START-UP CORNER: Licious bets on quality meat for growth
The company fills a gap for customers, but the challenge is quality and innovation, writes Gireesh Babu
The company fills a needs gap for customers, but the challenge is quality and innovation, writes GIREESH BABU 21 >
Every time he visited the nearby meat shop to buy chicken, Sanjay used to frown hearing the final cry of the bird. Besides, with the rumours of the high usage of antibiotics on birds and the possible antibiotics resistance his family would acquire from eating their meat, he used to think twice before buying chicken. He would be ready to pay a little extra for quality meat, free of antibiotics, growth boosters and steroids.
That is where Bengaluru-based Delightful Gourmet becomes relevant. It offers an online gourmet meat brand Licious, with a range of meat, fish, seafood and meat-based products. Started in Bengaluru in October 2015, it recently started operations in Hyderabad. Licious started with 1,300 orders in the first month of operations and now serves about 50,000 orders in Bengaluru in a month. Started with 30 stock-keeping units, it now has 90.
Licious has raised Series-B funding of $10 million, led by Mayfield India, 3one4 Capital, Sistema Asia Fund and Neoplux Technology Fund at the end of March. In December 2015, it raised Series-A funding of $3 million from 3one4 Capital and Mayfield Capital. Prior to this, in August 2015, the company raised $0.5 million from angel investors, including former Infosys board member TV Mohandas Pai and Helion Ventures co-founder Kanwaljeet Singh.
Inception and growth
Licious was founded in June 2015 by Abhay Hanjura, who has a sales and marketing background and is a food connoisseur, and Vivek Gupta, former finance controller of Helion Ventures. The venture was meant to address the demand gap they identified in the meat industry, which was highly unorganised. There is lack of good quality meat in a market which is $30-35 billion in size. There were concerns about the source of the meat, the way it was handled in meat shops, and lack of information on antibiotics or steroids.
The duo built up a farm-to-fork model after research and several experiments. Licious owns the entire back-end supply chain and has stringent cold chain control to maintain the quality and freshness of the produce. It has tie-ups with various integrators, such as hatcheries for chicken, and the birds are raised on specifications of age, weight, size and feed. The integrators supply specifically to the company and these birds are dressed and sent to the processing centre in temperature-managed vehicles every day within four hours of slaughter.
Licious takes control of the inventory, every batch is tested in the lab, processes these birds, packs them and sends them to cold chain managed delivery centres. The cold chain is not broken from the integrator to the last mile, says Gupta. Licious works with 30 vendors and buys around 3 tonnes of meat a day.
“Initially we thought it would be a challenge to procure more meat, but as the scale increases, it becomes easier to manage,” adds Gupta. The company offers chicken-based fresh spreads and pickles along with ready to cook categories and a wide range of raw meat.
“We pick up the seafood from the coast and maintain the quality in the cold chain. We are a gourmet meat brand and we do not do standard meat cuts. We do artisanal butchery and product innovation happens in our labs,” says Hanjura.
Licious focuses on developing the business in one city and making it operationally profitable before moving on to the next. Its Bengaluru operations have become operationally profitable and it has started operations in Hyderabad. It runs a hub and spoke model with a processing centre in Bengaluru and 11 delivery centres. Hyderabad has three delivery centres at present.
Commenting on the pricing strategy, Hanjura says, “For our quality, our products are not expensive, but the consumer perception may be we are 15-20 per cent expensive in some items. The reality is that we are not. In the traditional market, the meat is cut into pieces after it is weighed and the quantity of the final purchase is 1015 per cent lower. But Licious weighs meat after removing unwanted material and it is the absolute quantity that is delivered.” The company’s value-added products are offered at higher prices.
Investors feel the fresh meat and seafood market is a large, fragmented one that is poised for enormous growth. Licious claims 80 per cent repeat customers. “We were drawn to Licious by the team’s vision to be the leading fullstack consumer brand in this space, rather than an easily replicable marketplace model,” says Nikhil Khattau, managing director, Mayfield India. It will be interesting to see how they now scale up in newer markets and replicate the success in their home market, he adds.
Way forward
The money Licious has raised in Series B funding is expected to take it to a couple of other cities. It is planning to build the Hyderabad business and enter the National Capital Region as the next step.
“We should be able to build a ~15-crore per month revenue run rate with this money. This money will also make us profitable at a company level. After this, we will not be raising money for burn, but only for growth, if at all we raise money. The idea is to get all the business metrics right, a sensible balance sheet and unit economics,” says Hanjura.
The revenue run rate and company level profitability are expected to happen in two years’ time. After NCR, the company will look at launching in other cities, including Mumbai and Pune. While at present its sales are mostly online, once it acquires confidence about the front end, it will also look at serving some of the modern retail formats.
Two major challenges for the company are creating customer awareness about quality meat and increasing value-added products to satisfy customers, say company executives.