DISTRIBUTION NETWORK (SEC A -- GROUP 5)

Players at Various Levels

Concentrate Manufacturing: Coca-Cola India Pvt. Ltd. Responsible for manufacturing & selling of beverage

base/syrups/powder base etc and marketing activities

Bottling: Hindustan Coca-Cola Beverages Pvt. Ltd & 13 authorized bottling partners Each has its own territory Develop markets and prepare, package, sell and

lastly distribute SKUs

Some Facts

50 Bottling Plants in India700,000 retail outlets to be serviced25,000 system employees1,50,000 indirect employeesIndore Distribution:

Division into 30 Routes 2 types of routes: Institutional & Fragmented 2 Persons/ Route: Market Developer + Salesperson

: Distribution Strategy

CCI has built a distribution network in combination with its bottling partners and contract manufacturers

Urban Markets: Direct distribution, from bottling plants to retailers

Rural Markets: A three-tier ‘Hub and Spoke’ distribution model

Distribution: From Factory to Fridge

Ingredients Concentrate Manufacturing Bottling

Direct Sales Depot (WH)

TransportVisi Cooler/ Shelves

Fountain

Syrup Only

CO2 Only

Coca Cola Company

Bottler

The 3 As of ‘Thanda matlab

Availability: A CDS as in the urban areas would be infeasible, instead, a Hub and Spoke Model was adopted by Coca Cola

Central Warehouse

(Hub)

Warehouses (Spoke) Bottling Plant

RetailersBicycles are used too!

The 3 As of ‘Thanda matlab

Affordability: ‘Chota Coke’ (200ml) at ` 5/- using a ‘push’ strategy for the price-sensitive rural consumer

Acceptability: Participating in the weekly mandies by setting up temporary retail outlets; taking part in the annual haats

Rural penetration increased from 9% in 2001 to 25% in 2003

Distribution Process

Market Developer

Punches the order through Blackberry Application

Order enters DSD ERP system

After 7 PM, Pre Seller Orders (‘Dumps’) printed by DSD

DB Code Generated & Delivery Trucks Loaded

Next Morning, Order Transferred to Salesperson’s Handheld Device

SP goes with Delivery Truck, Delivers Goods

Retailer/Customer

Requirement

Visits the Retailer/Customer once or twice a week

PaymentCash & Carry Only

Key Account Outlets

•Channel

Class

Channel Type•Hy

per - >10 checkout counters

•Super – 4-9 checkout counters

•Convenio – 4 checkout counters

•Cash & Carry

Modern Trade

•Quick Service Restaurants

•Take Away

•Fine Dine

•Night Life

Eatery and Dining

•Single Screen

•Multi Screen

Cinema

•Hotels

•Amusement Parks

Entertainment and Leisure

•Airlines – Budget

•Airlines – Full Service

•Airport Kiosks

•Fuel Station

Travel

•At Work

•CSD Canteen

•Education College/ School Canteen

•Hospital Canteens

Institutions

Trade Margins and Promotions

Margin of 10-12% per SKU to retailersMargin decided by CCI; no influence by DSD or

retailersTrade promotion of around 20 days announced

every 2-3 months by CCI, such as: 2 tetra packs free with every crate Free diet coke with Kebab platter in Sayaji restaurant

Conditions of Sale

Payment Terms Cash and carry Zero credit policy

An order-to-payment cycle of 24 hoursOrder taking time: 9am to 7pmAverage inventory of about 4-5 days of sale by retailerProducer guarantee against defective bottles at the

time of delivery onlyProduct return only in case of expired productTarget based on previous year sales, and price, are

centrally set by CCI

A typical order punched in by a Market Developer

Degree of effort

Coca Cola employs both push and pull strategies.Push:

Frequent trade promotions Exclusive tie-ups with chains like McDonalds, Domino’s,

etc. Large display in stores New store acquisition

Pull: Heavy advertisement Sales promotions (scratch and win, etc.)

Channel Conflicts

Policy of zero credit: Small store owners demand credit from salesmen

Retailers demand to return defective products even after delivery

Shrinkage of trade margins during price wars

“Cold drink retailers are finding themselves in a duopoly squeeze for the first time now...Coke and Pepsi have cut retailer margins by more than half from Rs 48 a crate (24 bottles of 300ml each) to Rs 20 now. On small bottles of 200ml, the

margin is down to Rs 16 a crate from Rs 18 a few weeks ago.”- ET report

Training and Performance Measurement

Coca-Cola University has launched Parivartan, an innovative training program for traditional "mom-and-pop" retailers in India to equip them with the skills, tools and techniques required to succeed in India's evolving retail landscape

7 days’ field training for Market Developers (MD) and salesmen An elaborate DEEP RED evaluation score for measurement of

performance of MD and salesmen DEEP RED outlines the execution framework for key accounts. It aims to define the Picture of Success (PicOS) for key account

categories PicOS elements are the key strategic execution elements for

creation, registration, evaluation and maintenance of execution Key Performance Indicators (KPIs)

Distributor Management by DeepRED

Right Execution Daily is defined as a tool to measure the performance of the distributor

RED surveys were started in 2007, and is done by A.C. Nielson, monthly report is sent to HCCB

The following is checked daily by the Market Developer and scored on a scale of 100 points: Check the visi-cooler management (30 points) Check the availability of the product in the outlet (50 points) Check the activation in the outlet (20 points)

DEEP RED

Deep Red Score (100)

Chilling Equipments (20)

Size (10)

Purity (10)

Availability (50)

Cola + 3 Brands (35)

Diet Coke (5)

Juice (5)

Water (5)

Activation (30)

Display (10)

Mention in Menu (10)

Combo Pack (10)

A typical Visi-cooler: Notice the sequence: Coke > Sprite > Fanta > Kinley

Sources

Websites: http://www.coca-colaindia.com/ http://articles.economictimes.indiatimes.com/ http://online.wsj.com/article/ http://www.icmrindia.org/casestudies/CocaCola.html

Outlets Covered: Malls: C21,Malhar, Treasure Island: Big Bazaar,

Mangal City Eating Joints: McDonalds, Dominos, Radisson,

Sayaji

Thank YouThank You