However, as the dust settled, most consumers went back to buying from local shops. “During Covid, there was a big spike in the number of consumers ordering online. We assumed this will keep us growing. But consumers returned to offline retail. That led to stagnation,” says Nishanth Chandran, founder of TenderCuts. Anticipating this, several companies launched physical stores, which brought another set of challenges.

Offline Gamble

Fipola initially launched three stores in Chennai and later expanded across Tamil Nadu, Karnataka and Telangana. The company, while raising its fourth round ($3 million) from FMCG veteran C.K. Ranganathan in March 2022, announced plans to become the country’s largest D2C omni-channel meat and seafood brand. It operated 65 stores then. The aim was to cross 100 in a few months and 250 by the end of 2023. By 2022-end, however, reports said the company has spent all its funds and owes money to several vendors, besides salaries to employees. It shut down in February 2023. According to the executive quoted above, the company has not cleared dues of several employees despite a legal notice. Fortune India reached out to founder Sushil Kanugolu for comment; he did not respond.

Several others also had plans to expand rapidly and launch stores across the country in 2021 and 2022. In March 2023, FreshToHome, which had about 30 stores, announced a plan to open 100 new stores. TenderCuts announced similar plans in October 2021. The bet proved to be expensive for most. Licious, too, opened its first store in Bengaluru in August and plans to expand to 25 stores by the end of FY25. On top of challenges such as quick perishability and shortage of cold chain infrastructure, the companies had to pay high rentals, especially as they opened some stores at premium locations. A case in point is Fipola’s store in upscale Banjara Hills in Hyderabad. “It does not make sense to have a meat store at premium locations. Thin margins and price fluctuation make it difficult to be profitable operationally,” says Narendra Pasuparthy, CEO of hyperlocal meat retail chain Nandus Chicken, which operates over 50 stores in Bengaluru and Hyderabad. Nandus is part of the six-decade-old Nanda Group whose mainstay is the poultry business.

Lack of control over the supply chain also makes it difficult for companies to control prices. According to stakeholders, most companies source chicken, mutton and seafood from large poultry farmer groups, who have been around for several decades. Suguna Foods, considered the country’s leading poultry company, reported ₹10,100 crore in revenue in FY24. Venky’s, another poultry major, clocked a net revenue of ₹3,738 crore in FY24. Venky’s was launched in 1976 while Suguna was founded in 1984.

New-age companies have stayed away from poultry farming as it is more capital-intensive than delivering meat. “Lack of control over supply chain means these companies are exposed to the vagaries of the poultry market and have to take a hit on margins even when prices are down as the consumer is not willing to shell out more,” says Pasuparthy. According to industry estimates, the chicken meat business has about 30% margins; mutton is a little less. Margins in fish are around 25%. Value-added products such as spreads command 45-55% margins.

Zorabian Chicken

Funding crunch hits D2C meat delivery segment