What does the path to profitability mean for a social commerce company like Super?
That has always meant thinking beyond social commerce and tapping into the advantages of having a 48,000-strong agent network across Indonesia to effectively become the store-less Walmart of Indonesia, offering their own portfolio of products through development and acquisition, while also forming exclusivity deals in high-GMV and high-margin categories.
SuperApp VP of Innovation Nadira Zahiruddin and VP of Business Develompent & Strategy Gisella Tjoanda return to On Call with Insignia to give us the latest on Super’s growing portfolio of 36 private label and exclusivity brands, covering a wide variety from skincare products to mineral water.
They share how SuperApp’s social commerce network of 48,000 agents is innovating the way these brands are developed/partnered, priced, and distributed across rural Indonesia, transforming everyday goods retail for communities from East Java to South Sulawesi.
TLDR
What do acne spot treatments, snacks, rice, and mineral water have in common?
All are SKUs sold through SuperApp, a social commerce platform focused on improving access to a variety of everyday goods for Indonesians in tier-two, tier-three, and rural cities (under US$5K GDP/capita)
As they continue to scale their network of now more than 48K agents, effectively serving as app-enabled distribution points group buying for the end users, this very network has also become a supply chain for SuperApp to develop, acquire and partner with brands to reach the communities they are present in.
“When we acquire a brand, we can quickly grow it within our ecosystem. Some brands may not have operated in the areas we cover, so our supply chain can help them grow further in our channels.” – VP of Innovation Nadira Zahiruddin
“The products can reach a higher and broader audience compared to when there isn’t an exclusive partnership. Additionally, with higher margins from exclusivity, we have more room to create promotions and programs to boost our sales.” – VP of Business Development & Strategy Gisella Tjoanda
In our most recent podcast, Gisella and Nadira return to share key considerations needed when growing a portfolio of brands to meet the evolving needs of communities in rural Indonesia:
(1) Does the cost structure fit the price sensitivity of rural areas while also ensuring healthy margins? SuperApp is able to achieve this balance with a combination of data accumulated through their group buying supply chain and partnering with local manufacturers.
“For instance, our mineral water brand, Pirlo, sells a 600 ml bottle for only about 2,000 IDR (13 cents), whereas other big brands are usually around 15 cents. This small difference matters in price-sensitive rural areas.”
(2) What does each category or brand contribute to the overall portfolio? Not all goods will have the best margins, while others may have lower switching costs and be harder to scale volume.
“Daily goods are more of a volume play, while snacks and drinks have higher margins. We have seen breakthroughs with our daily goods products—they are now sold in well-known supermarkets, hotels, and restaurants in East Java, as well as in many well-known minimarkets. It’s really exciting to see this growth. Our snacks and drinks are still fairly new but very promising. Last month, we actually doubled the revenues. We’re betting on our snacks and drinks to boost our profitability further.”
(3) Where are people looking for goods? One of the key consumer behavior shifts in the cities Super serves has been the greater use of TikTok, especially for categories like cosmetics and personal care, which Super recently ventured into through Teratu Beauty.
“With the rise of cosmetics marketing on TikTok, we’ve seen a rise in demand for cosmetics products. Knowing which products are currently in high demand, we ensure we partner with those brands and supply those products to customers in the areas where we are available.”
At the root of all these efforts is ultimately to eliminate price disparities between urban and rural areas in Indonesia, especially when it comes to daily necessities.
As a mother herself, Gisella speaks to the impact this has on mothers across the country.
“We’re striving our best so that we hope that someday 22 million moms in East Indonesia can buy daily necessities with the same price as the ones living in the first cities.”
Timestamps
(03:13) Highlights;
(04:02) Introduction;
(05:23) The Latest on SuperApp’s Path to Profitability: Private Label;
(09:09) Growing Private Label and Exclusivity Brands;
(16:21) Evolving Consumer Retail Behavior in Rural Indonesia;
(19:08) How Much Closer To Becoming the Store-Less Walmart of Indonesia?;
The content of this podcast is for informational purposes only, should not be taken as legal, tax, or business advice or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any Insignia Ventures fund. Any and all opinions shared in this episode are solely personal thoughts and reflections of the guest and the host.
Transcript
The Latest on SuperApp’s Path to Profitability: Private Label
Paulo: I wanted to start with Super’s approach to monetization and its path to profitability. In our last discussion, we talked a lot about the role of White Label in this path to profitability and monetization.
I wanted to get a sense of how that has evolved over the past year. Are there any other updates on the company or exciting things you guys have been working on since we last talked?
Nadira: At Super, we are still focusing on growing our profitability initiatives, including building our private label and exclusivity. I would say that now we are focusing more on diversifying our portfolio with an emphasis on high-margin products. Our private label has been growing significantly.
We have more than 15 products in our portfolio now, and our private label revenues and margins have grown more than 4x in just a year. Moreover, we just acquired a skincare company called Teratu Beauty. So, very exciting things are happening at Super.
Gisella: We’re growing our exclusivity as well. Our exclusivity has grown 2x since last year, and currently, we have about 21 exclusive principals in diverse categories that are top-performing GMV contributors.
We want to emphasize these categories that are top GMV contributors at Super but also have high margins. With exclusivity, the margins can go 2x to 5x higher.
Nadira: Yeah, I just wanted to add on. We have another initiative that is in its very initial stages. As the one leading the innovation team, I’m working closely with the C-levels to build a new stream that could potentially fuel growth and be a profit generator for SuperApp. I can’t disclose much yet, but stay tuned for more updates on that.
Paulo: Oh, a teaser. I see. So, if you guys want to know what that is, I guess you have to apply to Super and find out yourselves. I’ll leave a link in the podcast description for you guys to get connected and find out what that is.
We did talk about cosmetics as a huge focus of our discussion last year, and you mentioned acquiring that beauty brand. Specifically for cosmetics, I wanted to focus on how that potential has led to this acquisition. What other verticals have you discovered that show great potential for growing Super’s business?
Gisella: As mentioned, we acquired Teratu Beauty, which is an affordable skincare brand focusing on acne treatment. It’s been interesting to see their growth over the last year—they’ve grown 3x in just one year. This brand has significant potential in the skincare market.
Our team is dedicated to maximizing this potential by leveraging our existing channels and exploring new avenues to escalate this growth further. We are confident that Teratu can thrive, and we are very committed to growing it significantly.
Nadira: Other than the health and beauty category for our private labels, we are still focusing on daily goods, snacks, and drinks as well. For daily goods, we have items like rice, cooking oil, wheat flour, and crispy flour. For snacks and drinks, we offer a combination of mineral water, soda, flavored drinks, and spicy and salty snacks.
Daily goods are more of a volume play, while snacks and drinks have higher margins. We have seen breakthroughs with our daily goods products—they are now sold in well-known supermarkets, hotels, and restaurants in East Java, as well as in many well-known minimarkets. It’s really exciting to see this growth.
Our snacks and drinks are still fairly new but very promising. Last month, we actually doubled the revenues. We’re betting on our snacks and drinks to boost our profitability further.
Growing Private Label and Exclusivity Brands
Paulo: That’s quite interesting that you’ve invested in all these different categories with different objectives and motivations for each. Like you mentioned, snacks have higher margins, and you’re exploring different types of distribution for those products. Whereas, the more FMCG-type daily goods are a bit more in the core distribution channels that Super already has. Then, of course, there’s your skincare brand that you just acquired, which is definitely an interesting play.
I wanted to follow up on how Super works with these brands. These brands already existed before you started working with them, whether through exclusivity deals or acquisitions. How does Super change or improve the distribution or reach of these brands once you partner with them?
Gisella: When we’re exclusive, we get certain areas that are exclusively for Super. This exclusivity allows us to distribute the products more effectively because we have agents focused on distributing these products. The products can reach a higher and broader audience compared to when there isn’t an exclusive partnership.
Additionally, with higher margins from exclusivity, we have more room to create promotions and programs to boost our sales.
Nadira: On the acquisition side, these brands have their own channels, but when we acquire a brand, we integrate it into our existing ecosystem. We have more than 48,000 agents and operate in East Java and South Sulawesi with established distribution channels.
So, when we acquire a brand, we can quickly grow it within our ecosystem. Some brands may not have operated in the areas we cover, so our supply chain can help them grow further in our channels.
Paulo: I think it’s important for our audience to understand the link between the portfolio you’re building and the infrastructure Super has developed over the years. This infrastructure is leveraged to grow the brands you’ve partnered with or acquired.
What has been the biggest challenge and learning experience when it came to building out this portfolio, considering you have a mix of acquisitions, exclusivity deals, and brands you’re developing from scratch?
Nadira: For private labels, the biggest challenge has been growing market share in categories with many large, established players already top-of-mind for consumers, especially in snacks and drinks.
We learned that for daily goods, consumers are less loyal to one specific brand. For example, it’s not as hard to switch the rice brand that consumers buy. But for snacks and drinks, it’s a different game, making it harder to acquire more market share.
Right now, our focus is on boosting the snacks and drinks category because they have higher margins, aligning with our objective to increase overall margins. We’re aiming to grow our snacks and drinks categories further.
Gisella: To add on, the biggest challenge for exclusivity deals is acquiring exclusive partnerships with top brands that have significant volume with Super but already have long-term distributor partners.
To get exclusivity, we have to build relationships with the principals and reach volumes that earn their trust, which can take years. However, it’s been exciting to see our volume and traction grow, and more principals are reaching out to explore partnerships.
Paulo: The dynamics can be very different depending on how the brand was sourced, and the challenges vary.
One thing I wanted to focus on is pricing. For exclusivity brands, the products already have set pricing, but for the brands you acquire or grow from scratch, how do you factor in pricing strategy when developing products for your target market? If you can share a specific example, that would be great.
Nadira: Our thesis for building private labels is to create products more affordable than existing ones in the market by partnering with local manufacturers to ensure competitive pricing. We conduct focus group discussions to test consumer reactions to pricing and competitive analysis to see where other channels sell these brands.
For instance, our mineral water brand, Pirlo, sells a 600 ml bottle for only about 2,000 IDR (13 cents), whereas other big brands are usually around 15 cents. This small difference matters in price-sensitive rural areas.
Additionally, Super processes a vast amount of data to see what products and pricing work best in our market. This helps us decide which products to develop next and which pricing category to tackle.
Paulo: It’s interesting that pricing also impacts what you decide to develop or focus on next.
Nadira: Yes, we ensure that when we partner with a manufacturer, we have a pricing threshold for certain categories. If the manufacturer cannot fit that cost structure, we move on to other manufacturers or look at the next category we can develop.
Paulo: You can do this effectively because you have visibility over distribution and the supply chain. 2,000 IDR for 600 ml is pretty cheap, even compared to bottled water here in Manila.
Nadira: You should come to Indonesia sometime.
Paulo: Maybe I should. If I go to Indonesia, I’ll just buy a lot of bottled water and bring it back to the Philippines.
Evolving Consumer Retail Behavior in Rural Indonesia
Paulo: Speaking of trends, like really targeting affordability, are there any other interesting cultural behavior trends coming out of the cities or communities that you serve, especially regarding the product segments that you focus on, because for rural Indonesia or areas outside of greater Jakarta, there’s been a lot more momentum in terms of economic development and government investment in these areas. How has that impacted consumer behavior from your point of view?
Nadira: One of the interesting consumer trends we’ve noticed is the increasing disposable income in Indonesia. This, combined with the rise of social media, especially TikTok, and the high volume of product marketing on the platform, has really helped the growth of certain categories like health and beauty. We also see powder drinks and other snacks becoming more popular, which we’ve leveraged in these categories.
Gisella: Just to add, the rise of social media is significant in Indonesia, including in smaller areas. Social media has boosted the popularity of certain categories, especially cosmetics and skincare, particularly among younger generations.
We’ve responded to this trend by ensuring our agents in areas lacking access to these goods can supply them in a timely manner, making sure potential customers have access to these products.
Paulo: I was curious, since you mentioned social media, how much has Super leveraged these channels to increase access to these products? Do you have any specific case studies or examples of how you’ve tapped into social media?
Gisella: Yeah, in the cosmetics industry, cosmetics are huge on TikTok these days. With the rise of cosmetics marketing on TikTok, we’ve seen a rise in demand for cosmetics products. Knowing which products are currently in high demand, we ensure we partner with the brands and supply those products to customers in the areas where we are available.
Nadira: We’ve also grown our social media presence on YouTube, Instagram, and TikTok, where we have over 2 million followers.
Paulo: You guys even have the gold button, right?
Nadira: Yes, exactly. We received that this year, which is definitely a milestone for us. We leverage these channels when we launch new products, tapping into our social media presence to help grow our product lines.
How Much Closer To Becoming the Store-Less Walmart of Indonesia?
Paulo: And I think, with how TikTok has made a lot of moves last year in Indonesia and you guys are certainly embracing social commerce, group buying, and social media. I think that’s also interesting for Super’s progress.
Given that we’ve been talking about how Super is building out its portfolio of brands through various means, it’s really marking its progress towards what CEO Steven mentioned about becoming the Walmart of rural Indonesia without the stores.
Even though that’s a comparison he made back in 2021, I think it’s still very relevant today. What excites you about the progress you’ve made towards that vision?
Nadira: Echoing Steven here, the grand vision for Super is to become the Walmart of Indonesia without having physical retail stores. We are now in 48 cities across four provinces. What’s exciting is that there are still over 200 second-tier cities and 17 other provinces in East Indonesia that we aim to tackle.
We’ll produce more private label products across highly demanded categories with the same quality as top products but more affordable for the rural market. It’s really exciting to see the business grow over the years and the direct impact we see in this market.
Gisella: To add on, we aim to eliminate price disparity and provide people in rural areas of East Indonesia with equal access to affordable goods. We’re striving to ensure that someday 22 million moms in East Indonesia can buy daily necessities at the same price as those living in the major cities.
Paulo: And as a mom yourself, Gisella, that’s a very important mission that you guys are working on.
I wanted to expand on the impact you’re having from the ground level, which you’ve alluded to, and really what Super’s impact is on the larger scale of Indonesia’s economy. What does Super’s work mean for other emerging markets, especially since I think Super is setting a new standard for social commerce in rural areas?
Gisella: With this mission, Super contributes significantly to the Indonesian economy in terms of market access and income generation in rural areas. Communities in rural areas can now access essential goods that are more affordable and can spend more money on other important things, such as their children’s education.
Super also enables individuals in rural communities to generate additional income by buying goods from our platform and selling them to their neighbors. This extra income improves the livelihoods of individuals and families and contributes to poverty reduction and economic empowerment in the rural areas we serve.
Nadira: To address the second part, Super plays a significant role in commerce in emerging markets through inclusive growth and market innovation. E-commerce penetration in Indonesia is currently only about 5% and largely concentrated in tier-one cities.
Super’s model demonstrates how technology and innovation can facilitate inclusive economic growth by extending commerce opportunities to underserved populations and emerging markets.
This inclusivity helps reduce inequality, socioeconomic disparities, and promotes more equitable development. Super’s success in Indonesia showcases the potential for innovative business models to thrive in emerging markets.
We don’t see a lot of businesses tackling tier-two and tier-three markets by leveraging technology to overcome traditional barriers to commerce. Super sets a precedent for other businesses to adopt similar approaches and tap into underserved market opportunities.
Paulo: So far, we’ve had a really informative discussion about Indonesia, especially for those learning about Super for the first time on our show, and the work you guys are doing to increase access to goods and lower costs in tier-two, tier-three, and tier-four cities across Indonesia.
As you mentioned, there are still a lot more cities you haven’t covered and are aiming to reach. It seems like you already have a playbook down, and it’s really a matter of scaling that out to more areas across Indonesia.
On that note, I wanted to wrap up this first part of our conversation. To those tuning in, if you want to hear part two, be sure to subscribe or follow us to get notified. In part two, we’ll learn more about both Nadira and Gisella as leaders and how they’ve developed since our last conversation. If you want to know how they joined Super, I definitely recommend our last conversation as well.
In the meantime, thanks again for joining us on this call, and we’ll see you in the next one.
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