Food startups: Not all hunky-dory under Covid, not all bleak as it weakens

Not every enterprise Business Standard spoke to had it as good as Swiggy or Zomato, and some even saw their very business models at risk. But all feel the post pandemic era holds a lot of promise

Post the first wave of the pandemic online food aggregators like Zomato, and Swiggy managed to grow as people stuck at home preferred ordering. However, there were other food platforms/entrepreneurs that bore the brunt of the lockdowns, and for the first time faced survival issues as well and had to pivot frantically. 

Take the case of Snackible, an enterprise that has an omnichannel presence selling healthy savouries, which was saddled with huge inventory that it is suddenly found difficult to liquidate. April 2020 sales were down to a trickle. Worse, the police in Mumbai weren't allowing the firm to operate as they weren't convinced snacks qualify as essential items. Snackcibles promoter Aditya Sanghavi, then 29, had a hard time telling them that he had been supplying to airlines, schools and hospitals, and that while the first two are shut, health care services are running full steam. He produced evidence of supplies to some of the suburban hospitals and finally after weeks of struggle, gets the go-ahead after meeting senior police officers.

This was quite the same situation at Happilo, a Bengaluru-based maker of dry-fruit-based healthy snacks. Its founder Vikas Nahar admits he had a hard time convincing the Police Commissioner that his products were essential category. "In fact, during the first wave, we had to shut operations for a few weeks," he says. "But we eventually convinced the police department, and were able to obtain a few passes to keep the show going."

Nahar says he had strong vendor support at both ends of the supply chain, but that there was a spike in input costs. Pre-pandemic, 70 per cent of his business was through distributors and modern trades such as Hypercity, Reliance, Namdhari and Big Bazaar, while the rest was on e-commerce sites such as Amazon, Flipkart, Swiggy and Zepto, to name a few. The two waves turned this mix around and today physical sales account for only 35 per cent of his business. 

Ceres Foods in Mumbai, had it easier. The firm, which sells ingredients that impart a restaurant-style flavour to home-cooked food, capitalised on the pandemic to give its products a big push. Since dining out was completely ruled out during lockdown, Ceres Foods made the most of the opportunity to sell its array of sauces and liquids through platforms like Amazon, Superdaily, Flipkart, Zepto, Blinkit and Big Basket, to name a few. "What helped was that we were already exporting, and were regarded as a priority sector business, so it was easy for us to get the passes from the BMC for our staff and keep the show going," says Deb Mukherjee, Founder & CEO, Ceres Foods Pvt Ltd.

Yet there were problems. It was after the first wave that the firm got into branding--something it hadn't done before. And that's when the difficulties cropped up. "Here we were with all our grand plans, but were finding it difficult to get the printers to come and print our packaging as they were all scared," says Mukherjee. Eventually, Ceres was able to identify printing partners and things have been smooth since.

Business sustainability

Some enterprises Business Standard spoke to said business sustainability was the major issue during the pandemic. Ashish Bhatia, who belongs to the family that owns the famous Gurukripa restaurant in Sion, Mumbai, and who runs Malaki, a startup set up in 2018, selling non-alcoholic health-focused beverages along with his brother Mohit, shares a similar problem. In his case, the business went for a big toss, as it was a B2B model distributing herbal teas, ginger ale, tonic water and other health drinks mainly through restaurants. And all of them were shut.

But Bhatia and his brother reinvented themselves and developed a D2C model to keep their heads above the water. "Just before the pandemic hit, we were doing Rs 10 lakh a month. But when the horeca segment shut down, everything came top a grinding halt. That's when we decided that quick commerce was the way forward."

Easier said than done, though. It would take some time for the D2C model to be developed on the firm's website, malaki.in. So the brothers leveraged on Amazon, Swiggy and Zomato to start selling their wares directly to the consumer. The move paid off, and Bhatia says that an entirely new vertical was created as a fallout. He claims his enterprise is doing business worth Rs 40 lakh a month today, with the D2C addition. Sales are achieved both on aggregator platforms and on malaki.in.

Mirchi.com, a Hyderabad-based aggregator of sweets and savouries that runs both, a pan-India and a hyperlocal model encountered a similar issue. According to Niraj Mital, co-founder of the business, the year 2020 presented a paradoxical situation. When Covid struck there was a lot of emphasis on home delivery and safe eating, but at the same time, the supply side was impacted. Most of the vendors from whom he sourced sweets and savouries were shut or had curtailed operations to a level where they could meet only the needs of their direct customers, not those buying online on the mirchi.com portal.

Says Mital: "But that period was a blessing as it gave us space to evolve new ideas and improve our gifting solutions."

One such was the creation of a customised box for the Indian mission in the UN. When the country got a permanent seat in the UNSC, the mission wanted something that showcased India's culinary diversity. "We curated a package called 'The Taste of India' that contained five smaller boxes of equal size, each with a unique delicacy from a specific region of India. The concept was a hit with the mission and has now become a line of business in itself," says Mital. He also used the time to build a corporate gifting business where one of his first successes was Sundram Finance.

Deb Mukherjee, Founder and CEO, Ceres Foods Pvt Ltd, with MOI SOI range of products

Logistics

This was a problem common to most startups in the food space that Business Standard spoke to. Sanghavi of Snackible says the first wave limited delivery to within Maharashtra, where his enterprise is based. "Suddenly our business went from servicing 20,000 pin codes across India to just 400-500 within the state. And here too, delivery vehicles would often be sent back from recently declared containment zones."

Nahar says he encountered a problem of inventory stuck in transit in containment zones like Bhiwandi in Maharashtra, and Ghaziabad in Delhi NCR. Happilo has a pan-India presence but its biggest markets are in the southern states, Maharashtra and Delhi. 

Mital of mirchi.com says some of the couriers even shut down or curtailed operations, since some of their own drivers were getting infected.

The big hit that air transport took during the pandemic badly impacted e-commerce companies such as those in the food business that banked on express delivery. Mital says, ""We don't have the kind of logistic infrastructure that Amazon or Flipkart do. We rely on companies like DHL, BlueDart and FedEx, so when these were impacted, obviously there was a ripple effect." The best thing he could do under such circumstances was to grin and bear it, and use the time to innovate on products, like he did with the curated box for the Indian mission at the UN.

Sanghavi says he was luckier as logistics firm Delhivery put up a robust road transport network. But there was a huge burden on backend operations. Consignments that would normally reach the door within 48 hours, were now taking 4-5 days. "Just imagine, sending emails to 600-700 customers daily, telling them that their orders would be delayed. Add to that the protocol of tracking these orders and keeping the customer informed on a regular basis." Thankfully, Sanghavi's robust ERP system supported such a requirement.

Post pandemic prospects

All the startups Business Standard spoke to were unanimous that the post pandemic period held a lot of promise for their enterprises. 

Mukherjee of Ceres Foods says the opening of restaurants would in no way dent his business of selling additives that replicated a dine-out experience at home. "We aren't competing with restaurants. We built sufficient brand credibility during the pandemic for our value proposition to sustain," he says. "And Ceres is supplying its products to restaurants and hotels anyway, so that side of the business will get a boost."

Nahar of Happilo says there were no layoffs or salary cuts at Happilo during the pandemic, and that the 4x spike in demand actually saw the firm bump up its headcount from 100-odd people to 275 today. In fact, just before the pandemic, the enterprise was operating out of 5,000 sq ft of manufacturing and warehousing area. This rose to 24,000 sq ft during the second wave and now the plans are to bump this up further to 100,000 sq ft by adding space on the outskirts of Bengaluru. Nahar says he sells about two million packets a month, and expects this to grow further. 

Bhatia of Malaki says there is a four-fold spike in his monthly deliveries due to the so-called revenge consumption brought on by lifting of the pandemic curbs. "At the end of the day we are social animals," he quips. "With a larger number of people visiting restaurants now, our B2B segment is back in action and accounts for 25 per cent of our overall business today." He does admit, though, that the heat wave has given another push to his beverages.

Mital says the relaxation of curbs, more specifically lifting the cap on the number of guests at social functions such as weddings and parties, spells good news for mirchi.com.

Sanghavi of Snackible says audiences from middle and upper-middle class and HNI segments have become habituated to eating healthy, even if it is snacks. "Obviously we won't be getting back to pandemic sales in the immediate future, but in the long run I believe we will. We did about 25,000 orders a month in the April-June quarter, or Q1 of the first wave. Despite the fact that WFH has reduced, we are still doing 20,000-22,000 today," he adds.