Ankit Sahni, Founder & CEO, The Hazelnut Factory, in conversation with BW Retail World on scaling in tier-II markets, hybrid formats, and operational challenges
Congratulations on crossing the Rs 100-crore milestone. What were the key strategic levers behind this scale-up, especially in relatively underpenetrated markets?
Scaling a business requires a combination of factors rather than a single strategy. First, access to the right kind of capital is essential, particularly when entering new markets. However, even more critical is the team, as they are ultimately responsible for executing expansion across cities.
The third pillar is a strong backend. In manufacturing-led businesses like ours, capacity must be built before scaling demand. Unlike typical retail models, we focus on strengthening production capabilities first and then expanding into new markets.
Additionally, location strategy plays a decisive role, especially in tier-II cities. Unlike metros, where multiple outlets can offset underperformance, smaller cities demand precision—choosing the right location is crucial to success.
The Hazelnut Factory has blended artisanal mithai with a modern café format. How has this hybrid positioning influenced consumer demand?
From the outset, we did not want to replicate international café formats. As an Indian brand, we wanted to retain a strong local essence while offering a contemporary experience.
Our approach has been to reimagine traditional products rather than replace them. For instance, sweets like ladoos—consumed for generations—are presented with a modern twist, while retaining their core identity.
At the same time, we tapped into emerging consumption trends such as the growing coffee culture in India. By combining traditional offerings with modern café experiences, we created a format that resonates with both familiarity and aspiration.
What operational challenges have you faced while scaling, particularly in tier-II and tier-III markets?
Manpower and training remain the most critical challenges. In metro cities, there is access to trained professionals, often with formal hospitality education. However, in smaller cities, such talent is limited.
As a result, we invest significantly in training from the ground up—starting with basic skills and gradually building expertise. Retention is another challenge, as career awareness in the F&B sector is still evolving in these markets.
With many F&B brands adopting franchise models for rapid expansion, how do you view this route?
The franchise model is complex and often misunderstood. One of the key challenges is aligning different stakeholders with varying mindsets. Franchise partners are typically driven by return on investment, whereas brand builders prioritise long-term value and customer experience.
This mismatch can impact quality and consistency. We believe that while franchising can aid expansion, operational control must remain with the brand to maintain standards. Increasingly, successful F&B brands are moving towards franchise-owned but company-operated models to address this issue.
What, in your view, is the biggest challenge for F&B brands in India’s tier-II markets today?
Beyond manpower, the biggest challenge is achieving the right market positioning. Tier-II consumers are still evolving in their exposure to organised F&B formats.
You cannot operate at either extreme—neither too premium nor too local. Striking the right balance between aspiration and accessibility is critical. Building a brand that fits seamlessly into this middle ground is perhaps the most difficult, yet most important, aspect of success in these markets.
