Cure.fit FY19

Cure.Fit’s search for numbers. Will customers bite?

Cure.fit FY19

Health and fitness startup Cure.Fit has joined the growing list of companies offering online groceries. The Mukesh Bansal-led company has started offering grocery products as it seeks to increase frequency on its app under the name Whole.Fit, its latest app update shows. 

The services are currently restricted to Bengaluru. 

The new offering sees Cure.Fit join Amazon, Flipkart and the major e-grocery incumbents BigBasket and Grofers in the race to tap into the online grocery market which is expected to grow to $10.5 billion by 2023. Swiggy-owned Supr Daily is also in the market after starting out with milk deliveries and launching Swiggy Stores.  

Cure.Fit’s grocery offerings for now range from breakfast cereals and staples to instant foods — all catered to an audience that is seeking health-friendly options. 

Since its launch in 2015, Cure.Fit has introduced multiple services in a bid to become a ‘super-app’ centered around better health. Starting with gyms in 2015, the company expanded to Eat.Fit for healthy eating, Mind.Fit for yoga and mental wellness and Care.Fit for primary healthcare. 

They recently also forayed into fitness wear, adding one more category to its app. And now, groceries through Whole.Fit.

The vision at Cure.Fit seems to be clear: build an ecosystem of health, fitness and healthcare. 

While the offerings of the company promise potential as health-consciousness spreads, industry experts question the sustainability of the business model considering the heavy capital expenditure involved, especially at a time when other capex-heavy companies such as WeWork and Oyo have come tumbling down. 

“Cure.Fit has been valued as a tech company rather than a real-estate company which will soon catch up with it,” said an investor at a top venture capital firm, requesting anonymity. “While customer service of the company has received positive feedback, it needs to be valued as a real estate company which has a thin layer of technology.”  

Breaking down the business model of the Cure.Fit ecosystem

Founded by Myntra co-founder Mukesh Bansal and former Flipkart executive Ankit Nagori, Cure.Fit’s business model is centred around creating a connected world where customers can move through an entire chain of healthy lifestyle including working out, healthy eating and mental health — all available at one place. The whole ecosystem runs through its Cure.Fit app.

Cult, its fitness offering, has roughly 200 centres across the country. To understand better, here’s an indicative one-time cost and revenue metrics from a  single centre. The company generally rents 3,000 sq ft space in commercial establishments. Unlike setting up a regular gym that requires about Rs 1.2 crore in initial investment due to heavy equipment, Cult’s single centre costs ‘only’ Rs 60-70 lakh — which includes flooring, painting and installing boxing bags, according to multiple people aware of the company’s operations. 

While rentals depend on the location, the typical cost to maintain a centre including salaries and marketing adds up to around Rs 15 lakh. 

“They are breaking even on a month-to-month basis at operational level — not counting technology costs, over-heads, training costs, etc,” said one of the persons mentioned above, requesting anonymity. 

According to sources, the company makes around Rs 15-18 lakh from centres which are located in Indira Nagar and Brigade Road in Bengaluru. This essentially outlines that about 650-700 people have been paying every month to Cure.Fit. However, that’s not the case with centres in other locations in Bengaluru and Hyderabad.

“About 70% of Cure.Fit’s centres have less than 300 paying customers. The number further goes down in north India (Delhi NCR),” said one of the sources cited above on condition of anonymity. The real-estate cost incurred by Cult.Fit’s operations is usually high. For example, its largest centre in NCR is located in Hauz Khas in New Delhi, a prime location where it has 12,000 square ft space. 

“The centre has about 1,100 members. That’s only 20% occupancy vis a vis capacity. Such a facility should have at least 5,000 members,” said the above quoted person.

Another factor that may not work in favor of Cult is that the rental costs are locked in and can rise at a faster pace when compared to membership prices, possibly causing an imbalance in income versus expenditure in the long run. 

While there are around 200 Cult centres across seven cities, the firm recently forayed into Dubai with plans to expand in South-East Asia, West Asia, Europe and North America.  

While Cult contributes a large chunk of overall revenue for Cure.Fit by virtue of its large ticket size, it is food that really brings in the numbers. Eat.Fit brings in about 80% of overall users. Several of these users overlap across different offerings — which is the main idea behind the ecosystem being created by Cure.Fit. 

Eat.Fit, which sells through the Cure.Fit app and through food-ordering platform Zomato, clocks about 35,000 daily orders. This is in sharp contrast to food delivery incumbents Swiggy and Zomato which clock over 1 million daily orders, as per industry estimates. More importantly, even the niche positioning as a ‘healthy’ option, thanks to the association with Cult, has not translated to selling profitably. 

“While they are able to predict orders due to the subscription model and the data they have, they are still running at a loss per order,” said another person familiar with the operations of Eat.Fit. “Per order they are losing Rs 25 without including delivery and kitchen costs.”

The firm was running around 40 Eat.Fit kitchens as of July 2019. With Swiggy’s recent entry into offering healthy options and an eventual expansion into home food subscription, Eat.Fit’s road to profitability seems to have become tough. 

Other verticals such as Care.Fit have around five centres and there are about 31 Mind.Fit centres.

Care.Fit itself is fairly new with offers on basic diagnostic tests and the Bansal-Nagori duo have plans to add other high-end health services such as skin, hair and dental care. 

Cure.Fit’s strategy: Outburn everyone 

Cult has managed to create a situation where other gym chains find it difficult to compete with it on membership costs. In other words, at Cult, it is always new year’s day — the day most gyms offer great deals to rope in members who have made resolutions to get fitter. 

This has been possible due to the large amounts of money that the company has raised over the last three years. It last raised $75 million in May 2019 at a valuation of over $500 million, less than a year after it raked in $120 million.  

“Everyone in the industry is confused and trying to figure out how the company is actually working. But maybe because of their high capital raise, which is around $60-70 million per year, they can afford such discounts and a cash burn of $25-30 million a year,” said a fitness industry veteran on condition of anonymity.

That said, some investors believe that Cure.Fit’s horizontal model is more of a boon than a bane.

“If Cure.Fit only ran fitness centres, then its revenues would depend on occupancy and retention rates, but with its ability to cross-sell multiple other features and products is what will work in its favor,” said another investor in this space, requesting anonymity. 

“Cult is their user acquisition channel and their other offerings don’t need any user acquisition cost.” 

Cure.Fit declined to comment for this story.

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Cure.fit FY19

Cure.Fit’s search for numbers. Will customers bite?

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