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With Rs 150 Crore Annual Recurring Revenue, Farmley Eyes Global Expansion, Expansion Of Offline Stores

Last month, the snacking brand raised $6.7 million in a funding round, adding to the $9 million it had previously raised

With Rs 150 Crore Annual Recurring Revenue, Farmley Eyes Global Expansion, Expansion Of Offline Stores
Farmley
POSTED ON January 27, 2024 9:36 PM

On the heels of a $6.7 million funding round, healthy snacking brand Farmley is gearing up to ramp up its offline presence. This pre-series B funding round was led by BC Jindal Group with participation from existing investors like DSG Consumer Partners, Omnivore and Alkemi Partners, adding to the $9 million raised previously.  

The start-up plans to utilise the funds to fuel the expansion of its distribution channels; its current network comprises 435 super stockists and 150 distributors. It also plans to enhance its offline presence, particularly in supermarkets and self-service stores.

Co-founded by Akash Sharma and Abhishek Agarwal in 2017, Farmley claims that its revenue soared to Rs 140 crore in FY23—up from Rs 50 crore in FY22 and Rs 2 crore in FY21. It hopes to cross Rs 220 crore revenues in the current financial year.

Sharma has fused his past experiences in the agriculture, wellness and logistics sectors to create a customer-centric brand with over 150 adulteration-free dry fruits, nuts and ancillary products portfolio. His family had a mustard farm where oil was extracted from the seeds. However, his father witnessed a 3X growth in business after he started doing value addition with mustard seeds. 

"This idea stayed with me and I decided to follow a similar route with Farmley," he revealed. While the brand started its journey offering products like rice, pulses, oil and dry fruits to business-to-business (B2B) buyers, the founders soon realised that it was impossible to scale the company by working on multiple product lines. They zeroed in on nuts and dry fruits, as several legacy and local brands offered staples like rice, pulses and oil to this clientele. 

Farmley's business received a fillip during the pandemic when consumers leaned toward healthy snacking. Recognising the need for transparency in food consumption, it introduced a line of dry fruits and nuts, gradually expanding to include flavoured dry fruits, date bites and munchies made from fox nuts. There are no plans to expand SKUs in the next four quarters, as it will focus on building hero products within each category.

Sharma said that in addition to adopting mindful eating habits, customers were also eager to know more about the production of the food items they were consuming to ensure it was unadulterated and followed sustainability practices. "We decided to educate them about how we were invested in improving our supply chain and the value addition we bring to our products," he added. 

The company established five farm-gate processing units close to its produce sources to maintain control over product quality. It works directly with over 5000 farmers, sourcing cashews from Mangalore, Makhana from Bihar and raisins in Sangli and importing almonds from California, walnuts from Chile and dates from the Middle East. 

Addressing challenges in the perishable business, Sharma outlined that Farmley's innovative approach to be closer to the sources of origin has helped it reduce distribution time and maintain product quality. Its processing units and centralised warehouses also optimises logistics for efficient delivery to e-commerce companies and distributors, which is crucial in the food sector. 

Akash Sharma, co-founder, Farmley
Akash Sharma, co-founder, Farmley

Sharma also pointed out that by taking ownership of sourcing directly from farmers, the company was able to eliminate several intermediaries in the procurement cycle. This has also helped prune unnecessary price escalation and pass on the cost-benefit to the end customer.

Currently, most of Farmley's business (over 95 percent) comes from the B2C sector, a major pivot for the company, which initially relied heavily on B2B business. While B2B trade drove the topline for the company with higher volume transactions, the margins were leaner as compared to B2C, which is why the company decided to shift gears and concentrate on the latter. 

Institutional business is also a key contributor to the overall revenue mix and it is exploring more opportunities to tap in this segment. It currently caters to airlines like Air India Express for the in-flight snacks as well as the canteens of corporate offices, including tech giant Google.

Farmley anticipates achieving profitability in FY25, building on EBITDA level profitability achieved in recent months with its shift from B2B to B2C driving margin growth. As the company increased its focus on the B2C sector, its distribution strategy also underwent a significant transformation. It branched out from its online e-commerce and quick commerce platforms to encompass modern trade. 

It is currently present at 10,000 outlets, including modern trade chains like Spencer's Retail, Godrej Nature's Basket, Reliance Fresh, as well as supermarkets and self-service stores. Sharma claimed that the company would like to ramp this up further as part of its omnichannel strategy to get closer to the customer. 

Farmley's reportedly has a Net Promoter Score (NPS) of 90 per cent for its value-added range with a repeat order percentage of around 35 per cent to 40 per cent. "Our business is not dependent on repeat customers but rather on first-time conversion," Sharma explained. This is why Farmley has not positioned itself as a premium or a mass brand but one that sits in between these two layers, charging a 10 to 15 per cent premium over locally available products. 

"The trick is about giving the proper grammage at the price point because impulse buying is very important in the snacking sector. Once someone buys our products, sees its health-oriented value and likes the taste, we see a decent repeat business of around 35 per cent to 40 per cent in our value-added dry fruits and nuts products," he added. 

Farmley continues to eye both domestic and international markets, recognising the growing healthy snacking industry. Sharma estimates India's dry fruits and nuts market at $7 billion, with the healthy snacking sector constituting a $2.5 to $3 billion market, doubling every four years. 

While legacy players like Marico and ITC Foods corner a major chunk of this market, several challenger brands like Farmley, Happilo, Beyond Snack and Paper Boat foods are gaining share. The latter have the advantage of agility and elasticity to launch new products based on customer feedback and market gaps, which the larger brands take longer to capitalise on. 

"As an insurgent brand, we have the flexibility to innovate and execute changes at a pace that incumbent brands can't. For instance, our innovations can hit the market within two months, while a legacy player could take a year. Within this two-month period, we can understand how the brand is performing, tracking our consumer data and our NPS scores to track our repeats and do things faster," Sharma elaborated.

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