PAPER INDUSTRY

-A Sales & Distribution Perspective

Group 5, Sec AA Group 5, Sec Sales and DistributionManagement Sales and Distribution Management
Avinash Madhavan, PGP26331 Goutam Madhavan, PGP26331 AvinashYenupuri, PGP26279 Guru Prasad, PGP26280 Goutam Yenupuri, PGP26279 Ravi Makwana, PGP26280 Guru Prasad, PGP26226 Ravi Makwana, PGP26226 Radhakrishna Gunde, PGP26297 Radhakrishna Gunde, PGP26297 Santosh Kamble, PGP26308 SantoshGraff Mauelle Kamble, PGP26308

Mayuele Graff IEP12015

The Paper Industry

An industry on gradual decline since the advent of PC
MS Office a potent enemy for writing paper, Internet for newsprint & printing

On the upside growing abolishment of plastics and polymers as packaging material Interesting Facts for the industry in India
15th largest market worldwide, per capita consumption low at 9 kg; compared to Japan (250 kg), S. Korea (170 kg), China (46 kg) Main raw material is straw bagasse as compared to soft wood worldwide, 40% of paper is recycled De-licensed since July97 and foreign equity participation allowed up to 100% yet no foreign player of note in the industry except International Papers acquisition of AP Paper Ballarpur Industries, one of the key players along with ITC was once one of the 30 shares comprising BSE Sensex, now almost a penny stock trading at ~Rs 25

Product segments
Writing Printing Paper & Paperboard Industry Newsprint Tissue Packaging

Writing & Printing coated woodfree uncoated wood-free

copier paper

stationery

cream-wove

Customer segments
Building Wallpaper Business Copier Paper, Stationery, brochures, letterheads Domestic Tissues, paper plates & cups, toilet paper Media Magazines, Newspapers Publishing Books Educational Exercise Books, Wall charts Electrical Insulation Entertainment Cards, board games, kites, etc. Industry Packaging, Filtration, cigarettes Financial Money, forms, certificates Covering B2C & not B2B & B2B2C

Office supplies & stationery

Business changing from the traditional production & distribution driven to consumer-centric business with finished products - Office Supplies and Stationery and also Retail (P3)
Production Centric Consumer Centric

Paper Mill Paper Mill/Products Distributor Distributor

Navneet Stationery

Paper Products Company Wholesaler Wholesaler Retailer Retailer

Modern Trade
Office Planet Landmark Big Bazaar P3 (Print, Paper, Pens)

Segmentation by behavior
Product segment Copier paper Consumer Segment Price sensitive Type of Product Convenience Product Characteristics of consumer behavior

Low consumer involvement Low brand difference Low risk Low effort Consumers passively receive information Medium to high consumer involvement Medium to high brand difference Low risk Moderate effort Behaviour passes through the standard cognitive process of beliefattitudebehaviour formation. Low consumer involvement Low brand difference Low risk Low effort consumers passively receive information Medium to high consumer involvement Medium to high brand difference Low risk Moderate effort

Brand loyal

Preference Product

Stationeries

Price sensitive

Convenience Product

Brand loyal

Preference Product

Key Players
 ITC Paperboards & Specialty Paper Division(Secunderabad, AP)
 (Finished Product Brands: Classmate, PaperKraft)

 Ballarpur Industries (Gurgaon, Haryana)

 (Brands: Royal Executive Bond, BILT Matrix, 10on10)

 JK Paper (Delhi)  Tamil Nadu Newsprint & Papers (Chennai)  Century Pulp & Paper (Mumbai)
 (Brands: Century Copier)

 AP Paper Mills (Secunderabad, AP)

 Bindal Papers Ltd. (Muzzafarnagar, UP) (Brands: Bindal FinePrints)

 Yash Papers Ltd (Faizabad, UP)  Sidharth Papers (Kashipur, Uttarakhand)

Design of Sales channel

PAPER MANUFACTURER
Fixes Quotas based on production capacity and demand Cash terms with Distributors, wholesalers and retailers Highest bargaining power Takes order on a real-time basis and fulfills them based on inventory levels and production capacity

DISTRIBUTOR
Offers a maximum of 60 day credit to retailers/ wholesalers Deals on a cash basis with the manufacturer Takes orders on a real-time basis from the retailers and can also place orders realtime. However, order consignment is received on a weekly basis. Margin: 2%-3% Uses third-party logistics for transferring goods from godown to company

WHOLESALER
Deals on both cash and credit basis with retailers depending on the size of business Also manufactures notebooks from paper purchased Margins: 2%-3%

RETAILER
Supplies to end consumers ( Xerox shops, SMBs, offices, etc) Margin: 8-10%

Kartikeya Distributors (BILT)

Kartikeya Distributors is the exclusive distributor for BILT (factory located near Gurgaon) for UP. Located in Gwynne Road where most other paper distributors in Lucknow are located. Turnover: Rs. 80 Cr Employees: 52 Incentives: None Infrastructure: 3 Warehouses in Allahabad, Kanpur and Lucknow, 5 Retail Outlets Distribution: 1000 wholesalers & retailers Technology: Tally (Licensed) for accounting

BILT produces Grade A Paper - highest quality, lowest margins for dealers. As the demand is high it has fixed quotas for its regular buyers and supplies above the quota on a case to case basis.
Paper Mill BILT

Distributor (UP)
Karthikeya Distributors

Institutional Customers
Large IT Companies

Company Owned Showroom P3

Modern Retail Warehouse Big Bazaar

Wholesaler 100+ in UP

Retailer 900+ in UP

Bulk Customers Xerox Shops

Front End Big Bazaar

Retailer Far flung areas

LUCKNOW PAPER Distributors (JK)

Lucknow Paper Distributors is an exclusive distributor for JK Paper (factory located in Rajgangpur, Orissa). It is also the distributor for 3 small scale Grade B & C Manufacturers. It is located in Lalbagh in Lucknow. Turnover: Rs. 30 Cr Employees: 22 Infrastructure: 1 Warehouse Area: Lucknow & Allahabad Distribution: 600 wholesalers & retailers Technology: Tally (Licensed) for accounting

JK Paper produces Grade A Paper - highest quality, lowest margins for dealers. It also does quota based distribution.
Paper Mill
JK paper

Retailer
Bulk Requirements

Distributor (UP)
Karthikeya Distributors

Institutional Customers
Notebook Makers

Modern Retail Warehouse

SPAR

Wholesaler
100+ in UP

Retailer
900+ in UP

Bulk Customers
Xerox Shops

Front End
SPAR

Retailer
Far flung areas

K.K. trading Co. (trident)

K.K. Trading Co. is distributor is an exclusive distributor for Trident (factory located in Nainital). It manufactures Grade A Paper and is a relatively new entrant. It is located in Aminabad in Lucknow. The company is also a dealer(nonexclusive) for Orient Paper, Bharat Paper & Abhishek Industries Turnover: Rs. 50 lakhs Distribution: 15-20 sub-dealer Employees: 10 Infrastructure: 3 warehouses & 1 SO Area: Eastern UP Incentive: Quantity discounts (75P to Re. 1) per kg for quantity >150-200 tonnes Cash discount for specific products (passed on to retailer/customer) Trident has 3-4 super-stockists per state Credit provided by company to distributor in range of 15 days to 3 months The margin for the distributor is 2-5% Logistics done by 3rd party - GATI

Paper Mill

Super Stockist

Sub-Dealer

Retailer

CHANNEL CONFLICT
 Retailer directly purchases from the manufacturer if the order size is significantly large causing loss of business to the distributor/wholesaler  Bargaining power heavily in favor of large players like BILT who employ take-or-pay contracts. Distributors may want to shift to smaller players given low-differentiation and as quality improves for smaller players  Small Players try to push sales during off-season by delivering quantity more than that ordered leading to loss of trust  Lack of Availability at the distributor level also frequently leads to retailer switching to another exclusive distributor.  Price difference for end-consumer in modern retail and traditional chains is causing conflicts between smaller distributor/retailers and established modern retail channels  Difficult for retailers to make significant growth in revenues as end-consumers like xerox shops may purchase directly from wholesalers

AREAS OF IMPROVEMENT (Distribution Channel)

The industry has been in transition whereas earlier the supply-demand equation was in favor of manufacturer, now the larger distributors have option of procuring by import (Brazil) as global logistics systems improve Quota System is an age old strategy to appease dealers given supply-demand mismatch and also to save companies the pain of forecasting. Now with systems available to identify trends and forecast, it may be relooked There is general deficiency in usage of statistical analysis in this sector. A transaction data base can be built to do customer and product segmentation and pricing can be done better Smaller Players can employ CnF agents to stock surplus in off-season rather than dump on to the stockist We generally found company sales staff complacent and uncooperative. Training programs may help to forge better relationships with dealers and also to be better in gathering market intelligence The large players could train the distributors on adding value to paper by processing into other value-added products like notebooks, envelopes, bags, etc.

Sales channel design

Territory Design
Criteria By Area By Retailer size By Paper type Example City, Region or district Turnover of Rs. 5Cr and above normal paper, hygiene paper, copier paper

Recruitment of Sales Force

Mainly through referrals and advertisements Very low attrition rate. Employee strength is kept optimum

Training
No Training. Only reactive corrective action.

Sales Target
Average sales target set for Kartikeya by Ballarpur for the UP state is around Rs 5 crore monthly Sales Target is set by Ballarpur which is divided judiciously among the salesman The target is monitored by Sales head through personal correspondence with the salesmen Kartikeya gives non monetary incentives to Salesmen, BILT gives incentive once a year for achieving the set target consistenlty

Some salient information

Competitor's information is obtained by sales head through market visits which is conducted once in every month Retailers are open to divulge competitors product details as there is no loyalty to any particular dealer Retailers dont have any prejudice to any particular company as product is very similar; they only seek quality at low price Relationships are maintained with retailers by distributors through formal and informal means Kartikeya Distributors serves 1000 + retailers in UP

Sales Hierarchy (BILT)

National Sales Head (VP Sales)

Zonal Sales (GM-Sales)

Regional Sales (DM-Sales)

Area Sales (ASM)

Sales Hierarchy

AGM Kartikeya

Sales Head Kartikeya

Salesmen (Lucknow)

Salesmen (Kanpur)

Salesmen (Allahbad)

The Sales Hierarchy is very simple and formal The salesmen of various cities directly report to the Sales head of Kartikeya (located in Lucknow) The Sales head directly report to the assistant general manager of Kartikeya The incentives, motivation and the setting of sales target for the salesmen is handled by the sales head

Sales hierarchy: Trident papers

Country Sales Head

Regional Sales Manager

Regional Sales Manager

Regional Sales Manager

Regional Sales Manager

Area Sales Manager

Area Sales Manager

Area Sales Manager

Area Sales Manager

Sales Officer

Sales Officer

Sales Officer

Sales Officer

Design of Sales Territories

Company Level
 Whole Indian market into four zones viz. east, west, north and south  Created sales territories on the basis of balancing sales potential and balancing workloads  Each zone is divided into 4-5 sales areas  Each sales area is sub-divided into 8-9 sales territory. (These could be a town or combination of 2-3 districts)

Macro Level (Distributor)

 Each super stockist serves a bunch of 4-5 districts called region  Each district or town or district is divided into sales bits  one or two sales executive serve each sales bit depending on the size of bit and volume generated from the bit

Selection, Training and Evaluation of Sales Personnel

Selection Process
1) 2) 3) 4) 5) 6) 7) Pre Interview Screening Preliminary Interview Final Interview Medical Examination Checking References Job Offer Induction Programme

Sales Training
 Periodically trained on new trends in market and effective skills for sales/marketing of products

Evaluation of Sales Personnel

 Evaluated quarterly for their targets  Monthly reports from the sales executives are reviewed to monitor the progress

Industry contacts
JK Paper Chief Distributor Details: Name: Lucknow Paper Distributors Location: Lalbagh Owner : Mr. I.D. Goyal Mob: 9935595472 Regional Sales Manager : Mr. Suman Mob: 991003369 Location: New Delhi Trident Paper Chief Distributor Details: Name: KK Trading Co Location: Aminabad Owner : Mr. Mohit Khanna Mob: 91612050000 Regional Sales Manager : Mr. Anil Mob: 9919501314 Location: Barnala BILT Chief Distributor Details: Name: Kartikeya Paper Distributors Location: Aminabad Owner : Mr. Harendra Rai Mob: 9919501311 Regional Sales Manager : Mr. Bhanu Kapoor Ph: 011 - 40549234 Location: New Delhi Century Paper Chief Distributor Details: Name: Agarwal Paper Distributors Location: Aminabad Owner : Mr. Sudhanshu Agarwal Mob: 919335904453 Regional Sales Manager : Mr. Kishore Kumar Mob: 011- 22056450 Location: Nainital