This 100X.VC-backed startup plans to disrupt the food supply chain with ‘vertical delivery’ and data science
Sudhakar Nimmagalla graduated as a mechanical engineer from IIT Bombay in 2014. Since then, he’s been involved — in some or the other capacity — with several startups born at IIT-B. TinyOwl, Housing, Supr Daily... to name a few.
“I developed a keen interest in logistics and operations as a result,” Sudhakar tells us. An interest that would lead to intent years later.
In his last role, Sudhakar served as the Mumbai Operations Manager of Supr Daily (a hyperlocal milk-tech platform acquired byin 2018). He was responsible for scaling up daily orders in the region from 2,000 to 60,000.
Armed with this rich experience in the hyperlocal food supply chain, Sudhakar foundedin early 2019. The startup had one goal: to bring fresh fruits and vegetables from ‘farm-to-table’ across Mumbai households.
It planned to achieve this through an asset-light model, where inventories would be exhausted daily thus leading to minimal wastage. And, buyers could avail benefits such as ‘no minimum order value’ and ‘free same-day delivery’ at their doorstep.
The Founder-CEO tells YourStory,
“We researched various solutions in this space and found that existing players have occupied only 1 percent of the market so far. This is the only category where consumers are still going from vendor to vendor on the roadside and haggling over prices. Plus, the freshness of the item is always questionable.”
FnV Farms is attempting to fix this pain point by combining a robust supply chain mechanism with cutting-edge data science.
Bulk sourcing from farms
The Mumbai-based startup procures its harvest in bulk from farmer’s markets in Nashik and adjoining areas in Maharashtra.
It then transports the harvest to its warehouses and cold-storage units in Vashi in Navi Mumbai and Borivali in West Mumbai, following which it runs stringent quality checks on the items.
Sudhakar says that adulteration is one of the biggest issues, and local vendors often use chemicals and other nutrients to make old harvest appear fresh. FnV Farms is trying to curb adulteration by managing procurement to delivery on the same day.
Farheen Jamal, Co-founder of FnV Farms, elaborates,
“We procure only those items that have been ordered by customers. That way we do not store anything longer than a few hours. This also allows us to keep our infrastructure investments low, and helps us earn gross margins of 30 percent.”
The ‘vertical delivery’ model
Besides directly sourcing from farmers, the startup has also devised a unique “vertical delivery” system, which Sudhakar says, takes care of its unit economics.
FnV Farms identifies high-density areas in a city, on-boards all society complexes within a three-kilometre radius in that area, and delivers crates from the ground floor to the top floor.
At present, its delivery fleet consists of 20 part-time executives, each covering only 500 metres in the fixed radius.
“This allows us to deliver 30-40 orders in just four hours, and bulk orders from each society allows us to reduce per-delivery cost to Rs 5,” Sudhakar explains.
“We have identified 100+ such locations in Mumbai and are looking to generate about Rs 1 lakh to 2 lakh in orders everyday,” he adds.
By 2025, FnV Farms looks to replicate this model in India’s leading metros, and is targeting a reach of one million customers. It also plans to expand to Pune, thereby utilising its existing farmer network within Maharashtra.
Price forecasts with machine learning
Before launching its first prototype, the startup collected food inflation data of 24 months, studied patterns in the price fluctuations, and applied machine learning algorithms to forecast prices of fruits and veggies for the next 60 days.
This forecast also takes into account the rainfall levels across regions.
Based on these predictions, FnV Farms fixes every item’s price for a 15-day period, and allows consumers ordering on its platform to escape day-to-day haggling.
Sudhakar claims this model is working, and buyers are enjoying price benefits of 15-18 percent. “We have a repeat customer rate of 70 percent, and 91 percent of the buyers agree that our prices are lower than what the market offers,” he shares.
Operations and growth plans
FnV Farms claims that it has supplied 55.5 tonnes of fresh produce in six months. Its inventory consists of about 90 SKUs, with onion, tomato, potato, ladies finger, banana, apple, and seasonal fruits emerging as the bestselling items.
There are about 2,100 customers on the platform, which sees 100 to 130 orders being placed daily. Without revealing specifics, the company says that it is growing at 50 percent month-on-month, with average revenue per customer at Rs 1,450.
“Our focus now is to build a 1,000-tonne supply chain and delivery mechanism covering India’s top 20 cities. By 2025, we’re looking to generate revenues of Rs 25 billion.”
These are big projections, yes. But considering India’s online food and grocery market is estimated to reach $10.5 billion by 2023 (RedSeer data), it may not be all that impossible to attain.
What will fuel FnV Farms’ growth plans is the recent backing from 100X.VC, an early-stage venture fund that looks to invest Rs 200 crore in 100 homegrown startups by the end of 2020. The Y Combinator-like entity has put in Rs 25 lakh as pre-seed investment in the 12-member startup.
FnV Farms is planning to raise another round of Rs 4 crore this year to fund its expansion and hiring.
Sudhakar signs off by saying,
“We’ve ensured price consistency and quality assurance so far. Now, we’re looking to roll out a subscription model too.”
After all, that is where domestic ecommerce is headed!
(Edited by Teja Lele Desai)