Can Licious Be India’s First Consumer Unicorn?

Last fortnight, Licious reported a 300% annualized growth rate, propelling the direct to home meat and seafood startup to one of the fastest growing brands in the country.

Rising in a Supergiant Market

India is primarily a non-vegetarian nation, quite contrary to the opinion that mostly everyone seems to have. 

Infact, the Sample Registration System (SRS) baseline survey 2014 – released by the Registrar General of India – revealed that 71% Indians above 15 years are non-vegetarian. 

Meat as a product evokes a strong emotional response. It is capable of delivering surreal gastric pleasures to human beings, often associated with festivities and celebrations. 

Depending on culture and ethnicity, there are certain non-vegetarian consumption traits that set groups apart. Foodies have been known to travel 20 kms or more to try out specific meat-based dishes, think biryani or kebabs.

Abhay Hanjura, a Kashmiri Pandit from Jammu, moved to Bengaluru in 2004 to do his graduation in biotechnology. After doing a business management course, he went to work as an insurance brokerage firm, eventually rising to be a Senior Vice President.

When Abhay was planning a meal with some of his friends who had come to visit him from the US, he heard one of them remark that whenever he came to India, he turned vegetarian. 

That got Abhay thinking. 

He knew that some of the best tasting meat dishes were found in India. In fact, India consumed meat worth around $50 Bn every year.

This demand for protein was only expected to grow, driven by economic growth, rising per capita income, urban trends, and a rise in the awareness of the nutrition provided by meat and related products.

All this demand was being primarily addressed by the unorganised wet market – the local suppliers who had set up their shops in the local market

Around that same time, Vivek Gupta, a Chartered Accountant from Chandigarh, was working with a venture capital firm. That VC firm happened to be a client of Abhay.

Abhay and Vivek used to catch up for meals. Being entrepreneurs at heart, the duo used to discuss many ideas. Both of them were itching to do something different, and that is when Abhay proposed the idea of starting a meat business.

The idea was afoot.

Challenger to the Royal Incumbents

At the time, no player in the country was thinking of organising this space. 

Abhay and Vivek saw an opportunity to build an iconic brand that changed the perception of meat in India. They teamed up to focus on delivering best quality meat to the customer’s doorstep.

Licious was born in 2015.

It was an uphill task for them to convince their respective families to align with their decisions to quit well-paying jobs and start a business. 

Abhay’s parents were startled when they heard this idea. In their opinion, Kashmiri Pandits do not go the entrepreneurial way, especially when there was a comfortable life with a good job.

Their journey to build Licious from scratch involved dedicating a lot of time understanding the problems in this space. They looked at the entire supply chain – procurement of livestock, storage, delivery as well as the quality of meat.

There were a few companies who had started selling meat online, but the problem of quality was still unsolved. Their meat product was either frozen or unhygienic.

After researching and studying all the aspects of the industry for a couple of months, Abhay and Vivek were finally ready to begin the delivery of quality meat online. 

Licious made its first sale in Bengaluru, but that wouldn’t mean solving all the structural problems associated with it. In India, meat does not enjoy the same privilege as its milk and dairy counterparts. 

There is a societal taboo associated with consumption of meat. Meat is sold in black polythene packs, to hide the unpleasant experience of carrying it in the open. 

Yet, India is one of the largest consumers of meat. It was poised to become a $65Bn market for meat and seafood by 2022. 

As disposable income and standards of living picked up, consumers were going to shift away from the wet market, which currently caters to 93% of the supply, to branded high quality sources of protein.

The current cold storage chain did not cater to this opportunity. 90% of the cold storage is dedicated to potatoes, while highly perishable meat items are kept out. The problem was therefore not of demand. 

It was of supply.

Charging into the Market Carefully 

Quality and hygienic products were unavailable in the category.

In this unfamiliar space, Abhay realised that acting as an aggregator, akin to unicorns like Ola/Swiggy, would not be the answer to procurement of large-scale meat and seafood.

Without stringent grasp on the quality of their product, brand Licious would perish even before taking off. 

Licious adopted a full stack, farm-to-fork model to maintain a tight control over quality in its integrated supply chain. 

They personally went to the suppliers, which were usually solo entrepreneurs, and had to build the supply chain from ground-up.   

This strategy appealed to the younger urban consumers who were willing to pay more for better-quality protein that they could trust.

In the initial days, Abhay and Vivek struggled to convince suppliers to adhere to their bar of quality standards. 

So much so that when they had first gone with their list of expectations to the supplier, they were laughed at. Poultry farmers thought that the duo were mad men looking to source “gold plated meat” from the market. 

However, investors really liked the method that Abhay and Vivek had chosen – building the business ground-up with razor sharp focus on unit economics. 

Licious did not want to grow GMV at all costs. Instead they opted for phased expansion, going city-by-city. This ensured they did not dilute the quality of their offering or have unnecessary cash burn.

From broken supply chains, they had to make sure that they do not just train their employees but train everyone along the supply chain – the people who breed the animals to last-mile delivery. 

Along with building the e-commerce infrastructure, they also focused on having quality assurance, and checks for all the products from the farms. 

With a solid fledgling business in place, Licious was able to raise a seed round in late 2015, which got them going towards creating India’s first D2C consumer food brand.

The first round of financing helped them to expand, introduce new product offerings, and build on the supply chain. 

In the first year of their operations in 2015, they clocked in total revenue of 1.47 crore INR, while doing about 1300 orders in the first month. 

The slow build had started to work.

Internet Enabled Warriors

In less than six months, they started clocking in 15,000 orders/month. 

With an average order size of 600 INR, doing almost 1Cr of revenue per month – from 2 Cr a year.

But through the process, there were plenty of challenges due to the goods being highly perishable, disease-prone products, and competition. For tackling the former two issues, they had to set up cold storage inventories in their supply chain.

By April 2016, Licious had raised $3.5MM for their Series A, and now they had five categories of products – fresh chicken, lamb, seafood, marinades and cold-cuts.

They managed to keep their supplier base to 30 as they wanted to maintain the quality across the products they offered. 

One key decision they made early on was to operate with a no frozen meat philosophy. The reason is that it wants to adhere to the Indian tastes of fresh quality meat produce. 

Licious knew there is a huge gap in the market for quality meat and a demand waiting to be unlocked. 

The rationale behind this was to go an extra mile and remove unwanted material in the product and add an ‘Aha’ experience for consumers. They did this to make sure Licious serves the best-in-class quality products as compared to local markets for the same kilogram.  

When it comes to pricing, benchmarking with equal weights, Licious priced its products 10-15% higher than the traditional market prices. It added an extra step to its value by removing and filtering for the unwanted material in the produce and hence fares higher in terms of quality meat in the net weight. 

Licious also charged an unheard of delivery fee (~5% of the total order value) to consumers in order for it to cover for the delightful, tight logistics experience it serves out. 

This resonated with the business psychology of India’s largest entertainment and ticketing booking platform BookMyShow, who were one of the first in the ecosystem to charge for “convenience”. 

Ticking all the checkboxes and growing at a moderate scale, it was time for Licious to grow at a rapid pace. 

With industry acceptance, the high adoption of smartphones and the introduction of Reliance Jio would transpire to be an inflection point for Licious.

Technology is the Purple Cap

The growth took off when the founder looked at Licious as a technology company and not just another e-commerce company. 

The integration of technology in this industry was unheard of at scale.The ideology of food e-commerce start-up using customer-centric and product first with technology as a backbone would change their operations.

An advanced technological backbone scaled up their customer buttressed the monetization strategy, consumer loyalty and increased word-of-mouth publicity.

They started building algorithms in four domains – past purchases, data analysis of people visiting their application and website, customer preference in browse categories, and product identification that were in most and least demand.

By building predictive analytics algorithms, now they could serve the customer better and also reduce their wastage drastically from 40% to 3% in Bangalore, something their competition failed to do.   

The ability to collect the data-points and provide products within 90-120 minutes when having stock, and within a day when not having the stock of a product was unheard of with a farm-to-fork business model.

With this new tech integration, the company started expanding into other avenues by providing end-to-end services from procuring fresh produce, processing them and storing it before delivery.

The company also started owning and operating fully-automated meat processing units and delivery centers.

Besides, there was more traction when they started serving exotic meat products like turkey, Quails, and Atlantic Salmons.

By this time, they found their product-market-fit, the customers loved the product they were offered. But the technology didn’t only help on demand, it transformed supply.

The data driven strategy resulted in a “zero-inventory” model which coincided with its motto of “fresh” quality produce delivery. 

This isn’t doable unless one has visibility at each and every step of the supply chain. The advantage of owning the entire supply chain kicks in here. 

Given Licious operated in a self-integrated fashion without third party dependencies, it had an unfair advantage compared to other D2C brands who grapple for visibility into their sales pattern, shipments and on stock inventories.

With 90% of recurring customers, and their customers didn’t want any other meat and seafood provider.  

Bidding for Market Leadership

The industry was set for a CAGR of 30% YoY, but Licious was growing at 300% YoY. 

This growth rate was desirable for the investors and raised $10MM in Series B in 2017, and just over a year in 2018; they raised $25MM for Series C.

Licious knew they had to innovate more, not just by providing better services, quality and taste. But also on other fronts to stay in this highly competitive industry. 

Thus, they focused on the packaging by leveraging design thinking and efficiency.

They started printing the caricature of the customers’ on the boxes of their parcels. This emotional connection had asserted loyalists in the hearts of Indians. From Sachin Tendulkar to common man, all relied heavily upon Licious for their quality meat and seafood purchases.

A lot of meat players, including the older incumbents, had thrown the hat into the direct consumer ring, but none could match with Licious.

The aspect that stood apart from their competition was technology. With this rich data of consumer preferences, they had to build it and grow at this consistent pace.

By now, Licious knew the secret sauce for success in this business were not the prices – as offered by the butchers and fishers in the market, but the quality of the product. 

They knew that meat and seafood was a celebration and were emotionally connected. The rising health awareness of protein-based food increased consumption was also advantageous.            

In September 2018, the company claimed to have processed 6000 orders/day with revenues touching around 5.5 crores/month.

From 2 crores a year in 2015, they had grown 30x by 2018. 

This trend had investors queuing up to invest in Licious; they raised another round of $25MM for Series D in December 2018, just within two months of raising Series C.

Licious wanted to connect with the rest of India; it wished to be in every meat lover’s heart. At its core, it still retained

It aimed to expand to eight cities. They built on their operations team, offered new frozen products, and continued the growth.

It raised $30MM for Series E in December 2019. The funds were and will be used for expanding in several Tier-2 cities, Stabilizing the existing cities, strengthening their omnichannel presence, and launching new products in ready-to-eat categories.

But as they expanded, their money making machine looked even more delicious.

Money Making Super Kings

Licious claimed that it achieved INR 300Cr (~$41mn) in annual revenue (run rate basis) as of March 2020 

It operationally broke even while processing more than 17K orders a day. Let’s say on average it processes 15K orders a day, implying an AOV of INR 550 ($7.5). This is close to the quoted AOV of INR 700 ($10), but we would want to proceed with a conservative number. 

To get a sense of Licious’ margins, we need to look no further than the traditional industry leaders in the category such as Venky’s, Saguna and Godrej Tyson foods. 

For instance, Venky’s margin just netting the cost of material consumed, ranges from 20-30%, per financials of the last two years. We can assume a similar margin for Licious as it is creating a parallel business to these players and layering it with powerful tech and self-regulated distribution. 

Of course the profitability margins would differ given Licious is a zero inventory, fresh supply model. We can assume the extra price along with delivery fee that Licious charges would more than cover for payment gateways and last mile delivery.  

Licious had 300k+ customers as of Apr18-19 when it was processing 6,000 orders a day. 

This gives an incredible ordering frequency of 7+ orders/ customer/ year. Consider the current 15,000 orders a day, and you realize why the business is so lucrative.

With the growth in orders and 90% of monthly orders coming from repeats, we’d assume the frequency would easily be 1 order/month and hence 12/orders/ customer/ year.  

Piecing it all together, this gives Licious a lifetime value of INR 1,644 ($23), which is a product of AOV, margin and order frequency.

But the customer’s lifetime value only makes sense if it covers the acquisitions cost. Recall that Licious broke even operationally in March-20 with INR 300Cr of Revenues.

Per our assumption of Licious having a 25% margin (post removing COGS, direct costs to distribution, supply etc), leaves us with Marketing, R&D and G&A as major cost chunks amounting to 25% for it to reach a breakeven. 

Licious is at its growth stage and it’s quite logical to assume that it would at least have 15% of revenues as its marketing and proportionate overheads, leaving 10% for R&D and overheads.

For 45K new monthly orders, it would have to spend INR 833 ($12), just half of its LTV. It now becomes clear as to why Licious’s model is so lucrative as a long term business. For every INR it spends on acquisition, it makes 2 INR of margin, essentially being a self sustaining machine. 

Technology and trust would become the pillars of the Licious machine.

Learning from the Bosses

By March 2020, COVID-19 had begun ravaging the world, including India.

While most of the businesses were affected, Licious benefitted. With 3X growth in the pandemic, it emerged as the “Most Empathetic” e-grocery platform during this time for it’s safest and high-quality product offering.

For social empathy, an indicator to assess social reliability and charitability during these uncertain times, it’s index score was 2X times better than the second position.

It also saw an ~1.3X jump in their Net Promoter Score, affirming it’s loyal consumer base and one of the best places to work in India.

It took care of everyone in the supply chain from the partner ecosystem to delivery executives. This was reminiscent of the early days of Amazon – being madly customer-centric and high employee loyalists.   

By then it had over 180 vendors, 56 delivery centers, 2000 employees and was aiming to reach $140MM revenue by 2023.   

As the pandemic accelerated online adoption, Licious found itself in a strong position.

Licious’ growth was a testament to the belief that India lacked a standardized, quality, neat and convenient option to consume fresh meat.

But while Licious changed the way meat was consumed in India, it also showed a strong sense of adopting best practices from incumbents and large players in other industries.

While Licious tied up with intermediary vendor clusters to procure raw material for poultry, for seafood it worked directly with the farmer families to source fresh water sea food. 

Does that ring a bell? Farmer cooperatives of course.

Licious not only looked for inspiration in meat, but also the famously successful dairy model of Amul. 

Licious is not just aligning with the mechanical details of operations, but even talks about giving respectable jobs to butchers at their growing processing centers. 

These members have till date been looked down upon by various sets in the society. It also works with farmers to save the margins that they make. In fact, it is hard to believe that the company even has the delivery fleet on roll as opposed to contracts, which is otherwise pretty much a norm in the industry. 

Licious wants to replicate the milk-run for meat-run and eventually be able to cut the middle-men, enhance further control over quality and accumulate better profits. 

Licious is excelling by not reinventing the wheel and taking up clues from the big players where it is needed 

A Rising Unicorn

Licious bold, yet measured approach, sets it up well as we enter a digital future.

With Licious attempting ambitious calls at every step from supply chain to installing cryogenic facilities in the processing units, it’s not a surprise that Mr. Hanjura even occasionally speaks about bringing blockchain to enable supply chain transparency.

It was touted to reach INR 500cr by March 2021 before the pandemic. But the numbers couldn’t be better for Licious, as it is on track given the more than normal demand generated after initial phases of lockdown. 

Licious’ outlook is to be at a revenue of INR 1,000 Cr by March 2022, and assuming a 7x multiple on revenue, a valuation of ~$1Bn. 

From a growth perspective, this actually doesn’t look very ambitious, which is a testament of how gigantic the market is. 

With the majority of the Indian population being meat eating, India easily has more than half a billion people consuming meat. 

If we just cut a minute 0.5% of this number and assume that it is ready to be captured, Licious, with the current number of customers, has just barely begun to roll. 

Licious has created a much needed dent in the consumer behavior and has started revolutionising the way India consumes meat. 

While our western counterparts began innovating and progressing in meat processing technologies from as early as late 18th and early 19th century, India is just starting. 

Licious’ focused vertical approach in the category, gathering and feeding back the learnings in, building a sound operational team, clocking highly efficient economics has set Licious on a sustainable trajectory. 

It’s strategy of staying small to experiment, building product market fit, and then pushing the pedal was contrarian. Results demonstrate that the strategy is working.

It is miles ahead of competition, and the amount of investment in people, technology and customers gives it a strong moat.

As we tentatively enter the next decade, Licious looks set to become India’s first direct to consumer unicorn.

By: Aviral, Raj, Shreyans and Saniya

Visuals: Abhinav

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