clear that till he returned the money that he swindled he was not leaving the factory. At the same time, my employees came and circled him as well. For quite some time, we kept him there. In due course, he wrote a cheque and thus I got my money back.

Likewise there was another incident. Once, I was traveling from Kannur to Thalassery (two towns in Kerala state) by bus. I got into the bus to Thalassery early in the morning. I had fixed an appointment with a dealer there at 11am. And I am quite rigid about being on time. So I had to be at Thalassery at 11. But as luck would have it, there was a strike by school kids in a small village on the way. As part of the strike, they were stopping all vehicles plying on that road. They stopped our bus too. These were small kids – 11 years to 13 years old. And no one was responding to this. I too stayed quiet for some time. But I was extremely irritated as it was delaying me and I did not want to break my word to the dealer in any circumstances. Sticking by my commitment is extremely important to me. The students who were striking were not satisfied with just stopping the vehicles but were letting the air out from the tyres of the vehicles. When they reached our bus, I jumped down and stopped them. I was livid. I said, “Don’t you dare touch the vehicle. You do not have any right to let the air out from the tyres. You can strike, you can picket. But you cannot touch the bus.” The funny thing is right when I exploded with frustration all the remaining passengers in the bus came together and stood by me. The students got scared and left our bus alone. By then police came and the students ran from the scene. All the buses before ours had the air from the tyres let out. But because I was not ready to take it, our bus escaped that fate and could go. The lesson I learnt from this incident is where required you have to stand up for justice. When you stand up for what is right and just, you will inevitably find support from others too. If your cause is unjust, you might not find support but if your cause is just, there will be people to support us.

So in instances like this I always stand by the side of justice. When I see injustice I fight it. It has become a habit of mine.

Coming back to V-Guard, it grew steadily and we had reached employee strength of around 100. We began marketing our products in other states like Tamil Nadu and Karnataka. We hired many supervisors as well. It was at this juncture that a union was formed here. Like it generally happens in Kerala, a union was formed in V-Guard as well with political backing. And as happens generally, they created unnecessary arguments with the management. Their problem was not that their salaries should be increased. I had created an incentive system for our workers then – that is, the workers had a fixed salary and were incentivized on the number of units they produced. So the workers who did well earned more while others earned less. The union did not agree with this practice and the union leader came and talked to me. Now, the union leader was not part of the factory. So I told him, “I don’t want to talk to someone outside my factory. I will speak to my workers. I don’t know who you are – you might be a political leader. But I don’t see why I should speak to you.“ He was unhappy and responded, “You do not understand the rules of the union. You should respect the leader of a union.” I told him I respected him and repeated that I had no wish or liking to speak to him. Anyway, there was this disagreement that happened there. And soon, the workers in the factory assaulted a Supervisor. That made me furious. As I said previously, if I see injustice I can’t not respond. So when they hit my Supervisor, the same day I shifted all valuable equipment from my factory to Coimbatore. After that, I shut down the factory and the workers began striking for a long time.


We will be transcribing more of the interviews in due course but those will be available to members only. Not a Member? Join Us.

We have covered Mr. Chittilappilly and his businesses in a few other articles. Please refer below for the same.

Case Study - Kochouseph Chittilappilly

Intelligent Fanatics and Their Love of Paradox

Apple - Wonderla - TTK Prestige: They Rhyme

Intelligent Fanatics Leverage Antifragility

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#2

People who understand Malayalam should listen to those interviews… It’s a lifetime of knowledge imparted in a very simple language… Almost like your uncle speaking to you…


#3

interesting read. I sense the hardship he must have gone through to reach this feat.