MDH business model: A few years ago, a term called “Hindu rate of growth” was highly popular in economic circles. It was a slanderous attack on people following Hinduism. The term was used in reference to the stagnant state of the Indian economy during the 1950s to 1980s. Unfortunately, these economists were inspired by the fly-by-night growth model of the Western World.
In India, on the other hand, the Hindu model of growth has always had a better chance of bearing fruit. Businesses built on the foundational values of Sanatan take time to grow, but their growth is more tangible and has higher chances of surviving market onslaughts. And, MDH has shown it.
MDH wale uncle is a school dropout
MDH is believed to be the brainchild of Dharampal Gulati, also known as Mahashay Dharampal Gulati. However, its original progenitor is his father Mahashay Chunnilal. Chunnilal and his wife Mata Chanan Devi used to run a spice shop named‘Mahashian Di Hatti’ in Sialkot, of modern day Pakistan. The shop was a major hit in the city since the family had a well-established social network. This network was built on the family following the Hindu way of life by gracefully contributing to religious, social and philanthropic activities.
Dharampal, whom we fondly call “MDH wale uncle”, was born to Chunnilal and Chanan Devi on March 27, 1923. By the early age of 10, this child showed no interest in studies. From that tender age, Dharampal started trying his hands in various businesses. He learned the hardships of life quite early, when he was engaged in carpentry, as a cloth merchant, in the hardware business, and rice trading to earn sufficient bucks.
The father and son duo expanded the business
His father came to his rescue and established mini businesses like selling mirrors and manufacturing soaps for him. But Dharampal could not succeed, and at the end of the day, he joined his father’s business. By now, his genetic business mind had learned all the required lessons from multiple failures. It did not take long for Dharampal to establish his authority over Chunnilal’s business. Within a few years of Dharampal’s joining the business, the demand for his family’s spices had expanded to areas like Lahore, Multan, Sheikhupura, Nanakana Sahib, and Lyallpur, among others. And then came the horrors of partition.
Hardship after partition
His family had to flee the reign of terror in Pakistan. Initially, they were stationed in the refugee camp in Amritsar. But soon, the Gulati family realised its futility and headed towards Delhi, where his sister was living with her husband, a government employee. Dharampal’s brother-in-law helped him to attain refugee status and availed whatever benefit was attached to it. But Dharampal was a smart man and had Rs 1,500 in savings.
He spent Rs 650 on buying a tonga, a horse carriage. At that time, it was a popular mode of public transport. To feed his family, Dharampal operated around New Delhi railway station, Qutab Road, and Karol Bagh. He used to charge only 2 annas for a one-way trip. It was only a matter of time before Dharampal Ji gained the confidence to start his own business.
Ready to start a business
He was not only earning enough for his family but was also saving a lot of money. However, his savings were not turning out to be good enough for his family, since Dharampal Ji’s family was a combined one. More and more relatives from Sialkot started flooding his house, and the Gulati family did not find it morally right to turn them away. He started selling cane sugar, which, later, had to be shut down due to low demand.
After witnessing this failure, Dharampal decided to focus on his strong areas only. In 1948, he decided to re-establish his family’s spice business. He bought a small wooden shop in Karol Bagh and gave life to the dying spice trade. But, there were lots of challenges for the Gulati family.
Challenges for business
First and foremost was convincing people to buy spices. At that time, 80 per cent of Indians were living below the poverty line. Naturally, the majority were just keen on buying enough to sustain them. Spices’ being an add-on flavour was considered just an extra, if not a luxury. The second challenge was that Dharampal Ji was not willing to compromise on his integrity to gain market share. He just refused to sell spices of substandard quality.
Both these challenges combined to produce a third challenge, which was producing a standard product while keeping the price low. Additionally, it meant that the initial cost of production would be high while profit margin would be extremely low, with the chances of the shop, ultimately, being a loss-making entity quite high. There was only one option for Dharampal Ji, which was to acquire cheap sources of labour.
Overcoming challenges and expansion of business
That is where the experience of his hardship days came in handy. Dharampal ji and his immediate family forgot the concept of time and worked tirelessly to ensure the quality of spices. The increase in sales was also catalysed by the shop’s advertisement in ‘Pratap’, a popular Hindi newspaper of the time. His consumer base included not only Delhites but also those who had migrated from Sialkot, Multan, and other areas in Pakistan where Gulati’s spices were popular.
Within no time, places like Khari Boli, Gaffar Market, and Chandni Chowk area were flooded with Gulati’s spices. The Gulati family’s second big store was opened in the Chandani Chowk region. But now it has become tougher to manage his business. Dharampal Ji needed more business partners as well as more manpower in managerial positions. He went ahead with the market demand and contracted many suppliers. To keep a watch on the quality of the product, he entrusted extended family members with quality control.
Betrayal forced him to go solo
Dharampal Ji was doing all this because he could not give 24 hours to his business, not because he did not have an eye for details. But contractors perceive it as some sort of weakness. They started to engage in malpractices which did not go unnoticed in Dharampal Ji’s eyes. His expert senses could catch even a minor change in composition. No wonder he cut ties with a business partner who was engaged in mixing lentils with the turmeric spices.
Dharampal Ji used to give 12 to 15 hours to his business and expected the same from his business partners and friends as well. But his own childhood friend betrayed him. Even his family members started to create trouble for him. Frustrated by all of this, Dharampal Ji decided to go solo and established a large-scale manufacturing unit in Delhi’s Kirti Nagar in 1959. It was an instant hit, and a company named MDH (short form of Mahashian di Hatti) was incorporated in 1965.
The burgeoning profit helped MDH to establish its manufacturing units in places like Delhi, Ghaziabad, Gurgaon, Nagaur, Sojat, Amritsar, Ludhiana, and even Sharjah in the United Arab Emirates. A large part of the credit for this expansion goes to the way MDH was advertised all across India.
Advertising led to exponential growth
By the 1970s, televisions had started to become a regular feature in Indian homes. Additionally, the Hindu ethos also teaches us to respect the elderly. This is where Gulati Ji took advertising into his own hands after a sheer coincidence.
You see, MDH always wanted family-friendly advertisements. For instance, MDH masala is used in family functions like marriages and birthdays, among others. While shooting for one advertisement, Dulhan’s father could not arrive on time, and so, as a stop-gap arrangement, Dharampal Ji himself appeared as Dulhan’s father.
The coincidence became a huge hit, and Gulati Ji’s face became more popular. The spending on TV advertising brought in revenues of gargantuan proportions, and today, this family-friendly brand is estimated to be valued anywhere between Rs 10,000 crore and Rs 15,000 crore. The total turnover of the business is more than Rs 2,000 crore at the current juncture. The company sells 62 kinds of spices, available in 150 packages. They do it through a network of over 1000 stockists and over 4 lakh retailers.
Today, MDH is the second largest player in the Indian spice market and occupies around 12 per cent of it. Not only in India, its products such as black pepper, red chilli, cumin, dhania, coriander, turmeric, blended spices like biryani and chicken masalas, and curry powders are exported to places like the US, Canada, Europe, the United Kingdom, South East Asia, Japan, the UAE, China, Malaysia, and Vietnam, among other geographies. The key sources of its raw materials are Kerala, Karnataka, Iran, and Afghanistan. Even American sanctions have not affected the import of raw materials.
Despite that level of success, Dharampal Ji walked his talk of staying on the Dharm path. He has established many schools and hospitals and has contributed by marrying off girls from poorer families. Mahashay Chunnilal Saraswati MDH International School Dharampal Ji established more than 20 schools, including Mata Leela Wati Kanya Vidhayala, Mahashay Dharmpal Vidhya Mandir, to name a few.
Dharampal Ji established an eye hospital at Arya Samaj, Subhash Nagar, New Delhi. In memory of his mother, Mata Chanan Devi, Dharampal Ji established a 20-bed hospital in JanakPuri, New Delhi. Today, this hospital has up to 300 beds with facilities such as MRI, CT scan, Heart Wing, Neuro Sciences, and IVF. Poor people are treated for free in the hospital, and the MDH family provides millions to ensure it. In other words, it won’t be wrong to call Dharampal Ji a pioneer of the concept of corporate social responsibility in India.
It is hard to believe that it was done by a person who died with Rs 5,400 crore in his personal kitty. You should not blame yourself for this mistaken assumption because modern capitalism produces highly unequal outcomes that favour the privileged few. But, the Hindu business model does not give such disastrous results. This business model is built on long-term trust rather than instant gratification. MDH’s success is a primary example of that.
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