While the Coronavirus pandemic has turned many businesses upside down, FreshToHome—an online marketplace for fresh fish and meat—saw a drastic change in the purchasing behaviour of its customers. Shan Kadavil, co-founder and CEO of FreshToHome—which raised $121 million in a series C funding round last month—in an exclusive conversation with Fortune India, points out how, ever since the pandemic struck, consumers have increasingly begun to gravitate towards e-commerce. “Due to safety concerns, consumers made the habit-forming shift to e-commerce and we saw online demand for our products going up many folds this year,” he says. In this freewheeling interview, Kadavil talks about the potential of the e-commerce market, challenges in the current environment, and how he and his team convinced the investors to spend big bucks in a pandemic market. Edited excerpts.
Despite a tough market you raised $121 million in funding. How did you convince investors?
Investors love businesses that have high customer stickiness and higher frequency of purchase since the largest cost in any e-grocery P&L is the cost of acquiring new users. Our business is extremely lucrative as our AI-based tech platform enables sellers to directly source from fishermen and farmers and provide the freshest quality fish and meat to consumers within 24-36 hours. This allows us to standby our brand promise of 100% fresh, 0% chemicals, leading to better retention of consumers while also being Ebitda profitable in our mature cities. High consumer stickiness combined with unit economics has led to large investor interest in FreshToHome.
How do you plan to utilise the fund? So far, how much of funding have you raised?
We have a raised a total of $121 million in our series C and $31 million prior to that. We will be utilising the funds to deepen our vertical integration to enable our sellers to add more fishermen and farmers to our platform. We today have over 1500 fishermen across 125 harbours in India on our platform and would love to expand that network. We will also be expanding to most tier one cities, starting with Calcutta in the immediate future. Internationally, we are expanding to Saudi Arabia and also continue to deepen our presence in U.A.E. where we are among the top five e-grocery players.
The Coronavirus pandemic has changed the course of many businesses. How have things changed for you in the last seven months?
Covid-19 has transformed the fish and meat purchasing behaviour of consumers dramatically. Due to safety concerns, consumers made the habit-forming shift to e-commerce and we saw online demand for our products going up many folds this year. Our ability to directly source from the fishermen and farmers with our patent-pending A.I.-powered supply chain technology is a key reason why we have seen larger growth in this category during the pandemic. Additionally, we are able to provide reputed third party lab certification [proving] that there are no antibiotic residue or preservatives in the products we sell. This has been a big reason to gain trust among consumers. We have grown over 2.5x times in the last six months.
In the current environment, how are you responding to the challenges?
The biggest challenge has been to establish credible supply chain through our platform. This is a hard task in India since almost 3-4 middlemen are involved, and supply chain for meat and fish is usually perishable. Besides, cold chain is relatively absent. It took a lot of time and challenges to cut off the middlemen and enable our sellers to be able to directly offer such products to the end consumer. Covid-19 has made these operations harder but we are using a lot of technology to overcome these challenges.
How do you see the potential of the addressable market?
As estimated by Euromonitor International, the consumer market size of fish and meat segment in India in 2019 was $94 billion. However despite these numbers, the organised retail including e-commerce, is only 0.3% of the overall fish and meat market in the country which offers immense potential. India is among the top five non-vegetarian countries in the world and over 80% of Indians are non-vegetarians. However buying fish and meat online is largely an urban behaviour. This is changing quite drastically as the growth of this category is more than 18% CAGR, so all sections of the society, both urban and rural, are increasingly buying fish and meat in an organised fashion.
How do you differentiate versus competition?
The key differentiator is our direct sourcing approach through the network of sellers on our platform. We use technology to eliminate middlemen and source directly from fishermen and farmers. For a competitor, who buys from vendors in the city, this is a hard task to do.
How do you keep a track of the supply chain?
The key to success in the fish and meat category is good quality products and how fast it reaches the end consumer. A typical fish supply chain in India has over three middlemen which take at least 3-4 days to reach the end-user. Our technology-enabled platform ensures that the sellers are able to source without middlemen, and the product reaches the end consumer within 24 to 36 hours. Additionally, the platform guarantees that an around-the-clock cold chain keeps the products within a range of 0-4 degrees. Apart from that, over 120 checks during the process, including standard chemicals, antibiotics, and preservatives make sure that the customers get the best quality products.