Can Ready-To-Eat Brands Finally Scale Up Beyond Niche Pockets Under Covid-19 Spotlight?

Beyond being an effort to flatten the curve of Covid-19, the lockdown has been a changemaker in many ways. For millennials who had become so used to paying for convenience, the responsibility had shifted to cooking rather than choosing from a menu on Swiggy or Zomato. But while many struggled, as apparent on social media feeds, others turned to convenience here too — with ready-to-eat, ready-to-cook, ready-to-serve categories have exploded and become a go-to choice for many young consumers.

Clubbed under the convenience food segment, these products which had been slow in scaling up have seen huge scope for growth now. Over the past decade, money spent by Indians on ready-to-eat food outside the home has doubled. The positives for the segment is that the industry is witnessing large-scale transformation, advertisement spends, distribution of free samples with the focus on improving the distribution network to make a strong presence in the Indian market.

Beyond the major players like Nestle, ITC, Tata, Haldiram, MTR Foods etc, smaller startups like Maverix (Fingerlix), Sattviko, Just2Eat, Being Chef, Samosa Party, Mom’s Kitchen, Sumeru etc have been leveraging the consumer attention.

However, in the foodtech space, dominated by food delivery, dining SaaS and cloud kitchens, the RTE market holds a minute share. DataLabs by Inc42+ research shows that foodtech investments have grown from $93.7 Mn across 14 deals in 2014 to 1.08 Bn across 42 deals in 2018 and $322 Mn across 37 deals in 2019.

Till date in 2020, the sector has already seen $41.96 Mn of investments across 28 deals in players like Forbidden Foods, Paper Boat, Box8, Timios etc. Being an essential service in the pandemic, the food industry has a large scope of growth and scalability. 

The Ready-To-Eat Struggles Turn Into Covid-19 Growth

However, till now the RTE industry has mostly struggled to grow in the right direction amid larger players. For instance, Yumlane, which started in 2016 to sell frozen pizzas, decided to pivot to the cloud kitchen model, the hot bet in foodtech. Another player, Fingerlix has been struggling with limited products available on Amazon and the website has disappeared.

It is notable that some of the players in the ready-to-cook or ready-to-eat market in India such as Maiyas, Asal Foods, iD Fresh, Yumlane, Fingerlix etc have raised funding from investors like SAIF Partners, Omnivore, O21 Capital and Accel etc.

However, the Covid-19 lockdown which has devastated many businesses has also created a host of opportunities and brought growth for a few players. For instance, Gurugram-based ready-to-cook player Being Chef claims to have grown 100% M-o-M during the lockdown.

Talking to Inc42, Shubham Maheshwari, founder and CEO, Being Chef said that the company’s meal kits sale has grown 100% M-o-M in the order numbers. Maheshwari declined to share exact sales figures but said that the company has sold over 500K meals since launch from its single kitchen while bootstrapping.

He also noted that the company has a healthy gross margin rate on its each meal kit. Further, the margins have increased in the entire food industry, as the raw material is available at cheaper price due to demand-supply mismatch during Covid-19. 

The company’s growth has also roped in investors and Maheshwari says that the company has received some commitments already and will close a seed round soon with other marquee investors.

Foodtech giant Swiggy had started a pilot of DIY meal kits, which lets users order the ingredients of a specific dish from restaurants using Swiggy to be able to cook it themselves. It was launched in select cities including some parts of Bengaluru and Gurugram. Even cloud kitchen firm Rebel Foods started offering DIY food kits but hasn’t seen much success yet to boast of.

In response to Inc42 queries on ready to eat food segment, a Swiggy spokesperson listed all its initiatives but didn’t respond about DIY food kits. The company spokesperson said that the overall restaurant supply has grown to over 70% of what it used to be during the pre-COVID times. 

Further, Amuleek Singh Bijral, co-founder and CEO, Chai Point told us that the company has started an all-day breakfast range and ventured into mini-meals. With this focus, it claims to have seen a sharp rise in the overall share of food. Bijral also noted that the company’s walk-ins are growing gradually but the delivery has picked up well. “And the delivery revenues are around 65% of the pre-covid levels with less than 60% of the stores open,” he added. 

Most recently, Cure.fit has launched ready-to-eat products under its healthy food delivery vertical—eat.fit, manufactured in conjunction with Tasty Bites. Further, Licious has now expanded its RTE product of chicken spreads with prawn spreads. The company said that with people working from home and children being away from school, the demand for quick fixes is on the rise. Licious claims to have seen a 3X growth in its RTE category over the last quarter.

Overcoming The Challenges

In the RTE segment, Bijral noted that the quality of product is a bigger challenge, as while there are many brands, very few of them are actually able to match up to the customer expectations. 

The ready-to-eat market in India is expected to expand at a compound annual growth rate (CAGR) of 16.24% (based on value) during the 2019-2024 period, to generate a revenue of INR 68.47 Bn by 2024. Major players and food production giants that are currently operating in the Indian ready-to-eat market include Britannia Industries Limited, Dabur India Limited, Godrej Agrovet Limited and Heritage Foods Limited.

Recently, food processing minister Harsimrat Kaur Badal said that new opportunities are emerging in the food processing sector, with various segments such as ready to eat, frozen food, superfood and nutraceuticals among others, emerging as leading segments.

To increase the sales volume of ready-to-eat products, retailers are offering lucrative offers in the form of combo packs, day-specific discounts, festive offers, flat discounts and coupon discounts. Further, rapid urbanisation and increasingly hectic lifestyles, along with the aggressive geographical expansion of ready-to-eat retailers, are also propelling the growth of the segment.

However, the RTE market is yet to be cracked by the startups, since even cash burn has failed to produce the right results. 

Talking to Inc42, Mark Kahn, managing partner at Omnivore, who has also invested in the RTE brands such as YCook, said that this could be the moment for otherwise struggling brands of RTE as the consumer demand is at the highest. However, the lockdown had impacted the supply chains, which even deterred giants like Nestle. Hence, there is a clear demand-supply gap, but this is the right moment for the brands to gain prominence.

He also noted that the dynamics of households changed. one of the determinants for lack of RTE growth was the availability of maids etc. But since that has been reduced largely, the RTE market is ripe for disruption.