Image credit: TenderCuts

VC Q&A: Why India’s rural development bank invested in an online butcher’s $15m fundraise

March 4, 2021

Last month, TenderCuts — an online grocer selling high-end meat and seafood — raised $15 million funding from Mumbai-based private equity firm Paragon Partners and NABVENTURES, the VC arm of India’s state-owned National Bank for Agriculture & Rural Development (NABARD).

According to the Chennai-based startup, India’s consumer market for meat is worth $100 billion; but 95% of that market is “disorganized.” In other words, the vast majority of meat and seafood in India is sold in open-air markets or at streetside stalls – often by farmers and fishermen themselves, or by small-scale ‘mom and pop’ merchants.

While this gives Indian consumers the flexibility to buy specific, ‘never-frozen’ cuts direct from vendors, it also makes the imposition, maintenance, and regulation of robust quality and hygiene standards a difficult proposition.

As India’s middle class expands — and, along with it, the country’s taste for meat — TenderCuts is bringing an alternative option to market, offering guarantees of quality, safety, and convenience in exchange for a higher price point.

In addition to freshly cut-to-order chicken, mutton, and seafood, the startup sells a range of pre-prepared and ready-to-eat products.

TenderCuts is pursuing an online-to-offline model combining an e-commerce platform with a physical store presence. It operates 25 outlets across Chennai and Hyderabad which serve both walk-in customers and online shoppers who are picking up their orders. Customers can also have their meat delivered to their doorstep within two hours of it being cut.

Under the bonnet, all of this is made possible by what the startup describes as “a fully integrated supply chain fueled by proprietary technology.”

The NABVENTURES and TenderCuts teams seal the deal. Image credit: NABVENTURES

It marks NABVENTURES’ first investment into a consumer-facing business. Playing true to type, the firm — which was launched by NABARD in early 2019 — has so far backed ag-focused companies, such as farmer fintech platform Jai Kisan and soil sensor startup Krishitantra.

Read on to hear from NABVENTURES CEO Rajesh Ranjan on why the fund decided to make the move downstream with its TenderCuts deal.


AFN: Is this NABVENTURES’ first investment in a consumer-facing company?

Rajesh Ranjan (RR): NABVENTURES is a venture-growth fund with an investment focus centered around tech-enabled startups in the food and agribusiness value chain. We invest across all stages of the value chain, from inputs to consumer brands […] Tendercuts is the maiden investment from the fund on the consumer side.

AFN: So why did you decide to invest in TenderCuts?

RR: The Indian F&B market is the third largest in the world with market size of $635 billion. It is expected to grow at a CAGR of 8.7% to reach $965 billion by 2025. The rising middle class consumers are increasingly vocal about their preference for quality brands, including F&B brands.

There lies an opportunity in the F&B space to create D2C [direct-to-consumer] brands that demonstrate customer stickiness by delivering on the brand promise, through quality, eliminating the middlemen, offering superior customer experience and convenience, and using a mix of cold chain and IoT tech to maintain high quality through the supply chain. TenderCuts fits the bill perfectly.

The traditional incumbents in the meat market have B2B, and not D2C, DNA. This enables the newer brands to tap the white spaces in the market and offer specialized and curated products in a D2C manner using digital distribution.

However, most of the new-age meat brands are purely online and don’t have an omnichannel approach. Given the nascent stage of the meat e-commerce market, there is a significant room for alternate D2C business models. The omnichannel
model enables the brand to offer quality meat and seafood to the offline segment which is about 96% of the market.

AFN: What can NABVENTURES bring to the table for TenderCuts?

RR: Beyond capital, TenderCuts will be able to leverage NABARD’s network of 5,000-plus FPOs [farmer producer organizations – essentially, smallholder cooperatives] covering 1 million farmers, and 10 million SHGs [‘self help groups‘ – rural microfinance groups formed mostly of women] comprising 120 million ‘base of the pyramid’ families.

This can help in augmenting its robust supply chain by enabling it to directly source farm-fresh meat at competitive prices. This can increase [TenderCuts’] margins, enhance farm incomes, and accelerate the consumer shift to the organized segment.

This is the same playbook which NABVENTURES follows with all its portfolio companies, as no other VC fund in India has access to FPOs and SHGs on a pan-India basis.

NABVENTURES will also be deepening the usage of tech and data analytics at TenderCuts in order to get superior customer insights and to smoothen the operational and financial processes followed at the company.

Furthermore, TenderCuts can get access to debt capital from NABARD’s network of banks and [non-bank financial institutions] which will ensure lower equity dilution in future rounds.

AFN: How is TenderCuts differentiated from other competitors in the on-demand fresh meat space? What is their unique selling point?

RR: TenderCuts is India’s only meat brand with an omnichannel presence. Unlike other players, providing freshly cut and hygienically packed meat is what makes TenderCuts unique. The meat at TenderCuts is always stored and transported in a temperature between 0–4 degrees Celsius, using ice gel pad technology. It provides customers with chilled meat which is freshly cut and packed only after the order is placed by customers.

Having retail outlets in different parts of the city also distinguishes TenderCuts from the other players in the industry. The merit of the omnichannel business model is reflected in the lowest CAC [customer acquisition cost] in the branded meat business, at less than ₹100 ($1.37) which is 15% of its competitors’ CAC.

It is the only organized meat brand in India to offer farm-fresh meat to the customers with 120 minutes of the first cut. The business has a high reliance on technology to monitor and optimize its supply chain and ensure customer satisfaction. The brand has served 3 million orders, with an average order value of ₹700 ($9.60).

The butchers at TenderCuts are well trained and certified, [and] use only approved food-grade knives and equipment.

One other major USP is the ‘farm-to-fork’ culture followed at TenderCuts. Livestock is generally processed following the halal method in a highly hygienic environment following 100% WHO and FSSAI standards.

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