Ajay Mariwala 2.0: Spicing it up with a secret sauce

Meanwhile back in Kochi in India, Mariwalas’s ‘offending’ employee took his boss to meet his loyal and strong bunch of suppliers. “They were all selling equipment for frying chicken,” recalls Mariwala, who quickly understood the ‘clever’ play of his staff. The chicken seasoning and coating was being sold to these local sellers who in turn sold to the equipment buyers. It was a win-win for equipment sellers and buyers, who anyway needed ingredients with the equipment! “It was an eye-opener for me,” he says, adding that a majority of the learning for an entrepreneur can come from sales’ staff. “One just needs to be receptive, and keep one’s ears, eyes and minds open,” he says. “There are untapped ideas everywhere.”

A year later, in 2016, Mariwala was tapping into one such virgin idea. “I just joined the dots,” he says, adding that his stay in the US and the ‘rogue’ incident in India prodded him towards completing the puzzle. Food services, he realised, is a massive untapped and under-penetrated opportunity in India, and the founder rolled out Food Service India. A B2B venture catering to hotels, restaurants and cafes (Horeca) and commercial kitchens in India and abroad, Food Service India makes spices, seasonings, pasta, gravies, sauces, beverages and bakery premixes products.

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The operations have gathered steam over the last few years. From a modest revenue of Rs 20.78 crore in the first year of operations in FY17, the numbers have pole-vaulted to Rs 200 crore in FY23. The numbers, though, are nothing. Mariwala explains. In FY22, Sysco clocked sales of $68.6 billion! “That’s the potential and that’s the opportunity we are chasing,” he says. Food Service India, he adds, is playing a different game with a differentiated set of rules. 

Mariwals’s gravy truck indeed has novel ingredients. Let’s start by contrasting the two business models—what Mariwala did for decades at VKL Seasoning, and what he is doing now in his second innings. VKL, he underlines, created a state-of-the art customised seasoning solutions for QSRs, snack food companies and for those in the convenience food segment. “So, they focussed only on seasonings for these three segments,” he says. Food Service India, in contrast, offers standardised products. “Horeca is massively under-serviced, and needs standardised and not customised solutions,” he reckons. Since the target customer segment is different, and the product basket is different, it made sense to start afresh, he says.

What, though, might change the game for Mariwala is the way he has structured his business. In 2019, he had a 38 percent stake in Food Service India. Fast forward to June 2023. Mariwala has increased his stake to 100 percent. The reasons are obvious. The gritty founder doesn’t want his second entrepreneurial innings to be short-circuited by being reduced to a minority partner. Take, for instance, how the story played put at VKL Seasoning. In April 2019, PE firm True North sold its majority stake to Swiss fragrance and flavours major Firmenich. In one stroke, the parent was reduced to being a guardian!

Mariwala, who recently bought the final set of stake from True North, explains why 100 percent ownership in Food Service India makes sense. “We are building a very different business, and it requires loads of patience and a long-term view,” he reckons, outlining the first set of reasons. Though he has worked closely with PEs for years, Mariwala feels that the Horeca play is something not many understand properly. “If you are in the US and Europe, you would understand the sector easily,” he reckons. Back in India, the big picture is clear to the entrepreneur. “I don’t need outside money,” he says.

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There is, however, another big reason for having a firm control. “One needs to be practical,” he says. The moment you bring an outside partner—whether PEs or any form of capital-- they would naturally need and have a deeper say in the business. They will have their requirements and exit timelines. “Even the most patient of them will have to exit in seven years or so,” he says. This business, he underlines, needs a longer timeframe and only a founder with deep skin in the game can make it happen.

Complete control over operations did help during Covid. When thousands of F&B companies perished due to the sudden evaporation of demand—and many died as stakeholders didn’t pump in more money—Mariwala waited for the low tide to subside. What also helped was the mushrooming of dark or cloud kitchens. “Netflix and dark kitchens benefited dramatically,” he says. With the waning of Covid, and with dark kitchens losing steam, QSRs and hotels have had a sharp rebound to more than compensate for falling demand for players like Food Service India.

Mariwala, though, reckons that the beginning of the golden period of India’s food industry is still at least four to five years away. “We need a little bit more network effect,” he says, alluding to an uptick in economic performance of states like Bihar, Jharkhand, Uttar Pradesh, Odisha and West Bengal. With an explosion of the middle class and rise in income levels, food service will see a widening of the market and opportunity.

But is going D2C not a bigger opportunity? After all, Mariwala has beefed up his ‘house of brands’ play by rolling out over a dozen brands. Six, in fact, drive most of the revenue (See box.) The entrepreneur, however, doesn’t want to go down the D2C road. And the reason is clear: High cash burn. “You have to burn a lot of cash, and it’s not a sustainable way to build a business,” he says. In fact, one doesn't need to burn money to build a food business, avers Mariwala. A lot of food companies in India, he points out, have been built by business families who've displayed a lot of patience and done the business in the traditional way by focusing on slow and steady progress, and keeping a firm eye on unit economics. “There is no need to throw money to try and build a food business. It can’t happen quickly,” he says.

At times, Mariwala, though, has been guilty of being ‘quick’. He explains. While Food Service India rolled out the first two of the six brands in a staggered manner, the remaining were rushed in 12 months. “My top mistake has been trying to do too many things all at once,” he confesses, though he is quick to add his take on making mistakes. “Businesses are about minimising mistakes, and not avoiding them,” he says.  If you're avoiding mistakes, he adds, then you're not doing anything. Another learning for Mariwala has been to grow at a sedate pace. Food, he underlines, is made best when cooked on a low flame.

Does he cook at home? The founder dishes out an ungarnished reply. “I am married to an absolute gourmet cook,” he says, explaining how the marriage works. “Our pact is that she cooks and I clean,” he smiles, adding that his father too is a terrific cook. “So, I don't need to worry about cooking. I just need to worry about eating and cleaning.”

For now, Mariwala also doesn’t need to worry about diluting his stake in the new venture. The gravy truck is moving slowly, and Mariwala is enjoying his meal.