Sales & Distribution Management Project

IIM Kozhikode
Group No 7

Agenda
Marketing Channel Strategy
Distribution Network Design
Channel Members and their operations
Distribution Network Logistics
Asset Management
Company offers and incentives
Reverse Supply Chain
Issues & Challenges
Distribution Channel Strategy
Global food & beverage leader with net
revenues of $65 billion. It entered India in 1989
38 Beverage plants, 3 food plants. Current
turnover is more than Rs. 1000 crore top 5
markets of PepsiCo. Product portfolio in India
16 brands in Foods and Beverages.

Typical Soft drink supply chain
Pepsi Co distribution models
Direct Store
Delivery
Employees take direct
orders and deliver
previous orders
Vending &
Foodservice
system
To make products
available in schools,
colleges, canteens,
restaurants etc
Broker
Warehouse
Distribution
Less perishable
products like soft
drinks. Third party
distributors are
employed
Distribution Network Design
3 nearby manufacturing plants:
Bangalore (Mysore Highway),
Palakad, Plachimada
3 distributors in Calicut Area
with turnover of about 2Cr.
Territories: Kozhikode,
Koduvulley, Mukkar
2 wholesalers in
Kunnamangalam
- Malabar, Minar
1500 retailers for
Profile Enterprise.
Total 2800 retailers
in Calicut area
500ml can, 600ml bottle, 1 litre,
2 litre - 7Up, Mirinda, Pepsi
350 ml bottles Slice and
Nimbus
1ltr, 2ltr Aquafina and Lehar

Sample SKUs
Retailers: Channel Members and their operations
Retailers: one who sells goods to customers. Items are purchased from manufacturers and wholesalers
and sold at marked up price. Also known as merchant.
We observed three types of retailers in Kunnamanglam
Organized retail: large retail outlets which stocks up large variety of products. We visited Reliance
Fresh and Day Mart. We observed that Pepsi freezers stocked up with Coke also. There were
weekly visits by the distributors who were not harsh on the retailers for doing so. They just
advised them to keep only Pepsi in those freezers.
Bakery : nearby bakeries and restaurants like KK Bakery, Spanish Bakery, Hotel Sangamam, Chicken
Chicago, Broast. They all talked about the schemes under which they order aerated drinks.
Restaurants: Both the restaurants(Broast & Sangamam) had Pepsi sponsored freezers. Even they
kept coke stocks in them and no penalties was charged.
Reliance Fresh Broast Restuarant
Day Mart
Around 90% market share in almost all products (Only for Slice
60%)
Highest selling SKUs 600 ml, 250 ml, 2 ltr
Minimum inventory levels decided by Pepsi, separately for
different SKUs for different distributors
Wholesalers are very few( about 1% of all the retailers)
Season: August to May (Off season only 2 months in Kozhikode
area)
Source of supply- Palakkad plant (Everything except Tropicana)
Reliance gets directly from plant (company), rest all get through
distributors
No schemes are offered to wholesalers and treated same as
retailers (trying to minimize wholesalers)
Supply time for distributor (2 days from the order placing day)
and Supply time for retailer(1 day)
Cold storage is given to new retailers also based on revenue
predictions
Retailers get incentive in terms of extra PepsiCo items (mostly no
cash discounts)

Profile Enterprises, Ashokapuram, Kozhikode
Pepsi Cos exclusive distributor
Turnover 1 Crore
Employees 20
1 small warehouse
Market coverage Kozhikode city area (60%
revenue)
Margin Rs. 23 average per case for all
products (Higher for 2 ltr packs)
Empty glass bottle system
The distributor pays separately for the glass bottles to the company in advance when placing first order
Cycle is repeated unless the distributor moves out of business. At that time only the initial advance for glass bottles is
refunded
The glass bottle collection depends on the market. In other parts of India, separate dedicated trucks are sent to collect the
bottles. But in Kozhikode the glass bottle market is very low, so the supply truck itself gets the glass bottles back from
retailers to distributors.
Distributors & Wholesalers: Channel Members and their
operations
Observations
Logistics
Through their use of the most modern technology, PepsiCo and its bottlers
were able to improve their distribution and logistics management
operations significantly
To further improve the market penetration, PepsiCo launched two new
distribution methods in early 2000s - chilled DSD system and the hybrid
system
The chilled DSD system was a relatively small distribution method, created
for items which required continuous refrigeration
Sold beverage
concentrate to
bottlers
Bottlers added
carbon dioxide,
sweetener and water
to make beverages
and beverage syrup
Syrup was either sold
directly to the
fountain accounts or
was combined with
carbonated water for
bottling
Advanced Logistics System in place by PepsiCo
Asset Management
Refrigerator
Refrigerator is provided to retailer by PepsiCo through
the distributor on the first purchase order for free
Distributer and company representative present during
the installation
Monitoring
PepsiCo has hired a third party company to monitor the
products stored in the fridge
Third party provides an unbiased evaluation report to
PepsiCo directly
Surprise visits happen once in 7 days or 15 days
If other company products are found the fridge is taken
back
PepsiCo executives also visit the retail stores
occasionally prior to which the distributor visits the
retailer shop and sets up shop as per PepsiCo guidelines
Company offers
Company offers vary with respect to season.
The current offers are available in two
different categories:







Other incentives
For displaying PepsiCo brands in display
retailer earns Rs. 500 per month

Company offers and incentives
7up, Pepsi, Mirinda: 1 case free with
purchase of 10 cases
Lehar, Aquafina: 3 cases free with
purchase of 10 cases
Mix of different SKUs within the category is
allowed
In order to build good relationship with the retailers and
push sales of PepsiCo products the company has come up
with a new scheme during Onam season named Joy of
Onam.
Scheme Period:
15
th
September,2014 to 15
th
October, 2014
Criteria:





Rewards:
Invitation to evening party at Taj, Foreign holidays,
Samsung galaxy smartphones Tshirts, Bags. IPL
tickets were given to top retailers in the previous
year

The retailer should sell 150 cases of any PepsiCo products
Refrigerator should be stocked with only PepsiCo products
50-100 units of PepsiCo products put on display in the store
Company offers and incentives
Reverse Supply Chain
Damaged Goods
If products are damaged inside the case, it can
be returned to PepsiCo order delivery guy with
full refund
Glass Bottles
4 cases of glass bottles are given in advance
For future transactions, number of cases that
can be ordered is equal to number of cases
returned by retailer
Same vehicle is used for both plastic and glass
bottles
No refrigeration is present inside vehicle
For Pepsi, 7up, Mirinda






For Aquafina and Lehar

Retailer Margins
Item Amount(Rs.)
Sales Revenue (1 Case) 840
Purchase Cost from Distributor 774
Profit per purchased case 66
Profit earned from free case 840
Total profit on sale of 11 cases 1500
Profit per case 136
Profit Margin per case 17.5%
Item Amount(Rs.)
Sales Revenue (1 Case) 240
Purchase Cost from Distributor 207
Profit per purchased case 33
Profit earned from free case 720
Total profit on sale of 11 cases 1050
Profit per case 81
Profit Margin per case 33.75%
Competitive Matrix
Vendors Plants DCs Stores Customers
Challenges
Distributor often has to combine bills to two or more retailers to meet his
volume or margin targets
Margin and Volume pressures
Many retailers buy solely based on schemes offered by the supplier hence
correct and timely communication of schemes is important
Communication of schemes
Local brands compete for share of sales, are stocked by retailers and generally
have higher margins as compared to Pepsi
Local brands/Duplicate brands
Health consciousness and the variety of available beverages leads to shifting
consumer preferences that are difficult to track
Shifting consumer patterns