The founders of Dropkaffe decided to launch an FMCG company, after a failed education tech venture. But, it is the key learnings from the first stint that is coming in handy, as Chaitanya Chitta and his co-founders build Dropkaffe with the goal of launching several new dairy-based beverages (like yogurt smoothie, cold brewed coffee and breakfast smoothies) into the market.
The market is filled with dairy products, but mostly, flavoured milk, lassi and yoghurt. When Lakshmi Dasaka, Chaitanya Chitta, Rakshit Kejriwal and Amar Yashlaha decided that they wanted to start a new venture in 2015, they wanted to do it in the food and beverages segment. They realized that there is a latent market for more dairy options that are convenient, healthy and easily available.
“I have studied and worked abroad, and traveled extensively. There the consumers have different options in beverages, some of which can even be a whole meal in itself,” explains Chitta. India is one of the largest dairy consumers, but has very limited choice. Therefore, this seemed like a wonderful opportunity that attracted the young Turks.
Learning from the Past
This was not their first venture, having run a tech-enabled education firm that was probably ahead of its times. “The problem we sought to address did exist, but the market was not ripe for it,” explains Chitta. This also gave them one business insight – do not try to create a demand, but meet the demand. The second lesson was that building the brand was just as important; and the third, that it should be unit economics positive.
So one of the first things the company did was to take steps to assess the market need. The easiest way was to go online, as it gives room for learning, while offline is more expensive and complicated. So they created an online beverage-ordering platform called Dropkaffe, allowing Bangaloreans to order coffee varieties and milk shakes online, to be delivered at their office/homes. In the next nine to ten months, with 7,500 people showing interest and 500 orders a day, it encouraged the four to take their business idea seriously and Dropkaffe decided to use the learnings from the early experiment to create its products and streamline operations for a brick and mortar business.
We need partners for the long haul, who understand our vision and are willing to wait to see the results
The Retail Route
Some of the key focus areas in the last six to seven months has been to make the product, its packaging and shelf-life better. Today, Goodness! brand of beverages are available in 100 retail outlets, supermarkets and hypermarkets, and offers a range of products – beverages in different flavours, smoothies, breakfast in a bottle, snack in a bottle and cold brewed coffee. The aim is to become a household name and meet the requirements of every member of the family. It has introduced protein shakes at disruptive price points due to its innovative management of the supply chain, that has enabled it to cut costs.
Dropkaffe has also launched an e-commerce site with the facility to ship anywhere within the country. Like its online presence in the early days, the idea is to understand demand in different cities and go with a brick and mortar business where the demand is high.
Funding and Team
Dropkaffe had raised US $300,000 in seed funding, led by Manish Singhal, Silicon Valley-based fund P39 Capital, and other angels based out of India, U.S., and Singapore. It has subsequently received US $550,000 in pre-Series round from GrowthStory, Apurva Salapuria of Calcutta Angels, Kanwaljit Singh of Fireside Ventures, Hitesh Oberoi of Naukri.com, Sidharth Pansari of Primac Group and Nirupa Shankar from Brigade Group. The funding will be used to ramp up production, on marketing, and team building.
Chitta agrees that investment is a challenge but that it has the potential to be the next ‘Amul’. “We need partners for the long haul, who share and understand our vision and are willing to wait to see the results.”
In the initial days, building the team had been a challenge, and it was a learning phase for Dropkaffe. But now, it attracts talent from the FMCG industry, and looks not only for experience and qualifications, but also for people who want to drive, and those who have entrepreneurial dreams. Dropkaffe assures them of the experience they need to independently manage their portfolios that will help them run their companies later. “Since we cannot match the industry standards for remuneration at this stage, we are offering ESOPs. It may take three to four years, but they will see growth,” Chitta says confidently.
Currently, it has a 26-strong team and aims to scale this up to over 100 before the end of the year. The company also hopes to identify two more cities in the south to establish base, based on its e-commerce demand.
In the next three years, the company expects to achieve a topline of Rs 100 crore, be present in five to six cities and, most importantly, become a household brand.
As for competition, he welcomes it. “It helps in establishing the category and is healthy for the industry,” says Chitta. The beverage market alone in India is expected to be Rs 5,000 crore. And with the carbonated drinks market also shrinking, dairy is expected to benefit and has a potential to grow to Rs 25,000 crore. And additionally, there is a latent market demand that also offers Dropkaffe a huge potential for growth.
Insights from Dropkaffe
Marketing Launch: For proof of concept, Dropkaffe started an online beverage ordering app. This helped it understand its market and plan its products and scale up accordingly. For expanding to other states too, the company has launched an e-commerce platform to assess demand from different regions and plan its next move based on that.
Product Development: While there is a market for dairy products, not much variety is available in the Indian markets. Dropkaffe calls it latent demand and creates products based on customer requirement.
Brand Building: Brand building must go hand in hand with product and market development, and Dropkaffe aims to capture not just the shelf space but mind space through various brand building activities.