Packworks, a Philippines-based B2B platform for community-based micro-retailers backed by CVC Capital Partners, may consider raising USD 5m to USD 10m after 12 months to finance its overseas expansion, co-founder Ibba Bernardo said.

Ideal investors will be those who can help the company enter new markets in Southeast Asia, Africa, and Latin America, Bernardo said. Packworks will only venture into markets behind the Philippines in terms of fast-moving consumer goods (FMCG) infrastructure distribution maturity, since that is where it can add the most value for its customers.

These markets also have a huge number of micro-retailers, but are suffering from different sets of challenges. For example, Packworks can focus on distribution efficiencies in Kenya since it already has an advanced payment infrastructure, and rural distribution in Cambodia since it has quite a number of convenience stores serving tourists in urban centers, while catering more to distributors instead of brands in Vietnam, he said.

Packworks has been invited by some of its brand partners to replicate its business model in other countries and its asset-light model allows the company to set up and localise the technology in any market, the co-founder said.

In July, Packworks raised USD 2m in a seed funding round led by logistics group Fast Group and private equity firm CVC, with participation from ADB Ventures Arise Techstars and IdeaSpace Foundation. It has actively looked for a balanced set of investors with CVC pushing the company to create value, ADB Ventures encouraging the company to make an impact beyond profits and Fast Logistics providing valuable knowledge on the distribution landscape, he said.

Packworks aims to amplify the 1.3m sari-sari stores, or mom-and-pop shops in the Philippines that are often run on pen and paper. Every Filipino is a kilometer away from these neighborhood stores and their importance was further highlighted during the pandemic when they became the main source of daily necessities in the community, Bernardo said.

Packworks offers full enterprise resource planning system for managing inventory, bookkeeping, and data collection. Stores can also avail of financial products and order supplies for a cheaper price without the hassle of coordinating and purchasing new stocks. Brands, on the other hand, can gain access to data that cover thousands

of stock-keeping units (SKU) to help them triangulate promos and understand the market, he said. Stores in its network have increased sales by up to 50%, Bernardo said, citing a third-party study.

Packworks has transitioned from a software model with a fixed fee to a variable fee model. Its closest peer is Bukalapak, which has also recently pivoted its business model to become an asset-light platform that captures the entire ecosystem, he said.

Packworks has an asset-light model because building warehouses, employing thousands of people, and holding inventory can be very difficult and risky. It has a plug-and-play, open-platform approach that empowers all the layers within the sari-sari store ecosystem and enables them to partner with all the players in the value chain, Bernardo said.

To further add value to the sari-sari stores, it hopes to leverage its data to offer more products and services focused on precision marketing and embedded finance. It operates as a financial technology platform by being an enabler instead of an originator, so it wants to have multiple partners that provide these financial products, the co- founder said.

Founded in 2018, Packworks started out as a solution for multinational companies in the Philippines to connect with neighborhood stores. By 2021, it has reached 130,000 stores with a gross merchandise value of USD 139m. It is targeting to have 220,000 stores by the end of 2022 and 500,000 by the end of 2023.

Another startup catering to sari-sari stores is GrowSari, which raised USD 77.5m in its Series C round from investors including International Finance Corp (IFC), KKR [NYSE:KKR] and Pavilion Capital, in March.

by Krista Montealegre in Manila