Rebel Foods has become the third unicorn after recent fund raising. This is also the 31st unicorn in this year in India and 3rd in the Indian food sector. Coincidentally, earlier two were also in Indian food sector. Readers will recollect that in the last issue, the author, Rajat K Baisya predicted that Faasos and Behrouz Biryani is the potential new unicorn.
In the last issue, I discussed two unicorns Zomato and Swiggy, in the Indian food sector, and both were from food service. One more is added now in this coveted club of unicorns based on their valuation. This time it is Rebel Foods which owns prominent brands like Faasos and Behrouz Biryani. It has become the third unicorn after raising USD 175 million at a valuation of USD 1.4 billion. This is also the 31st unicorn in this year in India and 3rd in the food sector. Coincidentally, earlier two were also in food service sector. Readers will recollect that in the last issue, I predicted that Faasos and Behrouz Biryani is the potential new unicorn, but at that time, I did not realize that it was going to happen that fast.
This series of fundraising was led by Qatar Investment Authority (QIA), a sovereign wealth fund with participation from existing investors Coatue and Evolvence. Rebel Foods calls itself an ‘internet restaurant’ having delivery-only food brands like Ovenstory Pizza, Mandarin Oak, Firangi Bake, Lunch Box, and The Good Bowl. Rebel Foods plans to use this fund for global expansion, brand acquisition, and technology development.
Rebel Foods was started in 2011 by Jaydeep Burman and Kallol Banerjee. The brand is present in multiple cities in India and has already expanded in 10 countries across the globe.
This was started in 2011 by Jaydeep Burman and Kallol Banerjee. The brand is present in multiple cities in India and has already expanded in 10 countries across the globe. The QIA has a track record as a long-term investor. Rebel Foods, like other food aggregators, is not making profit in the bottom line. Still, it claims that it is steadily moving towards profitability with annual sales revenue of USD 150 million and is eyeing an IPO in 18-24 months.
There are a couple of brick-and-mortar models of start-ups that are doing well in terms of growth, and in that list, I will include the name of ID Fresh, which has expanded its business and entered the UAE market, and is delivering profit in the bottom line. It has also got two rounds of funding in Indian food sector, including from Azim Premji investment firm, but its valuation is nowhere near 1 billion USD.
As I explained in my column in the last issue, growth potential is now what investors are looking for and not profit, which they think will come in due course of time. The e-commerce model offers significant growth potential and can easily expand geographical boundaries, which the process industry cannot accomplish. It takes long years for process industry start-ups to grow. That explains why within such a short time, we have three unicorns in the food service sector who are only aggregators of food delivery websites selling food produced by numerous processors through their portals.
There are a couple of brick-and-mortar models of start-ups that are doing well in terms of growth, and in that list, I will include the name of ID Fresh, which has expanded its business and entered the UAE market, and is delivering profit in the bottom line. It has also got two rounds of funding, including from Azim Premji investment firm.
Within days of Kishore Biyani’s Future Retail terminating its agreement with 7-Eleven, Reliance Retail Venture, the retail arm of Reliance Industries Ltd has struck a deal with the Texas-based convenience stores chain to launch its stores across India. 7-Eleven is one of the largest convenience stores chains, and their first store is going to come up in the Mumbai suburb shortly, followed by a rapid rollout in other cities in the country as per the plan. 7-Eleven will compete with Samir Modi’s Twenty-Four Seven and In&Out. With 7-Eleven’s experience and expertise in the convenience stores segment, Reliance Retail is all set to gain a significant advantage in the grocery segment. It can also be utilized as a launchpad for their own private labels as well.
Future Retail had signed a master franchise agreement with 7-Eleven in 2019 to launch and operate the latter’s stores in India. In early October 2021, Big Bazar, the parent of Future Retail, called off the partnership as it was not able to pay the franchise fees and also failed to meet the target of opening stores. This opportunity was quickly grabbed by Reliance Retail which has been increasing its footprint rapidly and added 1500 new stores last year, bringing a total number of stores under its umbrella to around 13000.
The return to normal operations from pandemic comes as an added opportunity to be exploited. Reliance was quick enough to capture this opportunity by tying up with 7-Eleven, which has been one of the most successful retail concepts for several decades. This association of Reliance Retail with 7-Eleven will also bolster B2B supply chain and last-mile connectivity for online orders.
Kishore Biyani’s Future group seems to be getting into difficulty. Future Retail is currently entangled in a bitter legal battle with US retailer Amazon over its proposed sale of assets to Reliance Retail for a consideration of Rs 24700 crores which we discussed in one of the earlier issues of PFI. Amazon has objected to the deal between Future Retail and Reliance Retail, citing violation of an agreement between Amazon and Future group. Amazon has a minority stake in Future Retail had, in fact, earlier to bring in strategic investors to help Future Retail with more equity funding.
The real problem of the Future group and its promoter Kishore Biyani was too much diversification. The speed of expansion and acquisition of more retail assets left the company burdened with huge debt, leading to downgrading the rating. Biyani also burnt his cash by investing in Bollywood. He puts his hand in everything, whatever comes his way. Even this author also mediated and formalized his association to set up a joint venture with Booker Plc. I was surprised that Kishore Biyani closed the deal in one sitting and finalized the stake acquisition price. But ultimately, the deal did not materialize. Booker finally got acquired by Tesco, which had a Joint venture in India with Tata and Booker India, thus becoming a subsidiary of Tata Tesco.
Organized retail share of the total retail market, which is mainly unorganized has been growing, and currently, it is 12% of the total. At the current growth rate of CAGR 15% by 2025, it will become 18% of the total retail universe.
We have so far seen three unicorns in Food Service and delivery business. However, we are yet to see such a valuation in food retailing. And the reason is again the same, the growth potential. All online retailers are retailing everything and not exclusively food retailing, and as such, they don’t come under the same category.
Author is the chairman of Strategic Consulting Group and served as Professor and Head of the Department of Management Studies, IIT Delhi. His research areas are marketing, strategy, project management and international business and he is an internationally well known consultant in these areas. Prof Baisya is also the president of Project & Technology Management Foundation and can be contacted at editor.at.pfionline.com