Food business draws on grandma recipes
People are willing to pay a premium for the right product in the UAE market and there is no price war
P.C. Musthafa,
CEO and founder, iD Fresh Food
Imagine sensing a massive business opportunity in the humble idli and dosa batter? The idea changed the lives of P.C. Musthafa and his five cousins, who now are co-founders of iD Fresh Food, an India-based fresh food startup that is valued above ₹10 billion.
The company sells perishable ready-to-cook products such as idli, dosa and vada batter, wheat and Malabar parathas, chappathis, idiyappam, paneer and filter coffee decoction.
The brand is present in over 3,000+ outlets across the UAE and has a large plant in Ajman to cater to the GCC market which has the potential to sell batter that can make at least one million idlis daily. After commencing operations in the UAE in 2014, iD Fresh Food was supplying only chappathis and parathas. It started batter operations in the UAE three months ago and will start supplying to Muscat, Oman, on November 15.
“People are willing to pay a premium for the right product in this market and there is no price war. The biggest advantage in the UAE is the last mile distribution network. In some places in India, stores switch off electricity and don’t maintain chillers properly. I don’t face those issues here. It’s a great place to do business,” says Musthafa, founder and CEO, iD Fresh Food.
The UAE currently contributes 25 per cent of the group’s overall revenue. The promoters aim to take the UAE’s share to 40 per cent of its overall revenue in the next two years.
After his corporate IT stint in Dubai, Musthafa returned to India to do something meaningful and pursue an MBA with the Indian Institute of ManagementBangalore. It was then that he and his cousins sensed a business opportunity on seeing the poor quality batter being supplied to small grocery stores in the city. The group invested only ₹50,000 to set up a 50 sqft kitchen with a small grinder, sealing machine, weighing scale and a second hand motorbike in 200506 and started making 100 per cent natural batter. The secret is in keeping the food as close to what grandmothers traditionally make at home.
“Our plan was to sell 100 packets of batter in a day. It took us nine months to sell 100 packets daily. I used my Dubai savings of ₹600,000 to set up a larger plant which produced around 2,000kg of batter per day. Today, we sell around 55,000 to 60,000kg of batter everyday which is close to around 1.4 million idlis daily. In 2010, we were a single product, single city company [batter and Bangalore]. Then, we started expanding to more cities and trying more products,” recalled Musthafa.
The group started with three employees and today, the staff strength has grown to 1,600 spread across 14 cities. There are 260 employees in the UAE.
The CEO said iD Fresh Food positions its products such that no credit is taken away from the home maker. “We should not replace our customer, only assist them.”
The company has had two fund raising rounds so far. In 2014, Helion Ventures invested ₹350 million and PremjiInvest (Wipro chairman Azmi Premji’s family office) deployed ₹1.5 billion in iD Fresh Food in 2017.
The promoters are in discussions with partners to set up operations in the US and UK. Double income Indian families are its target client base while its range of parathas are also popular among Arab customers.
iD Fresh Food also uses data heavily to reduce food wastage and improve productivity.
“One of the biggest challenges we initially faced was to reduce wastage. We then introduced real-time tracking of products. That gave us visibility on the sales patterns and we used it for data analytics. This helped salesmen supply the right amount of products to a store,” Musthafa explained, joking that iD Fresh runs on IT.
Since iD Fresh deals in highly perishable products, it manages its own distribution chain. The firm today has store-level sales data of around 20,000 outlets in India and across the UAE. This was obtained by geo-tagging and geo-fencing these outlets.
iD Fresh Food also looks at data from road traffic to gauge demand. The CEO added: “Since we deal in a perishable product, supply chain management is key. We have 360 trucks with 600+ salesmen distributing and replenishing products everyday. One year ago, we took up an operation to finetune our distribution network. We use data to arrive at an optimum route to travel. Using that approach, we were able to save around 15 per cent in terms of fuel costs.”
According to Haresh Balani, vice-president, PremjiInvest: “iD Foods has built a strong brand with high recall, pricing power and a very loyal customer base within 10 years of its existence. We believe the company is best positioned to own the traditional Indian breakfast space, which is a billion dollar plus market. We always look for companies scaling through organic growth management that deliver returns through strong execution. What impresses us most is the founder’s approach to category creation [ready-tocook vs. ready-to-eat] and frugality [highly focused on capital efficiency].”
PremjiInvest sees a large opportunity in serving fresh food to the Indian consumer — which tastes as good as made at home and is available in packaged form at neighbourhood stores.
Meanwhile, Asif Masood K., business partner at iD Fresh Food, became a part of the iD journey six years ago when he moved to the UAE to set up the brand’s operations in the region.
“Our growth has been progressive over the years, fuelled mainly by our range of parathas and
chappathis; currently, our products are available from groceries to all major retailers across the UAE. Our recently launched batter range has strengthened our position as an all natural and preservative-free brand in the UAE,” he said.
“Going forward, we will be aggressively expanding across the GCC in the next one year,” Asif added.