Brothers Vikram and Deepak may have split quietly, but they will fight it out in the marketplace noisily.

By George Skaria

Vikram and Deepak Kothari went to school together, went into business together-and strategised together. Once, over dinner, a little over 10 years ago, the 2 brothers browbeat their ageing father, Mansukhlal Mahadevbhai Kothari, the 74-year-old Chairman of Kothari Products, into submission. Arguing about whether the makers of Pan Parag pan masala should diversify, Kothari Sr stubbornly held out against the idea. But Vikram, 50, and Deepak, 48, would have none of it, and won the right to diversify their Kanpur-based group.

The Brothers Kothari are now thinking differently----and acting independently. And there are no winners at the Rs 500-crore Kothari Group, which has split into two. In end-July, 1999, Deepak (and his father, M.M. Kothari) bought out Vikram's 22.50 per cent stake in the Rs 300-crore flagship for Rs 30 crore, giving them control of 75 per cent of Kothari Products' equity. While the scrip-price was ruling at Rs 172.50 (on July 30, 1999), Vikram may have sold his shares to them at Rs 250 per share. In addition, he also gained control of the Rs 50-crore Rotomac Pens.

Clearly, a fair split, especially since it doesn't prevent Vikram from re-entering the pan masala business. So, will he soon launch a new pan masala brand? BT learns that, post-split, he has been meeting some of Kothari Products' distributors. While that may not be an indication of his intentions, something else may be: Deepak Aggarwal, the head of Kothari Products' production and operations, has recently signed up with Vikram too. Not only is this a big blow for Deepak, Vikram could easily use this as an opportunity to launch a brand to take Pan Parag head-on.

That's why the first division in the 27-year-old group has shocked the family into silence; none of the protagonists was willing to comment. Ironically, the bone of contention harks back to that dinner-table conversation years ago: diversification. The last time round, Kothari Sr proved to be right. Giants like Hindustan Lever and Nirma quickly swallowed up the Kotharis' forays into detergents and washing-soaps although the company still has an insignificant presence in the coconut-oils business (brand: 7 Up).

Undaunted, the Kothari Group has, through a slew of private companies, diversified into pens, greeting-cards, mineral water, and snack foods. Diversify the Group must. For, its pan masala and gutkha businesses-which account for 70 per cent of its revenues-are under siege by the Central and state governments. In fact, the sword of a total ban of the product hangs over the industry. ''The threat could be real,'' avers Raj Sujan, 53, the CEO of Dharampal Premchand, a Delhi-based competitor.

Coupled with intense competition from innumerable regional players, this has hurt Kothari Products for some time. While its sales have been virtually stagnant for 3 years now, growing from Rs 253 crore in 1995-96 to Rs 267 crore in 1997-98, the company's net profit margins too have been flat at 10 per cent. That's why Vikram and Deepak had set themselves a target of reducing their dependence on pan masala to 60 per cent of their turnover by 2001.

Logically, their growth-urges also dictated that they each hatch ambitious diversification-plans. And different styles of functioning. Vikram, for instance, has already inducted his children into the business while Deepak hasn't. BT also learns that when M.M. Kothari felt that his younger son should have more powers, Vikram-who looked after production and marketing-was not keen to cede power to Deepak. That Kothari Sr, eventually, stood by his younger son is a reflection of the differing pace and plans of the 2 brothers. Deepak spoke M.M. Kothari's language; Vikram did not.

In any case, an informal division has been in place for the last 5 years. While Vikram has been focusing on the Rotomac brand, Deepak concentrated on the Yes brand of mineral water. Says Y. Balaji, 31, Deputy CEO, Feedback Strategic Consulting: ''The Kotharis could have used succession planning as a driving-force.'' Perhaps. Perhaps not. Take their stand-alone approach to diversification. All the businesses developed distinct entities in the marketing, distribution, and manufacturing functions. For instance, the Kotharis have put into place 1,800 distributors for pan masala, 750 for pens, 500 for mineral water, 90 for greeting-cards, and so on.

The logic: dependence on one distributor would result in the promotion of only 1 product at the cost of the others in the portfolio. Adds Sanjiv Sarna, 33, CEO, Studio Communications, the communications strategy agency for the Vikram Kothari banner: ''One of the most important perspectives that the Group's members had on diversifications was that they should exploit their traditional strength and knowledge of distribution.'' That's how, over the next year, the 2 Kothari sub-groups will both embark on diversification sprees for their survival-but independently.

THE DEEPAK KOTHARI GROUP'S STRATEGY. While Deepak has grown the Yes brand (marketshare: 10 per cent) since its launch in 1994, Kothari Beverages is up against the might of Parle Exports' Bisleri (marketshare: 65 per cent) and Parle Agro's Bailey (20 per cent), not to mention the combined onslaught of the cola corporations, PepsiCo India and Coca-Cola India. Avers Bhupesh Thakkar, 39, Vice-President, Kothari Beverages: ''Even as we shift from a company-owned to a franchisee-owned bottling strategy, we will buttress it with a slew of diversifications under the Yes umbrella.''

During the next 6 months, apart from setting up franchisees in Rajasthan, Tamil Nadu, Hyderabad, and Goa, Deepak will also unveil a range of extensions: carbonated soda, Indian sweetmeats, processed dry fruits, like almonds and cashew, flavoured water, medicinal water for pregnant women and children, and water-filters. All this with one eye on the export market, particularly that in West Asia and South East Asia. Even in the absence of any investment data, it can be safely assumed that these extensions seek out only niche markets.

Just as well. When Kothari Beverages is taking a step forward, it can only afford to set up beachheads in other sectors. History is also against it: the company has been unable to crunch the ready-made snacks (namkeen) segment, playing third fiddle to Lehar and Haldiram's in that market. That's why the father-son duo will continue to rely heavily on the flagship, Kothari Products. Sure, its sales have been flat, but the company is profitable (net profits of Rs 25 crore in 1997-98) and has reserves of Rs 80 crore.

THE VIKRAM KOTHARI GROUP'S STRATEGY. A little before the split, Vikram invested Rs 4 crore in a joint venture with Japan's Pental, Indo-Japan Pens, to market premium pens under the Pental brandname. Meanwhile, Rotomac Pens-a 75:25 joint venture with the Flair Group-has done well for itself, by grabbing more than a 25 per cent share of the market from France's Reynolds (marketshare: 55 per cent). And, with Rs 20 crore in exports under its belt last year, Rotomac's markers and highlighters division-a 50:50 tie-up with Germany's Edding-also notched up a turnover of Rs 4 crore last year.

And Vikram hopes to write a sequel in greeting-cards. Reasoned Vikram, in a pre-split meeting with BT: ''We felt that our success could be extended to other areas provided we kept a few basic ingredients-such as quality, high brand-awareness, and sufficient volumes to leverage costs-intact.'' Christened Rotomac Greetings & Gifts, the fledgling company (marketshare: 10 per cent) is a 75:25 venture with old partner Flair Pens. Asserted Vikram: ''What is lacking in that industry is a certain level of empathy with Indian humour, history, and ethos. That is what we will try to provide to our customers.''

Easier said than done, since he will have to grapple with global giant Hallmark at the top end, and local strongman Archies Cards & Greetings at the middle. Avers Vineet Kapila, 32, Group Brand Manager, Archies Cards & Greetings: ''The differentiation in this business will have to come from value-addition, innovation, purchasing, and retailing availability.'' With his war-chest richer by Rs 30 crore, post-split, Vikram should not want for funds.

Of course, there are other loose ends in this partition. Although the ink hasn't even dried on a joint venture between the Kotharis and the Kanpur-based Dainik Jagran Group to set up a chain of multiplexes in Uttar Pradesh-for starters, in Kanpur and noida-who gains control of it isn't clear. While the project was Vikram's baby, it was being routed through Kothari Products.

Clearly, it will take a while for the dust to settle, but in terms of conviction, it does make sense for the Kothari brothers to walk their independent paths. That said, they have always done business by relying on a street-smart marketing strategy. Now, as Deepak and Vikram plan to diversify out of a family business to compete with each other in the pan masala segment, professionalism could hold the key to the survival of the Kotharis-singly.

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