Summarize the text below into a concise overview, highlighting the key insights and most imporatnt facts in a bullet-point list. Ensure the summary captures the essence and main points of the text. GrowSari (A): Design for the Last Mile Customer
Reymund (ER) Rollan and Shivapratim (Shiv) Choudhury, founders of the digital technology
platform GrowSari, were at a crossroads. The feedback from their initial product roll-out were not what
they had expected, and they needed to decide how to proceed. The pair, alongside co-founders Andrzej
Ogonowski and Siddhartha Kongara, had started GrowSari after they had each spent significant time
working at the intersection of technology and Fast-Moving Consumer Goods (FMCG). They were
trying to bring data and technology to inform how multinational consumer goods companies sold their
products through small, informal retailers known as “sari-sari” stores in the Philippines. These stores,
whose name means “variety” or “everything” in Filipino, were a typical convenience store or bodega,
selling consumer products from sachets of shampoo to cans of baked beans and potato chips and soda.
(Exhibit 1).
Having spent several years working together at P&G and then BCG, they believed that the key to
winning in this sari-sari channel was to use technology to shed light on this ‘data-dark’ environment.
Most FMCG manufacturers had no visibility on product flows from these stores and that held them
back from generating real-time insights on consumer demand and inventory analytics. Rollan and
Ogonowski had quit their jobs at Unilever in 2016 to launch GrowSari. With Kongara’s technology
team in India doing agile product development, GrowSari had piloted a low-cost Point-of-Sale (POS)
that would allow 200 sari-sari store owners on Luzon Island to scan their products as they sold them.
The low-cost, mobile-based POS app had a point-and-click functionality to capture sales and
inventory data in real time which could bring data transparency to FMCG manufacturers, who were
willing to pay for this data. In reviewing the first month’s data, Rollan and Choudhury were in a
quandary. The supplier side of the pilot was very successful: FMCG companies loved the data’s realtime granularity and the visibility it offered into competitors’ actions. But, the sari-sari store owners
had a mixed reaction, with many willing to adopt the technology, but few using it repeatedly.
“Do you think we should do a second pilot where we spend a lot more time on consultative selling?”
Choudhury asked. “With more training and better incentives, repeat usage should pick up as they see
the value that this brings to them.” Rollan agreed that was an option, but he wasn’t convinced. “I don’t
know Shiv. While the FMCG companies loved it, most of the sari-sari stores just ignored it after a week.
Maybe we should go back to the drawing board.” Neither felt like a compelling option, but they knew
that they would have to do something differently based on what the data told them.
Professor Brian Trelstad, Cam Carag (MBA 2022), and Michi Ferreol (MBA 2021) prepared this case. It was reviewed and approved before
publication by a company designate. Funding for the development of this case was provided by Harvard Business School and not by the company.
HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or
illustrations of effective or ineffective management.
Copyright © 2022 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
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2
The Philippine Economy
The Philippines is an archipelagic nation of over 7,000 islands. The largest island is Luzon, where
the capital city, Manila, is located. The country was colonized by Spain from 1521 to 1898 and then
became an American colony from 1898 to 1946; some Filipinos describe their history as “300 years
convent, 50 years Hollywood.” Upon taking over in 1902, the US government promised the Philippines
greater autonomy and full independence within ten years. The American influence resulted in several
national structures that exist in the Philippines today, most notably a free and universal system of
public education, the rule of law, and a court system.
Amongst its ASEAN neighbors, the Philippines stood out for being an exporter of services rather
than manufactured goods. The share of services in GDP had exceeded the industry sector since the
mid-1980’s.1 Despite this, almost 60% of the labor force was still in the agricultural sector, with a robust
manufacturing and mining sector as well. More recently, the business process outsourcing (BPO)
industry transformed the country. By 2016, the industry employed 1.2 million people and accounted
for about 8% of the country’s GDP. It had overtaken India in call centers, even though India’s
population was 12 times larger.2
In the 1950s, per capita income in the Philippines was one of the fastest growing in Southeast Asia,
second only to Japan. Yet in the 1980s, growth stagnated under the corrupt dictatorship of Ferdinand
Marcos. While its neighbors prospered as the “Asian tigers”, the Philippines was branded as the “sick
man of Asia.”3 The effects of this persisted such that, in 2009, just over 23 million Filipinos (or 26.5% of
the population) survived on PhP 54.20 (US$1.25) a day or less. (Exhibit 2).
The economic situation began to improve only under the leadership of Benigno Aquino III, more
fondly known as “Noynoy”, who was voted into office on a platform of anti-corruption in 2010. The
Aquino administration and a package of Daang Matuwid (“Straight Path”) reforms enabled the
country to improve its international credit ratings, develop a stronger reputation as anti-corruption,
and helped raise economic growth rates. Since 2012, the Philippine economy has re-emerged, enjoying
the highest growth rate in East Asia of 6.8%, bolstered by high consumption levels, one of the youngest
populations in the region, a growing middle class, a flourishing BPO industry, and a constant stream
of remittances from overseas workers. (Exhibit 3)
The Philippines was an attractive market to FMCG companies due to its growing middle-class
consumer base. Household spending had been above 70% of GDP since 1984, driven by the remittances
from Overseas Filipino Workers (OFWs), which went into basic expenses and consumer goods.4 In
addition, average wage growth in 2015 was 5.5%, with the Asian Development Bank (ADB) predicting
that the nation would have a per capita income of at least USD 4,126 by the end of the decade.5
Yet, despite these macroeconomic gains, economic inequality and poverty persisted within the
country. With a Gini coefficient of 0.44, the Philippines ranked among the highest in income inequality
relative to the rest of Asia. In 2016, 90% of Filipinos were classified as lower or working class, of which
27.9% lived below the poverty line.6 In the meantime, the collective fortunes of the country’s 50 richest
people in 2014 accounted for 25.7% of the country’s full-year GDP. Nevertheless, household spending
had been above 70% of GDP since 1984, driven by the remittances which went into basic expenses and
consumer goods.7GrowSari (A): Design for the Last Mile Customer 322-036
3
The Rise of the Sari-Sari’s
As the Philippines re-emerged in the global economy, micro, small and medium enterprises
(MSMEs) remained the lifeblood of the local economy. Virtually all of the businesses in the Philippines
were classified as MSMEs (99%), with 70% of business transactions occurring through these enterprises.
MSMEs additionally employed 65% of the workforce, equating to around 5.7M jobs.8
Among these MSMEs, sari-sari and similar stores provided an income stream for more than two
million microentrepreneurs and their families, and sari-saris by themselves contributed 13% to the
Philippines’ GDP and served over 80% of the population. Additionally, they had become a cultural
icon in every Filipino community, with their eye-catching storefronts often integrated into people’s
homes and sometimes acting as a gathering place for community members. Estimates claimed there
were around 1.2 million sari-sari stores in the Philippines. The estimate of sales through this channel
varied widely, with the estimates ranging from US$27 billion to US$65 billion in sales in 2016 (Exhibit
4).9,10 In addition to the sari-sari stores, there were two million other kiosks and informal distribution
points in the Philippines, from the Carinderias (food stalls) and wet markets to street vendors, where
similar distribution issues existed.
Sari-sari stores primarily served the Bottom of the Pyramid, with several of them scattered
throughout the villages or city slums where low-income families live. Japanese sociologist Toyoko
Funahashi described sari-sari stores as a staple for the Philippine economy, citing their ubiquity, the
degree to which they provide critical goods to consumers, and their relative permanence (largely due
to government investment and protection), as reasons for their staying power.11 Also for these reasons,
Funahashi explained that if FMCG were to profit from the BOP, “they must ensure that they have
effective means for product distribution and conditions for payment” for which sari-sari stores could
be extremely useful.12
However, despite their massive role in the consumer goods ecosystem, the distribution channel to
sari-sari stores was more of a pull than a push. For example, for a typical sari-sari store owner in Taytay,
Rizal, the purchasing process was tiresome and tedious. About three times a week, they would close
down their small store and take a 30-minute tricycle ride to a wholesaler in Pasig City (Exhibit 5),
spending PHP 40 (~80 cents) on the ride each way. At the wholesaler, they tried to bargain for the same
product prices as those given to retail chain stores, but sellers refused to take them seriously due to
their small basket size. At the end of the day, these storeowners not only had to spend extra money on
transportation and pay higher prices for goods, they also lost half a day in sales per week because of
having to close their stores.
Consequently, individual sari-sari stores only made an average of 20,000 PHP (US$410) in monthly
sales and an average gross profit of 4,000 PHP (US$80). After accounting for transportation costs to and
from the wholesalers, net profit wound up closer to 3,040 PHP (US$62) per month per store. With a
minimum daily wage ranging from 316 PHP (US$ 6.57) to 537 PHP (US$11.17), sari-sari store owners
earned some of the lowest wage rates in the country. Additionally, there was the personal and social
cost of the primary caregiver having to leave young children at home when she would prefer to be
home tending to their needs.
From the perspective of product (e.g. FMCGs like Unilever and P&G) and service companies (e.g.
Globe Telecom), there was a clear business reason for tapping into the customer segments served by
sari-sari stores, but the challenge to manage this channel was steep. According to Martin Basaca,
Channel Strategy Manager of Universal Robina Corporation (URC), one of the biggest consumer goods
companies in the Philippines: “Sari-sari stores are the bread and butter of middle to lower class income
families in the Philippines. It’s an important channel for us, but we have still only been able to tap into322-036 GrowSari (A): Design for the Last Mile Customer
4
300,000 out of one million of them. It is costly for us to serve them.” Basaca shared several of URC’s
costly efforts at engaging this channel, such as buying new trucks to service them when distributors
cannot, incentives for salespeople to promote new products to the store owners, and bundled “reseller
packages” at retail stores. Despite this, they could only ‘sell’ into 30% of the stores, and yet have
minimal visibility of what was going on in the stores.
At the same time, given the slowing of growth in other channels and increasing competition,
penetrating this part of the market was essential for these companies in the Philippines. Yet, no effective
method had been developed to leverage the sari-sari store channel due to the unfavorable economics.
The average distributor shied away from the distribution channel which often had as many as seven
layers of distribution between manufacturers and the sari-sari stores.
University of Michigan Ross School of Business Professor CK Prahalad (HBS ‘75) wrote about this
dilemma in The Fortune at the Bottom of the Pyramid. According to Prahalad, the conventional wisdom
in profiting from the bottom of the pyramid lay in a “low price, low margin, high volume” model.13
However, according to Prahalad, to do this effectively, companies would somehow need to obtain a
30% penetration rate within this target market, which was practically impossible given steep
operational expenses such as distribution and customer acquisition costs. Instead, Prahalad argued that
companies should focus on raising gross margins for this segment by pushing down variable costs and
boosting the price that consumers are willing to pay for a product. Only then could companies hope to
successfully profit from customers at the bottom of the pyramid. Prahalad’s research profiled a number
of multinational corporations’ efforts to reach these harder to serve markets, including Hindustan
Lever Limited’s (HLL) work at selling small sachets of soap in India.14
Founding GrowSari
Growing up in a densely packed locality of Manila, Philippines, Reymund “ER” Rollan saw sarisari stores all over his neighborhood. The bright and colorful storefronts of the sari-sari stores drew
attention in many drab residential and industrial neighborhoods. In 2002, Rollan went to college at the
University of the Philippines, then subsequently spent over a decade in the consumer products sector.
Through these experiences of working directly in Southeast Asia’s consumer goods industry, Rollan
witnessed how underserved these sari-sari stores were. Due to their small basket size, these stores were
often ignored by large FMCG companies in favor of bigger wholesalers, relegating them to
uncompetitive wholesale prices and zero logistical support. As a result, sari-sari store owners, often
low-income women with no other source of income, suffered from razor thin margins and poor service.
It was the same opportunity that Rollan first confronted in 2006, when he was working at P&G as
part of the Consumer & Market Knowledge team for Fabric Care. There, he experienced firsthand the
inescapable need to serve the mass market alongside the limitations of working with the sari-sari store
channel, especially around sourcing accurate and real-time data: “I was assigned to the laundry
business at Procter, where 80% of the category is sold through sari-sari stores. I was in the consumer
insights division, so I would work with a lot of panel data. That was my first job: reporting market
share and understanding performance trends. The companies really didn’t have a true read of what
was happening, especially six or seven layers down the value chain.”
In 2013, Choudhury, an ex-colleague from P&G, asked him to join and lead Boston Consulting
Group (BCG)’s Customer Insights Excellence Desk based out of Singapore. Choudhury was born and
raised across 12 different cities in India, and had grown up experiencing a similar ‘Kirana’ store
distribution structure there, particularly since his father ran a food distribution business. Out of college,
Choudhury joined P&G in Singapore and subsequently moved to BCG as the regional lead partner forGrowSari (A): Design for the Last Mile Customer 322-036
5
the consumer practice area where he developed a birds-eye view of the FMCG and retail value chains.
He was acutely aware that the economics of serving small stores was challenged and there were no
easy ways to get visibility into this channel. Choudhury recalled:
Sari-sari stores moved billions of dollars of consumer goods annually. There were
more than a million of them, but they each sold very little product every week. Over an
entire year, this channel probably sold around $300 million (USD) of products for a single
company, but individually they often sold less than $10 per week. Economically, it didn’t
make sense for companies to serve these customers for that size of order. Our hypothesis
was that data visibility would allow companies to forecast the demand more accurately,
which could enable route optimization and large stores could be visited two to three times
a week, while the others could be managed once a month.
At BCG, Rollan and Choudhury worked together on a series of projects to help companies ‘crack
the code’ on this channel and gain visibility into consumer demand. These included basic mapping and
geo-tagging of these sari-sari stores, and putting sales force incentives in place to visit smaller stores.
Their clients wanted to know answers to basic questions such as how big these stores were, which
categories they sold, and whether their brands were represented there. Companies were willing to pay
millions of dollars and yet they couldn’t be assured of data quality. “We would do an entire census of
these stores in a country like Vietnam, but within six months, the data became unreliable,” Rollan
recalled. He believed that the global market for research and data into these informal channels was at
least $4 billion USD and would generate very high margins.
As they worked on a series of programs for clients, Choudhury asked himself: “Could they use this
data to help improve the income of two million store owners? Was there a two-sided opportunity that
not only served the ‘paying client’ (the FMCGs) but could also help the stores?” One evening over a
beer, Choudhury broached the topic with Rollan and asked him if he was willing to work on a business
plan. As Rollan’s curiosity piqued, Choudhury shared how creating a real-time data-capture solution
would give them visibility and thus control of the network. They ended up talking for hours that
evening and for several evenings thereafter. With the right technology, the two thought this could
become a scalable and profitable business that could have both social and economic impact.
Rollan, who had just gotten married was trying to decide whether he wanted to build a life in
Singapore or return to the Philippines to pursue this new idea. Instead of leaving formal employment,
Rollan accepted a less demanding role at Unilever to provide a stable source of income while enabling
him to take trips to and from the Philippines to work on the business idea. After a year Rollan was
ready to quit Unilever and move back to the Philippines.
At his farewell party from Unilever in Singapore, Rollan shared the idea with a colleague, Andrzej
Ogonowski. Ogonowski, known as ‘Oggy’, hailed from South Africa and had worked with Unilever
for several years in emerging markets and was very familiar with the problem. He had always been
known within his Unilever teams as incredibly passionate about doing what it took to improve
customers’ lives using technology. He was excited by the idea and started discussing it with Rollan
and Choudhury. “I knew right away that this was a big idea and this team was a good fit for me. I’d
been thinking of making a shift to tech in any case, and this could apply across the world, not just the
Philippines.” A few weeks after Rollan left, Ogonowski quit Unilever. Rollan recalled: “We were
surprised at his energy and speed to action, but we were thrilled to have him as a co-founder and head
of platform development.” Choudhury and Ogonowski camped at Rollan’s Manila apartment for
several months as they researched and developed the idea further.322-036 GrowSari (A): Design for the Last Mile Customer
6
To provide manufacturers greater visibility into the sari-sari store channel, GrowSari’s first solution
was to create a mobile point-of-sale system that would allow storeowners to scan their sales and track
their product turnover data. The idea was to give each store a point of sale (POS) device that they could
use to capture information of what they were able to sell on a per ticket basis, in what volumes and at
which times. In exchange, storeowners would be given a loyalty scheme to incentivize using the
scanner, while FMCG companies would mine the collected data. Storeowners could also use the app
to determine when they needed to restock on a specific item. As Ogonowski recalled: “The idea was to
give these stores an app that they could use to scan out, then reward them for the number of scans that
they completed. The idea was to build that habit, monetize it, sell it back to the company, and compete
with data providers like Nielsen and Kantar.”
Launching the mPOS App
Rollan and his co-founders began brainstorming the design of a mobile phone application that
would help them collect the data they were looking for: a simple smartphone based scanning app that
would enable MSMEs to record every transaction that they performed, whether buying or selling
products or services. The app was to be fueled by certain monetary prizes or perks to incentivize usage,
such as a certain PHP amount per scan, competitions, recognition and rewards. They called the app
mPOS, to reference its usage at the point of sale.
To build the product, Choudhury turned to a good friend Siddhartha Kongara. Kongara was a
trained engineer and an Indian Institute of Management alumnus who ran a technology development
company based in Hyderabad, India. Choudhury and Kongara were friends from their time in
Singapore and had collaborated on several projects previously. Rollan, and Ogonowski hit it off with
Kongara as well, as they all shared a common interest in building quickly, testing and then scaling.
Kongara was intrigued by the idea and knowing that the founders were bootstrapping, agreed to
provide development at near-cost. He also operated as the quasi-CTO, given his knowledge of this
sector, as his company had developed go-to-market solutions to companies including FMCGs for over
a decade. Kongara later joined GrowSari as a full-time co-founder, CTO and operations design head.
In the earliest stages of development, Ogonowski used wireframes drawn on tissue paper to guide
the team of developers on what to build (Exhibit 6). Being clear about what they wanted allowed them
to move with speed. At times, Rollan and Choudhury would send over revamped designs and
Kongara’s team would turn them around in two days. They soon had a beta version of an app that they
could give to store owners to use (Exhibit 7). The first fully ready app could take pictures of the
different SKUs at the point-of-sale (POS) and record that a certain number of units had been sold. It
could also take pictures of empty shelves and determine what the store owner needed to restock. This
was matched by a company platform that gave them information on when the store needed inventory,
what was selling poorly and a view into product prices.
Rollan thought that they could help FMCG companies structure their operations more
advantageously if they leveraged analytics at the local level for enhanced route and inventory
optimization as well as more informed trade marketing. For example, companies could use the
scanning data to figure out which stores bought less of their products in a given month compared with
prior months, and they could then pre-target them with promotional campaigns or ads.
To test the usability of the first version of the app with stores, the team launched it for five stores in
the city of Pasig, a municipality in metro Manila. The early results were promising. The first customer
was the owner of a large store who recorded her large volume of transactions and thought the product
was a helpful way to track her inventory. She loved the incentive of PHP 1 per scan which helped herGrowSari (A): Design for the Last Mile Customer 322-036
7
build a ‘savings kitty’ over and above the money she earned from the store. This feedback boosted the
team’s confidence and they expanded to a full-blown pilot, with a rollout to 200 customers across the
Luzon island over four weeks.
While the FMCG companies loved it, the stores shared mixed feedback and there wasn’t enough
repeat usage of the platform despite the incentives. Store owners often forgot to scan the products when
selling or purchasing. When reminded, they would do it, but would lapse again into failing to scan.
Rollan, Ogonowski and Choudhury dove into the data and spent a lot of time talking to the store
owners. Choudhury recalled: “We learned that the stores didn’t want their sales to be known to anyone,
because they don’t necessarily pay taxes or own business permits. So, the thought of someone or
something capturing their sales scared them because they could be reported to the Bureau of Internal
Revenue. And there was no clear benefit for them to do it. We thought loyalty points could help, but
just that wasn’t enough to change their habits.”
The GrowSari team was in a bind, the pilot results surfaced critical customer insights they would
need to address to drive adoption of the POS system. The stores fundamentally cared more about other
things: pricing, the pain of leaving a store to go buy goods, the quality of vendor service and the ability
to learn about and stock new products.
At a Crossroads
While the team had been piloting mPOS app, Rollan and Choudhury had started to socialize the
idea with early-stage venture capital investors. It was at a meeting with Paul Santos, a partner at the
venture capital firm Wavemaker, that Rollan and Choudhury were forced to consider the crossroads
their young company had reached. Santos, a veteran investor, pushed them hard. “You have to decide
which side you are on: solving the data-dark problem for big companies? Or solving the problem of
the sari-sari stores? If it’s the stores you care about, maybe you should ask them what they really want?”
This feedback, accompanied with the mixed reviews from the pilot, forced the founders to ask
themselves which stakeholder they were truly serving. Rollan reflected: “We were getting clearer with
what problem we were trying to solve, but since it was a two-sided platform, who would we serve
first? Are we going to be a company that serves P&G and Unilever? Or are we going to be an enterprise
for the small stores? That was the most important question staring at us.”
On one hand there was a $4 billion market opportunity in the data transparency space, with
customers they knew well who were willing to pay for data and insights. On the other hand, there was
a harder to crack and potentially much larger market in helping the sari-sari store owners. With a
fledgling business and their livelihoods on the line, the team had to take stock and decide. Had they
landed on a workable product that just needed some refinement, or did they need to start over? Which
idea was investible, and which path would lead to more impact?