Distribution Management

Case Study -1 Group no. - 4

Mehta Soya : a promotional conundrum

Amit Balki (013)

Ashutosh Ghule (031)

Tushar Bhadalkar (106)

Ketaki Kawale (111)

Prakhar Roy (112)

Ganesh Shirude (114)

Vivek Arya (116)

Submitted By:

Introduction MSIL is among the top 5 FMCG companies in the edible/non-edible oil segment,

with its main focus on a high-volume and low-margin strategy. Among other edible oils, palm oil (46%), soya bean oil (16%), and

mustard oil (14%) are the three largely consumed oils in India. The imports of oil account to 45-50% of total consumed volume in India.The ‘Popular’ brand of MSIL was not so popular despite the fact that they

targeted the lower, middle, and upper-middle income groups.The kirana stores account for 70 percent of the edible oil annual sales,

and organised account for 30%. MSIL has an 22 percent market share in edible and non-edible oil. MSIL Delhi sales team comprised 11 salespeople as compared to a team

of 50 salespeople with the largest competitor. Mr Arnab Dasgupta, Head - North Zone of ‘Popular’ product division of

MSIL, challenge is expansion to achieve a market share of 25 % or more in the North Zone within two years. Budget of Rs. 4 crore is approved to achieve this target.

Problems One major concern is how to popularize the 'Popular' products of MSIL

(Moksh, Swaad, and Safal) and generate awareness among the target customers.

Channel partners have ranked MSIL as average in comparative ranking where as their competitors are ranked much higher.

Packaging quality of MSIL is not satisfactory. Channel Partners don't push MSIL products because of the lack of

incentives & low profit margins (Popular products). Lack of sales personnel for building long-term relationships with the

channel partners. No compensation policy whereas competitors offer compensation for both

transit as well as damaged packaged goods. MSIL sells directly to wholesalers and retailers. It is not appreciated by the

distributors. Channel members face difficulties in matching the supply with demand

because of the big orders are not fulfilled The fluctuation in oil rates causes the wholesalers to buy at high and sell

at low prices.

Brand Awareness for MSILWhen large businesses operate under multiple different brands, services and

companies, a brand portfolio is used to encompass all these entities under one umbrella.

It is very useful to identify weak brand and drop them. MSIL can reconsider its brand portfolio in light of cost benefits analysis and after using the portfolio the company can identify and drop on any weak brand which is not that much profitable or beneficial for the growth of company.

Carrying 3 brands under one product category requires huge promotional budget to build separate brand identity.

The company should have one brand for each category of products like, Popular-Swaad, Popular-Moksh, Popular-Safal. So it is very important to promote 'Popular' brand. Which can be very useful for further categorization.

Such a strategy would result in optimum utilization of the promotional budget.

BCG Matrix: Product PortfolioMSIL have 21% market share in edible/non-edible oil industry. MSIL have three

product divisions, viz., Popular, Premium and Specialty.

BCG Matrix: Product PortfolioDog: Product category having low market share but low overall business growth.Moksh (Mustard oil): Has seasonal demand & low pricing strategy resulting in low profit margin. It is famous in Western Zone.

Question Mark: Product category having low market share but high overall business growth.

Swaad (Palmolein): 50% share of total sales in popular category but market share is not strong. Its awareness is low hence more advertising is required.

Star: Product category having high market share but high overall business growth.Vishesh under Premium category has established presence and with high market share as well as business growth with 5.5cr turnover for MSIL.

Cash Cow: Product category having high market share but low overall business growth.

Due to inadequate information in case study it is difficult to categorize cash cow which Safal (Soyabean).

Channel Partners As we know from the case study that the retails stores dominate

the retailing of edible oil, accounting for almost 70% of its annual sales.

Next is Hub & Spokes Model -

Organised Sellers

•30% share•Big Bazaar, D-Mart

Unorganised Sellers

•70% share•Mom & Pop stores

Hubs & Spokes ModelThe Hub & Spoke model is used in the context of multi location sourcing wherein a central consolidator called the ‘Hub’ provides a single face to the customer while seamless extensions called ‘Spokes’ are leveraged to provide the services, distributed across multiple locations. In a wider role, the Hub is expected to take on management responsibilities including those of customer, quality, risk and performance management, training & development, manpower management and regulatory compliance.

MSIL Distribution NetworkDepots 110

Distributors 3300

Retail Stores

6.8 lacs

Sales Force 300

Hubs & Spokes Model Areas For Improvement DescriptionResponsibility Channel partners bridge the time, place,

and possession gaps that help the producer to reach the consumers.

To not only distribute the products but also create brand awareness & image of the products using promotions offers and benefit.

Customer Management Understand Customer Requirements from the spokes (channels) and strategizing according to the same.

Quality Risk & Performance Management

Set quality, risk & performance standards for the channel members

Monitor performance (Cost Savings) Report or initiate corrective actions

wherever requiredTraining & Development Train the sales force to deploy uniform

standards and pricing policy through out the channel members

Manpower Management Ensure continuous manpower planning across hub (Depots)

Channel Conflict Roles & Responsibility: It is not clearly defined by MSIL for distributors,

wholesalers and retailers. Nor does 11 sales person able to handle their channel; efficiently.

Compensation: MSIL wants greater market share through a low-price strategy whereas retailers want greater margins to achieve short-run profitability.

Direct & Indirect Conflict: MSIL sells directly to wholesalers and retailers by skipping the distributors for market share.

Competition: Channels are selling packaged products Big size – ADL & COL, Midsize - Medha & Mint along with MSIL which contribute 30% and also unpacked products which have major market share i.e. 70%.

Channel Composition: According to the below graph the composition of channels is given which is not evenly balanced for 4 zones.

Channel Conflict (Conti..)

It is clearly seen that the ratio of Wholesalers & Distributor is unevenly balanced for the Retailers.

We propose that the Distributors & Wholesaler are in ratio 1:3, Hence the network of D&W 61 will reduce to 48.

Area Zone

Wholesaler + Distributor

Retailers

North 10+4 = 14 45South 5+3 = 8 15East 15 + 10 = 25 50West 8+6 = 14 40

Channel Conflict (Conti..)Benefits for reducing the network: Sales force is increased to 23 which means 1 sales person will handle only 2

either Distributor or Wholesaler.

MSIL Sales force will have more control over 48 D&W.

Hub & Spokes model will be more effective.

To monitor the compensation for wastage & spillage is given to channels.

To monitor monthly/quarterly targets.

Assist with Promotional activities like Billboards, banners, etc.

The sales force will be able to use Push methodology through their channels.

Packaging and Pricing PoliciesAccording to Exhibit-7 the Insights of Channel Partners are as below:

The important concerns highlighted in RED are about schemes, packaging and incentives of MSIL.

Packaging and Pricing PoliciesPackaging:MSIL should invest in good packaging on primary level even if its increases the cost of the product

It influences the brand image of the product. Companies today have specialized packaging experts who not only design attractive packages but also make it easy to handle it for end user.

Packaging for Oil is very crucial not only from spillage/wastage point of view but also for dangers & hazards it can lead to during transportation and storage.

Transporter is accountable for the safe delivery of goods. Hence any damage during transit should be deducted from Transporters account.

Packaging and Pricing PoliciesPricing:The channel members are facing below issues on pricing: The profit margins for MSIL products are lower than its competitors. The rates of oil fluctuated on a day-to-day basis and hence D&W buy at higher

price and has to sell at lower price according to markets.

Volume Discounted Pricing: Order Slabs should be established according to volumes. E.g. 1000ltr of order 5% discount, 5000ltr of order 10%.

Forward Contracts: A forward contract is an agreement to buy an asset at a future settlement date at a forward price specified today. Wholesaler can order in advance for the current price and the orders will be delivered as schedule in future.

This will increase profit margins, lower the impact of price variations and also sell in higher volumes.

Marketing – Ads & Promotional PlanIts is mentioned in case “The marketing department of MSIL was not active in

devising market campaigns to expand the reach of popular products and was in turn heavily dependent on the sales team for the increased product sales/volumes.” & there is no schemes or display promotion incentives for Billboards & Banners given to retailers.

We Suggest: The advertising & promotional plan for MSIL products for Delhi is to be constructed

by focusing on retailers, sales personnel & intermediaries. MSIL is going to need a brand building hence campaign for that we need to focus

more on the reach via the ATL medium. The plan is to be divided into ATL & BTL mediums. We suggest adapting to a 35-

65 ratio approach for the ATL & BTL activities respectively. Moksh and Safal are the products which are going to be advertised on TV & Print. Radio is not much advisable here since it will be a waste because of two reasons:

1.) In ATL campaign we are focusing for brand building, if this was to be a sales driven campaign then radio would have been a good choice. 2.) Limitation of funds. (4 Cr. Budget).

Marketing – Ads & Promotional Plan ATL Plan

Target Group for these products would be masses i.e. females, 25+ SEC A, B. Total spends = Rs. 1,49,99,608

Medium Rate Cost Decision for the year Channels/Publication

Television

Rs 2.05 lacs/ 10 sec Rs 2.80 lacs/15 sec Rs 1.75 lacs/ 10 sec

Rs 2665000 Rs 2240000 Rs 2100000

13 primetime spots 8 primetime spots 12 non-primetime spots

Sony, Zee TV, Star Plus. Regional Channels with highest GRPs and lowest affinity.

Print

Rs 4838/sq. cm Rs 2599/ sq. cm Rs 2,90,000/ half page

Rs 1387584 Rs 1497024 Rs 1160000

3 ads  6 ads 4 ads

TOI Hindustan Times India Today(can consider local tabloids and Hindi newspapers)

RadioRs 9000/ 10 secRs 7000/ 10 secRs. 5000/ 10 sec

Rs 900000Rs 700000Rs 500000

300 spots  Radio Mirchi

Billboards Rs. 150/ sq. ft. Rs 1950000 65 billboards for 4 zones  

Marketing – Ads & Promotional Plan BTL Plan

Swaad is the product in the popular category which is mainly consumed by restaurants/hotels & Dhabas hence it will be mainly advertised & promoted BTL

Total Spends= Rs. 2,50,00,000

Medium Rate Cost Decision for the year

Incentives -Rs. 12000000

To be provided as per the performance

Sales personnel Rs. 8000/mth Rs. 2304000 Additional 12 salespersons( 3 per zone)

Free Gifts Rs. 3500 per retailer

Rs. 6300000 Rs 3500 per retailer for 150 retailers

Store Banners Rs.100/sq. ft. Rs. 600000 5 banners for 150 retail stores

Display Promotions

Rs. 3000 per retailer Rs. 450000 For all 150 retailers

Events & Trials   Rs. 3346000

Free trial packs, free coupons, promotional activities outside movie theatres, competitions for consumers.

Thank You