Lemonilo: A Community-First Approach to Building a Consumer Brand

Introduction

Dewi Fabbri: Indonesia is the world’s second largest consumer of instant noodles. According to the World Instant Noodle Association, the country consumed over 12 billion servings in 2020. Now, while the industry has long been dominated by a few legacy brands Lemonilo, a direct-to-consumer startup is making inroads by offering a healthier version of Indonesia’s favourite instant meal. We’re here today with Lemonilo Co-Founder and CTO Johannes Ardiant and Rohit Agarwal, a principal at Sequoia India and Southeast Asia to talk about how Lemonilo is banking on technology to help Indonesians eat healthier, one bowl at a time. Rohit, Johannes welcome to the show. Johannes, how did you come up with the idea to launch a healthy food brand in Indonesia and specifically why instant noodles? They’re not necessarily the first healthy thing that comes to mind.

Johannes Ardiant: So, the story goes back to – I think it was the year 2016, and I think we were considering Lemonilo as our second startup. We started with something else before, and there were a lot of mistakes that we made along the way. And, one of the biggest mistakes that we did was we didn’t think too much about the problem space. We jumped right into the solution. We tried to come up with a good solution. So with Lemonilo, we really spent a lot of time trying to understand – what the problem space is? And the core idea behind Lemonilo is, we want to do something related to healthy food or healthy eating. And, the problem that we are exploring is that healthy food products are generally not accessible. They are expensive. They have limited availability. And, this is a problem that Shinta felt, my co-founder, as probably among the three of us, myself, Ron, Shinta, she was the one with the highest awareness of healthy living. Generally everyday food in Indonesia is not healthy. Supermarket shelves [are] too full of food products with unhealthy ingredients – too much sugar, too much fat, too many calories, too many chemicals, artificial ingredients that could be bad for our body in the long run. And, the healthy food products that are available in the market, they are not; how to say – they are not every day. They’re generally more expensive or not widely available, not to mention the taste. People often associate healthy eating with pain with suffering because generally healthy food doesn’t taste good. So, we went on to try to validate the problem. So, we wanted to find out whether it is just a problem for Shinta or do we have many people facing the same problem? So, we went to talk with young moms, first-time moms, soon to be moms with similar personas to Shinta, and long story short, they were all unanimous that this was indeed the problem that they are facing. So, that was the beginning in which we started to embark on this journey. With Lemonilo we want to really focus on the healthy food space. But then when we first started Lemonilo, the solution that we proposed [for] this problem is not like what we have right now. Initially we thought like, “Oh, why don’t we just make something like a vertical e-commerce specializing in supplying healthier food products from various brands and sellers”.

Offer a new solution to an old problem

Johannes Ardiant As we talked to our customers and potential customers, we found that the products that we are selling in our marketplace are still not affordable to most people, not to mention the taste. Most of the health products that we are selling, they’re all foreign to our taste palate, like there are like granola, muesli, energy bar, among others. And, this was the time when we realized the first version of our solution does not really solve the problem that we found. So, we thought that probably we can do something with a white-label product that could answer the problem with tastes and also the price, plus with this white-label product, it has the potential to give us a bigger margin. And then of course the question is what kind of product we should create first. So, we went on to look at similar marketplaces in the US, and the first product that they created was tomato ketchup. So we wondered what would be our ‘tomato ketchup’? And then it turned out to be healthy instant noodles – because back then we were already selling multiple different instant noodles, healthier instant noodle products from different brands – and it turned out that these products have the highest retention. Customers will buy the products again, and again, and again. So this was sort of like a eureka moment for us, because from there, we started to realize that Indonesians consumed instant noodles a lot. And, people kind of know that this product is not healthy. It’s not that healthy. In a similar way, Americans consume ketchup frequently, but it contains unhealthy ingredients like high-fructose corn syrup, artificial colouring, and so on. And so with that data, we went on to launch our first Lemonilo fried noodle, ‘mie goreng’ product. It was launched. I think it was a quarter of 2017 and we only launched around can’t remember exactly, but probably around 5,000, 10,000 packets. We sold online through our marketplace and the feedback was great. It was super positive. We saw a big proportion of repeat customers, and with a very small churn rate. So, I think that’s the beginning. That’s kind of like the journey of how we come up with instant noodles. I think along the way, there have been multiple pivots that we did but the problem space is still the same and it’s just that we came up with a different solution to the problem.

Pick the right problem and validate it

Dewi Fabbri: That makes total sense to enter a market with a product that’s already well loved, rather than introducing something completely new. Now, Rohit, how did you meet the Lemonilo team and what excited you about this idea, and in particular, this market in Indonesia?

Rohit Agarwal: Dewi, before I jumped to how we met the team, let me share what excited us about the idea. I think coming in, we always sort of knew that packaged goods is a wonderful neighborhood to invest in. And with Indonesia’s population, it’s going to be a large market, but we were in for a surprise. I mean, Indonesia is not just a large noodle market, it is the third largest noodle market in the world. And then, as we started to look deeper, we realized that packaged goods, especially food, is a very tough category for young brands. You [have] got to get your customers comfortable at so many different levels. It has to taste good. It’s safe for me. It won’t upset my stomach. There’s so many questions going on in people’s minds when they are choosing a new packaged food product. And I think this is; and traditionally this has been done by brands by organizing tastings in small groups at supermarkets and community meetups, and so on, where they can leverage social proof. I mean, if it’s in the supermarket, it must be quality tested. “Oh, it’s at my community center. So many people are tasting it. It must be good. It must be safe.” But, I mean this is the real bottleneck for young brands. How many of those can you organize? How fast can you grow? And, this is where Lemonilo was differentiating from the word ‘go’. I mean, they were leveraging social media. They were leveraging online go-to-market to reach out and talk to their consumers directly, to engage them. And they were telling a new story. They were telling a story that centered around your health, that centered around your family’s health, and it was resonating. As we spoke to more and more customers we realised that this brand was starting to find, not just mass acceptance, but almost an ambassador-ish following among its customers. And so we knew that they were onto something and we didn’t want to miss the train. We wanted to be part of this journey. And among other things, we were also very encouraged and motivated by the positive social impact that Lemonilo could create for millions of Indonesians and their families. So that was the beginning of how we got interested in Lemonilo, but going a step back on how we first met Johannes… I think Johannes, we first met you when you were still pursuing your previous startup Konsula, right? And we thought that had a slightly limited market in Indonesia and we didn’t partner with you back then, but we kept in touch. And, around 2020 when Lemonilo was just beginning to scale up, I think I met Shinta, Ron and John on a trip to Jakarta, and I realized that this thing was at an inflection point. So, I remember asking Johannes what’s changed this time. And he exactly said, “This time we are not assuming that the problem exists, we are testing the problem. We are testing the problem more than our product. We don’t care whether our product is good or not, but we just want to pick the right problem”. And it struck to me then how many first-time founders think so much about the product, but so little about validating the problem and it can completely change your journey, your point of view on what product you build, how you build a product, if you start and think deeply about the problem, and validate the problem before starting to validate the product. Maybe Johannes, talk a little bit about what changed in your strategy and your plan as you started with the problem first approach vs. a product first approach.

Johannes Ardiant Long story short, 2015, we decided, let’s go back to Indonesia to build a startup together, and Ron joined in. And, back then the three of us were particularly interested in three sectors that we felt the need of disruption: logistics, education, and healthcare. So, we begin the story of Konsula in 2015. We got our first seed investment in September 2015. And, the big idea with Konsula initially is that we wanted to democratize access to healthcare. And one example that we have seen is Practo in India. And, what Practo did is to connect patients and doctors, as well as digitizing clinic operations. So we thought with Konsula; we assumed that yes, there is a problem that needs digitization in Indonesia’s healthcare sector. So, we went on to build products, copying reference products that we have seen working in other countries. And of course, after we built so many different products, we saw that numbers were bad. None of the products that we launched showed good user retention. We tried to monetise as well with some of them, but it didn’t work. And the second problem, the second mistake that we did is we lost focus along the way. I think we started as a booking platform for doctors, like you can book an appointment with a doctor, and then we provide a system for the doctors and the clinics as well to manage their products. And then, we then tried to create telemedicine services as well, in which you can actually talk directly with doctors, and have a chat, or have a video call, or phone call with doctors. So that was, I think, two of the most important lessons that we learnt. And then I think we made the hard decision to really pivot from this, because this is something that I read somewhere… What differentiates a successful entrepreneur and the unsuccessful one is that the successful entrepreneur, when they want to pivot, they still have some money in the bank. So, they still have some runway to actually try and test new ideas. So yeah, we put a hard break on Konsula. We completely pivoted. And, during the transition period, we were experimenting with many different ideas. And like I mentioned previously, the Lemonilo idea actually came from the problem that Shinta faced every day. So that’s kind of like the background story, the beginning in a way.

Don’t forget what it takes to build your MVP

Dewi Fabbri: So Johannes, when you look back on your Konsula journey, how are you doing things differently at Lemonilo?

Rohit Agarwal: And Johannes, before you answer that, I mean, so many founders today get started in the same way that you guys got started. So, I think maybe one takeaway for a lot of founders here is to think about the quintessential PMF (product-market fit) in two stages, they have to get to a problem-market fit before they think about the product-market fit. And, building on Dewi’s question, how are you doing things differently? I think you’ve gotten started this time around in a large market. So, you’ve picked sort of the right problem, which is 80% of the job when you’re thinking about how to get started. But I mean, what then? There’s so many noodle companies out there. It’s a very crowded market. How are you guys navigating this?

Johannes Ardiant: I think we really took our time back then to truly see, and really explore the problem space. And then even when we are trying, when we decide to build the product. I think a lot of times we tend to forget what it means to build an MVP, a minimum viable product. One of the mistakes with Konsula was that we didn’t build the minimum viable product to test if there is this problem that can be solved by this product. But, we continued to build full-fledged products in which we actually spent a lot of our investment money, time, and energy into them. And then with Lemonilo, we did this very differently. We scrapped that approach and we turned to something like, “Okay, let’s try to validate if this problem can be solved by a very simple MVP”. I still remember, when we already discovered that yes, there is a problem with the health foods sector, in the way that people want something that can be healthier, but also every day, we went back to the drawing board. We went around and again, asked our customers, “Why [are] you buying this product, why are you buying that product?” And even when we came up with a noodle product, I still remember, the first version of our noodle product, it was very basic, very rudimentary. I think it took us probably around one or two months to launch it. The packaging was just like a transparent plastic bag, we pasted a label on it, and when we launched the product to market, it was a very small quantity, like 5,000, 10,000 [units]. We didn’t spend that much on that product as well. But then that’s the principle of MVP, right? I mean, the product doesn’t have to be perfect. It has to be like super – I mean, at least it’s functional in a way. And then we get the product to market, we test it, and we see how the customer responded to that. So I think starting from that point onwards, the way we develop the products at Lemonilo, I think we have always been using the same approach. We want to get this product to market fast, as soon as possible with the least amount of investment. And then we see, do our customers like this product? Is it solving their problems? Is it something that they love? If it’s not, then yeah, then we have to kill it. We have to discontinue it and probably try with different products. So with that approach, we can iterate fast. The principles of failing fast, and then test and test until you perfect the product. So, I think that’s the main difference when looking at how we did at Konsula before, and how we are doing Lemonilo right now. And, to your question Rohit, when it comes to competition, like I mentioned before, when we first started this, we never thought that we would be in this noodle business. And we are competing with so many different companies that are giant. They have capital way more than us and they have everything actually. It is probably like we want to launch a new social media [company] competing with Facebook, for example. So, how do we go about that? I think the strategy – there has been like multiple layers of strategy that we do.

Lemonilo’s growth strategy: Leverage communities and remain agile

Johannes Ardiant: But, one thing that actually differentiates Lemonilo from the other brands is how close we are to our communities. And this is something that we have been putting emphasis on since Day One. We want to be really close to our communities. We want to build communities of followers and we want to interact with them directly. Not only will we get insights from them, feedback about the products among others, but they will be the champions of our products. We can rely on them, on the word-of-mouth effect. And I think that’s the most powerful marketing, right? And one of the examples that we have is actually our reseller program, Wiranilo. We started this program in September 2020, and now we have a thousand active resellers in this community. So, these ‘Wiranilos’, many of them have been Lemonilo consumers before. They are a part of our community and they have been experiencing the benefits and the quality of the products. And the second thing, I think what we believe in is agility. But then – I think there might be a risk that an organization, especially when you grow bigger and bigger, the more prone you are to complacency. We have so many big organizations that actually have that risk. And I think we really understood the risk, and we have been making a conscious effort to remain innovative and agile. For example, the speed from ideation to launching new consumer product is still at four to eight months for us. This doesn’t change. Even now when we are this big, we are still that agile. When it comes to launching the product, iterating the product, the timeframe is still the same. And on the other hand, we are also continuously on the lookout for the shift in the healthy trends in Indonesia. So, probably now is a good time for products like us, for a healthier instant product, but tomorrow it will be something else. And then, in that way, we have to continue innovating. We have to continue to be on the look out for, listening to our customers, looking at a trend and maintain our agility. And, I think agility is something that we still have right now, and I think something that we consciously want to make it to be there, even when we grow into like a company of 1000, 2000 people, we have to be agile.

Grow brand loyalty by listening to your customers

Rohit Agarwal: Johannes, technology, health, these things got you started, they help you differentiate from the giants, and compete with them. But how do you think about translating these early advantages into a sustainable edge? I mean, arguably some of these companies have now seen the success of your strategy and can combine elements of it into their own plans and execute along these lines to talk to their customers the same way, to focus and build products in the healthy domain like you’ve done. How do you make sure that you remain the disruptor and don’t get disrupted, or don’t get competed out by a bigger brand, or disrupted by a new upstart?

Leverage tech to shorten your supply chain

Rohit Agarwal: Johannes shifting gears a little bit. You are the Chief Technology Officer of a noodles company. You’re building one of the most data-savvy organizations in a relatively non–tech category. So, talk a little bit about your role, how it impacts Lemonilo. You’ve already drawn out many examples in this conversation already about how you’ve leveraged data and technology to actually better serve your customers, to draw out insights, to iterate your product. Do you see this trend gaining momentum within the broader industry? Do you think more CPG (consumer packaged goods) companies will follow the playbook of DTC (direct to consumer) brands and leverage technology in a more mainstream manner to better serve their customers?

Get your product to market quickly

Dewi Fabbri: Johannes earlier, you said that it normally takes four to eight months from idea to market. Is that normal? What’s the industry standard? And how many iterations do most Lemonilo products go through? And what’s the process there?

Bring tech and communities together to create social impact

Rohit Agarwal: Johannes, it’s incredible to see how you’re leveraging technology across all parts of your business, from supply chain to product development, to go-to-market (GTM). But I want to touch upon a part of the business where you’re leveraging technology and that’s something which is just super special and something that resonates a lot with me. And that’s in creating social impact. Lemonilo’s mission of ‘Menuju Generasi Hebat’, which translates to ‘Towards A Greater Generation’ is driving you guys to leverage your reach and leverage your platforms, whether it be the Lemonilo app or the social media channels, where you have millions of Indonesians every day, to bring in health experts to talk about positive eating habits, organizing yoga and mindfulness sessions to improve health for millions of Indonesians. Talk a little bit about how technology is helping you create a positive social impact – and this is for all Indonesians, whether they are Lemonilo customers or not.

Not all problems can be solved by technology

Dewi Fabbri: These are all great insights into how to build a community around healthy eating. So Johannes when it comes to building a CPG company, what advice would you give other aspiring founders who are also out there trying to build one?

Johannes Ardiant: I’ll probably say there are three things. I think it was very important from the lessons that we learnt throughout our journey. I think the first one is to be open-minded about your solution. The solution can be anything, but then you have to have a super laser sharp focus on solving the problem. In our early days, reflecting again on Konsula, I think we were so fixated in building a technology product to solve a problem, but then the more we think about it right now, not all problems can be solved by technology alone. And, I think this is true for Lemonilo. And then what matters again is the problem, then the solution can be anything. The second one is – find the right founding team and investors. Looking back, I think my relationship with our investors and co-founders, I think, I kind of likened that kind of relationship to a marriage; in the way that we are in the same bed and the same ship together through the thick and thin, through the ups and downs. So finding the right co-founders, it’s critical because the relationship is not always smooth sailing. I mean, there will be conflicts, there will be disagreements looking at my relationship with my co-founders as well, there are a lot of those things. But then finding people who can be open towards you. I think that’s what keeps us together. I think it’s pretty much like a marriage – communication, commitment, and the same vision – because you have the same goal. And then with investors, like our experience with Sequoia has been great. I mean, probably one of the best decisions that we have ever made. Sequoia has been super supportive as our brainstorming partners, playing devil’s advocate, giving thoughts that we probably didn’t think about, differing points of view. And during the fundraising round too, connecting us with various new investors that can bring us to the next level. And then, I’ll say, our journey as a company has not always been like growth, growth, growth all the time. But when we were facing tough situations – Sequoia was still there for us and was able to support us, and be founder-first in a way. And then I think, lastly, again, I think this is true for any startup – people are our greatest asset. I think when we hire people, we do not want to look for mercenaries. We want to look for people who really believe in the core value and mission. Finding people that really think that yes, what we are doing, makes an impact and may change things. And then another thing, when it comes to people as well, building the culture within the team and recruiting high-performance people who can fit with the culture. So, it’s not just about performance, but the culture fit is very important.

Ask the right questions

Dewi Fabbri: That’s really insightful, Rohit, you had a front row seat to how Lemonilo is building their company, as well as many other companies. What are the top three things that all startup founders should do when it comes to leveraging tech and building a CPG company?

Rohit Agarwal: I think people have to start by asking the right questions. I think towards some of these traditional categories, CPG, where you have very large international or multinational companies dominate market share, our instant view is, “Oh, these things are very well done, these things are saturated, and these markets don’t have enough space for a new startup to emerge. It takes a lot of capital to compete with these multinational giants”, and so on and so forth. But I mean, people are always looking for a better product, no matter how well the problem is solved. If you can solve it better, you have a business, you have a company on your hands. So, I think for a lot of founders out there, do not assume that the problem is solved. If you have a better solution, talk to your customers, and I’m sure they will find value in the products that you bring and be willing to try it and be willing to buy it. So I think there is a lot of value to be captured. A lot of market cap to be disrupted and traditional categories with technology with better products. I think my second [piece of] advice to founders is do not confuse technology for product. I mean, technology like the Internet or the smartphone, it has existed and it’s available. It’s democratized. It’s accessible to every company out there and each one of your competitors has access to it. The difference is in how you leverage it. And just because you are able to sell online doesn’t mean you naturally have an advantage over an incumbent. I mean we heard from Johannes today that they are actually rethinking the CPG industry from scratch. They are rethinking how they can leverage machine learning algorithms to shorten the product development cycles. I mean, you have to take technology a step further vs. just build a thin wrapper around your go-to-market or your supply chain. I mean, companies are far ahead of it. And I think my third [piece of] advice to founders would be – start small and iterate quickly. I think this is an industry which takes, as Johannes mentioned, a lot of time to bring products to market. And in today’s world where so many trends, so many new ideas come to the market every few weeks, every few months, what’s hot on social media drives a lot of what gets consumed in the supermarkets. So, you have to build that supply chain and that agility to drive what’s going on in social media, and translate it into a shelf on the supermarket as soon as possible. That’s your winning edge, that’s your competing advantage over a slower incumbent brand. So, I think we are super excited about the penetration and proliferation of technology in traditional categories like consumer packaged goods. It’s a very large market. And with rising income levels and changing consumer preferences, more discerning customers in emerging markets like Indonesia, this category is poised for a lot of very successful companies to be built in the next decade. And, we look forward to partnering with many of you out there who are trying to build companies in this space.