Food startups struggle for survival amid Covid-19

When the Covid-19 pandemic and the ensuing lockdown pushed most businesses to a grinding halt, food startups were no exception. The prolonged lockdown is making a way to ‘Unlock 1.0,’ but the struggle of several sectors continues until the economy crawls back to normalcy. Startup founders are grappling with many challenges and no clear solution.

Being agile and flexible, adaptation to rapidly changing market situations is part of a startup’s DNA. While startups are presumed to be alert to challenges, they are also vulnerable and remain at high risk due to limited cash flow. To sustain their business, startups burn cash and raise money. In the current situation, many of them are close to winding up due to a lack of funding and investment support since ‘no one is ready to catch a falling knife,’ according to experts.

Sectors like eGroceries, eCommerce, health, and hygiene have surged due to new requirements and can withstand the impact. The Covid-19 crisis and lockdown has hit the country hard, and every sector is reeling under its impact.

Supply chain dysfunction

In the first phase of the lockdown, the most noticeable impact on the food supply chain was the widespread disruption of transport and logistics, and scarcity of labor. Gurgaon-based Delna Food’s founder Moksh Eshpuniyani, says, “Any product that reaches the consumer passes through a chain of manufacturers and service providers. Any lapse in the supply chain results in chaos, disorder, and delays.”

Before lockdown, Hyderabad-based, Sweetooth, a fusion desserts startup, had a monthly revenue of Rs 32 lakhs. Due to Covid-19, the company had to shut its operations and dispose of finished products worth Rs 2 lakh. Sahithya Raj, the company’s founder, says, “At the beginning of lockdown, we faced difficulty in the procurement of raw materials and packaging as only essential services were allowed.”

Ruchika Gupta, chief marketing officer of Gulabs, addressing the unavailability of transport during the initial phase of the lockdown adds, “The products sent before lockdown to the logistic warehouses remained there and did not reach customers on time,” 

Halt on promotional activities

To promote a new product, many startups display products at malls and exhibitions. With restrictions and social distancing, these activities were no longer possible. Shikhar Sambhaav, the founder of Suvies – Ready to Eat Grills, says, “During this crisis, we are facing issues in promoting our products. We decided to hold events and awareness campaigns and doing in-store tastings later.”

Financial crisis

For many startups, the payment cycle runs on credit. Raj mentions that their payments were stalled as businesses they were working with were also affected. She says, “If we are unable to start operations at least to about 75 % within the next couple of weeks, we may need to make some tough decisions to cut costs and sustain the brand for the next one year.” Eshpuniyani also mentions that the fragility of cash flow at this stage is crucial and needs management.

Consumers trends

According to Eshpuniyani, with Covid-19, consumer preferences and habits have evolved. He says, “There is a strong shift to online purchases, whereas traditional retail is getting selective preferences due to hygiene, delivery options, and accessibility.” However, he feels the average person’s expenditure is bound to go down as everyone is experiencing a financial crisis. 

“Due to the pandemic, frozen foods have started to see a downfall in sales. Being a new entrant, it is even more difficult for us,” Sambhaav fears. According to Gupta, people are making informed food choices for better health and safety. She believes healthy food, safe packaging, hygiene, and food safety have become prerequisites now. 

Adapting to the new normal

Every business knows, if they have to survive, they need to adjust to the new normal. Eshpuniyani believes that it is time to conceive and implement new strategies quickly and plans to add new sales channels.

Gulabs have partnered with Zomato, Swiggy, Dunzo’s grocery market places for delivery, and Sweetooth has connected to last-mile delivery apps for essentials, retail stores, and supermarkets. 

Raj says, “We are trying to get our products online by associating with Big Basket and Nukkad Shop. This has allowed us to realize the potential of untapped markets, and we planned to keep this business running post-lockdown and add revenues to Sweetooth.”

Being a health-conscious brand, Suvies is planning to develop more healthy product options that boost immunity. “We have been working on the same for a while, and this is the perfect time when we can help people get back in shape by playing a small part,” Sambhav adds.

Regardless of the survival strategies adopted, the grim reality is that the pandemic will take a heavy toll. The vulnerable startups will be severely hit and collapse, and many will fall by the wayside. Post-Covid, the survivors will emerge stronger as nothing can hurt the market as severely as this crisis!