For a perishable product with a low shelf-life of just 3-6 days, distribution is key to reducing wastage and keeping stock fresh.

Recipe for success Blending advanced tech with idli batter to create a 1000-cr brandAll images: Twitter
Atom Strategy Wednesday, June 13, 2018 - 19:09

The business ID Fresh Foods is into is no rocket science, as founder Musthafa PC himself puts it. ID sells idly and dosa batter, ready-to-cook chapatis and parotas, and other fresh products.

“We don’t have an IP for the product. So, anybody can get into the business. There is no entry barrier,” he says.

Yet, with about eight products, ID Fresh Foods’ business is clocking in an annual run rate of over Rs 200 crore and 40% of this comes from batter. Go to any supermarket and you will find ID’s idly or dosa batter, paneer, rotis, Malabar parotas and most recently, Vada batter, on the shelves. ID is today making over a million idlis each day with roughly 70% market share in the branded batter market. And it is today a case study at Harvard University.

Having started 12 years ago in a small place in Bengaluru selling idly and dosa batter, what is the recipe behind the success of the brand?

“We kept the product simple and natural. We didn’t complicate it,” says Musthafa.

The secret, he says, is in keeping it as close to what grandmothers traditionally make at home.

“We stayed away from the spotlight. We didn’t want to take the credit away from the homemaker. I’m not selling idly, I’m selling idly batter. Once the homemaker buys our product, the product lands in the kitchen and not on the dining table. If the idlis or dosas come out well, the credit goes to the homemaker, not to ID. But for some reason if it’s not good, the blame goes to ID. That’s what we focused on and it worked,” he adds.

But more importantly, what has kept the brand popular is ensuring product freshness and quality consistency. This is also what sets them apart from the competition, Musthafa says.

“In the last 10 years, there are least some 30-40 companies who started a similar business. While most shut down, 3-4 companies are still operating. It’s a try and go model. It is not easy to maintain quality and wastage, which happens using technology, using prediction,” he adds.

That has been ID’s biggest USP, riding on which it hopes to become a Rs 1000-crore business in five years with nearly zero wastage.

Blending technology

ID Fresh Foods runs on a cash-and-carry model. It procures raw materials, makes the products and sells them in various stores. It maintains zero inventory.

“Whatever we manufacture today will get shipped to the stores the next morning and will be sold at the stores the same day and will be used at homes over the next 2-3 days,” Musthafa says.

For a perishable product with a low shelf-life of just 3-6 days, distribution is key to reducing wastage and keeping stock fresh.

ID has ensured it got the distribution right by setting up its own distribution team without depending on a third party to ensure it has complete control on the supply of its products. And how does it do that? Using technology. After all, ID was set up by a bunch of engineers.

“We are a group of techies. If you look at our team, all of us are software engineers. So naturally we try to use technology as part of the business. The tech we use is a combination of in-house and externally developed models. We have an in-house project team that conceives the idea and we get it developed by external parties,” Musthafa says.

Every store that ID supplies its products to is geo-tagged and geo-fenced. The vehicle movement and routes are optimised and monitored from a central place to keep track of each day’s supply.

“Our distribution model is every store, every product, every day. We ensure that every store is being visited every day. We don’t take orders in advance. We send the products in the vehicle, they go to the store, replenish the products and the leftovers are taken back. Then fresh products are supplied and we move on to the next store,” he says.

And this is completely controlled by technology. Data plays a very important role in ID. It uses predictive analysis to estimate the demand. This way ID has an idea of the amount that needs to be produced and delivered in each store and eventually reduce wastage. Musthafa says that for a matured product in a matured market, ID runs at a wastage of around 1%. However, a new city or a new product initially has a wastage of up to 30%.

“One to 1.5% in every market is a target. I think if I try to reduce it any further, it may not be really cost-effective,” he adds.

PC Musthafa along with the other co-founders. (From left to right): Shamsudeen TK, Jafar TK, Noushad TA and Abdul Nazer (seated)

As a result, ID has been profitable from its first year. The profit margins may have been lesser in the recent years, but Musthafa says this is because they have been focusing more on growth and investing money into the same.

“We are not making sweet money right now, but we are a break-even company. If you look at our growth, we have grown 10 times in 4 years,” he adds.

Despite being a market leader in the branded batter market, the opportunity is immense. Take for example Bengaluru, its largest market. The city eats roughly over a crore idlis every day, Musthafa says, but ID’s batter is served to less than 5% of the people.

“So, my market share in Bengaluru, if you look at it from an opportunity perspective, is less than 5%. From a branded batter market we might have a monopoly, but from the opportunity perspective, we’re not even 5%. The opportunity therefore lies in the existing products itself,” he adds.

Adding to the plate

But that isn’t stopping ID from continuing to innovate. Most recently it launched vada batter packaged in a pouch with a nozzle that helps you make perfectly shaped vadas. Musthafa says that more such products are in the pipeline. It will soon launch coffee decoction to make the traditional filter coffee at home. It is also looking to launch chutneys to complement ID’s existing products.

“We will not get into long life products. We want to be fresh and we want to be authentic Indian food. Ready-to-cook not ready-to-eat is our philosophy,” he adds.

ID is also looking to expand beyond its current 14 cities and will also look to set up manufacturing facilities in cities where distribution from existing factories isn’t possible.

It is also eyeing international markets and will be launching its products in Singapore and Sri Lanka. United States is also on the cards.

And technology will remain at the forefront of the business. “Our dream is that when a salesman reaches a store, the last pack should have been picked up by a customer. We will use technology to ensure that is achieved,” says Musthafa.

Also read: From selling 5-paise sweets as a kid to running a multi-crore idly-dosa batter empire

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