Bootstrapped and operationally profitable, Taaza Food works on the inventory model and has 90 percent customers on a credit model.
Gone are the days when we would buy vegetables and fruits every single day. Busy lifestyles have led us to shop less frequently, and, in some way, created an opportunity for farm-to-doorstep ventures. Businessman Pramod Rao saw demand, and chose to plunge into this untapped segment. Having run an IT company for over 10 years, he was also looking for a new challenge.
Pramod Rao started Taaza Food in March 2017, and the app-based hyperlocal startup delivers fresh fruits, vegetables and milk to households. The Gujarat-based startup delivers food in required time slots, and more importantly, offers a credit-based payment system. You can cancel an order with easy, and the company also accepts product returns by the end of the day.
Pramod completed a masters degree from Sardar Patel University in Anand, Gujarat, in 2004 and worked with Polaris Software and other companies in Mumbai for four years. He came to Vadodara in 2007 and started his own IT firm that develops ERP solutions for schools.
“While developing software for clients, I realised there was no big player who can deliver fruits and vegetables for a small ticket size of Rs 100. The shelf life of vegetables and fruits is also less. Competitors do take online orders for small ticket sizes, but they charge a delivery fee. We don’t charge delivery fee to our customers,” says Pramod.
“In Tier II and Tier III markets, the next day’s menu is decided instantly. Let’s say a housewife suddenly decides that she has to cook something in the morning and realises that she doesn’t have the raw materials. It is here that we come into the picture,” he says.
He added, “We take orders till 1 am in the night. The highest number of orders come to us in the midnight. For this, we have a special delivery option called “Santa Claus” delivery (i.e. hanging items at the customer’s doorstep). The benefit of this type of delivery is the customers get the orders early morning (between 5 am and 7 am) and the delivery boy saves traffic time.”
Fifty percent of the startup’s customers prefer delivery in this time slot.
“We have a credit-based payment system for up to Rs 2,000. But if our collection employees receive more money and have no change, the customers have the option to keep the excess money with us, which will be used for future orders,” says Pramod. Each customer can log in to the Taaza Food app and see their transaction history recorded. He says, ninety percent of its customers avail credit.
“Because we are targeting Tier II markets, it is homemakers who are usually at home. This is the reason we have all women collection employees,” he says.
“Initially, we bought a tempo and started our marketing activities in two societies. We geographically plot the entire area and feed it in the backend system. We started our operations and app with only 10 vegetables and three fruits. Since there was a clear need of what we were offering, we started receiving orders, and within a month, we reached to 30 orders per day,” says Pramod.
Taaza Food buys directly from farmers and wholesale markets, and stores them in its warehouse. It is now in the process of adding a second warehouse in Vadodara. It runs on the “inventory” model and doesn’t deliver other grocery items like masala, salt, etc.
Business and Revenues
Last month, bootstrapped Taaza Food became operationally profitable. It gets around 500 orders every day. “Today, we have more than 6,000 regular customers and have generated a revenue of Rs 1.5 crore since inception, with a small team of 24 employees (including management),” says Pramod. The startup claims to have an operating margin of 15 percent.
The fresh fruit and vegetable market size in India is about $200 billion.
Challenges and Competitors
The most important challenge the startup faced was to attain profitability. Pramod says, “We are already operationally profitable. Getting the items on time was the top challenge we faced initially. To overcome it, we purchase double the normal average daily quantity by the previous evening. And the remaining unsold quantity is being sent back to the brokers.”
Taaza Food presently competes with market major BigBasket in Vadodara. But the biggest advantage that Taaza Food has over its customers is the credit-based payment system.
Pramod says, “Unlike topping up of wallets, we give the option to buy in credit. We even have easy return policy. So, if the customer doesn’t require a product during the course of the day, they can ask us to take it back in the evening.” The startup says the returns are less than one percent due to better quality food being delivered.
Pramod says, “We are not looking for external funding currently. Next year, we are likely to operate in at least two more cities and we plan to talk to investors to scale up.”
In the next two years, the startup is planning to expand to Ahmedabad and Surat. This financial year, the company wants to strengthen its grip on Vadodara. Taaza Food is planning to achieve a revenue of Rs 3 crore this financial year, and in the next few months, it has targets to achieve a daily order of about 1,000. It is also planning to offer prepared foods such as dhokla, idli, and sandwiches, to customers by the end of this financial year. For that, it will have its own kitchen and bakery, says Pramod.