RP-Sanjiv Goenka's Too Yumm! adopts unconventional distribution channel

If you are operating in a category in which impulse buying accounts for nearly 70 per cent of all purchases, would you bank on the online channel, where the potential consumer will have to first find a connected device to locate your product and place an order, and then wait for several hours at the least for the product to be delivered at the appointed place? Off the wall, isn’t it? But that is precisely what Guiltfree Industries’ snackfood brand Too Yumm! has done with great success. 

Within a year of launch, Too Yumm! achieved sales of Rs 200 crore, growing at 15-20 per cent month on month — one of the fastest in the country to do so. It closed the financial year 2018-19 at Rs 358.5 crore. 

In the past one year, Too Yumm!, from the RP-Sanjiv Goenka group’s (RPSG’s) FMCG arm, has increased the contribution of ecommerce to its sales by over three times. The company feels this diversification in its sales strategy has helped it overcome the challenges of distribution any new brand serving low price points faces if it tries to make its way through the conventional channels. Suhail Sameer, CEO of RPSG’s FMCG business, says the contribution of digital channels in the mix has increased from 6-7 per cent in its first year to nearly 20 per cent in the second of its two-year existence.

In the past six months or so the company has aggressively pushed more of its products on platforms like Bigbasket and Grofers on the one hand, and signed partnerships with distribution partners like business-to-business platform Udaan and StoreKing, a technology-enabled platform aimed specifically at  rural markets. 

Discussing the shortcomings of the conventional channel, Sameer says: “Typically, direct distribution comes with a lot of costs. A distributor, even if serving only a few thousand stores, will need delivery vehicles and salespersons. So even if the general trade distribution margin structure looks affordable, brands end up paying a lot more so that your distributors make money.”

He adds that the smaller a city, the more challenges that come, especially for a new brand. “The population and affordability is low. So general trade does not make sense unless the brand is evolved enough and the brand is a part of a daily habit.”

Even though the urgency was sensed in the first year itself, the dilemma for Too Yumm! was which channel to choose and how to go about it.  

Conventional wisdom indicated ecommerce will not work — data showed the channel contributed only 0.2 per cent of the overall sales in the category. “But the evolution is happening from both sides, more and more consumers are going online and the online models are also evolving. What Bigbasket and Grofers in their revised avatars are doing is very different than what an Amazon does. And their model works really well for many brands. For e.g., your snacks are delivered within two hours under express delivery.” 

The tie-ups with Udaan, StoreKing and TFS all happened in the last one month. Before that came a tie-up with Barista, with INOX three months back and Spicejet around the same time. The sales volumes on Grofers has gone up four times in the last six months, claims Sameer. “In the future and in select cities, they might even take up my distribution needs. That is good because essentially, we are in the business of building brands and delivering great products. Distribution is just a means to an end. In some centres which have a population of around 100,000 or so, I would not like to spend my energy on distribution. 

These are centres where Bigbasket and Grofers may not be present but Udaan or StoreKing come to the service the needs.”

Vending machines are another channel through which the company is looking to push its products — they are often located in housing societies and in offices where Too Yumm!’s target group is present. 

Easing distribution aside, the data-driven approach of the digital channel has also ensured that the trends and buying patterns are easier to understand. This also allows the company to conduct trials more efficiently. For example, if a Grofers consumer bought articles worth Rs 500, including one pack of a Too Yumm! snack, the company will offer a free pack of another variant. Sameer adds the product will be given free only once to the same customer -- data is available to ensure one is not wasting trial money on the same consumer. The company currently has five products and 20-odd SKUs.

Another lesson that the company learnt while trying to expand the digital footprint is that whenever there is a slowdown, a large company — like HUL and ITC that sell 30-40 or more products — is able to hold on to its distribution because the relationship with the end seller is really deep and is across a series of products. So whenever a retailer is trying to cut corners with dipping sales, it is mostly a new brand that is ticked off the list, he adds.

RPSG has an ambitious target of clocking Rs 10,000 crore in revenue by 2025. The company is eyeing newer categories already. “In the snacks category, Too Yumm!'s better-for-you pitch translates to baked not fried and in some other category, it might be something else. So part of the thinking will be how do we expand Too Yumm! Whether we keep it to snacks or whether we take it to other categories will tell us how much will Too Yumm! contribute in the Rs 10,000-crore FMCG aspirations of our group. We are clear that we will have to enter a few more categories to meet our aspirations — which categories, and when, needs to be decided over the next few months.”

On the reoriented strategy, Third Eyesight founder Devangshu Dutta says that there will always be the risk of other takers coming  to fill up the shelf space a company concedes. “However, the optimisation of the online channel ensures that the shelf space there remains practically unlimited.”