A meaty opportunity for e-commerce industry in India amid Covid-19

Online meat and fish delivery companies see big potential in the growing consumer appetite for hygienic, home-delivered fresh produce

In March 2020, when a nationwide lockdown was announced, like any other growing entrepreneur in the country, Chennai-based Nishanth Chandran, too, suffered his share of panic over how his business would survive and the future of his business model. Little did he know that the pandemic was going to drive his business growth multi-fold.

Launched in 2015 as a platform to order fresh meat, seafood and eggs, Chandran’s TenderCuts had an annual revenue run-rate (ARR) of Rs 70 crore before the lockdown with a presence in Chennai and Hyderabad. Six months into the pandemic, that rate increased to Rs 220 crore and is around Rs 400 crore today, growing close to five-fold since the pandemic. Last month, Stride Ventures, a venture debt firm, invested Rs 30 crore in TenderCuts to support its expansion in eight cities in 2022.

“We thought the numbers might come down after the lockdown. But it continued to grow for the majority in this organised and online meat business because people started focusing on hygiene because of the pandemic,” Chandran said.

This is not just the story of TenderCuts. There are several other major players in the organised meat market segment for whom the pandemic turned out to be an opportunity.

According to a report by Bengaluru-based market research firm RedSeer, the se­c­tor saw a three-fold growth during the first year of the pandemic. “The online players effectively communicated their superior quality and hygiene practices, which boosted consumer confidence. Therefore, online players gained a significant number of new users since Covid, even as existing users or­­­dered more, which boosted volumes,” it said.

Vertical e-commerce companies such as Licious, FreshToHome, TenderCuts, Zappfresh, Meatigo and Fipola account for over 80 per cent of the online meat market, followed by horizontal players such as BigBasket and Milkbasket, and applications such as Swiggy.

Based on industry players, the size of the meat market is around Rs 3 trillion now (70 per cent fish, 16 per cent poultry, 11 per cent mutton, 2 per cent pork and 1 per cent beef). Despite this, the organised or online segment is nearly Rs 3,000 crore, just 1 per cent. Many see this as a reason for the huge potential, with the market expected to touch Rs 6-9 trillion in the next five years.

“Take the case of internal fish consump­t­­ion. Around 97 per cent is controlled by the wet market and only 3 per cent is run by organised players. Out of that share, only 6 per cent is the online market. This means there is tremendous growth potential across the country as more and more people adapt to online transactions and online buying,” said Mathew Joseph, co-founder of FreshToHome, which is looking to raise a fresh round of funds.

The platform that focuses on the sale of fresh fish with eight factories and presence in 56 cities claims to have seen its turnover grow from Rs 450 crore in 2019-20 to Rs 650 cr­ore in 2020-21 and is poised to touch Rs 1,200 crore in 2021-22. “What is driving online players like us is that we are providing fresh produce without chemicals along with good quality and service,” Joseph added.

Despite the ambitious growth numbers lined up, many of these players may not be making enough profits due to the rise in raw material costs, marketing costs, aggressive expansions and discounts offered. Acc­ording to media reports, another market lea­der Licious, which became the first D2C (direct-to-consumers) start-up to achieve unicorn valuation last year, posted a net loss of Rs 369.8 crore in FY21 against a loss of Rs 146.3 crore in FY20. This is despite a three-fold jump in its total income to Rs 435 crore. Licious founder Vivek Gupta was not available for comment.

FreshToHome, too, reported an annual loss of 17 per cent, while its marketing cost was seen as high as 47 per cent of total exp­enses. The advantage here is that all these players are seeing strong growth in their unit economics. For FreshToHome, from spending $6.85 to earn a single dollar in FY20, it improved to $3.38 in FY21. It has also gained a considerable share in the Un­ited Arab Emirates during the pandemic.

The industry is also facing a perception battle from customers. “Before the pandemic, people were hesitant thinking that we were expensive. We are only 4-5 per cent more expensive than a butcher shop. We grew from 14 stores in early 2020 to 60 stores now,” said Sushil Kanugolu, managing director of Chennai-based Fipola, which sells half of its products online and expects to be the largest B2C (business-to-consumer) omnichannel by March this year with monthly revenue of Rs 22-24 crore.

Though the 28 million fisherfolk and fish farmers across India see the expansion of online business as a positive sign for the wholesale segment, many believe that this may lead to job and business loss to traditional retail players and fishing community women. “Markets becoming organised is a positive move for the fishermen, but these companies are not sourcing fish from the respective states, leading to an imbalance as price in states such as Andhra Pradesh from where they are sourcing is much less,” said M D Dhayalan, president, Indian Fisherman Association.

This imbalance is the result of delivery dynamics. The majority of the online companies deliver fish within 48 hours and preserve it according to Food Safety and Standards Authority of India guidelines, while traditional players are unable to do this for lack of infrastructure.

Another cause for concern is possible job losses among fisherwomen. Govern­ment data shows that out of the 28 million fishing population in India, over 10 million or around 44 per cent are women engaged in the retail segment. “These wo­men may lose their sales as people may shift to the online mode. The government or these start-ups should take care of this as the online segment grow,” Dhayalan added.

Looking at a higher fish consumption on a per capita per annum basis, Tripura (29.29 kg), Kerala (19.41 kg), Manipur (14.1 kg), Odisha (13.79 kg) and Assam (11.72 kg) will be the markets online players may be betting on in the longer run. To cover this wide geography, the online players are likely to pump in more money in developing the requisite infrastructure.

“Fish or meat, we have to keep up our quality and standards, which the segment lacks now. We have to provide better infrastructure facility, too, as we are keeping the product’s temperature at 0-4 degree Celsius from the point of catching the fish. Hence, we have to invest some money for the infrastructure facility,” Joseph said.