StartUp Circle: How is AnKa SumMor one of its kind Plug & Play SnD Platform?

In today’s volatile market, e-commerce has become a key driver for F&B brands. When traditional sales and distribution models are proving to be fragile, fragmented yet high on cost, the sustainability of smaller, challenger brands has come into serious question. In such a market, AnKa SumMor has developed a model which helps Challenger Brands widen their scope of reach. It reaches the discerning customer at less than half the cost. Further, it ensures presence at key retail points which otherwise were not possible to achieve. It leads to greater choice for the customer and also proved to be beneficial for brands who are now finding greater uptake in sales and a larger brand footprint.

CIOL talks to the founders of AnKa SumMor.

What is AnKa SumMor about?

Anka SumMor is India’s first and only "plug and play" services platform with a vision to re-engineer FMCG sales and distribution for challenger brands.

AnKa SumMor is an inventory and working capital S&D Model, where ownership of stocks move to AnKa SumMor. We hire all infrastructure for storage and delivery on company roles. Since most of the operating costs are either fix or semi-variable, revenue scale coupled with productivity-enhancing technology brings down the operating cost as a percentage of revenue.

“SumMor Model”

• Single S&D partner for Brands in a city servicing directly all relevant retail channels/outlets.
• Servicing upcountry sub-distributors eliminating the need for CFA
• Direct Supply to AnKa SumMor warehouse resulting in lower logistics costs
• Frontline sales team on AnKa SumMor shared across brands, eliminates the challenge of deploying, managing and retaining team.
• Importantly the quality of the team is at par with that a brand hires.
• Transparent order and sales information at the retail outlet level, lighting up secondary sales.
• Improved order fill rates and lower market expiries in 6 months
• Resulting in revenue doubling in over 9 to 12 months, no trade scheme leakage and a reduction of S&D costs up to 50%.

How did you come up with the idea?

Both Rajiv and I have worked together in developing S&D for FMCG players like Coca-cola and Mother Dairy. For over 20 years, the problem of finding, managing and retaining distributors has been a constant challenge for both of us. Then there's the complexity of deploying and managing a large frontline sales team. In spite of all the effort and investment, the FMCG S&D system was always behind fulfilling brand growth goals.

The existing FMCG S&D system in India is multi-layered and fragmented. Take for instance even big brands like HUL, Amul, Britannia, Nestle and ITC have multiple distributors in any large city. This works for them as they have managed to create demand for their brands resulting in significant revenue for each distributor. But these same brands struggle with their long tail as this S&D system is geared to sell & distribute what sells.

Imagine the plight of the No. 3, 4 or 5 (challenger) FMCG brand in the category. One, the large distributors will not be interested due to lower demand and resulting in lower revenue, lower working capital rotation and importantly higher damage and expiry in the market vis-à-vis the large brands. Two, the small distributor does not make enough margin to support a salesman. This results in the brand having to deploy their own frontline sales teams. Then, it does not have enough infrastructure/working capital to support growth. They need smaller inventory loads which add to the logistics cost. And to top it all, they are always worried about distributor attrition. This results in a disruption in market service. This further weakens demand and possible consumer switch to large brands.

S&D Costs for these challenger FMCG brands is 2 to 3 times of the large brand. This leaves them with very little room to invest in the brand. Further with all these costs the challenger brands did not have any visibility on order & sales from distributor to retail, which results in trade scheme leakages, poor SKU assortment resulting in high damages & expiry. The brand's future was decided by the distributor and frontline salesman, a system that is the creation of large brands.

The biggest moat the large brands created along with exporting their management talent to these challenger brands who know only a fragmented S&D system and “increase distribution reach” a mantra of the large brands, thereby putting more strain on the system. Unfortunately, all experiments in the FMCG S&D system were limited to a Master Distributor and Sub Distributor model. It’s just outsourcing the problem but not solving the problem. Can’t blame the management too as there is no platform in India that solves the real S&D problem.

The answer was to create an S&D platform for multiple challenger brands, thereby solving the S&D challenges of scale, information and intelligence to service demand optimally at a reduced cost. For this, the brands have to realise that their conventional distribution margin is not the benchmark but their overall S&D costs. This platform will significantly reduce S&D cost.

Brands who have been asking these questions and were willing to take a leap of faith came onboard with AnKa SumMor. And they have clearly seen the benefit. The proof of their belief is that 4 brands of the 10 associated at Hyderabad have also moved to our operation at Chennai. They are asking us to start operations in Bangalore and other cities.

Tell us about the journey and the team.

Fireside Ventures incubated and funded AnKa SumMor in April 2018. Our first two clients were from the Fireside portfolio itself. We pivoted to challenger brands within 6 months of our operation as we realised that the true value of our platform was more for challenger brands (No. 3, 4, 5 in an established category). They had consumer traction and needed an efficient and consistent S&D system to service market demand.

Rajiv and I have founded the company together along with the support of mentors from Fireside Ventures. We come with a combined experience of more than 52 years in the S&D operations in FMCG space. Currently, we are a team of 40 people in Hyderabad, Chennai and Bangalore. Our team includes people across functions of Sales, Warehousing, Delivery and Accounts.

We operate out of Hyderabad and Chennai. Also, we look forward to expanding to Bangalore and then to other top 5 metro cities. Further, we have a portfolio of 8 brands, McVities, WaiWai, Wingreens, LuvIt, and Yoga Bar to name a few.

What has been your growth?

We have seen significant revenue growth in 9 to 12 months of inception, transparent order & sales visibility at outlet level, reduced expiry and zero trade scheme leakage for challenger brands at significantly reduced S&D costs.

• FY 18-19 revenue was Rs. 1 Cr.
• FY 19-20 revenue Rs. 10 Cr
• Current annual revenue run rate is Rs. 18 Cr.
• We expect to close FY 20-21 at Rs. 24 Cr.

What problems did you face while helping people transition to this model?

Transition to our model is an informed decision for the brands, so not too many problems. Infact all brands value the data transparency from day 1 which is missing in the traditional structure. What takes time is the alignment of the two teams, which is a given for any new engagement. But we have seen this stabilising in 2 to 3 months.

How are you different from any moral e-commerce company like Grofers, or BigBasket?

We are unique to any other S&D model as we are a Challenger Brand S&D partner in a market. The fundamental difference is that we are not a market place but an S&D partner for Challenger Brands.

We are solving the S&D problems of challenger brands, enabling them to reduce S&D costs, single S&D partner in a market, real-time transparent sales data, growth in revenues to name a few key benefits.

What are the challenges that you have faced while being within the “New Normal”?

Dynamic market condition of streets and outlets closed temporarily or fall under containment zones. The stock supply shortages are the major challenges. However, our teams and brand partners have stepped up their efforts to bridge the gap. Our revenues for April to June have grown by 201% vs months of 2019 and 72% vs pre-covid months. It is a reflection on the strength of our model. Importantly the market demand for our partner brands which they were unable to capture due to a fragmented S&D structure.

How scalable is your solution? And what are your post-covid plans?

Our Model is extremely scalable as we believe we can effectively partner 15 to 20 brands in the F & B category itself, similar to the number of brands in the Personal and Home Care category in one market. We are operational in 2 cities of Hyderabad and Chennai. Further, we will expand operations to all Metro and Tier 1 cities in 5 to 7 years servicing directly 1lakh outlets.

We are in the process of raising funds for expanding capacity in Hyderabad & Chennai and launch operations in Bangalore in FY 20-21.

Funding details:

We invested over Rs. 20 Lakhs and our time & experience in building this business from scratch. We further raised Rs. 6 Cr. as seed round from Fireside Ventures to build the business model.

We intend to raise Rs. 10 crore during this year to fund our expansion to Bangalore in Feb/Mar 2021. We'll also increase infrastructure at Hyderabad and Chennai. The goal to service 15,000 relevant outlets in these 3 cities exit March 2022. Deliver a profitable Rs 100 Cr revenue in FY 22-23. Subsequently, raise Rs. 100 crores to expand to the other Metros and Tier 1 cities in India. Also, we want the distribution to reach 100,000 relevant outlets. We aim to become a pan India operation in FY 25 with a top line of Rs. 600 Crores.