?Tyson Foods Inc. launches new venture to fund food and agriculture startups

While growing up in Chennai, Samrat Reddy frequented the neighbourhood juice and smoothie shops. “I was not too much of a tea, coffee enthusiast, so I gravitated towards smoothies,” says 33-year-old Reddy.

When he shifted to Australia and then to the UK, Reddy observed that the number of cafes serving coffee were far greater in number compared to shops serving smoothies. “I was sure if smoothies were as readily available as tea and coffee, a large number of people would take to them as a lifestyle choice,” says Reddy.

Looking to fill this gap in the market, inspired by his own experience, and backed by an extensive research that he carried out on the potential of the smoothie market, Reddy decided to give wings to his ideas. He founded Drunken Monkey in December 2015 and operations started in February 2016. The Hyderabad-headquartered company works on a franchise model and has established 60 stores across 16 cities in just about two years.

“I wanted to do to smoothies what Starbucks did to coffee. People want a space for meaningful social connections without restricting themselves to the regular coffee and tea outlets. Smoothies are the new social lubricant in the town,” says Reddy, Founder and MD. To provide patrons a relaxed café-like ambience, Drunken Monkey bars offer free Wi-Fi, board games and comic books too.

The startup has created 170 varieties of smoothies, made from locally-sourced, natural ingredients, without preservatives. The idea is to create a new market and offer a new lifestyle option to people. “Major retail food and beverage chains have stuck to the proven formula of a limited and focused menu. But I wanted to try something different and spoil the customer for choice,” says Reddy.

From fresh fruit shakes to detox smoothies to protein smoothies, the range is wide. The bar even offers a variant it claims helps people recover from ‘a night of partying’. But with variety have come challenges: Managing the logistics of the business has become quite demanding, customers get confused on what to order and take longer time deciding on the order.

Reddy insists that despite the problems, variety helps the business: “We are here for the long haul and our repeat customers continue to be fascinated by how much more they have to explore. Why not give them the freedom to choose?”

Founded with an investment of Rs 4 crore— spread over a year—put in by Reddy and his family, Drunken Monkey generated Rs 29 crore in revenue in 2017-18. The startup aims to increase its stores to 100 in 2018-19 and more than treble its revenue to Rs 100 crore in the current financial year.

“Besides smoothies, our R&D team is working on some food options as well and we will bring them out in August. The pace at which we are growing gives us the confidence to meet our revenue target,” says Reddy.

Winner of the ‘Best Juice Parlour of the Year 2017’ by Restaurant India, the startup’s current challenge is to educate customers on the health benefits of smoothies: “Smoothies are fruits in liquid form and fruits are among the healthiest forms of food. It is exceedingly important to communicate what the product is and why it is good. Drunken Monkey sees itself as a crusader for the smoothie revolution,” says Reddy.

Online food delivery start-up Swiggy said it plans to start ramping up its advertisement business next year, targeting to generate as much as a fourth of its overall revenue from that segment by 2020. The company is planning to start product development for the business by the start of 2018, where it will be looking to monetise relationships further with restaurant partners.

SriHarsha Majety, Co founder, Swiggy said “We are already making good amount of ad revenue without making product suites that we wanted. It will be huge part of our plan and important part of our revenue mix. Ad business would form 20-25% of its net revenue by 2020. Food tech moment for India has arrived again. There is a lot of interest in strong execution.  Swiggy continues to get a lot of interest from people who want to partner with us. We continue to remain an independent company.

The move is significant as Swiggy makes most of its revenue from the delivery business, even as Gurgaon rival Zomato gets much of the revenue through its profitable advertising business.

Out of the $49-million revenue that Zomato made in fiscal 2017, $38 million came from advertisement, compared with just $9 million from food delivery. A significant part of Zomato’s advertisement revenue comes from overseas, where it is present in 24 countries with about 1.4 million restaurants listed on the platform.

Swiggy also announced the launch of Swiggy Access, whereby it will bring delivery-only branch of partner restaurants to new localities in various cities.

It is starting the first Swiggy Access kitchen in Bengaluru’s Marathahalli area, which will serve from Leon Grill, Keventers, Punjabi Rasoi and its private brands, House of Dabbas and The Bowl Company.

The Bengaluru-based company, which is at the centre of consolidation talks with players like Flipkart, Amazon, Paytm and Zomato, said it plans to continue as an independent company while declining to comment on specific conversations.

The startup boom in 2015, saw mobile technology emerge as a promising business model, may have encouraged many to jump onto the digital bandwagon. But many segments in this space in Hyderabad are now marked by dwindling number of entrants and slowing fund inflows.

The reason: an ecosystem that has been filled to the brim with thousands of technology-enabled startups. A classic example, say experts, is the food technology segment, where startups struggle to compete with major players like Swiggy and Zomato.

Sanjay Enishetty, Managing Director, Hyderabad-based investor group 50K Ventures, said, "As the food technology segment appeared to be a lucrative market in 2015, too many startups entered this market. While a few managed to survive or get acquired, a majority of them had to exit the market after exhausting all their funds. This is because the startups had not built a sustainable business model or a viable product, which could survive in such a crowded market,

Sample this: While the country had nearly 258 startups working in the food order and delivery space in 2014, this number jumped to 610 in 2015.In 2016, the figure dropped to 138. The scenario is no different in Hyderabad where the number of startups in this space dropped from 46 in 2014 to a mere 4 in 2016.

Yuv Raj, founder, First Meal, said, "It has become very hard for a startup to survive in the food technology space. There are far too many players in the market and funding has also seen a lull since 2015. Without a sustainable business model, startups will only fade away in a market dominated by Swiggy and Foodpanda. This is why in spite of the plans I had, to expand my startup, agreeing to an acquisition was the smart thing to do."

According to Enishetty , many startups working in the 'edu tech' space have also had to shut down operations, after raising an initial round of funding. The number of startups entering this market in Hyderabad has also fallen from 10 in 2015 to 6 in 2014. A few point to this falling number, of new players in the market, as one of the first signs of a maturing startup ecosystem.

An insider said, "A significant increase in the number of startups followed by a sudden dip is a clear sign of maturing markets. The leading competitors start to command the major share of the market and any further change, if at all, will be gradual. The entry barrier gets higher and early stage investments dry up. New ventures are always better off focusing on sectors which are still nascent."