MTR Foods Private Limited, India’s largest ready-to-cook food retailer, is seeking to wrest market share from its competitor iD Fresh Food (India) Private Limited in a segment in which the latter is the leader – wet idli and dosa batter.
In 2021, MTR launched MTR Minute Fresh, a new range that comprises idli batter, dosa batter and red rice dosa batter. Close on the heels of the launch, the company released an ad campaign targeting its rival.
“Idli and dosa are not the same, then why is your batter the same?” went the MTR tagline of the advertisement, taking a dig at iD Fresh Food.
iD Fresh Food, founded by P.C Musthafa in 2005, is known for introducing wet idli and dosa batter. The start-up has recently extended its offerings and launched other products such as parathas and curd. Fresh idli and dosa batter remains the company’s highest revenue-generator and its most popular product.
The company’s success in the segment, which until now has been largely unorganised, has caught the interest of larger entities like MTR Foods.
According to industry estimates, MTR Foods, along with Gits Food Products Private Limited, command about 25 percent of the ready-to-cook food market in India. McCain Foods India Private Limited, which caters to consumers of frozen foods, is another major player with a 25 percent market share.
The ‘fresh factor’
MTR Foods, a company known for its ready-to-make South Indian food products, has retailed dry dosa and idli batters for ages. The company traces its origin back to the famous restaurant chain Mavalli Tiffin Rooms. The packaged foods business was sold to the Norwegian company Orkla in 2007. The restaurants operate as a separate entity.
The company is known to have created the ready-to-cook category ground up in the Indian market but has not tasted much success with the dry dosa-idli batters and the category is yet to take off.
“The market for the dry idli-dosa batter is very small,” said Anand Ramanathan, a partner at Deloitte India. “Making idli-dosa out of dry batter is not a prevalent practice in South India. While it has helped the category grow so far, over time the product will become irrelevant.”
The market for wet idli-dosa batter is valued at anywhere between Rs. 1,500-4,000 crore. Only 5-10 percent of the market is organised and dominated by the big brands, according to industry estimates.
The market is growing at a rapid pace and has expanded at an annual rate of 15-25 percent, driven by consumer need for convenience and preference for products perceived to be fresh and healthy. The wet batters also deliver high margins – 45-50 percent – which make them a lucrative proposition for businesses.
iD Fresh Food has capitalised on the trend and registered annual growth rates of 50-60 percent in recent years. In the financial year 2021, the company’s chief marketing officer Rahul Gandhi said, iD Fresh Food earned revenue of Rs 300 crore and was well on the way to achieving sales of Rs 400 crore in the following year.
“We have been tracking this category in the last seven-eight years since the start-ups came up in it but we thought it was not large enough for us to invest in,” said Sanjay Sharma, chief executive officer of MTR Foods.
As COVID-19 struck the country, the company witnessed the rapid shift to market for “shorter shelf-life and healthier products.”
“We feel the time for fresh foods or short-shelf life foods has come and this has attracted us to this category,” Sharma added. According to him, the market for fresh idli-dosa batter is upwards of Rs 1,500-2,000 crore and growing rapidly.
Strategic push
MTR Foods launched MTR Minute Fresh with a differentiation.
“We saw this gap in the market -- that the same batter was being sold to make both idli and dosa. However, that is not how a consumer ideally makes idli and dosa at home. You have separate batters for both these food items,” said Sharma.
The company is also pushing its product in the market by offering convenient and easy-to-use packaging, and smaller packs of 750 grams and 850 grams. iD Fresh Food sells 1 kg packs.
“We did not want our packs to slip from the shelf and hence designed it in a way that they stand up. Also, who is going to eat 25-30 dosas in a day; so we launched smaller packs,” said Sharma.
The strategy has helped the company price its products competitively. A 750-gram pack of MTR idli batter is available for Rs 75 compared to a 1kg pack of iD Fresh Food's dosa-idli batter that sells for Rs 85 in Mumbai, Rs 75 in Bengaluru and Rs 59 in Chennai.
The company has launched the product only in Bengaluru so far; its supply chain and logistics arms are preparing to supply a product that has a shorter shelf –life to other markets. iD Fresh Foods is available in 45 cities and over 40,000 outlets in the country.
"We launched this new offering in Bengaluru, based on our research and understanding that the city has the largest market for wet batter in India. So, before we go to another city, Bengaluru in itself is a big market to tap," Sharma told Moneycontrol.
“The biggest challenge for us is getting the front-end supply chain right because we are used to supplying products which have a shelf life of six months to a year. But we are slowly getting it right,” said Sharma.
MTR Foods has invested Rs 25 crore to expand its production facility and set up a customised cold chain network in the city. The company also claims to have placed its products in 5,000 outlets in Bengaluru compared to 3,000-4,000 general trade stores where MTR Foods’ products retail.
MTR Foods is also betting on its direct-to-consumer (D2C) platform, e-grocery players and modern trade to push its products in the market.
“The sales of the segment are skewed towards modern trade and e-commerce,” said the CEO of MTR Foods. The company is targeting Rs 100 crore in revenue from the category over the next three-four years. MTR, said Sharma, had clocked Rs 1,000 crore in sales in the financial year 2021.
Scaling up
iD Fresh Food’s biggest market is Bengaluru, but the company is scaling up quickly in other regions too. Earlier this year, it raised Rs 507 crore from private equity platform NewQuest Capital Partners and existing investor Premji Invest and others.
Flush with funds, it is gearing up to expand in the North and East of India. The company’s strength lies in its supply-chain network, which enables it to deliver its products from factory to stores in just a day.
“Most supply chains go from factory to warehouse to store and it takes 10-15 days. However, we manufacture our products overnight and deliver the product next morning,” said Gandhi of iD Fresh Food.
“So to crack this segment you need to have a unique supply-chain to enable delivery of fresh products,” he added.
Experts say MTR Foods will face a few challenges in setting up a supply-chain because iD Fresh Food has shown the way.
“The company will have to figure out how to get a foothold in the market and get consumers to buy its products,” said Ankur Bisen, senior partner and head of the consumer, foot and retail practice at consulting firm Technopak.
“It is a growing market nevertheless and hence has space for everyone,” he added.
The entry of MTR Foods in a market that has been its stronghold has not fazed iD Fresh Food.
“Whenever any category crosses Rs 100-150 crore mark then competition in it intensifies. And hence MTR’s entry here is natural but it is difficult for competition to sustain here, given the supply-chain capabilities needed in the segment, which we have built over the years,” said Gandhi of iD Fresh Food.
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