When Food and Tech collide – v

As per a recent KPMG – FICCI report, India is expected to become the fifth largest consumer market in the world by 2030. That sounds like the land of opportunity for retail and consumer goods sectors. 

• Online food discovery and delivery

Companies that have raised funds recently include Bangalore-based Petoo. The company expects to cut the delivery time of its orders to about 10 minutes by making use of “heat maps” that indicate high-order zones in the city.

Others that have managed to do likewise are:

• Gurgaon-based Leaping Caravan, which serves Indian food, mainly to corporate customers
• Delhi-based Frsh, which serves healthy foods like sandwiches and salads
• Gurgaon-based MealHopper, which serves home-cooked meals
• Mumbai-based ZuperMeal, also serving home-cooked meals
• Gurgaon-based Twigly, which serves fresh-cooked meals, including international dishes
• Vadodara-based Boibanit, which allows customers to order online for home delivery from multiple restaurants at the same time

InnerChef has launched a line of healthy and delicious breakfast options recently.

Sample this: Paratha Sliders – Three 5” Parathas (one each of Cauliflower, Potato and Onion), with Curd, Butter, Pickle & Fruit Bowl – All for Rs. 99. With the line-up including South Indian, North Indian and Continental delicacies, it looks like the customers will be really spoilt for choice.

Good news for the lovers of Maggi Noodles. The iconic brand is back on the shelves after a brief hiatus and has partnered with Snapdeal for online sales. It took just 5 minutes for 60,000 welcome kits of Maggi to be sold out on 12th November.

There’s good news for ice cream lovers as well. Mumbai-based Natural Ice Cream, owned by Kamaths Ourtimes Ice Creams Pvt. Ltd., has been pioneer in making artisan ice creams using only fruits, dry fruits, chocolates, milk and sugar. With no added preservatives or stabilizers, the ice cream brand enjoys almost a cult-like status today. The company has recently tied up with online grocer iOrderFresh to start home deliveries in NCR.

American doughnut giant Dunkin’ Donuts has also tied up with the online grocer Grofers to start home deliveries. While the company will deliver only fresh donuts to start with, the success of this pilot could see newer products like burgers and donut cakes getting included later on.

India’s largest local messaging app, Hike Messenger, has launched exclusive discount coupons for its users on the festive occasion of Diwali. Offers are available from over 100 top brands, including food brands like Domino’s, Pizza Hut, Berco’s, Burger Singh, etc.

A new app, Zeppery, allows its users to pre-order food at restaurants and other food outlets. No more waiting for the steward to come along with the menu card and going through the decision-making process.

Ambedo is an app that helps its users plan trips with multiple stops. Sounds ideal for people looking for a great day full of shopping and eating at multiple places.

Nomsy aims to be a lifestyle app that harnesses the power of social data to help its users find foods that fit their dietary preferences and also to connect with such like-minded community members.

Domino’s seems to be taking its deliveries pretty seriously. It has recently come out with Domino’s DXP (Delivery Expert) – a Chevrolet Spark car that has a storage for upto 80 pizzas along with a built-in heating oven that keeps the food nice and warm, away from the vagaries of the weather.

Indian Railways, on the other hand, seems to be pulling out the pantry cars, at least from the long-distance trains. With e-catering being introduced by Indian Railway Catering and Tourism Corporation (IRCTC), these trains are the first ones to shed the age-old baggage of the pantry cars. The move, however, seems to be pre-mature as some of these trains pass through stations without e-catering services during the three most important meal times of the day. Also, fundamental doubts remain whether all the customers travelling on these trains will be tech-savvy enough to use the e-catering service. If that’s not the case, then they will either be forced to carry meals or be at the mercy of the private caterers.

• Online Grocery

Online grocer PepperTap has recently raised capital from a clutch of investors, led by Snapdeal. With Snapdeal’s tie-up with Godrej in the grocery vertical already up and running, this is an interesting development that could prove to be the game changer in this segment.

Flipkart also announced its entry into this fiercely-fought space by launching the Flipkart Nearby app. As of now, the service is available in select areas of Bangalore and is available only for Android users.

ThirstKart, the new kid on the block, is an app-based beverage-delivery platform. Currently operational in Mumbai, the company delivers products across segments like juices, teas, coffees, milk and shakes.

Reliance Industries has also confirmed its plans to roll-out the online grocery marketplace by the fourth quarter of this fiscal year.

Looks like the potential of this sector is finally forcing some of the state-owned behemoths to sit up and take notice. Bharat Petroleum Corporation Limited, the Indian state-controlled Oil & Gas Company, is gearing up to leverage its vast network of 12, 800 gas stations spread across the country for taking online retail to rural heartland. The first to get going will be the company’s rural gas and cooking gas distributors. Sometime early next year, the company wants to explore using its urban branches for selling groceries as well. This development comes as hardly a surprise given the bottoming out of the oil prices and with private companies snapping at its heels. The company has already tied-up with retail chains like Café Coffee Day, Pizza Hut, McDonald’s, etc. for opening up their stores at its outlets. 

• Clouds of consolidation on the horizon

The pace of new start-ups in the Food Tech space seems to have slackened considerably in the recent past. That’s surely a sea-change from the first half of this calendar year when they seemed to be mushrooming up in hordes all over the country.

Gone are the heady days of the no-questions-asked investment boom. Sanity seems to be finally prevailing with investors deep-diving into the business models and asking hard questions. It is quite clear that the new entrants trying to blindly ape the successful earlier entrants will find it increasingly difficult to raise funds in the absence of any real innovation in the way they approach this business. The short-term pain is likely to go up further before it subsides. Economic slowdown may end up adding another layer of complexity on top of the expected upheaval.

According to data research firm VCCEdge, 19 food-tech startups raised about $ 160 Mn. in VC funding in 2015. Only five companies have been able to raise capital twice so far.

Nikesh Arora, vice-chairman of Softbank, voiced his concerns recently on the sides of the NASSCOM Product Enclave in Bangalore. Terming the current trend of burning heaps of cash on a bad product, being exhibited by some Indian start-ups, as a bad idea, he stressed on the need to build world-class products and businesses.

“There are very few companies in the West that have become very big companies who invested millions of dollars on marketing in the early stages of their lives. You can’t take a bad product and spend a lot of money marketing it because you won’t survive.”

Alok Jain and Abhimanyu Maheshwari, founders at Yumist, summed it up beautifully in their debut company blog recently when they said, “It’s fundraise not fund-race. You need funds to build the business but you are not building a business to raise funds.”

Zomato, the industry leader, seems to be shedding the flab by laying off about 300 employees. Most of cuts – about 10% of its global workforce – will affect the US content operations.

Deepinder Goyal, the co-founder and CEO, recently said, “We will be getting smarter with the effort that we put into content. 40% of the restaurants on Zomato account for 92% of our traffic. We will rethink our processes to make sure that the frequency of our data updates goes up in multiples for the top 40% of restaurants. We are also going to have to make important changes to our business and make sure we put every dollar and every Zoman behind the things that matter the most. The countries we entered in the recent past have not been working with our existing model of collecting content and building community relations – alternate models will need to be identified and implemented.”

The company has drawn up plans to divide all its markets into two distinct categories:

• Full Stack – Markets like India, Middle East, South East Asia and Australia & New Zealand. In these four regions, the markets are large, growing very fast and Zomato is the strongest player. The focus here will be on ad sales and the company will sell its full suite of services.
• Enterprise – All other markets which are relatively small or are growing slowly or where Zomato is not the dominant player. The focus here will be on increasing transactions (read online ordering, table reservations, POS and the Whitelabel platform), and not on ad sales.

Other belt-tightening measures are also in the offing as the company confirmed that it will be shutting down its Cashless business, currently operational in Dubai. The “product-market fit” was lacking and the operational costs were prohibitively high.

Interestingly, it has announced its partnership with Paytm which would let its users pay through the mobile wallet for online orders. Till date, Zomato users had credit cards, debit cards, net banking and cash-on-delivery as payment options. "We hope to see a lot of cross-pollination between Paytm's 100 million wallet user base and Zomato's 25 million monthly visitors in India," said Tanmay Saksena, Global Business Head, Zomato Order. Mobile wallet company MobiKwik has also tied up with Zomato to enable similar transactions.

TinyOwl also reportedly laid off about 100 employees recently, the second such round in as many months. The company admitted being in the middle of a restructuring process to control its cash burn rate through measures such as outsourcing deliveries and scaling back operations in some geographies.

Online food ordering company Foodpanda seems to be on a massive clean-up spree in order to plug the loopholes and revenue leakages in its system. According to some reports, the company has been identifying and cancelling the registrations of restaurant listings with a dubious track record.

Food delivery start-up Dazo also shut down shop after running the operations for almost a year. What had initially started as an internet-first kitchen based business model was later pivoted to aggregator-and-delivery based model.

Grofers, the online grocer, is all set to complete the acquisition of Townrush, a hyperlocal delivery company. This comes close on the heels of the company having bought SpoonJoy, a food ordering app. Both cases look like “acqui-hires” i.e. instances of buying out a company primarily for the skills and expertise of its staff, rather than its products or services. It is speculated that both these businesses will be shut down going forward.

Localbanya, the company delivering online groceries, has also suspended operations indefinitely. The company website suggests that this is due to “renovation on account of upgradation of technology and services”.

Deliveries have also been suspended by Mumbai-based Greencart due to “logistics and system upgradation”. The company is apparently in talks with a few other start-ups in the same category for a potential merger and also with Jain Irrigation for a potential sell-out.

There are also reports of some cash-strapped online startups asking the restaurants to hike up the prices of dishes on websites and apps before offering a discount on the same. Mindless cash burn can only take you so far.

However, such course-correction is bound to be an integral part of the growth-stage in any sunrise sector in this digital age. Evolution of technology at such a scorching pace, coupled with fearless young entrepreneurs who are keen on going through the “trail-and-error” grind, will mean that only some of these initiatives will taste success. Too much noise is being made on measures being taken by companies to stay afloat and build profitability at the unit level. While the sector will surely see a high company mortality rate given the mushrooming of such ventures in a relatively short period of time, I see needless and pre-mature obituaries by some who feel that the sector is devoid of any real substance and is just a bubble waiting to burst. 

• Hunt for new sustainable revenue streams is no longer an option

Firms such as Grofers and PepperTap are also trying hard to develop new and innovative sources of revenue. They are exploring ways and means of displaying ads for consumer companies on their websites and apps. The ads could be anything ranging from static to push notifications to full-page ones.

Exclusive product launches on apps are also being considered by these companies. With HUL tasting success in its experiment of a digital-first launch of the Thai and Mexican Knorr soups, it is now reportedly keen on considering this platform again for its premium ice cream brand Magnum as well. Mondelez India is actively considering options like “checkout” prompts for its impulse-driven categories like chocolates.

These ideas are really worth a serious consideration given the customer attention span some of these apps are capable of generating. Contextually-relevant ads and the derived analytics around consumer behaviour are precious nuggets of data that have the potential to completely alter the previously-thought-of revenue roadmaps.

Foodpanda is foraying into the lucrative B2B segment through the launch of its “corporate programme”. Meant for companies that pay for the meals for their employees, the programme is designed to allow these companies to exercise complete control over this process through management of meal allowances, frequency of orders and capping of order values. Detailed analytics and customized invoices are also an integral part of the programme. This service is currently available in other countries like Singapore, Hong Kong, Indonesia and Philippines.

Such developments bode well for the sector in the long-run, as they will clearly distinguish the men from the boys. From the look of it, it surely won’t be winner-takes-all market. The pie is large enough for a few dominant national and regional players flanked by the niche ones.

The reverberations of this tectonic shift will undoubtedly also be felt in the entire ecosystem, where the partner companies’ success is solely dependent on the success of the primary players.

Niffler, the hyperlocal deal discovery platform, has been acquired by the personal assistant app, HelpChat. The buyout will put HelpChat in a strong position to rapidly increase the adoption of its platform by offering relevant and timely deals to its users.

Hyperlocal delivery startup Shadowfax has “acqui-hired” its peer, Pickingo, after the latter failed to seal the deal to raise additional capital from both SAIF Partners as well as Zomato.

Baidu, the Chinese Internet search giant, is reportedly in talks with Mydala, a coupon and discount marketing platform, for acquiring a majority stake. If the deal goes through, this will be Baidu’s first investment in India. Malaysian sovereign fund Khazanah is also said to be interested in the same deal.

Similar deals are also being witnessed in the country which has emerged as a breeding ground for start-ups. In China, group buying deal start-ups Meituan and Dianping announced their plans for a merger. The companies had evolved into a marketplace for local merchants including hotels and restaurants. The deal will also see traditional rivals Alibaba and Tencent holding stakes in the same company.

• Expansion of the ecosystem

Deals , Discounts & Offers

FirstHandle is a new hyperlocal platform that enables discovery of local deals and offers. It allows users to find out these offers in their vicinity and also allows the retailers across segments like food, drinks and cafes to reach out to these customers in real-time. Other players in the segment include Discount Me, Niffler, Wooplr and Roposo. 

Gifting

Move over conventional gifting and make way for “gifting of experiences”. Giftxoxo is a platform that enables its users to gift gourmet dining experiences to other people, apart from other experiences like adventure and hobbies. Estimated market size of such experiences and activities is more than $ 10 Bn. 

Packaging

Chennai-based Insular Bags specializes in producing insulated bags for delivering hot and cold food. Some of the big names it works with are Amazon, BigBasket, Faasos, Swiggy, Ola and Domino’s.

Nikita Containers, also based out of the same city, works closely with Hector Beverages on the packaging for the Paper Boat product line. 

Supply Chain & Logistics

A significant effort is being made by some companies in the private sector for transforming the cold supply chain logistics landscape. Leading from the front is Delhi-based ColdEX. The company delivers products anywhere between the temperature range of +25°C to -18°C through 800 plus reefer trucks. Customers include some of the biggest names in the industry like Subway, Domino’s, KFC, Starbucks, Nestle, Amul, Hershey, etc. A fleet of scooters is also being employed by the company to fortify its last-mile deliveries.

The temperature-controlled logistics industry is pegged between Rs. 12000 to 15,000 crores. 

Payments

Handling of petty cash has been one of the biggest headaches for the grocery and hyperlocal start-ups. The inherent risks have forced these companies to turn towards alternatives like Prepaid Debit Cards and Virtual Wallets. Companies like Bangalore-based Happay have been offering prepaid expense-management solutions to organizations like PepperTap, Grofers, RoadRunnr and TinyOwl. The app and web-based solution scores over the typical bank prepaid cards by offering features like instantaneous cash deposit and withdrawal coupled with expense analytics. Novopay in another company offering similar services. 

Restaurant Management

DineDesk, a start-up, aims to provide restaurants with an end-to-end task management solution. The key components of this cloud-based offering include reservation management, table management, billing, analytics and a complete marketing platform. The company is also gearing up to launch its B2C business called ReserveDine, a restaurant discovery and reservations platform with reviews and verified content.

 

The expansion of the complete ecosystem further strengthens the basic foundation of the Food Tech industry. It is difficult to imagine that this sector will be able to flourish to its complete potential without commensurate growth of companies that will act as partners and allies, when the core companies look around for solutions to some of the unique issues that plague the industry today and the new ones that are bound to crop up with regularity on this journey.

At the end of this current storm, however, lies the bright prospect of some of these companies creating real value that will change the rules of the game forever. Companies that able to weather this storm well will come out much stronger, fitter and wiser. The “also-rans” will fall by the wayside to make way for these “new-age gladiators”.