How Scandalous Foods has found the sweet spot in post-meal impulse buying space

Adgully has been turning the spotlight on the entrepreneurs who fought against all odds to bring their dreams to fruition in our special series – START-UP STARS. We at Adgully wholeheartedly support the ‘Vocal for Local’ movement and have been featuring numerous local/ homegrown businesses, brands, and Apps in the country launched in the last few years.

In conversation with Adgully, Sanket S, Co-founder, Scandalous Foods, speaks about the origins of Scandalous Foods, capturing the significant white space in the post-meal impulse consumption of Indian sweets, challenges of standardizing sweet production, government initiatives, cloud kitchens, and much more.

What inspired you to start Scandalous Foods, and how did you identify the niche for post-meal impulse buying of Indian sweets?

Indians have a tradition of craving something sweet after meals, often saying, “Kuch meetha ho jaye” to cleanse their palate. This practice is deeply ingrained in Indian culture, making post-meal consumption of sweets a common custom. Recognizing this, we saw a significant white space in the post-meal impulse consumption of Indian sweets.

We identified the HoReCa (Hotels, Restaurants, and Cafes) industry as the ideal channel to reach impulse post-meal buyers. While restaurants often sell ice cream due to its easy procurement and standardization, they typically avoid selling mithais because of issues with shelf life and appropriate packaging. Mithais are generally seen as a side-of-the-plate category, contributing around 4-6% to a restaurant’s top line. Therefore, restaurants are unlikely to hire skilled labour to make mithais, but are interested in selling them because these side categories offer higher margins, increase the average order value, and optimize their bottom line. This makes selling sweets more profitable, similar to how selling fries is more profitable than burgers and iced tea more profitable than pizza.

Could you elaborate on your current B2B operations and how you collaborate with restaurants and catering businesses?

We’ve secured key accounts like Zeptocafe, EatFit, and Wow Momos, leveraging my extensive network in the food service industry of 14 years. My co-founding of the Tie Food Network further helped strengthen my connections within the industry. Our collaboration with these restaurants and catering businesses is built on providing high-quality, single-serve mithais that cater to their post-meal offerings, enhancing their dessert menu without adding operational complexity.

Looking ahead, we’re expanding our reach through distributors, enabling us to cater to smaller restaurants. Additionally, we’ve recently activated a dedicated sales team to further accelerate growth. Our B2B operations involve regular engagement with our partners to understand their needs and ensure seamless delivery of our products. We provide training and marketing support to help them effectively promote and sell our mithais, fostering a mutually beneficial relationship.

How does Scandalous Foods address the challenge of standardizing sweet production across diverse restaurant and catering environments in India?

For all restaurants and caterers, sweets are usually a side item, but once they become the centerpiece of the plate, they are the main course. As long as they can get sweets that are 8 out of 10, 9 out of 10, or 10 out of 10, they prefer standardized sweets over customized ones. Just like they do not bother about customizing Coca-Cola, Pepsi, or iced tea, this is exactly how it works.

The mithai market is majorly dominated by local heroes and is highly fragmented. Most businesses have focused on targeting celebrations in India, a trend that has been happening for generations. Many have not thought of scaling up and exploring other sales channels. Packaged mithais are targeting B2C, which is usually a planned purchase.

It wasn’t difficult to create this product, but it was about spotting the opportunity to create a category within mithais focused on post-meal impulse buying and competing directly with chocolates.

A strong backend infrastructure is crucially lacking to support the HoReCa (Hotel/ Restaurant/ Café) industry, presenting immense potential for improvement in warehousing, cold chain logistics, and leveraging technology enablers. The food service industry in India is currently at an adolescent stage, where the importance of a robust backend is increasingly recognized. However, the absence of input credit from the government for the food service sector poses significant challenges. For example, a gulab jamun sold at Rs 20 costs Rs. 21 to produce, and when considering bulk sales, this discrepancy significantly impacts pricing and profitability. Addressing these backend inefficiencies could substantially enhance the industry's growth and sustainability.

Our USPs include preservative-free sweets with a remarkable 6-month shelf life, available in convenient single-serve sizes. We are an affordable sweet manufacturing business with competitive prices.

What are the specific pain points that you have identified in the restaurant industry regarding the sale of side-of-the-plate categories?

One of the primary pain points that we identified in the restaurant industry regarding the sale of side-of-the-plate categories, specifically mithais (Indian sweets), is the lack of availability and standardization. Restaurants typically sell ice cream as it is easy to procure and has a long shelf life. However, mithais, with their varied shelf lives and packaging requirements, are not as readily available, making them less appealing for restaurants to offer.

Additionally, the restaurant industry usually sees side-of-the-plate categories, like desserts, as contributing only 4-6% to their top line. This relatively low contribution means restaurants are not inclined to hire skilled labour specifically to make mithais. Yet, there is a significant opportunity here: these side-of-the-plate categories often offer higher margins and can boost the average order value, ultimately optimizing the bottom line. By providing standardized, well-packaged mithais, we aim to fill this gap, enabling restaurants to capitalize on the high-margin, post-meal impulse buying behaviour of their customers without the added operational burden.

You raised Rs 3 crore in your pre-seed round. How are you planning to utilize these funds to drive further growth and expansion?

We are utilizing these funds to drive innovation and enhance our operations. At our factory, we have introduced New Product Development (NPD) to experiment with new offerings. We have also upgraded our facility to support expansion into B2B exports and the B2C market with mithai cafes. Currently, our focus is on cloud kitchens and QSRs, but we plan to eventually launch our own B2C brand to further scale our business.

Why have you chosen to focus on cloud kitchens, and how do they fit into your overall business strategy?

At Scandalous Foods, we have identified a niche in the large yet unorganized mithai (sweets) market, particularly in the area of impulse buying post-meal. Noticing a gap in the market, we decided to focus on the HoReCa (Hotel/ Restaurant/ Cafe) segment as our primary channel. By selling sweets in a convenient single-serve format, we cater to the post-meal impulse buying trend, fitting seamlessly into our strategy to target this specific consumer behavior and meet the demands of the modern food service industry.

What are the government initiatives that you have benefited from or your sector benefited overall?

The government offers various initiatives, including CGT-MSE loans and food processing subsidies. While we haven’t yet leveraged these benefits, we look forward to collaborating with the government and utilizing these programs as Scandalous Foods scales.

What advice would you like to give young entrepreneurs in the food sector?

For food-sector entrepreneurs, the product is king. When building a QSR, cafe, or cloud kitchen, don’t get sidetracked by technology – it’s an enabler, not the star. Your product will do the talking. Focus on building a strong brand that resonates with your customers.

Beyond traditional QSRs, the food service ecosystem offers a wealth of opportunities. You could explore food production (processing), logistics, warehousing, or first/ middle/ last-mile delivery. Even venturing into agriculture could be a strategic move. Patience, perseverance, and an eye on cash flows are very important for remaining in the food business.

What is your long-term vision for Scandalous Foods, and where do you see the company in the next five to ten years?

Scandalous Foods will always target affordable sweets in India. We want to be the Monginis of sweets.

Currently, we have a single-serve format. In the future, we will come up with mithai sachets, bars, cookies and waffles too.

Imagine a jalebi waffle, a moong dal halwa cookie, a motichoor sachet, a gajar halwa bar!

Scandalous Foods should be able to reach a revenue of about Rs 400 crore ARR in 5 years.

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