Startup Street: A Path To Survival For India’s Craft Beer Startups Amid Covid-19 Pandemic
This week on Startup Street, a global data and analytics firm with a suggestion that may help India’s craft beer startups survive the disruptive Covid-19 pandemic. Fitness startup Fitternity plans to raise investment from overseas investors by next January to fund its expansion. Sequoia Capital India Managing Director Rajan Anandan believes India’s startups are using this time wisely to improve unit economics. And private equity firm KKR is doubling down on India’s financial sector investments. Here’s what went on.
Craft Beer Makers Should Flow With The ‘Immunity Boosting’ Trend, Says GlobalData
India's craft beer makers can weather the Covid-19 storm by incorporating "immunity-boosting ingredients", according to leading data and analytics platform GlobalData, following a trend that is clearly taking hold among fast-moving consumer goods companies.
"Craft beer companies often experiment with flavors, nutritional content and water composition. Adding functional ingredients can be a differentiating, yet familiar feature for beer drinkers in India," said Kshama Raj, consumer analyst at GlobalData. This has already been done in Japan, where Ryukakusan Tazawako — a wheat beer brand — claims to alleviate cough symptoms due to the added dragon herb, she said in a report.
India is already seeing a ton of food and drinks marketed with an "immunity boosting" claim. Mother Dairy, in June, introduced a new tumeric-flavoured milk. Local sweets makers have launched tulsi-flavoured treats. Even the Karnataka Milk Federation has launched a range of products, including tulsi milk, ashwagandha milk, pepper milk, clove milk, and ginger milk, which the federation claims are immunity boosters.
Indian craft beer brands should also add functional ingredients such as gooseberry, neem, turmeric, basil, black pepper, ginger and herbs that are associated with home remedies for cold and flu symptoms to increase their attraction to customers, GlobalData said.
Raj, however, warned that they need to be careful while making health and wellness claims in their marketing strategy.
India's beer industry is witnessing a slump in sales as the coronavirus lockdown forced restaurants and pubs to shut down. A report by Economic Times quoted Shekhar Ramamurthy, managing director at United Breweries Ltd., saying people are preferring hard liquor over beer as the former is easier to store.
GlobalData's 2023 forecast for beer and cider category in India has been revised down from $12.9 billion to $10.7 billion. Around 21% of Indian consumers drink craft beer, popularising bottled craft beer brands such as Bira 91, Simba, The White Owl, Kati Patang, Medusa Beer, White Rhino, and Brewbot — all startups.
Raj said apart from introducing new flavours, the startups need to strengthen their retail channels to ensure the beer reaches consumers at home. According to GlobalData's Covid-19 consumer survey carried out in the first week of July, 63% consumers would dine at home instead of restaurants, and 30% agree they plan to spend more time socialising with friends and family at home in the foreseeable future.
Fitness Startup Fitternity Looking At Raising $12-15 Million By January
Fitness startup Fitternity plans to raise $12-15 million (Rs 90-112 crore) from overseas investors by next January to fund its expansion at a time its business has been “badly hit” by the pandemic.
The company has been operating across Mumbai, Delhi-National Capital Region, Bengaluru, Pune, and Hyderabad and just has opened in Ahmedabad, Chennai, Jaipur, Kolkata and Chandigarh. It plans to enter Kochi, Lucknow and eight more cities by March, co-founder and Chief Operating Officer Jayam Vora told PTI.
Fitternity claims to be the largest fitness platform and marketplace with over 6 lakh monthly active users across a network of 12,000 gyms, studios, fitness centres, hotels, and swimming pool facilities among others, which will go over 20,000 by March.
“We were close to striking a funding a deal with a few foreign investors in March but the pandemic scuppered it,” Vora said. “Now we are working towards raising something like $12-15 million by January. Thankfully, many foreign investors have significant interest in our business model.”
The company is backed by domestic private equity players like Sixth Sense Ventures and Exfinity Venture Partners of Mohandas Pai, apart from angel investors Akshay Chudasma of Shardul Amarchand Mangaldas, and Rohit Kapoor of Oyo, among half a dozen others. They have collectively pumped Rs 40 crore into the startup.
Admitting that his business has been badly hit due to the lockdowns — down 75% from the average monthly revenue run-rate of Rs 10 crore pre-Covid — Vora expects digital playing a bigger role in revenue generation. On profitability, he said if the present public interest sustained in fitness, they hope to report first profit over the next 12 months.
Indian Startups Focusing On Improving Unit Economics Amid Pandemic: Rajan Anandan
Startups are focusing on improving their unit economics amid the Covid-19 pandemic that will help improve the underlying health of ecosystem, and drive more funds by 2022, Sequoia Capital India Managing Director Rajan Anandan said.
Speaking at the Global Fintech Fest 2020, Anandan said there are going to be some "material" changes in the Indian startup ecosystem as the pandemic and resultant lockdown have forced many startups to shut down.
"India has over 40,000 startups, only about 10% have raised venture capital funding, and of the startups that have raised venture capital funding, 90% are deeply unprofitable. Of the ones that haven't raised, only 40% are profitable," he said.
While many startups have closed shop, Anandan said Indian startups have materially improved their underlying unit economics in the last four months and many companies will move towards profitability.
"By the end of 2021, I think the underlying health of the Indian startup ecosystem is going to be 10 times better than what it is today and as a result, I think Indian startups will generally require less capital but whatever capital they need, they'll be able to get," he said.
KKR Plans To Buy Stake In Fintech Startup Incred
Private equity firm KKR is all set to buy a stake in fintech startup InCred Finance, PTI reported quoting a person aware of the matter. KKR and InCred have signed an exclusivity agreement under which the private equity firm plans to merge its retail non-bank lending arm with InCred.
The equity injection will take the form of a merger of KKR's wholesale non-bank financial company with InCred's retail franchise. The aim appears to create a strongly tech-focused Indian financial services behemoth, the person quoted above said.
KKR and its limited partners will pick up a large minority interest in InCred, the person said. The combined entity will operate under the InCred brand name, and after the deal, the merged book size will be around Rs 6,000 crore with a relatively low debt-equity ratio.
The four-year-old startup, founded by former Deutsche banker Bhupinder Singh, has raised over Rs 1,000 crore to date from a set of investors, including Investcorp, Manipal chief Ranjan Pai, Dutch government-owned FMO, Moore Venture Partners, Paragon, Elevar and OAKS Asset Management, among others.
KKR India Financial Services Ltd. also has two other marquee investors — Abu Dhabi Investment Authority and Texas Teacher Retirement System. Both these investors will also join the InCred equity roster, the person quoted earlier said.
KKR recently invested around $1.5 billion into Reliance Jio Platforms and announced a majority acquisition of JB Chemicals for as much as $500 million. It has a controlling interest in other Indian companies like IndiGrid Trust, EuroKids, Max Hospitals, Avendus Capital and Ramky Enviro Engineers.