Food Tech Start-ups in Gurgaon

Gurgaon, the growing city in the state of Haryana, is slowly becoming a favored technology hub for many entrepreneurs and start-ups in India. Similarly, the food industry is also experiencing a wave of heavy industrialization. Thus when tech meets food, it becomes a deadly combination that can surpass both the industries individually. This is exactly what is happening in Gurgaon.

The city has seen such growth that it has become the third-largest city in terms of food-tech companies in India after Bangalore and Mumbai in 4-5 years only. The reason behind this success is surely the foreign as well as domestic investments into this sector. Further, the flagship projects like Start-up India, make in India have surely contributed to boosting these industries. However, there are certain challenges that the market players in this industry are facing often.

The Business Models of Food-Tech Business Entities

The food sector in India is set to become the third-largest market in the world after China and the USA by 2025. No wonder the food-tech corporations will play a major role in achieving such a landmark. For this, the market players resort to different market strategies to grow their business. But broadly there are three models of business strategies that these food-tech corporations follow— Aggregators, online delivery by the business entities, and cloud kitchen. Aggregators are companies who aggregate restaurants in their online platforms and enable the consumers to order from their online platform and deliver foods at their doorstep (ex. Zomato, Swiggy, etc.). The second category includes the companies or restaurants which are large food chains or franchises that have their own online food ordering and food delivery systems. The third category includes companies or small businesses (e.g. start-ups) which generally do not own traditional food shops for customer dining; rather they have centralized or distributed kitchen networks that receive orders online and delivers the food at the doorstep of the customer either by themselves or through the help of any aggregator. The presence of companies like Zomato or Swiggy is not unknown at the present time.

However, the number of business entities like cloud kitchen or ‘kitchen in the cloud’ is overwhelming especially when the city of Gurgaon is concerned. The reason as claimed behind is that the consumption of newer trends is higher in the city of Gurgaon than any other city in the country. Another reason is the flow of a huge amount of investments from both foreign and domestic investors that is available. The food-tech industry is indeed the investment-intensive sector, but the flow of such a huge amount of investments has led to the success of the industry.

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Factors affecting the Food-Tech Business Entities

No matter how great success this industry has achieved till now, the market players are facing impediments to their business growth due to some factors. These are—

• Young entrepreneurs and lack of their business experience

• Mismanagement of funding they are receiving

• Lack of quality of the products

• lack of scalability of the business

• Lack of proper advisory teams

• Misreading of the market economy

• Lack of skilled manpower

The above factors are not exhaustive and there may be more. Therefore proper counseling and advice from the professionals and adequate awareness should be given.

Overcoming the Drawbacks

There are some basic points an entrepreneur has to keep in mind when he goes setting up a food-tech company. These basic points will help to sustain their companies for a longer period.

Choosing of business entity: The first thing a start-up or an entrepreneur should look for in choosing the right business structure. The company law provides different business structures and their requirements (i.e. company, one-person company, partnership, LLP, proprietorship, etc.). Therefore the choice of business will be according to the capital and requirements of that entrepreneur or start-up.

Location and property: Food tech business entities generally do not require large space property to set up their business. They also neither require a prime location for their business nor require high footfall. Therefore, these types of small businesses can grow up in the backside of a parking lot or inside a residential apartment, or at a house garage. The entrepreneurs can also avail of shared kitchen rooms which reduce the cost of setting up these businesses. In acquiring such small spaces, executing a lease deed or a rent agreement can be sufficient.

Affiliation to Govt. Licenses: As the business entities will operate their business in online mode, certain trust issues always remain from the consumer’s side. Therefore, proper licensing from the government side is always helpful for the businesses to generate trust amongst the consumer base. Further, some regulations are requiring the food businesses to comply with certain standards and requiring them to mandatorily obtain licenses. These regulations include licenses from FSSAI (Food Safety and Standards Authority of India), GST registration, trade licenses from the local municipality, licenses from fire & safety standards authorities.

Intellectual property protection: One of the main legal protection a food-tech business entity should seek is IP protection especially the trademarks. It is known that reputation to a business is the most crucial factor which determines the success of the business. Therefore the creation of a brand name can distinguish a particular company from others and this in turn creates a loyal customer base. Thus a business should always look for protection to their brand names including logos, colours, words, or a combination of all of them.

Employment of professionals and staffs: The business entities should always look for engaging professionals such as Chartered Accountants, Lawyers, or Management professionals for their businesses and take decisions according to their advice to make the business as successful as possible. Also, the food-tech business entities should employ skilled staff and employees according to proper service terms and conditions including employment agreement, payroll and wages structures, etc.

Investment and promotion of the business: As already stated above, food-tech businesses are investment intensive businesses because of their high initial capital requirement for the establishment and setting up costs. These costs generally include kitchen equipment costs, online platform establishment costs, cost of raw materials, cleaning and maintenance costs, standards maintaining costs, etc. Therefore proper investment is necessary for setting up such a form of business. However, there is plenty of investments flowing and the opportunities are to be grabbed. Provided, the investors are satisfied with the performance and credibility of the food-tech businesses. Promotion of the business also has to be conducted through intensive advertisements on both online and offline platforms.

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Conclusion

Indian economy is moving towards the digital era where everyone will have to incorporate technology to develop a successful business. The indication is already given by the investors when they considered the food-tech industry suitable for investment. The reason perhaps is the human reluctance towards physical labour. Nevertheless, efficiency and profits always trump drawbacks. Therefore there is no doubt that the future of technology incorporated business models is far brighter than the current circumstances of these industries.

BY -

DEBKRIPA BURMAN