B&E | What Calls for the Fall of Indian Food Start-ups?

In India, food startups have become a trend against the traditional system of food supply chain. Given the emergence of food delivery services app compounded with noticeable venture funding, the sudden revolution in food business seem to face a significant low point given their competitive struggle for survival in the current dynamics of the market.

By Rahul Guhathakurta

In India, food startups have become a trend against the traditional system of food supply chain. Given the emergence of food delivery services app compounded with noticeable venture funding, the sudden revolution in food business seem to face a significant low point given their competitive struggle for survival in the current dynamics of the market. 

With the ebb and flow of e-commerce in food supply mechanism, the primary reason behind the failure of sustenance of these startups can be attributed to the existing disconnect between the organization's objectives and common Indian mindset that is predominantly driven by the logic of discounts. Although, most of the startups did succeed in creating a market of their own based on "communal kitchen" concept but significantly failed to create a required brand loyalty for their respective apps and others.

This scenario of decline in food business calls of a deliberation. Wherein, one needs to have a microscopic view of the Indian Food start-up ecosystem. In this, it is found that the operational framework is predominantly occupied by the similar logic of common commercial fundamentals of any given business to add value to multiple sub-systems. However, this process is faced with recurrent problems, such as lack of core innovations, duplicity of efforts and poor customer management skills- which eventually influence the outcomes and most importantly, not a viable option for the later stage of “merger and acquisition” or any sort of “exit valuation”.

Image Attribute: "Overcrowding is just an excuse to hide the failures. In fact, crowd brings in competition and competition brings out the best" / Chart Source: VCCEdge

This can be said so, as in any given scenario, each and every start-up (irrespective of their domain) is just like a laboratory experiment. Within it, prototyping is a very important phase based upon market trials. With the boom in internet driven economy, tons of food sites/apps rapidly came into existence, without having any understanding of the existing Supply Chain road-blocks in Indian market as well as the necessities of knowledge about the trivial tax structure and  food licensing policies.

Why it’s failing?

Food e-commerce model has been flawed in its orientation. of which, primarily, the hiring processes were and are practiced on substandard principles- which were not in sync with the FMCG/CPG* norms of Indian market. Hiring people from cross e-commerce domains doesn't provide an edge rather it eventually brings in more complexity. Adding to this gap is the fact that the food startups initial propagation of the concept of aggregation translated to a sales perspective without any understanding of the need of right kind of manpower for the latter. 

REALITY CHECK: Simply log in to linkedin.com, put a search query related to any food delivery start-up in India and check the profiles of the employees – most of them don’t have any Food/FMCG/CPG experience at all prior to joining their current organization.

Poor hiring practices are directly affecting the followings:

• Poor "Sales Management Knowledge" - on overall margins with respect to various categories at granular levels are giving huge blows to current businesses at irregular intervals.

• Mismatch in operational objectives - half of them claim they are revolutionizing India’s food distribution system without having sound supply chain fundamentals at place. Eventually, forcing poor adaptability towards existing circumstances and available infrastructure.  

• Overtly intensifying the dependency upon technology and still experimenting with the processes - the use of trial and error method is a regular practice. Data is crucial and we accept it, but customers are not just mere numbers. Such data (in a lucid way) should be made easily available to ground force to complete a sales process cycle and should create the path for the repeat sales.

• Ambiguity in pricing engine – now-a-days ordering food on an app is like buying an equity share from fluctuating stock market. Besides that, lower differential price exists when a customer walks into the joint and places an order.

• Customer care and grievance management, totally out of focus – providing discounts only creates fly-by-night customers. To develop a loyal customer base, a 360 degree approach is required.

Conclusion:

In India, it is an accepted fact that a huge divide exists between the purchasing behaviors of urban class and rural class added with recourse to technology accessibility. It becomes very important to understand the diversity and vastness in India to accordingly frame the business structures and mechanisms. Therefore, given the rising crisis of survival of food startups and their delivery channels, the objective lies in having a self-sustaining future based on seamless integration rather than aggregation. The practical choice lies in drawing from experienced and tenured manpower derived given the FMCG/CPG operational mechanism. Secondly, for all kind of start-ups, suffering will keep on continuing with respect to scalability until the government stops practicing cluster based developments only in and around urban and sub urban areas. It's time to look beyond these clusters where the true market opportunities exists and ready to be conquered with the growth in hyper-local delivery concepts. 

About The Author:

Rahul Guhathakurta (K-4094-2015), Founder at IndraStra Global. He can be reached at his Linkedin Profile.

*FMCG - Fast Moving Consumer Goods / CPG - Consumer Packaged Goods