The post-meal craving for dessert is a great uniter of humankind. While scrolling hopefully through Zomato one afternoon for a post-lunch sweet, I discovered NOTO, a healthyish ice cream brand. I was amazed to find that a generous 125ml helping of ice cream can have just 75 calories, while tasting pretty much like regular ice cream!
I sat down with NOTO co-founder, Varun Sheth, to understand how they found a niche in a hard-to-crack, seasonal market.
|2019, by chef Varun Sheth and designer Ashni Shah.
|Guilt-free, low-calorie ice cream & desserts
|Bars, popsicles, macaron sandwiches, gelato, mini bites. Vegan and diabetic-friendly options. Sugar-free Indian mithai and syrups.
|Pre-Series A in March 2023: $2 Mn from White Whale Ventures and Rainmatter.
~$0.5 Mn from angel investors including Titan Capital, Rockstud Capital, Venture Catalysts, and Bollywood actor John Abraham.
|₹45 Cr in annualised revenue against 3 months of summer (the benchmark season for ice cream).
Taste Above All
Trained at the Natural Gourmet Institute in New York, Varun Sheth is a chef who ran 1Tablespoon, a NY-style pizzeria, in Mumbai for 11+ years. Both he and his partner, designer Ashni Shah, have a sweet tooth. They found that while an increasing number of Indians were becoming fitness-conscious, no one had solved for the ‘can’t resist dessert’ problem.
Their research included an extensive visit to supermarkets abroad, where they discovered that taste-wise, the most popular healthy desserts were comparable to regular desserts. Sheth says, “While people want to eat healthy, they still want the indulgent dessert experience. Customers may try a healthy dessert once, but if the taste feels like a compromise, they will not come back for more.”
Creating the Product
As he worked on the product recipe, Sheth set himself a challenge: to come up with an ice cream that’s as healthy as possible without compromising on the taste. NOTO’s value proposition is ‘delicious desserts you can enjoy guilt-free, and not just on cheat days.’ Some of the choices he made became NOTO’s USPs:
- Low calorie count, so it won’t throw people off their diet
- Added fibre so that one serving will satisfy people’s cravings and stop them from overindulging
- Added whey protein (in addition to what’s in the milk) to make the dessert healthier
- Sugar replaced with low-calorie, natural sugar alcohols such as erythritol and maltitol, which are about 6% of the calories of sugar while imparting 70% of the sweetness. These have the advantage of not spiking blood glucose levels.
Sheth says the brand doesn’t shy away from talking about their ingredients, which are listed prominently on the packs along with recommended portion sizes.
Fun Fact: The brand (pronounced no-tow) is named after a town in Italy known for its great ice creams—both Sheth and Shah have trained in Italy and felt a connection to the place. Many people pronounce the brand as ‘no-to,’ and the team has decided to give that a positive spin of saying ‘no to unhealthy desserts or white sugar.’
Learning From the Market
Unsurprisingly, the bulk of NOTO’s market is made up of fitness-conscious millennials and Gen Z. But as the brand gained traction among these customers, it led to another customer base of diabetics. Sheth says a number of customers began ordering NOTO for their diabetic parents, so that they could enjoy ice cream without a spike in blood sugar.
To address this market as well as buffer against the seasonality in the ice cream business, NOTO eventually expanded to a range of sugar-free Indian mithai for occasions and festive gifting, which they are revisiting.
“Our ice creams are competitively priced compared to gourmet ice creams and customers don’t feel the pinch when they pay a little extra for a healthier alternative. But this isn’t true for Indian mithai; not enough customers were willing to pay a premium for healthy mithai. This was a learning experience for us and we are re-looking at our product and pricing to see how we can make this line work.”Varun Sheth, Co-founder, NOTO
Differentiating Through Pack Design
Studio Glyph has designed the brand’s identity and packaging. Ice cream packaging is typically cluttered with product images. To differentiate themselves visually, NOTO packs are colour-coded and sport clean illustrations of the star ingredients.
They also called out the brand name and calories per serving in a big, bold, easily readable font. Sheth says, “In retail stores, ice creams are stacked in freezers, which means often only their top is visible. We made sure the brand name, flavour, and calorie count are clearly visible in this view.”
Pari Purohit, Founder at Studio Glyph says, “We didn’t want to jump onto the obvious, health food design bandwagon of a ‘clean, white, light and low-cal’ visual style. When we spoke to NOTO’s potential consumers, we realized that on cheat days, people went the whole hog and wanted to enjoy uncompromising, sinful indulgence. Varun had already achieved this with the flavour and taste of the product. As NOTO’s design partners, we decided to treat the visual language the same way. With confetti-like ingredient illustrations and a clear emphasis on the health benefits, we were able to convey exactly what was important to our customers—fun and flavour first, but fitness for sure.” The brand’s USPs are also graphically displayed on the ice cream packs.
Early Marketing Efforts
NOTO’s primary goal in the early days was to drive product trials. Once customers realised how good the product tasted, repeat purchase was not a problem.
They did this by consistently gifting their products to friends, friends of friends, and celebrities, leveraging their network as much as possible. They got some celebrity shoutouts organically on Insta Stories (this was ~4 years ago, before influencer marketing became big) and that got the word out. Sheth attributes this to the attractiveness of their packaging as well as the product because it was vibrant and ‘Insta-worthy’; this made early customers want to click pictures and put them up on Instagram.
Ice cream is an impulse purchase and customers expect near-instant gratification. “One possible way to scale up was through fresh scoops at parlours. The other was to build an extensive distribution network like the bigger players. We did not have the resources or desire to do either,” says Sheth.
NOTO cracked the need for a hyperlocal presence by leveraging the reach of food-tech players. They identified key areas within the cities they operate in and set up dark stores within 5 kms of office/residential hot spots for ice cream. They use Swiggy/Zomato’s delivery network to get orders to customers. Today, NOTO has about 90 dark stores in 6 cities.
Sheth and Shah noticed that even when they got customers to their own website (at a CAC of around Rs.600), they noticed no repeats. Once customers liked the product, they began asking why NOTO wasn’t available on Instamart or Blinkit or Swiggy or Zomato. So NOTO shifted their spends to increase visibility on these platforms. While they still have around 40,000 active users on their D2C website, CTAs on the website direct customers towards food delivery platforms.
Tracking the Right Metrics
Sheth says one of the disadvantages of relying on external food-tech partners is the lack of intel about customer lifecycles. “Swiggy and Zomato define a repeat user as anyone who re-orders from you within 3 months. So if someone re-orders after 4 months, they are treated as a new user. This doesn’t give an accurate picture.”
It is also important, he says, to look at customer feedback on these platforms at a granular level. For example, someone may have loved the ice cream but rated it 3 stars because they received it melted. That’s not feedback for the product but for the operating process. That is why NOTO continues to have a D2C website and build its own database of users.
Key metrics they track are:
- Overall ROAS (Revenue On Ad Spend)
- Ratio of New:Repeat users. (they try to increase the % of repeat users month on month so that ad spends per dark store do not increase)
They benchmark their performance against competitors at a similar brand life stage and not, say, a Baskin & Robbins, who has a much bigger brand recall.
Sheth and Shah believe in achieving saturation in one city or market before expanding to the next to optimise costs and margins. In the six cities they are in currently, NOTO has achieved online saturation. Sheth says the next step is to really tap offline opportunities. For example, in malls or cinema theatres where ice cream is a typical impulse purchase. They intend to spend some of the funds raised to grow offline.
Sheth’s Advice to Founders
- In a category that’s never been defined, you are guesstimating. Understanding the Total Addressable Market (TAM) and how you can disrupt it is very important. The larger the TAM, the easier it is to raise funds.
- Take your time, figure out one market, then expand to the next. We spent two years in Mumbai alone and expanded to other big markets for ice cream (Bangalore and Delhi) only after consistently doing ₹30L/month of sales in Mumbai.
- If you’re in the food space, online is expensive and your own website cannot be your primary sales channel. You have to rely on aggregators to achieve scale. Try and go offline sooner as it will reduce your spends on ads and discounts considerably. It’s easier to go online once you have cracked offline than vice versa. (A food brand that did this successfully is Yoga Bar: read that story here)
- Build true product love and brand goodwill so that customers create demand for you—then your distribution partners, be it Swiggy/Zomato or retail stores, will want to stock your products without you spending a rupee on marketing. Plus, you can negotiate better commissions.