[Startup Bharat] This Tamil Nadu-based organic grocery brand is using ‘click-and-mortar’ retail to be a Rs 100 Cr company

The COVID-19 pandemic has led to the growth of the Indian consumer’s consciousness about safe, hygienic food, and the subsequent rise in demand for premium farm-fresh products. 

From fruits and vegetables to meat and dairy to gourmet grocery, online farm-to-consumer (F2C) platforms have gained a significant edge over traditional food retailers post the lockdown.

Accel India and Omnivore stated in a recent report, “With people shifting to online ordering due to the lockdown, this could prove to be a watershed moment for F2C brands as they look to disrupt traditional distribution channels. Technology is a key lever through which F2C brands were able to shift distribution from retail to consumer doorstep delivery.”

Meet Rural Basket, a Tirunelveli-based (Tamil Nadu) farm-to-home grocery startup witnessing exponential growth since the pandemic began.

“COVID-19 has been our turning point. The food industry is booming because of it,” Palani Rajan, Founder and CEO, RuralBasket, tells YourStory Media. “Now, people want a healthy diet, and our online sales have taken off since March,” he says.

Before we get into its pandemic-induced highs, what is RuralBasket? 

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‘Click-and-mortar’ grocery commerce

Founded in 2018 as RuralShop — an online marketplace for farmers, artisans, weavers, and rural industries to list their products and find customers — the platform shifted focus to food and grocery, and rebranded itself as RuralBasket in March 2019.

Since then, it claims to have grown its sales over 200 percent. 

RuralBasket sources organically grown products directly from farmers; grades, packs, and stores them in its warehouses; sells online and through RuralBasket retail stores, and delivers to customers’ doorstep using its own logistics fleet. Essentially, it is a full-stack “click-and-mortar” food retailer. 

Founder-CEO Rajan shares, “It was in August [2020] when we decided to get into the click-and-mortar model and open small retail shops where customers can just walk-in or get door pick-ups. RuralBasket stores are both a farmers’ marketplace and a one-stop destination for chemical-free grocery products.”

“Now we have four retail outlets in Tamil Nadu, and plan to open 25 more in Chennai and other parts of the state by March 2022,” he adds.

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RuralBasket offers about 15 categories and 500+ SKUs of pesticide-free, healthy, and “traditional” groceries, including daily needs items like rice, dals, millets, spices, oil, and other eatables as well as ready mixes, native snack baskets, home and beauty products, and the occasional handicrafts sourced from rural artisans.

The startup’s focus is on providing “high-quality, traceable, and traditional products” with a shelf life of at least 20 days.

Rajan elaborates,

“Our aim was to bring farmers and consumers one step closer to each other. Consumers are left with a plethora of choice but little information about products that are natural and sustainable. We wanted to be a one-stop-shop that offers these products by cutting down middlemen, and also empowers consumers with the knowledge of what they consume.”

The startup claims that its products are not only more affordable than average supermarket items, but also fetches 20-30 percent higher prices for farmers.

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Business growth and COVID-19 impact

RuralBasket has processed 6,000 orders with a GMV of Rs 70 lakh in almost two years.

The startup has partnered with over 15 Farmer Producer Organisations (FPOs) and 50 women Self Help Groups (SHGs) across Tamil Nadu to source a wide variety of “traditional” organic products. 

Minister Thiru K Pandiarajan, who launched one of its retail stores, said,

“It gives me immense satisfaction and pride to see young entrepreneurs doing their bit to nurture agribusiness in India. Their work with the farming community and bringing the produce directly to consumers is commendable.”

The startup is also planning to launch an upgraded app to tap into the millennial, upwardly-mobile consumer segment. At present, its “traditional” groceries are appealing to a slightly older demographic, says the founder. 

Contrary to several food and grocery retailers, RuralBasket’s gross margins stand at 10-12 percent, which is higher than the industry average. “Because we’re eliminating three layers of middlemen, our margins are higher,” Rajan states.

Add to that, the positive impact of the lockdown that compelled consumers to shop for essential products online.

F2C brands, in fact, recorded a 10X reduction in customer acquisition costs and a 2.5-3X growth in sales volumes during COVID-19, as per the Accel-Omnivore report.

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Funding and future roadmap

In December, Rural Basket received Rs 5 million in funding from Nativelead Foundation. It plans to utilise the capital to expand its retail footprint in Tamil Nadu, and enable 10,000 ‘ruralpreneurs’ across the state by 2022. 

Issac Devaraj, Co-founder and COO, Rural Basket, said,

“It [the funding] is encouraging and motivating for budding entrepreneurs from Tier-II cities. It will help us scale our operation both in terms of retail footprint and product offering. This directly impacts the people/farmers we very closely work with and help our goal of building 10,000 ruralpreneurs in the near future.”

The startup also plans to ramp up its product categories, and clock revenues of Rs 10 crore by 2022. And by 2025, it is targeting a turnover of Rs 100 crore. 

Rajan says, “Our focus for the next five years is to open 100 retail outlets in Chennai, Bengaluru, Hyderabad, and Kerala, and scale up the online operations, and product research. If we can do that, we will become a Rs 100-crore company by 2025.”

Going ahead, RuralBasket looks to be the ‘OYO for small retailers’ who are struggling in the wake of the pandemic.

“Our store expansion plans include both flagship stores and franchise units. We’ll give the suffering stores our brand name. That will help us scale faster with less manpower,” the founder explains.

“The end goal is to create ruralpreneurs who are interested in selling organic and farm-fresh stuff. Some of them also need employment now,” he adds. 

With COVID-19 creating significant tailwinds in the farm-fresh and grocery retail segment, RuralBasket will only go north. Literally and figuratively.