Foodtech business has its share of ups and down in the past two years. While 2015 and first half 2016 had witnessed spurt in funding that essentially triggered emergence of several me-too business models, post second half of 2016 heralded closure of many startups in the space.
Despite of funding crunch and overall skepticism in the model, a few startups remain relevant and keep going strong. One such startup is Gurugram-based Yumist.
Launched in October 2014 – Yumist kept its focus on core fundamentals that has helped it to build sustainable business and remain relevant in highly competitive space.
Like most startups, Yumist made its mistakes too, in its attempt to scale fast or compromising bottom line for growth, et al. “But we learnt from our mistakes quickly and course corrected every single time,” said Alok Jain, co-founder and CEO Yumist.
Importantly, the company had wrapped up its Bengaluru operation as it wanted to concentrate on NCR market.
Since its inception, the company claims to have serviced lakhs of customers in NCR with about a few thousand of people, ordering every day from the platform. “Our average order value is Rs 195 and we make Rs 70 in gross margins on every order,” added Jain.
The company also states to have lowest customer acquisition cost (CAC) in the space. “Our customer acquisition cost is less than Rs 200 and we recover the money spent on marketing within weeks,” revealed Jain.
Yumist claims to have about 20 per cent of its customers order over 10 times in a month from the platform.
Besides sound unit economics, cracking supply chain is a complicated task especially for full-stack food-tech companies. Right from first mile to logistics of getting food from the central kitchen to the distribution outlets, and the last mile logistics of delivering hot food to the customers require laser sharp focus on multiple fronts.
However, Yumist made multiple iterations to surmount supply chain challenges. “We have made multiple iterations to our supply chain since we started and finally built a strong, technology backed logistics infrastructure that is scalable and allows to deliver good quality and hot food to our customers consistently,” said Jain.
Why full stack model has advantages over marketplace & aggregation models?
Majority of the so-called full stack models in foodtech weren’t really full stack. During 2014-15 when foodtech was hot with investors, many entrepreneurs took the shortcut to get into this business. They would procure food from commercial kitchens or home kitchens and sell it under their brand names.
“Models like these were prone to failure because of complicated logistics and unsustainable unit economics, not to mention that their core product (food) was outsourced. If you’re in the business of food, your product is the food itself and tech is just an enabler. Food entrepreneurs, who understood this, are the ones who survived,” added Jain.
Jain’s claims could be corroborated with the fact that only handful of aggregators and marketplaces have been able to survive. Full stack models like Yumist, Box8, Innerchef among several others with relatively less capital survived as they snap-up better margin and control complete consumer experience.
Yumist asserts that all its outlets in NCR are operationally profitable. “Owing to the unique supply chain we have built, we have an asset light model compared to traditional food businesses,” explained Jain.
The company can set up an outlet in less than Rs 400,000 in capital and run it at a monthly cost of Rs 150,000. With low setup cost and operational expenses Yumist’s outlet is capable to achieve break-even at 70 orders on a daily basis.
Collating data is crucial for foodtech business
Yumist leverages data across every aspect of the business. For an instance, when it ran a pilot on offering subscription to its customers the company realised that the major pain point customers face with dabbawallas (delivering across offices) is the lack of choices on offer. Even if you hate Bhindi, you’d receive just that from your dabba subscription.
Today customers want the convenience of not having to order daily and they also want to get food they like. To cater to this problem in the right fashion, Yumist started collecting behavioural data in various ways to know what customers like, their eating preferences, et al. “This allows us to bring in personalisation into our subscription product that we will launch soon,” added Jain.
Why Yumist decided to evangelize franchise route?
At present, Yumist has six outlets in NCR, and now it’s slated to evangelize franchise model for expansion. Jain explained, “In food and beverages franchising, there are two major challenges:
- For the brand to be able to control quality and consistency of food
- For the franchisee to make a quick return on capital invested
“Our model is such that we control food production and packaging completing, thus eliminating the risk of our product not being consistent. Also, because the capital expenditure (CAPEX) and operational expenses (OPEX) is so low in our business, it allows for the franchisee to break even very fast,” added Jain.
For Yumist as a business, it also allows company to scale much faster, and franchisees bring in the local knowledge of their own markets which is crucial to succeed in any hyper-local business.
Road ahead and competition
Yumist is currently expanding across NCR and will cover all the areas by October this year. Early next year, it plans to launch in other cities.
On competition front, Yumist competes with corporate canteens, dabbawallas, maids employed to cook at home, hawker stalls among others in unorganised market.