The organised food business in India is worth $48 Bn, of which food delivery is valued at $15 Bn – An IBEF 2017 Report.
‘Food’ in any form is a business in itself. Whether it’s farming, processing, procurement, delivery – food forms an evergreen industry with niches worth exploring. IIT Kanpur alumni – Abhishek Verma, Harshit Mittal, Kumar Kushang and Nitin Prakash are trying to disrupt one such niche – making the procurement of products and services easy for food-related startups – with their online procurement portal Adurcup.
The Adurcup team is focussed on what they call as ‘HoReCa’ industry, which stands for ‘Hotels, Restaurants, and Catering.’ As Kushang states, “According to the latest report by NRAI, the top 75 cities across India have 1,50,000-1,75,000 restaurants in the organised segment. We had the first-mover advantage here and we have cracked this tough space.” A space which is believed to be only for fundamentally strong businesses to scale.
The Delhi/NCR-based startup also recently raised growth capital from strategic corporate investors and well-known family offices. They plan to raise a total of $500K, and has already closed 65% of the round. Earlier, the founders of Dineout funded the startup for an undisclosed amount in July 2015, as mentioned in a press release statement. Thereafter, Adurcup also received $100K as a part of the accelerator program by GHV.
Adurcup Is Not A Product Born From A ‘Eureka’ Moment
“We started our journey with a mission to convert one of the major quick service restaurant cost centre, i.e – the food packaging (cups, tissues, containers etc), into a revenue channel by introducing relevant branding based on the customer catered by the QSR. Hence, the name AdUrCup – Advertise on your cup – symbolic to other food packaging materials,” begins Kushang.
They now offer a singular web platform for the restaurants to procure products and services from multiple categories in order to cater to all the major backend needs of a restaurant. This further helps restaurant owners bring down cost efficiency, reduce turnaround time and, thereby, reduce their dependency on multiple vendors.
“There has been no Eureka! moment. We have learnt from our market and evolved to the current stage,” he adds.
Apart from food packaging, the startup currently deals in five more verticals – pest control, Wifi, housekeeping products, breads, and payment solutions. “Post-demonetisation, we introduced the new vertical of payment solutions for our customers, so that they could receive digital money. Our current partner is Ezswype in that category and going forward we are looking at many more partnerships.”.
The platform reportedly offers over 20 varieties of bread, 300+ food packaging items and 500+ housekeeping products. It currently claims to cater to the procurement needs of over 1,000 restaurants in Delhi/NCR like Subway, Wow Momos, Yumist, InnerChef, Tpot Cafe etc. The founders boast of offering more than 200 services per month and selling more than 1.5 Mn units per month across product categories.
As Kushang explains further, “We have been able to generate value for our customers by making restaurant procurements smarter and have created our own metric called ‘PES’ (Procurement Efficiency Score) to monitor the procurement efficiency of a restaurant.”
Adurcup is working towards a mission to improve the average PES of the restaurant industry by 20%, in the coming financial year. The PES of a restaurant powered by Adurcup is at least 50% better than the current PES, as per the founder.
Kushang reveals that the company has already become profitable in categories like food packaging and pest control services. “In the last 180 days, we have grown consistently, focussing on increasing adoption rate by restaurants to order online.The current fund raise will help us scale, bring more process innovations and will help us improve our product – with profitability being the first milestone.”
A Tough Market To Crack
With all this progress, Adurcup team had to face its set of challenges too. As Kushang states, “HoReCa is a tough market and we did face challenges like adoption of new methods of procurement by restaurants, payment behaviour of the market, team building for such a niche segment, coming up with the right product catering to the breadth of restaurant types (from fine dining to dhabas).”
The founders consider Adurcup a unique offering with no direct competition. However, they do look up to Monotaro in Japan as a benchmark. Monotaro is a Japanese ecommerce company of industrial supply products based in Hyogo, Japan. The company was named in the Forbes Asia “Best Under A Billion” list in 2013.
The team aims to reach $500 Mn in revenues in the next four-five years, by tapping just 1% of the total opportunity. The company also plans to launch Adurcup Prime for restaurants, capturing all their procurement needs in one place.This service is expected to be launched by the end of the coming quarter.
The overall plan is to reach 10,000 unique orders a month by the end of this financial year, impacting more than 10 Mn dining out experiences. Focus will also be on working with more than 2,000+ SMEs and generating new jobs in the sector.
The secured funds will also be used for building stronger unit economics by bringing efficiencies in the current supply chain process using technology. The company is further looking to expand its operations in Jaipur, Lucknow, and Chandigarh and will add three more verticals – kitchen appliances, vegetables, and packaged food by this year.
As Kushang inferred, the scope of the HoReCa industry is immense – with about 1.5 Lakhs restaurants available in India in just the top 75 cities. For a company to organise the supply chain and procurement aspect of this industry adds to scope of disruption, as well as changing the way the market itself functions. Adurcup has first-mover advantage, at the moment, wherein they are encashing on both customer validation as well as investor confidence. But the company is also playing the long tail game by first ensuring profitability across verticals and then looking to scale, at par.
With a sound business model, several moving parts of the procurement vertical in place and a firm grip on the customer’s wallet, Adurcup looks to be on the right track in terms of scale and product. But, as with any nascent vertical, it won’t be long before we see startups mushrooming in the space trying to depose the first-move. What Adurcup does then, how it handles scaling while ensuring customer satisfaction and combating newcomers remains to be seen.