Build it like Binod

Late ’90s, when the violent Maoist revolution was at its peak, Binod Chaudhary had a conversation with Pushpa Kamal Dahal, the guerrilla leader-turned-Prime Minister, famously known by his nickname ‘Prachanda’ or The Fierce One. Those days, Maoists would regularly announce their hatred for capitalists and businessfolk, berating them as “foreign agents” and “imperialists”. Chaudhary’s empire, with 60 brands in 30 countries, including the popular brown noodles Wai Wai, could have been a prime target. “But Prachanda told me, ‘What do you think my men survive on? Wai Wai.’ That’s why they had strict instructions not to disrupt supply of the noodles,” Chaudhary tells Fortune India sitting in a Delhi hotel suite. “Funnily, Baburam Bhattarai (another Maoist leader who later became prime minister) also used to tell me that he survived on Wai Wai when in hiding.”

Chaudhary, 60, was in India to help coordinate relief efforts after the recent earthquake that has killed close to 7,000 people in Nepal at last count. His story is unique in that he has built a global empire over 40 years from an impoverished country that has seen some of the worst political and social upheaval—including 18,000 dead in the Maoist civil war, a regicide, and a tumultous courtship with democracy—during that time. He defies the idea, particularly popular in India, that it is impossible to grow a business without stability and calm.

How did Chaudhary, who dropped out of school at 18, build a $1.5 billion (Rs 9,475 crore) made-in-Nepal conglomerate that stretches from hotels to biotech to consumer goods and has 7,000 employees? He says the key was to “embrace the local at every stage”. “During the worst phase of Maoist violence, we knew that the only way to keep ourselves neutral was to be as close to the people as possible. The only protection was our relations at the grassroots. So food became our No. 1 priority,” says the man who has been a member of the Nepalese parliament.

Chaudhary traces his roots back to the famed trading tribes of Rajasthan, and his father, a textile trader, started Nepal’s first department store. A vital lesson he picked up growing up in that milieu: how to use price stability to win millions of loyal customers. “A packet of Wai Wai cost Rs 10 three decades ago and costs Rs 10 now,” he says. “Do you know of any other product that can claim this?”

Chaudhary says the pricing strategy has brought him precious goodwill, apart from bolstering Wai Wai’s position as the market leader in Nepal. (The goodwill generated by mass-oriented businesses is also what motivated Chaudhary to pioneer suburban housing in Nepal.)

“Wai Wai is staple food for the poor in my country. And not just the poor, almost everyone eats or has eaten Wai Wai. This means the brand has tremendous impact, and anything that hurts its supplies will be protested by the masses.” Cue the Prachanda anecdote.

Before Prachanda's assimilation into the political mainstream, Chaudhary had many conversations with him and his lieutenants about the economics Nepal needed. He was instrumental in convincing them that business people building industries in Nepal actually worked for the country and not against it. “They had a standard line about how the people of the country ought to own everything, but finally they realised that the people themselves supported certain businesses because they made the products which were in demand and created jobs,” he says.

At times, Chaudhary overestimated the demand in his tiny country with a population in the region of 28 million. In 1972, his group diversified into making biscuits, and set up the first biscuit factory in Nepal under the Pashupati brand. But it proved to be too big, and supply outstripped demand in a market dominated by Indian brands like Britannia and Parle. Chaudhary spotted an opportunity in Northeast India. “Everyone told me that was a troubled belt, but it was nothing compared to Nepal! It was an underserved market and we saw great opportunity,” he says.

Here again, Chaudhary decided to hire mostly local people, ignoring his advisors. “I did have the option of running the operations with my people from Nepal, but Nepal had taught me that unless you have locals on your side, you cannot sustain yourself,” he says. “Thanks to local labour, I have never been bothered by the violence in Nepal, and none of the violence in the north-east (which has a long history of separatist militancy) has affected our business.”

The local expertise has come in handy in other ways too: Pashupati’s sales platform helped Chaudhary bring Wai Wai into India through the north-eastern states in 2005. Today, the brand claims 25% market share in India. (Globally, its market share is about 2%.)

In fact, when plagued by strikes and highway closures for months in Nepal, Chaudhary opened the first Indian factory to make Wai Wai noodles in Sikkim in 2006, followed by another in Assam in 2010. It was local advice that helped get the timing in Sikkim right, as 2006 was the year when the Nathu La Pass was opened for cross-border trade between India and China. The group has so far invested Rs 200 crore in six factories across India and is looking to spend another Rs 3,000 crore, with the goal of doubling its market share.

Chaudhary's knack for making a virtue of adversity also helped him when he was desperate to expand into hospitality outside Nepal. By the end of the ’90s, he was offered a deal to run the Taj Samudra in conflict-torn Sri Lanka by the Indian hospitality giant, Taj Hotels. “No one in Sri Lanka was willing to touch it. The banks were trying to repossess it. We had to spend good money after bad money,” Chaudhary recounts. “But we saw the opportunity and convinced Taj to also add a Maldives property to the deal.” The move paid off in spades: These two hotels are now among the most profitable properties in the Chaudhary stable.

In the backdrop of the latest catastrophe in Nepal, sobering thoughts of posterity aren’t out of place. How does Nepal’s only billionaire want to be remembered? “[As someone] not afraid of conflict,” he says.