Food tech startup Raízs’ purpose is reasonably straightforward: the startup proposes to deliver fresh and healthy products from small farmers to the table of its consumers. However, escalating this operation and maintaining the quality of the products while keeping good relationships with its suppliers (producers and truck drivers, mainly) is much more complicated.
As Raízs’ chief product officer, Luís Fontes, explains, reaching new consumers without losing sight of its purpose is a challenge that the startup has not yet fully overcome.
“It’s one thing when you have ten stalks of lettuce in a garden; it’s another thing to deliver 5,000 stalks of lettuce a day. The question is: how can we grow, maintaining the quality of the products and maintaining the quality of relationships? Or, how to treat the small farmer with respect, pay a fair price and also treat the product with respect, without falling into the commonplace of the food chain that treats waste as something normal”, says Fontes.
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Founded in 2014 by Tomás Abrahão, the startup is an e-commerce for organic products and, even without completely solving the logistical puzzle; it has been progressing. With the increasing demand for food delivery, the startup has tripled its team since the beginning of 2020 and now has 150 employees. More than 400 small producers supply goods, and the online shop handles around 10 tons of organic products every day.
Spreading roots
The service reaches 7,500 consumers per month, including individual customers and subscribers, mainly in the metropolitan region of São Paulo, but it has been extending its reach. Within the state, it has already reached large cities, such as Campinas, Vinhedo, Jundiaí, Hortolândia, Valinhos, Santos, Guarujá, Bertioga, Maresias and São Sebastião.
Raízs’ goal for 2022 is to reach other states, such as Rio de Janeiro, Paraná, and Rio Grande do Sul. Technology is essential in this next leap. Fontes explains that with each new city, the complexity increases: to understand how the local organic market works in the region and how to connect them to its logistics network.
“There is a whole effort of getting to know the region, negotiating with the producers, structuring the logistical chain, and preparing everything before starting to sell,” says Fontes.
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To consolidate this movement, the company will go to the market to raise capital. In 2018, Raízs received an injection of US$ 720,000 from the WeWork Creator Fund, while the startup was still in the pre-seed stage. “We are in an advanced process of raising new investors for a Series A so that we can grow in a structured way,” tells the executive.
Looking for convenience and prices
In addition to taking its organic products to more consumers, the company is also launching two new product categories: cleaned and chopped vegetables and fruits and an “Emporium section,” with nuts, grains, and dried fruits sold in bulk.
During the pandemic, Raízs also improved its subscription model, allowing customers to have more variety for product selection. It is also possible to rule out specific fruits and vegetables. Other features of this format include pausing the subscription, skipping the delivery date, and choosing add-ons to orders.
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In addition to adding value to its portfolio, these solutions help Raízs change the perception that organic products are expensive. Telling the story of the producers is also another ally in this process for engaging consumers.
One thing is for sure, consumers want to pay less. But paying less can mean that suppliers (producers, drivers, distributors, and shopkeepers) can be crushed by the price.
LUÍS FONTES, CPO OF RAÍZS
To seize a point of balance, the startup uses artificial intelligence to develop the best distribution routes and helps farmers plan their crops — making the most of each season.
In addition to competition from traditional grocery chains (St. Marche, Natural da Terra, Oba, Pão de Açúcar), the startup also sees food techs entering its territory. One of Raízs’ main rivals in this segment is another startup: LivUp. Known for ready-to-eat and frozen meals, the startup raised a R$ 50 million round in September and has been diversifying its product offering — adding categories such as organics, grocery, dairy, butcher, fish, among others.
Another startup with a similar model is Chilean Lomi, which raised US$ 850,000 in June to become the “Mercado Libre” of fruits and vegetables. The difference in this dispute may be the relationship with regional producers. However, as territories expand, competition may be unavoidable.
According to Fontes, the greater the ties between the startup and its suppliers, the greater the predictability for the entire chain. In other words, the executive explains that efficiency is a non-negotiable condition to make the business viable. Still, that doesn’t mean the company won’t have competitive prices.
“Technology is an area that provides the tools for us to be efficient. Maybe Raízs is not the cheapest option on the market. But, before being cheaper, we want to pay a fair fee”, argues Fontes.
