Changing trends of fmcg report (dharm project)

A
RESEARCH REPORT PROJECT
ON
“CHANGING TRENDS OF FMCG IN INDIA”
For The Partial Fulfilment Of The Degree of Masters in
Business Administration Awarded By UPTU.
(Affiliated to Uttar Pradesh Technical University, Noida)
(2012 – 2014)
MANGAL MAY INSTITUTE OF
MANAGEMENT & TECHNOLOGY
SUBMITTED TO: SUBMITTED BY:
Prof. SANDEEP SHARMA Ravi Kumar
(MARKETING) Roll No.-1215270064

Declaration
I, Ravi Kumar a bonafide student of MIMT, GR. NOIDA. I hereby declare that the
research title “CHANGING TRENDS OF FMCG IN INDIA”, has been done by the
undersigned with full devotion for partial fulfilment of degree of M.B.A.
I also declare that the facts mentioned are true to date and best of my knowledge; any
discrepancies have been avoided for the same.
Ravi Kumar
2

ACKNOWLEDGEMENTACKNOWLEDGEMENT
Behind every study there stands a myriad of people whose help and contribution make it
successful. Since such a list will be prohibitively long, I may be excused
for important omissions.
I would like to express my heart-felt gratitude to my faculty Prof. SANDEEP
SHARMA , for his invaluable guidance and encouragement.
I would also like to record my sincere gratitude to all those who have helped us directly
or indirectly in the fulfillment of this study.
Ravi Kumar
3

SYNOPSIS
The study taken up by us pertains to the study Dynamics of distribution of FMCG
industry. We have tried to study and understand the ideologies of the distribution with
regards to FMCG sector and further how much interaction is there, how much feed back
is there, how much successful are the companies in utilising distribution network in
boosting the sales and establishing its brand equity.
The project can be divided in two parts. In the first part – the current or the present
status of distribution, its changing face and the transition from push to pull environment
and lastly current distribution set up of FMCG sector is studied by means of literature
survey.
In the second part -we visited companies like HLL, AMUL, NESTLE, and
BRITANNIA and administered questionnaires to the executives of the concerned
department and studied the distribution set-up of the respective company. Secondly also
studied the implication of the companies in near future i.e. in the era of globalisation
and IT. This part was cumbersome as nothing was organised and as such I had to go in a
random fashion.
On a whole it was a good learning experience, as one is able to understand distribution
dynamics not with the help of books but with the help of real learning – in the real
world.
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TABLE OF CONTENTS
Topic Page No
1. DECLARATION......................................................2
2. ACKNOWLEDGEMENT...........................................3
3. SYNOPSIS...................................................................4
4. TABLE CONTENTS......................................................5-6
5. INTRODUCTION............................................................7-16
6. LITERATURA SURVEY....................................................17-18
7. CHANGING FACE...............................................................19-28
8. FMCG SUPPLY CHAIN.........................................................29
9. DATA PREPRATION ANALYSIS..............................................30-44
10. COMPANY OF FMCG ............................................................45-75
11. FEATURE STRATEGIS.............................................................76-83
12. OBJECTIVE..................................................................................84
13. RESERCH METHOLOGY...............................................................85-87
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14. LIMITATION.....................................................................................88
15. DATA ENTERPRETATION..............................................................89-103
16. FINDING..........................................................................................104-105
17. CONSULATION..............................................................................106
18. SUGGETION.....................................................................................107-108
19. BIBLOGRAPHY...............................................................................109-110
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INTRODUCTION
RATIONALE FOR CHOOSING THE PROJECT
In the current business environment, which appears to be difficult and
unpredictable, Indian industry has found a new avenue to pin its hopes on. Supply chain
and logistics management are suddenly under close scrutiny. Between them, they offer
companies the best way to sustain their businesses in rough times. Thus studying and
evaluating one of the aspect of supply chain management i.e. Distribution and that too
of the industry, which is a key component of India’s GDP and is a significant direct and
indirect employer, is worthwhile. Having an excellent distribution network is one of the
strengths of this FMCG sector, so we tried to carry out an in-depth study in dynamics
of distribution in FMCG industry with its relevance in the new millennium.
WHAT IS FMCG?
FMCG refers to consumer non-durable goods required for daily or frequent use.
Typically, a consumer buys these goods at least once a month. The sector covers a wide
gamut of products such as detergents, toilet soaps, toothpaste, shampoos, creams,
powders, food products, confectioneries, beverages, and cigarettes.
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Typical characteristics of FMCG products
 Individual items are of small value. But all FMCG products put
together account for a significant part of the consumer's budget.
 The consumer keeps limited inventory of these products and prefers to
purchase them frequently, as and when required. Many of these
products are perishable.
 The consumer spends little time on the purchase decision. Rarely does
he/she look for technical specifications (in contrast to industrial goods).
Brand loyalties or recommendations of reliable retailer/ dealer drive
purchase decisions.
 Trial of a new product ie brand switching is often induced by heavy
advertisement, recommendation of the retailer or neighbours/ friends.
 These products cater to necessities, comforts as well as luxuries. They
meet the demands of the entire cross section of population. Price and
income elasticity of demand varies across products and consumers
8

The FMCG sector has been the cornerstone of the Indian economy. Though, the
sector has been in existence for quite a long time, it began to take shape only during the
last fifty-odd years. To date, the Indian FMCG industry continues to suffer from a
definitional dilemma. In fact, the industry is yet to crystallize in terms of definition and
market size, among others. The sector touches every aspect of human life, from looks to
hygiene to palate. Perhaps, defining an industry whose scope is so vast is not easy.
After witnessing booming sales and flooding markets with innumerable
products, FMCG companies have had to abruptly apply the brakes and look for various
ways to save costs. The RS. 52,000 crore (listed companies) FMCG industry in India,
which has been on a roll for many years, faces tough times ahead, although many
segments still shows good growth.
Fast Moving Consumer Goods (FMCG) goods are popularly named as
consumer packaged goods. Items in this category include all consumables
(other than groceries/pulses) people buy at regular intervals. The most common
in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products,
shoe polish, packaged foodstuff, and household accessories and extends to
certain electronic goods. These items are meant for daily of frequent
consumption and have a high return. The Indian FMCG sector is the fourth
largest sector in the economy with a total market size in excess of US$ 13.1
billion.It has a strong MNC presence and is characterised by a wellestablished
distribution network, intense competition between the organised and
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unorganised segments and low operational cost. Availability of key raw
materials, cheaper labour costs and presence across the entire value chain
gives India a competitive advantage. The FMCG market is set to treble from
US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. Penetration level as well as
per capita consumption in most product categories like jams, toothpaste, skin
care, hair wash etc in India is low indicating the untapped market ...
10

TRENDS
Global Concentration
Major global consumer product companies (such as Unilever, P&G, Colgate,
Nestle, Heinz) have a lion's share of the global market. These companies have been
established for a very long time and possess a clutch of strong brands with proprietary
technology. Most of these companies are cash rich and well managed. Their brands
generate strong cash flows and allow them to reinvest in strengthening their brand
equity further, with continued promotions/ advertisements. (Harvard Business Review,
Sept-Oct, 2004) They also have the financial clout to acquire small local brands to
strengthen their position in the category. These companies also make considerable
investment in R&D to sharpen and maintain their edge in the business.
Growth Is In The Third World
Most of the global majors have their origins in Europe or USA. They find their
home markets saturated and are banking on the third world for future growth. These
companies are setting up shop and are aggressively expanding their base in these
countries. They also look out for opportunities to acquire local brands to push start or
consolidate their position in these markets. (www.web-enable.com/industry/enabling-
scm.asp)
Value For Money
During the last 4-5 years, particularly after reduced consumer spending during
the global recession, the new buzz word is value for money. FMCG companies globally
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have embarked upon major re-structuring/ cost cutting exercises as the business has
become fiercely competitive. Also, several innovations in packaging media have taken
place. (CMIE reports)
Adapting To Local Conditions
In the last few years, process of adapting to local conditions has accelerated.
MNCs are adapting their products, process and marketing communication to the local
conditions. They alter the manufacturing process to maximize use of local raw materials
and suit their products to the taste and requirements of local consumers. This process
has been necessitated by the imperative to be cost effective and be competitive vis-a-vis
strong local players.
Packaging
The role of packaging has increased significantly in recent times, partly due to
improvement in packaging technology. Traditionally, packaging was expected to serve
the purpose of protection and economy. Then, packaging was expected to fulfill the
objective of convenience. (Kotler Philip, 2003)Today, packaging is used as an effective
tool for promotion. Besides, new packaging technology has enabled most FMCG
companies to significantly reduce their packaging costs.
Rural distribution
Increased focus on rural distribution has increased logistics spend for the leading
companies.
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INDIAN MARKET PERSPECTIVE
Background
At the time of independence MNCs were allowed to operate in India, but the
Indian market was too small for global MNCs. HLL had a manufacturing base, Colgate
and Nestle mainly undertook only trading activities. In the early '60s, several MNCs set
up manufacturing base in the country (www.hll.com). The government policies
continued to be protective, modelled on socialistic pattern with strong emphasis on self
sufficiency. As a result economic growth was slow (around 3.5% pa which many
economists dubbed as Hindu rate of growth) and India's share in international trade was
nominal (even today India's share in international trade is only 0.6%). Slow growth was
aggravated by major set backs in the late 60's due to drought and in the early 70's due to
oil shock. The new Government in power reserved several product categories for small-
scale. It also forced MNCs to dilute their equity stake to 40% or leave the country. IBM,
Coca-Cola and several others decided to leave. Amongst major MNCs, Unilever (HLL)
was the only one which managed to retain 51% foreign stake by complying with the
Government conditions of minimum 10% export and 60% turnover from priority
sectors. Thus HLL got into the business of fertilizer and chemicals. In the '80s, when the
underlying factors for the economy were strong such as major oil discovery at Bombay
High, satisfactory monsoon, stable oil prices etc, the economic growth averaged 5% pa,
much lower than its potential. (www.hll.com) Several FMCG products such as toiletries
and cosmetics which are essentially mass consumption items, became luxury products
due to exorbitant burden of excise duties, sales tax (which added up to over 150% on
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basic price). Local players sans technology and capital were not able to provide good
quality products. (www.hydepages.com/news)
Liberalization Wave
Foreign exchange crisis in 1991 (precipitated by Kuwait war) proved to be
blessing in disguise, due to which IMF suggested reform process began. The reforms
have continued over the last few years.
The economic growth rate is averaging 5-6% pa which is likely to continue. This
growth rate in GDP will imply 4-5% volume growth in mature categories and 8-10% pa
growth in upcoming categories where penetration levels are low. More importantly, the
organized sector will witness even a faster growth at the cost of the unorganized sector.
ABOUTTHEINDUSTRYININDIA
FMCG in India has a strong and competitive MNC presence across the entire value
chain.It has been predicted that the FMCG market will reach to US$ 33.4 billion in
2015 fromUS $ billion 11.6 in 2003. The middle class and the rural segments of the
Indian population are the most promising market for FMCG, and give brand makers
theopportunity to convert them to branded products. Most of the product categories
like jams, toothpaste, skin care, shampoos, etc, in India, have low per capita
consumption aswell as low penetration level, but the potential for growth is huge.The
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Indian Economy is surging ahead by leaps and bounds, keeping pace with
rapidurbanization, increased literacy levels, and rising per capita income.The big firms
are growing bigger and small-time companies are catching up as well.According to the
study conducted by AC Nielsen, 62 of the top 100 brands are owned byMNCs, and the
balance by Indian companies. Fifteen companies own these 62 brands
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CRITICAL SUCCESS FACTORS:
FMCG business rests on the two pillars of brand equity and distribution network.
Brand Equity
 Brand equity refers to the intangible asset in the form of brand names. The
consumer's loyalty for a particular brand is due to the perception that the
product has distinctively superior and consistent quality and also satisfies
his/ her specific needs. Further provides better value for money than other
competing brands. (Kotler Philip, 2003) In FMCG products, brand equities
are relatively stronger as the consumer is reluctant to try unknown brands/
unbranded products as most of these products are for personal use. It is
often difficult to differentiate a product on technical or functional grounds
and therefore little reason to switch from a known brand. A successful
brand generates strong cash flow, which enables the owner of the brand to
reinvest a part of it in the form of aggressive advertisement/ promotion to
reinforce the perceived superiority of the brand. The worth of a brand is
manifested in the consumer’s insistence on a particular brand or
willingness to pay a price premium for the preferred brand.
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Distribution Network
 In FMCG sector, one of the most critical success factors is the ability to
build, develop, and maintain a robust distribution network. Availability
near the consumer is vital for wider penetration as most products are low
unit value products and frequently purchased. Distribution network refers
to the consumer buying points where products are available (almost
always). It takes enormous time and effort to build a chain of stockists,
retailers, dealers etc and establish their loyalties. (Poirer C. Charles, 2004)
There are entry barriers for a new entrant as a new product is typically
slow moving and has lesser consumer demand. Therefore dealers/ retailers
are reluctant to allocate resources and time. Established players use their
clout to inhibit new entrants. However, when a product offers a strong
breakthrough (such as Nirma in late 90s), equity we build up rapidly and
so does the distribution network.
Thus we see that distribution is the critical factor that at times even drives the brand
equity factor.
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 Assumption is made that views and suggestion given by the respondent are his
own perception and idea.
 The study is not free from sampling error
 Seasonal changes in sales figures may affect the quantitative data.
 My study is based on responses of executives of mentioned companies of
concerned department only, which may not give a true picture.
 Last but not the least and the most deciding factor paucity of time
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LITERATURE SURVEY
Objective: To analyse the present scenario of FMCG industry in terms of emerging
opportunities & challenges.
There is only one formula to win a 100-meter race --- run faster than the other
guys. To do that, you need to be learner and fitter than the competition. The same
applies to business as well. The only way to stay ahead in business is to be faster and
fitter. Indian business realized this clearly during the tumultuous decade of the 90’s,
which changed the rules of the game forever. No longer does any artificial wall protect
any business. In the race to get more competitive, an area that is increasingly coming
under focus is Distribution i.e. the physical movement of good. Here an attempt is made
to study aspects of distribution, along with its changing face. Further the transition from
push to pull environment is also studied. Thus in nut shell to study the current status of
distribution in FMCG industry.
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In the heydays of 1980’s the business Mantra was distribution reach. Every
distribution manager believed the way to market dominance was by reaching the
greatest number of brands to the maximum number of outlets across India (Carvalho,
2002) The large scale and geographical diversity in retail outlets spread across the
country meant that all FMCG markets needed to service a large percentage of these
outlets to really reap economics of scale. Over the period companies like HLL, Godrej,
P&G along with recent entrants like Nirma and Wipro have build their distribution
networks diligently. Distribution is the crucial success factor for FMCG, but
distribution at best cost, is vital. For Company’s like GCMMF (Maul) distribution is
literally all, since it deals in perishables like milk and milk products. For all higher
product visibility and lesser inconvenience for the customer in obtaining the product
results in more sales. (Mitra, 2003).
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CHANGING FACE
The Basic structure of FMCG supply chain has not changed in many years.
What has changed is the attitude of efficiency of each element. The end of 1990’s
revealed a different way of looking at distribution. A new movement called SCM had
been slowly redefining the distributor’s role in channel. The market was changing and
distributors were expected to corporate with suppliers and customers to decrease total
channel costs. While increasing customer expectations were nothing new, they were
unfolding at an alarming rate. The tasks required of distributors in order to satisfy
customer expectations were not necessarily the ones that distributor’s would have
chosen (Lawrence et. al. 2002)
FMCG or the Fast Moving Consumer Goods industry is also known as the CPG
(Consumer packaged goods) industry in India. This industry is named so because goods
are produced, distributed, marketed and consumed within a short span of time.
Products which are frequently purchased are examples of Fast Moving
Consumer Goods. FMCG products mainly include; toiletries, detergents, tooth cleaning
products, soaps, cosmetics, shaving products, paper products, glassware, batteries,
plastic goods and bulbs. FMCG also includes consumer electronics, pharmaceuticals,
soft drinks, packaged food products, tissue paper and chocolates.
In the year 2005, the FMCG Market in India was growing at a rapid rate of 5.3
percent. The value of the industry stood at Rs. 48,000-crore in the same year.
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Currently the FMCG Market in India is one of the biggest and is growing at a
rapid rate of almost 60 per cent. Despite the economic downturn the FMCG Market in
India currently stands at Rs.85,000 crore. The phenomenal growth of the FMCG
industry especially in the tier II and tire III cities in India is mostly due to the
improvement in the standard of living of the people of such cities and the rise in the
level of disposable income. Over the last few years companies like Dabur, HUL and
ITC have managed to change the face of the FMCG industry in India by using cutting
edge technology in production and a very strong distribution channel. Companies like
Colgate Palmolive and Britannia have also managed to penetrate into the urban areas of
the country.
The FMCG sector in India happens to be the fourth largest in the world. According to
experts this industry will reach US$ 33.4 billion by 2015. Both the organized and the
unorgaganized sectors are largely responsible for the success of the Indian FMCG
industry. The Indian FMCG market also has a well defined and established distribution
network that makes products available even in the most urban areas of the country - See
more at:
DISINTERMEDIATION MYTH
Disintermediation is the term that means elimination of distributor; it was first
suggested for distributors in the early 1990’s no a response to new technology and
increasing pressure on the supply chain to cut costs. Distributors were perceived as
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middlemen who added cost to supply chain through redundant inventory, services and
information handling. It scared logical that if suppliers and end users could “Automatic
out in efficiency” they could eliminate the distributor. This logic follows from the
reasoning that a shorter supply chain is inherently more inefficient (Narus and
Anderson, 1997).
Until recently, most distributors described their core competency as
“relationships”. The statement covers the need for the following two roles. First is that
of a channel leader, who determines where the sources of supply are and how to access
them. The second role is that of a manager of customer information for manufactures.
As such the classical relationship of these functions (Inventory management, financing
for small customer, supplying technical info) became unchanging or “frozen”, the
classic business-relationship has become “unfrozen” by business forces like Just in
Time (JIT). The technological revolution caused by the Internet and advanced
information system. (Agawam D.K, 2000). Traditional relationships are in flux. It is
unclear now new channels and new bus models will be structured. To eliminate the
distributor from supply chain, channel members must eliminate the services the
distributor currently supplies. Thus this means eliminating some services following
others. (Agawam D.K, 2000)
All in all, distributors sound like a rather noble bunch-always rising to occasion
for customer, willing to deal with uncertainty, provide flexibility and focus as customer
service (Lawrence, et. al. 2002)
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THE ECONOMICS OF DISTRIBUTION AND THE TRANSITION
The foundation for developing a successful channel arrangement rests in fully
understanding the underlying economics of distribution. The economic aspects of
channel relationships extend beyond issues of logistical operations. Several distinct
functions must be completed to achieve effective distribution. (Bowers ox Donald J. et
al, 2001)
Early scholar grouped functional requirements for effective distribution under 3
headings: Exchange, physical distribution and facilitating
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Buying
Exchange Function
Serving
Transportation
Physical Distribution Function
Storage
Standardization
Facilitating Function Market Financing
Risk Bearing
Market Information and Research
(Bowers ox Donald J. et al, 2001)
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The exchange functions involved broad activities related to buying and selling.
As such exchange concerns activities required to transfer ownership’s. The physical
distribution functions are the origin of what is referred to as logistics. The essential
activity consists of getting the right products to right place at the right time. Facilitating
functions include standardization, Market Financing, Risk Bearing and Market
Information and Research Activities. (Gattorna John, 2002)
In contemporary logistics the scope of operational concern is significantly broader than
transcending broad supply chain arrangements, logistics is viewed as encompassing all
work related to inventory positioning, which can also involve aspects of satisfying firm
and possession requirements.
Thus there is supply chain integration, below figure illustrates an overall supply chain
focussing on integrated management of all logistical operations from original supplier
procurement to final consumer acceptance. (Bowers ox & Closes, 2001).
ENTERPRISE
26
Inventory Flow
Procurement SuppliersManufacturing
Support
Physical
Distribution
Customers

CURRENT STATUS
As already started that FMCG supply chain has not charged in many years. What
has changed is the attitude and efficiency of each element. Also several new business
models have developed in the recent past like Direct Market, e tailing, B2C, B2B,
intranet and extranet (McAfee Andrew, 2004). The increasing competition in the market
place caused several changes through the chain.
FMCG (CURRENT) SCM TRENDS IN INDIA (Table #1)
Supply Chain Element Status Today Trends Towards
Retailer Dispersed, unorganised, not
much buyer power
Larger retail outlets; more number
of SKUs, concentration of buyers,
retailer power increases
SKU Variety High numbers of SKUs of
various sizes, offers and
usage
Rationalization of SKUs to
optimise costs
Inventory At Plant Push to warehouse Pull from retailers/C&Fas
SKU Analysis Time-dated Dynamic, Instantaneous & fast
corrective action
Production Planning Top down (from parent to
vendors); lots of buffer
stocks & time
Collaborative but still with some
buffer time and inventory
Manufacturing Practice Long production runs, low
overheads, fixed stations
Flexible manufacturing, short
runs, low change-over times,
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Information Flow

increased overheads
Contact Manufacturing
(Outsourcing)/Third
Party manufacturing
Contractual, opportunistic Strategic partnership, alliance,
essential cost control element
Information Aggregated at every level
and then transmitted
upwards loss of time in
reacting to change in
demand pattern
Instant transmission to hubs,
redirected to supply centres,
rather than planners; faster
response to demand change
Forecasting Historical data based;
varying levels of accuracy,
person based
ERP, trend data, qualitative field
inputs and allowance for force
majeure
Replenishment To maintain stock level, on
shelf, at stock point, at
plant
Dynamic replenishment: mix of
products replenished depends on
an array of factors, only of which
is stock
Distribution systems Traditional linear flow;
some hub and spoke
Hub and spoke at more than one
level; distributors get their goods
directly from C&FAs
Integrated Data Systems ERP used internally ERP used with supply chain
planning to improve throughput
and efficiencies
Technology E-mail, Fax, Telephones V-SATs, leased lines, mobile
ordering & automatic
Source: ETIG, L&SCM 2007
The emergence of the Internet, ERP systems and contract manufacturing are
important trends in India. Each has a clear implication for the FMCG supply chain. All
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the FMCG companies list logistics above all other issues like price, how to get the
product at the right time, in the right quantity, assortment and best cost is the challenge
of FMCG logistics.
The supply chain concept in the FMCG business in India really took root during
the downturn of the industry in 1999. A look at the FMCG industry growth trends in
distribution, raw materials, finished goods and ad spends clearly shows that the
industry, while undergoing strong fluctuations in all aspects, never really suffered a de-
growth. 2001, while net margins grew by 9 per cent, distribution expenses grew by 9 per
cent, but still 60 per cent lower than 2003.
(www.indiainfoline.com/fmcg/stma/st35.html)
In other words, the same distribution set up was giving an increase in net
margins. Most companies confirm they had initiated cost cutting measures, but heading
the list was control of supply chain costs. Other measures included longer credit periods
to vendors; faster collections, dropping slow moving brands and cutting back on ad
spend. (ET knowledge series, 2003)
They key trends emerging from the analysis include:
 Increased focus on rural distribution has increased logistics spend for the
leading companies.
 New alliances and re-negotiation with vendors is increasing, with the concept
of third party units (TPUs), already well established.
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 Working capital cycles are already turning negative for most FMCG majors
due to tighter control of credit, closer demand matching and SKU
rationalization (see table ‘Good Control).
30

FMCG INDUSTRY SUPPLY CHAIN TODAY
(Source ETIG, L&SCM, 2004)
31
Vendors
Contract Owned Plants Imports
Manufacturers
Central Warehouse
Regional Distribution Centres
C & F Super stockists
Stockiest
Retail Chain Stores
Consumers
Retailer Local wholesaler
Supply
Chain
Planning
And
ERP
Software
CRM

DATA PREPARATION AND ANALYSIS
QUESTIONNAIRE ANALYSIS
Q1. Please specify the importance of various functions of marketing in the present days
competitive scenario in the scale of 1-7: 1 being least important and 7 being most
important?
FUNCTIONAL AREA HLL AMUL NESTLE BRITANNIA
Brand Mgmt. 7 6 7 7
Advertising Mgmt. 6 3 5 6
Sales Promotion Mgt 7 2 5 5
Distribution channel
Management
7 5 6 6
Physical
distribution/Logistics
Management
7 6 5 7
Demand forecasting
& Management
7 7 4 5
Sales admn. & Mgt. 7 1 4 5
Q2. Please specify various purposes behind efficient distribution management on the
scale of 1-7: 1 being not important & 7 being most important?
HLL AMUL NESTLE BRITANNIA
Sustainable Bus. 7 7 6 7
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Growth & long term
performance
Greater market
dominance
5 5 4 6
Competitive
advantage
5 6 7 6
Total cost
containment
7 5 5 5
Dev. & maintenance
of harmonious
channel relationships
7 6 3 6
Improvement of
economic & social
welfare
2 6 2 5
Q3. Please indicate the combination of advertising and sales promotion for the products
of the company.
More advertising
& less sales
promotion
* *
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More sales
promotion & less
advertising
Both equally ^ * *
Here we see that although HLL stresses that more of advertising should be done and
less of sales promotion, yet it is stated that at times both are to be done equally.
 AMUL says that advertising should be done more than sales promotion.
 On the other hand NESTLE & BRITANNIA believe both should be done equally.
Q4. Please specify the share of trade related schemes meant for channel members out of
total promotional budget?
Below 20% * *
20 – 30% * *
30 – 40%
40 – 50%
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Above 50%
 HLL & AMUL say that share of channel members in trade related schemes
should between 20 – 30%.
 Whereas, NESTLE & BRITANNIA believe it should be less than 20%
Q5. Do you think that in the global competitive scenario and the era of information
tecnology, the role of distribution channel members have increased?
Increased * * * *
Decreased
No Change
.
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 Here every body is of the view that increased competition and advent of IT has
imposed greater challelenges for the channel members and has also increased
their role immensely
Q6. Do you use Internet to sell your products to consumers directly?
YES *
NO * * *
 Only AMUL has B2C venture over Internet. In fact 9it was one of the
first to launch shopping on its web site. (amul.com Shoppe)
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Q7. Do you plan to sell your products on the Internet?
YES
NO * * *
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Q8. Do you have web enabled Distribution Channel system?
YES *
NO * * *
 Only HLL has the system where all its stockists and the C&FA are in a web
enabled network throughout India.
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Q9. In order to have smaller demand chain, if you have been asked to cut down one
channel member, which would you like to bypass?
C & F agents *
Stockists/Distributors ^
Retailers/Dealers
None * * *
 As talked to Mr. Kharbanda AM (scm), of NESTLE he said that we have already
done away with C&FA and as such our sales team directly meets with the
retailers/dealers. This helps for demand forecasting.
 Again HLL would not like to cut any of its channel members, but if a
revolutionary change is to happen then they may bypass stockists.
 AMUL& BRITANNIA believe every part of the channel is inevitable and as such
they don’t think there is any need to bypass any of them.
39

Q10. Do you think that qualitative results of marketing largely depend on contributions
made by distribution channel members now a days?
YES ** * * ½*
NO
 Here HLL strongly believes that due to the contributions of distribution channel
members overall marketing efforts have a synergistic effect, thus they have given
two stars to their YES.
 AMUL & NESTLE also are of the similar view, but BRITANNIA thinks that it is
true but other factors also affect the overall marketing results and that is why half
star.
40

Q11.Is it essential to keep channel members happy, loyal & well motivated towards
trade?
YES * * * *
NO
41

Q12.Rate the role of intermediaries in the era of globalisation and IT? Rate on a scale of
1-7; 1 being least important and 7 being most important.
HLL
FACTORS
Role of Intermediaries in the scale of 1 (Not important)
to 7 (very important)
C & F Agents Stockists /
Distributors
Retailers
Logistics and Exchange Functions
 Breaking Bulk 5 6 6
 Assortment
 Timely, intact movement and Delivery of
Products
6 7 3
 Availability and proper storage of products 5 6 6
 Order processing and Fulfilment 6 4 3
Marketing Functions
 Market coverage and penetration 1 7 5
 Facilitating Buyers in Information search 0 4 7
 Supporting Buyers in their Purchase Decision 0 5 7
 Product Holding and Risk – sharing 6 6 1
 Local Credit (if any) 0 6 5
 Push Effort to generate sales volume 4 6 2
 Trust Building 2 7 7
Information sharing with firms
 Product performance 0 5 7
 Market knowledge 2 4 6
 Consumer Tastes and preferences 0 6 7
 Dynamic Price effectiveness 0 0 3
 Competitors Actions and Reactions 0 6 7
 Effectiveness of Current promotional strategy 3 6 7
42

NESTLE
FACTORS
to 7 (most important)
Distributors
Retailers
 Breaking Bulk 4 2
 Assortment 5 2
Products
7 7
 Availability and proper storage of products 6 4
 Order processing and Fulfilment 7 7
Marketing Functions
 Market coverage and penetration 7 7
 Facilitating Buyers in Information search 5 7
 Supporting Buyers in their Purchase Decision 6 7
 Product Holding and Risk – sharing 3 2
 Local Credit (if any) 5 5
 Push Effort to generate sales volume 0 0
 Trust Building 4 5
 Product performance 7 7
 Market knowledge 7 7
 Consumer Tastes and preferences 5 7
 Dynamic Price effectiveness 4 3
 Competitors Actions and Reactions 6 6
 Effectiveness of Current promotional strategy 2 1
43

AMUL
FACTORS
Distributors
Retailers
 Assortment 6 6 5
Products
7 6 4
Marketing Functions
44

BRITANNIA
FACTORS
Distributors
Retailers
 Assortment 5 3 2
Products
5 7 3
Marketing Functions
45

COMPANY OF FMCG
ABOUT HINDUSTAN LEVER LIMITED
(HLL)
You simply cannot think of the FMCG industry in India without Hindustan Lever
Limited (HLL). At Rs. 10,000 crore plus, it is a personal products behemoth. It is
difficult to define HLL’s competition on an overall scale. The only way to do it is to go
down segment by segment (Nirma in soaps, for example) to find out who can (if at all)
challenge HLL. (www.hll.com)
On any given day, you end up using at least one HLL markets 110 brands with
950 pack sizes across categories as diverse as foods and soaps. The logistics handled
vary from the cold chain for its ‘Walls’ range of products to the open-air cycles in the
rural hinterland of India for ‘Surf. All possible and feasible modes of transport are used
and vast quantities of products and unlimited information zips across from one end of
the country to the other. (www.indiainfoline.com/fmcg/stma/st35.html)
It is an ethos HLL shares with its parent company, Unilever, which holds 51 per
cent of its equity. A Fortune 500 transnational, Unilever sells over 1,000 foods and
home and personal care brands through 300 subsidiary companies in 88 countries
worldwide with products on sale in a further 70. Individual consumers choose
Unilever’s foods and home and personal care brands 150 million times a day across the
world. Unilever is the number one consumer goods company in the world in market
competitiveness, according to a survey of leading international corporations by Prof.
46

Jean-Claude Larreche of the International business school, INSEAD.
(http://www.indiainfoline.com/ meet/me516.html)
A few numbers drive home the scale of operations at HLL 7,500 distributors, 100
manufacturing locations, SKUs varying from 5 ml to 1 litre going to 56 distribution
locations. With 36,000 employees and 1,300 managers, it reaches about 1 million
retailers across the subcontinent. HLL’s distribution network directly covers the entire
urban population and reaches as far as villages with over 2,000 people. In the rather
smallish Indian market for cosmetics alone, it has 70 brands. This diverse product range
is manufactured in close to 100 factories located across the length and breadth of India.
The operations involve 2,000 suppliers and associates. About 28 factories are situated in
backward areas. Obviously, the company has its financials well under control
HLL is known today for its massive and penetrative distribution set up Many of its
products are no different from those manufactured by others, but what sets HLL apart is
its unique approach. The company web site explains: “While the distribution system, is
quite similar for different businesses, each of the businesses have, over the years, fine-
tuned the system to meet their objective of serving their respective customers and
consumers in the most efficient manner. The differences, therefore, lie in the manner
business use an existing distribution network, and the channel players involved therein,
to improve their reach and service to their customers and end users"”. (www.domain-
b.com/news_review)
HLL has several lines of business detergents, personal products and foods, the
detergents & soaps division is the largest (contributing 18 and 16 percent
47

respectively to turnover), followed by the personal products (16 percent) and foods
lines with tea contributing 16 percent. In almost all lines, it holds dominant market
shares. Analysis and company estimates suggest that at tight focus on supply chain
and usage of IT has saved HLL up to US$ 125 million (Rs. 6,000 crore) in
inventories right across the various levels of the chain.
PRODUCT OF HLL
Tubal Rings
48

Hinglact - polyglactin 910
Hidox
49

GROWTH OF HLL
HLL’s is a journey that started with a single contraceptive unit in 1966. It is today a
multi-product, multi-location organisation addressing various public health challenges
facing humanity.
With a vast array of innovative products and social programmes, HLL Lifecare Limited
is day after day taking a step closer to its vision of ‘Innovating for Healthy
Generations’.
52

HLL is the only company in the world manufacturing and marketing the widest range of
contraceptives. It is unique in providing a range of Condoms, including Female
Condoms, Intra Uterine Devices, Oral.
HLL’s healthcare product range include: Blood Collection Bags, Surgical Sutures, Auto
Disable Syringes, Vaccines, Women’s healthcare Pharma products, In - Vitro
Diagnostic Test Kits, Hydrocephalus Shunt, Tissue Expanders, Needle Destroyers,
Blood Bank equipment, Iron and Folic Acid Tablets, Sanitary Napkins, and Oral
Rehydration Salts
Over the past fifteen years HLL has steadily set up a strong and sound infrastructure for
direct marketing. HLL has put in place a vast distribution network covering the length
and breadth of the Indian continent.
HLL today reaches out to over half a million-retail outlets, including over 1,00,000
villages, in the remotest corners of India.
HLL’s products are today exported to over 70 countries.
The company set up the not-for-profit organisation, the Hindustan Latex Family
Planning Promotion Trust (HLFPPT), in 1992 for the purpose of designing and
implementing social sector intervention projects, particularly in the area of reproductive
health, women empowerment and HIV prevention and control activities, with the
objective of creating planned social change. HLFPPT is today one of the top social
marketing organization in India.
HLL’s association with world leaders include those with Okamoto of Japan; Finishing
Enterprises, USA; Female Health Company, UK; and Beijing Zizhu Pharma of China.
53

HLL has seven state- of -the art manufacturing facilities with quality and environmental
management system certifications. Products manufactured at its Plants also have the
‘CE’ marking.
HLL is today a leading provider of contraceptives and healthcare products to various
global public health programmes managed by international agencies like UNFPA,
UNOPS, UNHCR, WHO, PSI and IDA.
Nearly 2700 employees and with several world leaders as partners, HLL has over the
past four decades stood to uphold its mission to achieve and sustain a high growth path,
and focus on five key thrust areas to achieve its vision. These are - customers,
employees, business, industry, and social initiatives.
In the future through technical collaborations, marketing alliances and joint ventures,
HLL wishes to keep alive the dream of all humanity – of a healthier world.
HLL is fully owned by the Government of India. It is managed by Board of Directors
appointed by the Government. Presently, it has four Directors and it is being expanded
to include independent Directors. The list of Directors in the Board is given below
HLL (formerly Hindustan Latex Limited) clocked a record business of Rs.1,376
crore during the 2012-13 fiscal.
HLL Lifecare chairman and managing director M. Ayyappan presented the
cheque to union Minister for Health and Family Welfare Ghulam Nabi Azad at a
function in New Delhi last week.
Explaining that HLL has now transformed into a healthcare delivery company
after starting out as a single-product initiative, Ayyappan said that the
company's growth strategy was driven by innovation.
"The HLL corporate research and development centre, the 60,000 sq ft state-of-
the-art facility that started functioning here Jan 1 is an example of this growth
54

story aided by innovation. The key focus area of the research centre will be
reproductive health," Ayyappan said.
Elaborating on the firm's expansion plans, the CMD said the construction of the
prestigious Rs.594-crore integrated vaccine complex, implemented by HLL's
subsidiary, HLL Biotech (HBL) at Chengalpett near Chennai, is progressing per
schedule.
"The total annual production capacity of condoms touched at 1,640 million
pieces during the last year," he said.
The Department of Public Enterprises (DPE) has rated the performance of HLL
as "Excellent" for the third consecutive year.
HLL's range of products includes contraceptives, hospital products,
pharmaceuticals, ayurvedic products, vaccines, personal hygiene products and
diagnostic kits.
Its services include infrastructure development, procurement consultancy and
facility management.
HLL was established in 1966 with the objective of providing quality condoms for
the National Family Planning Programme.
HLL, from a single-product company, has transformed into a total contraceptive
company and is now also active in the healthcare delivery sector.
55

At present, HLL has seven state-of-the art manufacturing facilities and 22
regional offices across India
INBOUND LOGISTIC
In the mid – 1990s, HLL realised it had too many suppliers for its raw materials.
Raw materials procured ranged from chemicals to foods to glass bottles to
plastics- a logistical maze. Around 40 odd key raw materials and 60 plus
finished goods vendors supplied to HLL’s factories. Overall numbers of
suppliers were around 1,000 not to mention overseas unilever vendors for
products like deodorants and after shaves. Earlier, there was a lot of
uncertainty regarding vendors, their abilities and plans leading to a
proliferation of vendors, sometimes up to five supplying the same item.
This meant not just checking the quality of each supplier, but also five
items in the same paperwork. In the 1980s, the inbound side of not just
HLL, but all other companies was dominated by paperwork.
Then came the crunch of the 1990s. Several factors combined to help rationalise
the inbound side. Foremost was the spiralling transaction costs.
56

Taking Stock (HLL)
Inventories
2000 2001 2002 2003 2004 2005
Total inventories 685 904 1,045 1,146 1,310 1,182
Raw Materials 298 366 456 535 565 515
Finished Goods 322 470 521 549 674 590
Source: CMIE Prowess database Table # 18
Company figures clearly show an improvement in raw materials inventory with
days of raw materials falling continuously from 84 days in 1990 to just 29 days of stock
in 2005 (see table Remarkable Result). That’s a reduction of over 66 per cent over the
past 10 years. This reduction has been made possible largely due to better forecasting
data which is now being transmitted throughout the HLL supply chain quickly-and the
increasing visibility of business data. HLL has launched a number of e-commerce
initiatives that will bring e-business to the heart of the company’s operations. HLL’s
vision is ‘Connect, Attract and Fulfil’ on a massive scale. In the supply chain for
example, the vision is to link in with some 3,000 stockists, 30,000 retailers and 100
suppliers spread over some 1,000 locations. The size of the ambition is based on HLL’s
unique ability to leverage on scale and technology and the development in the telecom
infrastructure. HLL’s Internet vision encompasses three opportunity segments-
business connectivity, consumer connectivity and consumer commerce.
The Net- based e- tailing will work on a combination of HLL’s own V-SAT
network, that of others, mobile telephony and the public network. HLL is creating an
57

extranet covering its key stockists and retailers to optimise the supply chain right up to
the front end. Similarly, an extranet is also being created covering the suppliers,
factories and the purchasers with the aim of achieving real time, vendor- managed
inventory.
Today, the inbound side of HLL is a very different from what it was even five
years ago. There are upwards of 240 supply chain locations- be it own plants around the
country, or third party manufacturers, or stock points or transit/transportation points.
Almost all are linked by one form of IT or another - from the simple telephone call to
V-SATs. The plants and TPUs are, in fact, linked by V-SATs and HLL’s ERP system
(MFG-PRO). MFG-PRO today works on more than 220 locations all over the country,
including the head office, branch offices, factories, depots and key redistribution
stockists. Also, HLL plans to move towards vendor- managed inventory (VMI). “VMI
has already been used in the auto sector in India.
(www.indiainfoline.com/fmcg/stma/st35.html)
Information exchange is critical for HLL. Sales information systems will be linked,
eventually, to the retail level. They are already linked at the stockist level. The moment
HLL sells 5,000 pieces of Lifebuoy in any one region, a signal traces right back via the
stockist to the region depot and the branch office straight through into the production
and replenishment plans, and thence onto the factory. It is this backward trace ability,
which gives HLL a sharp edge over competition in the one area that is crucial for any
FMCG manufacturer stock at the point of sale.
58

OUTBOUND LOGISTICS
HLL works on the hub and spoke system. The hubs are the mother depots and
regional depots, while the spokes radiate from these to the stockists, depots and
retailers. But HLL’s large number of SKUs and brands demand a more sophisticated
version of the hub and spoke system. Fittingly, HLL uses not a one-tier hub and spoke,
but a three-tier set up
Like any other company, HLL has slow moving and fast moving brands. It has
premium and mass-market products and any other segment that you may think of is
catered to. Inevitably, you have the Pareto Principle working 80 per cent of business
from 20 per cent of brands. In HLL’s case , brands like ‘Lifebuoy’, ‘Lux’, ‘Hamam’,
‘Vim’, ‘Rin’ and ‘Surf’ are the fast moving ones, while brands like ‘Denim’, ‘Rexona’,
‘Breeze’ and a host of others are slow moving by relation.
HLL has a three-tier system of stocking and order replenishment. On the first tier it
has the all – India buffer depot, the second level has the regional depots and the last
level h has the JIT (just-in-time) depots. From the last level, they supply the products to
the brand that needs to travel more than two days goes to this depot. These are sent
from the manufacturing sites to the all India buffer depot where these products are
accumulated up to a full truckload for that sales region. Once the truckload is made up,
the goods are sent to the regional buffer depot in the states, where break bulk occurs-
the load is split into the supply as per area demand. The smaller lots are now sent onto
the JIT godowns in the cities or towns and then onto the retailers via the stockists.
59

The real challenge for HLL begins now when the FMCG industry is in a
downturn. Most analysts predict that HLL is well poised to fight it out. HLL itself has
started focusing on supply chain as a means to maintaining its leadership profile. How it
manages the chain will be the only factor that will ensure its sustained leadership.
60

HLL’S DISTRIBUTION NETWORK
61
Raw Materials
suppliers
Packaging materials
supplier
Manufacturing units
in-house, third party
Head office All-India
buffer depot
Regional
Offices
Regional
buffer depot
JIT godowns
Rolling sales
forecasts & mktg
plans
Stockists
RetailersWholesalers
Consumers

ABOUT GCMMF (AMUL)
The Gujarat Co-operative Milk Marketing Federation (GCMMF) is the largest
food marketing company in India today with sales turnover of Rs. 2,500 crore. While
there are a host of other players in the foods market, GCMMF reigns in the milk and
milk products and perishables segments.
GCMMF has come a long way. It is the largest organised collector and distributor
of milk and its value added products are marker leaders under the brand names of Maul
(cheese, butter, milk, powder) and Dhara, Lok Dhara (oils). Amul’s brands of paneer,
ice cream and sweets like Gulab Jamun and Shrikhand are fast catching up with the
market leaders in various segments. Among with a sustained brand-building exercise
over the past two decades. GCMMF is today in a position to leverage all its assets for
exports. Some thing not even considered some years ago.(www.amul.com)
GCMMF owes its market dominance to several factors. Crucial amongst these is
its milk procurement system, which gives it access to a vast reservoir of milk at
massive economies of scale. The logistic of milk are considerably more difficult than
for most other foods products.
62

GROWTH OF AMUL
Amul India's growth in revenues has dropped from over 20 per cent a year till
about 2011, to 8 per cent in the quarter ended September 2013, which is its last
declared results. A Amul India spokesman declined to comment on an email
query by ET, stating that since the company was in the 'closed period', it would
be unable to comment.
To revive its fortunes in India, industry experts said Nestle could do well to bring
in fresh perspective from outside. "One of the best ways forward for Amul could
be to become more outwards focused...in terms of people and business
partners," Pinakiranjan Mishra, partner and national leader (retail & consumer
products) at Ernst & Young, said. Currently it works mostly with its own set of
people and consultants, experts said.
Industry peers say the lack of an Indian CEO could be another reason for Amul
comparatively slow growth in the country. After Daraius E Ardeshir quit the
company over 'hushed speculation of financial irregularities' in 1998, the Swiss
MNC has never had an Indian head.
"Understanding local consumers and insights, and being in direct contact with
market realities are critical," CEO of a top global foods firm said, requesting
anonymity. "More so in a high-potential emerging middle-class market like India,
with intense competition playing out across categories," the person added.
Most consumer goods multinationals in India including Hindustan Unilever,
Coca-Cola, Procter & Gamble,GlaxoSmithKline Consumer
66

Healthcare and PepsiCo have almost always banked on Indians to head their
businesses.Amul is an exception, with a string of expatriates heading it for 16
years now.
Under Carlo M Donati, who was incharge from 1998 to 2004, Maggi noodles
became a top power brand and the firm kicked off an innovation pipeline of
products such as Munch. Martial Rolland led Amul from 2004-09, followed by
Antonio Helio Waszyk till October 2013 when MD Etienne Benet took over.
Experts consider lack of innovation as Amul biggest problem in India where
consumers have increasing disposable incomes and modern trade is growing
rapidly.
At a time when most firms are innovating products, analysts and rivals say
Nestle doesn't have enough products for the middle class. The firm is also
facing increasing competition across its key product segments of noodles,
chocolate and dairy.
ITC's Sunfeast Yippee and HUL's Knorr soupy noodles and to a small extent
GSK's Foodles have taken away share from its flagship Maggi, although the
Nestle brand still dominates with 80 per cent market share. Newer entrants
such as Danone in dairy, Cremica in ketchup and several regional players have
been making it tough for Nestle to grow its volume share. All this shows that
Nestle needs a new recipe for India and, perhaps, an Indian at the top to
prepare that.
67

INBOUND LOGISTICS
Inbound logistics in milk are governed by time. “Within 2.5 hours, they collect,
check, transport and process up to 1 million litres of milk every day – 365 days a year,
non stop.” “Maul is committed to accepting every drop of milk it is offered, whether
they have use for it or not.
GCMMF and the National Dairy Development Board, under the able guidance of
Dr. Verghese Kurien and Tribhuvnadas Patel, formed what is today called the Anand
Pattern of Co-operatives. In the Anand pattern of co-operatives, the farmer – in most
cases the small marginal, non-landed farmer with 2.3 cows in his herd – sells directly to
the cooperative society and then by extension to the dairy. The traditional middlemen –
the brokers, the consolidator, the trucker – who are so potent in other agriculture
markets, are conspicuously absent here. The direct implication of this structure is on
costs of procurement, fair returns to the producer and quality of the milk.
So how does GCMMF procure milk? The farmers tip over their milk into a standard
container that the village society has. The computer linked to the scale electronically
notes the weight of milk and container. The same computer automatically deletes the
weight of the container from the total to give the weight of the milk.
At the same time, another man at the counter (again an employee of the society)
takes a small sample of the milk into a machine called the lactometer. This machine
68

determines the fat content of the milk and automatically transmits the result to the
computer. The price to be paid to the farmer is pre-determined based on the fat
content. The computer then generates a pay slip for the farmer who is paid either in the
evening or the next morning, as the case may be. There is no credit period and the
disbursements are completed within one day of selling the milk to the society.
Rationalisation of vendors is not necessary.
At the farmer level, the aggregation is low – from 1 litre to 10 litres/. But at the
society level, the total volume of milk may touch more than 5,000 litres a day. GCMMF
found a way out by developing village chilling centres or VCCs.
The milk that is bought from the farmers is filled into these VCCs, which maintain
a temperature of 4 degrees Celsius. In the absence of these VCCs, the milk would either
get contaminated or spoilt. Moreover, in order to reduce this wastage, the collected milk
would have to be transported urgently to the nearest district chilling centre or, it
possible, to the dairy directly. In a country like India with massive infrastructure
bottlenecks, this short window span of 2 hours ore often than not meant that overall
milk quality was low and cost of procurement was much above what it should have
been. Lots of things could go wrong – the truck would not come, the milk could spill,
too much heat or bad roads. These were the issues at the village level.
The development of the VCCs down to the village level could cause several crucial
changes in Amul’s supply chain. Also, the milk could be held at the village longer, thus
smoothening out the morning high capacity utilisation and spreading the receipt and
69

processing of milk evenly over the day. In effect, the window span of two hours to
handle 1 million litres of milk was expanded to 4-8 hours. Today, Maul chaims to have
upwards of 10,000 VCCs across the state, with average capacity of around 2,000 litres
each. At the same time, it must be noted that just about 2-3 per cent of all GCMMF
societies have these VCCs. While its success on a small scale is clear, on a state-wide
scale, they have a long way to go.
Having collected the milk at the VCC and ensured its quality level, the milk now
has to be transported to the chilling centre or the dairy. Each dairy has 4-5 chilling
centres. Earlier, the vehicles used were either matadors or jeeps or 9-tonne trucks.
Today, the 9-tonne truck and the insulated truck are the norm. The insulated stainless
steel truck-tanker, with capacities up to 10,000 litres, goes from society to society and
collects the milk. The trucks reach the dairy by 9 am and the ‘milk run’ is completed.
The next run is in the evening around 7 pm.
(http://www.indiainfoline.com/meet/me516.html)
At the dairy, the milk is either processed into butter, cheese or powder, or is
pasteurised. GCMMFs priority is for liquid milk, which has a shelf life of a hours at the
dairy, while the powder has a life of anything up to 18 months.
Take a peek into the scale of Maul Dairy 120 trucks arrive daily at the gates with
milk from the societies. Around 1.5 to 2 lakh litres come from other dairies, either due
to excess at their ends, or for further processing at Anand into powder. Each truck can
carry up to 10,000 litres in its tank, chilled and ready for processing. On an average, the
70

milk travels 150 to 160 km. every day the whole year around, all of these arriving in a
span of 4 hours up to 9 am
OUTBOUND LOGISTICS
As Critical As The Inbound Side Is For Maul, the outbound is just as complex with
108 SKUs – all at various levels of perishability. Maul butter, cheese, shrikhand, curd,
ice cream and mithaee all are perishable and time-bound products. This means they
have to be sold within a very tight window from the date of production. GCMMFs reach
extends nation-wide, so accounting for packing time, transfer times and delivery to
retail outlets time, the net time available for sale can be as low as four days for curd and
is less than one day for milk. this, in turn, means that inventory management is of prime
importance in GCMMF. Unlike other products, the inventory of milk is practically one
day. So GCMMF follows a strategy where plans of procurement and production are
made for 12 months rolling forecaste and inventories of butter and others are built up
during flush season for the following summer.
Too much milk is also a problem, says Vyas. “I have to have an outlet for all the
milk that I collect and process. This means that a vast sales and distribution network is
almost imperative”. GCMMF certainly has spread its wings. Today, it directly
reaches half a million retailers and aims to expand its reach to a million by 2005 (see
table ‘Wide Reach’). Its products need a rather different set-up than a typical FMCG
company, due to the requirement of the cold chain. Says Sodhi, “we reach 4,000
distributors across India, serviced from our 48 offices nation-wide. These distributors
71

invest in facilities like freezers, cold rooms and insulated vans.” Sodhi claims GCMMF
has had no problems in all these years with this set-up.
72

Fig # 23
-
73
Farmer
Society
Milk weighing
Fat content check
Payment slip
1.5 hours
6 – 7.30 am
2 – 3
hours
by 9 am
Milk into VCC
Society collection
Sent by truck to
DCC or dairy

GCMMF today uses 35-40 transporters to ferry its products nation-wide to 2,500
distributors of butter and 1.5 lakh outlets for refrigerated products. Along with the
butter, cheese and other products can also be sent, but temperature requirements are
different. For example, ice cream needs freezing t temperatures (below zero), while
chocolate can be maintained at 4 degrees Celsius. This requirement drove another
change in transportation – the refrigerated truck.
Today, 125 refrigerated trucks ply on the routes. These cost up to Rs. 3 lakh to
configure and have higher running costs but the net result is very desirable. Ultra Heat
Treated (UHT) milk is sent daily by refrigerated trucks to Vashi where it is processed
further for sale in Mumbai. These trucks have enabled GCMMF to leverage both its
products as well as its distribution. Highly perishable goods like ice cream and curds
are sent to Mumbai – GCMMFs largest market for these products – and stored at chilled
temperatures at Goregaon, the Fruits and Vegetables godown.
GCMMF’s butter, frozen foods (Peas) and ice cream need frozen temperatures
(below zero degrees Celsius) while products like milk and powder need chilled
temperatures (4 degrees Celsius) and chocolate has to maintained at different settings.
Each is stored separately with separate, insulated stres and sophisticated temperature
controls. From this warehouse, h the stockists withdraw the butter, curds and other
products as and when needed. This single warehouse gives GCMMF a winning edge
over competitors.
74

GCMMF also encourages containerised cargo. It pays up to 6-7 per cenmt more
than usual open truck rates. Today, up to 40 per cent of GCMMF’s cargo goes by such
trucks.
GCMMF estimates that vehicle costs have gone up to Rs. 6 lakh from Rs. 3-4 l akh
some years ago and fuel rates have also increased substantially to nearly Rs. 20 per
litre from Rs. 12 five years ago. Petrol is today Rs. 28 per litre in the metros. But
relative to these increase, freight rates haven’t gone up in the same ratio put together,
this adds up to considerable sayings for a leading company like GCMMF.
(www.domain-b.com/news_review)
GCMMF Inventory Norms
Level Inventory Days
Dairies 90*
to 5.7**
Distributors 7
Retailers 3-4
* Summer ** Winter
GCMMF Network
2000 2005
Distributors 4000 7,000 (including Cold Chain)
Offices 48 100
Retailers Served 500,000 10,00,000
75

On the marketing side, GCMMF already has a formidable distribution network.
Not only does this give GCMMF vital access into the vast rural market. It also gives it
the advantage of introducing new products into the same system at little extra costs.
Unlike other companies, GCMMF use a legacy system for ERP designed by Tata
Consultancy Systems (TCS) in the early 1990s. This system is still used to track
business data. The orders booked by the branches are compiled and stocks and sales are
monitored daily. The data is received from the depots and branches by email/fax/phone
and these are collated everyday. Then dispatch department breaks down the demand
into product groups and decides which dairy (member union) should supply the goods.
The dispatch department coordinates the flow of information to truckers to pick up their
goods at the respective dairies and deliver. The goods are taken to the C&FA’s who
manage the depots in the zones. Today this set-up is considered the most robust and
penetrative in India. The Internet is a key ingredient in GCMMF’s marketing strategy.
GCMMF was, in fact, one of the firsts to launch shopping (amul.com shoppe) on its
web site. GCMMF accepts the order placed through the ‘shoppe’, relays it to the
nearest dealer of Maul in that area who then delivers and collects payment. Hence, the
system uses the existing network, but has created a new channel for sales.
76

GCMMF order Replenishment System
Order booking (Mumbai)

Branches
(Mumbai)
Depots
(Mumbai)

Head Office
(Anand)

Demand breakdown into
products/destination at Anand

Demand allocation to various
member unions (decided at
Anand)

Dispatch from member unions to
depot (coordinated from Anand)

Order received at depot; stocks
updated; into sent to Anand

Stocks breakdown into
stockistwise demand

Dispatch to stockist

Retailers
77

ABOUT NESTLE.
Nestlé is the world's leading Nutrition, Health and Wellness company. Our mission of
"Good Food, Good Life" is to provide consumers with the best tasting, most nutritious
choices in a wide range of food and beverage categories and eating occasions, from
morning to night.
The Company was founded in 1866 by Henri Nestlé in Vesey, Switzerland, where our
headquarters are still located today. We employ around 2,80,000 people and have
factories or operations in almost every country in the world. Nestlé sales for 2009 were
CHF 108 bn.
The Nestlé Corporate Business Principles are at the basis of our Company’s culture,
developed over 140 years, which reflects the ideas of fairness, honesty and long-term
thinking.
78

GROWTH OF NESTLE
Nestle India's growth in revenues has dropped from over 20 per cent a year till
about 2011, to 8 per cent in the quarter ended September 2013, which is its last
declared results. A Nestle India spokesman declined to comment on an email
query by ET, stating that since the company was in the 'closed period', it would
be unable to comment.
To revive its fortunes in India, industry experts said Nestle could do well to bring
in fresh perspective from outside. "One of the best ways forward for Nestle
could be to become more outwards focused...in terms of people and business
partners," Pinakiranjan Mishra, partner and national leader (retail & consumer
products) at Ernst & Young, said. Currently it works mostly with its own set of
people and consultants, experts said.
Industry peers say the lack of an Indian CEO could be another reason for
Nestle's comparatively slow growth in the country. After Daraius E Ardeshir quit
the company over 'hushed speculation of financial irregularities' in 1998, the
Swiss MNC has never had an Indian head.
"Understanding local consumers and insights, and being in direct contact with
market realities are critical," CEO of a top global foods firm said, requesting
anonymity. "More so in a high-potential emerging middle-class market like India,
with intense competition playing out across categories," the person added.
82

Most consumer goods multinationals in India including Hindustan Unilever,
Coca-Cola, Procter & Gamble,GlaxoSmithKline Consumer
Healthcare and PepsiCo have almost always banked on Indians to head their
businesses. Nestle is an exception, with a string of expatriates heading it for 16
years now.
Under Carlo M Donati, who was incharge from 1998 to 2004, Maggi noodles
became a top power brand and the firm kicked off an innovation pipeline of
products such as Munch. Martial Rolland led Nestle from 2004-09, followed by
Antonio Helio Waszyk till October 2013 when MD Etienne Benet took over.
Experts consider lack of innovation as Nestle's biggest problem in India where
consumers have increasing disposable incomes and modern trade is growing
rapidly.
At a time when most firms are innovating products, analysts and rivals say
Nestle doesn't have enough products for the middle class. The firm is also
facing increasing competition across its key product segments of noodles,
chocolate and dairy.
ITC's Sunfeast Yippee and HUL's Knorr soupy noodles and to a small extent
GSK's Foodles have taken away share from its flagship Maggi, although the
Nestle brand still dominates with 80 per cent market share. Newer entrants
such as Danone in dairy, Cremica in ketchup and several regional players have
been making it tough for Nestle to grow its volume share. All this shows that
Nestle needs a new recipe for India and, perhaps, an Indian at the top to
prepare that.
83

INBOUND LOGISTICS
Nestle India’s inbound supply chain is similar to most companies in the business,
using tankers, collections and so forth to bring the milk into the plants. As early as
1999, Carlo Donatti, Nestle India’s CEO, had talked about Nestlé’s foray into tetra
packed milk which needed a basic shift in supply chain. In an interview to a business
magazine, Donatti acknowledges that, if Nestle launches milk in tetra packs, its milk
production facilities will have to be close to its customers. “You must have satellite
factories and manufacturing facilities close to the market,” he says. Nestle has a giant
operation going at Moga in Punjab – set up in 1962, the plant processes 800,000 litres of
milk that’s collected from 71,000 farmers, every day. But to be close to customers, the
equivalent of the Moga plant may have to be set up around the country, with perhaps
smaller plants at the district level. So Nestle may have to eventually invest huge sums in
setting up plants, though it won't have to invest in freezers for shops because milk in
tetra packs have a shelf life of up to six months.
The coffee supply chain is of course more volatile dictated by global pricing, which
in turn affects inventory planning. Nestle has no major issue with either milk or coffee
inbound logistics.
Trace ability in the entire chain was crucial. Nestle India demarcated trace ability
of goods into two types - reactionary (trace and point the goods after an event), and
preventive (ensuring the goods are a high quality right from the start). In this regard,
84

Nestlé’s views are very similar to those echoed elsewhere in India. Both these, needs
information back up. Firstly, regarding the type, speed, format and ease of data
collection; and secondly on the IT system back up". In all these, it’s the people that will
make the difference. Today, Nestle uses MRP and ERP for internal planning and
processes, but our folloups with vendors and others still remain on phone, fax and
email. Some vendors share data, others don't.
85

OUTBOUND LOGISTICS
The longer the supply chain, the weaker the demand signal becomes. In India, on
retail side as well as the vendor’s side, Nestle has too many intermediaries. That adds to
time and costs, also badly impacting quality. In India, no feedback comes from retailers.
The only source is Nestle's own staff, and the data is limited by sheer size and
complexity of the Indian market. It is in these conditions that initiatives like ERP, SCM
software and ECR will greatly help.
In Nestle India, the demand plan using statistical tools the demand plan using
statistical tools and sales data is first prepared, then broken down into stocks data -
where and when to hold, which in turn gets broken down into a manufacturing plan.
This plan is then further broken down into materials plan handed over to the different
vendors. For materials like cocoa and coffee, where imports play a role, stock norms
could be one-month stock, or price based. If prices go down, stock up; if up, maintain
the safety stock only. Milk is brought in daily, as detailed above. The finished goods
move by truck, containerized trucks and concor (by rail) to far off areas. Nestle has no
issue with outbound transport, using very much the same structure as most corporate in
India. It spent Rs. 87 crore in 1995. Spend on freight has remained well in control at
around 5.4 percent of net sales, in spite of increasing sales over the past five years.
86

Product strategy also plays a role in Nest's supply chain. Nestle plans to market
milk in tetra packs, which gives milk a longer shelf life and in fact helps by increasing
the sales window. Because milk can be sold over a longer period of time, it can also be
distributed further. Nestle India has a world of experience to draw upon in strategy,
implementation and usage of the Net and e-commerce for its supply chains here. At
Nestle's the consumer demand chain involves the entire business including people and
processes as well as managing the links between them. The importance Nestle places on
staff. The human element is crucial.
The keywords for linking people with the technological infrastructure are connect,
collaborate, consolidate and compress. The last named involves cutting least times. And
in logistics, that refers to eliminating errors in orders. In a recent survey, Nestle
discovered the root causes for such problems were: 45%, partner's process, 36% non-
aligned systems and 19%, incomplete data and poor communications. The solution lies
in setting up coherent information architecture. These include personalizing the
methods, searching and classifying data, managing content and validating information
and data sources.
87

IT has been used as a tool in Nestle, but Nestle's is not award by E-Commerce's
potential. It simply considers emerging business-to-consumer (B2C) marketplaces as
newer channels that argument existing ones. At the same time Nestlé’s would retain its
legacy EDI infrastructure to capture the full value of its investment.
88

ABOUT BRITANNIA
Britannia is the market leader in the organized biscuit and bakery product market in
India. Biscuits contribute to more than 80% of Britannia's total turnover. Other products
include bread and cakes. Britannia diversified into dairy products in 1997 with
processed cheese and dairy whitener. The portfolio was expanded with the launch of
butter, pure, flavoured milk in tetra packs and UHT milk.
The biscuit market in India is estimated to be 1.1mn tap, valued at Rs35bn. The
unorganized sector accounts for over 50% of the market. The market has been growing
at a CAGR of 6-7% pa. Per capita consumption of biscuits is estimated at a low 1.5kgs,
reflecting the huge potential for growth. Manufacturing was reserved for small scale up
to 1997, which put large players at a disadvantage. In the organized sector, Britannia
and Parley are the only national players with dominant market shares. Other organized
players include domestic players like Brakeman’s, Champion, Quality, Praia and
MNC’s like SmithKline Consumer, Kellogg’s, Sara Lee, Heinz, Excelsior (Nestle) and
United Biscuits.
Operating margins have been improving despite the fast pace of new product
launches in the last 2-3 years. Rationalization of manufacturing operations, and greater
contribution of higher margin dairy products has both contributed to the margin gains.
Britannia has decided to hive off its dairy business into a joint venture with the New
Zealand based Fonterra Cooperative. Britannia and Fonterra will each hold 49% of the
Rs2.25bn equity, while the balance business associates will hold 2%.
89

Again in this case where milk is the main raw material, the inbound logistics is
governed by time. But inbound logistics in case Britannia is not as efficient as in the
case of Maul, though it works more or less on the same principle as that of Maul.
As it also uses VCCs but it does not matches the scale and reach of Maul. Further
the distribution is not very IT integrated, which as per their VP materials management
V.K.Rao is going to be implemented very soon. Thus Britannia uses the local Channel
means i.e. near and easily accessible to the plant location in the respective city and this
is actually done with great care and efficiency.
90

GROWTH OF BRITANNIA
The company said the organisational changes will enhance "Britannia's position
to become an all-embracing foods company from a bakery/dairy company".
"We are preparing Britannia for high growth in India operations by catering to
the changing food habits of the evolving Indian consumer and pursuing
opportunities for growth in the overall food domain, here and abroad," said
Chairman Nusli Wadia in a statement.
Britannia's shares rose 16.5% to a lifetime high of Rs 665.80 on Monday after
the company announced robust fourth-quarter results late last week.
During Bali's tenure, first as CEO and then as MD, the company's revenues
have quadrupled from Rs 1,510 crore in 2005 to Rs 6,185 crore in 2013. But net
profit in these eight years has increased from Rs 149 crore to Rs 259 crore, a
much slower rate of growth.
This is because the company has had to navigate high costs and ward off
competition not just from older rivals such as Parle and ITC in its core biscuits
business, but also from relatively new entrants like Cadbury Kraft's Oreo and
United Biscuits' McVities.
94

While biscuits still make up over three-fourths of its total sales, the company
has made an aggressive push into other categories such as milk, cheese and
ready-to-eat food to earn higher margins. In these segments, too, it is facing stiff
competition from MTR, PepsiCo and its erstwhile partner Danone, among
others.
The international business currently accounts for less than 10% of Britannia's
revenues, with the Middle East being its main overseas market. It operates in
the region through Dubai-based Strategic Food International and Oman-based
Al Sallan Food Industries.
A Mauritius-based wholly owned subsidiary of Britannia is the holding company
of Britannia and Associates (Dubai) Ltd, which in turn holds investments in the
Middle Eastern subsidiaries.
Analysts expect Britannia to grow its international operations inorganically. "Its
international business is very small right now, and there could be some
acquisitions to make it large," said Nitin Mathur, consumer research analyst at
Espirito Santo Securities.
95

PLANT LOCATIONS
Britannia's plants are located in the 4 major metro cities - Kolkata, Mumbai, Delhi
and Chennai. A large part of products are also outsourced from third party producers.
Dairy products are out sourced from three producers - Dynamic Dairy based in
Barmaid, Maharashtra, Modern Dairy at Carnal in Haryana) and Thacker Dairy
Products at Howrah in West Bengal.
96

FUTURE STRATEGIES
The firm must recognize that it cannot make this journey alone. Companies that
want to be industry leaders realize they must reinvent the total network in which they
are merely one player. To achieve such leadership, a firm must cooperative in creating
the value chain constellation that will dominate an industry. This network consists of a
linked set of agile companies that not only react to market challenges but in fact
dynamically anticipate and exploit new opportunities that can sustain profitable
revenue growth and exceptional shareholder value well into the next decade.
Considering the importance of targeting markets and consumers, a company must
also choose its value chain partners very carefully because they are the key to future
profits and competitive advantage. In short, alliances must be built with organizations
that are qualified to assist in the process..
With the road map laid out and the destination defined, value chain partners can
pursue a jointly determined set of process improvement initiatives based on what works
for other networks or on new and innovative designs created by the members of the
value chain constellation.
97

The Value Optimising a Value chain Constellation
Suppose that these revenues are 10 to 20 percent above the business plan. Imagine
that profits can be increased by 30 to 50 percent, cycle times reduced by 20 to 50
percent, and inventory as a percentage of revenue cut in half. Add to the dream in fact
that shareholder value rises because of a doubling in earnings per share, and customer
satisfaction reaches new highs.
These results can be achieve by leveraging the network effort and the enabling
technologies to “turbocharger” a particular supply chain. Leading manufacturing and
service organizations in the automotive, aerospace, chemical, consumer goods,
electronics, and pharmaceutical industries have already increased profits and
shareholder value through the supply chain strategies and solutions outlined in this
book. They are now seeking even higher levels of success.
United efforts may be used to move an entire industry forward. Efficient health-care
response (EHCR), efficient food service consumer response (EFCR), and several
industries focus on collaborative planning, focus on collaborative planning, forecasting,
and replenishment (CPFAR) are excellent examples of such a combined effort.
Whether industry sponsored or promoted by a nucleus firm, the value chain
constellation emerges as an alliance among organizations with a similar vision. The
constellation focuses on meeting the classic supply chain objective; offering the right
98

combination of data, products, and services to customers and consumers at the right
time and place and at the right price. Available-to-promise is an important feature of
this alliance, backed with the lowest total delivered cost. To achieve this reality, the
partners in the alliance must embrace a number of key elements:
 A focus on the Internet as a vital medium of communication
 Rapid, interactive, and successful product design and introduction.
 Global available-to-promise capability with completely visible inventory.
 Ability to assemble, builds, or configures diverse components into a finished
order.
 Features of mass customisation in the finished offering.
 A glass pipeline for viewing availability and flow of goods and services.
 Analytical and financial feedback loops that accurately measure progress.
 Flexible planning and execution to meet customer needs.
 Zero working capital.
 Continuous learning and improvement.
99

OBJECTIVES: -
The objectives of the study can be divided in to: -
1. To analyse the present scenario of FMCG industry in terms of emerging
opportunities & challenges.
2. To measure the status of distribution in overall marketing mix of FMCG
industry.
3. To identify the emerging paradigm of distribution in the era of globalisation &
IT.
100

RESEARCH METHODOLOGY
METHODOLOGY: -
The study conducted to achieve the before said objectives was both exploratory and
descriptive in nature and involved personal interviews based on the questionnaire
format.
DATA COLLECTION METHOD: -
 Primary source
 Secondary source
Primary sources: -
The data required for the study would be based on:
 Personal interviews based on pre-decided format of structured
undisguised questionnaire, which would be administered to the
respondents.
 Personal interview with the Company representatives regarding the
various data.
 Short interviews with the customers.
101

Secondary Sources: -
The secondary data consists of information collected from:
 Websites
 Annual Report of the Companies
 CMIE Report
 Business magazines
 Trade guides
 Published data on FMCG industry
102

QUESTIONNAIRE/TECHNIQUE USED: -
The questionnaire would consist of: -
 Open ended questions: - To bring out the ideas and pertinent thinking
of the respondents.
 Multiple-choice questions: - These questions made answering
procedure more convenient for respondents.
Tools: -
 Sample constitutes of companies like HLL, AMUL, NESTLE,
BRITANNIA.
 Use of percentages and bar graphs for analysis
103

LIMITATIONS
Throughout the study utmost care has been taken to avoid biases, errors so as to
ensure authenticity and accuracy. But there is possibility for some discrepancies to
come in between due to following limitations:
 Respondents may give their biased opinion, as they know the identity of
interviewer.
 Some questions are quantitative and respondents are answering without
understanding it fully.
104

DATA INTERPRETATION
Q1.
Importance of various functional areas
0
1
2
3
4
5
6
7
8
BrandMgmt.
AdvertisingMgmt.
SalesPromotionMgt
Distributionchannel
Management
Physical
distribution/Logistics
Management
Demandforecasting
&Management
Salesadmn.&Mgt.
Functional areas
ratings;1beingleastimportant
Here we see that almost by all the companies the functional areas of Physical
distribution, Brand management and Distribution management were rated as the most
Important. Thus we learn how important is distribution these days as it even drives the
branding factor.
105

Q2.
reasons for effecient distribution management
0
1
2
3
4
5
6
7
8
Sustainable Bus.
Growth & long
term
performance
Greater market
dominance
Competitive
advantage
Total cost
containment
Dev. &
maintenance of
harmonious
channel
relationships
Improvement of
economic &
social welfare
ratings
In this graph we see that why companies want efficient distribution management.
Thus accordingly respective companies gave ratings. The reason, which was rated as
most important by almost all the companies, was Sustainable Business growth & long-
term development and subsequently others.
Q12. Role of intermediaries in the era of globalisation and IT.
106

HLL
1.) LOGISTICS & EXCHANGE FUNCTION
role of intermediaries in Logistics & Exchange functions
in case of HLL
0
1
2
3
4
5
6
7
8
Breaking Bulk Assortment Timely, intact
movement and
Delivery of Products
Availability and
proper storage of
products
Order processing and
Fulfilment
Functions
Ratings1beingleastimportant
C&F agents Stockists/Distributors Retailers
Here the role of various channel members like C&F agents, Stockist and Retailers
under the broader function of Logistics & Exchange were rated on a scale of 7, where 7
is the most important. Rest is quite evident from the graph that which sub-function was
rated the most and which one the least important.
107

2.) MARKETING FUNCTION
Role of intermediaries in Marketing functions in case of HLL
0
1
2
3
4
5
6
7
8
Market
coverage and
penetration
Facilitating
Buyers in
Information
search
Supporting
Buyers in their
Purchase
Decision
Product
Holding and
Risk - sharing
Local Credit
(if any)
Push Effort to
generate sales
volume
Trust Building
Marketing functions
Here again the role of various intermediaries is rated under the broader function of
marketing and rest the graph is quite self-explanatory.
3.) INFORMATION SHARING WITH THE FIRMS
108

Role of intermediaries in Information Sharing with firms in case of HLL
0
1
2
3
4
5
6
7
8
Product
performance
Market
knowledge
Consumer
Tastes and
preferences
Dynamic Price
effectiveness
Competitors
Actions and
Reactions
Effectiveness
of Current
promotional
strategy
categories
ratings1beingleastimportant
Here again we see that role of channel members varies with category of function as in
product performance C&F agents plays no role at all. Similarly in Dynamic price
effectiveness C&FA and stockists have no role to play.
109

NESTLE
1. LOGISTICS AND EXCHANGE FUNCTION
Role of intermediaries in the logistics and Exchange Functions in Case of NESTLE
Here we see there are no C&F agents as company has already done away with them.
Therefore, in case of timely Intact movement and delivery of products and in order
processing and fulfilment stockists/distributors and retailers play a pivotal role.
110
0
1
2
3
4
5
6
7
Rating1beingleastimportant
BreakingBulk
Assortment
Timely,intact
movementand
Deliveryof
Products
Availabilityand
properstorageof
products
Orderprocessing
andFulfilment
Function
C&F Agent Stockist/Distributors Retailers

2. MARKETING FUNCTION
Role of intermediaries in marketing function in case of NESTLE
Again here in market coverage and penetration, facilitating buyers in information search
and supporting buyers in purchase decision. Stockists/distributors and retailers play a
fairly important role.
111
0
1
2
3
4
5
6
7
Marketcoverageand
penetration
FacilitatingBuyersin
Informationsearch
SupportingBuyersin
theirPurchase
Decision
ProductHoldingand
Risk–sharing
LocalCredit(ifany)
PushEffortto
generatesales
volume
TrustBuilding
Function

3.INFORMATION SHARING WITH FIRMS
Role of intermediaries in Information sharing with firms in case of NESTLE
Again in product performance and market knowledge both stockists/distributors and
retailers play a most important role.
112
0
1
2
3
4
5
6
7
Productperformance
Marketknowledge
ConsumerTastes
andpreferences
DynamicPrice
effectiveness
CompetitorsActions
andReactions
Effectivenessof
Currentpromotional
strategy
Function

GCMMF (AMUL)
1.) LOGISTICS AND EXCHANGE FUNCTION
Role of intermediaries in Logistics & Exchange function in case of AMUL
0
1
2
3
4
5
6
7
8
movement and
Availability and
proper storage of
products
Fulfilment
Functions
Here this graph tells us very clearly that where time is a pertinent factor. C&FA play a
most important role than distributors and retailers. This is so because products are
highly perishable in nature.
113

Role of intermediaries in Marketing function in case of AMUL
0
1
2
3
4
5
6
7
8
Market
coverage
and
penetration
Facilitating
Buyers in
Information
search
Supporting
Buyers in
their
Purchase
Decision
Product
Holding
and Risk -
sharing
Local Credit
(if any)
Push Effort
to generate
sales
volume
Trust
Building
Functions
In this graph we learn that in push effort to generate sales, trust building, helping buyers
in their decision and facilitating buyers in information search, retailers play most
important role and then comes stockists/distributors or C&F agents.
3.) INFORMATION SHARING WITH FIRMS
114

Role of intermediaries in Information Sharing with firms in case of AMUL
0
1
2
3
4
5
6
7
8
Product
performance
Market
knowledge
Consumer
Tastes and
preferences
Dynamic Price
effectiveness
Competitors
Actions and
Reactions
Effectiveness
of Current
promotional
strategy
categories
In this graph we see that for judging the effectiveness of current promotional strategy
and competitors action, stockists/distributors and retailers play a major role than C&F
agents
BRITANNIA
1.) LOGISTICS AND EXCHANGE FUNCTION
115

Role of intermediaries in Logistics & Exchange function in case of BRITANNIA
0
1
2
3
4
5
6
7
8
movement and
Availability and
proper storage of
products
Fulfilment
Functions
Ratings1beingtheleastimportant
Here we see all the three play an equally important role in almost all of the Logistics
and exchange function.
116

Role of intermediaries in Marketing function in case of BRITANNIA
0
1
2
3
4
5
6
7
8
Market
coverage and
penetration
Facilitating
Buyers in
Information
search
Supporting
Buyers in their
Purchase
Decision
Product
Holding and
Risk - sharing
Local Credit
(if any)
Push Effort to
generate sales
volume
Trust Building
Functions
Ratings1beingtheleastimportant
3.) INFORMATION SHARING WITH FIRMS
117

Role of intermediaries in Information sharing with firms in case of BRITANNIA
0
1
2
3
4
5
6
7
8
Product
performance
Market
knowledge
Consumer Tastes
and preferences
Dynamic Price
effectiveness
Competitors
Actions and
Reactions
Effectiveness of
Current
promotional
strategy
Category
118

FMCG logistics costs trends
2001 2002 2003 2004 2005 CARG
Sales (Rs Cr.) 27,455 29,421 32,192 34,559 35,290 6.0
Cost of production
(Rs Cr)
23,882 24,953 26,828 28,592 28,335 5.4
Distribution Cost
(Rs Cr)
665 683 742 784 853 2.9
Outbound
Cost/Sales (%)
3.7 3.5 3.4 3.4 3.6 (0.6)
RM Inventory (Rs
Cr)
876 1,108 1,150 1,104 1,1042 2.8
FG inventory (Rs
Cr)
1,285 1,417 1,398 1,552 1,438 2.7
RM Inventory
Holding (Days)
41 50 52 50 49 1.5
FG Inventory
Holding (Days)
31 33 30 28 29 (1.1)
Interest Cost (%) 16.4 14.6 11.9 12.2 11.3 (1.4)
Inventory Holding
Cost (IHC) (Rs cry)
355 370 304 323 280 (2.4)
IHC/Sales (%) 2.0 1.9 1.4 1.3 1.1 (1.0)
Material
Consumption (Rs
Cr)
11,016 11,800 13,174 14,537 14,055 5.0
Inbound Logistics
Cost (Rs cry)
294 293 322 346 363 2.3
Inbound Logistics
Cost/Sales (%)
1.7 1.5 1.4 1.4 1.4 (0.8)
Total Logistics
Cost (Rs Cr)
1,114 1,146 1,168 1,253 1,296 2.8
Total Logistics
Cost/Sales (%)
6.4 5.9 5.3 5.1 5.1 (1.0)
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CHAPTER V – FINDINGS
Following Are The Findings Of the Study On The Topic Dynamics Of Distribution In
FMCG Industry
 India is still in its infancy in the logistics and supply chain business.
 FMCG industry is in doldrums and as such must look for ways to save costs.
Thus the most drastic end effective way is controlling the distribution or in
bigger perspective supply chain.
 Today distribution systems have a linear flow and some hub and spoke,
whereas the trend is moving towards Hub & Spoke at more than one level and
multidimensional flow of information.
 With the passage of time use of sophisticated software tools- ERP, Trend Data,
Qualitative field inputs will increase and as a result forecasting would be
better.
 One major finding is that, while branding differentiates the image of the
product, the distribution will determine its success to a large extent.
 Rural markets would be the cornerstones of all FMCG strategies in the near
future and this difficult markets will only be cracked by companies that form
partnerships across their value and supply chains.
120

 FMCG companies are now realising that change will come faster and harsher
than ever before, so why not change before change is thrust upon. Therefore,
Distribution has suddenly emerged from the background of the business to the
very forefront.
 Last but definitely not the least with all attention now being centred on Supply
chain and logistics specifically in FMCG sector, this could well turn out to be
the business to be in.
121

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