[Matrix Moments] Milktech startup Country Delight co-founders on how they got unit economics right during coronavirus crisis
Hyperlocal delivery and milk brand startup Country Delight is currently serving 200,000 families across Delhi, Mumbai, Pune, and Bengaluru. It has a $50 million run rate and 3x year-on-year growth.
In this episode of MatrixMoments, the Country Delight team spoke about the highlights and milestones of its journey, and how they are growing in times like these.
Setting the context, Sanjot Malhi, Director, Matrix Partners India, said, Country Delight has it all - deep markets, deep moats, and a high margin D2C business. So, the question is, how did they land on this business model.
“We are a direct-to-home consumer brand, and we are loosely based on the concept of a milkman at one end and also based on the concept of whole foods on the other end,” explained Chakradhar Gade, co-founder, Country Delight.
He said that in the early days, they felt it was a good idea to invest in a farm because animals are non-depreciated assets and they multiply.
The initial focus
“Initially, we started with 50 cattle, and we told each other that we'll get 500 cattle in two years. In terms of volume, we were doing 200 litres of milk a day, and we thought we’ll reach 5,000 in two years. But it took us six years to reach 5,000 litres,” says Chakradhar.
Nitin Kaushal, co-founder, Country Delight, said, they started as a milk subscription business. “In India, you will see milk being delivered to the doorstep of the customer on a daily basis. That’s pretty much the consumer habits that our business piggybacked on initially,” he added.
The idea was to start building a farm-to-table business. This was built on two broad tenets - the product should be a natural product in its original form and the product should be fresh.
“When we say fresh product, it means the product should be delivered to the doorstep of the consumer within 24 to 36 hours, and the product should be rigorously tested and should adhere to all parameters as far as the local compliance standards are concerned,” said Nitin.
Building the cold chain
They soon built a cold-chain enabled integrated pipeline, and the business is now pivoting to add more fresh produce and fresh products, where they can build on the farm to table philosophy and follow the same principles of natural, fresh, and unadulterated products.
“We have launched bread and free-range eggs. The idea is to ensure the product is fully developed right from the source to the final packaging, within our control, and all the raw material which is going into the products is fresh and is rigorously tested so that the end product delivered to the consumer is great,” says Nitin.
The important part is that the product should be fully cold-chain enabled so that there is no need for preservatives to be added at the time of delivery.
Chakradhar said their business model was an evolution of a thought driven by deep understanding of customers. He added, when you go and try to really get to the bottom of things with your customers, the two key things which they figured out was that people want ‘better things for themselves’ in terms of products, but they also want it at an affordable price.
Building a business for a large audience
“You don’t want to be a business that caters to 3-5 percent audience. You want a business that caters to probably 60-70 percent audience. And when you are trying to do that, there is the need for people to really want to believe in a good product for themselves,” said Chakradhar.
He said, for milk, it took them four or five years to figure out that the tangible taste difference is proof of a good product for a customer. Also, price was a big mental barrier.
“We could have packed our milk in glass bottles and given it to customers, but that makes it a super-premium product and that doesn’t allow us to reach as many audience. And when you’re throwing away the packing every day, it makes sense for you to spend two of the MRP on the product and transfer the remaining benefit to the consumer in terms of price,” added Chakradhar.
When Avinsh asked when did the idea of direct-to-home get added to this whole vision, Chakradhar said the idea of reaching a customer directly wasn’t there in the beginning. The idea was to give a good product at the best possible price.
But since distribution wasn’t available, they had to build it out and reach the customer. “What has always been important is to have a captive customer. You should not be one of the four choices which keeps coming out in front of the customer,” said Chakradhar.
However, what was not clear is whether you need to start developing the expertise or whether to get people. What eventually became clear to the team was that the customer has insights for all products, and if you start digging deep enough, you develop very sharp insights on every product, and you can really perfect every product that you deliver.
Focussing on customer needs
Nothing was evolved from day zero. There was no standardised recipe which worked well with the customer. It took a while to communicate with the customer, to know how the customer perceives the product, how the customer tastes the product, and their feedback, which led to all the re-engineering and creation of the product.
Country Delight now has a supply chain network spanning across six states across north India, and predominantly west India. It gives them access to high-quality raw materials, milk, wheat, oils, and access to a large range of poultry.
“And that has also enabled us to launch products which fit into that whole farm to table concept. On the supply side, from the beginning, the business has been built on the philosophy of working with a lesser set of stakeholders, where you have access to relatively higher quantities, where you have access to better quality produce, which comes in two or three formats,” said Nitin. It means working and choosing the right medium-sized and large-sized farms.
The idea is to select farms which have better hygiene practices, who have better cold-chain practices, who have higher adoption to technology when it comes to better quality milking, and all this leads to a better product fundamentally at the source.
The team has also started working with IoT integration. This gives real-time updates on the bacterial growth, which the team is receiving with all quality parameters and all payment parameters. At the core, Country Delight works as a subscription-based business, which offers a highly recurring revenue.
“Our 24-month-old customers give us the same revenue today as they were giving on the day one as a cohort. The second thing is that we always believed in creating a fundamentally sustainable business. The unit economics are just right enough for us to be efficient as a business. And we use a lot of tech,” said Chakradhar.
While brands like Amul and Mother Dairy handle close to 40 million litres every day, Country Delight is trying to create a differentiated premium audience, service, and product. And they believe it has even kept them going during the coronavirus crisis.
As Avnish puts it, hustling in crisis, being nimble, and having a commercial mindset keeps you going.
Listen to the podcast here.
Edited by Megha Reddy