We are thrilled to announce that Elevation has led a Series C round of INR 195 Cr (primary + secondary) in direct to consumer fresh food brand Country Delight. We had first met the company in May 2017 when they were serving ~6,000 households in Delhi NCR with fresh milk every day. Over the next 3 years, we have been fortunate to meet the team several times and track the evolution of the business and the founders very closely through their ups and downs. In this period, we have also interviewed hundreds of customers and witnessed the creation of a very strong brand, built on strong differentiation and consumer love. This note is an attempt to outline the reasons for our excitement and our thought process behind the investment.

Country Delight operates in a very large market and solves for a ubiquitous pain-point

Food and Grocery is a $600 Bn market in India, and about 50-60% consumption happens in urban areas. However, <10% of this consumption is packaged FMCG products, and the penetration of organised retail is <5%.

Indian consumers have always cared about freshness, traceability and have liked purchasing minimally processed products. While we visit supermarkets and order online to fill our monthly basket of staples, pulses, snacks etc., products such as milk, fruits and vegetables, eggs and breads are often bought on a daily basis and never stocked in large quantities at home. For example, UHT milk which has ~15 day shelf life and is often sold in tetra-packs / cans in supermarkets is the predominant mode of consumption in most countries globally including USA and China. However, India has <1% penetration despite several attempts by brands such as Amul, Nestle and Danone, and pouch milk which has 1-2 day shelf life continues to dominate.

Try talking to any millennial / Gen-Z in metro cities about this purchase experience though and no one really enjoys it. Not only does this process require time commitment on a daily basis; consistent quality and price points are also not guaranteed. Even freshness which is the only reason people shop this way is often missing, since the nearby mom & pop retailer is also dependent on multiple middlemen in the backend and is at least 5-6 steps away from the original source of the fresh produce.

This dynamic often perplexed us and a large market, with recurring need and broken consumer experience seemed ripe for disruption. Wouldn’t it be awesome if we could access the freshest country-side produce at the click of a button while sitting in our apartments? If eCommerce has to penetrate in the food and grocery space, someone has to solve this problem.

Country Delight has figured out an innovative and capital-efficient model to solve this problem

Country Delight provides a mobile app to consumers where they can enable subscriptions and place ad-hoc orders across fresh products such as milk, curd, paneer, ghee, breads, eggs, fruits and vegetables. All ordered products on a particular day are delivered at the consumer’s doorstep the next morning between 6-8 AM. To enable all of this and to provide the best possible quality, Country Delight controls the full-stack including sourcing of products, processing and last-mile delivery. The company has deployed technology in a big way to ensure complete traceability from the source and to maintain and track cold chain compliance throughout the chain which leads to a fresher and better product for consumers.

The uniqueness of Country Delight’s approach, not only provides a strong value proposition to consumers, but also makes the business much more efficient in comparison to brands and retailers that have been operating through traditional supply chains in this category. For example; the daily ordering behaviour on Country Delight enables the consumer to buy fresh and consume fresh. At the same time, it creates predictability for the business to source fresh produce just in time and minimise wastage.

A passionate, customer-obsessed, and resilient team

Chakri and Nitin went to IIM Indore together and worked in the financial services sector before starting Country Delight in 2015. They had felt themselves and heard from people around them that the quality of packaged milk in cities was inferior to fresh milk that they had consumed while living in their villages. Therefore, on Day 0, they set out to solve the problem of fresh and pure milk availability in urban cities. Both founders came from very humble backgrounds and did not have access to a lot of capital in the early days. They thought that the best way to create a sustainable business was to avoid traditional retail channels and instead went direct to customers and tried to create a subscription behaviour with milk as the initial hook.

The urban markets are dominated by cooperatives such as Amul and Mother Dairy which are institutions set up to solve the problem of milk availability for everyone in the country and to provide fair market prices to farmers throughout the year. To achieve these objectives, they often store skimmed milk powder inventory and then re-constitute fresh milk in subsequent months to maintain consistency between the lean and flush season. Also, it sometimes takes these brands 3+ days to deliver milk to the top cities of India from the date of milking because their supply chains are designed keeping in mind a very large population base. Because the cold chain infrastructure in India is not great, the quality of milk deteriorates significantly with each passing day. Both of these are structural issues which lead to inferior quality. On top of this, the distribution of these brands is not controlled directly and is hence prone to adulteration. The team’s realisation was that quality and freshness were completely orthogonal to the objectives of availability and price stability which the cooperatives had and this created space for them.

It took the company ~3.5 years of iteration to gather these learnings and figure out the right playbook to scale. Most elements of this playbook were learnings that the company had by constantly talking to its consumers. Customers were always very comfortable in transparently sharing their experiences with the product, what they liked and disliked, what could be done better etc. and that has always been the guiding light for Country Delight.

Strong consumer love and loyalty once value proposition was established ...

One of the biggest learnings for the company through consumer interactions was that in a market like India solving for convenience alone is not enough. We are a low trust economy and customers demand proof before buying into a brand’s promise. This proof was discernible taste difference in the case of Country Delight and the company only focuses on categories where it is possible to deliver the same. Doing this consistently day over day creates immense consumer delight and leads to virality for the brand as evident from the feedback that the company receives on Social Media.

Love for the brand and appreciation of the value proposition by consumers also reflects in the customer & revenue retention metrics of the business. Customers typically start their journey with Country Delight through a milk subscription and start buying other categories over a period of time. Therefore, despite some amount of user churn, Country Delight’s revenue retention hovers at 100%+ levels even post Month 18 of onboarding.

… leading to strong growth and traction

At the time of our investment in Country Delight, the company had ~1.2 lakh subscribers that were getting serviced daily, direct sourcing network spread across 500 farmers and 3 processing units. The company grew 2.7X YoY in FY20 and is on track to double once again in FY21. The company had also meaningfully demonstrated the ability to extend it’s value proposition to other categories, with non-milk products contributing ~30% to overall revenues and growing fast. Delhi NCR which is the oldest geography for the company was about ~75% of the business at the time of our investment, and Country Delight had <2% market share in that region.

Country Delight resonates with multiple core-beliefs that we have at Elevation

A. As discretionary income increases and Indians become more discerning, new-age brands will proliferate. In the case of Country Delight, while companies such as Amul and Mother Dairy have solved the problem of milk availability for everyone, quality and freshness are orthogonal objectives which creates space for a new brand.

B. The way to create these new brands is to focus on severe pain-points (freshness/fear of adulteration in the case of Country Delight) and engage with customers directly on a continuous basis to evolve your offering. Incumbent consumer brands have not been able to create a culture of doing this and customer obsession is almost always the challenger brand’s #1 edge.

C. Building a business in a low trust economy like India takes time. It is not easy to convince customers to buy your product, employees to join and investors to invest. Therefore, resilience, perseverance and capital efficiency become super important characteristics of a successful founder & company.

Given the strength of Country Delight’s value proposition, deep moats and mass-premium price points, our belief is that there is still a long way to go and that the company is just getting started towards realising it’s vision of being India’s most loved fresh and dairy essentials brand.