How Licious can scale even better!

What is Licious

Licious is an e-commerce startup that delivers fresh meat and seafood to a user’s doorstep. It operates under its own D2C brand and also sells ready to cook and ready to eat meat products.

Vision & Mission

  • We will sell only the meat that we would eat ourselves
  • If it’s not fresh we won’t sell it
  • We will charge only for what you buy

Current Financials & Economics

The company clocked a 300% YoY growth since its inception in 2015, and its revenue increased 75% from INR 78.96 Cr in FY2019 to INR 138 Cr in FY2020

It makes revenue from selling meat products. It also has a subscription offering ‘Meatopia’ as a revenue source.

Further, as it has removed middlemen in procuring meat, the cost savings contribute to its margins.

Operations

Licious operations are based on zero inventory and a farm-to-fork model. It owns the entire supply chain, from procurement to processing to packaging, and final delivery.

Major stakeholders and processes include:

  1. Meat and livestock farmers
  2. Backed supply chain: Includes coldchain, processing centers and delivery centers
  3. Front end supply chain: Delivery executives
  4. Consumers

Growth

Assumption: Growth here will be in terms of Revenue, which is dependent on user growth and order value.

Problems

What could be the problems faced by Licious in the next two years which stop it from growing 10x?

Supply side

  • Onboarding new livestock partners: Licious partners and handholds livestock, poultry and fish farmers who are highly unorganized, and with limited understanding of technology and best farming practices (per Licious standards). As Licious scales onboarding such meat suppliers while maintaining quality would be increasingly difficult.
  • Scaling back-end supply chain: Meat (fresh not frozen) is a perishable product for good for 24–36 hours (in a 0–4 degree environment) and could not be stocked like some of the groceries. Licious currently has five processing units, one each in Mumbai, Delhi-NCR and Hyderabad, and two in Bengaluru. As Licious expands to different cities delivery from these processing units won’t be viable and the supply chain would require expansion. Further, as Licious has taken a call to own the complete supply chain, scaling this fast and in a cost effective manner could be a problem.

Demand side

  • Growing users in New locations
  • Retaining existing customers: The pandemic led to a huge demand growth for online meat delivery. With the opening up of restaurants, as well nearby shops, demand is likely to be impacted for home meat cooking
  • Competition with other online players: Established grocery delivery players such as Big Basket and Grofers also deliver meat products that are currently frozen (not fresh like Licious), however with back end meat supply chain evolving with players such as Shadowfax these could enter into competing with Licious at a lower price point. Further, competition also exists from other D2C players such as Freshtohome, Zappfresh, etc. Another set of competition arises from hyperlocal delivery such as Dunzo which can deliver fresh meat from shops (however with no quality check)
  • Competition from local butcher shops: Local butcher shops control 90% of the meat market. Given its perishable nature, people won’t feel okay ordering online when they can get the same freshly
  • Pricing: Licious offerings are priced higher than all of its competitors. In some items, the price is more than 30%-40% of what could be available locally. In a price sensitive market like India, acquiring the next 10x users with such pricing could be an issue.

Fulfillment

  • Developing fleet of delivery executives: Difficulty in creating supply chain (onboarding delivery executives).
  • Timely delivery: Deliveries are sometimes late, even for established delivery players such as Swiggy. With meat being a perishable item, timely delivery to various parts of the city could constraint the scaling.

Solutions

  • Onboarding livestock Partners: The partners would need to derive value by partnering with Licious. Currently, Licious is working towards creating a mainstream livelihood for butchers, farmers, fishermen. Going forward to scale and ensure regular supplies it has to provide consistent incentives in terms of purchasing produce at competitive or higher than market prices, education, and financial support to establish livestock farms (much like Ola/Uber did for drivers). Licious also needs to engage with the community to get referrals from existing farmers and expand their supply network.
  • Scaling back-end supply chain: It’s a business decision Licious has taken to control quality. However, as the category matures it could look into partnering with trusted suppliers with utmost quality control. Further, Licious could also pivot into certifying/ supplying to specific own/franchised local meat shops per Licious standards and create a hyperlocal delivery ecosystem.
  • New customers: Innovative marketing techniques like trying first order from Licious for free (with a ceiling on purchase amount). It can also target health conscious people (with current emphasis on high protein diets) by partnering with fitness influencers who can vouch for its meat. It can also expand its ready to cook and ready to eat range to attract different user groups.
  • Retaining users: provisioning more value in Meatopia subscription plan and not just the current unlimited free delivery. Adding exclusive access to launch of new products, priority delivery, etc.
  • Competition with other online players: Licious enjoys the first mover advantage in this space. Also, the market is currently underpenetrated and big enough for multiple players to operate (at least for the next 2 years). Pricing could play spoilsport (discussed below in detail), however, meat being in a category where quality would play a bigger role and lead to repeat purchases (currently 90% for Licious), Licious could continue to position itself in this segment.
  • Competition with local butchers: Licious could look into partnering with some of these as long as the quality standards are maintained. Many users will still prefer these due to past experiences and connections, as well as pricing advantage.
  • Pricing: Licious could look into having products with different price points based on features of the meat (with bone or without, % fat, etc), similar to what Big Basket does with BB Royal and BB Popular
  • Onboarding Delivery executives: The area needs to be well served by a network of delivery executives so that delivery is within the promised 90 minutes. While delivery executives have a good supply (owing to existing players such as zomato, swiggy, etc,), for optimizing it for cost vs area coverage, technology has to be leveraged.
  • Timely delivery: Being one of the most important factors for perishable items, Licious could partner with hyperlocal delivery partners with strict quality control (They did this during Covid times)

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