India’s Growing Appetite For Food Service Startups

(This is an excerpt from the story which was published in Forbes India’s issue dated March 20th 2015)

People who love to eat are always the best people, or so declared the inimitable American chef, author and TV personality Julia Child (and who are we to disagree?). India’s rapidly growing food technology space couldn’t agree more. With an increasing number of consumers looking for newer offerings, the market is, quite literally, ripe for the picking. Be it for healthy salads, sandwiches, continental or home-cooked meals, online and mobile-only-food services startups are increasingly developing an appetite for the country’s busy urban population that seeks wholesome, nutritious meals, but may not have the time or inclination to prepare them.

Over the last one year, the number of such food-tech startups has grown exponentially across the country, garnering investor interest. Reason: The business is touted to be the ‘next big thing’ by industry watchers in the consumer internet space after ecommerce and cab-rental services. According to Tracxn, a database for startups and private companies, in the food-tech space, out of 145 companies that operate in the country, 66 were launched last year.

Globally, both food-on-demand startups such as the US-based Sprig, SpoonRocket and Munchery and ready-to-cook food kit services like Blue Apron and Plated, all of which rely on apps and online ordering to deliver meals to customers, have been a success story. A Forbes article, dated October 2014, estimates a $180 million valuation for San Francisco-based Munchery, while New York-based Blue Apron was rumoured to be valued close to $500 million last year when it raised a funding of $50 million. According to a December 2014 report by Tracxn, $1.2 billion has been invested last year across multiple deals in the global food tech space.

Can this buoyancy be replicated in India?

There has already been movement, but experts reckon the extent of it would depend on the scalability of the model. “Anybody who can build scale has the potential to build a very good company. Food has a sizeable wallet share. It is said that globally the next Uber will come out of here [the food tech space], maybe even from India,” says Abhishek Goyal, founder, Tracxn. “Investing in technology and backend is of utmost importance. You have to scale up there. It helps keep other costs lower.”

Take Mumbai-based Holachef for instance. Started by IIT-Bombay alumni Saurabh Saxena, Anil Gelra and Ritu Rana last May, this meal-service startup actually serves as an online marketplace for chefs—professionals as well as amateurs (homemakers)— to list their signature dishes.

The company chooses to not have a central kitchen in order to save on rentals. The costs incurred by them are in technology (app and website that takes care of taking orders), packaging and door-to-door delivery. “We want to create a community of chefs while serving good, home-cooked food to the consumers,” says founder-CEO Saurabh Saxena (33). “We might rent spaces offered by the chefs themselves, but don’t intend to build a central facility now. The food is prepared in home kitchens.” Holachef has got 150 chefs on its platform already, some of whom have had stints at hotel chains like the Taj, Le Meridien, and Marriott.

At any given point, the platform has 40 active chefs who service consumers in Powai, Andheri, and Mumbai’s central suburbs. Holachef has grown from five orders in September 2014 to 150 orders per day in January 2015. “We have been able to retain 60 percent of our customers. The average order per person is five every month,” says Saxena.

Growing at 50 percent month-on-month in revenue, it is targeting over 200 orders and 450 meals a day by the end of February. It is also looking to enrol as many chefs as possible. “We track analytics and reviews to know which dishes and chefs are being liked by our customers. It helps us arrive at the right mix in our meals,” says Saxena, adding that variety in menu and the quality of food will be key differentiators going ahead. The company has attracted investor interest and raised Rs 2 crore led by IndiaQuotient, a seed-stage venture capitalist firm, in February. It is also looking for Series A funding of Rs 20-30 crore in the coming months. Most funds will be utilised in building the technology backend and optimising delivery.

While Holachef s average price for a dish is Rs 200, which might be on the higher side, investors believe that customers are willing to pay a premium for good, home-cooked food. Anand Lunia, founder-partner at IndiaQuotient, says, “When customers know that it is fresh food, and not refrigerated, and has been cooked at home with good quality ingredients, they are willing to pay extra.”

Lunia also endorses the less capital intensive no-kitchen marketplace model. “There is no need for a centralised kitchen and an assembly line to cook food… it is a network of local chefs which is preparing the food. Few years ago, nobody must have imagined that there could be a marketplace model for the food business very much like in the taxi and ecommerce industry,” he says.