Milkbasket offers daily doorstep grocery before 7 am

Indian market for food & grocery is estimated at $413 bn & is expected to grow at a rate of 25-30%

At 11 pm on a working day, just before hitting the bed, Rupa realised that her stock of oats was not enough for the next morning. With few options to buy oats at night and hardly any time to step out the next morning, she thought of skipping the regular oatmeal breakfast for her husband. But then she placed an order in the Milkbasket mobile app, ensuring her brand of oats would be delivered by the milkman the next morning before 7.

Milkbasket, a Gurugram-based start-up, claims to be India’s first daily micro-delivery grocery service taking a cue from the age-old door-to-door milk delivery model. It follows a model in which a customer can purchase one or two items to be delivered early next morning.

The company, founded by Anant Goel, Ashish Goel, Anurag Jain and Yatish Talvadia in early 2015, believes that its reliance on the milk delivery model decreases the cost of customer acquisition and delivery while increasing the margin. It offers free delivery of groceries from a gamut of 5,000 stock keeping units. The company recently saw the exit of its first investor, EVC Ventures, with a return of around 200 per cent within a year of investment. With the exit, in the third round of fundraising, the company raised an undisclosed amount from Blume Ventures and Lenovo Capital.

Business model

The business works on a prepaid model, where the customer can remit a minimum of Rs 500 to the company and order groceries to be delivered at his doorstep the next morning. Changes can be made in the order any time before midnight. Delivery is free even if there is only one low-value item purchased on a day. It does not offer any discount on the products.

Rapid, wider expansion is a challenge in this business model. The company has plans to penetrate smaller markets rather than rapid state-wise growth. At present, the company offers its services to 115 societies in Gurugram, even though there are around 500-700 societies in the city, says Satyendra Singh, head of marketing at Milkbasket, which began by supplying to three societies in March 2015.

Milkbasket relies on focused marketing and word-of-mouth publicity and at present three out of ten houses in the societies it serves are its customers. Engaging delivery boys on a part-time basis, and running the delivery vehicles in the early hours helps to reduce the cost of last-mile delivery. The cost is Rs 5-6 per delivery as against Rs 80-100 per delivery for the industry.

While Milkbasket has a direct tie-up with milk producers, the margin from milk is four-seven per cent and milk delivery was almost 90 per cent of its business in the beginning. Now, it has only 35 per cent of its supplies comprising milk, while 65 per cent is grocery items, including fruits and vegetables, which fetch margins of 15-25 per cent.

Fundraising

Milkbasket had raised $500,000 in a pre-series A round led by EVC Ventures with participation from investors from China and India. EVC, the Chicago-based venture capital fund that exited Milkbasket last week, says the investment made 200 per cent returns within a year. Around 45 customers have invested in another round of funding for an undisclosed amount.

With the exit of EVC Ventures, Milkbasket closed the Pre-Series A round with Blume Ventures and Lenovo Capital, in the third round of funding. The company did not divulge the quantum of funding. The latest round of fundraising will be to improve technology, supply chain and operations.

Aript Agarwal, principal, Blume Venture, says it was attracted by the unique delivery chain the company has created to ensure money on every order and the strong emphasis by the founders of the positive unit economics.

Opportunities and challenges

The Indian market for food and grocery is estimated at $413 billion and is expected to grow at a compounded annual rate of 25-30 per cent in the next five years, according to Technopak. In the top 15 cities and dense urban conglomerates, which are the prime market for Milkbasket, the opportunity in this space is around $21-25 billion annually, says Anant Goel, co-founder and CEO of the company.

“Our main competitors are a local mom and pop stores. In cities, 80 per cent of grocery purchases happen at these stores,” he said.

The model has unique problems, such as will Milkbasket be able to scale up ten times? Will it be able to increase its wallet share and still maintain margins? Will the market move to a consumer habit that forces people to order for a week at a time, rather than ordering daily?

“Our belief is that the team has the right focus, passion and smarts to solve these problems as and when they appear. They have grown ten times since we met them first and there is no reason why they cannot do another 10x from here," says Agarwal.

Hiring the right talent is another challenge, in this context. The company needs to look for the right people who can deliver the right products and services to customers.

Way forward

Milkbasket receives 5,000 orders a day now and is aiming at 50,000 daily orders by June 2018. The company has posted revenue of Rs 10 crore in 2016-17 and has seen a revenue growth of 15 times in the last 15 months. It has seen a threefold jump in margins and a 45 times growth in its overall business.

The company is expected to be operationally profitable in the next three months.

Over the next three years, the company plans to expand to three cities and in two years it is targeting 350,000 daily orders. The vision is to become the default mom and pop shop for a million households in the next five years. Milkbasket will look at further fundraising to support its growth.