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Repackaging Packaged Foods Business

Building fast moving consumer goods company requires a lot of patience.
Repackaging Packaged Foods Business
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Timely and healthy eating has slipped down our priority list for healthy living. The packaged food sector that thrives on on-the-go lifestyle has pushed in a handful of young foodies that are making a beeline for innovative yet healthy and lip-smacking products that do away with the headache of what, when, and where to eat.

Building fast moving consumer goods company requires a lot of patience. As any other young company, Bengaluru-based bottled beverage brand Goodness by DropKaffe also faced different challenges around its product, people, sales and operations at different points in time. However, it was the team of investors and advisors, who guided them through these challenges, says Lakshmi, Founder, Goodness by DropKaffe, who sells freshly brewed coffee in a packaged form. With Kanwaljit Singh, founder of Fireside Ventures and angel investor Manish Singhal on board, the start-up will cross Rs 1 crore in turnover by September this year. As of now, their offline distribution comprises of over 400 stores in Bengaluru and have a decent visibility over online websites like Amazon and Bigbasket.

Creating Differentiation

Brand creation and positioning among customers is another challenge for any business. Traditional forms of advertising can burn a hole in young companies’ pockets, hence it is important for entrepreneurs to leverage social media and involve growth hacking techniques to spread the word as soon as possible.

“From placing the product in the right stores to getting the right team and talent in place is what has been a major challenge,” says Jasmine Kaur, Founder, The Green Snack Co. Having done with their seed round last month, the company will be increasing its turnover from over Rs 25 crore and will also be expanding their online and offline distributions.

“The challenge for young entrepreneurial companies in building the brand is the cost of traditional channels and the amount of noise by large fast moving consumer goods companies in print and television. Therefore, young companies have to focus on how and why they are different,” says Ash Lilani, Managing Partner and Co-founder, Saama Capital. Bengaluru-based venture capital fund has backed companies in food processing space including Raw Pressery, Veeba, and Chaipoint apart from unicorns like Paytm and Snapdeal.

The lack of proper infrastructure has been another major challenge while building up a successful brand in market. PC Musthafa, founder of ready-to-cook packaged food company, iD Fresh Foods, an earlier entrant in this space, says, “Ensuring the last mile storage (in stores has been a major challenge in the Indian market. The end-toend connectivity of my products wasn’t as smooth initially. Alongside, it was very difficult for me and my team to convince our consumers that the product is 100 per cent natural without any added preservatives and chemicals, which is the unique selling proposition of our product”. The company has Rs 25 crore in annual turnover and in January this year the company has raised Rs 165 crore from Wipro’s Chairman Aziz Premji’s family office PremjiInvest.

The quality of processed food has also remained questionable in Indian market. For Nipun Katyal and Varun Jhawar who started a Mumbai-based ready-to-cook food start-up Fizzy Foodlabs, ensuring a 100 per cent natural and premium product at an affordable price available is the real battle.

“Convincing the vendors, retailers, and others to work on costing, in terms of volume for good business was a real task,” the duo say. The company has also been trying to commercialize advanced global technologies like MAP, rotary retort, etc., right from building an in-house technical and research team, to convincing its vendors for equipment upgradation. Convincing the retailers to take a bet on the emerging categories wasn’t easy for Katyal and Jhawar.

“Competing with the existing valued products, has been a path of least resistance for retailers. With time, the retailers have seen the category expanding and the support started flowing in,” says Katyal. The company had earlier raised Rs 40 crore from private equity firm SAIF Partners and Haresh Chawla, partner at True North (earlier known as India Value Fund Advisors) private equity firm.

Road Ahead

With a consumption level of nearly 22 billion litre of drinks, India is the fourth-largest market for beverages in Asia. Goodness by DropKaffe sees more than 300 orders a day. “We are exploring slightly offbeat channels such as corporate cafeterias, fitness centers, etc., for promoting our products. This is not only acting as a clutter free sales channel, but is also helping in building loyalty and trust over the brand,” claims Lakshmi. The company is planning to expand the product portfolio with bringing in protein shakes and flavored milk as well.

Katyal and Jhawar, on the other hand, are focusing on their readymade food boxes venture Chef’s Basket and snacks brand Colonel & Co. “It would take around three to five years on an average for Chef’s Basket to expand and gain a leadership position in market. Colonel & Co. is a pure product and format innovation, which makes it ahead of the curve,” adds Katyal.

Trying to make a mark in healthy food snacking sector, Kaur is planning to introduce an extensive range of snacks for their customers. “The basic aim is to replace the unhealthy munching which usually takes place between 5 pm to 7 pm,” says Kaur. iD Fresh Foods is aiming to scale much faster. The company is aiming to build a Rs 1,000 crore business in next four years and presence across nine cities in India.

A study by Grant Thornton opines that “by 2020 food processing market will hit $482 billion mark”. The sector has grown at around 15 per cent over last three years. It would be interesting to see how young business drive efficiency to tap the market share, even as existing players invest into innovation and make their supply chain more robust.

(This article was first published in the March issue of Entrepreneur Magazine. To subscribe, click here)

Edition: March 2017

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