There has been widespread reportage on how beef politics, and the recent tightening of rules on the sale of cattle across the country, has affected the beef industry in the country. Supply has hit rock-bottom, supply chains have gone frigid and slaughterhouses are facing financial loses. Demand too, has fallen.
But there has been another expected impact on the meat market, even if that is not being talked about much – the sale of other meat, especially chicken, has skyrocketed.
Officials of Assocham say that the change in cattle slaughter rules and other beef-related controversies have come as a blessing in disguise for poultry firms in several key regions and states, including Andhra Pradesh, Kerala, Tamil Nadu, Telangana and Punjab. The price of chicken in India has been rising after the central government’s tightening of rules for the sale of cattle, according to a study by the industry body. With consumption of chicken likely to increase by 35-40%, prices are projected to go up by 25-30% in the near future.
In contrast, between June 2013 and May 2014, wholesale price levels of beef and buff increased by 10%, while that of poultry chicken declined by about 9%. It was around 2015 when the beef controversy erupted in Maharashtra and it has been downhill for cattle meat ever since. According to the Assocham study, poultry wholesale price index has risen by 22%, while that of beef and buffalo meat has declined about 3% between May 2014 and March 2017.
And it is not just poultry firms that are benefitting out of this. Meat-delivery startups, which see great potential in sourcing meat directly from producers and assuring quality to the end-buyers, have seen their business improve. With the beef market being mostly unorganized, the organized markets of other meats are seeing a jump in demand.
“The recent rule change by the Government on the ban on sale of cattle for slaughter has automatically directed the interest of the meat lovers to the next best option which is goat, chicken and fish,” says Nishanth Chandran, CEO, TenderCuts, stating from the experience of the data from his company.
Deepanshu Manchanda, founder of Zappfresh also feels the government’s intervention on unorganised slaughtering, leading to supply of beef plummeting, is one of the drivers for consumption of poultry and other meats in India. “The drivers are consumer awareness on healthy eating, high protein intake, government intervention by banning unorganised slaughtering, banning beef, all this is giving a push to poultry and red meat consumption and the market is going through a gradual shift from unorganised to organized,” he says.
Deepanshu Manchanda, founder, Zappfresh
Abhay Hanjura, co-founder of Licious says that while the political aspect of the new cattle slaughter rules has been blown out of proportion, what this has done is put pressure on the entire ecosystem to tighten screws and make meat available through regulated channels. And so there could be a shift in demand to alternative meat options. “But if you ask me, while there is some of it reflecting in the industry, it’s still early days and there is no large movement yet,” he adds.
What Hanjura and Manchanda point out is that because of the new slaughter rules, there is a larger drive to regularize the meat supply chain, and startups are benefitting from it.
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Former Infosys CFO Mohandas Pai, also an investor in Licious, says that beef politics has nothing to do with the growth of this business. “There is a group of discerning consumers wanting convenience in whatever they buy. They want clean, hygienic and organic food. And this is a very large number across India. The old ways of selling some of these products is not something consumers like. They’re busy people and they look at ecommerce and companies like Licious to meet their needs. It has nothing to do with beef,” he says. Pai was recently under fire on social media for what many claimed was ‘hypocrisy’ on his part for backing the new slaughter rules of the government (being seen as ‘against’ meat-eaters) while having invested in a meat startup. As it turns out, there could be no hypocrisy in it at all.
Not just beef politics
But in the case of the online meat ordering industry, is this beef politics the only driver promising growth?
Leading players in the space are also seeing a gradual shift in the consumption patterns of Indians. And unavailability of beef is only adding to this growing trend.
According to a recent survey, 62.3% of Indian households consumed non-vegetarian food in 2011-12 compared to 58.2% in 2004-05. An 80% growth in demand for meat is expected by 2022. According to TenderCuts, Chennai market alone has been estimated at potentially INR 2500 Crore, and 8 Billion USD in urban India. The market is expected to triple by the year 2020.
And of the total domestic meat market, whose market size is about two lakh crore rupees, only a fraction of it is organized. No surprise then that in the past few years, a number of startups have forayed into the space of organized meat sale, especially through online channels.
Growth drivers
One of the main reasons for growth in consumption of meat has been consumer awareness. Be it health benefits of high protein intake coming from chicken, or fish, rising awareness of consuming fresh and hygienic meant or even simple awareness of various non-vegetarian delicacies available.
“The Indian consumer is becoming more evolved when it comes to consumption of meat and seafood. With travel, exposure and higher spending power, Indians are shifting their meat buying and consumption behaviours and are looking to consume meats such as pork and more delicatessen products such as bacon and pepperoni,” says Siddhant Wangdi - founder and CEO of Meatigo.
Siddhant Wangdi, founder and CEO, Meatigo.
Nishanth of Tendercuts says that meat has also been considered highly nutritious and has become an integral part of human diet. The significant rise in the income of the urban population has led to a structural change of food demands in the country. Availability of more varieties of meat, chicken and seafood across different platforms has created awareness among customers to select and consume the right food.
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The team of TenderCuts
TenderCuts currently has 35,000 customers and processes about 4000 orders a week. Meatigo, on the other hand, has a customer base of around 5000+ consumers and sees around 400 orders on a weekly basis. Licious does about 2500-3000 orders a day. Zappfresh has 60,000 customers and does 7500 orders a week, and expects more growth in the next two years.
Srivatsan N, founder of SME Leadengine says that with growing demand, this industry is grabbing eyeballs and investor attention. “Demand is huge for fresh meat. The local butcher shops don’t guarantee it. These companies procure directly from farms and quality isn't being compromised. This unique quality of not selling stale meat has helped these startups in enhancing sales,” he says.
Investors definitely seem to be bullish on this industry. Gurgaon-based Zappfrresh, run by DSM Fresh Foods raised Rs 2 crore angel funding from undisclosed investors. Angel investor Suresh Krishn, MD, Isha Homes has invested Rs 4.6 Crores in TenderCuts. Bengaluru-based Licious, run by Delightful Gourmet raised $10 million in a Series B round of funding led by existing investors Mayfield India and 3one4 Capital, which is Infosys ex-CFO Mohandas Pai’s fund.
While these startups are currently attracting both consumer and investor attention, will the demand sustain in the long term?
Long term game not with meat startups?
According to Rajinder Balaraman, vice president at Matrix Partners India, while it is an interesting market, it is too early to tell. The market size is not huge enough, he says.
“There is a market but the practical challenge is who’s going to win the story. My opinion is that companies like Bigbasket are in a better position to win this story than a dedicated meat store. The ticket size is small for individual players at a maximum of Rs 300-400. But if they are creative about increasing ticket size, there is an opportunity,” he adds.
But in the long term, Rajinder is betting on Bigbasket to win the meat story. Because an app like BigBasket caters to a much larger need Standalone companies, he says, can get large but will have a very niche segment to cater to.
Even in terms of the regulation of cattle trade, he says that beef is consumed by many because it is one fourth the cost of chicken. “They are not going to start ordering online just because there is a ban,” he adds.
But Srivatsan of SME Leadengine says that this industry is here to stay given the demand for fresh and preserved meat with a variety that is huge and growing.
These startups too, are extremely confident of their long-term growth, given the growth they are seeing right now.
Meatigo says that it is currently seeing a growth of around 20-25% on a month on month basis. Zappfresh grew 15X in FY17 compared to FY16. Demand is not going to be a problem in this industry, according to Deepanshu. With domestic consumption is growing very fast, there is a need of organised players in this industry to accommodate the demands of the customer and give them the quality they deserve, he says.
TenderCuts, which has been growing at 100% every three to four months, says that customer cohorts are very good and they see a lot of customers making frequent repeated purchases.
“The prospects are very bright in this segment as meat and fish contributes 18% of the monthly grocery needs. Today consumers are getting aware about the quality of the meat and are particular about the hygiene standards. We believe these two things will streamline our growth,” Nishanth says.