Quick Commerce Fuels a Sweet Funding Rush for Ice Cream Start-ups

Even as summers recede, ice-creams continue to sizzle in India, thanks to the fast-growing quick commerce (Q-Comm) business, which is spurring unprecedented demand for the dessert and an increasing flow of startup capital into the sector. With VCs and their ilk licking their lips at the mouth-watering prospects of Q-Comm, 2024 promises to end up as a record year for the business.

Since 2020, when the Q-Comm business started, fund flows to the ice cream segment have grown consistently, with 2024 set to erase all previous records having already scooped up $26.5 million, according to Tracxn. 

Venture Capital Bets Big

 VC firms are increasingly betting on the ice cream sector as a high-growth opportunity, thanks to the expansion of quick commerce. BDO India partner Jeetu Bairathi notes that this period is particularly favourable for new-age ice cream companies: "The ice cream market is on an upswing and is expected to grow at a 12 per cent CAGR,” he says. “The ice cream market has a bright future, driven by increasing per capita consumption and overall growth."

 Several new-age ice cream start-ups have already made headlines for securing significant funding. In June, guilt-free ice cream brand Go Zero raised $1.5 million, while Hocco closed a $12 million round. Very recently, Mangalore-based Hangyo Ice Cream also raised about $25 million. It is indeed raining cash for these startups.

Ninad Karpe, founder and partner at 100X, describes the surge in funding driven by quick commerce as a cultural phenomenon. "Quick commerce has transformed the ice cream sector in India, he explains.  “It's a category perfect for impulse buys, making it an ideal match for Q-Comm. For VCs, it's about tapping into a new wave of demand for innovation and quality in a market that is just starting to grow. The potential here is truly mouth-watering."

Sweet innovations on the rise 

Quick-Comm's on-demand delivery model is fueling an era of instant gratification that resonates with the digitally savvy Gen-Z urban consumers. More than ever people are reaching for their phones to satisfy a spontaneous craving for ice cream, a convenience unheard of until recently. Increasing disposable income and evolving consumption habits are feeding into this indulgence. 

However, there is a twist. Many consumers seeking healthier options are dialling new-age vendors like Go Zero, Hocco, Brooklyn Creamery and Scuzo. These upstart brands are racing up the ranks and outpacing established names like Amul, NIC and Kwality Walls in quick commerce.

Alisha Chona Shah, founder and CEO of Ice Cream Works remarks: "We are setting ourselves apart by focusing on healthier, artisanal flavours that appeal to evolving consumer preferences. Investors are excited by the sector seeing it as a strong bet given its alignment with health trends.

Although established brands continue to hold sway in Tier-1 and Tier-2 cities through conventional retail, new-age companies are leapfrogging them in urban centres through quick commerce, offering healthier versions like low-calorie, sugar-free and vegan ice creams, categories that traditional brands are yet to explore. 

Quick commerce: a game changer 

Quick commerce has played a pivotal role for these ice cream startups boosting their visibility and rapid growth. Shivaan Ghai, director at the Brooklyn Creamery, credits quick commerce for more than half his company’s revenues, describing it as a game-changer. He explains: "Quick commerce significantly cuts down the need for heavy investments in manpower and infrastructure. It provides a direct-to-consumer channel allowing us to reach customers swiftly and efficiently."

This platform's power in product discoverability is undeniable. Smaller players, especially those targeting health-conscious consumers, are seeing rapid traction in competitive markets thanks to quick commerce channels that showcase products seamlessly. 

70 per cent of revenues of Go Zero comes from quick commerce with an additional 20 per cent from food delivery giants like Swiggy and Zomato. Notes its founder Kiran Shah: “Quick commerce has made ice cream as accessible as a tap on your phone. We have grown swiftly on platforms like Blinkit and Zepto, which has been instrumental in helping new brands like ours showcase, innovate and expand."

Even large Q Comm players like Zepto have witnessed a surge in ice cream demand selling thousands of units daily. Speciality ice creams, especially sugar- and dairy-free varieties, are topping the demand charts particularly in Tier-1 cities this festival season. A company official commented, “We have seen a remarkable rise in demand for ice creams, be it summer or winter."

Archana Jahagirdhar, founder and managing partner at Rukam Capital summarises the potential by stating, "The ice cream market in India remains under-penetrated despite rapid growth in the last 5 years. As more new-age brands see this funding boom, innovate and establish ice cream as a year-round product, the sector is primed to soar."

In essence the quick commerce revolution has created a sweet spot for ice cream startups bridging them directly with consumers in real time. This trend has sparked a funding surge that is not likely to cool off anytime soon