Ferns & Petals: Revitalizing Gifting with Quick Delivery and Expanded Offerings
Ferns & Petals is rebooting its business with a focus on quick delivery and a wider range of products to cater to the growing demand from millennials and affluent consumers.
Ferns PetalsQuick DeliveryOnline GiftingEcommerceMillennial ConsumersReal EstateJan 12, 2025
However, CEO Pawan Gadia, who regrets the excessive spending on ineffective advertising, believes he has learned from his mistakes and is steering the company in a new direction.
Now, FNP is ramping up its efforts with a quick-delivery initiative.
The company is in talks with logistics players to test 10-15 minute delivery in select locations.
'If the customer wants it, let’s provide it.
If I don’t, someone else will,' Gadia emphasizes.
Beyond in-house initiatives, FNP is also leveraging quick commerce (q-comm) apps like Blinkit, Swiggy Instamart, and Zepto, which now account for about 10% of the company's revenue.
Although the online channel isn't profitable yet, it’s crucial for FNP to turn it around soon, given the rising popularity of online shopping for convenience and speed.
According to Angshuman Bhattacharya, partner and national leader of consumer products and retail at EY-Parthenon, q-comm can facilitate planned gifting, a segment that is gaining traction.
Anand Ramanathan, Partner and Consumer Industry Leader at Deloitte India, adds that millennials are more willing to spend on gifting and get more involved in the process.
'Gifting is an attractive segment, especially with millennials being more engaged,' he notes.
While online sales may not bring in huge margins, they can boost volumes and market share.
FNP has a strong foundation, having mastered the complex supply chain for fresh products, a challenge that new players might struggle with.
Additionally, FNP has a large consumer base to tap into.
There are currently around 60 million Indians with an annual income over Rs 30 lakh, a figure expected to double by the end of the decade.
For these consumers, discretionary spending remains high, even though it has halved in the past few years.
'The propensity to spend on gifting, where there is more involvement, is high.
This could be 1.5 times the amount spent on less involved gifts,' Ramanathan explains.
Real estate costs are another factor driving FNP’s focus on online channels.
Setting up physical stores, especially in major cities, can be costly and drain resources.
'Rentals are expensive, and the business is seasonal, which can stress working capital for six months,' an expert points out.
FNP currently operates four stores directly and 276 through franchisees, with plans to add 30 more annually.
Finding franchise partners who are both financially invested and share the same vision remains a challenge.
To scale the business, experts suggest FNP expand its product range.
Changing lifestyles and frequent gifting among younger consumers present an opportunity.
'This could be a risk,' an expert warns, noting that consumers are willing to pay more for premium products from the bakeries that make them.
FNP is already making efforts to diversify its offerings.
Cakes, flowers, and gifts currently account for 91% of the company’s operating revenue.
Diversifying the product range could increase the average order value (AoV).
In a rapidly evolving market, innovation is key to growing the consumer base.
'Gifting as a concept is becoming more significant.
Collaborations for more valuable gifts could expand the total addressable market and fetch larger AoVs,' Bhattacharya suggests.
There is also potential in overseas markets, where FNP already generates over 35% of its revenue.
While Gadia aims for 25% annual growth and 15% operating margins, achieving these targets won’t be easy.
In FY24, revenues grew by 16% to Rs 705 crore, a modest increase from the 5% growth in FY23.
Losses narrowed from Rs 110 crore in FY23 to Rs 24 crore in FY24, primarily due to cost-cutting measures.
The company reduced its customer support team from 350 to 275 and automated some roles.
Despite these efforts, an operating loss of Rs 8.6 crore still persists.
With material costs accounting for 42% of total expenses, FNP faces the challenge of managing inflation and maintaining competitiveness without raising prices.
Frequently Asked Questions
Why is Ferns & Petals focusing on quick delivery?
Ferns & Petals is focusing on quick delivery to meet the growing demand for convenience and speed among online customers. This strategy also aligns with the rise of quick commerce (q-comm) platforms and the increasing popularity of planned gifting.
What are the challenges in expanding the physical store network?
Expanding the physical store network is challenging due to high real estate costs, especially in major cities. Setting up too many stores can drain resources and stress working capital, particularly because the gifting business is seasonal.
How is FNP diversifying its product range?
FNP is diversifying its product range by adding more options beyond cakes, flowers, and basic gifts. This includes collaborating with other brands to offer more valuable gifts, which can help increase the average order value (AoV) and attract a broader customer base.
What is the potential of overseas markets for FNP?
FNP has significant potential in overseas markets, where it already generates over 35% of its revenue. Countries like the UAE and Singapore present opportunities for growth, especially given the company's strong brand presence and existing customer base.
What are the financial challenges FNP faces in achieving its growth targets?
FNP faces several financial challenges, including managing inflation, controlling costs, and maintaining competitiveness without raising prices. The company is working on cost reduction and efficiency improvements to achieve its growth targets of 25% annually and 15% operating margins.
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