This B2B startup helps reduce procurement costs for F&B industry

This B2B startup helps reduce procurement costs for F&B industry

Monday December 26, 2016,

5 min Read

From getting the basic everyday ingredients to those exotic additions that make up your signature dish, Soukwagon, a B2B e-commerce platform, intends to reduce procurement costs for the food and beverage industry.

Every city has its own version of a traditional wholesale marketplace, a mecca for restaurateurs, hoteliers, and caterers, but procurement still poses a major challenge.

It was the exact same problem that prompted 39-year-old hotelier Jimmy Kuruvilla, who has over 17 years of experience with hotels like Taj, Hilton, Leela, and IHG, to join hands with hands with his friends to start Soukwagon. The startup is a B2B e-commerce marketplace for hotels and restaurants to perform their everyday procurements to run their business.

Founders of Soukwagon
Founders of Soukwagon

Over a cuppa

Jimmy’s eureka moment came while chatting with friends who were running restaurants, who would often fret about procurement being one of their biggest daily challenges.

“By the time you find the right seller, you could easily have been buying at the wrong place or for the wrong price without even realising that better products are available at better prices. I realised an online B2B marketplace could add immense value for the entire industry,” says Jimmy.

From that moment on, he spoke to various restaurant owners and sellers to validate the idea of Soukwagon and to see if it would make sense. The answer was an overwhelming ‘yes’.

Jimmy, Sagar Bhupalam, and Nanda Kishore met through common friends over a cup of coffee and explored possibilities to work on. “After a few days of discussion, we were convinced the food and beverage industry needed an online procurement marketplace and we began the journey of Soukwagon,” says Jimmy.

The team believes that the mix of complementary skill sets helped build the product and allowed the marketplace to grow. Sagar has more than eight years of experience in software development, enterprise architecture, and systems integration, while Nanda has over 15 years of experience in buying and merchandising, sales, and distribution.

They decided to build a platform that lists everything from vegetables, fruits, meat, and seafood to groceries, dairy, operating equipment, housekeeping products, uniforms, and more. For the first couple of months, the trio discussed the various work flows with all stakeholders to understand how to get the business model right.

Focusing on the food and beverage industry

“Even after going live, we continue to fine-tune it further to ensure all users find value and convenience in buying and selling. This is a curated list of products sold by experienced sellers, making it a unique one-stop platform for the food and beverage fraternity,” Jimmy says.

The advantage that businesses have by buying with Soukwagon is that they get complete transparency in their purchases with the wholesale pricing, purchase reports, and spend analytics for buyers to make informed decisions for their business.

The challenges

The task, however, wasn’t — and still isn’t — simple. The entire procurement in the food and beverage industry is done offline. It is the same problem of ‘touch and feel’ that the B2C internet companies faced. There is a need to change mindsets.

However, Jimmy adds that most people come to understand and accept the convenience, price benefit, and value-add that comes from shopping online on a B2B platform.

“One of our sellers summed it up by saying ‘you are changing the way the industry buys and sells’,” says Jimmy.

The B2B space

Without a doubt, there is a growing need and requirement for B2B e-commerce. A 2014 Walmart report suggested that B2B e-commerce market in India is likely to touch $700 billion by 2020.

There are 4.8 crore SMEs that need to secure bulk supplies, and that's a much bigger opportunity than B2C e-commerce.

Alibaba is believed to be the pioneer in the space with a whopping $27.28 billion in GMV. Currently, China, the US, and Japan are the biggest drivers of the B2B e-commerce market.

This year, the spate of funds deployed into the B2B e-commerce space seems to be growing.

Earlier this month, Accel Partners-backed Bizongo, the B2B packaging marketplace, had raised a $3 million in Series A funding from IDG Ventures. Recently, Udaan, the B2B platform started by Sujeeth Kumar, Amod Malviya, and Vaibhav Gupta, raised Series A funding of $10 million in a round led by LightSpeed Venture Partners.

Other players in the space include Wydr (founded by a Shopclues founding member), and IndustryBuying, a B2B platform for industrial products. Jaipur-based WholeSaleBox also raised a $2 million pre-Series A funding.

Specifically in the grocery segment, BigBasket seems to be eyeing the market opportunity and has opened its B2B wing — Horeca. Ahmedabad-based GrocNation ventured into the B2B segment by doing away with the B2C wing.

Differentiator and plans

One of the biggest differentiators for Soukwagon is the fact that the founding team has a deep understanding of tech and the needs of the food and beverage industry.

“We, therefore, are able to showcase relevant products to our buyers. We offer a curated list of verified professional sellers specifically for food and beverage businesses. Also, we can integrate into their business processes with very little or no learning curve for an individual to use the platform,” says Jimmy

In seven months, the team claims to have had over 80 food and beverage businesses sign up on the platform. These include hotels, standalone restaurants, bars, caterers, cafes, and online food operators.

The team claims to have an average order size of Rs 4,000 per customer. The repeat customer rate is 43 percent and over 32 percent buy across different categories.

One of their customers, Sorse, says that they have seen an eight percent drop in their procurement cost since they started buying with Soukwagon. Also, that the Soukwagon team is able to address any quality issues and provides great customer service.

Currently bootstrapped, the team intends to initially focus on Bengaluru, deepen their services there, and then expand across the country.