Hangry: Finding New Opportunities in Crowded Spaces

Indonesia’s food delivery sector is a crowded space - dominated by industry giants and an increasing number of startups all vying for a slice of the pie. It’s also an industry that’s rapidly growing, with more cloud kitchens opening across the country to cater to young, tech-savvy Indonesians looking for a variety of food options to be delivered right to their doorstep. Hangry, a fast-growing cloud kitchen startup that launched in 2019, is feeding this demand by offering international cuisines, along with local favourites, to appeal to an increasingly global-minded target market. On this episode of Moonshot, we speak with the co-founder and CEO of Hangry, Abraham Viktor, and Sequoia India and Southeast Asia’s Aakash Kapoor to discover how the startup is taking on industry giants, riding the K-pop trend, and creating a winning recipe for cloud-kitchens (and hungry customers) in Indonesia.

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Show Notes

  • A tasty way to take on industry giants (2:07)
  • Appeal to different palates with a wide variety of flavours (4:15)
  • Taste and iterate: The Moon Chicken recipe for success (9:40)
  • How the Hangry Academy sets outlet staff up for success (13:18)
  • Count Your Chickens: Deciding on quantities with the help of technology (14:25)
  • Be quick to respond to customer complaints (16:06)
  • Entice your customers by nailing the basics and riding trends (18:25)
  • Customer complaints for breakfast: Team Hangry’s morning ritual (20:20)
  • The key ingredients of building a brand (21:50)

Transcript

Introduction

Dewi: Thanks to affordable internet plans and mobile devices, Indonesia is projected to become the largest digital economy in Southeast Asia by 2025. The country is also home to a vibrant and emerging startup scene. At every turn, Indonesian startups are revolutionising their sectors and categories in new and inventive ways. Now, with us on the show today is Abraham Viktor, the co-founder and CEO of Hangry, and Sequoia India’s Aakash Kapoor, an investment advisor focused on Southeast Asian startups. Aakash worked very closely with Abraham and his team as they went through Surge. That’s Sequoia’s rapid scale-up program for early stage startups in India and Southeast. Now, what exactly is a cloud kitchen? It’s also known as a ghost or dark kitchen, depending on where you’re from. These are central kitchens that accept delivery-only orders, but without the space to dine in, they often rely on online orders, placed through food delivery apps and aggregators. Now, first of all, Abraham, cloud kitchens are not a new thing. In Indonesia, you already have giants like Grab and Gojek who already operate a number of them across the country. It’s a pretty brave move to want to dive into a market that’s already pretty crowded.

A tasty way to take on industry giants

Abraham: Yeah, I think you’re absolutely right. It’s a very crowded market. But so is every other market if you think about it. We try to enter categories that we think are very large. One example would be fried chicken. So, the fried chicken category is known to be the largest food category in the world. And, in Indonesia, it’s definitely the largest category. And then, Japanese food is another category of sorts that across the globe, people just generally love it. So, we try to identify those categories and we especially like categories that are dominated by few players. So, for example, the fried chicken category here is dominated by some of the top fast food chains that we know. And, what we try to do is to come up with something that sells at a similar price range, but is absolutely better in the customer’s eyes. So, that’s how we decide on which category, and which brand to build. When the idea came, it was an intersection between my personal affinity towards the sector called F&B because I love food, and I’m not just a foodie, I actually vote for Asia’s best restaurant every year, so I’m seriously committed about eating. And, I thought that that means I’m one of the more picky eaters out there, and that means I should have a pretty demanding appetite or palette in terms of the product itself. So, I thought, “Hey, maybe if let’s say I jumped into this industry, I should be able to know how to create a product or how to discern a product that is probably better than everything else in the market”. So, that’s what gave me confidence to want to jump into this industry. And, I think across the globe, customers in general are always looking for better and better products. So we’ve seen that trend in mobile phones, how Nokia was the largest player for a long time, but customers switched in the end, right? And then, we were also seeing the same thing in content, how people used to rent DVDs, and now people are watching Netflix. So, I think across the globe in different industries, we can safely conclude that customers are always looking for better and better things. And, I believe the same about F&B too. And, that’s why we think there’s an opportunity for us to come into the market and win here.

Dewi: That’s so true. So, walk us through the model. How does Hangry work and how are you different from other cloud kitchens in Indonesia?

Abraham: All the food giants of the world are players like KFC, McDonald’s, Pizza hut, all of which have been in the market for 50 to 70 years. And, I firmly believe that customers are actually open to new brands if these new brands can offer something different and better, compared to what they’ve been consuming in the market for a while. So, we actually tried hard to think about what can be the next global brands? What can be enjoyed across the globe? What can be a part of global citizens’ lifestyle for the next hundred years? And, in the end we decided to start several brands from scratch and all these brands range from Korean fried chicken, Japanese beef bowl, Indonesian food, as well as some beverage brands as well. But one thing that we do differently compared to the other brands is how we are now building brands that are purely delivery. So I think we have a huge privilege and luxury, which is that we live in a market where delivery food is actually a part of people’s lifestyle. This is a phenomenon that didn’t exist a few decades before. So, we think that rather than building a dine-in operation, that is very capital intensive, we could actually build brands and host them under the same kitchen, and scale that way. That way our brands would be able to scale without requiring so much investment. And, plus we don’t even need to actually rent a prime property because we do delivery only. So, customers don’t need to actually see a nice facade of the restaurant itself. So, in the end, we decided to build that operation, which are multi-brand, delivery-only restaurants by the end of 2019.

Appeal to different palates with a wide variety of flavours

Dewi: Abraham, it’s clear that you’re really tapping into this whole digital economy in Indonesia. And, the fact that so many Indonesians are tech-savvy and able to order their food via an app or online. Now, Aakash, let’s bring you in on the conversation here. When you first met Hangry in 2020, they had eight kitchens, I believe. And, now they have over 40 across Jakarta and Bandung. What excited you about this whole cloud kitchen scene in Indonesia, and in particular Hangry?

Aakash: That’s right Dewi. They had eight kitchens and four brands. That’s what I recall. Let me start by saying it’s no secret that Indonesians love food. We picked up a few interesting facts over the last two years. One of them, for example, is one in three Indonesians snack more than twice a day. 30 to 40% of personal income is spent on food. Both of these translate to a large market of US$40 to US$50 billion market opportunity in F&B. Cut that to this decade now. And, you’d see that ride hailing has enabled the shift towards people caring, not necessarily about the location of the restaurant, but caring about the best food available at the best price. That’s where Hangry or models like Hangry come in. Specifically, when it came to Abraham and the Hangry team, what got us interested was if you talk to any of the consumers who’ve tried their food, you realise that people talk about the perfection that Hangry puts in into each of the recipes and each of the foods. For example, the crispiness of the Moon Chicken came up in many conversations. The freshness of San Gyu came about in many conversations. So, these are small things that Abraham and team have worked on, very important thing, small things, but very important things that Abraham and team have worked on, which as a result of these things Hangry has become a multi brand food retail company, on top of the cloud kitchens, powered by ride-hailing.

Dewi: So Abraham, Aakash, you mentioned that you have four products. How did you choose these products?

Abraham: So, we tried to identify categories that we think are big. So, obviously there are so many categories of food. There’s fried chicken, there’s pizza, there’s burger, there are snacks, but not all categories are equal. So, what we consciously decided to do since the beginning is to identify categories that are very large and build brands that we think would win those categories. So, that’s why we have Moon Chicken, which is entering the fried chicken market, which is one of the most sizable, if not the most sizable category globally. And, we also have San Gyu, which is in the Japanese food category – also another genre of food that everyone across the globe loves. So, we try to enter those very large categories and the aim is to win those categories.

Aakash: And, Dewi, if I may add, Abraham and team also have this concept of timeless categories. Categories that – or food items – that existed 10, not 20 years back and will continue to do this for another 10, 20, 30 years. Fried chicken is one example. I mean that existed 15, 20 years ago. It’s still going strong and will continue to go strong. That is another concept they have.

Taste and iterate: The Moon Chicken recipe for success

Dewi: So, let’s take it back to Moon Chicken. That’s, if I may call it, your breakout brand, right? And, when it comes to chicken in Indonesia, it’s like every street there’s at least two Ayam Penyet stores. Is that why you specifically chose chicken? I mean, it’s universally loved throughout Indonesia. And, how are you making your chicken different?

Abraham: I love talking about Moon Chicken. It’s one of the brands that I really love personally. So, when we started thinking about Moon Chicken, I remember that we tried to [00:11:00] identify what makes a great fried chicken. And, when it comes to fried chicken, I think there are three elements, which is the chicken skin, and then the meat, and the seasoning, right? So, the skin has to always be crispy and the flavour has to penetrate to the bone, and the meat has to always be juicy.

So, what we had in mind is that we want to create something that should be great on its own but that in itself is not enough because we thought that if we were to come into the market, we have to come up with something that one-up the standard in the market. So, I remember that everyone else that we were speaking to at that time was telling us that their favourite chicken in the market are those off the top QSR (Quick Service Restaurant) chains. So, we did a couple of research on how we can make it even better. And in the end we decided that, first of all, we have to make sure that our chicken has to remain crispy after two hours because we’re a delivery-focussed player, meaning that people wouldn’t eat the chicken fresh from the fryer. And then, the second thing is we would like our chicken to be a little thinner in the skin. So, our chicken wings have thinner batter, and that allows for a crispier, more airy feeling when people bite into it. Now, the hardest part is, I mentioned earlier that I wanted to one-up the offering, right? So, instead of presenting our chicken naked, we decided to coat all our chickens in sauces and seasonings. And, that actually makes it very complicated because if the batter is more thin, but we douse it in sauce, it’s physically a bit impossible to make sure it remains crispy after two hours. That is why it actually costed us about three to four months to develop that recipe alone, that in the end, we were confident about.

Dewi: So it took you like three months to develop the secret recipe behind Moon Chicken. Tell us about what does that entail in a day? How many chickens were you eating?

Abraham: So, I think I’ve definitely put on a few kgs because of that. I remembered that every day, my R&D team would send me samples. Sometimes they would send in the morning, sometimes they would send at night. And, I had more chickens than ever. Not just me, actually, everyone in my family has had more chickens than they’ve had in their entire life, I think the past one year or so. I think consistency is key. So, I think, the first impression – customers want something that wow’s them, right? But what keeps them coming and what keeps them being a regular customer is consistency and reliability. So, that’s something that we try to focus on. And, consistency comprises of quality consistency, as well as SLA (Service-level Agreement). So, food has to be done well all the time, and at the same time, food has to also be done fast all the time. And, for us that’s our DNA. The largest theme in our company is operations. And, the one theme that I think carries the heaviest load is the quality assurance and training team. So, we try to create a DNA in the operations team, where every single person working in the kitchen really strictly follows our SOP. And, obviously, the challenge is now even bigger as we scale which is why we’re investing in this thing called Hangry Academy with the intention of equipping our kitchen staff better and better, which will result in more and more consistent products.

How the Hangry Academy sets outlet staff up for success

Dewi: Let’s talk a little bit about that. What does Hangry Academy entail? When you go to Hangry Academy, what do you learn?

Abraham: The way we recruit our team is that we try to make sure anyone can work in our kitchen, meaning that people don’t have to go through culinary school to be able to thrive in our kitchen. And, the gap between those kind of people with the products that we come out of our kitchen is basically training. So, it’s a rigorous training of understanding the product, of being able to be more meticulous and disciplined in our work, and it takes time. So, right now we’re mixing and matching between a combination of theoretical teaching, as well as practical teaching in the outlets itself. And, there’s a whole curriculum that is maintained by the whole Hangry Academy team.

Count Your Chickens: Deciding on quantities with the help of technology

Dewi: It’s a little bit like the Haidilao Academy, if I may say, where they bring people in and train them up to work in their restaurants, but Haidilao, they use a lot of tech behind the scenes. Is that something that Hangry is doing as well or planning to do, or currently does?

Abraham: We incorporate a lot of tech in the way we operate in the kitchen. Maybe I can share one example. One of the biggest challenge in running a restaurant, deciding this thing called holding quantity. It’s basically deciding how many chickens to prepare ahead of rush hours. If we prepare too much, then it’s gonna go to waste. But if you don’t prepare enough, then the SLA (service-level agreement) is going to be screwed up. People are going to have to wait for a long time. So, we are building this tech stack called Hangry Prediction Engine, where we try to predict automatically how many chickens or how many other sorts of SKUs we need to prepare ahead of time. And, traditionally, this function has been performed manually, actually. So, across different restaurants you guys will find out that most of these functions are covered by store managers that are experienced. So, they will decide on the holding quantity based on their experience. But we believe we should be able to automate this, which is one of the examples of the incorporation of technology in our operation.

Be quick to respond to customer complaints

Aakash: Dewi, you mentioned a critical part around tech and obviously the delivery partners, one other aspect of tech is that the delivery partners are critical to Hangry’s existence. But, at the same time, the brand is now maturing such that people are coming on to the app that Abraham and team have developed, and ordering food from there. And, many of the repeat users and many of the repeat customers prefer to just come on the app, and order food from there. And, on the app, they can choose various – either they can go to the kitchen and pick it up themselves, or otherwise order from the kitchen. So, I think that’s another aspect that in the last couple of years, the team has developed.

Abraham: And, we really see that everything that we do here has to one-up everything that customers have been experiencing for the past five decades. And, technology is obviously one of the best things to infuse into the business and operation to deliver those services to customers. So, I think Aakash did mention about Hangry’s app. So, why we made that app is actually because customers have been telling us that their biggest frustration about F&B is that sometimes when something goes wrong in their order, it’s really hard to complain. It’s really hard to complain. And, they feel that if they complain to the restaurants, it just takes so much effort and it takes so much time. So, we built the app for that purpose actually, so that customers could contact us right away. And, we have a 10 minutes strict SLA (service-level agreement) meaning that after 10 minutes the customer would have a response, for sure. And, I think our resolution rate is about 98%, meaning that 98% of the complaints are resolved.

Entice your customers by nailing the basics and riding trends

Dewi: Wow, that’s great. So, you really solve these customer’s pain points almost immediately, or rather within 10 minutes if they have any issues. So, apart from that, what are some other ways that Hangry is building affinity with their customers? How do you keep them coming back, apart from being delicious, and convenient, and quick to respond to any issues?

Abraham: So I think when based on our strategy, we actually carefully choose categories that are large. But, in addition to that, we also decided that we want to enter categories that we think are timeless. So I think there are many kinds of foods in the market and we believe that some are there to last, and some are just there temporarily. So, for us, we only want to enter categories that we think are timeless, meaning that these are things that people have been eating for the past 50 years and things that people will keep on eating for the next 50 years. So, fried chicken, gyudon, these are examples of those kinds of things. Now, when it comes to this kind of food, people have higher expectations actually, because people have tried many [different brands], and people are very familiar about the products. They want consistency. They want to be wowed every time they eat, they want value for money, but even if we do all of that, people will still get bored. So, for us, we have to nail the basics. So food has to be great and food has to be consistent and food has to be delivered fast, but on top of that, we still have to sway them and excite them with our brand. So, one of the things that we’re doing recently is we noticed that customers have been catching the Korean K-pop bug. And, we thought that we should do something about it. So, we struck a partnership with this Korean instant noodle brand called Samyang, where we did an official partnership launching the Samyang series in our Moon Chicken. So, we’re the only brand, if ever worked with in Indonesia and customers loved that in the end. So, I think just to answer your question, Dewi, we try to focus on nailing the basics, but on top of that, we think hard as well on how to keep customers excited about us.

Customer complaints for breakfast: Team Hangry’s morning ritual

Dewi: Wow. Samyang noodles and Moon Chicken sounds like a match made in heaven. Delicious heaven, really. So, it seems like attention to detail is behind [00:21:00] everything that Hangry does. You’re paying attention to your customers. You’re looking at this K-pop craze. Abraham, you are a year into your journey and you’ve built a loyal following among Indonesians in what’s a very competitive market. What advice would you give aspiring founders who are trying to break into a crowded space?

Abraham: I think the advice that I would like to share is something that I keep on hearing from Aakash as well, which is that product-market fit is everything. And, I think any entrepreneur might be able to relate, my weakness is that I like my own idea, but my own idea may not actually be what the market wants, right? So, I think the biggest advice is for us to keep on listening to customers. And, for us, we try to make it our company DNA. So, our company’s number one value is customer obsession, actually. And we don’t just say it. So, one of the rituals that we do in Hangry is we look at customer complaints every morning. So, every 9:00 AM to 9:45 AM, different divisions would look at the same complaint list that comes and we try to address each of them. Of course, it’s a painful exercise and it’s very discouraging at times, but I believe that these are things that would make a difference in the long run.

The key ingredients of building a brand

Dewi: Wow, that’s for sure, a tough way to start the day, but very important. Even as you look at people saying negative things about you, that’s the only way to iterate and make your product better. Now, Aakash, as you look back on your experience over the last year with Hangry, what are the three most important things that they’ve done to break into a crowded market?

Aakash: Well interestingly, it’s not very different from what you would hear on the internet or a tech company talk about. And, I’d say I’d rank these three things in the following order. First would be, at the time of product development, focus on making sure that you get the product right is very important. The more you iterate on it, the better each change should make it better for the customer. That would be number one, I’d say. Number two, consistency. Once you’ve developed a product, delivering consistent experience, consistent product, and then caring about the customer service is very important. That would be number two. I’d say third, brand is not built by spending dollars on marketing. Brand is built by how well you do the first two things. It’s how well you develop a product or how good a product you develop, and then how well do you take that product to market repeatedly back to the customers. I’d say third is brand building, but it’s a function of the first two.

Dewi: Abraham, Aakash, it seems like the saying the way to a man’s heart is through his stomach holds true for Hangry. And, I can’t wait to see how many more Indonesians will become fans of the brand soon. Thank you both so much for joining us on the show today.

Abraham: Thank you Aakash and Dewi.

Dewi: I’ve been speaking to Abraham Viktor, the co-founder and CEO of Indonesian cloud kitchen chain, Hangry, and Aakash Kapoor, an investment advisor from Sequoia India based in Singapore. Well, that made me really hungry. So, I may just go and get some fried chicken. Thank you for joining us. I’m Dewi Fabbri, and for more interesting startup stories, visit our website sequoiacap.com or follow us on Spotify. Terima kasih untuk mendengarkan kami dan sampai jumpa lagi!