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FreshToHome earns Rs 25 Cr net commission from India in FY23

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Online fresh meat and seafood ordering platform FreshToHome has been struggling to scale and this is evident from a marginal fall in its revenue during the fiscal year ending March 2023. However, the Bengaluru-based firm managed to cut losses by 22% in the same period. FreshToHome’s revenue from operations saw a mere decrease of 1.6% in FY23, its consolidated financial statements filed by the company’s ultimate holding entity in Singapore show. The sale of products (meat, seafood et al) was the primary source of FreshToHome gross merchandise value (GMV). Income from sales commission and royalties were other revenue drivers for the Singapore-incorporated company in FY23. See TheKredible for the detailed revenue breakdown. Notably, FreshtoHome worked through different business combinations in India and the UAE. The company booked only Rs 25 crore from net commission and royalty in India. According to its spokesperson, this was net income which roughly translates into Rs 800 crore of GMV in FY23. FreshToHome follows a cash-and-carry model in the UAE where it earned Rs 100 crore of gross sales during the fiscal year ended March 2023. FreshToHome spent Rs 323 crore on sales and marketing in FY23 which was 23.5% less when compared to FY22. The cost of procurement formed 17.3% of the overall cost which stood at Rs 93.5 crore in FY23. The firm’s burn on employee benefits, legal-professional, delivery charges, contract labor, packaging, and other overheads catalyzed its overall expenditure to Rs 539 crore in FY23 from Rs 655.5 crore in FY22. Head to TheKredible for the detailed expense breakup. Reduction in sales and marketing costs helped FreshToHome to contract its losses by 21.7% to Rs 409.4 crore in FY23 from Rs 522.9 crore in FY22. Its ROCE and EBITDA margins stood at -82% and -314% respectively. On a unit level, it spent Rs 4.88 to earn a rupee in FY23. FY22-FY23 FY22 FY23 EBITDA Margin -392% -314.1% Expense/₹ of Op Revenue ₹5.84 ₹4.88 ROCE -226% -82% FreshtoHome has raised over $290 million to date including its $104 million Series D round led by Amazon Sambhav Venture Fund in February last year. According to the startup data intelligence platform TheKredible, Iron Pillar is the largest external stakeholder followed by Raed Ventures. FreshToHome competes with Licious, Zappfresh, BBDaily, and Easymeat among a few others. During FY23, Licious’ gross income saw a modest 9.6% growth to Rs 747.7 crore from Rs 682.5 crore in FY22. The company’s losses remained flat at Rs 500 crore in FY23 against Rs 485 crore in FY22. The firm recently claimed that it has achieved an annual revenue run rate of $100 million, or around Rs 850 crore for FY24. Zappfresh ended FY23 with Rs 57 crore revenue and a nominal profit of Rs 3.5 crore. The problems being faced by FreshtoHome are not unique to it. Clearly, there are assumptions that have not held up about the Indian market, the most obvious being pricing of meat and related products. The market has simply refused to accept the kind of premium these firms demand, leading to failure to build long term relationships with customers. In the case of FreshtoHome, the ‘pivot’ to UAE is unlikely to be done at the same scale or using the same tactics, as the firm will probably not spend as much on market penetration. Cultivating relationships as a supplier with a core group of customers, thanks to higher average meat consumption and purchasing power means they have a far better chance of making it there, even as margins are unlikely to improve further due to local competition. The continuing high losses for these firms means that survival itself could become an issue if a health scare were to turn up, always a risk with meat products. While we won’t be looking out for a turnaround in FY24, we do believe that FY25 could be make or break for quite a few firms in the segment.