A STUDY ON DISTRIBUTION CHANNEL AT

PEPSICOAND LIMCA(COCA-COLA)

Submitted in partial fulfillment of the requirement for the award of degree

In

Post Graduate Diploma in Management

Submitted byNITIN SABHARWALGAURAV PATHAK

Under the guidance of

BIANCA RAY CHOUDHARY

POST GRADUATE DIPLOMA IN MANAGEMENT

NEW DELHI INSTITUTE OF MANAGEMENT

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EXECUTIVE SUMMARY

PepsiCo is one of the oldest, largest and most successful beverage and snack food

companies in the world. PepsiCo was founded by Caleb Bradham in 1902 in USA.

Today PepsiCo and its affiliates operate in more than 140 countries in the world

and generate revenues in excess of $ 40 Billion. In its pursuit of never ending

growth and expansion, PepsiCo entered India in 1989 in a joint venture with

Punjab Government. However, PepsiCo India very soon started its beverage

operations in collaboration with the R K Jaipuria group. Soon after entering the

beverage segment PepsiCo Established its dominance in the market owing to its

expertise in sales, marketing, operations and local collaboration. PepsiCo

maintained its market dominance for many more years to come. However, this

advantage slipped and PepsiCo had to concede the market leadership to Coca Cola

India. Distribution channel is having an important role in positioning of the product

because we know that distribution channel is tool by which we can make reach our

product to the final consumers Discontinuation of slums in the distribution network

by PepsiCo. This move by PepsiCo adversely affected its position of a market

leader because while PepsiCo discontinued the use of Slums in its distribution

network, Coke continued it and within one year, it was able to snatch considerable

market share from PepsiCo. Acquisition of well-established and flavored brands

like Thumps Up and Limca by Coca Cola India. These two brands still constitute a

bulk of sales for Coca Cola India.

To explore the reasons behind these developments this study will analyze the

marketing initiatives and policies of PepsiCo India in detail with particular focus

on its partner relationship management.

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INTRODUCTION

Distribution Channel is the chain of businesses or intermediaries through which a

good or service passes until it reaches the end consumer. A distribution channel

can include wholesalers, retailers, distributors and even the internet. Channels are

broken into direct and indirect forms, with a "direct" channel allowing the

consumer to buy the good from the manufacturer and an "indirect" channel

allowing the consumer to buy the good from a wholesaler. Direct channels are

considered "shorter" than "indirect" ones.

The Distribution Channel

Distribution is also a very important component of Logistics & Supply chain

management. Distribution in supply chain management refers to the distribution of

a good from one business to another. It can be factory to supplier, supplier to

retailer, or retailer to end customer. It is defined as a chain of intermediaries; each

passing the product down the chain to the next organization, before it finally

reaches the consumer or end-user. This process is known as the 'distribution chain'

or the 'channel.' Each of the elements in these chains will have their own specific

needs, which the producer must take into account, along with those of the all-

important end-user.

Channels

A number of alternate 'channels' of distribution may be available:

Distributor, who sells to retailers,

Retailer (also called dealer or reseller), who sells to end customers

Advertisement typically used for consumption goods

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INDUSTRY PROFILE

Soft Drink Industry, the production, marketing, and distribution of nonalcoholic, and generally

carbonated, flavored, and sweetened, water-based beverages. The history of soft drinks in the

United States illustrates important business innovations, such as product development,

franchising, and mass marketing, as well as the evolution of consumer tastes and cultural trends.

Many Europeans long believed natural mineral waters held medicinal qualities and favored them

as alternatives to often-polluted common drinking water.

Pepsi

Type Cola

Manufacturer PepsiCo

Country of origin United States

Introduced 1898 (as Brad's Drink)

June 16, 1903 (as Pepsi-Cola)

1961 (as Pepsi)

Related products Coca-Cola

7 Up

Irn Bru

Cola Turka

Big Cola

Website pepsi.com

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Limca

Type Lemon-lime soda

Manufacturer The Coca-Cola Company

Country of origin  India

Introduced 1977

Related products Coca-Cola, 7 Up, Sprite

PepsiCo in India

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PepsiCo gained entry to India in 1988 by creating a joint venture with the Punjab government-

owned Punjab Agro Industrial Corporation (PAIC) and Voltas India Limited. This joint

venture marketed and sold Lehar Pepsi until 1991, when the use of foreign brands was allowed;

PepsiCo bought out its partners and ended the joint venture in 1994. Others claim that firstly

Pepsi was banned from import in India, in 1970, for having refused to release the list of its

ingredients and in 1993, the ban was lifted, with Pepsi arriving on the market shortly afterwards.

These controversies are a reminder of "India's sometimes acrimonious relationship with huge

multinational companies." Indeed, some argue that PepsiCo and The Coca-Cola Company have

"been major targets in part because they are well-known foreign companies that draw plenty of

attention."

Pepsi is a carbonated soft drink that is produced and manufactured by PepsiCo. Created and developed in 1898 and introduced as "Brad's Drink", it was later renamed as Pepsi-Cola on June 16, 1903, then to Pepsi in 1961.Pepsi is marketed in 200 ml and 300 ml glass bottles with national maximum-retail prices of 8 Indian Rupees (INR) and 11 INR, respectively, 600 ml plastic bottles priced at 27 INR, 1.5 liter "Family Pack" plastic bottles at 50 INR, and 2 liter "Party Pack" plastic bottles priced at 60 INR. In certain establishments such as cinema-halls, snack-bars, and bakeries, Limca is available from soda-fountains, in 350 ml paper glasses.Its competitors are Thumbs-up, Coca-Cola, Rc-Cola.

COMPETITION

The Coca-Cola Company has historically been considered PepsiCo’s primary competitor in the

beverage market, and in December 2005, PepsiCo surpassed The Coca-Cola Company in market

value for the first time in 112 years since both companies began to compete. In 2009, the Coca-

Cola Company held a higher market share in carbonated soft drink sales within the U.S. In the

same year, PepsiCo maintained a higher share of the U.S. refreshment beverage market,

however, reflecting the differences in product lines between the two companies.

Coca Cola

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The Coca-Cola Company re-entered India through its wholly owned subsidiary, Coca-Cola India Private Limited and re-launched Coca-Cola in 1993 after the opening up of the Indian economy to foreign investments in 1991. Since then its operations have grown rapidly through a model that supports bottling operations, both company owned as well as locally owned and includes over 7,000 Indian distributors and more than 1.3 million retailers. Today, our brands are the leading brands in most beverage segments. The Coca-Cola Company’s brands in India include Coca-Cola, Fanta Orange, Fanta Apple, Limca, Sprite, Thums Up, Burn, Kinley, Maaza, Maaza Milky Delite, Minute Maid Pulpy Orange, Minute Maid Nimbu Fresh and Nestea Iced tea, the Georgia Gold range of teas and coffees and Vitingo (a beverage fortified with micro-nutrients).In India, the Coca-Cola system comprises of a wholly owned subsidiary of The Coca-Cola Company namely Coca-Cola India Pvt Ltd which manufactures and sells concentrate and beverage bases and powdered beverage mixes, a Company-owned bottling entity, namely, Hindustan Coca-Cola Beverages Pvt Ltd; thirteen authorized bottling partners of The Coca-Cola Company, who are authorized to prepare, package, sell and distribute beverages under certain specified trademarks of The Coca-Cola Company; and an extensive distribution system comprising of our customers, distributors and retailers. Coca-Cola India Private Limited sells concentrate and beverage bases to authorized bottlers who are authorized to use these to produce our portfolio of beverages.These authorized bottlers independently develop local markets and distribute beverages to grocers, small retailers, supermarkets, restaurants and numerous other businesses. In turn, these customers make our beverages available to consumers across India.The Coca-Cola Company has invested nearly USD 1.1 billion in its operations in India since its re-entry back into India in 1992. The Coca-Cola system in India directly employs over 25,000 people including those on contract. The system has created indirect employment for more than 1,50,000 people in related industries through its vast procurement, supply and distribution system. We strive to ensure that our work environment is safe and inclusive and that there are plentiful opportunities for our people in India and across the world.The beverage industry is a major driver of economic growth. A National Council of Applied Economic Research (NCAER) study on the carbonated soft-drink industry indicates that this industry has an output multiplier effect of 2.1. This means that if one unit of output of beverage is increased, the direct and indirect effect on the economy will be twice of that. In terms of employment, the NCAER study notes that “an extra production of 1000 cases generates an extra employment of 410 man days.”As a Company, our products are an integral part of the micro economy particularly in small towns and villages, contributing to creation of jobs and growth in GDP. Coca-Cola in India is amongst the largest domestic buyers of certain agricultural products.As an industry which has strong backward and forward linkages, our operations catalysis growth in demand for products like glass, plastic, refrigeration, transportation, and Industrial and agricultural products. Our operations also lead to incremental growth for enterprises engaged in post production activities like merchandising, marketing and sales. In addition, we share best practices and technological advancements with our suppliers, vendors and allied industries which often lead to improvement in the overall standards of quality across industries.

Limca is a lemon and lime flavoured carbonated soft drink made primarily in India and certain parts of the U.S.Limca is marketed in 200 ml and 300 ml glass bottles with national maximum-retail prices of 8

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Indian Rupees (INR) and 11 INR, respectively; 330 ml cans priced at 18 INR, 600 ml plastic bottles priced at 27 INR, 1.5 liter "Family Pack" plastic bottles at 45 INR, and 2 liter "Party Pack" plastic bottles priced at 60 INR. In certain establishments such as cinema-halls, snack-bars, and bakeries, Limca is available from soda-fountains, in 350 ml paper glasses. Its competitors are Nimbouz, Mirrinda lemon flavour.

Variables we need to work with are Transportation, Timely-delivery, stock-updation Commission, compensation, promotional-material and lead time.

SALES AND DISTRIBUTION NETWORK OF PEPSICO INDIA.

COMPANY

COBO

WAREHOUSE

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FOBO

C & F Agents

SALESMAN

WHOLESALER

RETAILER

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RETAILER

CUSTOMER

DISTRIBUTERS

SALESMAN

SLUMS

REARCH METHODOLOGY

MEANING OF RESEARCH:

Research in a parlance refers to a search for knowledge. One can also define research as a

systematic search for pertinent information on specific topic. In fact research is an art of

scientific investigation.

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STATEMENT OF THE PROBLEM:

Limca Co. wants to know whether its downfall in the market is due to its distribution

channel, so it does a research by comparing its distribution channel with Pepsi Co.

The Comparison is done In order to know the effect of distribution channel on its sales &

revenue.

PURPOSE AND OBJECTIVE OF THE STUDY:

TO know distribution channel Strategy of Limca co.

To know the importance of Distribution channel strategy in Positioning of the product.

How strong relationship limca and pepsi has with the distributors and retailers.

RESEARCH METHODOLOGY:

Method of research- Description research was used.

Tools used for data collection: A questionnaire was structured together the primary

Information.

SOURCES OF DATA COLLECTION:

The data has been collected from both primary and secondary methods have been used.

Primary data- It was collected by surveying the distributers of PepsiCo and limca (coca-cola).

Secondary data- it was collected from,

• General library research source like marketing book.11

• Advertising journals like magazines and newspaper.

• Internet: PepsiCo website, coke website, wikipedia

Structured questionnaire: Structured questionnaire is a printed list of questions to be filled

by the respondents. The structured questions are being made as short as possible and simple to

understand. The questionnaire is designed such that it helps to elicit the accurate information.

TOOLS AND TECHNIQUES:

The first hand information was collected by interviewing the Distributor regarding the

Strategies followed by the company for distribution channel. Hence the survey method is the tool

used here for data collection.

SAMPLING DESIGN:

• Sample unit: Distributers of Pepsi and Limca, Retailers and customers

• Sample size: 8 distributors

• Sampling technique: Random sampling

• Sampling method: Stratified sampling

• Place of study: Delhi

LIMITATION OF THE STUDY:

• Biased- The study was purely based on the information provided by the respondents and they

may be biased.

• Time constraint- The study was conducted in a short period of time and a detailed

study was not possible.

• Cost constraint- This being a academic study suffers from cost constraint.

• Area constraint- The area of study is limited to only Delhi.

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• Sample constraint- The sample size was not large enough as planned, as the time factor was

the key limitation in the study.

• Confidential constraint- Due to confidential constraint certain information, not all

details could be obtained.

FINDINGS AND RECOMMENDATION

FINDINGS

Some retailers are unable to get the services which are provided by the company

There are some retailers are not happy with services provided by the distributors and the

company.

There is a gap between the retailers and the company

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Distributers are not satisfied with the services like margins, product availability, credit

facility

Customers prefer the taste of Thumbs Up more than the PepsiCo’s product.

Most of the time desired products are not available or not chilled due to unavailability of

visi coolers.

In most of the mix outlet company has not provided its Visi Cooler, so it is becoming the

major cause for not getting fulfill of the demand. Because retailers are promoting that

brand to the consumer which company is satisfying them more in terms of Visi Cooler,

Schemes, Relationship etc

Retailers are not happy with the MDC (Marketing Development Coordinator) of

PepsiCo. Retailers are saying that what they promise, do not fulfill that.

Marinating good relationship with the retailers as well distributors is very important for

having a strong distribution channel

Visi cooler have an important role in enhancing the distribution channel and policy.

Time concern is very important in good distribution channel, it means providing product

at retailers door within a time.

Company should provide better facility of logistics because without logistics any

company cannot maintain good distribution strategies.

RECOMMENDATION

This is one of the most important and most difficult part of the study. I arrived at certain

recommendations for PepsiCo India after the analysis of the data. Some of the important

recommendations are as follows.

There should be and correct feedback from the retailers on the performance of salesmen.

This will help improve their efficiency and accountability. Moreover, this will also help

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in reducing the confusing that the retailers have at times because the salesman does not

explain the schemes properly.

As already mentioned V.C. coolers are a major reason of dissatisfaction among retailers.

The periodical maintenance check of V.C. coolers is done at three months. This should be

done at an interval of 45 days or 60 days instead of the current practice of 90 days.

Company should adopt aggressive marketing strategy that it could reach each and every

place.

Company should have better logistics facility for making reach the product at retailer’s

door at a right time.

Marketing Development Coordinators/ Marketing Executives/ Sales Executives of the

company must focus more for making better relationship with retailers.

Company should provide visi cooler to every retailer. Because who is having visi cooler

of which company they are promoting the same brand to the consumer.

Company should more focus on youth of the country because youths more prefer the soft

drinks.

Company should focus on the consumers taste and preferences and launch new product

according to the consumer taste and need.

CONCLUSION

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1. CONCLUSION

After analyzing all the aspects of the data available and giving some important recommendations

a suitable conclusion which should be derived for this study. However, before starting the

conclusion part, the objective of the research must be kept in mind so that we can arrive at a

befitting conclusion for the research problem. The primary objective of this research was to

know distribution channel Strategy of PepsiCo and to know the importance of Distribution

channel strategy in Positioning of the product. The data collected provided a sound base for

understanding the overall organizational set up of PepsiCo in India. By analyzing the data and

the literature review, following conclusion was inferred:

The Sales and Distribution Network of Pepsi is very strong and almost flawless. PepsiCo India

had the first mover advantage when it entered the market and it capitalized on that advantage to

grab the market. Franchisee based operations combined with the Company’s operations add

strength to the overall presence of the Company in the market.

Franchisee takes care of its operations and PepsiCo does not interfere in its operations. The

Franchisees are required to report to the Company at specific time intervals.

The Advertising Campaigns are conceived, implemented by the PepsiCo and Franchisee has no

say in that. It is very important to develop good relationship with the retailers by providing them

better services and schemes. Maintaining the good relationship with the distributors are very

important for the company because they are the main part of the distribution channel.

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