Daybreak - Licious has enough money but not enough customers

Episode Date: October 5, 2023

Licious, the online meat delivery platform, was India’s first direct to consumer company or D2C that achieved the unicorn status.  It was valued at $1.4 billion two years ago and it had enough money to grow to Rs 100 crore of revenue per month, but its revenue has remained flat from the last two years.Licious follows the premium pricing strategy. Its products are priced higher price than the average market but its customer base is ready to pay that extra amount because of the quality Licious delivers. But Licious is not being able to expand its user base to the larger meat eating population because of this very premium pricing strategy.But it needs to deliver on a growth rate worthy of its billion dollar plus valuation.Tune in.RecommendationWhy India won’t see a $100 billion internet company anytime soonDaybreak is produced from the newsroom of The Ken, India's first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Ramon Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. In an interview some time ago, Abhay Hanjura, one of the two founders of the meat delivery platform, Licious, had said that four things in India are sold in black bolletine bags. condoms, liquor, sanitary pads, and meat of course.

For those of us who grew up eating fish and meat, it brings back so many memories. I get reminded of my grandfather who would go to great lengths to find good fish in the Himalayan town of Targiling. And of course, he always came home carrying it in a black plastic bag. It says so much about our socio-cultural environment. You know, the idea of what is pure. what is impure, but that is not what I'm here to talk about today. We're going to talk about Licious, India's first direct-to-consumer company or D2C company that achieved the unicorn status.

It's quite amazing how it managed to change this perception about meat and fish to a certain extent, and at least in the big cities where it delivers. Like, you can have premium quality meat delivered to your doorstep with great packaging and real good about it. No more black plastic bags. And here is a crazy fact. Both the founders of India's leading meat delivery brand, Abbe Hanjura and Vivek Gupta, come from strictly vegetarian families. From 1,500 orders per month in 2015 to 2 million orders per month in 2022, Licious has come a long way. Now, if you know this brand, then you also probably know that Licious follows the premium pricing strategy.

Whatever it is selling to us is at a higher price than the average market, but a particular set of people who we like to call California users are ready to pay that extra amount because of the quality that Licious delivers. I'm going to link an edition of a Ken newsletter to the show notes of this episode, and it is about California users and you have to read it. It is super interesting. Now, coming back to Licious, bringing this quality to its consumers obviously comes at a cost. Licious's premium meat comes from sourcing animals that are bruised free, weigh about 900 to 1,100 grams and are not pumped with antibiotics. So you can imagine how high that makes the input cost. Now, you might say,

So what? It's been established that people are ready to pay for it. But here's the problem. Licious is not being able to expand its user base to the larger meat-eating population of India because of its premium pricing strategy. But the company needs to grow. So either it has to make changes in the products that it offers so that they cost less, or it needs to start charging more for the products that it currently offers. But both these options are much easier said than done. Welcome to Daybreak, a business podcast from The Ken. I'm your host, Nickdaa Sharma, and I don't chase the news cycle.

Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Friday, the 6th of October. While most startups were facing a reckoning earlier this year with mass layoffs, there was one company that was sitting proud, unaffected. Licious. Both the founders, Hanjura and Gupta, were giving interviews talking about how their company had made no job cuts

and how they did not want that kind of bad karma. It sounds so nice, right? Especially when there is a bloodbath going all around you? Unfortunately, though, this strategy did not help Licious. In fact, it's been seeing some of it's totally. top talent at key leadership positions leave the company. Its chief financial officer Meita Agarwal, head of strategy on Khan Haldar, chief customer officer Kostubarakrabarti, Prashant Varma, who used to head business,

revenue and marketing, and three other business heads left the company between February and June this year. Not just that, three former employees told my colleague the Ken's deputy editor, Arunati Ramanathan, that the average leadership tenure at Lishus has not been longer than 15 to 18 months. What is going on? Stay tuned to find out. You see, funds are not a problem for Licious right now. The direct-to-consumer Unicorn raised $150 million just last year.

The problem was that this was not enough for the company to meet its revenue targets for this year. Licious's annual revenue has been flatlining since the funding round last year. It hit almost $10 million a month in gross revenue during the pandemic's peak in 2021. Then this fell down to about $8 million a month by 2022. The company also failed to hit its monthly revenue target of $12 to $15 million before March 23. Let me explain what is going on with chicken. Chicken makes up for 60 to 65% of Licious's sales, but the amount of a premium price that people will happily pay for chicken is very limited.

Even Licious employees have found it difficult to formulate selling strategies for meat that can be 15 to 40% more expensive than the average depending on the category. This meant that the company needed to rationalize its growth expectations. But think about it. It can't really do that. Because you see, so far, Licious has raised over $450 million in funding from big investors like TAMSEC, multiples and others, at a valuation of $1.5 billion. It has to keep up its growth rate for this very reason.

Licious has little room to backtrack on this. And what makes the whole thing even more of a. catch-22 situation for Licious is that its core customer base exists because of its premium promise. If it takes that away from them, then Licious will risk losing them for good. So what is the company doing to figure out this conundrum? Coming up next. Around four years ago, the co-founder of Flipkart Binnie Bunzel, along with two other people, set up a university that was aimed at helping start.

startups solve their scaling issues. Licious happened to be among the first companies to be a part of its six-month program that helps with OKR or objectives and key results design, operations, customer experiences, and a bunch of other related stuff. The company or the university is called X to 10X. The X to 10x team would spend four hours every week in Licious's offices when they came in as consultants in 2022. They conducted reviews with different business heads and their teams in the presence of the founders. A formalicious employee told the kin, and I'm quoting,

week on week, we were asked for different data cohorts. They helped us structure the data very well, but we could not find answers to the growth problem. I could see that they were adding more value in helping Abhay and Vivek ask better questions. End quote. But what happened is that this led to frustration within the leadership team at Licious, especially the ones who were there to deliver on growth. They saw their roles kind of being diminished. Their teams now had to take directions from Licious's CXos and also the X to 10X co-founders. The role of Bini Bansel's X to 10X is similar to what global consultancies like McKinsey do for their corporate clients,

but a bit more extensive or deeper. Anish Reddy, the founder of Capillary Tech, explained what X to 10X does actually. He said that they ask hard questions, and if you as a team do not appreciate it, you have a problem. But at Lish's X to 10X's intervention brought about an important result. The cost of delivery has dropped by 30 to 35%. Now, that is a solid result.

It is a big number. So what Licious did after X to 10X came into the picture was taking steps to introduce variable pay for its workers over fixed pay. The company's cash burn also has been reducing. But there is still the revenue problem to deal with. An industry analyst gave us a clearer picture. They said that Licious's revenue challenges come at a time when the growth rate, for online meat delivery startups is falling, as it is unable to widen its user base to the

larger meat-eating population. Licious, meanwhile, has also tried to expand its offerings with products like plant-based meats, but all these verticals did not really take off, and the people heading them also left the company. For now, though, as it figures out a solution, let us not forget that Licious has enough of cash in the bank. But to put that to good use, Lishis may need to rethink what it can really deliver. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform.

What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the ken.com and click, click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.