Fermenting an idea to make a lot of dough

Suganthi Shanker faced a peculiar problem. When she found a solution to it, she realised that she could make a business out of it.

She was living in Coimbatore with her two daughters and found it difficult to grind for idli or dosa at home because of the small quantity involved. Besides, more than the actual grinding of the rice and the dal , cleaning up the grinder was a chore. So, she started buying readymade batter – the quantity was just enough for a small family and would last two days. The quality of the batter was also good.

She even worked in a unit that made

idli and dosa batter in Coimbatore for six months. And, when she moved to Chennai for her children’s education, she decided to set up her own idli/dosa batter making unit, in the garage of her house in a residential locality in South Chennai.

Suganthi says she would have invested ₹10-12 lakh in the business – buying large-capacity grinding machines from Coimbatore. Her company, Tawa Special Food Products, makes

idli and dosa batter selling it under the Mav-G brand. Suganthi’s venture is among the numerous ones that have come up selling idli and dosa batter, as the ever growing number of nuclear families resort to buying the batter rather than making it at home. A packet of batter is about one litre (or 800 g) and can serve a family of four for two days.

It is a largely unorganised market dominated by local brands. But it is a growing market with a lot of potential for both entrepreneurs and investors as can be seen from the fact that one venture, iD Fresh Foods (India) Pvt Ltd, started by an engineering graduate with an MBA from IIM-Bangalore, has raised ₹35 crore from Helion Venture Partners, a venture capital firm.

More potential

PC Musthafa, Founder and CEO, iD Fresh Foods, realised the huge opportunity in the ready-to-cook fresh food category and quit his software job, to start iD Fresh Foods in Bengaluru. The business itself started off in a small way when his cousins and associates used to sell batter produced by somebody else in their small grocery store. Why not make our own batter, was the idea.

Musthafa agreed, put in some money and waited for the business to grow, before throwing up his job and getting involved in the business.

Today, says Musthafa, iD Fresh Foods is the largest player in the segment with “factories”, as he describes them, in seven cities, including one in Dubai. The batter, he emphasises, is the same as what “your mother prepares at home.” Getting the consistency and quality right are the key to getting the batter right – for this they had to ensure that the rice and urad dal were of the highest quality and the grinding and packaging process was clean and hygienic. The batter is preservative-free and naturally fermented, he adds.

“It is a huge market,” says Musthafa. iD Fresh Foods alone sells more than 23,000 kg a day of batter and is all set to expand its presence with the funding from Helion.

Kannan S Mahadevan of Thayar Food Products says the unorganised sector accounts for almost three-fourths of batter market.

Thayar is among the oldest in the market having started off in 1997. Mahadevan recollects that on the first day of business, they sold just 48 packets. Today, they make and sell over six tonnes; the business having touched a peak of 8-10 tonnes a day in 2006-07, but stiff competition from street-corner vendors forced a scaling down of the business.

The shopkeeper, according to him, gets 23-25 per cent margin, the distributor gets an 8-10 per cent margin on the maximum retail price. A packet of batter now retails at ₹38-41, depending on the brand. The street-corner vendors sell it even lower and in much smaller quantities.

CK Ranganathan, Chairman and Managing Director, CavinKare, which sells the batter under the Hema’s brand, agrees that the market is highly competitive, especially in Chennai’s suburbs. But what do investors see in this business? A good opportunity, says Rahul Chowdhri, Partner, Helion Venture. His reasoning is simple.

The ready-to-cook fresh batter reduces the cumbersome part of the work for customers, especially housewives, and just leaves 10-20 per cent of the work to do – that of actually preparing the idli or dosa .

The majority of the work, the mechanical part that takes up time, is taken care of. There are no preservatives and the batter is naturally fermented. This is the value proposition companies like iD Fresh Food bring to the table for an investor, adds Chowdhri.

Eyeing North India

The challenge before the companies is to convince home makers that this is as good a batter as is prepared at home.

North India is an unexplored market for the batter makers and the customers would not even need convincing.

The batter business is all about what gets done at home being taken over by some else – convenience and assured quality. As more entrepreneurs realise there is dough to be made in the batter, newer ventures will come up, closer to the large markets.