The journey of building Country Delight
Salonie:
Hi and welcome to Matrix Moments. This is Salonie and in today's episode we will be covering the journey of buildingCountry Delight, India's leading direct to home, mass premium, dairy, and fresh grocery brand. Joining us for this conversation are Chakradhar Gade and Nitin Kaushal, the Co-founders of Country Delight as well as of Avnish Bajaj, Founder and Managing Director at Matrix Partners India and Sanjot Malhi, Director and lead for the consumer and consumer tech investments at Matrix Partners India. Sanjot will also be moderating today's episode.
Country Delight currently serves 200,000 families across Delhi, Mumbai, Pune, and Bangalore. With a $50 million run rate along with the 3x year on year growth rate, this episode will essentially follow a masterclass style format wherein we will go through the highlights and milestones of the journey with insights and inputs from both sides of the table, founders and investors.Tune-in.
Sanjot:
Great guys. Thank you. Chakri and Nitin and welcome to Matrix Moments. I know we've been talking about doing this for a while, but it's taken a global pandemic for all of us finally to sit down and do it. But I'm glad and very, very excited to share the journey with everyone else as well.
So let me start by saying, I started tech investing a few years ago and not even in my wildest dreamsdid I think that one of the companies I’d be most excited about would be a company called Bijapur Dairy.But that's exactly the case and not in my wildest dreams did I think I'd be traveling around villages of Haryana, Rajasthan, and Maharashtra with you guys, learning about cows and yields and everything to do with milk and dairy. But it's been a real pleasure and a privilege not only because, it's been so much fun working with you guys, but also because I think what we're building is a truly unique company, not just in India, I think in the world, which is changing consumer habits and improving lives in many, many ways.
So let me step back for the viewers and talk a little bit, very, very quickly about why we were excited about coming in as a fund to make this investment. We had come up with an investment thesis a couple of years ago on tech-enabled businesses, and D2C consumer brands. And I thought it was a fairly insightful thesis, it had all the right things that had deep markets, high return on capital, non-linear growth, deep moats. So I think theoretically, as you know, as most thesis go it had all the right elements, but as we set out to make an investment behind that thesis, I think what we found was that there were actually very, very few companies in India and also in the world that had all those tenets in one company. And I think that's what we found very unique about Country Delight that it had most of those things that I mentioned - right from deep markets, deep moats, a high margin D2C business. And actually, that's the purpose of this discussion, to go into the detail of a lot of those core building blocks of why it makes it a very, very high-quality business.But let me start with a broader question the answer to which I know is a fun one. Chakri and Nitin, why don't you tell us a little bit about how you came to start this business and how eventually you landed on this business model?
Chakradhar Gade:
So, Sanjot, thanks a lot for this. And thanks, sir, for having us here,and for talking about our story. It's always a delight to recount how we've gone about doing things. But, just a little bit about us - we are a direct to home consumer brand and we are loosely based on the concept of a milkman at one end and also based on the concept of Whole Foods on the other end. So I mean, it's a combination of these two and like you said, Sanjot, it's a very, very, very unique business that's been built, and it's an advantage and a disadvantage that there aren’t many ‘comparables’ that we have in what we do. But you know, when we started out, both Iand Nitin thought that, we should do a dividend-based business model and you have very little money with you, so you think, how do you make without having the zero one mindset, how do you make more money out of the little money that you have? And somehow, you know, coming from a finance background, it seemed like a very good idea to invest in a farm because, these are non-depreciative assets, animals are non-depreciative assets and they multiply, and when we thought initially we started out with like the 50 cattle and we told each other that we'll do like 500 cattle in two years. And in terms of volume, we were doing like 200 liters a day and we thought we'll reach 5,000 in two years. But it took us six years to reach 5,000 liters.
Sanjot:
Just to be clear, you actually went and bought a farm right?
Nitin:
So we went, I think we bought some 50 cattle in the first go. In fact, by the time we purchased those 50 cattle, we didn't even have a place to keep them. So once we bought them we then ran back and tried to identify a land parcel, which we could take on lease where we could place them. We had a couple of weeks to do that. And that's how our journey started, with 50 cows. And then eventually we did buy two bulls because, you know, for the herd multiplication, and artificial insemination didn't work. So we went back to the same set of guys, who sold us those cows to take some of them back, but rather he sold us a couple of bulls. So we paid him more eventually and that also didn't work though haha.
Sanjot:
That's really interesting. So look, I mean, I think a lot of people think of this as a dairy or a milk company. But you know, we know that that's only part of the story. Talk a little bit about what is the business and how it's evolved over time.
Nitin:
Okay. So see when we started the business Sanjot, it started as a milk subscription business. And of course, in India, you will see milk being delivered to a doorstep of a customer on a daily basis. That's pretty much the consumer habits that our business piggybacked on initially. But the idea was never to, you know, look at it prominently as milk business, the idea was to start building a farm to table business. This was built on three broad tenets, which is number one, the product should be, especially if you talk about dairy, the product should be a natural product, which is the product in its original form. The product should be a fresh product. When we say fresh product, means the product should be delivered to the doorstep of the consumer within 24 to 36 hrs and the product should be rigorously tested and all parameters are fully adhered to, as far as the local compliance standards are concerned. So that is how the milk journey evolved for our business, but as we have built the pipeline of delivery to the doorstep of the consumer, cold-chain enabled integrated pipeline, the businesses is now pivoting to add more fresh produce, fresh products, where we can build on the farm to table philosophy and follow the same principles of natural, fresh and unadulterated. So that is how the businessis pivoting. So we have launched bread, we have launched free-range eggs. The idea is to ensure that the product is fully developed right from the source to the final packaging, within our controls, all the raw material which is going into the products is fresh and is rigorously tested, so that the end product delivered to the consumer is great. The product should be fully cold-chained enabled, so that there is no need of a preservative to be added by the time it reaches to the doorstep of the consumer. And all this then eventually leads to a better tasting product for the customer. So whether it is our milk or it is our bread or the eggs, the consumers can identify a perceptible difference, whether it is by taste or it is by optics or it by effervescence, which leads them to believe that this is a better product. So that is how the business philosophy has been expanding. Chakri if you want to add something to it.
Chakradhar Gade:
Yeah, I mean just adding to that, at the core, there are two very key things that, that we hold very dear to us, which is that, we are not from the milk background, we didn't have any idea on how to do this, And when you're out of a job, you don't have a salary and you don't know what you're doing.The only thing you can figure out is what the customer is trying to tell you about what you should do and that is our guiding light. And that’s what really helped us define what we are doing. And that's what makes this business very creative and unique. Because it is not that, this one idea that came out as a flashing bulb one day that made this a business model.
It's an evolution of thought driven by very deep understanding of customers. And when you go and try to really get to the bottom of things with your customers,the two key things which we figured out is that people want ‘better for themselves’ products, but they want it at an affordable price. Because you don't want to be a business that caters to a 3% -5% audience. You want a business that caters to probably 60-70% audience. And when you are trying to do that and the need is there for people to really want to believe in a good product for themselves. So the two key things which really came out for us is you need to give customers a better quality product. And people don't believe brand promises, which are hollow, or statements which are hollow, people need proof. And when you say proof, for milk it took us four or five years to figure out that the tangible taste difference is proof of a good product for a customer. And similarly, price was a very big mental barrier. I mean we could have packed our milk in glass bottles and given it to customers, but that makes it a super-premium product and that doesn't allow us to reach as many audience. And when you're throwing away the packing every day, it makes sense for you to spend 2% of the MRP on the product and transfer the remaining benefit to the consumer in terms of price. So these are the two key, big discoveries for us, which was that people want ‘better for themselves’ products for their family, for their children, and people want it to be affordable. And these two things helped us define how we do, what we do and build our own distribution model and reach the customer and all these things.
Avnish:
So, Chakri, a lot of that makes sense except when you said also build distribution to the customer. Everything you said what customers want, which by the way, I'm going to be doing a videocast on outside-in versus inside-out, and you guys are like Amazon, a customer-obsessed company and it’s a great example, and following what the customer wants. But the customer didn't tell you to come and deliver to their house. They just wanted a great product. So where did the thought of direct to home get added to this whole vision is one question, and secondly which I genuinely didn't know when we invested, when you started did you actually think of milk plus or was it milk and plus has come later?
ChakradharGade:
So for the first question, the idea of reaching a customer directly was not there in the beginning. The idea was that you want to give a good product to the customer at the best possible price. And because distribution was not available, we had to do it on our own because finally you had to reach the customer with a good product and having a good cold-chain is part of that promise because it's a perishable product. We didn't have a choice more than anything, to reach the customer with the product. But there was one very important thing that was clear to us from day one, it is to have a captive customer. So when you're catching a customer, you have to catch the customer in the whole. You should not be one of the four choices which keeps coming out in front of the customer. You get that customer and you just keep the customer with you. So even if we would have, let's say, done an outsource distribution model, having the direct customer connect was sacrosanct, because the customer was telling us what we needed to do. And that was really the most important thing that we had with us as a belief. And on the non-milk products, again, the idea was from day one to have a captive customer because having a recurring revenue, no need to advertise while selling, so having a very recurring revenue is very important. So when you are having a captive customer it was always in the mind to do other products. What was not very clear is whether you need to start developing the expertise or whether people with expertise will get to you and what eventually became clear is that your customer has insights for all products and if you start digging deep enough, you develop very sharp insights on every product and you can really perfect every product that you deliver, and having this distribution network gives you a pricing advantage because if someone is good at doing breads and he's, let's say going on a general trade format, the customer price that he will have to serve to make money as a business versus a Country Delight having your own captive distribution network will actually translate into better price benefit to the customer, better mass premium propositioning for the customer and hence a better business overall.
Nitin:
I would like to add just one point here that it is because of this direct to consumer approach from day zero that we were able to really dissect the customer product, which has to go to the, which the customer really identifies well with, which is because we are directly connected with the customer. The customer has a mechanism to directly communicate with us whether by way of app or by way of you know, communication with our delivery team or by contacting us at the contact center, where we were able to understand what are the problems that the customer is facing and the industry-standard products which is being delivered to them and that is how we were able to reinvent and change the product in a manner that could suit the customer.
Avnish:
You answered my question. I was just going to say that, did you let the customer dictate what else you could sell, or did you figure that out?
Nitin:
Everything was customer sir, whether it is milk, whether it is curd, whether it is bread, everything was iterated. Nothing was evolved from day zero, you know it was not that we had any standardized recipe which we created, which worked well with the customer. It was over a period of time, communication with the customer, how the customer perceives the product, how the customer tastes the product and what their feedback is, which led to all the re-engineering and creation of our product, which was most suitable for a larger set of the audience. I mean, of course, when it comes to taste, some people will have a differentiated taste, but we had to identify what works well with the broader set of audience, so that there is mass adaptivity.
Chakradhar Gade:
And we don't give up unless until we get that right. Because like for example, in Paneer, it took us a year to perfect our product - one year, that’s a really long time! Typically, we develop a product in two months, but the product was just not coming out perfectly. The customer was giving us feedback again and again and again. So, it is very important to build that perfection out, both in terms of the taste of the product and the quality of the product as well as on the price that you can give to the customer.
Sanjot:
Actually, my next question was going to be partly what you just answered. Chakri, one of the things that struck me initially when we started talking was the product centricity that you guys had, perfecting the product. So maybe just elaborate a little bit more on that. How do you decide which categories, obviously your customers ask for certain categories and products, but how do you as founders and as a company decide which categories to enter? Like what are the sort of key checks in your mind and then what is maybe a little bit about the process of how you get the product right and what are the sort of basics of doing so.
Chakradhar Gade:
So basically Sanjot, again, a big part of it is driven by the customer. What they asked more frequently is what we try to do. But between that and the ease of the launch of a product, so let's say when we are doing a milk value-added product, part of the infrastructure that we do for milk is already there. So that is the second component of let's say us deciding whether we want to go with a particular product category. But usually the leeway is like three to six months. If I were to let's say, decide that we do the Dahi today and let’s say Paneer after three months, the decision is only because of the available infrastructure that we have from a business execution point of view, now the third thing is then understanding the customer. Now we are developing a template for it and we're working across product categories, but when we do it the way we do it, is we first test with the customers, test with a hundred customers on what they want with the particular product, start out with any product that is available. Just give the normal bread and ask what they want, why they want it, what do they like about it and not like about it. And from that initial consumer research bit, you get a lot of inputs. And then once that helps you determine a process around it, on the feasibility of implementation of the process around it. And then you start going into multiple layers of iterations. But by the third round of testing with customers, with the select set of customers, you get clear on whether it's a viable product to launch, whether it is available, whether the unit economics are possible or not.
Like for example, fruit juices is a category which customers have been requesting us, but we've not been able to crack the unit economics because the consumer, what the consumer wants is not something that at least is possible within the basic construct. Any juice that we try to create a is a 60 rupee juice and consumer don’t want a 60 rupee juice. What consumer wants a 40 to 45 rupee juice, and it’s minimum a 60 to 80 rupee juice. So we are not going ahead with that category till we get the whole thing right. It is a bunch of these factors but primarily consumer-driven.
Nitin:
I would like to add one more thing Sanjot, we have built now a supply chain network spanning across six states, across north India and predominantly west India. And that also gives us access to very high-quality raw materials, whether it is milk, whether it is wheat, whether it is access to you know, oils, whether it is access to free large range poultry’s. And that has also enabled us to launch products which fit into that whole farm to table concept. Sanjot like you already know as a business we are fully integrated from a supply-side and not just supply-side from a cold-chain standpoint to the customers. We will just speak about the supply side, so supply side from the beginning the business has been built on the philosophy of working with a lesser set of stakeholders, where you have access to relatively higher quantities, that’s A. B, where you have access to better quality produce, which comes in two or three formats. Number one, if you just talk about milk for example typically, we work with medium-sized to large-sized farms. You have visited a few farms in Haryana and in Maharashtra as well. So the idea is to not engage with multiple sets of stakeholders but a restricted set of stakeholders, where you can work closely with them and build on the supply chain there at the source itself. I’ll just expand a little bit here. When we select any smaller medium-sized farms, the idea is to select farms who have better hygiene practices, who have better cold-chain practices, who have higher adoption to technology when it comes to better quality milking and all this leads to a better product fundamentally at the source. The minute the milk reaches a four-degree cold-chain which fundamentally leads to no bacterial growth in the product and a very high-quality product in comparison to let's say how it works with any other industry players. B, the product is rigorously tested at the source there itself, now because you have built materiality at the source and because you're working with medium-sized farms, you are investing in better quality testing, better quality cold-chain infrastructure at restricted locations, which is giving you access to larger quantities in comparison to how a typical cooperative network will operate.
Third thing which we would like to add is, over the years we’ve started working with a lot of IoT integration. So we are sitting today, we are getting all the real-time updates of the temperature of the milk. We are getting real-time updates on the bacterial growth of the product, which we are receiving with all quality parameters, all the payment parameters. So IoT also has evolved over the last two years which is leading to a better-quality product and more importantly, a more transparent product. So this is now becoming more scalable. If we are able to identify what is the source, which we are procuring right in Maharashtra, even in Kolhapur, where we have our procurement, or in Andhra, you know which is a thousand kilometers away, predominantly because of access to good quality IoT systems.
Sanjot:
Yeah. and the one thing that I’ll add from my experience with you guys is also how not just customer-centric you are, but how much the farmer loves you as well. You remember this Chakri, when I visited, I think the guy insisted that we sit down and have lassi before we left, it was very genuine because some of the specific things that you mentioned, the payment terms, the payment cycles, I think the help that you give to these progressive farmers on how to rear cows and work with their produce, and that really helps with the word of mouth in the farmer community as well.
Chakradhar Gade:
One or two things that actually add a little more value is because we are a consumer, premium brand. We pay our farmers a little better, which creates a lot of sustainability in the engagement. And also, we are a direct subscription business. Our demand is highly predictable. So from a farmer's point of view, the predictability is very, very high. And Nitin was saying technology is a very big part of scaling with good quality products because today like the stuff we are doing, no one has even been thinking about it, like the kind of things which we are talking about being able to monitor the entire business while sitting here. And that's the kind of stuff which is possible. And with a very lean investment mechanism, it is not going to cost you that much. And that's why the ROCE numbers come out the way they are. But yeah…
Sanjot:
Yeah, actually this is not scripted I promise you. But it's another great segway to my next question, which is, as an investor, one of the things that we obviously obsess over is a return on capital as well as growth. And I think traditionally the argument against consumer brands and D2C brands has been that, they're low growth, they are restricted by your general trade and modern trade routes and even in modern days restricted by the growth rates of E-com marketplaces, right? Flipkart grows at 30%. It's very hard to outgrow Flipkart or Amazon in that case. But I think one of the things you've cracked is, is that you've obviously grown very well over the last several years and you've done so in a very capital efficient manner, which is again unheard of in consumer internet companies. So maybe spend a little bit of time talking about both those aspects and how you've managed that.
Chakradhar Gade:
See at the core we are a subscription-based business and what the subscription business offers you is a highly recurring revenue. Our 24-month-old customers give us the same revenue today as they were giving on the day one as a cohort. And when you have one linearity that, if you add a bunch of customers and they give the same revenue over time and then you're adding new customers, the growth becomes highly exponential. That is point number one of why we are able to grow at the pace we are growing. It is not that we are spending a lot in terms of marketing dollar or anything like that. It's just the nature and the power of the business model that we have, which is the entire subscription-based pattern. And the second thing is that we always believed in creating a fundamentally sustainable business. So it is again, not that we are making a lot of money from our customers. It is just that the unit economics are just right enough for us to be efficient as a business. And the third thing is we use tech a lot. Like this business wouldn't have been possible 15 years back if there was no mobile revolution. The whole tech ecosystem is not the way it is today. Today we deliver to more than 3 million customers a month. And that's not something that was possible 15 years back. And because we use tech, we are able to monitor everything in real-time. We're able to save a lot of money in terms of capital investment, by being nimble with technology. And because of the power of the subscription nature of our business, we are able to sort of have this 98% month on month retention, a hundred percent revenue retention over time, an efficient ROCE, and less investment in the business.
Nitin:
On growth I just like to add Sanjot, that even at the levels that we are operating at, we are just skimming the surface. Like even if you just talk about just for example, liquid milk or dairy as a category you know companies like Amul and Mother Dairy handle an upward of 40 million liters of milk daily, and what are we trying to do? We are trying to create a differentiated premium audience, or service a differentiated premium audience with a differentiated product of course, out of the larger set of audience. We are operating in key metros where the consumption is very high. Per capita consumption is very high, densities are fairly sustainable. So the market where we are operating, we are not even one percent, of the current consumption trend and we are trying to build a premium produce which can cater to a far larger audience than what we are catering to. So that's where we feel like the business normally should grow. Like of course, historically business is growing 2 to 3 times annually. We feel that this is a growth rate which is sustainable for the next few years as well because the market size itself is so large and the consumer capacity to consume within metros itself is so large that there's enough of a market for us.
Sanjot:
Yeah absolutely. I will add my 2 cents since, you know, it's a topic close to my heart as well. So on the ROCE specifically the return on capital, I think what's unique about our business is like both of you mentioned, I think the margin profile is, is very, very unique, right? A, the cross-sell makes our gross margin much, much higher. The price point and the cross-sell makes the gross margin much higher, then owning the customer makes the return on CAC much higher than any other business.. So your LTV - CAC which is more than 5x-6x is unheard of. And then I think the delivery model gives us best in class delivery costs, right? I mean without giving away too many of the numbers, less than 12-15 cents per delivery is unheard of the world over, the net margin is just far higher than any business can achieve in such a scale and at the same time, the capital employed is so little like we have a negative working capital and such high return on the capex that your effective return on capital ends up becoming extremely high overtime.
Chakradhar Gade:
Yeah, I'd like to add here that if you take a typical dairy businesses, what they do is when they procure milk they want to use every ounce of that milk and they go about setting the whole chain integration, making cheese, making milk powder, making everything possible. But what that results in is actually poor utilization of capital. What we do is, we have the same thinking at a consumer level. So when you are giving a good product to the customer, you have taken all the pains to figure everything out, now you're adding dimensions to it and adding linearity to build the whole exponentiality in the business.
Sanjot:
Absolutely. So I think the discussion would be incomplete without talking a little bit about the current scenario, obviously we’ve all gone through as a global society through a lot of pain in the last couple of months. So talk a little bit about, how you handled the whole Covid phenomenon and how you've kind of come out of it.
Nitin:
So one thing which has worked to our advantage, and it's not that it's helped us now, but traditionally the business is built like that, we own the complete supply chain, like we discussed before. So it's not that we haven't faced problems when the whole COVID crisis happened because there's a lot of uncertainty in the market or when the whole news started percolating down the value chain.But because we were able to individually dissect the challenges on our supply chain and because we were fully owning the supply chain,we were not dependent on anybody else for a solution. There was no business disruption so whether it was testing of our raw milk or raw produce, from our distribution centers to our customer locations, or It was operating our production facilities with full containment practices. Everything was handled individually, and wherever we were facing problems, we were working very closely with the local district administration and trying to resolve issues. Like for example, in Bombay, we have gone up to the Bombay commissioner of police to receive letters from them so that there is no impact at the delivery boy level. In sourcing locations which are in the containment zone, we have gone to the local administration and requested them that given the essential nature of the business, we should not be impacted, so luckily because everything was in our control the whole supply chain is in our control, we were able to handle each problem to ensure that there was no supply disruption. We had very, very marginal supply disruption. Maybe, you know, hardly 2 – 3% like in the first two, three days, which was predominantly because of the panic. As a business, we are very proud that we are doing a 100% fill rate. We have not missed any orders. We have added new customers during this whole crisis, which has resulted of course, positively for the business. The other thing that we have done is we have tried to build backups across all our operating zones so whether it’s a production facility, we have quickly gone and tied up with more facilities who could work with us on a contract manufacturing basis. Whether it's our distribution centers, we have reduced the risk of densities of delivery boys, to avoid too many delivery boys coming and reporting at the same time. We have split the centers; we have split the timing so that at any point of time not more than 15 to 20 people are available and interacting with the team, so that even if there is a potential risk of COVID within one of our sectors, it’s minimally spread and maximally contained. So that is something that we have done. Something extra which we have done is we have ensured that the movement of our core team is restricted. We have provided lodging to them. We provided food for them. They are kept very comfortable so that they don't have to you know, go out and interact with other people for their basic requirements. So that you know, there is any potential risk of contamination or contamination is again further mitigated.
Chakradhar Gade:
It comes from the culture of consumer obsession more than anything because we have never wanted to miss a delivery as a business and that's ingrained in our business over the last many years and that builds a sort of big coherence in the team to make it happen. And everyone really wants to just do their job and make this happen. And it is the job of us to address their problems and some of the problems, what most of the things which Nitin mentioned - it's about understanding what are the potential risks. Everyone wants to do their job, they want to serve the customer and you have to figure out how to help them. So if it's a delivery guy getting caught at the police station, you have to address his concern like getting him released in the next three, four hours, talking to him personally, gaining the confidence of that person and that sort of has a big ripple effect within the entire business. And when they see that, founders are working 18 hours a day, on the worst day of the lockdown to just make things happen, calling you at 3:00 AM in the morning, 2:00 AM in the morning, figuring, asking you questions and solving your problem at that moment as an individual, then the whole thing moves in a very, very positive direction. I think that was the biggest momentum creator in the first couple of days more than anything. So it was coupled with the culture of not wanting to miss the delivery from a consumer point of view and the desire of the team to move towards it. And the second biggest thing is again, the power of the business model. We are a full-stack business model. We have control over the entire value chain. So like on the first days of the lockdown, when even Amul, Mother Dairy, everyone's business was not doing well, we were able to take all the milk from our farmers fully, that built so much confidence with all the stakeholders across the system.
Nitin:
Additionally, we maintained constant communication with the customers. Every day a customer would get a message that tomorrow your milk delivery will happen. And that builds a lot of assurance from a customer standpoint. And whenever we would see that we were sending those messages, we would see that customers are trying to order even more at that point of time because, the customer realized that they could rely on us for their daily requirements. I think that really worked. We spoke on the supply chain, we spoke on the operational side of the impact and how we are trying to address it, from the customer side like we said, number one we mentioned we highlighted to our customers daily, that they don't have to worry about their milk or any other products and all the products will be delivered, that assurance was given. Second, we built more transparency for the customers. So today a customer gets a message which highlights the temperature of the delivery boy, which gives the assurance to the customer that proper sanitization measures have been taken, for the person who has delivered to you. The customer finds a lot of assurance and it builds a lot of brand loyalty predominantly because you're trying to be as transparent with the customer as possible.
Chakradhar Gade:
Yeah, I mean like from a consumer point of view, like there were times that we used to tell that, you know, you'll get your milk at 2:00 AM in the morning. Customers appreciated it, that at least these guys are telling that something will come or something will not come. If it comes, it will come and then you are apologizing that you’re sorry for the inconvenience. But this is the best we can do. And some of the measures which Nitin is saying like most people have implemented now, but we were the first ones to do it. So we are ahead of the curve, whether it's integrating with the Arogyasetu App or whether it's what we are doing now. We are building some very solid video analytics on monitoring COVID and monitoring people and monitoring distribution centers, precautionary measures. One of the strengths is that we are ahead of the curve and we don't mind sharing because it's a time where we all learn by sharing. But that is one of the strengths that we have as a business.
Sanjot:
So I only have one, one last question guys. A more open-ended one. You know, if you were to think today, two, three years out, what's your vision? What excites you the most about the business?
ChakradharGade:
We have had the privilege of building this amazing business model, which was purely taught to us by customers and supported by partners like you guys. So, and at least today we are at a stage where we've figured out that there are many businesses, there are many platforms today, there are many marketplaces today, and people get offered a wide variety of choice of products. But as a business, if you take the pain of understanding what the consumer wants beyond the obvious choices in the market. And if you take the pain of going to the depth of solving a customer's problem, there is a huge opportunity that you can create. And we are all about creating many such products which we can give to our customers and because we own the distribution, we can do it at a beautiful price from a consumer point of view and be sustainable as a business also. So it's a huge opportunity that we have, which is being given to us by timing, by our customers and by our efforts to see this pan out, and as a first step, what we see is ourselves as a business with a half a million customers spending a hundred dollars a month with Country Delight.
Nitin:
Today we are just capturing 20 to 30% of the fresh produce basket for the customer and fresh produce can mean in various formats in various products. And the idea is to add onto those products where there is a repeat purchase place of which builds beautifully to our subscription, which builds into our already existing, established cold chain because that leads to a better-quality product ultimately. And thirdly, where we have access at the source itself, which again fundamentally leads to a better product when it is created. Like Chakradhar said, right now we are at a 30% of customer basket and we should ideally target a hundred dollar R2 for our customers with a high repeat purchase. We don't want to be in a laundry list of products. We want to have restricted set of products, but those products, which are high margin, which builds on to our ROCE, which builds on to better delivery efficiency and at the same point of time within the whole tenets of the product being perceptibly different from, what the customer is already having. It’s just started Sanjot, I hope it's a long journey and you guys have seen it for quite some time and, there are a lot of thoughts of what new we can do, where all we can add as long as it stays true to the whole brand promise, of an honest and a great product for the customer, we will keep launching more products.
Sanjot:
Excellent. Thank you again guys.
Avnish:
Sanjot if I may, I've been listening and noting down some learnings. Can I summarize our top 10 list.
Sanjot:
Yes, please.
Avnish:
So first it's almost like a recipe to see how this was built up over a period of time. Nitin said, or Chakri said that animals are non-depreciating assets. I've never thought of them like that because they multiply.
Nitin:
Yeah.
Avnish:
But I think for founders it's important to see that, that reveals a commercial mindset even when you guys started and it kind of flows, to the rest of your business.
These are all quotable quotes by the way, in my view. Chakri said, when you're out of a job, the customer tells you what to do. I think this customer obsession and being outside in and following the customer is really amazing.
Then you guys spoke about, I think Nitin spoke about a captive customer and surrounding them with a wallet share which I think is a great learning. A lot of times I find businesses start to capture a customer and then they start looking for product lines for other customers, figuring out more product lines, more monetization for the same customer if you've got something going. So I thought that was amazing, but it's also the fact that the customer was dictating that. And again, I don't think I've ever heard more of a customer obsession coming out than today.
Chakri you said, we don't give up until we get the product right, amazing. I think this point Sanjot you made that farmers also love them, I think that's amazing. I have found rarely in two-sided marketplaces if we can call this one because you are in some ways that both sides love the company, right? It's generally one or the other one is marginally more pissed off. So I thought that's amazing. And that again goes to why you're such a great business.
Coming to the financials, subscription business gives great ROCE, great point. Deep market, Nitin, which gives growth, so you've got both going. And from my perspective, and Sanjot and I talk about it, that in consumer, it's a little bit like you've seen him for fintech and NBFC, 3x for two years is better than 10x in one year, in my view, because the former is more capital efficient, more repeatable, more scalable, and it compounds with time that 10xin one year can actually go down. So again, very interesting.
Hustle in the crisis, backup plans, changing the delivery force. So being ahead of the curve, like you said, video analytics, all the things Nitin you said. This is very important - you guys hustled very early and you didn't miss a single delivery. I think that's amazing. Leadership lesson everybody wants to do the right thing. founder's job is to enable it, amazing leadership. The fact that if a delivery boy is stuck in a police station, you guys lead by example, took care of them and took care of their family, spoke to them, awesome leadership lessons, over-communicate in a crisis, great lesson. The 10thpoint I didn't have, so I just said Matrix is a great investor. I actually think this is a masterclass and thank you Sanjot and thank you guys for this.
Nitin:
Thank you, sir.
Chakradhar Gade:
And Matrix is an awesome investor.
Avnish:
Sanjot, do you have any closing thoughts.
Sanjot:
No, nothing, I think I just wanted to thank these guys not just for today, but you know, for all those lessons that you summarized Avnish, I’ve seen them in real life over the last few years. So it's been a real pleasure working with you guys. And a privileged to learn from you as well. And hopefully, it continues for a long time, and this year a lot more success. So thank you.
Chakradhar Gade:
Thank you.
Nitin:
Thanks Sanjot.
Salonie:
Thank you for tuning in and you can find the transcribed version of this podcast on www.matrixpartners.in you can also follow us on Twitter and LinkedIn for more updates.
