The war for market share in the crowded B2C food-tech segment has opened new doors for innovative institutional food-tech players in the B2B space. Sandipan Mitra, cofounder and CEO, HungerBox, says the company recognised the opportunity over three years ago, and is now reaping the first-mover advantage of growing in this high potential market.

Mitra says HungerBox is the“SAP for food”, as it has successfully addressed the needs of the typical working professional who eats out mostly on workdays. While it was challenging to sell the idea to clients in 2016, HungerBox currently caters to 126 clients across 18 cities and 535 corporate cafeterias. It is also tapping into multiplexes, hospitals, and educational institutes to expand its operations. With marquee investors like Paytm, Sabre Capital, and Kris Gopalakrishnan on board, HungerBox is looking to raise $25 million in a Series C round of funding over the next six-eight months.

Mitra is undaunted by the rising competition from Zomato’s B2B offering Food@Work, SmartQ, and Sodexo. “We have created a moat to defend market share. We have signed three-five year contracts with our clients which makes it challenging for a competitor to rapidly scale business in terms of stickiness, offerings and tech adaptation,” he says. Even as Mitra has set his eyes on foraying into international markets, he is confident the company will break even by March 2020. In an interview with Fortune India, Sandipan Mitra talks about HungerBox’s growth strategy, opportunities, and threats. Edited excerpts:

Food tech has been an attractive segment for entrepreneurs over the past few years. What is unique about HungerBox? How do you pitch HungerBox to woo investors in this cluttered market?

HungerBox is clearly an attractive pick for savvy investors tracking food tech. While food tech in India has become synonymous with B2C,this market is quite cluttered. In fact, B2B, or more precisely, institutional food tech, is the largest contributor in the overall food space because on average a typical working professional has about 17 of 28 meals outside home. This is a huge opportunity. As an institutional food-tech company, HungerBox offers end-to-end food-and-beverage operation management for our clientele. We are a technology-led B2B2C company, and focus on solving problems faced by stakeholders in the institutional F&B segment. In a span of three years, daily orders on our platform has crossed 500,000 and we are growing 10% month-on-month. We serve 125+ clients in various sectors including I.T. services, retail,healthcare, manufacturing, aviation and financial services. We count 10 out of 11 of the biggest MNCs in India as our clients and have annuity contracts of three-five years. Ours is an asset-light model and we have sharply focussed on unit economics—right down to the cafeteria level—from day one. We realise the importance of growing the ecosystem and have deep partnerships with all our stakeholders, including food vendors. We help them solve inefficiencies in their operations using our tech expertise and understanding of the food space.Our platform serves as a bridge between the users and the food partners while also enabling facilitators, such as admin teams, with real-time data to make informed decisions. Another unique aspect of the HungerBox solution is the comprehensive and completely customisable technology suite, curated food partner network, unmatched F&B operations expertise and food safety standards.

You say you are Asia’s first institutional food-tech company catering to B2B clients. So, how easy was it to get your first client on board? How did you sell the idea and convince them to try HungerBox?

Convincing companies to change the way things are done takes a lot of effort. Especially, when it comes to an area as sensitive as food, one can become a lightning rod for criticism if not handled well. Our first client was FirstSource back in September 2017. My cofounder Uttam and I have been in the food-tech space in India for a number of years now. We were the ones who championed the concept of online food ordering in India 12 years ago with a business that was later acquired by Just Eat India which was later acquired by Foodpanda. The idea of building a B2B food-tech firm originated when we noticed an untapped profitable food-tech opportunity. There was tremendous potential for a tech-led, disruptive solution that comprehensively addressed the B2B institutional food-tech space and that is what we decided to focus on. All corporates have food suppliers, hence demand already exists in the market. The missing component in the market has been a platform which can connect suppliers to corporate clients and hence add significant value in the entire B2B food value chain. Other players who have been trying to do this are catering service providers, without any technology, or tech companies without any experience in food. Our razor-sharp focus and background has allowed us to penetrate deep into the market and to become the leader in India, even as we set our sights on other countries in the South East Asia region.

What are the top five areas that differentiate HungerBox from a traditional catering business?

At a fundamental level, though we are deeply involved in the food business, we don’t prepare food and therefore do not compete with our food partners. A conventional catering business focuses on procurement of ingredients, preparing food, serving, transportation, etc. The HungerBox platform consolidates demand on the one hand, and on the other, dovetails the preparation and supply of food in a dynamic and efficient manner, eliminating leakages and minimising food wastage. Technology pervades every aspect of our business and is used across the entire value chain. A catering business may use some technology, but this is mostly confined to billings and kitchen operations, whereas HungerBox’s offering is a completely tech-based management of the end-to-end food experience with features including artificial intelligence-based personalisation, health module to track calorie consumption, gamification, etc. Traditional catering businesses are brick-and-mortar with a heavy asset base, while ours is an asset-light model with no investments in catering equipment, ingredients, transportation, kitchens etc. We employ a commission-based model which is charged on the gross food value (GFV) sold by our food partners, whereas catering businesses are compensated by their clients/customers. In fact we work with food service businesses to address inefficiencies in their operations, enhance quality and food safety, and also assist them financially to grow their business and so on. We deploy 28 different technology products aimed at improving day-to-day food partner operations, inventory and cash management.

So, which companies do you cater to currently, and what is the growth roadmap for the next two years? Which new cities, new countries are you targeting?

We have 126 of the largest companies in India as clients and manage 535 corporate cafeterias on the HungerBox platform. We are the No. 1 institutional food-tech player in India with 10 of the 11 largest MNCs as our clients. These MNCs employ 100,000-plus staff. While most of our clients are corporates from the IT/ITES sector, we are expanding our footprint to other sectors such as manufacturing. In addition, we have forayed into other large segments such as mall food courts, tech parks, educational institutes,hospitals, multiplexes, etc. We plan to expand to 28 Indian cities from 18 currently, and plan to foray into the Southeast Asian market in the next one year.

What is your business model? What commission do you earn and is that the only revenue source?

Our revenue model is commission-based and charged on the gross food value (GFV) sold by our food partners. Commissions are typically 10%.

What’s the daily turnover? What was the revenue in FY19 and what is the growth trajectory next couple of quarters?

We have seen over 100 million transactions on our platform till date. We are currently at an ARR (accounting rate of return) of 500 crore growing 3.5 times over last year. We closed at 143 crores in FY 2018. We’ve received approximately $12 million in funding from marquee names including Paytm, Sabre Capital, Neoplux, Lionrock Capital, Kris Gopalakrishnan, K. Ganesh, etc. We expect to double the number of daily orders and reach one million orders per day by the end of this year.

What’s the outlook on margins?

We are sharply focussed on unit economics at a cafeteria level. We operate at 48% gross margin at our cafeterias today. However, we are working towards improving those gross margins. In a steady-state business we could take this up to 68%.

Sodexo, Smart Cube and Zomato’s Food@Work are competitors. Do you see pricing pressure going forward?

Unlike the B2C side of the food business, institutional food tech is not price or discounts driven. It requires a different ‘DNA’ to establish, operate efficiently, and scale this business.

You told me you see HungerBox as the “SAP for food”. You have the first-mover advantage, but how long can you leverage on this? What’s the strategy to defend your leadership given the rapid and ongoing disruption in the startup space?

There are a number of things that we are doing to drive home our positioning as the No. 1 institutional food-tech from India. We continue to focus in a razor-sharp manner on unit economics while scaling the business both within and outside India, in step with our clients, engage with and support our food partners thereby guaranteeing sustainability, deploy our learnings in the corporate segment to aggressively address other large and untapped markets such as mall food courts, tech parks, educational institutes, hospitals, multiplexes,etc.

In your own words,‘data privacy is an ongoing war’, is that one of the key challenges going forward?

Data sensitivity and security has become very sensitive across industries. Fortunately, not for us, since we have been a B2B company since inception. We have seriously put all systems and processes in place. Our focus has always been to be a very compliant company. Data security and privacy is an ongoing war, hackers are getting smarter, and you need to be up in your game, you constantly have to upgrade one step ahead.

You have been in talks with Naspers for the next round of fundraising. What is the company’s current valuation and how much are you looking to raise in Series C?

We are looking to raise up to $25 million in the next six-eight months. We do not reveal valuation publicly.

The growth curve has been steep in the last three years. When do you expect to break even and turn profitable?

That’s the beauty of the B2B model. That is, the fundamentals are very strong. Every unit we manage today is in the green, and that has been our number one focus ever since we started the organisation. Having had a ringside seat and observed the food business in India at close quarters for more than a decade now, we have had some great learnings. I firmly believe companies will have to centre their business on a path to profitability. Our plan is to reach break-even by March 2020.

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