International Journal of Management & Strategy, July-Dec.2010 Vol.1No.

THE EFFICACY OF SCHEMES AND PACK WISE MARGINAL CONTRIBUTION ANALYSIS OF PEPSI IN COIMBATORE

P.Varadharajan, Faculty, PSG Institute of Management,Coimbatore,India

Dr.P.Vikkraman, Faculty, PSG Institute of Management, Coimbatore,India

ABSTRACT
The research article ‘To study the efficacy of current scheme and high volume management study, recommend on ways of improvement and
Pack wise marginal contribution analysis of high volume outlets’ is carried out for Pepsi Co, Coimbatore. The study focuses on the
management of HVO and Schemes and marginal contribution analysis. The study is done in Coimbatore region.

Pepsi Co finds it difficult to survive in the Bottled water Category because of the high discount offered to the Outlets which is a cost to the
Company and the high discount offered to the Outlets by the Competitors. At present the company’s main objective is to reduce the discount
cost so as to enhance the Net Marginal Contribution. Company is also looking forward to remove the High Volume Outlets from the HVO list
whose sales volume is not giving justice to the HVO status given.

Data has been obtained both from the Primary source and Secondary Source for this report. Primary Data has been obtained from the various
officials of Pepsi Co and Secondary Data has been obtained from various internal documents of Pepsi Co. Limitation of this report is that the
findings of the report is based on the data available from 01/01/2008 that has been projected for the whole year. In the Coimbatore Territory
Aquafina is showing a negative net marginal contribution whereas in contrast CSD category is showing a positive net marginal contribution in
both the territories. The Best solution to remove the net marginal contribution of Aquafina is either by increasing the price of Aquafina or by
reducing the discount given to this outlets by the cross promotion pack mix.
International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

NEED FOR THE STUDY

At present Pepsi Co is struggling in their Bottled Water Category Aquafina and Carbonated Soft Drinks category in Coimbatore because of the
high discount given to the Outlets. Pepsi Co’s Carbonated Soft Drinks Category is doing well in its category compared to Aquafina. Pepsi Co
finds it difficult to survive in the Bottled water Category because of the high discount offered to the Outlets which is a cost to the Company
and high discount offered to the Outlets by the Competitors. At present the company’s main objective is to reduce the discount cost so as to
enhance the Net Marginal Contribution. The project is to study the present discount strategy of the company and find out those distributors
who are availing more discount than approved by studying the Cost Per Case for different pack mix given to the distributors.

Company is also looking forward to remove the High Volume Outlets from the HVO list whose sales volume is not giving justice to the HVO
status given. Customer Executives and Territory Development Managers of the Coimbatore Territory are suffering a lot because of the
vagueness and the non clarity of the Claims Top Sheet and insufficiency of the uniform Supporting documents that is submitted by the
distributors. Customer Executives and Territory Development Managers are not able to make any meaningful decisions or take corrective
actions on the basis of Claims submitted by the distributors.

The company faces problems with pending claims as claim processing is consuming more time. Even though the company has approved new
format for claim sheet, many distributors are not following this. Once this has been strictly implemented, the claim processing can be made
more easy and less time consuming.

OBJECTIVES OF THE STUDY

To identify the distributors showing a hike in cost per case (CPC) or crossing the break even for High Volume Outlets in Coimbatore.
(separately for Aquafina and Carbonated Soft Drinks).
International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

To analyse the discounts being offered to various High Volume Outlets in Coimbatore Territory. (separately for Aquafina and
Carbonated Soft Drinks).
To identify the High Volume Outlets showing a Negative Net Marginal Contribution in Coimbatore Territory. (separately for Aquafina
and Carbonated Soft Drinks).

To analyze discounts being offered to various Channels like Convenience, Leisure, Eatery, Grocery, Wines, Transport, Modern Trade
and Institution in Coimbatore Territory (separately for Aquafina and Carbonated Soft Drinks).
To find out the Pack wise and Channel wise Net Discounted CPC for High Volume Outlets in Coimbatore. (separately for Aquafina
and Carbonated Soft Drinks).
To find out the Net Marginal Contribution Ratio of CoimbatoreTerritory.(Separately for Aquafina and Carbonated Soft Drinks).
To find out the percentage of distributors whereas actually following the new approved Claims Format.

CONCEPTUAL FRAMEWORK
Cost per case (CPC)
Cost per case is the discount pay out(part of expenditure) divided by number of cases sold out.Pepsi co has an approved CPC for every High
Volume Outlets and Schemes.
Given approved CPC the company can find the outlets showing negative CPC, ie hike in CPC.
Calculation of cost per case (CSC)

The company calculates CPC for each outlets based on their past sales to formulate approval list.Every month end the distributors will have to
prepare a claim report claiming the discount based on their sales.The company will grant discount only if the amount claimed is less than or
International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

equal to the maximum allowed.Also there is a maximum allowed CPC for each outlet.If any pack crosses the break even CPC,that particular
outlet has to be tracked.

Formula :

CPC = Sales Amount / Total Quantity

Total Quantity = Sales quantity excluding free +Free quantity

Marginal Contribution:

Marginal Contribution is sales revenue less variable costs. It is the amount available to pay for fixed costs and provide any profit after variable
costs have been paid.

A company's Marginal Contribution can be expressed as the percentage of each sale that remains after the variable costs are subtracted. Given
the Marginal Contribution, a manager can make better decisions about how to price a product.

Calculation of Marginal Contribution of all packs in Pepsi Co:

Step 1: Bottles/PET/CAN per case is multiplied with Maximum Retail Price to get the
Consumer price.
Step 2: Difference between the Consumer price and trade margin gives the Gross Revenue.
Step 3: Sales Tax and Excise Duty is to be deducted from the Gross Revenue to get Net
Revenue.
Step 4: Direct Manufacturing cost, Variable Manufacturing cost, Variable sales and
distribution cost are to be deducted from Net Revenue to get Marginal Contribution
International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

of each pack.
Step 5: Marginal Contribution % can be calculated by dividing the Marginal Contribution
with the Net Revenue and multiplying it with 1
Net discounted cost per case:
Net Discounted CPC = Total Discount given in Rs / Sales Volume in cases
Net Discounted Cost per case can be calculated Outlet wise, Channel wise, Pack wise, and Territory wise.Net Discounted Cost per Case refers
to the cost incurred by the company for one case in terms of discount given.
Research Methodology
Methodology to identify distributors exceeding Break-even Cost Per Case(CPC):-
Step 1: The total discount amount claimed by each distributor is found from the physical
claims sent by them to the company every month.
Step 2: The discount amount claimed is found separately for High Volume Outlets and
Schemes(for Aquafina and Carbonated Soft Drinks).
Step 3: The actual Cost Per Case is found for different pack mix (separately for Carbonated
Soft Drinks and Aquafina) from the HVO Summary Sheet and Scheme Summary
Sheet.
Step 4: The actual Cost Per Case is compared with the approved Cost Per Case to find the
distributors exceeding break even CPC.

Methodology for finding out the Net Marginal Contribution of High Volume Outlets:-

Positive or negative marginal contribution of high volume outlets can be calculated as follows:-
International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

Step 1: Total sales volume is multiplied with the Pack mix and Marginal contribution
excluding discount to get gross marginal contribution.
Step 2: Total sales volume is multiplied with Pack mix and discount given to the outlets
(cost per case) to get the discounted CPC.
Step 3: Discounted CPC is deducted from Gross Marginal Contribution to get Net marginal
contribution.
The outlets showing a negative net marginal contribution is a loss to the company.
(Calculation for CSD and Aquafina are done separately).

Methodology for finding out the Net Discounted Cost per Case of the Outlets:-

Step 1: Total sales volume is multiplied with pack mix of the outlets and discount given to
the outlets (cost per case) to get the Net discounted CPC.
Step 2: Discounted CPC of the Outlets is divided by the Sales Volume of the Outlet in cases
to get the Net Discounted CPC.
Outlets having a High Net Discounted CPC’s discount should be reviewed.
(Calculation for CSD and Aquafina are done separately)

SOURCES OF DATA COLLECTIONS

Primary Source for the CPC Analysis of High Volume Outlets and Schemes: Interaction with the employees of Pepsi Co, Market Auditor,
Distributors and Customer Executives
International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

Primary Source for the Marginal Contribution Analysis of High Volume Outlets: Interaction with the employees of Pepsi Co(Vice President ,
General Manager – Finance ,Marketing Development Manager , Asst. Manager – Finance, Other employees)

ANALYSIS OF HVO-CARBONATED SOFT DRINKS

TABLE:1.1Distributors showing negative CPC in Coimbatore -Carbonated Soft Drinks

HVO 200ml 200ml SLICE

COIMBATORE TERRITORY

S.NO DISTRIBUTOR NAME CPC- CPC-Break CPC CPC- CPC-Break CPC

Actual even Differ Actual even Differ
1 DANUSH MARKETING 31.17 28 -3.17
2 SRI VIGNESH AGENCY 29.5 27 -2.5
3 CEEDEES ENTERPRISE 29.72 28 -1.72
4 ABISRIYA MARKETING 36.13 28 -8.13
5 JENE AGENCIES 29 28 -1
6 SRI BALAJI AGENCIES 31.55 30 -1.55
7 BALAJI TRADERS 28.33 27 -1.33
8 ANJANEYA AGENCIES 29.86 29 -0.86
9 KRISHANT AGENCIES 29.24 28 -1.24
10 MPR AGENCIES
11 PREETHI AGENCIES
12 RATHINAM AGENCIES
13 JENE AGENCIES
14 SRI PADIYAN AGENCIES
TOTAL 27.66 24 -3.66 29.89 29 -0.89

HVO 300ml HVO 300 ml SODA

International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

COIMBATORE TERRITORY

S.NO DISTRIBUTOR NAME CPC- CPC-Break CPC CPC- CPC-Break CPC

Actual even Differ Actual even Differ
1 DANUSH MARKETING
2 SRI VIGNESH AGENCY
3 CEEDEES ENTERPRISE 49.12 46 -3.12 27.12 5 -22.12
4 ABISRIYA MARKETING
5 JENE AGENCIES
6 SRI BALAJI AGENCIES
7 BALAJI TRADERS 32.62 31 -1.62
8 ANJANEYA AGENCIES 48.77 45 -3.77
9 KRISHANT AGENCIES
10 MPR AGENCIES 54.57 50 -4.57
11 PREETHI AGENCIES 50.77 37 -13.77
12 RATHINAM AGENCIES
13 JENE AGENCIES
14 SRI PADIYAN AGENCIES
TOTAL 47.78 37 -10.78 26.59 20 -6.59

HVO 600 ml HVO TOTAL

COIMBATORE TERRITORY

S.NO DISTRIBUTOR NAME CPC- CPC-Break CPC CPC- CPC-Break CPC

Actual even Differ Actual even Differ
1 DANUSH MARKETING
2 SRI VIGNESH AGENCY 43.7 39 -4.7
3 CEEDEES ENTERPRISE 48.66 34 -14.66
4 ABISRIYA MARKETING 46.66 39 -7.66
5 JENE AGENCIES
6 SRI BALAJI AGENCIES
7 BALAJI TRADERS
International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

8 ANJANEYA AGENCIES 71.81 19 -52.81

9 KRISHANT AGENCIES 34.84 18 -16.84 31.09 29 -2.09
10 MPR AGENCIES 41.9 38 -3.9
11 PREETHI AGENCIES 31.02 29 -2.02
12 RATHINAM AGENCIES 51.69 36 -15.69 37.7 32 -5.7
13 JENE AGENCIES 75.73 19 -56.73 49.05 35 -14.05
14 SRI PADIYAN AGENCIES 60.86 60 1 37.75 36 -1.75
TOTAL 49.08 25 -24.08 35.56 29 -6.56
 International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

HVO-AQUAFINA

Table: 1.2 Distributors showing negative CPC in Coimbatore,

AQUA 1000ML AQUA
2000ML
COIMBATORE TERRITORY
S.NO DISTRIBUTOR NAME CPC- CPC- CPC CPC- CPC- C PC
Actual Break Differ
even
Actual Break Differ
even
1 SRI BALAJI AGENCIES 45.2 28.59 -16.61
2 SREE LAKSHMI &CO 138.12 25.06 -
113.06
3 EVEREST SOFT DRINKS 37.83 24.76 -13.07
4 SRI 37.34 31.24 -6.1
VENKATACHALAPATHI
TRADERS
5 MPR AGENCIES 39.02 34.45 -4.57
6 PREETHI AGENCIES 31.43 22.67 -8.76
7 KRISHANT AGENCY 37.3 34.51 -2.79
8 SRI PADIYAN 38.91 36.44 -2.47 45.58 37.93 -7.65
AGENCIES
9 ABISRIYA MARKETING 39 30.42 -8.58
10 JENE AGENCIES 35.16 33.42 -1.74 37.8 36.14 -1.66
11 ALAGUNATCHIAMMAN 31.15 28.95 -2.2
AGENCIES
12 SOLAI AGENCIES 38.91 35.61 -3.3
13 HAJIYAR&CO 49.11 30.88 -18.23
14 J&J ENTERPRISE 60.27 34.37 -25.9
15 BALAJI TRADERS
 International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

TOTAL 31.5 33 1.5 100.13 31.24 -68.89

S.NO DISTRIBUTOR NAME 38.91 29.96 -8.95
1 SRI BALAJI AGENCIES 35.42 33.75 -1.67
2 SREE LAKSHMI &CO 31.15 29.09 -2.06
3 EVEREST SOFT DRINKS 38.91 35.18 -3.73
4 SRI VENKATACHALAPATHI TRADERS 44.84 34.14 -10.7
5 MPR AGENCIES 42.82 34.11 -8.71
6 PREETHI AGENCIES 31.38 23.52 -7.86
7 KRISHANT AGENCY 40.97 27 -13.97
8 SRI PADIYAN AGENCIES 39.41 36.72 -2.69
9 ABISRIYA MARKETING 32.8 31.52 -1.28
10 JENE AGENCIES 27.88 24.8 -3.08
11 ALAGUNATCHIAMMAN AGENCIES 19.43 19.43
12 SOLAI AGENCIES 27.24 24.81 -2.43
13 HAJIYAR&CO 28.05 22.67 -5.38
14 J&J ENTERPRISE 27.24 24.8 -2.44
15 BALAJI TRADERS 26.14 24.53 -1.61
TOTAL

Table: 1.3 Chart showing Percentage wise Break up of Discount being Offered to Various Outlets

(Aquafina)

Type of Discount Offered No Of Outlets Percentage Of

to Outlets offered discount Outlets offered
discount
10+4 cases(for every 10 257 58
cases, 4 cases free)
10+3 cases(for every 10 106 24
cases free)
10+2.5 cases(for every 20 18 4
 International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

cases 2.5 cases free)

10+2 cases(for every 10 58 13
cases 2 cases free)
0thers(cash discount of Rs 4 1
,Rs43,Rs 48 for every case

Table: 1.5 Channel wise Sales Break Up Of Coimbatore Territory (Aquafina)

Percentage
Of 2007
Percentage Of Total Sales
Channel Outlets Volume
Convenience 39 40
Eatery 35 40
Grocery 13 9
Leisure 1 1
Modern
Trade 2 1
Transport 1 2
Institution 2 1
Wines 5 5

Table:1.6 Aquafina outlets in Convenience Channel and Eatery Channel given

discount over and above the Break Even CPC

No of Aquafina Outlets discounted in the Convenience and Eatery

Channel 331
 International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

No of Aquafina Outlets Offered discount more than the Break Even CPC
in the Convenience and Eatery Channel 278

Table: 1.7 Outlets showing a high Net Discounted CPC of Above Rs 45

Net
2007 DISCO Disco
Sl Sales GROSS UNTED unted
No Outlet Name Channel Volume MC CPC NET MC CPC
Subhika super modern
1 market trade 51 5271.25 2637.95 51.722633.30
modern
2 Subiksha trade 54 5602.00 2803.47 2798.53 51.72
GRG modern
3 Stores(Group) trade 339 35038.33 24871.07 10167.25 73.37
GRD modern
4 Stores(Group) trade 10 1033.58 738.30 295.28 73.83
Nilgiri Diary
5 Farm Convenience 2518 156693.48 130815.59 25877.89 51.96
modern
6 Marginfree trade 173 17863.69 8999.86 8863.83 52.07
modern
7 Subiksha trade 330 34142.56 17201.28 16941.28 52.07
Subiksha modern
8 Corner trade 19 1963.80 989.38 974.42 52.07
KG
Palamuthir modern
9 Nilayam trade 655 67699.42 32776.53 34922.90 50.04
10 Pizza Hut Eatery 301 37538.61 24561.60 12977.01 81.60
11 Residency Eatery 5076 308544.70 244469.49 64075.22 48.17
 International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

Out of the 11 Outlets having a high Net discounted CPC of above Rs 45, 8 Outlets are from the

Modern Trade Channel. This is due to the high discount given on the Pet Bottles in the Modern

Channel. But high discounted CPC of the Nilgiri Diary Farm is not acceptable as it belongs to the

Convenience Channel where 200ml is the main component of the pack mix.The discounted CPC

for 200ml and 300ml is 28.5 and 50.76 respectively. High discounted CPC for 300ml is due to 10+3

cases discount given compared to 10+2 cases for 200ml.

Table: 1.8 Net Marginal Contribution Ratio of (Aquafina and CSD) in Coimbatore Territory

Net Marginal
Pack Contribution %
Aquafina -4.99%
CSD 23.92%

Net Marginal Contribution Ratio is obtained by dividing the Net Marginal Contribution of the Territory

in Rs by the Total Sales of the Territory in Rs. Aquafina is showing a Negative Net Marginal Contribution

Ratio of -4.99% and CSD’s Net Marginal Contribution Ratio is 23.92%.Aquafina is not even providing

enough to cover for the fixed cost that has been incurred.CSD category is doing fairly well as almost

24% of the sales is providing to cover for the fixed costs and profit. But still it can be improved

if the discount given to outlets with low sales volume is reduced. Aquafina’s Negative net

contribution ratio is to be looked upon with as it is not providing anything to cover even the fixed
 International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

costs.

Table: 1.9 Outlets showing high discounted CPC of above Rs 45.

NET
SL SALES GROSS Discounted DISCOUNTED
No. Account Name Channel VOLUME MC CPC NET MC CPC in Rs
CINI RAJ
1 THEATRE Leisure 2000 143910.8 92400 51510.8 46.2

2 RAJ THEATRE Leisure 720 51807.89 33264 18543.89 46.2

K.S.P.S.
3 THEATRE Leisure 720 51807.89 33264 18543.89 46.2
MILLER modern
4 SUPERMARKET. trade 750 77633.03 36908.75 40724.28 49.21167
MEDLIES modern
5 SUPER MARKET trade 750 77633.03 38204.25 39428.78 50.939
SUBIKSHA modern
6 SUPER MARKET trade 200 20702.14 10256.4 10445.74 51.282
SUBIKSHA modern
7 SUPER MARKET trade 400 41404.28 20512.8 20891.48 51.282

FINDINGS:

MARGINAL CONTRIBUTION ANALYSIS

1. Out of the 443 Outlets discounted on Aquafina in Coimbatore Territory, 367 Outlets are showing

a Negative Net Marginal Contribution. It is mainly because of the discount given to the Outlets

above and over the break even CPC.

2. All the Outlets in the Coimbatore Territory in CSD category are showing a Positive Net Marginal

Contribution. Pepsi Co’s CSD category is not facing extreme competition like it is facing in the
International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

Bottled water Category.

3. 8 Outlets in the Coimbatore Territory in CSD category is having a high Net CPC of above 50.

Majority of the Outlets showing high discounted CPC is from Modern Trade Channel where

PET bottles are discounted.

4. Net Contribution Ratio of Aquafina is -4.99% and CSD is 23.25%. Aquafina is not even providing

anything to cover for the fixed cost and Profit whereas CSD category is providing 23.35% of its

sales to cover for the fixed cost and Profit.

5. The Break Even CPC of the Aquafina 1 Litre is 10+2.8 case (For every 10 cases 2.8 cases free).

Therefore any discount given Over and above the break even CPC will end up in Negative Net MC.

But out of the 443 Outlets discounted on Aquafina, 367 Outlets are given a discount of over

and above 10+2.8 case (For every 10 cases, 2.8 cases free). 80% of the Sales Volume of

Aquafina in Coimbatore Territory is from the Convenience and Eatery Channel. Convenience

and Eatery Channel is where the Pepsi Co benefits a lot. Out of the 331 Aquafina Outlets

discounted on the convenience and Eatery Channel, 278 Outlets are given a discount over and

above the Break Even CPC.

6. Net Discounted CPC of Wine shop Channel and Modern Trade Channel is the highest in the

Coimbatore Territory (CSD). High net discounted CPC of wine shop channel is due to the 10+3
International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

case discount on 300 ml given to a large number of outlets in this channel. High net discounted

CPC of Modern Channel is due to the high discount on PET given to majority of the outlets in this

channel. The only way to reduce the high discounted Net CPC of Wine shop Channel is to reduce

the 10+3 discount offered to outlets in the wine shop channel with low sales volume.

7. High Net discounted CPC of 300ml pack is because of the 10+3 cases (For every 10 cases 3

cases free) and 10+2case (For every 10 cases 2 cases free) discount given to a high number of

Outlets in the Wine Shop Channel.

8. Discounts have been given to many of the Outlets in Coimbatore Territory whose sales

Volume is even lower than an Ordinary Outlet which have increased the Net discounted CPC

of the Territory.

9. 35% of the Sales Volume of the CSD Category in the Coimbatore Territory is from

Convenience Channel. It is from the Convenience Channel Pepsi Co benefits a lot. This is

mainly due to the high sales of 200 ml pack in the Convenience Channel. Eatery Channel’s

Contribution to the Sales volume is low. Eatery Channel is where Company can focus as there is

a high scope for CSD products in eatery channel.

10. The Most discounted pack in the Coimbatore Territory is the 300 ml pack and the channel in which

300ml discounted more is the Wine shop Channel.

 International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

11. Company gave the HVO status to a large number of Outlets without even looking at the concept

that an HVO should have at least double the sales when compared to an ordinary Outlet.

12. 7 Outlets are given 10+3 discount in 300ml CSD category whose sales are less than 30 cases per year.

These Outlets are having a Sales Volume less than that of an ordinary Outlet.

13. 8 Outlets with single digit sales in a year is given discount. This is a worst situation where Outlets

14. With just single digit sales is given discount. Company is not even considering the concept of HVO

15. When granting HVO status to these Outlets.

16. Outlet ‘Raja Stores’ with Sales Volume of just 3 Cases per Year is given discount in 200ml and

Category.

17. Outlets ‘Blue Bell’ is given 10+5 discount on Aquafina. This Outlet is given 10+5 discount in a

scenario where 10+2.8 cases is the break even CPC.

RECOMMENDATIONS:-

In some of the distributors show negative CPC. This is because they exceed the approved

CPC. The outlets of these distributors have to be studied to find those outlets availing more discounts.

The extra discount has to be cut down to match with the approved CPC for each outlet. By doing this the

company can reduce its expense in terms of discount.

 International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

Cross pack promotional Mix :

Cross pack promotional Mix refers to giving Aquafina as discount instead of CSD as trade price of

Aquafina (Rs 136) is less compared to 200ml (Rs 171) or 300ml (Rs 220)

SWOT Analysis of the Cross Pack promotional Mix:-

Strengths Weakness

Company’s Incremental Net Resistance to change by the

Marginal Contribution Perspective. Retailers

Increase in Aquafina Sales Volume Agreement by the retailers with the

competitors not to sell Aquafina
No Drop in distributor Margin. Products.
No loss to the Retailer as they are Low feasibility in Aquafina Outlets
not forgoing any discount.

Opportunities Threats

Chance to penetrate into Outlets Chances that competitors COKE

where Peps Co CSD products are will come up with the same strategy and
available but Aquafina is not available. enter the Aquafina Outlets.

A good chance to penetrate into the

Wine shop Channel as 300ml is most
sold in these Channel
 International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

Cross Pack Promotion Mix will be a helping hand to the Aquafina which is suffering in the water

category. These calculations are based on the assumption that CSD products will not have any dip in its

sales and Aquafina given as discount will be an incremental profit to the company.

Increase the price of Aquafina 1 L from Rs 13 to Rs 14. At present Break Even CPC is 10+2.8 for

Aquafina 1L. If the Price of Aquafina is raised from Rs 13 to Rs 14,this offers the company an added

advantage of giving discount to the retailers.

A benchmark should be introduced for different discount slabs. The average of ten best performing

outlets (in terms of sales volume) for a particular slab/rate of discount should be taken as the benchmark

for all the outlets getting a higher slab/rate of discount. For eg. An outlet receiving 10+2 discount should

have more sales than the average of 10 best performance outlets that gets 10+1 discount .Channels like wine

shops , leisure and transport need not be considered as they are closed counters where customer has to

buy what retailers offers.

The main reason for the high Percentage of Outlets showing a Negative Marginal Contribution

is the High discount Offered to these Outlets. The Negative Net Marginal Contribution can be avoided by

reducing or waiving the discount given to those outlets. Other option is to convert the High Volume

Outlets into Scheme Outlets so that there will not be any commitment on the part of the company to give

the same discount for the entire year and the discount can be given to the outlets according to the market
 International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

situations.

Discount of new Aquafina HVO’s should start from 10+1 even though their sales justify a higher

discount. Discounts given to present HVO’s with Negative Net Marginal Contribution should be reviewed.

Discount given to present HVO’s should be kept constant and should not be increased.

The Contribution of 1000ml Aquafina and 2000ml Aquafina is less compared to 500ml Aquafina.

By increasing the proportion of Aquafina 500ml in the Aquafina Pack mix the Net Marginal Contribution

can be improved. In Coimbatore and Tirunelveli Territories 500ml Aquafina sales comes to just 1% of the

total sales.

Adequate measures should be taken to make sure that distributor’s HVO sales are greater than the

distributor’s non HVO sales.

Following the Claims format designed by the Company should be made mandaratory to the

distributors and corrective measures like not passing the Claims or holding the Claims is to be taken

against those distributors who are not following the claims formats.

Strictly implement the use of new Claims Format by all the distributors. This will reduce the claim

processing time which will further reduce the problem of pending of Claim approval.

CONCLUSION
 International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

The HVO concept is that a HVO should have at least double the sales when compared to an ordinary

Outlet. But many High Volume Outlets are not even having the sales of an average Ordinary Outlet.

Discount has been misused in a large scale by giving discount to these outlets with low sales volume

mainly in the Coimbatore Territory. The main reason for the Negative Net Marginal Contribution showed

by the majority of the Outlets in the Aquafina Category in the Coimbatore Territory is

because of the high discount given to these Outlets. The Company can convert those HVO outlets which

are showing a Negative Net MC into Scheme Outlets so that there will not be any commitment to give

the discount for the entire year. The Negative Marginal Contribution showed by the Aquafina Outlets is

the main problem Pepsi Co is facing in the Coimbatore Territories. Company can come

out of this problem by reducing the discount given to the Outlets or by increasing the Price of Aquafina

1 Litre. But in the CSD category Pepsi Co is continuing its domination with its wide range of brands and

packs. 300 ml soda hasn’t made any high impact in the Wine shop channel like it has made in Other

Territories.

High Volume Outlets should have business through out the year. That is why Company has been entered

into a 1 year agreement with the HVO’s. The present scenario is that HVO outlets are not removed

from the HVO list in the succeeding year even if they are showing a low sales volume in the preceding

year. Certain high volume outlets are not giving justification to this High Volume Outlet status in terms
 International Journal of Management & Strategy, July-Dec.2010 Vol.1No.1

of their sales volume. Thus it is necessary to continuously monitor HVO’s and review discount of Outlets

whose sales volume does not justify the discount they receive.

Benchmark for different discount slabs can be used to set limits in terms for HVO’s. This can result in

significant savings in terms of discount cost as well as to rationalize the process of assigning different

discount slabs to outlets.

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