On SmallCap Spotlight, DSM Fresh Foods founder Deepanshu Manchanda shares the journey of DSM Fresh Foods and its brand Zappfresh—from a D2C startup to a listed company. He discusses building a robust supply chain, navigating the challenges of fresh food, and how the IPO has strengthened credibility and growth ambitions.
Karunya Rao: Hello and welcome to SmallCap Spotlight. I’m Karunya, and today we’re being joined by the management of DSM Fresh Food. We have the founder of the company with us, Mr. Deepanshu Manchanda. Hi Deepanshu, thank you so much for taking time out and chatting with us today.
Deepanshu Manchanda: Hi. It’s my pleasure talking to you.
Karunya Rao: Now, I want to start with talking about the brand. Zappfresh, which has evolved from a D to C, fresh meat and ready to eat startup into a full grown listed company. Take us through the journey so far that the company has seen. If you could tell us the big milestones or the turning points which shape the scale, the business, the credibility, and of course, leading up to your big listing.
Deepanshu Manchanda: Uh, yeah. So, uh, started in twenty fifteen. The idea germinated, uh, while in a conversation with the founder of, uh, Blinkit Albinder, where we were just conversing about how they are, you know, solving the New Age grocery problem of delivering at home. And you know, how meat is posing to be a challenge for them. You know, amongst all the grocery items, they they were really struggling, uh, you know, to, to standardize that experience where there’s local monopolistic behavior, uh, you know, the local meat shops don’t, uh, respect the customers enough in case of quality concerns and availability, pricing. Everything was really broken, you know, is what you know, that first hand information which we got from him, this is a, you know, very, very, uh, perennial issue, uh, somehow, uh, is is, uh, you know, not really being looked upon as seriously as fruit and vegetables. Uh, the category lacks that kind of, uh, uh, stability promise, uh, from stakeholders, even government levels. Uh, so we found many challenges, of in the value chain, right from the farmer to the wholesaler to the retailer.
All all the pieces, you know were unsolved. I think that’s, uh, where I really got, you know, interested to, uh, solve it piece by piece. Um, so, yeah, I mean, the initial days were really rough. Uh, we did get a lot of love from customers in Delhi when we. Which was our first market. Um, and we raised our small seed family seed round and, uh, you know, started, you know, interacting with, uh, uh, nutrition based, uh, you know, uh, communities and health communities which, which were looking for more protein.
So protein, you know, was our major, uh, you know, cue which we wanted to focus upon. And, uh, as you must be aware, that India, eighty five, eighty percent is Nutrient deficient. So nutrition is something which we really wanted to focus upon. Um, so yeah, the, the initial days, uh, we, we started as an online and offline omnichannel, uh, brand, uh, from Delhi. And, uh, we invested about five years in one market in till twenty twenty one almost.
We were in single market and then we grew to other markets, uh, like Bangalore and Bombay. Uh, overall we’ve seen, uh, and done a lot of, uh, uh, trials and pilots and different formats and uh, been able to really understand, uh, the nuances of how we can scale, uh, and, and not really bleed. So that part, I think, took us almost, uh, four or five years, uh, consistent effort towards that, uh, really helped us.
Karunya Rao: What about your personal experiences? I mean, starting a business on your own, from scratch with, you know, great insights from a player like, uh blinkit. But talk to us about any experiences that you’d like to share which influenced the way you built your business.
Deepanshu Manchanda: Oh, very good question. So, uh, I think entrepreneurship leadership to me, to some extent is ingrained in you. I think, uh, the the real business, uh, DNA was there. Uh, I come from a middle class business background. Uh, I didn’t want to join my family business, so I wanted to pursue something of my own. Uh, easier said than done, but I was really, like, you know, very stubborn as a person where I wanted to pursue something or or go after something. So I just bang my head and learn from the mistakes. Uh, so not afraid of mistakes. Uh, a lot of courage. Uh, high risk appetite. Uh, and I would say, you know, a long term, uh, approach towards, uh, everything in life, uh, helped, uh, me, you know, uh, be a better entrepreneur.
Karunya Rao: That’s quite true, actually. And very, uh. Nicely put. You also mentioned that you, uh, raised some initial seed funding from within your ecosystem and your family. If, you know, could you tell us who were these initial, you know, people who were backing you? What was the quantum of money that you put in in the initial part of the business?
Deepanshu Manchanda: So this is not family. I’d say this was more friends and, uh, in the network who, you know, uh, you know, where you are able to, you know, the friends are able to refer, uh, the other friends, and you create a small kitty of an angel round, uh, we did about, you know, half a million dollar kind of, uh, seed money raise in twenty fifteen.
At that point, it was, uh, the ecosystem was still developing, so it was not very mature as it is today. So the angel, uh, side of the business was also, you know, fairly nascent in those times. So you could only rely upon people, you know, so through them, I think, uh, they could see the, the passion, the drive. Uh, initially everybody bets on that. And then gradually they start seeing the proof of the pudding in terms of how the, you know, product market fit is developing and, you know, how we are pursuing, approaching, uh, you know, the product and the service overall.
And then, you know, it’s a snowball effect. You know, it keeps moving on. And then people, uh, keep liking the product. Customers also become investors. Investors become customers. So like that, you know, the ball gets rolling.
Karunya Rao: You know, this is a very interesting category, but also a very tough one to crack the fresh food category. What have been some of the biggest challenges you faced? Whether it’s around sourcing, cold chain logistics, unit economics, getting the consumer trust, building your brand. What was the hardest puzzle to solve?
Deepanshu Manchanda: I think supply chain is very hard in this category, and when I say hard, it means that, you know, it’s very easy to procure to buy from one, uh, wholesaler and sell it to, you know, the customer. But, uh, the way we were looking to solve it is to the source, like from the farm to the to the fork.
Exactly. And then there were mediators in between. So it was very difficult to, you know, um, make these farmers trust you, uh, because initially the scale is small. It took us about three years to, uh, to really stabilize the supply chain, uh, where we are able to efficiently build the business, not just buy and sell as a as a trade, but essentially to source and to process from the right source, looking at the quality parameters. All of those things were, you know, fairly important.
Karunya Rao: You know, this is also a largely unorganized space, fresh meat and protein consumption market. Now that you’ve been an insider for for a decade, almost, how do you see the fresh food and meat rich industry evolving? What are the structural shifts that you believe are going to drive growth in this industry over perhaps the next one decade?
Deepanshu Manchanda: Um, okay. So India, as a country, we see a lot of food wastage in the fresh space. Almost twenty six percent of the food gets wastage, uh, and the perishable side of it. And that uh, is responsible for, uh, the inflation, uh, in the, in the commodity side, uh, the price increase, all of that creates a challenge, uh, for it’s it’s basically getting expensive and expensive.
The reason it’s getting expensive is because of lack of infrastructure. Uh, and that infrastructure, I mean, is cold chain infrastructure. Uh, I mean, till date, I have I don’t see a lot of impact effort, uh, development happening, uh, in the sector because the propensity to pay, uh, that premium, uh, which the processor is incurring by, in, you know, a building that infrastructure doesn’t, you know, match.
So if he has to spend, let’s say ten rupees extra on, uh, per kg on a particular product, is the market ready to pay for that kind of, uh, quality and that price? That’s where I think there’s a mismatch. India largely remains a very price sensitive market. So, you know, the processors end up not able to over, you know, invest or invest properly in that, you know, cold chain ecosystem, uh, which is, uh, extremely needed.
Karunya Rao: This is, you know, not just organized but also a very competitive space. Now, many players have come. They’ve explored some states, some failed. What do you believe Zach has done fundamentally better or differently? You know what? What has sort of helped you stay, uh, stay on and stay strong in this space?
Deepanshu Manchanda: So we like solving problems. Uh, that is, I think, individually with me. Also, I like solving challenging things, doing things which are, uh, you know, going the uncharted way, you know, like a little more stubborn, rebellious kind of a person. So I think that is something which we have seen in the project, reflecting also where we don’t, uh, we just don’t, you know, uh, say no to the problems coming our way.
That’s number one. Number two, we don’t solve problems with, uh, with spending money, okay? Uh, we we really want to innovate. Now, how do you innovate? Whether you use technology, whether you use, uh, state of the art, uh, processes or some level of controls, uh, which are industry first, uh, fresh, chilled is is extremely difficult, uh, category. And, um, I would say that it’s a supply chain problem.
Uh, so if you are able to build your supply chain in a very robust manner, then I think you have a better, uh, better chance of, uh, you know, success in the sector, which we have somehow been able to crack, um, where all the cost and all the overheads are so tightly managed.
Karunya Rao: So you would say that is your sustainable edge, your supply chain.
Deepanshu Manchanda: Supply chain is core in our industry. Uh, and I mean, there’s no two ways about it. Um, that’s the inherent nature of the business. So you cannot go without it.
Karunya Rao: You know, there are often questions about profitability and scalability in the kind of business that especially that you’re operating in. So how are you looking at unit economics today? What are the levers which are most critical for you to improve your margins as you grow and as you scale?
Deepanshu Manchanda: Um, so see, we we are looking at a, uh, a healthy product mix. Uh, going forward, the plan is to diversify, uh, add new products in the basket, which complements the main category. Um, and uh, there we see a margin and category contribution helping us further going more in depth, uh, in, in certain categories like fish and seafood, uh, is something which is uh, which we believe, uh, has humongous, humongous potential in the country. Um, and so we are looking at different markets, different products, uh, largely to, uh, improve the margins and also to create more, uh, in-depth, uh, in at the back end.
Karunya Rao: Um, if I want to go back to that supply chain question once again, because there are a lot of moving parts there. Um, first is of course sourcing, uh, what kind of price volatility and supply risks do you face when it comes to sourcing and overall because you have to ensure quality as well as pricing? How are you doing that while strengthening the supply chain.
Deepanshu Manchanda: So there are controls which we have to, you know, put in place uh, at every level, whether it is at a farm level or it is at a processing level. If we are able to somehow ensure that the partners are following a certain checklist or from a quality point of view, uh, that enables and standardize the process at a at a very farm level, which generally is missing. So for example, uh, there is no veterinarian doctor, uh, which is available at the farm. Uh, or if there is, they don’t follow the right, uh, you know, parameters to breed the chicken, uh, which will result into, you know, a more, uh, you know, healthier chicken part of it.
So there are certain checklists which we, uh, ensure gets followed. And then, uh, then there is, uh, you know, uh, at a, at a slaughtering level also where we believe, uh, a certain infrastructure is required. And then, uh, from a pricing point of view, Um, it is very sensitive. Um, and it remains, uh, you know, a challenge always where you have to ensure that, you know, we are not, uh, over, uh, extending ourselves when it comes to procurement. Uh, we have to buy at a certain price. So that price has to be locked in, uh, from a annual pricing, uh, contract point of view or whatever is, uh, you know, uh, decided and prefixed as a price point.
Uh, so I think the critical part is choosing and qualifying these partners, uh, which are not only following the quality protocols but also are, uh, able to work upon a certain price format, which is agreed upon with a certain variance is how we see it.
Karunya Rao: Okay. Also, you know, uh, you’ve you’ve gone listed very recently. September twenty twenty five is when DSM Fresh Foods went public. What really motivated, uh, you know, you to go to the markets. List yourself. What did you want to do with the funds raised? And what was the primary goal behind the IPO?
Deepanshu Manchanda: Yeah. So we never thought that we’ll go IPO this early, frankly. Uh, but, you know, the public markets were really booming. And then it was a good time to go listing. So what we thought was that this will be a growth spurt, uh, which we, we can anticipate. So this is a growth capital which we wanted to raise from the public investors. I founded myself more relevant to this ecosystem as compared to the private equity in the venture capital fund funding side of it, because the public markets respect efficiency and profitability more than the private markets, at least at that point. And uh, now I think that the, the its keep changing here and there.
But you know, I, I thought that this is a more, uh, larger framework, uh, which you are able to abide by, uh, where there is a set guidelines of CB and everybody. So you follow that process and that’s about it in the private ecosystem, however, you know, there are too many, uh, cyclical changes, which keeps happening sometimes the mood, the theme is this, sometimes it is that. So I didn’t find that very stabilizing as a long term project. Uh, and then we thought that committing to public market in terms of the long term view is the best approach. Uh, and we are actually the first to see food business to be listed also.
So, uh, again, like to be the first in whatever we do. Um, so that I think, uh, was a was a, you know, good, uh, spinning story, uh, for us and for the industry also.
Karunya Rao: Okay. And if you could also break it down for us, how much of the IPO proceeds are being deployed where whether it’s expansion, infrastructure, debt reduction, whatever else?
Deepanshu Manchanda: Yeah. So so we have about, uh, fifteen crores, which we have taken as a part of marketing about eleven crores in infrastructure. Uh, about twenty, twenty five crores, twenty five crores is in working capital and rest is for general corporate expenses. Uh, that’s a broader mix.
Karunya Rao: Okay, but, you know, typically the overall, if you look at the way things are at the company, what has actually changed post listing, whether it’s governance, access to capital, customer trust, anything that that has really stood out.
Deepanshu Manchanda: A lot, a lot. See from a governance point of view, I do not say that, you know, it has changed a lot because we were already we had private equity with us. So we we knew, you know, generally how to build compliances and follow all the regulations at a private level. Now the public spectrum is slightly different. Uh, but I would not call it really suffocating in that manner. Uh, so it, it’s governance, I would say not not much of shocking things which we are able to, uh, face.
We are we are pretty fine with it. Uh, so it has been a good thing, actually. What? I mean, uh, and then the other part of, uh, credibility, I think, has risen to the roof, uh, we are able to attract a lot of serious partners to work with us, uh, at a vendor level at, uh, you know, at at every level, at a strategic level, uh, you are able to demand and also, you know, attract a certain type of, uh, you know, uh, human resource also. So credibility overall three hundred sixty degree has, you know, impacted across the board.
Uh, people have started taking us more seriously. Uh, and it’s been anyways, eleven years, ten, eleven years. So we are not anymore a startup startup, per se. And, uh, yeah, I think, uh, overall it has been great. I mean, loving the journey.
Karunya Rao: Wonderful. And, you know, typically when any food tech or a food related IPO comes, uh, to the market, there are often a lot of high expectations. So what should investors realistically track, uh, when it comes to your company over the next two to three years to assess whether Zappfresh is, uh, you know, doing well post IPO beyond just the the top line growth, what are the parameters that we should be tracking and following, then.
Deepanshu Manchanda: I think innovation, uh, is core. We would always be innovating, bringing new things to the fold. Um, and, you know, because that’s how you are able to inorganically take leaps in the business, um, and not just organically, structurally grow the business. Um, and then, of course, you know, our performance is from a from a financial point of view, we are operating in one of the high opportunity market, high demand, high consumption. So scale for us I don’t think will ever be a problem.
Um, it is mostly about how you’re building, uh, you know, uh, the organization, how we are, uh, realizing the vision of, uh, being a large food conglomerate, uh, is something which, uh, which we will see different milestones coming in between. So one will be able to, you know, uh, put the pieces together, um, as, as we keep, you know, coming with new initiatives, new strategic partnerships, multiple different, uh, handshakes with different, uh, government bodies. So a lot, a lot is in store. Uh, just got listed. So, uh, there’s a long journey ahead of us and, and, uh, it’s a, it’s it’s a conglomerate in the making in, in my view.
Karunya Rao: The who are the people who are helping you bring this vision to reality in terms of execution and talk to us about the leaders within your organization who are driving this phase of growth for you. And, you know, uh, ensuring everything is aligned and ensuring accountability as a listed company. I mean, of course, that is an important part of the the game.
Deepanshu Manchanda: Yeah. So, uh, recently started building the leadership team, uh, after listing and as I said that, we started attracting, uh, senior leaders who, uh, who are, uh, aligning to the vision. Uh, so we have Akil recently joined us as a chief strategy officer, looking after the overall execution and the strategy with me. Uh, he comes with a twenty five years of experience with Indiabulls.
He was heading one of the NBFCs with them. Uh, he was the CEO. Uh, so most of the people in the leadership team have been CEOs, uh, of certain projects, either in a large format of a company or a smaller project. We have CEO as well, who is, uh, looking after the entire operations, logistics, supply chain, uh, so that, uh, that guy also is Surender. He he’s worked with, uh, you know, small chain of grocery stores, uh, worked as a CEO there. So, uh, overall, the theme at leadership for us is entrepreneurial in nature.
Okay. Um, and even the acquisitions, which we have done like the the Mumbai one or the the team gets retained when we acquire these projects. So those entrepreneurs then become the leaders to multitask and build certain initiatives, uh, and take care of charge of multi-city operations, business growth, everything. So it’s a very dynamic, uh, not in a, you know, box kind of a scenario, uh, where you are, you are you are given a lot of freedom to to do what you like to do and take ownership kind of people. Uh, and, and, uh, people who, who, who don’t think in small or big, they just think, uh, they have to impact is what critical at the leadership level.
Karunya Rao: Okay, just a final question, uh, about the long term vision for Zappfresh. If you, uh, you know, have to give us any projections of the next five to seven years, where do you see the company in terms of revenue scale, your, um, footprint and product mix.
Deepanshu Manchanda: Um, so as I said that we will be across the board when it comes to food. We are looking at diversification in the in different spaces. Right. Ready to cook. Ready to eat is uh, is is of high interest for us. So we’ll be developing new categories, uh, venturing into businesses from a product standpoint, which are complementing the fresh chilled meat business. That’s one on the broad strategy level, uh, in terms of size, you know, uh, there is really no, uh, dearth of what you can achieve in terms of revenue volume in our space.
As I said, that, uh, achieving a revenue of one thousand crores, two thousand crores, uh, is not, frankly, uh, the single most important benchmark for me. Um, what is very critical is, um, how we are building efficiency across the board, across categories. What kind of, uh, integrations we have at the back end? Uh, because that’s going to enable profitability at large. Um, and, and, and also look at, you know, how we are able to, uh, you know, uh, build impact at a, at a farmer ecosystem level as well.
Okay. So at a local level, at, at a SME level, because essentially we are an SME company and we believe that India, India’s backbone is SMEs. Uh, so we do feel to collaborate a lot with uh, the relevant stakeholders, whether it is a retail shop or it is a small hotel restaurant or a small startup as a business. So this collaborative approach, uh, is going to bring, uh, you know, uh, you know, thrust, uh, which is going to be, uh, Um, very, very strong from a impact point of view. Revenue point of view. Um, yeah. Broadly, you know, I think these are three, four thoughts, which I have in terms of how I see moving forward. Um, and the vision is to really, as I said, be a conglomerate which will have diverse interests and in different, uh, food categories, uh, operating and complementing each other as businesses. Uh, yeah. That’s that’s broadly how I picture it.
Karunya Rao: Great. That’s a great picture that you’ve painted for us and, uh, your investors as well. So hopefully they’ll all keep a close watch on what the company will be up to over the next few years. Thank you so much once again, for taking time out and joining us on SmallCap Spotlight.
Deepanshu Manchanda: Thank you so much. It has been a pleasure talking to you.