FreshToHome Trims Losses Despite Stagnant Revenue Growth
FreshToHome, a Bengaluru-based online platform for fresh meat and seafood, is grappling with scaling its business. While the company managed to reduce losses by 22% in the fiscal year ending March 2023 (FY23), its revenue growth remained stagnant, dipping by a mere 1.6% compared to the previous year.
Financial Breakdown Reveals Revenue Streams
Consolidated financial statements filed by FreshToHome’s Singaporean holding entity offer a glimpse into the company’s finances. The sale of meat, seafood, and other products forms the primary source of revenue, contributing significantly to the company’s Gross Merchandise Value (GMV). Additionally, income from sales commissions and royalties generated further revenue streams for FreshToHome in FY23.
Limited Success with Net Commission and Royalty Model
Interestingly, FreshToHome’s net commission and royalty income in India amounted to only Rs 25 crore, translating to an estimated GMV of Rs 800 crore for FY23. This limited success suggests challenges associated with this business model in the Indian market.
UAE Operations See Positive Sales Growth
FreshToHome employs a cash-and-carry model in the UAE, where it achieved gross sales of Rs 100 crore during FY23. This demonstrates some level of success in this market compared to India.
Cost-Cutting Measures Lead to Reduced Losses
FreshToHome implemented cost-cutting measures, particularly in sales and marketing, which decreased by 23.5% compared to FY22. This strategy contributed to a reduction in overall losses, which contracted by 21.7% to Rs 409.4 crore in FY23. However, the company still faces significant financial challenges, reflected in negative Return on Capital Employed (ROCE) and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margins.
Competitive Landscape: FreshToHome vs. Rivals
FreshToHome faces stiff competition from other online grocers like Licious, Zappfresh, BBDaily, and Easymeat. While Licious witnessed modest revenue growth of 9.6% in FY23, it continues to grapple with significant losses. Zappfresh, on the other hand, achieved profitability in FY23 with a nominal profit of Rs 3.5 crore.
Market Challenges and Potential Solutions
The difficulties faced by FreshToHome are not uncommon in the Indian online meat market. One key challenge appears to be pricing, as customers are reluctant to pay the premium demanded by these platforms. This hinders the formation of long-term customer relationships.
FreshToHome’s shift towards the UAE market is likely to involve a different approach compared to its Indian strategy. The company may adopt a more targeted approach, focusing on cultivating relationships with a core customer base due to higher average meat consumption and purchasing power in the UAE. However, local competition might limit further margin improvements.
Survival Concerns and the Future of Online Meat Retailers
The persistent high losses for companies like FreshToHome raise concerns about their long-term viability, especially in the event of a food safety scare, a common risk associated with meat products. While a significant turnaround is unlikely in FY24, FY25 might prove to be a pivotal year for the survival of several players in this online grocery segment.