2

INTERMEDIARIES
STOCKIST/DISTRIBUTOR

THIRD PARTY BRANCH OFFICE.
ON A COMMERCIAL CONTRACT.
A SYMBIOTIC RELATIONSHIP.
PROTECTING HIS ROI IS IMPORTANT.


3
INTERMEDIARIES
WHOLESALER

A FREE BIRD IN THE CHANNEL WHO SELLS TO RETAILERS.
THIN MARGINS, HIGH TURNOVER.
USES PRICE BUNDLING.
USES CREDIT TO ENSURE DEBT TRAPS.
4
INTERMEDIARIES
RETAILER

SELLS TO END CONSUMER.
SMALL PARTIES USUALLY IN A BIND FOR WORKING CAPITAL.
LOW BARGAINING POWER UNLESS YOU ARE A SUPERMARKET.
5
MAXIMISING ROI


HOW CAN WE MAXIMISE THE STOCKISTS ROI?


6
HOW ROI IS MAXIMISED
BRAND PULL.
VISUAL MERCHANDISING.
MARGINS AND INCENTIVES.
QUALITY AND FREQUENCY OF SERVICING.
CREDIT.
PROTECTING TERRITORIAL INTEGRITY.
7
INNOVATIONS


NIRMAS METHODS TO REDUCE COSTS.


8
INNOVATIONS


UNILEVERS URBAN EXTENSION UNITS.


9
INNOVATIONS


MERCHANDISING IDEAS FROM THE FIELD FORCE.


10
INNOVATIONS


IDC MARKETS, TJP AND PJP TO IMPROVE ROUTE PROFITABILITY.


11
INNOVATIONS


FEEDER WHOLESALERS AND SUPER STOCKISTS.


12
INNOVATIONS


CURBING INTER-STATE POACHING.


13
INNOVATIONS


CURBING INTER-STOCKIST POACHING.


14
THE CHANGES.
SUPERMARKETS ARE CHANGING THE FACE OF DISTRIBUTION.
THEY ARE RETAILERS WITH HIGHER OFFTAKE AND MORE DATA. THUS,
THE BARGAINING POWER WITH THE COMPANIES IS HIGHER.
HOWEVER, THEY STILL REMAIN A SMALL SPECK ON THE MAP IN
FMCG.
Strategy Development and Execution
Brand Strategy
Outlets
Mapping
Outlet
Classification
Investment Plans
Investment
Strategy
Channel Sales Strategy
Execution
Volume ,Location, type of consumers etc +
historical
Define Basis of segmentation
image/volume/clientele/consumption etc
Trade Marketing + KAM
Data
Availability
Sales Team
To access

To be done by Sales Force
Distribution
Strategy
RTM
INDIAN RETAIL SNAPSHOT

7.88 MILLION OUTLETS CATERING TO A POPULATION OF
1,210 MILLION. THIS DATA IS FOR FOOD & GROCERIES
TRADITIONAL.
OR, 154 PERSONS COVERED BY AN OUTLET.

INDIAN RETAIL SNAPSHOT



80% OF THESE RETAIL OUTLETS IN INDIA HAVE A
TURNOVER OF LESS THAN RS. 10,000 PER MONTH.
INDIAN RETAIL SNAPSHOT


AND THIS ACCOUNTS FOR 95% OF FOOD & GROCERIES
SOLD IN INDIA.
ITC Foods 19
What can marketers do?
Realigning distribution channels to target different consumer
segments in different retail formats
Team up with small retailers to :
Modernise and make them more efficient
Enhance store infrastructures
Creative display of merchandising
Revamp store layout
Help tackle shoplifting
Offer special price to Special Stores
Targeted initiatives at point of purchase
Encourage them to stock wider range of products

ITC Foods 20
What else can marketers do?
- Continue focus on Wholesale
While the retail space in India is changing, there is a huge population
that is serviced by small retailers
These small retailers will continue to source their merchandise from
traditional wholesalers
Hence it is imperative for marketers to work with these wholesalers
In a way, these wholesalers are similar to the large retail chains /
stores emerging in urban India
The growth in rural India will be driven by these wholesalers
ITC Foods 21
Modern Trade giving birth to Store Labels
Private Labels in India are considered by 60% of urban consumers as providing good VFM with
similar quality to large brands
The Nielsen Company estimates that grocery items account for 45.9% of private labels , packaged
foods 25.7% & home care 16.4% - within the modern retail
How big is Private Label in the developed world ?
ITC Foods 22
Years to come
Top 35 towns are estimated to account for 70% to 80% of modern
retail trade
Similar to the experience in China where cities like Shanghai & Beijing account
for 70% to 80% of the modern retail trade
ITC Foods 23
A few more trends
Consolidation of players


Convenience stores & Hypermarkets would
gain prominence already seen in a KPMG
survey

Growing importance of Private Labels


Modernisation of traditional channels




Region/
Country
No of retailers accounting
for 20% MS
1990 2005
US
30 8
Europe
37 10
#% of respondents who feel that there is a high
potential to grow
ITC Foods 24
Store labels around the world..
Company Total Sales ($ bn)Private label(%) PL sales ($bn) Sales ($bn) Company
Walmart 316 40 126 75 Nestle
Carrefour 94 25 24 69 Altria
Metro group 73 35 26 57 P&G
Tesco 71 50 36 51 J&J
Kroger 61 24 15 50 Unilever
Royal Arnold 56 48 27 33 Pepsico
Costco 53 10 5 26 Tyson foods
Target 53 32 17 23 Coca cola
Rewe 51 25 13 20 Sara lee
Aldi 43 95 41 18 L'Oreal
Schwarz gp 43 65 28 18 Japan tobacco
ITM 42 34 14 17 Danone
RETAILERS MANUFACTURERS
Scenario can be equally competitive in India as well.
India: the land of dispersion.
Population Range No of Towns % Population
Urban
> 10 million 3
1 -10 million 50
100K 1million 415
< 100 K 5698 10%
Total Urban 6166 32 %
Rural

~ 630,000

68%
22%
Census Of India : 2011
India the land of shopkeepers
Country No. of Retail outlets
(millions)
No. of Retail
outlets / million
Popn.
UK 0.30 4900

USA 0.95 3150

Japan 1.00 7300
Brazil 1.20 6200
Indonesia 2.70 11500

China 4.50 3500

India Estd.15.0 12000

Source: Euromonitor, 2007 with extrapolation
Category Penetration
Category % Penetration
Toilet Soaps 96
Washing Powder 92
Detergent bar 88
Hair Oil 74
Toothpaste 66
Shampoo 56
Talcum powder 52
Fairness cream 17
Antiseptic cream 1.7
Cold cream 1.3
Penetration Urban vs Rural
Category Urban Pen % Rural Pen %
Shampoo 57 37
Hair Oil 80 67
Skin cream 32 18
Mosquito repellent 59 18
Instant noodles 19 3
Floor cleaner 26 4
Hair Dye 5 2
Toothpaste 77 42
Concept 1 : Classification of
Markets

Selective
Focus

Extensive
Focus
Avoid
Selective
Focus
Low Gr Hi Gr
Large Size
Small Size
Concept 2: Classification of Retailers
Why classify?
What criteria to use?
Role of different retailers


Sales :
SUSTAIN
Star :
DOMINATE
AVOID
Future
Star:
BUILD
Hi Cat Sales
Low Cat Sales
Hi % of TG Low % of TG
Target
Group
User
group
Non User
Group
Urban Rural divide
An Urban town is defined as:
1. All places with a municipality, corporation, cantonment board
etc.
Or
2. a) Popn. > 5000
b) 75 % of Popn. engaged in Non - agri activities
c) Popn. density > 400/ sq km
.Infrastructure bottlenecks

Road density (Km/ 000 people) India: 2.75
World Avg: 6.70

% of Rural Popn within 2 Kms of a motorable road : 60 %

National Highways as % to Total roads : 2%
% Traffic in National highways : 40 %
% of National Highways which are 4 laned : 14%
% of State highways which are 4 laned : 1%

Availability is not automatic, but needs to be created.
Physical distribution beyond the top 468 big towns is a challenge that
requires planning and proper design.
Rural distribution is another ballgame....esp. given the density of
demand !
In smaller markets : Supply side economics works!

Retail environment challenges
Traditional Retail environment is sub optimal:
Buying patterns are haphazard
Inventory holding is low / inconsistent
SKU range is low / inconsistent
Storage conditions are poor
Display is poor
Stock rotation is poor
Advocacy is absent

Modern Retail is in its infancy but growing..