Why 2018 may be the year of food start-ups
Action in the food start-up space is heating up. A host of companies in the sector are coming up with new ideas and propositions. If you visit any modern trade outlet today, you will see a plethora of new brands in the chilled/frozen foods section, snacks shelves or the sauces area. If you don’t find them there, you may encounter them at, say, a movie theatre or at an airport. While some of them may have limited distribution, a brand like Raw Pressery, the fresh cold-pressed bottled juice brand that originated in Mumbai, is now available in several cities including Delhi, Pune, Bengaluru, Chennai and Hyderabad.
Or take Epigamia. The premium Greek yoghurt brand that was launched in 2015 is now available in the large metros. Among others spreading their wings are Licious, the one-stop shop for meat and seafood that delivers to your doorstep, and Bengaluru-based iD Fresh Food, the idli/dosa batter company.
Then there is Samosa Singh, which is into selling a wide range of innovative samosas. The brand now boasts several outlets in Bengaluru. Samosa Singh is also available at food counters in theatre chains.
“The food start-up space is buzzing. We have invested in at least four food-related start-ups in the last eight months,” says V.S. Kannan Sitaram, venture partner at Fireside Ventures, which invests in bricks-and-mortar start-ups, especially home-grown consumer brands.
Fireside Ventures has invested in Samosa Singh, Goodness!, Yogabars and Kwik24. While Goodness! markets oats and yoghurt smoothies, Yoga Bar makes nutritious snack bars from natural ingredients. Surprisingly, all the four companies are Bengaluru-based. “Kwik24 is an IOT(Internet of Things)-enabled vending machine company which dispenses hot and cold food. We believe each of these has a great idea which can be very big—worth several hundred crores in five years. Brands like these can transform the way young Indians eat,” says Sitaram.
It is easy to see why there is action in the food start-up space. For starters, the big fast-moving consumer goods companies are expanding to reach out to rural markets. As they go in for economies of scale, the consumers at the top of the pyramid are not being addressed. This top-of-the-pyramid consumer is more attuned to spending on processed food. Sensing this gap in the market, the start-ups are coming in.
What these start-ups are riding on are the convenience and hygiene factors. Although processed food is still a small part of the total food market, it is growing. Besides, consumers are looking for authenticity—they want to ensure that their extra virgin olive oil is from Greece or the balsamic vinegar from Modena in Italy. In food, it is all about the place of origin, how it is grown and processed to give you the real experience. Although it is a small trend in India right now, it seems like something which will be a big opportunity in the future.
Some of the start-ups may also be marketing their products on ethics. The first manifestation of this was the Fair Trade movement, which was about ensuring fair wages for the farmers. The more recent movement in this space is veganism—largely driven by prevention of cruelty to animals. Although this is big in the West and the food industry there has responded promptly to cater to this consumer trend, it is yet to gain momentum here.
However, health seems to be biggest trend globally and is getting big in India as well. And these start-ups are riding this trend. It resonates with consumers looking for food that is healthy, organic, low calorie and preservative-free. They need to be sure that what they’re eating is good for them. They should trust the brand that they bring home. This is the kind of requirement that the food companies need to meet.
Yet, challenges for food start-ups remain. Access to market is a primary one as most of them start off as internet-first brands. It is quite a challenge for them then to get into the offline retail market, given the disaggregated nature of Indian trade.
Their next challenge is talent. Even though the entrepreneurs are very resourceful, they have to build the next-level team when they scale up. Besides, they lack scale—an issue that cuts across everything—in buying material, using production capacity optimally, keeping down costs of logistics, etc.
Lastly, India lacks a strong food manufacturing technology industry. Most high quality equipment is still imported, which adds to the cost and is often not suitable for the purpose.
But solutions to some of these problems will emerge. Fireside Ventures, for example, is incubating a sales and distribution network that will help young food companies reach the top 6,000 retailers. Sitaram says that the space is so attractive that several funds are investing in food start-ups. “We are looking to do more such investments too,” he says.
Shuchi Bansal is Mint’s media, marketing and advertising editor. Ordinary Post will look at pressing issues related to all three. Or just fun stuff. Respond to this column at firstname.lastname@example.org