PALLI Report - May 2024
Overcoming the Seasons' Setbacks Toward a Stronger Service
tl;dr
Seasonal Impact on Supply: As April’s rainy season began, we felt its effects on inventory turnover, particularly within the beverage segment.
Revenue Growth Amidst Fluctuations: Despite fluctuations in transaction volumes, our revenue has steadily increased, demonstrating the resilience and adaptability of our service.
A Need for Disciplined Anticipation: We've also experienced the risks of oversupply when we fail to adequately predict sudden changes.
Adapting and Improving: Addressing these challenges—alongside the unique cultural and economic realities of Uganda—has refined our approach to managing inevitable disruptions in our clients' operations.
Strategic Partnership: By focusing more on local businesses that work with formal suppliers, our first significant partnership provides a valuable opportunity to assess our impact across the formal-informal economic divide.
March was dry, hot, and dusty. Bottled water manufacturers struggled to meet market demand. Many business owners journeyed to the factory before being turned away, leaving with hope that tomorrow water would be available again.
This tough period highlighted our service's value, empowering clients with the means to secure necessary inventory while others scrambled to find alternatives.
But the rains were coming (Joy says that they always arrive with the moon). On April 1st the moon was again new. Washing away the dusty roads, commerce ground to a crawl. Movement became increasingly burdensome, and businesses were significantly impacted (very soon, our clients were eager for the dry season to return). Our overall volume (and the volume of our clients) was down over 30%.
Our goal at Palli is to see consumer demand drive the supply chain (not cash availability). Experiencing the dramatic change in season is critical to our understanding of market trends. Properly anticipating demand is critical to optimal operations. We don’t want to over nor undersupply.
Working with clients, it’s our responsibility to ensure they’re properly serviced for success; our ability to anticipate both macro and micro trends is critical to our effect. In a few cases, despite knowing a change in season was coming, we allowed some clients to “overheat” and overstock in the final days of March. In a cash-scarce context, overstocking means capital is tied up in inventory on shelves, not moving and generating sales, and ultimately reigniting cash flow challenges we work hard to address.
This highlights the importance of our approach to underwrite with consideration of the broader landscape—seasonal variations, market trends, and community interactions shape our assessment of each client’s potential. April’s rain brought the seasonality factor to even greater attention.
Thankfully, May returned. School was back in session, and the roads were once again dusty. Mirinda and Coca Cola began moving, and water manufacturers were able to leverage their reserves to steady the supply of water to local markets. Our overall volume returned to all-time highs. Throughout the whole period, we consistently saw our revenue growth, despite the ebbs and flows of the market, demonstrating our constancy in a less than constant world.
The Unexpected Inevitable Setback
Joy recently shared insights into the inevitable challenges faced by business owners in local communities. In May, the unexpected struck — funerals and, sadly, theft — impacting our clients and indirectly, our risk.
This reality prompted our response that was both empathetic yet fair. Across three distinct cases, we reworked the financial terms of our engagement specifically designed to help these business owners navigate their temporary disruptions. Rather than exacerbating their challenges with pressure, we chose engagement, focusing on recovery and support for clients to rebuild our confidence in their long term potential. Each client has confronted their challenges head-on, and a swift recovery and return to normal operations is already happening. This situation has demonstrated our commitment to partnerships, a contrast to others who would have withdrawn their support.
Forward, the Future
We're dedicated to transforming local businesses by deepening their ties with suppliers, enhancing the entire supply chain. This month, we have our first formal partnership to demonstrate our potential to alter the trajectory of business growth within a networked ecosystem. Francis and Joy are hard at work onboarding new clients that align with our target customer and strategy. Already, even preliminary data from these partnerships is increasing the clarity of our potential to effect beyond the first-order impact on the local business community.
