Daybreak - Why Licious had to lay off after all

Episode Date: February 16, 2024

While most startups were facing a reckoning earlier last year with mass layoffs, Licious, the meat delivery platform, was sitting proud, unaffected. 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 became the anomaly in a market that was seeing a bloodbath that going on all around.But to be honest, the  strategy of not laying off, didnt really help Licious. In fact, it saw some of its top talent at leadership positions leave the company.And now, as it turns out, it may not be all good karma for Licious founders after all.  The company has laid off 80 of its employees as a part of what its calling an operational reset. What’s going on? Tune in.Recommended read: California usersDaybreak 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 Raman 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. You know, while most startups were facing a reckoning earlier last year with mass layoffs, there was one company that was sitting proud and unaffected. Licious, the meat delivery platform. 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.

Sounds really nice, right? Now, for context, Licious was India's first direct-to-consumer company or D2C that achieved the unicorn status. The company delivers millions of orders every month. But it does it at a premium price. Its customers are ready to pay that extra amount because of the quality of the product. that Licious brings to them. Now, coming back to Licious being the anomaly in a market that was seeing a bloodbath going all around.

To be honest, that strategy of not laying off did not really help Licious. In fact, it saw some of its top talent at leadership positions leave the company. And now, as it turns out, it may not be all good karma for Licious founders after all. Last week, the company laid off 80 of its employees as part of what it calls an operational reset. What is going on? Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Dha 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 16th of February. Interview some time ago, Abhay Hanjura, one of the two founders of Lishes, had said that four things in India are sold in black polatine bags. Condoms, liquor, sanitary pads and meat, of course. For those of us who grew up eating fish in meat, this brings back so many memories. I get reminded of my grandfather who used to go to great lengths to find good fish in Darjeeling, a mountain town in North Bengal. And of course, he always came back home.

carrying it in a black plastic bag. It says so much about our socio-cultural environment, the idea of what is pure and what is impure, but that is not what I'm here to talk about today. What Licious did was remove the taboo around meat to quite an extent. It's amazing how it managed to change this perception about meat and fish, at least in big cities where it delivers. Like, you can have premium quality meat delivered to your doorstep with great packaging and feel good about it. No more black plastic bags. And here's a crazy fact. Both the founders of India's leading meat delivery brand, Abe Hanjura and Vivek Gupta, come from strictly vegetarian families. So from 1,500 orders per month in 2015 to 2 million orders per month in 2022, Licious has really

come a long way. Now, if you know anything about this brand, then you also probably know that Licious follows the premium pricing strategy. What 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 the piece on California users by my colleague Praveen Koppal-Krishnan to the show notes of this episode. You have to read it.

It's a super interesting piece. Now, coming back to Licious. Bringing this kind of quality to its customers obviously comes at a price. 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, right? But here's the problem.

Licious is not being able to expand its user-based to the larger meat-eating population because of its premium pricing category. And the company really needs to grow. And it is for this reason that it has laid off 3% of its workforce. But funds are not an issue for Licious. The Unicorn raised $150 million in 2022. So what is the problem then? Stay tuned to find out.

The problem was that it was not enough for the company to meet its revenue target. for 2023. Licious's annual revenue has been flat since the funding round of 2022. It hit almost $10 million in cross revenue a month during the pandemic's peak in 2021. And then this fell to about $8 million a month by 2022. In fact, FY 2023 ended for Licious with a flat revenue. Now let me explain what is going on with the help of chicken. Chicken makes up for 60 to 65 percent of 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 come up with 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 cannot really do that. Why? Because so far, Licious has raised. over $450 million from big investors like Temasek, Multiple and others at a $1.5 billion valuation. So it has to keep up its growth rate for this very reason. Licious has little room to backtrack on this. And here's the Catch-22 situation that Licious is stuck in. Its core customer base exists because of its premium promise. And if it takes away that from them, then Licious, will risk losing them for good. So, what is it doing to figure out this conundrum?

Coming up next. Around four years ago, the co-founder of Flipkart, Binnie Bunzel, along with two others, set up a university that was aimed to help startups solve their scaling issues. Licious was among the first companies to be a part of this six-month program that helps with OKR or objectives and key results design, operations and companies, and companies. customer experiences and a bunch of other related stuff. It is called X to 10X.

So this X to 10X team would spend about four hours a 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 former Licious employee told the Ken 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. the answers to the growth problem. I could see that they were adding more value in helping Abhay

Hanjura and Vivek Gupta by asking better questions. End quote. But this led to frustration within the leadership team at Lish's, especially the ones who were there to deliver on growth. They saw their roles diminished. Their teams now had to take directions from Licious's CXOs and also the X-10-10-X co-founders. The role of X-2-10-X is similar to what global consultancies like McKinsey drive for their corporate clients, but a bit more extensive. A niche ready, the founder of Capillary Tech, explained it to us. They ask hard questions and if you as a team do not appreciate it, you have a problem. But at Licious, X to 10X's intervention brought about an important result. The cost of delivery has dropped by 30 to 35% for Licious,

and that is a considerable amount. So what Lishis did after X to X's, X to 10x came into the picture was take steps to introduce variable pay for its workers over fixed pay. The company's cash burn also reduced. But there's still the revenue problem to deal with. Industry analysts gave the ken a clearer picture. They said Licious's revenue challenges come at a time when the growth rate for online meat delivery start-ups is falling as it is unable to widen its user base to the larger meat-eating population. Licious has also tried to expand its offerings with products like plant-based meats,

but the verticals did not really take off, and the people heading those verticals also left. For now, though, as it figures out a solution, let us not forget, Licious has enough cash in the bank. But to put it to good use, Licious may need to rethink what it can actually 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 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.