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India is brand-starved: Freshmenu CEO

The focus on delivery food and making it a great experience is one reason why Freshmenu is successful, says Rashmi Daga.

Sep 23, 2019 by Moulishree Srivastava
India is brand-starved: Freshmenu CEO

Freshmenu swears by its name. Fresh food is the stock-in-trade of the Bengaluru-headquartered food tech startup. However, the god is in details. Freshmenu CEO Rashmi Daga, in an exclusive interview with Moulishree Srivastava and Ruiyao Lou of The Passage, revealed the tricks of trade that go into the making of Freshmenu as a delivery-focused food brand. For instance, she says, if you're taking from a delivery kitchen, it takes 40 minutes or less for the food to reach customers. The rice has to be cooked lesser, as its getting cooked on the way in the simmering heat. Therefore, our product feels better at the end point. It’s this attention to detail that puts Freshmenu in the map. Rashmi Daga spoke in length about the reasons to get into food tech, the brand’s inventive menu and funding goals.

Edited Excerpts:

The Passage: What made you choose food tech when you decided to set up your own business?

Rashmi Daga: I was a typical Indian student who pursued engineering and MBA from one of the best schools in India, IIM. Ahmedabad. I started working with IBM and later moved to J&J Medical. I learned a lot in those four- five years.

I moved to Bangalore in 2008. At the time, Bangalore was in the process of becoming a startup city. I got a chance to work at an ed-tech startup called Tutorvista and since then I've not gone back to a big company. In 2011, I tried to bootstrap a startup in the art and craft space. But it was too early for India and didn't work. I moved back to working at Bluestone and Ola. Sales is very interesting because it teaches you a lot of skills. The experience really helped me to think that I can now do multiple other pieces of the business.

In 2014, a lot had started happening on food tech world over, especially on-demand food.

World over different models were being tested. In big cities in India, travelling is a big pain. Therefore, food delivered to you would be the largest category of food going forward. Food tech looked like a big opportunity to work with. That’s why I chose to do food tech.

The Passage: How has Fresh Menu been able to survive in this cutthroat market?

Rashmi Daga: In India, food is like a religion. From the start, we have focused 100% on the quality and excitement around food. We've been able to survive because the product was very good.

Freshmenu thinks of food as delivery food. We are the first ones to bring single serve meals to India. The focus on delivery food and making it a great experience is one reason why Freshmenu is successful.

Freshmenu is the only company which is not trying to do the microwaved, re-heated and assembled food. We’re doing fresh cooking in our kitchens every day. So the fresh food made all the difference.

The Passage: How did the competition landscape change over the years?

Rashmi Daga: In food, companies should not focus on the competition because food is a large category. It's an execution focused business. Competition was always very high in food.

In Bangalore, there are probably 14,000 listed restaurants. But it’s an underserved market and you have to be focused on your opportunity more than competition.

The Passage: Your menu seem millennial-oriented for the most part

Rashmi Daga: We started with non-native cuisine - Western and Asian menu. But of late, we are offering Indian dishes. We made sure there is something for people in the 20-45 age bracket. These are the people who are on their phone and who are savvy enough to order. They are working, they're moving and they are the best target group.

The Passage: How has food tech changed over the years?

Rashmi Daga: Customers feel comfortable ordering food online now. The friction on placing an order and getting it has been reduced. Overall, it’s been made easier for the consumer to think of food ordering as a natural behavior. We are here to enable convenient food reaching you more reliably and that's what the industry has been able to shift and shape.

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The Passage:What’s your business model? Do you see Swiggy and Zomato as competitors?

Rashmi Daga: We get 60% orders from aggregators and 40% from our own platform.

We see Zomato and Swiggy as partners. As aggregators they get a lot of customers to order different brands and we are one of the brands that work with them.

Business model is clearly building a very strong food brand in India and on the back of that see huge volumes come to us. We want to be really seen as a good food brand. That's what we believe would bring customers to us.

The Passage: How many satellite kitchens do you have? How many cities are you present in?

Rashmi Daga: We don’t cook in one central kitchen. In Bangalore alone, we have 23 kitchens. We are present in Mumbai, Bangalore and Gurgaon largely. Couple of months back, we started operations in Noida and now we are getting into Pune.

Every outlet would have a chef who's in charge of the food and about 10 to 12 people cooking in every kitchen. We have 40 kitchens in total and fulfill about 15,000 orders daily.

The Passage: Could you tell us about your revenue model?

Rashmi Daga: The current revenue stream is people ordering food online. We are thinking of working with offices more closely. Monday to Friday lunch requirement is something we are actively looking at. We are also thinking of launching a couple of brands. One of the brands we've already started is a Pizza brand called Wander Crust.

The Passage: Tell us about your cloudkitchen model

Rashmi Daga: Zomato is setting up shared infrakitchen where multiple brands could cook food. The operation costs are much lower.

We are partnering with them. In Pune, it’s a Zomato kitchen. Swiggy Access is also doing the same thing. We are partners with both.

The Passage: How do you see emerging competition from brands like Faasos and Inner Chef?

Rashmi Daga: Everyone is trying to find their set of customers and will try different things. Each brand has to find its own space. We also have done different things. For example, we had a fresh club membership program. I think everyone would want to find a different set of mechanism to attract customers.

While it is possible to look at whatever everyone else is doing it's not like the same would have a result for you. You have to do what is right for you.

The Passage: Lots of consumer brands are coming from China and the West to India. What advantage do local players have over foreign brands?

Rashmi Daga: Food is a category that allows for a lot of products to be available. It’s a category where a consumer never eats from one brand. In India, global brands are very big.

I don't think Chinese food brands have entered India so far. We would like to think of Indian food opportunity as so big that as long as you do your stuff right consumers and they would come to you. For example, we've not diluted our focus from delivery food.

Market is still wide open. India is brand-starved. Very few brands exist in India, especially in food.

The Passage: Lot of Chinese money is coming into Indian food tech ecosystem. Did Chinese investors show interest in Freshmenu?

Rashmi Daga: We had spoken to only a couple of Chinese investors. So far the business size is not very big. But I feel a lot of Chinese investors have understood that in India the cloud kitchen opportunity is very big. But more supply needs to come in. I think there should be investor money available to scale this business.

The Passage: Have you broken even yet?

Rashmi Daga: We have EBITDA break even. We make money at kitchen level and money as a company now. We have achieved profitability in August and are one of the first food tech companies to do so.

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The Passage: What is your revenue forecast?

Rashmi Daga: The revenue for FY19 should be similar to last year (around Rs 120 Crore) because the focus was profitability over growth. Now we are seeding in some new growth initiatives and, we believe, in the next six to twelve months, we should touch like a 250 crore rupees kind of run rate.

It is contingent on the number of kitchens you have and the number of customers that you could service. We should be able to get to that by just opening more kitchens.

The Passage: How did you manage to achieve profitability?

Rashmi Daga: Firstly, the product has a lot of organic reach. We’ve been able to work at all levels of cost structure. Fundamentally, food has very high gross margins.

In our case, gross margins are as high as 73%. Now that we've learned to run it efficiently I think the next set of kitchens we’d open, we will be profitable very quickly because we've learned all the things that go into achieving profitability.

The Passage: What are your expansion plans?

Rashmi Daga: Firstly, geographic expansion. Now that food deliveries are available in 200 cities in India, we would like to be in at least 10 cities in next two years. We want to launch a couple of brands in complimentary categories that don't cannibalise each other but help us grow our total sales.

We are running our own training program so that you can actually take fresh graduates out of catering schools train them so that your cost of cooking goes down. We are looking at improving the SOPs, working on people cost, overheads and multiple matrixes to improve efficiencies at the kitchen level.

We might increase the marketing spend to 8-10% of revenue post fund raise.

We do our own logistics and have nearly five hundred riders today.

The Passage: What is your projection for the number of orders per day one year down the line as you expand to more cities?

Rashmi Daga: Orders would grow purely because the pie of food delivery is growing and we should get a larger share out of it. It is very likely that in each of the markets we are present at, on a year to year basis, you see 40-50% growth and you are able to double the business every two years.

The Passage: Last year, Freshmenu was looking to raise USD 75 million but ended up raising USD 2.94 million

Rashmi Daga: It was only a bridge round. Last year, billions of dollars were coming in to Swiggy and Zomato and a lot of investors wanted to wait it out. So we put the investment round on hold. We’ve restarted the process now.

You need capital for growth. You need to do branding. You need to do infrastructure.

The Passage: What kind of round are you looking at this time?

Rashmi Daga: I think, in the neighbourhood of USD 15 million. We are already in talks with some people. We started the process a month back. I think now we see a different level of interest because the company has shaped differently and the business people have understood that the supply needs to be there. It's not just an aggregator play. We expect to close the round by January.

The Passage: How do you come up with innovative menus?

Rashmi Daga: We have a team of innovators. These are qualified chefs who are constantly thinking up new dishes. I personally invest a lot of time in thinking through the new menu.

I believe future of food is on Instagram and therefore our food has to look more photo-friendly and more people should take photographs and post it online, which is good free marketing.

When we think of a product, we think of nutritional balance, color elements etc to make it more platable.

Earlier in India, if you talked to people in food industry, they would say India is five years behind the world in terms of food. Now, if an ingredient is popular in the US or somewhere in the world we can bring it in three months.

Moulishree Srivastava

Moulishree Srivastava is a Bangalore-based tech journalist. She focuses on emerging Indian startups and unicorns. She can be reached at moulishree@thepassage.cc.

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