Cult Fit Business Model: How Does Cult Fit Earn Profit?

Cult Fit, launched in 2016 by Mukesh Bansal and Ankit Nagori, has emerged as one of India’s leading health and wellness brands. Its innovative approach to fitness, combining offline and online experiences, has helped it grow despite several challenges, including the COVID-19 pandemic. Here’s an analysis of Cult Fit’s business model and how the company generates revenue.

Cult Fit Business Model: A Hybrid Approach

Cult Fit’s business model revolves around providing fitness solutions through both offline centers (gyms and studios) and online platforms. Initially, it focused on physical fitness classes in their studios, offering various workout formats such as Zumba, yoga, strength training, and boxing. With the rise of digital services, especially during the pandemic, Cult Fit transitioned to online workout classes through its app, where users can access fitness content from home.

To enhance its offerings, Cult Fit also introduced mental wellness programs under Mind.fit and healthcare services via Care.fit. Additionally, it ventured into the food industry with Eat.fit, a healthy meal delivery service. By offering these complementary services, Cult Fit aims to create a holistic health ecosystem for its users.

Cult Fit Revenue Streams

1. Subscription-based Fitness Services: Cult Fit’s primary revenue comes from its fitness services, contributing around 62.4% of its earnings. Users subscribe to various fitness plans, which include access to workouts at Cult Fit centers or online classes. The subscription packages are available in monthly, quarterly, and annual options, offering flexibility to the users. Moreover, the company provides a free trial period for new users, encouraging more people to join and then convert into paid customers.

2. Eat.fit: About 34.5% of Cult Fit’s revenue comes from Eat.fit, its healthy food delivery service. By acquiring Kristy’s Kitchen, Cult Fit ensured a streamlined meal delivery service focused on nutrition and wellness. The subscription-based food service offers meal plans tailored to individuals’ fitness goals and dietary preferences.

3. Mind.fit: This yoga and mental wellness program contributes a smaller portion to the revenue, but it plays a significant role in the company’s holistic approach to health. The company acquired ‘1000yoga’ in 2017 and rebranded it under Mind.fit, focusing on meditation and mindfulness sessions.

4. Care.fit: Cult Fit entered the healthcare domain by launching clinics in Bangalore in 2018. This allows users to book doctor appointments and access preventive healthcare services. While it currently contributes less than 5% to the overall revenue, it represents an important aspect of the brand’s long-term growth strategy.

5. Merchandising (Cult Sport): To further boost revenues, Cult Fit has a direct-to-consumer arm called Cult Sport, which sells fitness apparel, equipment, and accessories. As this business grows, it is expected to contribute significantly to the company’s overall earnings in the future.

6. Live and On-Demand Fitness Classes: During the pandemic, Cult Fit swiftly shifted to online live classes. Initially free, these classes were monetized by mid-2020, adding another revenue stream. The online sessions include workout programs, mental health sessions, and personalized guidance through its app, keeping users engaged at home.

Marketing and Growth Strategy

Cult Fit has invested heavily in influencer marketing, partnering with celebrities like Mandira Bedi, Yasmin Karachiwala, and Jonty Rhodes to promote its fitness culture. These partnerships help the brand gain credibility and attract a large user base. The company also leverages social media and referral programs, creating an active community of fitness enthusiasts who share their progress and motivate others.

Additionally, Cult Fit has expanded through franchising, particularly to tap into Tier 2 and Tier 3 cities. This move allows them to scale their physical presence without significant capital expenditure.

Cost Structure and Profitability Challenges

Despite its growing revenue, Cult Fit has faced challenges in turning a profit. In FY23, the company reported losses of Rs 551 crore, down from Rs 688 crore in FY22. The losses were attributed to high operational costs, especially salaries for fitness trainers and food delivery staff, as well as substantial advertising and promotion expenses.

However, the company has made strides in reducing its losses. Its EBITDA margin improved from -127% in FY22 to -18% in FY23, indicating better cost management. Moreover, its Return on Capital Employed (ROCE) improved slightly, reflecting some operational efficiency gains. Cult Fit’s ability to decrease its operational costs per unit while increasing revenue will be crucial in its path toward profitability.

Future Outlook

Cult Fit is positioning itself for future growth by planning to go public within the next few years. Its strategy of expanding into new cities, franchising, and offering diverse health services positions it well for long-term success. The company’s focus on a hybrid model of online and offline fitness solutions, combined with healthy food delivery and mental wellness programs, creates a comprehensive health ecosystem for its customers.

In conclusion, while Cult Fit has yet to achieve profitability, its revenue streams from subscriptions, food services, and health solutions continue to grow. By refining its cost structure and leveraging its extensive fitness ecosystem, the company is on the path to becoming a dominant player in India’s health and wellness market