The FMCG sector has a unique set of rules that its players have fashioned for themselves – the largest among them being the aforementioned brands. It is easily accessible, is affordable, and is distinctive by branding.
Cracking this sector in the digital age in India is no mean task, considering the competition from legacy players who have invented the industry and who directly or indirectly own every single product that an average shopper consumes – from toothpaste to noodles to ketchup and jam.
Coupling this with the ease of ordering online from the likes of Swiggy, Zomato or more traditional fast food options or your local area restaurant and the scope of innovation and disruption seems insurmountable, to say the least.
So, what does a seven-month-old startup have to do in its pursuit to become the next ‘Coke’ of India – ubiquitous, immediately identifiable, and affordable?
Let’s find out.
“It’s All About Fulfilling Basic Needs”
“In the realm of large business opportunities, it’s all about fulfilling basic needs,” begins Hitesh Ahuja, ex PE veteran and a self-professed foodie, and co-founder of Yumlane. “Roti, kapda, makaan. Cracking any of these needs makes you an FMCG force to reckon with, which is what players like Nestle, Domino’s, Haldiram’s and even HUL are doing, right now. Of these, I focussed on food because of the fast-moving nature of the product and the creativity afforded when it comes to experimenting.”
After moving from his lucrative position as VP at New Silk Route Ventures, Hitesh took the plunge into entrepreneurship in 2012 with two self-funded albeit unsuccessful ventures modelled around a QSR (quick service restaurant) – one with and one without a delivery angle. Of course, foodtech being taken over by Zomato, Swiggy and smaller players like TinyOwl and others, was a bust. But what it did do was help Hitesh understand the processes of running a business in the food sector and the importance of going digital.
“As I delved into the makings of running a successful food business a couple of things became clear to me. You have the demand side of the chain where customers are saying, ‘Hey, we want to eat good, affordable food.’ And then, on the supply side, with players like Swiggy, Zomato was the option to eat said good food in the convenience of your home. But, the catch being, it was expensive for the companies delivering these orders. On an average, each order costs about INR 150, for a substantial meal.”
From 2012-2015, while running the two ventures in Mumbai, Hitesh devoted time to doing due diligence about the food industry in general. It was around then that he realised the similarities between the ‘business he was trying to create’ and the globally recognised brand ‘Coke.’
First, it had to be safe, in terms of not being sold as street food. Second, this would ensure a quality product. Third, he wanted it to be accessible to everyone like Coke was because it was sold for a nickel (25 cents) during WWI, lastly, making it affordable.
This revelation came to Hitesh on a regular business day like any other, but it did change the way he thought about food, tech and the third venture he wanted to start.
Bright Packaging, Identifiable Branding, Tasty Food
While the premise seems far-fetched and reasonable at the same time, as with all hypothesis, the first thing to be done was to identify use case and a successful validation. The way Coca Cola was able to capture the FMCG market by smartly applying the tenets of advertising and packaging to its basic product – from the unique shape of the bottle to the various taglines and campaigns associated with Coke over the years. All ideas that Hitesh wanted to execute. i.e. visualise the product and humanise it.
“You have food. But where does the food go? How will it be sold? You need a box? And then you need food in it,” he shares. This aspect of packaging characterised the shelf-life aspect of Coke.
Now that the idea had been crystallised, validation was needed. And Hitesh found the packaging idea validated successfully in the UK and the US markets with other brands. And the next step from validation was the proof-of-concept.
Related Article: Snack FMCG Startup YumLane Raises $4 Mn Series A Funding
“It went exactly like this. I worked with a global packaging giant whom I contacted via cold email and you know what? They liked the idea enough to give it traction, which made me confident enough to take the idea forward,” he says with a chuckle.
Yumlane’s meal boxes are medium-sized with a bright orange cover and plastic coverings that can be removed when heating the box on a gas stove or the microwave. They aim to be eye-catching and easy-to-use while maintaining functionality.
This proof-of-concept was also enough to convince his co-founders, Ruben Ghosh and Rahul Kumar, to come on board. Ruben heads food development coming from a background of having studied at Cordon Bleu, Sydney. While Rahul had previous entrepreneurial experience in the hyperlocal food tech sector having co-founded GrocShop.
“My own experience in the PE sector helped me understand the macro picture, which has come in pretty handy with ventures one, two and three,” says Hitesh.
‘When It Comes To Food, Timing Is Everything’
When it comes to food, it is all about customer taste and their preferences. But, in order to understand the preferences of their customer they had to break down their customer, humanise them, so to speak.
“When we created our ideal customer profile it came out as something like this – 18-28, spends a lot of time outside of home, is looking for hygienic meals so is health conscious in a way but on a limited budget. Not interested in street food that doesn’t come with quality assurance.” Hitesh informs me that the profile was created on the basis of brainstorming as well as validating from the product being sold, and is continuously evolving too.
Breaking down the customer was one aspect and led them to the firm conviction of selling ‘quality ready-to-eat-food under a dollar.’ Each Yumlane meal box costs anywhere between INR 50-70.
But because of the very specific nature of food and the shelf-life associated with it, the next important focus for Yumlane had to be breaking down the product itself.
There are four chunks of time during the day when people, especially working people, consume food – breakfast, lunch, snacks, and dinner. The lunch-snacks-dinner time slot is from 12 pm-7 pm and consists of people in metros grabbing something from outside. This was the timing Yumlane targeted when they started experimenting with the kind of products they would manufacture.
The most important and distinguishing feature of the new age, millennial consumer for Yumlane was their preference and dependence on technology. “Legacy FMCG brands had established themselves in mom-and-pop stores in a world before technology was a way of life. But, in today’s world, if you’re not digital, you do not survive. Which is where Yumlane differentiates itself.”
In Hitesh’s own words, the Yumlane platform is entirely digital – in that the end-to-end process can be carried out online. Locating (an outlet where a Yumlane box is available), pre-order it, pre pay for it using any of the numerous online options and then finally, collect it at the retail outlet.
“With this last puzzle piece in play, we finally understood what Yumlane would ideally stand for – an FMCG, (not food) digital platform for the average millennial consumer selling food under a dollar.”
Experimenting With Food, Experimenting With Models
Mumbai-based Yumlane currently sells its meal boxes in two categories – snacks and full-fledged meals. It has a snacks play with a variety of momos and pizzas.“We decided to start off with low-hanging fruit in snacks and which are dynamic in nature,” says Hitesh.
In the meals section, which has debuted as recently as February 2017, Yumlane has three varieties of Asian cuisine.
The snacks play was launched in the second month after Yumlane began operations in July 2016. In the same month, it announced $1 Mn Series A fundraise – from industry stalwarts such as Anupam Mittal, Binny Bansal, Darius Pandole, Kunal Khattar, and Dheerag Jain. “It is a good kind of validation when you’re able to raise money without having launched the product. Gave us the confidence that we were onto something right,” says Hitesh.
The pilot phase of the snacks play debuted in a small store Paras General Stores in Chembur, a Central Mumbai suburb, where the concept was also tested out for tweaks and improvements.
As Hitesh tells it, the M-o-M growth was enough for them to have expanded to 200 retail outlets all over Mumbai, at the time of publication. “But cumulatively, we must have received some 2,000 orders over a six-month period when we were piloting.”
Hitesh credits the success of the pilot to two reasons – the retailers were wowed with the novelty of the idea – readymade food in a box. And the consumer was excited with the affordability and novelty.
The process of experimenting with food was not always successful, though. Upma boxes did not do as well as the other popular snack varieties as well as an item called ‘Masala Bao – a twist on the traditional masala pao.
Yumlane’s business model is B2B and depends on traditional channels of FMCG distribution – general stores, organised retail chains such as Hypercity (with whom they already have a tieup), and future partnerships are being planned with D Mart, Food Bazaar, etc. “But the future is endless. We could be in airports, we could be in a retail outlet opened by us, and we could be anywhere you want to have good quality, affordable food, right?” he laughs.
When it comes to manufacturing, the process is streamlined with clear divisions of labour – Yumlane partners with ISO-certified, FSSAI compliant to procure from all over India for manufacturing. This ensures hygiene and safety in the process. The manufactured food is then packaged according to strict standards and Yumlane’s logistics partners are responsible for last-mile servicing.
7 Months Of Operations, 65,000 Yumlane Boxes Sold
Yumlane’s vision of being a digital FMCG platform is reportedly without precedent, which meant there were no benchmarks for the eight-member team to hit. As per Hitesh, in seven months of operations, Yumlane has sold close to 65,000 Yumlane boxes and reveals a revenue of about $45.3K (INR 30 Lakhs), so far.
Hitesh also mentions how traditional retailers still have a hard time buying into the concept, but once they see the enthusiasm with which the consumers take to the product, they come on board.
For the company, 99% of the payments for the platform happen online, unlike traditional FMCG products. So even though it has competitors and, as Hitesh puts it, “surrogate players” such as Haldiram’s, Maggi noodles and even other traditional ready-to-eat meals from brands such as Everest, Haldiram’s, its pricing sets it apart. “With Maggi which has to be cooked, and Haldiram’s which is pure-play Indian snacks, our true competitors are the street food vendors who offer the same margins as us. But, then the issues of hygiene and safety pops up and that’s what we are counting on,” he says.
While other players such as InnerChef and Faaso’s can be considered competition for Yumlane, InnerChef does not carry a separate snack vertical, their lowest pricing begins from INR 109. Faaso’s has ‘dark kitchens’ that make it easier for the company to be present in nine cities and is affordable to boot, Yumlane’s leg up against it is the ‘heatability’ of its meal boxes and its tie-ups with offline stores across the FMCG vertical.
Yumlane has a business model in place that is scalable, they plan to expand to Pune and Bengaluru in Q4 2017, and their target of selling 1 Mn boxes, a month, does not seem farfetched or unrealistic at the moment. “Our repeat rates and the fact that we firmly believe that an FMCG business needs to be margin positive while being proven at scale is our biggest confidence-booster,” concludes Hitesh.
The foodtech sector has taken a brutal beating over the last couple years, with numerous shutdowns, acquisitions, and pivots happening in the space. But, with Yumlane firmly positioning themselves as an FMCG tech product, instead of pure play foodtech, their business to has been modelled according to FMCG channels of distribution – one of the biggest advantages the nascent startup possesses, in a cutthroat digital world.
While, the notion of becoming the ‘Coke’ of India is indeed achievable and Yumlane’s growth trajectory speaks to its sensibilities of retaining customers and vendors, instead of just acquiring them to show growth, whether the brand, its identity and the food itself will be able to withstand the challenges of scaling up across cities and maintaining guaranteed quality is a question for the future.
Yumlane is part of Inc42’s 42 Fellowship – a year-long fellowship programme for India’s top growing and upcoming startups with the aim to build a close-knit community who can help each other multiply their impact.