This article discusses the business model of an off-beat yet successful start-up that has grown into a sizeable business. In other words, it has clearly moved away from the small business world to a startup world focusing on scale and expansion. This is not a business model analysis of a popular tech startup that has made it big, there are plenty of them out there. But, here we’re discussing a start-up that’s exploring unchartered territories.
Happy Roots
Happy roots is a national award-winning food brand that sells healthy multi-grain snacks like Whole wheat crackers, Barley espresso cookies etc… Their specialization lies in creating “contemporary snacks from traditional grains”. Established in 2016, its main focus was to create great value, especially for marginal farmers and women in rural areas who were made an integral part of their value chain. Today the brand works with about 20000 farmers, increasing their average income by 150%!
What market need/trend is the business addressing?
There’s a growing trend of consumers looking out for healthy food products in India. Some famous brands in the Indian market are –Paper boat Chikki; Nutty Yogi Bars; McVities Digestive biscuits; etc..
Current Scenario, Market, Consumer behavior, and Competitors-
The “Indian snack” market is ever expanding and so is the “healthy food” trend. Highly populated with many big brands and startups coming up with their own “healthy snack”. Some popular packaged food curating e-commerce websites such as “Qtrove”; “Places of origin”; etc… are promoting and selling such snacks big time. It’s a great market for startups to explore, since consumers are also opening up to try regional/traditional foods. According to the CEO of Nutty yogi, a healthy snack brand in India, “The organic packaged food industry is projected to grow at 25% year on year”.
The price and value distribution of a product like this gets divided into these segments-
- Manufacturing costs– Manufacturers typically get paid around 20-40% of the Selling price of the product.
- Retailer’s & Distributor’s Margin – About 25% +/- if the selling price of the product is given to whoever is selling it on their store, like a Super market chain, e-commerce website etc. . It’s lesser if you’re a big brand like Pepsi Co., Unilever etc..
- Company’s Margin – This is the percentage of total cost of the product that you get minus all the overheads. No matter what, at least at the initial stages, the company has to operate on very thin margins after all is given out. Hence it is more of a volume game in this industry- As the sales volume increases the overhead cost per product decreases, thereby increasing net margins.
- Incubators- Although the social startup ecosystem in India is in its initial phase, There are many types of incubators supporting for-impact businesses such as Unltd India, Upaya Social Ventures, Villgro, Surge Impact etc. This startup itself was incubated at Unltd India, headquartered in Mumbai.
The USP
Unique selling point: All their products are manufactured in rural areas by women Self Help Groups in a first of it’s kind manufacturing unit run and owned by these women. The grains used as raw materials are sourced from the local farmers – encouraging them to grow what is indigenous to their region.
Their website says they’ve so far sourced raw materials from 15000+ farmers across 3 different states of India, and worked with 2000+ women.
Core activities done by the company-
- Product development
- Quality control
- Building rural relations
- Overlooking operations
Outsourced activities
- Manufacturing is done by Co-operatives & SHGs.
- Online Sales are driven by Qtrove & Places of Origin.
Team members & Investors
The skill set of team members is core to a business at any stage. Their skills drive the core business activities. Also, investors are not just your money banks but also should be able to bring in relevant knowledge and connections. It doesn’t make sense if a real-estate tycoon invests in your tech start-up. They should have relevant domain knowledge and know-how about the industry the startup is in.
Happy Root’s core team skills match with what the company does. The founder, Reema Sathe herself carried some experience working in social startups before starting this business. She took the startup through some prestigious incubators. Apart from her, there is a lead food technologist, Marketing & Sales lead, Operations and Rural relationship manager, and Sales Executive.
Conclusion
Overall this is a great example of a start-up that’s not just aiming for financial growth but is also pulling all it’s stakeholders along with it. It doesn’t mean they aren’t taking finances seriously. In fact, they teach the women in the co-operative about profits, margins, work ethics etc.
The rural population in India is facing many challenges such as Unemployment, migration to cities in search of jobs, high dependency on farming activities, etc. Such businesses will create job opportunities and address at least part of many looming issues in rural India. The advantages of Rural India are that the manufacturing set-up costs, labour costs etc are pretty low as 60-70% of the massive population of India is from these regions.
Such business models have great scope in this context.
I’d love to know if readers have come across start-ups which are exploring any such paths. Also please comment your thoughts on this article or any relevant topic in general.
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