This Indore-based food and beverage startup is bootstrapping its way in conquering the $50 bn packaged food marketSindhu Kashyap
It was a warm summer of 2014. Abhishek Bardia and his wife Shikha Jain were enjoying a fun conversation during a holiday in Mauritius. During the course of the conversation, they decided to start something of their own. Considering they were passionate about food, they decided to venture into the business of food and beverages.
Once they returned to India, Abhishek, who was a Senior Vice President with IDFC Ltd. in Mumbai, put his papers and both Shikha and Abhishek moved to Indore two months later so that Shikha could continue her CA practice. It was after six months of building and dropping several business plans, that the duo was finally able to start Shikha Foods in Indore last January.
Bringing in the differentiators
Thirty-four-year-old Shikha an FCA, was a senior partner with Indore-based Jain Mittal & Associates and was also actively involved in her parental business of manufacturing of soya oil. Abhishek, and IIML graduate, had over nine years of corporate experience with Aditya Birla Group, Hexaware Technologies, and IDFC Ltd.
The primary goal of Shikha Foods is to create F&B brands in different categories. Abhishek says that these product categories have been largely unorganised and it is the regional players who dominate the market. But no player like ITC, HUL, or P&G, is present in these segments.
“We try to create a differentiated product from the ones existing in the market by focusing on product innovation, especially in terms of raw material, manufacturing process, taste enhancement, hygiene, and quality assurance,” says 34-year-old Abhishek, who is the MD of Shikha Foods.
Focus on an asset-light model
Shikha Foods focusses on the ‘Ready-to-cook’ snacks market with seven product offerings across 18 variants and over 20 SKUs under the brand name – Oraya.
These are pastas and vermicelli made from durum wheat semolina, 3D papads made from whole grain wheat, special shapes papad made of corn and wheat, potato papad, Bikaneri papad, and poha.
Shikha Foods is focusing on R&D and sales and marketing. The manufacturing of the products has been outsourced to various manufacturers across the country for different products either completely or in parts.
This, Abhishek believes, keeps the company follow an asset-light model and focus on providing a wider product range. Quick addition and rejection of product pipelines can be made as per market needs.
Breaking through the entry barriers
However, the idea of Shikha Foods did not come up as easily as they had anticipated. They were in the final stage of procuring machines for production of two food products in December 2014, when they realised that the way these products are being sold in the market (in bulk packaging), it would be practically impossible for them to tell customers why their products were superior to others.
“This is when we decided to focus on selling our products in consumer packing and creating a brand, so that customers know what to expect from our products,” says Abhishek.
He adds that the smallest of the machines for any of the products has the capacity to produce over two to three tons of the product in a day. This meant that they would’ve been under constant pressure to sell the goods in bulk packaging at the end of each day, which is why they decided to outsource the manufacturing and give orders as and when required.
One of the biggest challenges the team faced was in setting up a distribution channel. Most FMCG brands start with a small presence or selling in the bulk market. It is only over a period of time that they build a brand. Shikha Foods, however, entered multiple markets with multiple products, that too in consumer packaging, right from the beginning.
Abhishek says, “We had to convince the distribution channel partners to associate with us purely on the basis of the quality of our products, without any previous success story of the product or brand.” Since the pricing of the products were higher, it was a challenging task convincing both the distributors and retailers.
A wary market
Another major challenge for the team has been in raising funds. Abhishek says that they have spoken to over 40 angel investors, VCs, and private equity investors, without any success. Most investors are wary of an offline business that handles a large distributor and vendor model.
Apart from this, there are already stronger and more established home-grown brands like Haldirams, which brings a revenue close to Rs3500 crores -- believed to be more than the combined revenues of Dominos and McDonalds. There’s also MTR Foods, which is reportedly a Rs 400-crore revenue brand.
Pepsico is believed to have committed $4.9 billion by 2020 in the Indian market. A report by ASSOCHAM also suggests that the packaged foods market in India is currently growing at 32.5 percent since 2010. Pepsico had a sales turnover of Rs 7217 crore by the end of 2014.
What does the future hold?
Shikha Foods launched four products in the Indore market in first week of May 2015. Since then, they have added more products in more geographies. As of May 2016, they have seven products, 18 variants, and 20 SKUs.
“We are selling our products in MP, North East (seven states), North Bengal & Sikkim and Punjab & Haryana. Our estimated reach is over 1000 A category retail counters in these regions,” says Abhishek.
Shikha Foods has a distribution setup of various scales in MP, the Northeast, North Bengal and Sikkim, and Punjab and Haryana. In FY 2016-17, they intend to grow the business volumes by significantly investing in the sales team build up and marketing channels.
Speaking of the future, Abhishek says, “We have a decent presence in three distinctive corners of India and would want to now strengthen our presence in these markets and grow from thereon. We plan to be a pan-India player in the next five years.”