Mumbai-based VS Logistics brings FMCG brands closer to consumerAthira Nair
When Mihir Mehta started VS Logistics in 2006, the industry was an upcoming one, and the Thane-based company had no ambition for scaling for the first five years.
In his own words, Mihir was ‘reborn’ as an entrepreneur after the birth of his son in 2011, which gave him a purpose in life. “We became parents when we were both 39, which is not the normal parenting age. The first thing I did was close my textile business and divert funds from there into VS Logistics. Around Diwali 2012, VS Logistics was reborn as I decided to focus full-time on it.”
An MBA graduate, Mihir has earlier worked as a merchandiser with a garment export company before starting a textile trading business in 1996. Mihir considers VS Logistics’ 50 percent annual growth in the past three years his finest success — a turnover of Rs 13.5 crore in 2013–14 has more than doubled to Rs 28 crore in 2016–17.
“Profits are always the very basis of any business decisions we make. Since day one we have been making profits, and now we aim to increase our profitability year on year,” he says. In 2017–18, they intend on touching 100 percent growth rate.
Inspiration and strategising
On his frequent travels abroad, Mihir was inspired by the likes of Walmart and Tesco. He recollects why he started VS Logistics: “In India, the FMCG distribution business is highly disorganised. If the distribution is done in an organised manner, it will resolve many supply chain solutions, leading to fewer damages, the creation of more value to partners, and providing necessary sales data for partner brands to forecast their productions.”
The growth of India’s FMCG purchased through modern trade is surpassing the growth of FMCG purchased in general trade, according to a recent IBEF report. In 2015, the market size of the organised FMCG sector was nine percent of the overall organised retail market and is expected to reach 30 percent by 2020.
Mihir’s textile business was located in Bhiwandi, Thane, which many consider out of the way but Mihir found certain advantages for the region - Bhiwandi is the logistics hub for most companies as Mumbai used to have Octroi charges on goods entering the city. Mihir handpicked the entire team to include experienced industry professionals.
“We had the advantages of an existing location which was ripe for FMCG business. Initially, we were only catering to the local Bhiwandi and Thane markets. Today we cover the entire Greater Mumbai territory of 120 km,” he says, claiming that this has resulted in high business growth with improved service levels for brands. “It saves them lot of time and effort to get the sales data from a single source,” Mihir adds.
Getting with the times
As its USP is providing complete umbrella solutions for brands — as super stockists, modern trade distributors, and as e-commerce seller on multiple platforms in FMCG — VS Logistics doesn’t have many competitors. The company presently works with over 100 brands including Patanjali, Heinz, Hershey’s, and Pedigree.
VS Logistics claims to be the only company that provides third-party logistics support, B2B distribution, and B2C sales within the same organisation. Mihir says they have the highest fill rates in FMCG in the Mumbai market. (Fill rate is the percentage of the value of goods delivered against the purchase order amount. For example, if the order is for Rs 1 lakh and goods delivered are of only Rs 80,000 then the fill rate is 80 percent.)
Today, their clients include Big Bazaar, Dmart, Reliance Retail, Tata-Tesco Star Bazaar, Godrej Nature’s Basket, Big Basket, Snapdeal, Flipkart, Shopclues, Amazon, and Paytm.
Revenue comes to VS Logistics in multiple ways — as CNF (cost and freight), as super stockists, and as modern trade distributors. In e-commerce too they make decent margins. “Due to the multiple revenue streams, we have managed to get EBIDTA of 5.75 percent on business, which is a great return on investments in the FMCG distribution business,” says Mihir.
Present to future: making a difference
VS Logistics is now increasing its team size and shifting to a 55,000 sqft warehouse. Mihir claims that they are the largest FMCG sellers on Paytm, Flipkart, Snapdeal, and Shopclues. “We have just started selling on Amazon and have already seen a growth of 50 percent month on month in the last three months,” he adds.
Tying up with a third-party logistics partner, VS Logistics is now starting distribution centres in eight cities. Those in Delhi, Gurgaon, Kolkata, and Chennai will start operations in a month and those in Bengaluru, Hyderabad, Pune, and Ahmedabad by the end of November.
Mihir adds, “We shall also have improved profits as now we can get input value of GST which will be charged by our service providers, thereby reducing our liability of the GST payable.” VS Logistics is targeting a turnover of Rs 60 crore in 2017–18. “We have been successfully maintaining EBIDTA of 5.75 percent and are targeting at least 5.9 percent in this year by deploying technology and optimising inventories holding,” says Mihir.
As per IBEF data, modern retail is expected to reach $180 billion in 2020 from $60 billion in 2015. Traditional retail is expected to grow at 10 percent and modern retail at 20 percent. The overall retail market is expected to grow at 12 percent annually. FMCG will always be huge in a country with a population of 1.3 billion and VS Logistics is out to get a lion’s share of this market.