Food adulteration is a growing concern in Dhaka. Many people have already given up the hope that what we buy and eat could be healthy. Consequently, the demand for safe and organic food has grown manyfold in the past few years.
Many consumers are willing to pay a premium. Others wish safe food to become the norm. This is what Khaas Food, a Dhaka-based farm-to-table food company, aims to make a reality - safe food for all. (read our previous stories on Khaas Food here)
Founded in 2015, the bootstrapped startup continues to experience an excellent growth proving a growing demand for safe food in the market.
In this wonderful follow-up interview Future Startup’s Ruhul Kader sits down with Habibul Mustafa, co-founder, and chairman of Khaas Food, to unpack developments at Khaas Food over the past one year, growth and state of its business, expansion, and insights into its business model going forward.
This was a much longer interview, so we had to break it up into two parts. This is the first part of the interview. The second and final part of the interview will be published later this month.
Future Startup
It has been almost a year since we last talked. How are you doing? One thing we know for sure is that you have experienced a wonderful year and great growth. How much has Khaas Food evolved as a company? Please tell us about major updates.
Habibul Mustafa
A number of things have changed since we had our last conversation. The number of orders we get on a daily basis has gone up. Our processes are now more streamlined. As an organization, we are stronger than before. Our team has grown. We have new areas added to the company as well. We have a dedicated marketing team, a logistics team, and a technical team. We had none of them a year ago.
Previously, we had to use public transport to deliver products because we did not have our own transport. Now we have motorcycles and bicycles for delivering products to our customers in far and nearby areas respectively.
Our operation has expanded. In order to handle the growing number of orders, we also have taken three new warehouses - totaling four warehouses including our existing one. These warehouses are situated at different points in Dhaka which would expedite our delivery process, improve efficiency and customer experience.
From the Dhanmondi warehouse, we will make deliveries in Dhanmondi, Kalabagan, Mohammadpur, Azimpur, Old Dhaka, and some parts of Mirpur. The warehouse at Uttara will cover South City Corporation areas including Bashundhara, Baridhara, Uttara, and the rest of Mirpur. There are two other warehouses at Rampura and Khilgaon which would cover the nearby localities.
We believe that decentralizing our delivery process would accelerate the pace and improve the productivity of our delivery personnel. The model is essentially hyperlocal in nature. It makes sense when it comes to logistics. At the same, this will allow us to let our customers from all of these locations to come and pick products from our nearby warehouse.
Currently, we are focused on positioning ourselves as a safe food manufacturer/supplier in the market. To that end, we have made some investments in production to ensure a greater control on the backward linkage and better quality supplies.
We have invested in a dairy farm which used to be our third-party supplier up until recently. We were satisfied with their product quality. But they were having difficulties in meeting the rising demands of our customers. So, we lent them a helping hand and underwrote an expansion of their operation. Previously, the dairy farm had only three cows and now they have 23.
Our milk has made quite a name in the market for its quality. Just a few days ago, we received a call from Chaldal. They were planning to add dairy milk to their product mix. And searching for the right supplier, they first called us. We intend to keep up that reputation.
Besides investing in the dairy farm, we have financially backed our natural honey and seasonal fruits suppliers. And we are already seeing good results. We plan to do more this as we grow.
In future, we will particularly focus on expanding our own production houses and strengthening our suppliers. We are also planning to build better relationships and better integrations with our suppliers which would help us to maintain the growth of our customer base and ensure a speedy delivery without having to deal with wastage and misappropriation.
At present, we have 35 different suppliers for different types of products.
The number of orders has almost quadrupled from 65 to 200 per day and the average basket size has also grown. Trucks fully loaded with fruits and similar products are coming into Dhaka from suppliers in different regions in the country every two days. We anticipate that we would need to add new vehicles to speed up the logistics soon.
Habibul Mustafa
We have also been pushing into corporate for a short while now. It has turned out to be a good strategy for us. We have made considerable strides in the corporate sector.
We already have partnered with 13 companies and the list continues to grow. Some of these companies take our products on a regular basis for their kitchens. For others, it allows them to give their people access to our products at a good price.
Organizations such as OnnoRokom Group, Dhaka Bank among others take our food when there is a need.
This partnership works in two ways; one being that the employees of a partner corporation enjoy a discount whenever they buy something from Khaas Food. At the same time, they can take our products at a corporate rate for their kitchen. We have plans to grow this channel in the coming days.
We are more of a food company that an ecommerce company. And our goal is to play to that strength. Our long-term plan is to establish a popular and reliable food business in which e-commerce will only be a distribution channel. To have control over our customers, we are trying to improve our distribution channels (e.g. e-commerce platform and physical outlet/warehouse) gradually.
Future Startup
How much has your team grown?
Habibul Mustafa
There are presently 26 people in our team which includes the delivery and pre-sales processing personnel.
We didn't have a marketing team before which we do now. A separate logistics department has emerged as a consequence of swelling customer demands.
Previously, we outsourced most of our IT operation. Now we have a dedicated technical team as well.
Future Startup
Today many big internet platform businesses in the world have one thing in common: they control customer interaction which is essentially demand. Giants like Amazon, Google or Uber have reached such a magnitude through accumulating the suppliers and reining in the customer demand. It is, therefore, safe to say that aggregation is essentially the way to scale up if you are building a marketplace. Endless suppliers and endless customers. You get upper hand on suppliers by controlling demand. Customers come to you because you have all the collections. Although Khaas Food is a very different business, you are an ecommerce company at the end of the day. How do you think this factor would influence in determining the ultimate business model of Khaas Food?
Habibul Mustafa
It is true that for many marketplaces the right way to go probably is to aggregate as many suppliers as possible while controlling the demand. Building a platform like that would be great. But our business is different.
We are more of a food company that an ecommerce company. And our goal is to play to that strength. Our long-term plan is to establish a popular and reliable food business in which e-commerce will only be a distribution channel. To have control over our customers, we are trying to improve our distribution channels (e.g. e-commerce platform and physical outlet/warehouse) gradually.
To summarize, our plans for future is to build our own distribution channel which would be at the intersection of online and physical retail. It would comprise of stores in different areas of the capital and, eventually spanning out to different parts of the country.
We closely work with some of our suppliers now. We plan to grow the number in the coming days.
Gradually, we are building better control over our backward linkage to ensure supply and quality. I think as we grow our model will also evolve but given our priority, it should be a different model.
Currently, we receive a huge traffic on our website. Website orders have eclipsed social orders by a significant margin. Around 65% of our orders are now laced via the website. And the rest comes from either Facebook or via our hotline cell number.
Future Startup
When we spoke last time, a significant percentage of orders were coming from social platforms and you website orders were not noteworthy. What percentage of your orders now comes from your website?
Habibul Mustafa
Previously, the majority of our orders used to come from Facebook. That has changed. Multiple strategies have been used to drive our customers to our website and order through the website. Even these days, part of marketing budget goes into that.
Currently, we receive a huge traffic on our website. Website orders have eclipsed social orders by a significant margin. Around 65% of our orders are now laced via the website. And the rest comes from either Facebook or via our hotline cell number.
Future Startup
eCommerce users predominantly prefer COD. This has been the case since the beginning. However, with the rise of various digital payment options, it is likely to change soon. What percentage of your customers opt for cashless/digital payment?
Habibul Mustafa
Only 10% of our customers are now paying digitally via credit/debit card and bKash. Most of them pay cash on delivery.
I think people hesitate to pay digitally due to a lack of trust in the market. If we can ensure the reliability, digital payment will surely get a momentum.
Future Startup
How are you doing business-wise i.e break-even, profitability etc?
Habibul Mustafa
We have been doing pretty good. As you can see, our order numbers have grown. Business has expanded.
At the same time, we have made some major infrastructural investments including our new hubs in different parts of the city. If everything goes according to plan, we hope to break-even within a year or so.
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Interview by Ruhul Kader, Transcription by Sheikh Rahatil Ashekan
