38538121 Role of Distribution Channel in FMhiCG Sector

8/13/2019 38538121 Role of Distribution Channel in FMhiCG Sector

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ROLE OF DISTRIBUTION CHANNEL IN FMCG

Distribution channel (also known as marketing channel)

Distribution (or plac!nt" is on o# t$ #our aspcts o# !ar%tin&' A istributor is t$ !il!anbt)n t$ !anu#acturr an rtailr' A#tr a prouct is !anu#actur* it !a+ b )ar$ous ors$ipp to t$ n,t c$lon in t$ suppl+ c$ain* t+picall+ it$r a istributor* rtailr or consu!r'

T$ ot$r t$r parts o# t$ !ar%tin& !i, ar prouct !ana&!nt* pricin&* an pro!otion'

Fr-untl+ t$r !a+ b a c$ain o# intr!iaris* ac$ passin& t$ prouct o)n t$ c$ainto t$ n,t or&ani.ation* b#or it #inall+ rac$s t$ consu!r or n/usr' T$is procss is%no)n as t$ 0istribution c$ain0 or t$ 0c$annl'0 Eac$ o# t$ l!nts in t$s c$ains )ill$a1 t$ir o)n spci#ic ns* )$ic$ t$ proucr !ust ta% into account* alon& )it$ t$oso# t$ all/i!portant n/usr'

Channels

A number of alternate 'channels' of distribution may be available:

Sllin& irct* suc$ as 1ia !ail orr* Intrnt an tlp$on sals A&nt* )$o t+picall+ sllsirct on b$al# o# t$ proucr Distributor (also call )$olsalr"* )$o slls to rtailrsRtailr (also call alr or rsllr"* )$o slls to n custo!rs A1rtis!nt t+picall+us #or consu!ption &oos Distribution c$annls !a+ not b rstrict to p$+sical

proucts alon' T$+ !a+ b 2ust as i!portant #or !o1in& a sr1ic #ro! proucr toconsu!r in crtain sctors* sinc bot$ irct an inirct c$annls !a+ b us' Hotls* #or,a!pl* !a+ sll t$ir sr1ics (t+picall+ roo!s" irctl+ or t$rou&$ tra1l a&nts* touroprators* airlins* tourist boars* cntrali. rsr1ation s+st!s* tc' T$r $a1 also bnso! inno1ations in t$ istribution o# sr1ics' For ,a!pl* t$r $as bn an incras in#ranc$isin& an in rntal sr1ics / t$ lattr o##rin& an+t$in& #ro! tl1isions t$rou&$tools' T$r $as also bn so! 1inc o# sr1ic int&ration* )it$ sr1ics lin%in&to&t$r* particularl+ in t$ tra1l an touris! sctors' For ,a!pl* lin%s no) ,ist bt)nairlins* $otls an car rntal sr1ics' In aition* t$r $as bn a si&ni#icant incras inrtail outlts #or t$ sr1ic sctor' Outlts suc$ as stat a&ncis an builin& socit+o##ics ar cro)in& out traitional &rocrs #ro! !a2or s$oppin& aras'

Channel members

Distribution c$annls can t$us $a1 a nu!br o# l1ls' 3otlr #in t$ si!plst l1l*t$at o# irct contact )it$ no intr!iaris in1ol1* as t$ 0.ro/l1l0 c$annl'

T$ n,t l1l* t$ 0on/l1l0 c$annl* #aturs 2ust on intr!iar+4 in consu!r &oos artailr* #or inustrial &oos a istributor' In s!all !ar%ts (suc$ as s!all countris" it is

practical to rac$ t$ )$ol !ar%t usin& 2ust on/ an .ro/l1l c$annls'

In lar& !ar%ts (suc$ as lar&r countris" a scon l1l* a )$olsalr #or ,a!pl* is no)


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!ainl+ us to ,tn istribution to t$ lar& nu!br o# s!all* ni&$bor$oo rtailrs'

In 5apan t$ c$ain o# istribution is o#tn co!pl, an #urt$r l1ls ar us* 1n #or t$si!plst o# consu!r &oos'

In Ban&las$ Tlco! Oprators ar usin& i##rnt C$ains o# Distribution* spciall+

0scon l1l0'

In IT an Tlco! inustr+ l1ls ar na! 6tirs6' A on tir c$annl !ans t$at 1norsIT prouct !anu#acturrs (or so#t)ar publis$rs" )or% irctl+ )it$ t$ alrs' A ontir 7 t)o tir c$annl !ans t$at 1nors )or% irctl+ )it$ alrs an )it$ istributors)$o sll to alrs'But t$ !ost i!portant is t$ istributor or )$olsalr'

The internal market

Man+ o# t$ !ar%tin& principls an tc$ni-us )$ic$ ar appli to t$ ,trnalcusto!rs o# an or&ani.ation can b 2ust as ##cti1l+ appli to ac$ subsiiar+0s* or ac$part!nt0s* 0intrnal0 custo!rs'

In so! parts o# crtain or&ani.ations t$is !a+ in #act b #or!ali.* as &oos artrans#rr bt)n sparat parts o# t$ or&ani.ation at a 8trans#r pric0' To all intnts an

purposs* )it$ t$ possibl ,cption o# t$ pricin& !c$anis! itsl#* t$is procss can ans$oul b 1i) as a nor!al bu+r/sllr rlations$ip' T$ #act t$at t$is is a capti1!ar%t* rsultin& in a 8!onopol+ pric0* s$oul not iscoura& t$ participants #ro!!plo+in& !ar%tin& tc$ni-us'

Lss ob1ious* but 2ust as practical* is t$ us o# 8!ar%tin&0 b+ sr1ic an a!inistrati1part!nts4 to opti!i. t$ir contribution to t$ir 8custo!rs0 (t$ rst o# t$ or&ani.ationin &nral* an t$os parts o# it )$ic$ al irctl+ )it$ t$! in particular"' In all o# t$is* t$lssons o# t$ non/pro#it or&ani.ations* in alin& )it$ t$ir clints* o##r a 1r+ us#ul

paralll'

Channel Decisions

C$annl strat&+9rouct (or sr1ic"/ Cost/ Consu!r location

Channel management

T$ c$annl cision is 1r+ i!portant' In t$or+ at last* t$r is a #or! o# tra/o##: t$cost o# usin& intr!iaris to ac$i1 )ir istribution is supposl+ lo)r' In* !ostconsu!r &oos !anu#acturrs coul n1r 2usti#+ t$ cost o# sllin& irct to t$ir

consu!rs* ,cpt b+ !ail orr' In practic* i# t$ proucr is lar& nou&$* t$ us o#intr!iaris (particularl+ at t$ a&nt an )$olsalr l1l" can so!ti!s cost !or t$an&oin& irct'


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Man+ o# t$ t$ortical ar&u!nts about c$annls t$r#or r1ol1 aroun cost' On t$ot$r $an* !ost o# t$ practical cisions ar concrn )it$ control o# t$ consu!r' T$s!all co!pan+ $as no altrnati1 but to us intr!iaris* o#tn s1ral la+rs o# t$!* butlar& co!panis 0o0 $a1 t$ c$oic'

Ho)1r* !an+ supplirs s! to assu! t$at onc t$ir prouct $as bn sol into t$

c$annl* into t$ b&innin& o# t$ istribution c$ain* t$ir 2ob is #inis$' ;t t$atistribution c$ain is !rl+ assu!in& a part o# t$ supplir0s rsponsibilit+4 an* i# $ $asan+ aspirations to b !ar%t/orint* $is 2ob s$oul rall+ b ,tn to !ana&in&* albit1r+ inirctl+* all t$ procsss in1ol1 in t$at c$ain* until t$ prouct or sr1ic arri1s)it$ t$ n/usr' T$is !a+ in1ol1 a nu!br o# cisions on t$ part o# t$ supplir:

C$annl !!brs$ipC$annl !oti1ationMonitorin& an !ana&in& c$annls

Channel membership

Intnsi1 istribution /


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!ertical marketing

T$is rlati1l+ rcnt 1lop!nt int&rats t$ c$annl )it$ t$ ori&inal supplir /proucr* )$olsalrs an rtailrs )or%in& in on uni#i s+st!' T$is !a+ aris bcauson !!br o# t$ c$ain o)ns t$ ot$r l!nts (o#tn call 8corporat s+st!s

int&ration0"4 a supplir o)nin& its o)n rtail outlts* t$is bin& 0#or)ar0 int&ration' It ispr$aps !or li%l+ t$at a rtailr )ill o)n its o)n supplirs* t$is bin& 0bac%)ar0int&ration' (For ,a!pl* MFI* t$ #urnitur rtailr* o)ns H+&na )$ic$ !a%s its %itc$nan broo! units'" T$ int&ration can also b b+ #ranc$is (suc$ as t$at o##r b+McDonal0s $a!bur&rs an Bntton clot$s" or si!pl co/opration (in t$ )a+ t$atMar%s = Spncr co/oprats )it$ its supplirs"'

Altrnati1 approac$s ar 0contractual s+st!s0* o#tn l b+ a )$olsal or rtail co/oprati1* an 8a!inistr !ar%tin& s+st!s0 )$r on (o!inant" !!br o# t$istribution c$ain uss its position to co/orinat t$ ot$r !!brs0 acti1itis' T$is $as

traitionall+ bn t$ #or! l b+ !anu#acturrs'

T$ intntion o# 1rtical !ar%tin& is to &i1 all t$os in1ol1 (an particularl+ t$supplir at on n* an t$ rtailr at t$ ot$r" 0control0 o1r t$ istribution c$ain' T$isr!o1s on st o# 1ariabls #ro! t$ !ar%tin& -uations'

Ot$r rsarc$ inicats t$at 1rtical int&ration is a strat&+ )$ic$ is bst pursu at t$!atur sta& o# t$ !ar%t (or prouct"' At arlir sta&s it can actuall+ ruc pro#its' It isar&uabl t$at it also i1rts attntion #ro! t$ ral businss o# t$ or&ani.ation' Supplirsrarl+ ,cl in rtail oprations an* in t$or+* rtailrs s$oul #ocus on t$ir sals outlts

rat$r t$an on !anu#acturin& #acilitis ( Mar%s = Spncr* #or ,a!pl* 1r+ libratl+pro1is consirabl a!ounts o# tc$nical assistanc to its supplirs* but os not o)nt$!"'

"ori#ontal marketing

A rat$r lss #r-unt ,a!pl o# n) approac$s to c$annls is )$r t)o or !or non/co!ptin& or&ani.ations a&r on a 2oint 1ntur / a 2oint !ar%tin& opration / bcaus it is

b+on t$ capacit+ o# ac$ ini1iual or&ani.ation alon' In &nral* t$is is lss li%l+ to

r1ol1 aroun !ar%tin& s+nr&+'

$C%

&hat are $ast oving Consumer %oods ($C%)

9roucts )$ic$ $a1 a -uic% turno1r* an rlati1l+ lo) cost ar %no)n as Fast Mo1in& Consu!rGoos (FMCG"' FMCG proucts ar t$os t$at &t rplac )it$in a +ar' E,a!pls o# FMCG&nrall+ inclu a )i ran& o# #r-untl+ purc$as consu!r proucts suc$ as toiltris* soap*

cos!tics* toot$ clanin& proucts* s$a1in& proucts an tr&nts* as )ll as ot$r non/urablssuc$ as &lass)ar* bulbs* battris* papr proucts* an plastic &oos' FMCG !a+ also inclup$ar!acuticals* consu!r lctronics* pac%a& #oo proucts* so#t rin%s* tissu papr* an


5/47

c$ocolat bars'

A subst o# FMCGs ar Fast Mo1in& Consu!r Elctronics )$ic$ inclu inno1ati1 lctronicproucts suc$ as !obil p$ons* M9> pla+rs* i&ital ca!ras* G9S S+st!s an Laptops' T$sar rplac !or #r-untl+ t$an ot$r lctronic proucts'


6/47

1arious #inancial ais !a 1r+ rasonabl an ,pnsi1 purc$as* as+ t$rb+ &i1in& t$Inian consu!rs an unli!it ,posur to ,princ t$ sa!' But sinc Dc!br* t$ salso# 1arious brans blon&in& to %+ pla+rs an t$ o1rall FMCG inustr+ pr#or!anc $a1

pic% up an t$ intns sals pro!otional ##orts* cut t$roat co!ptiti1 strat&is* stron&ristributional ##orts $a1 $lp 1arious brans pntrat pr into t$ !ar%tsan incras sals' Toa+* rural Inian consu!rs !ar%t $as b+ #ar bco! t$ $i&$st r1nu

&nrator #or !an+ o# t$ FMCG prouct co!panis an a1ailabilit+ o# a )i 1arit+ o# ran& $asallo) toa+s Inian consu!r to anal+. an 2u& ac$ prouct accuratl+ an !a% an ial

purc$as cision'

echanics of Distribution Channels of ector

T$ suppl+ c$ain o# proucts in t$ FMCG !ar%t in Inia is on o# t$ lon&st suppl+ c$ains aninustr+ coul rall+ $a1' T$r ar as !an+ as l1ls o# intr!iaris in1ol1 in t$ ntirsuppl+ c$ain t$rou&$ )$ic$ a prouct passs b#or rac$in& t$ n consu!r'


7/47

1Ba2a2 Hinust$an Lt'Balra!pur C$ini Mills Lt'Ba!bino A&ro Ins' LtBCL Inustris = In#rastructurs LtD

B+u O1rsas LtBio


8/47

%Ga+atri Su&ars LtGla,oS!it$3lin Consu!r Halt$car Lt

GMR Inustris LtGo#r+ 9$illips Inia Li!itGor2 Consu!r 9roucts Li!itGo%ul R#oils an Sol1nt LtGooric% Group LtGRM O1rsas LtGu2arat A!bu2a E,ports LtGu2arat A-ua Ins' Lt

"Harrisons Mala+ala! LtHatsun A&ro 9roucts LtHn%l Inia LtHrita& Foos (Inia" LtHilloc% A&ro Foos (Inia" LtHi!al+a Intrnational LtHin Inustris LtHinustan Unil1r Li!it

IB In#otc$ Entrpriss LtIna& Rstaurants an Lisur LtInian E,tractions LtInian Sucros LtIno Biotc$ Foos LtITC Li!it

45a+ S$r Ta = Ins' Lt5a+ant A&ro/Or&anics Lt5+por Su&ar Co!pan+ Lt'53 Su&ar Lt5oon%toll Ta = Inustris Lt5?L A&ro Inustris Lt

5

3as$ipur Su&ar Mills Lt'3o$inoor Foos Lt3ot$ari 9roucts Lt
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9/47

3RBL Lt3SE Lt

3Lon&1i) Ta Co!pan+ LtLon&1i) Ta Co!pan+ Lt

Lott Inia Corpn' Lt'Lotus C$ocolat Co!pan+ Lt

Ma$ur Inustris LtMa$usuan Inustris LtMa$aan Foos LtMarico LtMa)ana Su&ars Lt' KMr&

Mi$i2a! ?anaspati LtMorn Dairis LtMo$an Ma%in LtMons$i A&ro Inustris LtMount E1rst Minral


10/47

Ri A&ro LtRi1ral Foos LtRT E,ports LtRTCL LtRuc$i So+a Ins' Lt

Saboo Soiu! C$loro LtSa!pr Nutritions LtSan)aria A&ro Oils LtSBEC Su&ar LtSi!ran Far!s LtSir S$ai Lal Entrpriss LtSita S$r Foo 9roucts LtS3M E&& 9roucts E,port (Inia" Lt

Spctru! Foos LtSrini1asa Hatc$ris LtSunil A&ro Foos LtSupr Ba%rs (Inia" Lt

TT=I Global LtTarai Foos LtTast+ Bit Eatabls Lt

Tata Co## LtTata Ta Li!itT!ptation Foos LtTrai Ta Co!pan+ LtT.por Ta Co!pan+ LtTri1ni En&inrin& = Ins' LtT+roon Ta Co!pan+ Lt

6

U&ar Su&ar


11/47

?ol&a Air Tc$nics Lt'

& cror' Nstl an A!ul slu& itout in t$ po)rs s&!nt' T$ #oo cat&or+ $as also sn inno1ations li% so#tis in ic cra!s*c$apattis b+ HLL* ra+ to at ric b+ HLL an pi..as b+ bot$ GCMMF an Gor2 9illsbur+' T$iscat&or+ s!s to $a1 #astr 1lop!nt t$an t$ sta&natin& prsonal car cat&or+' A!ul* Inia0slar&st #oos co!pan+* $as a &oo prsnc in t$ #oo cat&or+ )it$ its ic/cra!s* cur* !il%*

buttr* c$s* an so on' Britannia also ran%s in t$ top FMCG brans* o!inats t$ biscuitscat&or+ an $as launc$ a sris o# proucts at 1arious prics'

In t$ $ous$ol car cat&or+ (li% !os-uito rpllnts"* Gor2 an Rc%itt ar t)o pla+rs'Goo%ni&$t #ro! Gor2* is )ort$ abo1 Rs @ cror* #ollo) b+ Rc%itt0s Mortin at Rs Jcror' In t$ s$a!poo cat&or+* HLL0s Clinic an Sunsil% !a% it to t$ top * alt$ou&$ 9=G0sHa an S$oulrs an 9antn ar also tr+in& $ar to b position on top' Clinic is narl+ oublt$ si. o# Sunsil%'

Dabur is a!on& t$ top #i1 FMCG co!panis in Inia an is a $rbal spcialist'


12/47

*utlook

T$ Inian !ar%t is so 1ast t$at an+t$in& an 1r+t$in& can b !ar%t $r' T$is is )$at &i1st$ FMCG sctor an i!!ns &ro)t$ prospcts' !or an !or co!panis ar ntrin& t$is!r&in& sctor )it$ bttr proucts' soonr or latr can+ !ar%t )ill also b associat )it$FMCG sctor as Mrisant* t$ /!illion US/bas tabl s)tnr !a%r* plans to ntr t$

su&ar/#r con#ctionr+ !ar%t in Inia'

T$r is a $u& &ro)t$ potntial #or all t$ FMCG co!panis as t$ pr capita consu!ption o#al!ost all proucts in t$ countr+ is a!on&st t$ lo)st in t$ )orl' A&ain t$ !an or prospctcoul b incras #urt$r i# t$s co!panis can c$an& t$ consu!r0s !inst an o##r n)&nration proucts' Earlir* Inian consu!rs )r usin& non/bran apparl* but toa+* clot$so# i##rnt brans ar a1ailabl an t$ sa! consu!rs ar )illin& to pa+ !or #or bran-ualit+ clot$s' It0s t$ -ualit+* pro!otion an inno1ation o# proucts* )$ic$ can ri1 !an+sctors'

"*& DT+16T*- C"A--.3 23A,-% A A4*+

+*3. - $C% .CT*+

T$ #ast !o1in& consu!r &oos (FMCG" inustr+ is pos to &ro) ra!aticall+' To l1ra&opportunitis* FMCG !anu#acturrs an rtailrs )ill $a1 to 1lop an i!pl!nt libratstrat&is #or &ainin& !ar%t accss' T$is papr pro1is an in/pt$ loo% at t$ strat&ic rol o#istribution c$annls in t$ FMCG inustr+' Spci#icall+* it sur1+s t$ stat o# currnt istributionc$annls in Inia an inti#is #our arc$t+ps t$at FMCG #ir!s can us as a startin& point to

1lop t$ir istribution strat&+'


13/47

@"' In rcnt +ars* t$ !p$asis $as s$i#t to inclu rsarc$ on ot$r topics li% ntr+ !os(5o$nson an Tllis @"* an outsourcin& (Mars$all @@"' Ho)1r* t$r r!ains a paucit+ o#s+st!atic )or% on t$ i!pact o# istribution on t$ Inian cono!+ in &nral an t$ FMCGinustr+ in particular' T$is stu+ att!pts to bri& t$ &ap in our unrstanin& o# FMCGistribution c$annls in Inia'

A-A3, 0 .!A36AT*- *$ DT+16T*-

C"A--.3 - $C% .CT*+:T$ suppl+ c$ain o# proucts in t$ FMCG !ar%t in Inia is on o# t$ lon&st suppl+ c$ains aninustr+ coul rall+ $a1' T$r ar as !an+ as l1ls o# intr!iaris in1ol1 in t$ ntirsuppl+ c$ain t$rou&$ )$ic$ a prouct passs b#or rac$in& t$ n consu!r'


14/47

Manu#acturr


15/47

r-uir o# Srious co!!it!nt o# t$ c$annl partnrs

Fairnss in alin&s

Clarl+ #in custo!r sr1ic polic+

Hi&$ l1l o# int&rit+ E-uitabl istribution at ti!s o# s$orta&

Ti!l+ co!pnsation c$annl partnrs

Channel functions:

In#or!ation &at$rin&

Consu!r !oti1ation

Bar&ainin& )it$ supplirs

9lacin& orrs

Financin&

In1ntor+ !ana&!nt

Ris% barin&

A#tr sals support

Financial support

Distribution Channels

Distribution c$annls s$oul ta% car o# t$ #ollo)in& 'discrepancies

Spatial

T!poral Discrpanc+

Bra%in& bul% Assort!nt

patial

In t$is c$annl s+st! $lps ruc t$istanc bt)n t$ proucr an t$ consu!r o# $isproucts' Consu!rs ar spott Ha1 to b rac$ cost ##cti1l+'E,a!pl: co!panis prouc proucts in on location 1n #or &lobal ns' MICO !a%s #ulin2ction -uip!nt* spar% plu&s tc in i##rnt plants but its alr )ill sll t$ ntir proucts'

Temporal Discrepancy

T$ c$annl s+st! $lps in spin& up in !tin& t$ r-uir!nt o# t$ consu!rsTi! )$n t$ prouct is !a an )$n it is consu! it is i##rnt'

.8ample:

Maruti plant in Gor&on / cars an spars ar a1ailabl )$n t$ consu!r )ants

1reaking 1ulk

T$ c$annl s+st! rucs lar& -uantitis into consu!r accptabl lot si.s 9rouction $as tob in lar& -uantitis to bn#it #ro! cono!is o# scal Consu!ption is ncssaril+ in s!all lot

si.s ' E&4 Inia is ulti!at ,a!pl in bra%in& bul% +ou can bu+ on ci&artt* on Annacian'


16/47

-eed for Assortment

T$ c$annl s+st! $lps a&&r&at a ran& o# proucts #or t$ bn#it o# t$ consu!r / t coulb !a b+ on co!pan+ or s1ral o# t$!' For t$ sa! prouct* it coul b a 1arit+ o# bransan pac%a& si.s'

Channel $lows :

$orward flow/ co!pan+ to its custo!rs / &oos an sr1ics * proucts*

1ackward flow/ custo!rs to t$ co!pan+ pa+!nt #or t$ &oos' Rturn &oos'

$lows both ways/ in#or!ation

Channel 3evels:

7ero level / I# t$ prouct or sr1ic is pro1i to t$ n usr irctl+ b+ t$ co!pan+' Us!ostl+ b+ co!panis li1rin& sr1ic li% $alt$* ucation* ban%in& (also %no)n as sr1icc$annls"

*ne level/ consists o# on intr!iar+'

Two level/ consists o# t)o intr!iaris an is t$ !ost co!!on #or FMCG proucts'

arketing channel system:

; !ertical


17/47

A!inistrat

Contractual

; "ori#ontal: T)o or !or unrlat co!panis 2oin to&t$r to pool rsourcs an ,ploit an !r&in& !ar%topportunit+E&:Rtail out lts in ptrol bun%sCo## a+ outlts in airports

ulti channel Distribution:

6sed in situations where

Sa! prouct but i##rnt !ar%t s&!nts

Si. o# bu+rs 1aris

Go&rap$ic concntration o# potntial consu!rs 1aris

Rac$ is i##icult

.8pectations from channel:

?arit+ an assort!nt at on location

Bul% bra%in&

Clos to custo!r location

Sp o# Dli1r+

Aitional sr1ics

Distribution organi#ation $unctions:

9ri!ar+ ai!: tr!in )$o )ill o )$at Ma2or Dcision points'

E,tnt o# co!pan+ support an outsourcin& to b ci Bu&t #or t$ cost o# t$

istribution ##ort

Slct suitabl c$annl partnrs / C=FAs* an istributors

Sttin& clarob>ectives#or t$ partnrs

A&r on l1l o# #inancial co!!it!nts b+ t$ c$annl partnrs'


18/47

T,2. *$ -T.+.DA+.

T$r is a 1arit+ o# intr!iaris t$at !a+ &t in1ol1 b#or a prouct &ts #ro! t$ ori&inalproucr to t$ #inal usr* t$+ ar

+etailers:

Rtailrs oprat outlts t$at tra irctl+ )it$ $ous$ol custo!rs' Rtailrs can b classi#i in

s1ral )a+s:

T+p o# &oos bin& sol( '&' clot$s* &rocr+* #urnitur"

T+p o# sr1ic ('&' sl#/sr1ic* countr/sr1ic"

Si. ('&' cornr s$op4 suprstor"

O)nrs$ip ('&' pri1atl+/o)n inpnnt4 public/-uot rtail &roup

Location ('&' rural* cit+/cntr* out/o#/to)n"

Bran ('&' nation)i rtail brans4 local on/s$op na!"

&holesalers


19/47

Franc$iss ar inpnnt businsss t$at oprat a bran prouct (usuall+ a sr1ic" in,c$an& #or a licns # an a s$ar o# sals'

Agents

A&nts sll t$ proucts an sr1ics o# proucrs in rturn #or a co!!ission

+ole of ntermediaries in Distribution channel:

Gratr ##icinc+ in !a%in& &oos a1ailabl to tar&t !ar%ts'

Intr!iaris pro1i

Contacts

E,princ

Spciali.ation

Scal o# opration

Matc$ suppl+ an !an'

$unctions of ntermediaries

In#or!ation

9ro!otion

Contact

Matc$in&

N&otiation

9$+sical Distribution

Financin&

Ris% ta%in&

Channel 3evels


20/47

Manu#acturr


21/47

ntensive distribution

Distribution t$rou&$ 1r+ rasonabl outlt a1ailabl / FMCG

Strat&+ is to !a% sur t$at t$ prouct is a1ailabl in as !an+ outlts as possibl *

9r#rr #or consu!r* p$ar!acutical proucts an auto!obil spars

elective distribution

Multipl* but not all outlts in t$ !ar%t a #) slct outlts )ill b pr!itt to %p t$9roucts Outlts slct in lin )it$ t$ i!a& t$ co!pan+ or alternatives

ntensive

distribution

elective

distribution

.8clusive

distribution

.valuating ma>or alternatives

Slctin&

Moti1atin&


22/47

E1aluatin&


23/47

ndia@s top ; $C% companies:

$*33*&-% A+. T". T*2 ; $C% C*A2A-. - -DA:

.8hibit T". T*2 ; C*2A-. - $C% .CT*+

S' NO' Co!panis

' Hinustan Unil1r Lt'

@' ITC (Inian Tobacco Co!pan+"

>' NstlQ Inia' GCMMF (AMUL"

' Dabur Inia

' Asian 9aints (Inia"

' Cabur+ Inia

' Britannia Inustris

J' 9roctr = Ga!bl H+&in an Halt$ Car

' Marico Inustris

ource: -aukrihubcom

$6+T".+ &. &33 T6D, +*3. *$ DT+16T*-

C"A--.3 - $C% !A A-A3,-% +*3.

DT+16T*- C"A--.3 - -DA@ T*2 *T $C%

C*2A-, &"C" "-D6TA- 6-3.!.+

3T.D("63)

"industan 6nilever 3imited

-T+*D6CT*-

Hinustan Unil1r Li!it (HUL"* #or!rl+ Hinustan L1r Li!it (it )as rna! inlat 5un @ as HUL"* is Inia0s lar&st Fast Mo1in& Consu!r Goos co!pan+* touc$in& t$li1s o# t)o out o# t$r Inians )it$ o1r @ istinct cat&oris in Ho! = 9rsonal Car9roucts an Foos = B1ra&s' T$s proucts no) t$ co!pan+ )it$ a scal o# co!bin 1olu!s o# about !illion tonns an sals o# narl+ Rs' > crors' HUL is also on o# t$ countr+0s lar&st ,portrs4 it $as bn rco&nis as a Goln Supr Star Train& Hous b+ t$

Go1rn!nt o# Inia' T$ !ission t$at inspirs HUL0s o1r * !plo+s* incluin& o1r*>!ana&rs* is to 6a 1italit+ to li#'6 HUL !ts 1r+a+ ns #or nutrition* $+&in* an

prsonal car )it$ brans t$at $lp popl #l &oo* loo% &oo an &t !or out o# li#' It


24/47

is a !ission HUL s$ars )it$ its parnt co!pan+* Unil1r* )$ic$ $ols @' o# t$ -uit+'T$ rst o# t$ s$ar$olin& is istribut a!on& >* ini1iual s$ar$olrs an #inancial institutions' HUL0s brans li% Li#buo+* Lu,* Sur# E,cl* Rin*


25/47

Detail Overview

T$ istribution nt)or% o# HUL is on o# t$ %+ strn&t$s t$at $lp it to suppl+ !ostproucts to al!ost an+ plac in t$ countr+ #ro! Srina&ar to 3an+a%u!ari' T$is inclus*!aintainin& #a1orabl tra rlations* pro1iin& inno1ati1 incnti1s to rtailrs anor&ani.in& !an &nration acti1itis a!on& a $ost o# ot$r t$in&s' Eac$ businss o#HUL port#olio $as custo!i. t$ nt)or% to !t its ob2cti1s' T$ !ost ob1ious#unction o# pro1iin& t$ lo&istics support is to &t t$ co!pan+s prouct to t$ n custo!r'

Distribution System of HUL

HULs proucts* ar istribut t$rou&$ a nt)or% o# * ristribution stoc%ists* co1rin&'> !illion rtail outlts rac$in& t$ ntir urban population* an about @ !illion ruralconsu!rs' T$r ar > C=FAs in t$ countr+ )$o # t$s ristribution stoc%istsr&ularl+' T$ &nral tra co!priss &rocr+ stors* c$!ists* )$olsal* %ios%s an&nral stors' Hinustan Unil1r pro1is tailor !a sr1ics to ac$ o# its c$annl

partnrs' It $as 1lop custo!r !ana&!nt an suppl+ c$ain capabilitis #orpartnrin& !r&in& sl#sr1ic stors an supr!ar%ts' Aroun @* supplirs an associats sr1 HULs !anu#acturin& plants )$ic$ ar cntrali. across @ !illion s-uar !ils o# trritor+'

(Fi&' Sc$!atic o# HULs Distribution Nt)or%"

Distribution at the !illages:

T$ co!pan+ $as brou&$t all !ar%ts )it$ populations o# blo) * unr on rural salsor&anisation'T$ ta! co!priss an ,clusi1 sals #orc an ,clusi1 ristribution stoc%ists'T$ta! #ocuss on builin& suprior a1ailabilit+ o# proucts' In rural Inia* t$ nt)or% irctl+ co1rs about * 1illa&s* rac$in& @ !illion consu!rs* t$rou&$ substoc%ists'

9HASE 9HASE >

HUL

C=F A&nts Ristribution stoc%ists


26/47

9HASE @

(Fi&' @ Rural Distribution Mol o# HUL"

HUL approac$ t$ rural !ar%t )it$ t)o critria

t$ accssibilit+ an 1iabilit+' To sr1ic t$iss&!nt* HUL appoint a Ristribution stoc%ist )$o )as rsponsibl #or all outlts anall businss )it$in $is particular to)n' In t$ @ o# t$ accssibl !ar%ts )it$ lo) businss potntial* HUL assi&n a sub stoc%ist )$o )as rsponsibl to accss all t$ 1illa&s at last onc in a #ortni&$t an sn stoc%s to t$os !ar%ts' T$is sub stoc%ist istributs t$ co!pan+0s proucts to outlts in a2acnt s!allr 1illa&s usin& transportation suitabl to intrconnctin& roas* li% c+cls*scootrs or t$ a& ol bulloc% cart' T$us* Hinustan Unil1r is tr+in& to circu!1nt t$ barrir o# !otorabl roas' T$ co!pan+ si!ultanousl+ uss t$ )$olsal c$annl* suitabl+incnti1isin& t$! to istribut co!pan+ proucts' T$ !ost co!!on #or! o# train& r!ains t$ &rassroots bu+ an sll !o' T$is nabls HUL to in#lunc t$ rtailrs stoc%s an -uantitis sol t$rou&$ crit ,tnsion an tra iscounts' HUL launc$ t$is Inirct Co1ra& (IDC"in Js'Unr t$ Inirct Co1ra& (IDC" !t$o* co!pan+ 1ans )r rplac b+ 1ans

blon&in& to Ristribution Stoc%ists* )$ic$ sr1ic a slct &roup o# ni&$bourin& !ar%ts'Distribution at t$ Urban cntrs: Distribution o# &oos #ro! t$ !anu#acturin& sit to

?an bas #i, routco1ra&@ Rural pop

S$a%ti Entrprnurs Rural population(tar&t"

Bas Distributor

SS

SS/Star sllrDistributor bas in t$1illa& Hub= spo%nMol> Rural population '


27/47

C = F a&nts ta% plac t$rou&$ it$r t$ truc%s or rail roas pnin& on t$ ti!#actor #or li1r+ an cost o# transportation' Gnrall+ t$ !anu#acturin& sit is locatsuc$ t$at it co1rs a bi&&r &o&rap$ical s&!nt o# Inia'Fro! t$ C = F a&nts* t$ &oos ar transport to RSs b+ !ans o# truc%s an t$ proucts#inall+ !a% t$ last !il bas on t$ local popular an c$ap !o o# transport'

16-. *D.3 *$ "63:


28/47

Dirct !ar%tin& !ans sllin& proucts b+ alin& irctl+ )it$ consu!rs rat$r t$ant$rou&$ intr!iaris'

Traitional !t$os inclu !ail orr* irct/!ail sllin&* col callin&* tlp$on sllin&*

an oor/to/oor callin&' Mor rcntl+ tl!ar%tin&* irct raio sllin&* !a&a.in anT? a1rtisin&* an on/lin co!putr s$oppin& $a1 bn 1lop'

T$ !ain a1anta&s o# sllin& irct ar t$at t$r is no n to s$ar pro#it !ar&ins an

t$ proucr $as co!plt control o1r t$ sals procss' 9roucts ar not sol narb+ t$oso# co!ptitors it$r'

T$r !a+ also b spci#ic !ar%t #actors t$at ncoura& irct sllin&:

T$r !a+ b a n #or an ,prt sals #orc* to !onstrat proucts* pro1i tail pr/

sal in#or!ation an a#tr/sals sr1ic

Rtailrs* istributors* alrs an ot$r intr!iaris !a+ b un)illin& to sll t$ prouct

E,istin& istribution c$annls !a+ b o)n b+* or lin% to* co!ptin& proucrs (!a%in&

it $ar to obtain istribution b+ an+ ot$r !ans t$an irct"

Ho)1r* t$r ar si&ni#icant costs associat )it$ sllin& irct )$ic$ !a+ b $i&$r t$an

t$ costs associat )it$ usin& an intr!iar+ to &nrat t$ sa! l1l o# sals' T$r ars1ral potntial a1anta&s o# usin& an intr!iar+'

Mor ##icint istribution lo&istics


29/47

O1rall costs (1n ta%in& into account t$ intr!iaris !ar&in or co!!ission" !a+ b

lo)r

Consu!rs !a+ ,pct c$oic (i'' t$ proucts an brans o# !an+ proucrs" at t$ point

o# sal

9roucrs !a+ not $a1 su##icint rsourcs or ,prtis to sll irct'

n indirect distribution

It is t$ s+st! t$ !ar%tr rac$s t$ intn #inal usr )it$ t$ $lp o# ot$rs' T$s rsllrs&nrall+ ta% o)nrs$ip o# t$ prouct* t$ou&$ in so! cass t$+ !a+ sll proucts on aconsi&n!nt basis (i''* onl+ pa+ t$ suppl+in& co!pan+ i# t$ prouct is sol"' Unr t$is s+st!intr!iaris !a+ b ,pct to assu! !an+ rsponsibilitis to $lp sll t$ prouct'

ndirect methods include:

ingle92arty elling ystem/ Unr t$is s+st! t$ !ar%tr n&a&s anot$r part+ )$o t$nslls an istributs irctl+ to t$ #inal custo!r' T$is is !ost li%l+ to occur )$n t$ prouct issol t$rou&$ lar& stor/bas rtail c$ains or t$rou&$ onlin rtailrs* in )$ic$ cas it is o#tnr#rr to as a tra sllin& s+st!'

ultiple92arty elling ystem

T$is inirct istribution s+st! $as t$ prouct passin& t$rou&$ t)o or !or istributors b#orrac$in& t$ #inal custo!r' T$ !ost li%l+ scnario is )$n a )$olsalr purc$ass #ro! t$!anu#acturr an slls t$ prouct to rtailr


30/47

-ew distribution channels

2ro>ect hakti

T$is !ol crats a s+!biotic partnrs$ip bt)n HUL an its consu!rs' Start in t$lat @* 9ro2ct S$a%ti $a nabl Hinustan L1r to accss * o# Inia0s >*

1illa&s 'HUL0s partnrs$ip )it$ Sl# Hlp Groups(SHGs" o# rural )o!n* is bco!in& an,tn ar! o# t$ co!pan+0s opration in rural $intrlans' 9ro2ct S$a%ti $as alra+

bn ,tn to about @ stats An$ra 9ras$* 3arnata%a* Gu2arat* Ma$+a 9ras$*Ta!il Nau* C$attis&ar$* Uttar 9ras$* Orissa* 9un2ab* Ra2ast$an* Ma$aras$tra an


31/47

toa+' It alra+ $as about s1ral la%$ consultants all inpnnt ntrprnurs*train an &ui b+ HLN0s ,prt !ana&rs' HLN $as alra+ spra to o1r to)ns an citis* co1rin& o# t$ urban population* bac% b+ @ o##ics an @sr1ic cntrsacross t$ countr+' It prsnts a ran& o# custo!is o##rin&s in Ho! = 9rsonal Car an Foos'

T$ N) Co!pnsation plan #or HLN partnrs pro1is n) ,citin& )a+s o# arnin&substantial inco! in aition to o##rin& r)ars li% r1nu s$arin& t$rou&$ t$inno1ati1 concpt o# VpoolsW Mot$r Dpot an 5ust in Ti! S+st! In orr torationalis t$ lo&istics an plannin& tas%* an stp $as bn t$ #or!ation o# t$ Mot$r Dpot an 5ust in Ti! S+st! (MD 5IT"' Crtain C=FAs )r slct across t$ countr+ to act as!ot$r pots' Eac$ o# t$! $as a !ini!u! nu!br o# 5IT pots attac$#or stoc% r-uir!nts' All brans an pac%s r-uir #or t$ st o# !ar%ts )$ic$ t$ MDan 5ITs sr1ic in a &i1n ara ar snt to t$ !ot$r pot b+ all !anu#acturin& units'

T$ 5ITs ra) t$ir r-uir!nts #ro! t$ MD on a )%l+ or bi )%l+ basis' L1ra&in& In#or!ation tc$nolo&+ HUL custo!rs ar sr1ic on continuous rplnis$!nt' T$is is possibl bca

us o# IT conncti1it+ across t$ ,tn suppl+ c$ain o# about @* supplirs* #actoris an * stoc%ists' T$is sop$isticat nt)or% )it$ its 1oic an ataco!!unication#acilitis $as lin% !or t$an @ locations all o1r t$ countr+* incluin& t$ $a o##ic* branc$ o##ics* #actoris* pots an t$ %+ ristribution stoc%ists' T$+ $a1 also co!bin bac%n

procsss into a co!!on S$ar Sr1ic in#rastructur* )$ic$ supports t$ units across t$countr+' All t$s initiati1s to&t$r $a1

n$anc oprational ##icincis* i!pro1 t$ sr1ic to t$ custo!rs an $a1 brou&$tus closr to t$ !ar%tplac' RS Nt Initiati1: T$ RS Nt initiati1* launc$ in @* ai!sat connctin& Ristribution Stoc%ists (RSs" t$rou&$ an intrnt bas s+st!' It no)co1rs stoc%ists o# t$ Ho! = 9rsonal Car businss an Foos = B1ra&s in closto @ to)ns an citis' To&t$r t$+ account #or about o# t$ co!pan+0s turno1r'RS Nt is on o# t$ lar&st B@B co!!rc initiati1s 1r unrta%n in Inia'It pro1is lin%a&s )it$ t$ RSs o)n transaction s+st!s* nabls !onitorin& o# stoc%san sconar+ sals an opti!iss RSs orrs an in1ntoris on a ail+ basis t$rou&$ onlin intraction on orrs* spatc$s* in#or!ation s$arin& an !onitorin&' T$ IT po)r s+st!$as bn i!pl!nt to suppl+ stoc%s to ristribution stoc%ists on a continuousrplnis$!nt basis' Toa+* t$ sals s+st! &ts to %no) 1r+ a+ )$at HUL stoc%ists$a1 sol to al!ost a !illion outlts across t$ countr+' In#or!ation on sconar+ sals is no) a1ailabl on RS Nt 1r+ a+' RS Nt is part o# 9ro2ct Lap' 9ro2ct Lap b&ins )it$ t$

supplir runs t$rou&$ t$ #actoris an pots an rac$s up to t$ RSs' T$is nsursHULs &ro)t$ b+ nsurin& t$at t$ ri&$t prouct isa1ailabl at t$ ri&$t plac in t$ ri&$t -uantitis an at t$ ri&$t ti! in t$ !ost cost##cti1 !annr' Lap also ai!s at rucin& in1ntoris an i!pro1in& ##icincis ri&$tt$rou&$ t$ ,tn suppl+ c$ain' RS Nt $as co! as a #orc !ultiplir #or HUL


32/47

sc$ulin&' HUL c$os t$ A,a iCollaboration suit #or #acilitatin& cntrali. !onitorin&o# t$ SCM* li1 custo!r 7supplir collaboration* an int&ratin& !an an istribution

plannin& )it$ prouction sc$ulin&'


33/47

Total nu!br o# RS in 5a!s$pur X > (at Sa%c$i* Bistupur* 9arsui$"' T$is is &oin& tob ruc toonl+ on )it$ ##ct #ro! n,t !ont$ o# t$is +ar' Sals Mar&in: ' )$ic$ incluscas$ iscount* ntal ,pnss' Mos o# transport us: Ric%s$a)* t!po' Incnti1 sc$!s:B#or @ $olia+ pac%a&s an tours but a#tr @ no non !ontar+ incnti1 #or RS'So#t)ar s+st!s an In#or!ation S+st!: UNIF; '> (D1lop b+ IBM = CMC"' T$is

so#t)ar ns to b s+nc$roni. ail+ an t$ s+st! upats an+ in#or!ation7 incnti1sc$!s 7 sals #i&urs tc to an #ro! t$ co!!on s$ar plat#or!' Aras o# Oprations: Mar% #or ac$ o# t$ RS' Sllin& Oprations: RSs slls t$ &oos to


34/47

incras purc$asin& po)r o# t$ rural population' HULs istribution nt)or% in ruralInia alra+ irctl+ co1rs about * 1illa&s* rac$in& about @ !illion consu!rst$rou&$ about * sub stoc%ists'

I!pl!ntation o# suppl+ c$ain s+st! t$at conncts stoc%ists across t$ countr+* an alsoinclus a bac% n s+st! connctin& supplirs* all co!pan+ sits an strtc$in& ri&$t up to

stoc%ists' IT tools $a1 bn plo+ #or conncti1it+ across t$ ,tn suppl+ c$ains'Bac%n procsss $a1 bn co!bin into a co!!on S$ar Sr1ic in#rastructur'Launc$in& o# 9ro2ct S$a%ti t$rou&$ )$ic$ t$ co!pan+ is abl to ,tn its oprations in1illa&s' HUL $as also inclu s1ral NGOs an stat &o1rn!nts as t$ initiati1 $lpsrural )o!n to i!pro1 t$ir #inancial position'Launc$in& o# HUL Nt)or% to l1ra& t$ c$annl o# irct sllin& b+ prsntin& custo!iso##rin&s in $o! an prsonal car an #oo cat&oris' Start in @>* it alra+ $as a

bas o# >* consultants across t$ countr+'Startin& o# #ranc$is La%! Baut+ Salons an A+us$ T$rap+ cntrs to o##r stanaris

sr1ics* in lin )it$ t$ strat&+ to l1ra& t$ -uit+ o# its brans t$rou&$ rl1antsr1ics'

Finin& out Inno1ati1 )a+s to rac$ out to its consu!rs* particularl+ in rural aras b+l1ra&in& non con1ntional !ia li% )all paintin&s* cin!a 1ans* )%l+ !ar%ts ($aats"*#airs an #sti1als'Initiatin& t$ concpt o# Supr ?alu Stors (S?S" in urban aras to partnr traitional stors

to pro1i a ran& o# sr1ics ran&in& #ro! !ana&in& t$ir in1ntor+ to sttin& up 9OS(point o# sal" bannrs' In aition to t$is* to boost up traitional rtail in t$ #ac incrasin&in roas !a b+ lar&* !orn rtailin& c$ains li% Spncrs* Rlianc Frs$ tc ()$rHUL is s-u. $arr #or iscounts"* HUL start rstructurin& so! o# t$ slct S?Ssinto t$ #or! o# sl# sr1ic rtail s$ops a la !orn rtails' T$is is to protct = !aintain t$co!ptiti1 a1anta& t$at HUL $as o1r its bi&&st co!ptitors in t$ ot$r !ar%ts ('&'*9=G"* )it$ its 1r+ p istribution rac$ t$rou&$ traitional rtail'Launc$in& t$ Unicar sc$! )it$ up!ar%t p$ar!acis an rtailrs to sal its pr!iu!

brans'Unrta%in& s1ral initiati1s #or traitional c$annls in orr to i!pro1 its capabilitis at

t$ #ront n b+ 1lopin& s%ills #or stoc%ists0 sals #orc' Unr 09ro2ct Dronac$ar+a0* t$FMCG !a2or continuousl+ i!part trainin& to o1r * stoc%ist sals!n'Launc$in& o# s1ral pro!otional sc$!s #or ,istin& )$olsalrs an istributors' For

instanc* it $as start t$ ?i2ta Ris$ta 5t 3a sc$! last +ar to pro1i a plat#or! #ort$ )$olsalr an HUL to &ro) t$ businss b+ arnin& points an r!in& t$!'

$ield $orce anagement

T$ )or%in& c+cl o# a t+pical HUL #il #orc !!br is #ro! @st o# 1r+ !ont$ to t$ @t$ o# t$ n,t !ont$' Durin& t$is prio $ is &i1n 1arious tar&ts t$at $lps to ac$i1co!pan+ ob2cti1s an &i1s $i! a c$anc to pro1 $is pr#or!anc rlati1 to ot$r'To start )it$ t$ #il #orc !!br is &i1n a particular ara an $is rsponsibilit+ is tocatr to all t$ rtailrs in t$at ara'


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>' Focus (Ma, points X '"' FCS (Ma, 9oints X '"

ECOSECONDAR;FCS

FOCUSZOC

Sconar+ Sal Bas on t$ opratin& ara* ac$ !!br is &i1n a spci#ic tar&t intr!s o# 1alu ('&'* Rs' lacs" #or t$ opratin& !ont$ (@st @t$ o# n,t !ont$"' I#$ ac$i1s o# t$ tar&t $ &ts @' points* i# $ ac$i1s J tar&t $ &ts '

points' T$s points ar us to a to t$ total ZOC scor as )ll as lin% to !ontar+ incnti1'

ECO 7


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I# ZOC scor \ ' T$ prson is li&ibl #or star a)arI# ZOC scor \ T$ prson is li&ibl #or star a)arI# ZOC scor \ >' T$ prson is li&ibl #or > star a)ar

In t$ 1nt o# ,cptional pr#or!anc* !ana&!nt rprsntati1s #ro! t$ r&ional o##icco! to t$ .onal o##ic to istribut t$ a)ars' T$ p$oto&rap$ o# t$ a)ar )innrs is ispla+in t$ o##ic as a sourc o# inspiration #or ot$r sals prson'

Tar&t Sttin& Mc$anis! an !onitorin&T$ r&ional o##ic !onitors t$ pr#or!anc o# 1arious .ons' A t$orou&$ anal+sis is on at t$n o# ac$ !ont$ an bas on t$at t$ )a% proucts ar inti#i or t$os #or )$ic$ t$!an $as )a%n' T$is is t$ basis o# sttin& ECO an FOCUS tar&ts #or t$ #il prsons' Eac$#il prson is &i1n a pal!top )$rin $ can # t$ ntris on t$ spot )$r t$ transaction ison' T$is sol1s basicall+ t$ t)o purposs a" T$ #il prson is #r #ro! t$ tious tas% o# !aintainin& cu!brso! rcors an can t$nconcntrat on t$ 2ob (t$us IT is rplacin& so! o# t$ #il #orc or ot$r c$annl !!brs"*

b" T$ sol it! is i!!iatl+ upat in t$ co!pan+ in#or!ation s+st!'

Analytical $ramework

Inian consu!rs' T$is ac$i1!nt is u to

t$ s$r strn&t$ o# its istribution nt)or% (proucts s$oul b&oo as al)a+s* ot$r)is t$+ )ill #in no bu+rs in t$ lon& run"' For a co!parison* 9=G*)orls lar&st FMCG !a2or* os not #in its na! in t$ list o# top FMCG !a2ors in Inia as its strn&t$ lis in !ana&in& !orn rtail (bi&&st ,a!pl*


37/47

For a countr+ as &o&rap$icall+ i1rs as Inia* pan Inian prsnc = !ar%t lars$ipcanonl+ b possibl )$n proucts rac$ 1n t$ r!otst parts o# t$ countr+' HUL is 1r+succss#ul in ac$i1in& an !aintainin& t$is rac$ u to its istribution nt)or%'= $reEuency of 2urchase

I# t$ #r-unc+ o# purc$as is $i&$* t$n transport intnsit+ in Vt$ last !ilW (i''* #ro!

istributor to rtailrs" incrass !ani#ol' For FMCG proucts* as a t$u!b rul ) can ta% t$att$ !an ti! bt)n t)o purc$ass is ] J a+s' !illion outltsacross Inia' Sinc !anu#acturin& is on at plants aroun t$ countr+* rationali.in& t$ lo&isticsan plannin& is a $u& tas%' An inno1ati1 stp in t$at r&ar $as bn t$ #or!ation o#

t$ Mot$r Dpot an 5ust in Ti! S+st! (MD 5IT"'

Crtain C=FAs )rslct across t$ countr+ to act as !ot$r pots' Eac$ o# t$! $as a !ini!u! nu!bro# 5IT pots attac$ #or stoc% r-uir!nts' All brans an pac%s r-uir #or t$ st o#!ar%ts )$ic$ t$ MD an 5ITs sr1ic in a &i1n ara ar snt to t$ !ot$r pot b+all !anu#acturin& units' T$ 5ITs ra) t$ir r-uir!nts #ro! t$ MD on a )%l+ or bi)%l+ basis an suppl+ to stoc%ists in t$at ara* )$o* in turn* suppl+ to rtailrs'

F Tendency to 2ostpone 2urchase

I# t$ tnnc+ to postpon purc$as is lssr* t$n t$ prouct )ill b asir to istribut'For ,a!pl* proucts7sr1ics li% Fir E,tin&uis$rs* Li# Insuranc tc' ar suc$ t$at t$ou&$t$s ar n* t$ o1rall tnnc+ #or t$ consu!rs is to postpon t$ purc$ass t$s proucts7sr1ics can b tr! as Vncssar+ 1ilW' For t$is %in o# proucts*r&ular rin#orc!nt in t$ !ins o# consu!rs bco!s ncssar+* sals #il #orc

bco!s critical an us o# V,prtW #il #orc is co!!onplac' I!plication #or HULSinc FMCG proucts ar us r&ularl+ an t$s proucts ar not Vncssar+ 1ilsW*istribution nt)or% o# HUL os not r-uir an+ ,prt #il #orc to sll its proucts'Onl+ t$ rcnt i1rsi#ication o# HUL into Ho!


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Rtailrs ROI XInvestmentRotationin

M^ar&

For a FMCG pla+r )it$ a non stablis$ bran* !ar&ins to c$annl !!brs an point o# sal(9OS" a1rtisin& ar bot$ i!portant' I!plication #or HUL As HUL n2o+s lars$ip position in !an+ FMCG s&!nts li% Soaps* Dtr&nts* 9rsonal Car proucts tc )it$ stron& brans )it$ continuous VpullW* HUL $as lss to )orr+ about !ar&ins to c$annl !!brs or 9OS a1rtisin&' Butt$is situation can c$an& consirabl+ in t$ #ac o# ris o# a si&ni#icant co!ptitor $a1in& al!ost t$ sa! rac$ as HUL $as ('&'* ITC as its atin& into HULs !ar%t s$ar continuousl+ sinc it ntr FMCG s&!nt"'G 2urchased on mpulse

T$ i!puls purc$as proucts li% c$ocolats* to##s* colas* ic cra!s tc' #ollo) Sa+s La)

)$ic$ stats t$at VSuppl+ Crats D!anW* i!pl+in& a1ailabilit+ o# t$s proucts ar t$ !ostcritical aspct #or t$s to b sol an consu!' T$is strsss on t$ #act t$at T=L #or t$s

proucts bco!s 1r+ i!portant'I!plication #or HUL HUL $as onl+ on prouct in t$is i!puls purc$as cat&or+ 3)alit+


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For FMCG &oos* rol o# ,prt in#luncr is li!it' But co!panis tr+ to associat brans )it$r&ulator+ bois7aut$oritis an s$o) a1rtisin& )it$ ,prts co!!ntin& upon suprior1irtus o# a prouct in an att!pt to !a% t$ bu+in& b$a1iour s$i#t #ro! pic%in&71arit+ s%in& to subcontract an !a% consu!rs !or lo+al to t$ bran' T$s ar tru #or HUL also('&'* 9ons Intitut"'

;


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; $ungibility

Fun&ibilit+ is t$ proprt+ o# a &oo or a co!!oit+ )$os ini1iual units ar capablo# !utual substitution' E,a!pls o# $i&$l+ #un&ibl co!!oitis ar cru oil* )$at* oran&

2uic* prcious !tals* an currncis' Fun&ibilit+ $as not$in& to o )it$ t$ abilit+ to,c$an& on co!!oit+ #or anot$r i##rnt co!!oit+' It r#rs onl+ to t$ as o# substitution

o# on unit o# a co!!oit+ )it$ anot$r unit o# t$ sa! co!!oit+ #or all intnts an purposs'Fun&ibilit+ is i##rnt #ro! li-uiit+' A &oo is li-ui an traabl i# it can basil+ ,c$an& #or !on+ or #or anot$r i##rnt &oo' A &oo is #un&ibl i# on unito# t$ &oo is substantiall+ -ui1alnt to anot$r unit o# t$ sa! &oo o# t$ sa!-ualit+ at t$ sa! ti! an plac' It is sai t$at co!!oitis ar #un&ibl* &oostan&ibl* sr1ics intan&ibl* ,princs !!orabl = trans#or!ations ar ##ctual' As an,a!pl* on Rs' 7 ban% not is intrc$an&abl )it$ anot$r' Cas$ is #un&ibl' A

barrl o#


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;I !alueB!olume +atio (!alue Density) of the 2roduct

T$is ratio is 1r+ i!portant #or bot$ t$ co!pan+ an t$ rtailr #or its t)o critical aspcts T=L cost an rtailr ROI7s-' c! (rtailrs ar actuall+ in ral stat businss in tru sns"'Hi&$r t$ ratio* bttr it is #or bot$ co!pan+ an t$ rtailr as $i&$r ratio si&ni#is lssr T=Lcost pr unit 1olu! transport #or t$ co!pan+ an &ratr ROI pr unit o# s$l# spac #or t$rta

ilr' i!plication #or HUL In &nral #or FMCG &oos an #or HUL as )ll* 1alu nsit+ is rlati1l+ lo)r' In aition to t$is #act* incrasin& trn to)ars usin& s!allr pac% si.s incrass t$ pac%a&in& nsit+ (incras pac%a&in& nsit+ incras cost to so! ,tnt* but #a1ours !c$ani. $anlin& &ratl+* rucin& $anlin& costs"' Sinc 1alu nsit+ is lss* transportation costs )ill b $i&$r an t$us it is o# cono!ic sns to $a1 !anu#acturin& plants locat closur to !a2or !ar%ts'T$is is t$ rason HUL $as 1arious !anu#acturin& plants ( in totalit+" locat across Inia' T$is is a pointr to t$ #act !ost o# t$ !a2or FMCG pla+rs (incluin& HUL" us contract!anu#acturin& isprs across t$ &o&rap$ic spra so as to lo)r transportation costco!ponnt'G $inancial Analysis


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proucts )$ic$ constitut appro,' o# its sals* all rlat to Vinto,icationW or$abitual consu!ption pattrns $a1in& intnsl+ bran lo+al consu!rs an t$us al!ost noa1rtisin& (surro&at a1rtisin& is on" is n it$r to ra##ir! t$ brans orintrouc n) consu!rs to t$ brans (t$r is r&ulator+ an&l as )ll"'Currnt consu!rs o# t$s tobacco proucts ar t$ bi&&st a1rtisin& a&nts t$at ITC $asan o# cours* t$+ o it 1oluntaril+ an )it$out %no)in& )$at t$+r oin&' But )$il

!o1in& #astr into non tobacco

FMCG businss riin& $i&$ on its strn&t$ o# istributionnt)or% !atc$in& or surpassin& in so! cass t$at o# HUL* ITC $as start a&&rssi1a1rtisin& ca!pai&ns (VFia!a Di : Mar%tin& E,pnss as prcnta& o# Salsarketing .8penses as J to ales'@''''' 'J ''>J'''>@'

@'''''@''''HUL Nir!a Dabur Col&at/9al!oli1 Rc%itt

Bnc%isr 9=GHo! Gor2 E!a!i 9=GH+&in =


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Halt$Hr ) s t$at t$ !ar%tin& ,pnss o# HUL ar a!on& t$ lo)st in t$ !ar%t (onl+ t$ scon lo)st a#tr Col&at 9al!oli1 )$ic$ $as 1r+ &oo bran pull #or its VCol&atWtoot$pasts"' T$is pro1s t$at HUL is abl to !aintain consirabl bran pull t$rou&$ a1rtisin&'ITC a&ain co!s a!on& t$ lo)st its tobacco proucts r-uir 1r+ littl pus$ an $a1 1r+ $i&$ rotations' Also* ITC !ostl+ als )it$ s!all rtailrs an istributors (paan ci&artt s$ops o)

nrs" )$o $a1 !ar&inal bar&ainin& po)r'Anot$r r1lation is t$at Hn%l* )$ic$ $as .ro a1rtisin& ,pnitur* $as t$ $i&$st !ar%tin& ,pnss a!on& all ot$rs' But t$is strat&+ to pus$ t$ proucts t$rou&$ t$ c$annl partnrs!a+ not b a &oo on #or Hn%l as it !i&$t b losin& out #or t$ lac% o# 1isibilit+ an t$usconsu!r !in s$ar an brans suc$ as Mar&o* Fa* N! toot$past tc ar losin& out in t$!ar%t' Furt$r* it is also a pointr to t$ #act t$at Hn%ls lar&st businss s$ar is in inustrial

c$!icals (a$si1s* salants '&'* popular bran VLoctitW4 t$is s&!nt constitut ]o# )orl)i sals o# Hn%l" an #or B@B* a1rtisin& pr s is not t$at !uc$ i!portant'For B@B * i!portant is irct sllin& approac$* )$ic$ &nrall+ r-uirs n&otiations*1olu! iscounts tc* )$ic$ ar r#lct in $i&$st !ar%tin& ,pnss (as prcnta& to sals" co

!par to ot$rs' 9=G is in bt)n t$ ,tr!s an )it$ consirabl a1rtisin&,pnss also* it is unabl to crat su##icint pull #or its proucts in Inia (as 1inc

b+ t$ #act t$at !ar%tin& ,pnss ar also rlati1l+ $i&$r" or its &ttin& stuc% #or t$lac% o# su##icint istribution !uscl a la HULin traitional rtail in Inia an su##rs #ro! lac% o# rac$ an a1ailabilit+ at t$ n consu!r l1l' As !ntion arlir* bot$ Col&at 9al!oli1 an Rc%itt Bnc%isr bot$ n2o+s 1r+&oo bran lo+altis an !ar%t lars$ip #or t$ir %+ brans li% Col&at toot$pastsan Dttol (_ in antisptics"* Hrpic* Mortin tc' T$is is corroborat b+ t$ #act t$at t$s co!panis $a1 so! o# t$ lo)st !ar%tin& ,pnss (as prcnta& to sals" in t$ &roup* as s$o)n in t$ c$art' Distribution E,pnss Distribution ,pnss inclu t$ out)ar #ri&$t cost to t$ co!pan+' E,$ibit : Distribution E,pnss as prcnta& o# SalsDistribution .8penses as J to ales'J '>'@'@'J'>>'@'>'>'

'@@@'''@'>''''''

HUL Ni r!a Dabur Col &at/9al!oli 1 Rc%ittBnc%isr 9=G


44/47

Ho! Gor2 E!a!i 9=GH+&in =Hal t$Hn%l Hn%lMar%tin& ITC

Distribution .8p asJ to ales


45/47

TCITC is on o# Inia0s #or!ost pri1at sctor co!panis )it$ a !ar%t capitalisation o# narl+ US

J billion an a turno1r o# o1r US billionITC $as a i1rsi#i prsnc in Ci&artts*Hotls* 9aprboars = Spcialt+ 9aprs* 9ac%a&in&* A&ri/Businss* 9ac%a& Foos =Con#ctionr+* In#or!ation Tc$nolo&+* Bran Apparl* 9rsonal Car* Stationr+* Sa#t+Matc$s an ot$r FMCG prouctsITC0s i1rsi#i status ori&inats #ro! its corporat strat&+ai! at cratin& !ultipl ri1rs o# &ro)t$ anc$or on its ti!/tst cor co!ptncis:un!atc$ istribution rac$* suprior bran/builin& capabilitis* ##cti1 suppl+ c$ain!ana&!nt'

The 2roduct9i8$C%

Ci&arttsFoosLi#st+l rtailin&9rsonal CarStationr+Sa#t+ Matc$sA&arbattiHotlsA&ri/businss9aprboar an 9ac%a&in&In#or!ation Tc$nolo&+

The CompositionManu#acturin& Unit

Sparat #or ac$ prouct linContract Manu#acturin&Bac%)ar Int&rationE/C$aupalStora& HubsStors all t$ proucts

DistributorsE,clusi1 bas on populationNs to stoc% all FMCG proucts( E,cpt Stationr+"


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Dpst pntration possibl

uitability9ris$ablS$ort Span

Custo!rs pr#r #rs$ prouctsLot Si.S!allr Lot si.sCon1nincectivesConsu!r B$a1iorZualit+ Conscious

Con1ninc &oos* Ns Intnsi1 istributionD!ans 1arit+?r+ lss )aitin& ti!Co!pan+ Ob2cti1sRac$ !asssRural pntrationDi1rsi#icationCo!ptiti1 a1anta&Altrnati1sSll ra+ to at proucts t$rou&$ s)t s$ops li% bi%anr)alaS$o)roo!s #or Hi&$/En proucts

E/C$aupal

$eaturesSlctionDistributor is slct bas onIn#rastructurs* Dli1r+ ?an* Co!putr*


47/47

1enefitsrarl+ Cas$ &i#ts (lin% )it$ pr#or!anc"* Ot$rs* Orr Distributors/

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38538121 Role of Distribution Channel in FMhiCG Sector