Deal focus: GudangAda fills FMCG distribution void

Ensuring timely delivery of goods to far-flung locations has always been a challenge in Indonesia, with more than 600 towns spread across nearly 18,000 islands. 

Fast-moving consumer goods (FMCG) manufacturers initially tried setting up their own distribution networks. Over time, a network of nearly 20,000 wholesalers emerged, reaching down to small neighbourhood shops. However, competition from e-commerce, rising purchasing costs, and difficulties retaining personnel have hurt this offline network in recent years.

Recognizing the need for a more efficient solution, Stevensang, formerly head of sales and distribution at FMCG player Orang Tua Group, launched GudangAda last year. It was initially a website through which the top dozen wholesalers could transact with smaller peers.

The B2B marketplace has grown exponentially and now counts more than 15,000 wholesalers as users. As of the end of last year, it had facilitated over $1 billion in cumulative transaction value, taking a fee from the seller for each deal. The seller is responsible for delivery. Buyers tend to purchase goods locally, anyway, so this is no great burden.

“I had been thinking about this business model since 2015,” says Stevensang. “Over 25 years, I built very good relationships with large wholesalers – I used to travel three days every week to meet them. I convinced them that GudangAda was built for them.”

Last week, Sequoia Capital India and Alpha JWC Ventures led a $25.4 million Series A round for the 16-month-old start-up. The plan now is to try and go further downstream and connect with up to 10% of the one million small-scale retailers that sell goods to the final customer.

Given the curbs on intra-city travel as part of government-imposed restrictions to halt the spread of COVID-19, GudangAda has seen activity slow down lately. The company responded by building small logistics networks in select cities in order to meet demand. However, the long-term goal remains digitizing Indonesia’s FMCG distribution network, which has for many years relied on phone calls and verbal agreements.

In time, improved supply chain data analytics across various types of goods should help sellers and buyers alike. Operating with limited working capital, buyers – small neighborhood shops and local wholesalers – currently make repeat orders of the same goods. Stevensang notes that significant inefficiencies still need to be solved.

“FMCG distribution involves bulky products so there are high delivery costs. None of our wholesale users could have created marketplaces on their own so GudangAda, as an independent body, was very much needed,” he says.

Not only will sellers be able to stock appropriate volumes of inventory, the hope is that the transactional activity can eventually lead to better financing solutions too. “Because we provide the platform, we see what small shops buy,” Stevensang adds. “We want to teach them how to manage their working capital better and maybe also source financial services and other things.”

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• Topics
• Southeast Asia
• Technology
• Early-stage
• Indonesia
• Alpha JWC Ventures
• Sequoia Capital