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Mar 5, 2021
Now, he wants to build a global F&B brand 05/03/2021 In a year, Hangry went from one cloud kitchen serving 1,000 portions a month to 40 locations serving 525,000 a month. The company expects to be profitable by the end of 2021. In March 2019, Abraham Viktor joined Ovo after selling Taralite , the peer-to-peer lending startup he founded, to the Indonesian fintech unicorn. But just three months later, he packed his bags and left. “At the end of the day, not everyone fits all kinds of work settings. And I’d be one of those people that don’t fit corporates,” he says. He talked to his wife and also spoke with his mentor, Tokopedia co-founder William Tanuwijaya, who both affirmed his calling: starting another company. The idea came to him during a babymoon trip to Hokkaido, Japan, when he realized that the food and beverage (F&B) industry has given birth to huge businesses like McDonald’s, Starbucks, and Haidilao . “Coming from a startup background, I have a bias of only looking at ideas that are typically VC-funded,” Viktor says. Photo credit: Hangry In September 2019, he and two co-founders officially launched Hangry , a chain of virtual restaurants serviced by cloud kitchens. The mission: to build global, top-of-mind F&B brands. The company started with a lone outlet at a Central Jakarta condominium, selling an average of 1,000 portions of food per month. One year later, as food delivery was thriving during the Covid-19 pandemic, that number jumped to over 525,000 portions per month across 40 locations in the Greater Jakarta area and Bandung. VCs have taken notice. Hangry has raised a total of US$6.5 million over two rounds of funding. Building the next big thing Hangry currently has five brands, each of which serves either trendy food or traditional Indonesian dishes: Moon Chicken (Korean chicken wings) San Gyu (Japanese beef bowl) Bude Sari (Indonesian traditional chicken dishes) Ayam Koplo (American fried chicken with Indonesian chili sauce) Kopi Dari Pada (coffee and milk-based drinks) All of the brands are individually available on the GoFood and GrabFood platforms. Customers can also order through the Hangry app, which allows them to purchase items from different brands in one go. That said, the app is mainly meant as a platform for customer engagement, rather than sales. For example, app users can play games to earn points, which can eventually be traded for free food from one of the brands. While Moon Chicken and San Gyu see the most demand, only 15% of Hangry’s customers overlap across the startup’s different businesses. This is deliberate, Viktor says. Firstly, it allows for a wider customer base by appealing to varied preferences – customers say they discover Hangry brands simply because they’re looking for options. Data suggests that many customers do end up becoming more loyal to each brand as months go by: New customers order 1.2x a month on average, and this typically grows to 1.8x by the fifth month. Secondly, it also presents cost-saving opportunities. For example, each of Hangry’s fried chicken brands uses a different part – wings for Moon Chicken, thighs for Bude Sari, and breasts for Ayam Koplo. This allows Hangry to optimize raw material costs by buying the chicken at volume, while also minimizing wastage. Abraham Viktor, co-founder and CEO of Hangry / Photo credit: Hangry The company operates a central kitchen in Jakarta, which prepares ingredients such as marinated chicken parts. From there, these items are delivered to one of 40 cloud kitchens, where meals are prepared upon order and delivered to customers via Gojek or Grab. While Viktor has had no prior F&B business experience, he’s definitely a foodie. Currently, he is one of the voters for Asia’s Best Restaurants , selected on the back of his food-focused Instagram page . And while F&B and consumer brands aren’t typically backed by VCs, there’s a precedent in Indonesia. Kopi Kenangan , a grab-and-go coffee chain, has found a way to make the beverage business more cost-efficient and scalable by integrating tech into its operations. Other players in Indonesia and beyond are also exploring the use of tech to scale food businesses. Yummy Corporation, a cloud kitchen management company in Indonesia, has raised a total of US$19 million across three funding rounds. Philippine startup CloudEats is looking to build more than 100 cloud kitchens across Southeast Asia, while Rebel Foods claims to be the world’s largest internet restaurant company with a footprint in India and the Middle East. Japanese beef bowl from San Gyu / Photo credit: Hangry “Tech-enabled food startups is a lucrative sector with huge potential. It’s interesting to see how technology can push more options to cater to different consumer behaviors,” says Chandra Tjan, co-founder and general partner at Alpha JWC Ventures. The investment firm, along with Sequoia Capital, are Kopi Kenangan backers. And in early 2020, they too became investors in Hangry . Unlike Kopi Kenangan, Hangry’s brands target a segment above the mass market – around the same level as McDonald’s, which isn’t considered cheap in Indonesia. For instance, a bowl of Japanese gyudon from San Gyu would cost about 46,000 rupiah (US$3.23) – about the same as a McDonald’s double cheeseburger meal. “This implies that not everyone can afford our product, but those who can care about quality,” says Viktor. Being decisive about the company’s target segment, he says, is something he learned from Kopi Kenangan CEO Edward Tirtanata. It all comes down to finding a balance between reaching out to as many people as possible and being able to compete based on Hangry’s strength – which is mainly its product quality. As an example of what Viktor calls an “intense” focus on food quality, Hangry tested and revised its fried chicken recipe so that the dish would remain crispy even after three hours, taking into account long delivery times due to Jakarta’s infamous traffic. In spite of the founding team’s lack of experience in the F&B business – the firms’ two other co-founders, Robin Tan and Andreas Resha, are alumni of Taralite and Ovo, respectively – Viktor isn’t fazed. The company has hired team members from both upscale restaurants – who bring professional cooking skills – and quick-service chains, who are proficient at restaurant operations. Evolving from a virtual restaurant Hangry aims to have 150 cloud kitchen locations by the end of 2021 and 300 by the end of 2022. But it’s not stopping there – the company also wants to open 50 physical restaurants across Greater Jakarta and other major Indonesian cities by the end of 2021. It just launched its first physical location, dubbed “Hangry the Alley,” in Jakarta. Viktor clarifies that Hangry will exist in “all dining formats.” That means doing both deliveries and dine-in outlets, as well as adapting to whatever new formats will become popular in the future. This strategy is crucial to Hangry’s ambition to become a global household brand. “What’s very different between Hangry and Taralite is that here [at Hangry], we’ve dreamed big since the beginning. We knew that we wouldn’t be satisfied with being an Indonesian winner – we knew that we wanted to be a global winner,” says Viktor. Launching as an online-only restaurant chain has allowed Hangry to save on costs and scale faster at the start. And even with physical restaurants, it still expects 50% of orders to come from deliveries. This allows Hangry to be flexible with the design and operations of its restaurants, which in turn leads to savings. For example, the company can have 60 seats on average – far fewer than that of international food chains – given its anticipated mix of online and in-store orders. Korean chicken wings from Moon Chicken / Photo credit: Hangry In fact, the cost of opening a physical restaurant for a Hangry brand is only up to US$150,000. Global food chains, on the other hand, would require 2x to 6x more. (Setting up a cloud kitchen costs even less, at around US$90,000.) Having launched Hangry just before the Covid-19 outbreak, Viktor can’t say exactly how the pandemic has affected the startup’s sales. One thing’s clear, though: The firm performed well in 2020. With revenue growing 15x from pre-Covid-19 days to December 2020, the startup is on track to become profitable by the end of 2021. But it’s not all about growth. In fact, Hangry has learned that it helps to hit the brakes sometimes. “As a company, it’s hard to see things from the bigger picture sometimes when you are so engulfed by the work,” says Viktor. That’s where partners and advisors come in. In the second half of 2020, amid rapid growth in Hangry’s business, Alpha JWC Ventures advised the company to consider slowing down and focus on other things. These included optimizing cost, improving inventory management, and enhancing its standard operating procedures. Hangry the Alley, the company’s first dine-in restaurant / Photo credit: Hangry “They pointed out that we have been growing faster than we could chew as a company. That was a wake-up call,” Viktor adds. “If they didn’t point that out to us, we would have to work on some fundamental things that would be very painful to work on when we are already larger.” While Hangry aims to build more brands in the future, its focus this year is to expand the menu of its different businesses. Restaurant chains tend to offer five tiers of products, such as rice bowls, sides, and desserts. Each Hangry brand offers just a single tier for now. Still, the firm’s backers have high hopes. “Other countries like the US have also proven that other direct-to-consumer verticals can become unicorns, and I believe it’s just a matter of time that we will see Indonesian startups achieving similar things,” says Alpha JWC’s Tjan. Hangry appears to be winning over more investors, too. The startup expects to close its series A fundraise by the end of March. Vietnam got through 2020 as one of only a few to fulfil the dual goals of containing the COVID-19 pandemic and developing its economy. This achievement can be attributed to the determination and effort of all sectors, most notably science and technology.