It was a pitch fest of the Keiretsu Forum Chennai in late 2018, and Anusha and Mahesh Dharam were understandably nervous as two of their earlier pitches for venture funding hadn’t met their mark. They had brought two cartons of candy and lollipops made at their venture, Kandee Factory, for the roomful of sharp investors to taste. Keiretsu Forum, among the largest angel investor networks in the world, favoured funding tech start-ups and the Dharams’ venture was anything but that.

Rajan Srikanth, then president of Keiretsu Forum, remembers popping a lollipop into his mouth. “It was bursting with taste; all the ingredients, they said, were natural. I was hooked,” he says. Kandee Factory also made all-vegetarian gummy drops and candy canes. But it was a product still in the works that truly intrigued Srikanth and the other investors. The couple was developing a vegetarian marshmallow, made not with gelatin but seaweed extract and soy proteins. “Given the variety of ways marshmallows are used, from chocolates to ice creams, their vegetarian offering made Kandee an investible proposition,” says Srikanth. 

There was one hitch, though. Kandee Factory was a proprietorship, and Keiretsu invested only in private limited companies. But since Anusha and Mahesh needed funds immediately, the investors handed out a ₹25-lakh soft loan and set them on their journey. 

Switching lanes

One would expect a couple in financial services — Mahesh was with an insurance company while Anusha worked with ICICI Bank and, later, Spark Capital — to venture into an allied area. So, why candy, instead?

Mahesh says there were a few ‘light bulb’ moments. One was on a trip to Europe, where he saw the popularity of candy, gummies, marshmallows. Another was on a trip to Goa, where his young son demanded buying him an enormous lollipop from a store. An imported product, its price was highly marked up. “It was in all kinds of colours; I didn’t know how safe or food-grade the lollipop was. It had a green-dot marking, but I was sure it contained beef-based gelatin,” he recalls. 

Mahesh was familiar with business as his dad ran a signboard company. In his late teens, he tried his hand at various businesses before getting into financial services. Quitting his job in 2013, he took a serious plunge into candy making by enrolling in a sugar confectionery course, while Anusha held on to her job. 

Confectionery is an estimated ₹40,000-crore a year business. However, the market is fragmented, with only 20 per cent in the organised sector. While Kandee competes with small and big players, its ready-to-eat vegetarian marshmallows command a white space as nobody else makes it.

Early struggles

The couple’s home kitchen became Mahesh’s laboratory while he experimented with recipes. “I would come home from office and find the kitchen in such a mess,” recalls Anusha, laughing. Mahesh requested vendors to develop machinery for a small-scale business, as existing ones were designed for large-scale units. Kandee’s first product was candy cane, which was displayed at a mall and sold quite well, Anusha recalls. The repeat order saw them making candy canes well until 3 am! 

Converting a bedroom into a production unit and hiring a couple of people, they expanded their product portfolio. They supplied candy and lollipops to local chains like Nuts & Spices; the first big deal involved supply to Nature’s Basket. As demand grew, Mahesh took up a small space for manufacturing. “But it was still bootstrapped on borrowed money and a big expansion was beyond my capacity. I was advised that it was an investible business, but I needed to make a mental shift to bring in investors. I took a year to learn how to even make a pitch deck,” he recalls. Then the Keiretsu Forum happened. 

Today, the Dharams are in a happier space. Over a four-year period, a bunch of investors — Keiretsu Forum, ah!Ventures, Polaris family office, Nice Angel Network, and Aprameya Radhakrishnan’s family office — have put in around ₹4 crore. 

Now way bigger, Kandee Factory is looking for institutional investors to raise around ₹8.5 crore for marketing, branding, and hiring more people. It can scale up from 150-200 kg of products a day to 500 kg. “The biggest challenge for Kandee now is having enough working capital to grow, though it’s a good problem to have,” Keiretsu’s Srikanth quips. 

Pushing their products on social media and other online marketplaces, the Dharams make over 150 stock keeping units, or SKUs, in five broad categories: lollipops, marshmallows, gummies, choco-mallows and hard candy. Its brands such as Oriley candy, Ville Nour choco-mallows, Marshmelts, Toon Pops et al are available in big chains such as Reliance Retail, Spar Hypermart, Nature’s Basket, Ikea food counters. Walmart appears interested, too. At Reliance Retail outlets in Chennai, Kandee is putting up an ‘experience centre’ where kids can experiment with candy making. “What impressed us is how quickly they learnt the ropes and came up with great packaging and messaging,” says Srikanth. 

The Dharams say Kandee Factory has certifications from FDA, FSSAI and more. They wrapped up FY23-24 with revenues of ₹2.2 crore and expect double the following year. The quarter gone by was its first profitable one as investments were heavy so far. Meanwhile, the Odisha government has invited Kandee to put up a factory in that State. Cliched though it may sound, this success is indeed sweet all the way.