Epigamia, a dairy and dairy-free brand produced in India, has set an ambitious growth target for this year despite the challenges Covid-19 poses in the world’s second most-populous country, which is arguably still in the first wave of the outbreak. Simon Harvey speaks with CEO Rohan Mirchandani for some insight behind the start-up’s strategy.
Epigamia, a Greek yogurt brand in India owned by Drums Food International, has a huge local dairy market to conquer before it even considers reaching out further afield.
Headquartered in Mumbai, the business is physically present in five major cities in India with another 20 on the immediate horizon as it looks to increase revenues by 20-25% this year from the US$15m it generated in 2019.
Epigamia also operates a direct-to-consumer platform to service the wider population, a channel that has proved attractive during the pandemic, and is expected to continue to do so beyond the crisis given Indian consumers, especially the vast, younger demographic, are now exposed to digital and social media channels like never before.
And representative of the perhaps unquantifiable potential in India, Epigamia has attracted Danone as an investor, while Verlinvest, a Brussels-headquartered private-equity fund, is its largest shareholder.
Epigamia’s roots date back more than a decade when Drums was born as an ice-cream manufacturer producing the Hokey Pokey brand. One of the three would-be founders of Epigamia, former investment banker and now chief executive Rohan Mirchandani, became an investor in Drums during its early days before the brand in its current form emerged in 2015, with Ganesh Krishnamurthy and Uday Thakkar also at the helm.
While the Epigamia brand’s origins were centred on Greek yogurt, it has recently added a plant-based alternative to its range with coconut yogurts, which also includes a version containing jaggery, a cane sugar grown in many Asian countries and used as a traditional sweetener in India. Epigamia is also in the process of developing yogurt-based beverages to potentially launch in November or December.
Mirchandani, who spent most of his youth growing up in New York, moved to India in 2013 shortly after discovering Drums, which he says was a business with no “savviness, it was simply a shot in the dark and passion-driven”.
He tells just-food: “I realised there was this massive opportunity in India on the macro side – the large population and the movement in consumption trends – and I decided to leave everything in the US. The Indian dairy industry, from a volume perspective, is the largest industry globally and India has the largest volume production but the bulk of it is still very much unorganised, just cows on the street that are producing milk and locals that are consuming it.
“Part of the plan was to expand the product range into Greek yogurt and that’s how Epigamia was born. We stopped doing ice cream because we had a lot of challenges and issues skewing it up. And then pretty much everything we learned from the ice-cream business we put behind the yogurt business.”
Mirchandani says India has a long tradition when it comes to dairy, products like lassi (a yogurt-based drink) and shrikhand (an Indian dessert made from curd) have been consumed for centuries. However, Epigamia wanted to “create a lifestyle brand that would cater to the healthier trends of eating”.
He explains: “We see ourselves as someone taking this very traditional industry that has seen no disruption for the last 100 years and adding a lot of value in terms of contemporising it. We’ve never attached ourselves or married ourselves to a very functional health trend – it’s not like we are known as the new, no-added sugar guy or the high-protein guys or the plant-based guys, I mean those are just functional features. We are contemporising it by making it more functional with higher protein, very minimal processing, no added sugar, and giving it a modern sort of smoothie twist.
“Similarly with plant-based, we actually went after coconut for a reason because India has a massive tradition with coconut and there are a lot of coconut-based products that exist in different pockets of the country. Nothing we are giving to the larger population is unfamiliar in terms of the palate but it’s new and innovative and cutting-edge in terms of the format we are delivering it in.”
Epigamia’s business philosophy and strategy has attracted attention, especially when it can land investment from such a company as Danone with significant clout in the global dairy sector. The French firm effectively exited the Indian dairy market in 2018 to focus resources on the nutrition space, namely its infant-formula brands.
Danone’s venture capital arm, Danone Manifesto Ventures (DMV), joined a $25.6m investment round in Epigamia last year led by Verlinvest, along with a contribution from New York-based Mousse Partners. The Indian firm then got top-up funding of $5.2m this year, mostly from DMV and Mousse.
When Epigamia came to fruition, Mirchandani says Danone was a competitor but he was introduced to the company’s venture arm when the Activia owner “decided to step back from the value-added dairy business in India”.
He continues: “We just loved the company, loved the people, loved their culture, their mission, their values. Not something I had anticipated, considering they were our competitors. We really hit it off and they launched this new arm DMV, and the mission really spoke to me. I think their process is to really engage with new-age companies and see how they can lend their resources and expertise, and, of course, in exchange they take an equity stake.”
Mirchandani confirms Danone’s position is a minority holding. Epigamia’s founding team and Verlinvest are still the two largest shareholders, he adds, while DSG Consumer Partners is also a small investor.
DMV observes over board meetings and gives strategic advice in terms of production strategy, scaling up, logistics and operations. “Who better than them to guide us,” Mirchandani says. “We can be the destructive cutting-edge company in what we do and that’s what we want to be but you don’t need to reinvent the wheel for everything.”
India’s young population and innovation
That philosophy is evident in taking shrikhand and making the traditional product in a healthier format by adding fresh fruits and reducing the sugar content.
Manufacturing is farmed out to three companies, two of which are dedicated to Epigamia, while the other makes a “few products for us”, Mirchandani confirms.
Through its own R&D lab, Epigamia is looking to use social media to develop products particularly sought after by younger Indian consumers exposed to online channels.
“What we are seeing is a very young population – perhaps one of the most youthful populations in the world. They are living in an environment where social media has been completely embraced … they are able to see the world through this digital lens and they are seeing people in New York eating Greek yogurt, they are seeing people in London having a cold-pressed juice and it’s peaking curiosity – why don’t we have that?” he explains.
“The exposure to the digital world is playing a big role in demanding new products. But then there’s also obviously the economy story and that’s growing with many other factors fuelling it. I think one of the biggest drivers is just the exposure this next generation of consumers has, which is beyond just what they see physically in India. We are seeing a lot of early adopters coming in because of this movement globally. We think it will still take some time to have a massive volume contribution but that is what we are seeing right now.”
Mirchandani says the competition in India mainly comes down to a “bunch of regional players”, notwithstanding Nestle in terms of yogurt, which is “probably the biggest” competitor.
But can Epigamia’s products appeal beyond the more affluent consumer in India? Mirchandani thinks so as the company has launched dessert-based yogurts for INR25 (US$0.34) and INR30 a piece, as opposed to INR45 for some of its yogurt cups.
India’s so-called mom-and-pop shops, or kirana stores, found on most streets and selling all kinds of wares from food to household items, stock Epigamia’s products but the order sizes tend, Mirchandani says, to be “extremely minimal – you are talking about ten to 12 cups at a time because they just don’t have the space”.
Investment in direct-to-consumer
However, the closure of these outlets during the coronavirus lockdown was partly the reason for Epigamia experimenting with the direct-to-consumer channel. The company plans to make the service a permanent fixture to add to its 12,000 distribution points in the major five cities which it serves via its own fleet of vehicles – Mumbai, Delhi, Bangalore, Chennai and Hyderabad. Epigamia hopes to expand to 20 cities over the next eight to 12 months.
“We weren’t able to get to the consumer because a lot of these stores were shut but we were allowed to operate as an essential service. We had the fleet of trucks, we had the infrastructure, the distribution and packing capabilities, so we decided to experiment and just deliver to homes, especially apartment complexes,” Mirchandani explains.
“It was an ugly order-taking website but the platform took off and I think consumers liked the idea. Now of course everything has opened up, e-commerce is bumping and Amazon is becoming a decent account for us. We’ve decided to invest and modify it a little bit and continue running it because we see it as a great insight into the consumer’s brain and for data collecting.
“We’ve only been two months into direct-to-consumer and it’s played a hell of a role during the lockdown but even now it’s continuing. The way I see it, it will be a cutting-edge research channel for us, especially when we are trying to experiment with new products and try out new products to see if we want to move them to scale.”
Amid all the talk about the risk of a second wave of Covid-19 in the western world, Mirchandani “absolutely” agrees with the view India is still in the first phase of the virus. But with more people confined to their homes, he says revenues from Epigamia’s digital channels, including both e-commerce in general and direct-to-consumer, as a proportion of the total, rose to 22% in July from 5% in the same month a year earlier.
To a certain degree, Epigamia’s digital channels have helped offset the drop off in demand from offices, restaurants, hotels, airlines and airports, which under normal circumstances would contribute about 15-20% of overall revenues, Mirchandani clarifies.
Nevertheless, a 20-25% growth target for this year could be considered optimistic given the current operating environment but Mirchandani suggests there are enough growth opportunities for Epigamia to target in India.
“We haven’t come anywhere close to cutting in to the Indian market. The easiest expansion [is to] the neighbouring countries like Bangladesh and Sri Lanka, as well as the Middle East. These are markets that are in our business plan but I think it would be a little bit premature for us to start jumping into those markets when we have so much work to do in India.
“Eighty five to ninety per cent of our business is still just five cities, whereas the market potential is easily 40 or 50 cities, and many of those we haven’t even entered yet.”