Meat delivery startup FreshToHome raises $104 million in funding led by Amazon Smbhav Venture Fund

Existing investors including Iron Pillar, Investcorp, Investment Corporation of Dubai, Ascent Capital and others also participated in the funding round. New investors include E20 Investment Ltd, Mountshan Judi Ventures and Dallah Albaraka.

Amazon Smbhav is the ecommerce major’s venture fund dedicated to India with a corpus of $250 million. It has previously invested in content-to-commerce platform Good Glamm Group, Cashify, a seller of used phones and other gadgets, among others.

The company plans to use the funds to enter more markets in the Gulf Cooperation Council (GCC) region, starting with Saudi Arabia, and also open more offline stores, cofounder Shan Kadavil told ET.

About 15% of its overall revenue comes from the UAE. “We have launched in 160 cities and 100 of these cities came in the last 12-18 months,” he said. “The first use of funds is going deeper into these cities…we are looking at Saudi as a market that we are looking to enter and the broader GCC.”

Kadavil declined to share the company’s valuation but said there has been a ‘massive uptick’ in its value since the previous round which it announced in October 2020.

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FreshToHome had closed $121 million in funding led by Investment Corporation of Dubai (ICD) – the principal investment arm of the Government of Dubai, private equity firms Investcorp and Ascent Capital, US government’s development finance institution – DFC, the Allana Group and other investors. ET had reported the company was valued at around $400 million following the investment.

Online meat market slowdown

Recently, online food and grocery delivery startup Swiggy decided to shut down its meat delivery business. Swiggy cofounder Sriharsha Majety told employees in an internal note that the vertical could not achieve “product market fit”, a term that refers to the degree to which a product satisfies a strong market demand.

Kadavil said while his company saw a 10x growth in sales three years prior to last year, the growth rate has slowed down to around 30-40% currently. While macroeconomic factors such as a return of offline stores are one reason, he said that FreshToHome’s focus on growing in a “sustainable fashion” also contributed to the slowdown.

“Obviously, when Covid-19 got over, offline started catching up again. All those macro trends are important,” he said. “But for us it was an intentional decision. We intentionally wanted to make sure that we grow in a sustainable fashion and that the operational profitability is a result of all that hard work. It is not easy trying to get to 40% gross margin in 160 cities, and this also includes wastages.”

Kadavil said expanding its offline presence is key to achieving profitability.

He said that offline stores can bring down the cost of acquisition, one of the highest cash burning exercises for consumer internet startups.

Offline key to attracting new users

FreshToHome has opened about 30 offline stores, largely in its home city of Bengaluru, and the company plans to take this to about 100 stores soon. These stores are completely owned and operated by the company.

“Essentially, any city you look at, we have 20-28 hubs or fulfilment centres which enable 2-hour delivery,” he said. “Now we are basically converting that into offline stores.”

Converting existing “dark stores” into offline stores helps the company bring down the cost of acquisition.

These stores are now bringing 20% of FreshToHome’s new consumers.

“While the cost will not be material from a capex perspective there is still a fairly large opportunity to give a similar sort of experience that consumers are used to from an offline perspective. That is the third usage of funds we have raised now,” Kadavil said.

FreshToHome competes with Licious, BigBasket, and smaller startups including ZappFresh, and TenderCuts. The company was founded in 2015 by Kadavil and Mathew Joseph to deliver fish and meat products. It also sells fresh fruit and vegetables, and ready-to-eat foods.

(Graphics & illustrations by Rahul Awasthi)