How SupplyNote Is Fixing Supply-Chain Menace For Indian Restaurants

After enduring two tumultuous years of the Covid-19 pandemic, restaurant businesses, especially chains, in India seem to be sizzling again, largely driven by an overall increase in people’s disposable income and quick-delivery apps that ensure deliveries at your doorsteps within minutes, among other things, boosting demand. 

In fact, India’s food service market, which was estimated to be at $41.1 Bn in 2022, is expected to touch $79.65 Bn by 2028, according to a report. Add to this the influx of restaurant chains in the country in the last few years. 

Despite the rosy picture, all is not well in the space, as restaurateurs in India are often observed struggling with challenges like poor inventory management mechanisms, wastage of perishable products purchased in bulk, and poor inputs, which bite into their bottom line and take their toll on operational efficiencies.

Understanding the crux of the issues plaguing the segment, Kushang, Abhishek Verma, Nitin Prakash and Harshit Mittal cofounded SupplyNote in 2019, with a vision to help Indian restaurateurs optimise supply-chain processes, reduce stockouts, increase efficiency, and, eventually, scale their profitability.

The startup has three business verticals — SaaS service for inventory management of large restaurants, fulfilment services for large restaurants, and the recently launched marketplace for small restaurants. 

Through its SaaS vertical, SupplyNote serves restaurants that have more than three outlets and are classified as chain restaurants by the National Restaurant of India (NRAI).

“Our SaaS offering helps these chains streamline and digitise the overall purchase and kitchen operations,” Kushang said.

The startup’s primary customers comprise large to mid-sized restaurant chains like Biryani By Kilo, Naturals Ice Cream, Rollsking, Bercos, and Burgrill, among others.

These restaurants use the company’s software to manage the end-to-end supply chain and strengthen operational efficiencies.

Besides, the startup also helps its clients keep track of any emerging gaps in supplier management processes such as reconciliation of different ledgers and loss of inventory. For the SaaS offering, SupplyNote charges between INR 10K and 25K per annum from its clients, depending on their requirements.

Meanwhile, to solve small restaurants’ supply and purchase needs, the startup provides a simple app-based interface, also available in the website format, through which a restaurant can purchase the required raw materials. This service is only operational in the Greater Noida and Ghaziabad regions currently.

SupplyNote Gets Ready To Serve  

The cofounders of SupplyNote met at IIT Kanpur while they were pursuing their graduation. Their entrepreneurial brotherhood goes back to 2015 when they started a venture, AdUrCup, to create an offline advertising network for restaurants by using packaging material as a channel to advertise.

However, within six to seven months, the cofounders decided to change the business model as most restaurants were not open to sharing their branding space with others. The IIT alumni then decided to focus on just supplying packaging materials and became a multi-vertical solution for restaurants over the next three years. 

In their quest to become a single-point procurement source for restaurants, the cofounders launched SupplyNote in 2019 to solve poor supply chain infrastructure and the lack of standardisation in the space.

“It was at this point in time, in 2019, that we pivoted from a marketplace model to a SaaS-enabled marketplace model. Today, we share the table with more than 5,000 restaurants,” Kushang said.

The cofounder told Inc42 that one of the major troubles any restaurant endures is the poor bottom line. According to him, a restaurant in India hardly captures about 12.5% in net margins or gross profit. Further, for a small restaurant, most of the inefficiency comes from poor or expensive inventory purchases. 

“So, if you are just a single outlet set up, you could be buying your raw materials at least 10-15X costlier than a large restaurant in the same segment,” Kushang pointed out. 

On the other hand, the challenges for large restaurant chains are mostly related to high structured management costs. 

“Interestingly, both these segments end up in situations where they either stock out of raw materials or incur heavy wastages due to the offline and disconnected way of managing their supply chain,” he said, adding that SupplyNote is solving these challenges in the industry with its SaaS solutions.

“With our solutions, we help them focus on when to procure, who are the right suppliers to buy and when is not the right time to make purchases,” he said.

What Else Is On The Menu?

According to Kushang, the addressable market for platforms like SupplyNote is immense and is only expected to grow in the future. This is because, unlike the US and China, which have an equal ratio of small and large restaurants, Indian restaurant chains account for only 8% of the total market.

To give an idea, a CARE Ratings report published in March 2020 anticipated the restaurant and food services industry to reach a size of INR 6.7 Lakh Cr by FY24, growing at a CAGR of 10.3% between FY19 and FY24. 

“The reason for the split in India is because of the poor supply chain infrastructure and lack of standardisation. That’s what we are bridging here. And the numbers are also in our favour. So, if you look at the rate of growth in the chain restaurant segment, it’s higher than the standalone segment,” the cofounder said.

The startup, which raised $1.2 Mn in a Pre-Series A round led by Venture Catalysts in 2021, expects to turn profitable in the next eight to nine months, piggybacking on 10% month-on-month growth in revenue.

According to the cofounders, SupplyNote’s primary growth metric is its total transactions that happen across its core verticals mentioned above. 

Currently, the startup is witnessing purchases to the tune of $70 Mn annually through its software solutions. The startup also takes a cut on every transaction that happens between restaurant chains and their respective suppliers, which are also enabled by SupplyNote’s SaaS solutions.

“We want to confer about a billion dollars of transaction volume in the next 24 months. And by the next 12 months, we’ll be at about $500 Mn in annualised transaction volumes,” he added.

SupplyNote’s biggest rival in the segment is Zomato’s B2B supply business Hyperpure, which supplies fresh and packaged products to restaurants. The business vertical generated an adjusted revenue of INR 421 Cr in Q3 FY23 as against INR 334 Cr in Q2 FY23. 

Besides, there are small-scale startups, such as Supply Port, which aggregate and supply all-branded and packaged consumables to the Indian restaurant sector.

While offline logistics remain a challenge across sectors, the Indian startup ecosystem has recently witnessed the growth of many supply chain startups and raising millions of dollars in funding. Some of the startups that lapped up investments in the space last year include names like FourKites, Magma, and Wheelocity, among others.