Description
Describing about ITC shampoo distribution network. It covers distribution channel, portfolio, flow of goods.
Study of Distribution Network of Shampoos
A Brief Overview
• Rs. 2900 cr Shampoo Market in India
• Major Players : HUL and P&G • Other Players : Dabur, Wipro, ITC • ITC : a Rs.18,000+ cr. turnover company • Growth of Industry : 15% pa
• FMCG Revenues: 12,955 cr.
• ITC’s Share : 5% (despite being a very late entrant)
• Rs. 145 cr. Revenue contribution through shampoos
ITC Business Portfolio
ITC
Hotels
Lifestyle Retailing
Information Technology
FMCG
Agribusiness
Paperboards, Paper and packaging
Cigarettes
Foods
PCP
Matches, Incense Sticks
Education and Stationary
Soaps
Shampoo
Vivel
Fiama Di Wills
Superia
Territory division in Mumbai
Mumbai divided into region : A 6-8 distributors per 3 of 4 Every “City” consists sub cities of 23 distributors total : “City 1” , “City 2”, regions “City 3”of 12 regions A total
Distribution Channel
Distribut or
CFA at Bhiwandi Company Freight
Rs.100
3rd Party WSP Fee Based Service Production at Haridwar
Rs. 102 Rs.100 Rs. 95
Organized Retail
TOT on Case to Case Basis : Decided by Central Office Distributor pockets 3.5%
Fixed Margin: 3.5%
Rs.103.5
10% on Bottles 24% on Sachets
Rs.113.85
End Customers
Unorganized Retail
Credit flow across the Chain
?
No credit offered to distributor
?
Goods delivered strictly on cash, cheque, RTGS basis.
? ?
Distributor offers 7-15 days credit to retailers. Margins of Distributor includes an interest component towards the credit he offers down the chain
Flow of Damaged Products
Only replacement of Damaged Products, No reimbursements Paid
ITC
Distribut or
Retaile r Damaged Goods Moving Back to ITC
May Replace May Reimburse
Consum er
Achieving Economies of Scope
Distributor
Single distributor for all 3 verticals
Single Sales team for entire PCP: Soaps, Shampoos and Agarbattis
Distribution of “Distribution” @ Kamla Enterprises
1600 retailers under this distributor- Malad & Goregaon
Deals with 7 salesmen handle Soaps and Shampoos 1 Salesman handles 6 beats
1 beat per day
Sales tracking sheet
Linking “IT” ? FORUM system
?
Uses FORUM – IT system to monitor distribution activities, link distributors with company, track orders, etc
FORUM
?
Sales persons use PDA to transfer information into the FORUM system. Database consolidation happens every evening.
The system helps to track inventory, determine reordering levels other than being a one-stop-shop for all the information about salespersons and retailers
?
-Key Strategies
Selection of Distributors
Exclusivity of distributors is strictly maintained in ITC ? Company leverages its brand and high inherent demand of its products in the market to enforce exclusivity on distributors ? Not possible for smaller manufacturers to force exclusivity, as they don’t enjoy bargaining power with distributors Advantages ? No need to push products through distributors as they have access to only ITC products ? Saves on extra margins company gives to distributors to lure them in ITC’s favor
?
Area Wise Strategy- SKUs vs Retailers
Mumbai Area selection according to Standard of Living
Areas with High standard of living
Areas with low standard of living
SKU and key Products
Bottles of Fiama Di Wills and Vivel
Sachets of Superia and Vivel selected as the key product
Selection of target outlets
Target outlets to target people with high standard of living
Target outlets to target people with low standard of living
Share of Sachet by revenue
Share of Bottles by revenue
Superia
80
20
Vivel Fiama Di Wills
60 20
40 80
Choice criteria of distributors/retailers (80-20 rule)
?
?
ITC is a late entrant in the shampoo market Currently enjoys 5% of the market share
Fiama Di Wills : Oct, 2007 ? Vivel : June, 2008 ? Superia : August, 2008
?
?
?
?
Strictly follows 80:20 principal to gain economies of scale first Selects the first 20% of the most profitable retailers for ITC in a particular territory Out of the total 1 lakh retailers in Mumbai, it today serves only 24000 retailers
Organized versus Unorganized Distribution
Organised Retail
End Customer
Retailer has the freedom to give any discounts on MRP Distributor margin decided by company on the basis of no. of retail outlets of key A/Cs in the territory Company decides on the prices for the key accounts. Differs from A/C to A/C.
Unorganised Retail
End Customer
Retailer has freedom to give discounts on MRP Distribution margin is fixed for all distributors No discrimination on price by the company
The Way Forward
Exploring New Channels
Pushing High Margin Products Exclusive ITC Retail Outlets
• Small unbranded Salons a major consumer of Shampoos • ITC under the process of exploring these sales outlets • Introduction of reward points at retailer end • Highest points for Fiama Di Wills, Lowest for Superia
• Pilot Project in Mumbai • Retailer been incentivized to stock only ITC products
doc_403407571.pptx
Describing about ITC shampoo distribution network. It covers distribution channel, portfolio, flow of goods.
Study of Distribution Network of Shampoos
A Brief Overview
• Rs. 2900 cr Shampoo Market in India
• Major Players : HUL and P&G • Other Players : Dabur, Wipro, ITC • ITC : a Rs.18,000+ cr. turnover company • Growth of Industry : 15% pa
• FMCG Revenues: 12,955 cr.
• ITC’s Share : 5% (despite being a very late entrant)
• Rs. 145 cr. Revenue contribution through shampoos
ITC Business Portfolio
ITC
Hotels
Lifestyle Retailing
Information Technology
FMCG
Agribusiness
Paperboards, Paper and packaging
Cigarettes
Foods
PCP
Matches, Incense Sticks
Education and Stationary
Soaps
Shampoo
Vivel
Fiama Di Wills
Superia
Territory division in Mumbai
Mumbai divided into region : A 6-8 distributors per 3 of 4 Every “City” consists sub cities of 23 distributors total : “City 1” , “City 2”, regions “City 3”of 12 regions A total
Distribution Channel
Distribut or
CFA at Bhiwandi Company Freight
Rs.100
3rd Party WSP Fee Based Service Production at Haridwar
Rs. 102 Rs.100 Rs. 95
Organized Retail
TOT on Case to Case Basis : Decided by Central Office Distributor pockets 3.5%
Fixed Margin: 3.5%
Rs.103.5
10% on Bottles 24% on Sachets
Rs.113.85
End Customers
Unorganized Retail
Credit flow across the Chain
?
No credit offered to distributor
?
Goods delivered strictly on cash, cheque, RTGS basis.
? ?
Distributor offers 7-15 days credit to retailers. Margins of Distributor includes an interest component towards the credit he offers down the chain
Flow of Damaged Products
Only replacement of Damaged Products, No reimbursements Paid
ITC
Distribut or
Retaile r Damaged Goods Moving Back to ITC
May Replace May Reimburse
Consum er
Achieving Economies of Scope
Distributor
Single distributor for all 3 verticals
Single Sales team for entire PCP: Soaps, Shampoos and Agarbattis
Distribution of “Distribution” @ Kamla Enterprises
1600 retailers under this distributor- Malad & Goregaon
Deals with 7 salesmen handle Soaps and Shampoos 1 Salesman handles 6 beats
1 beat per day
Sales tracking sheet
Linking “IT” ? FORUM system
?
Uses FORUM – IT system to monitor distribution activities, link distributors with company, track orders, etc
FORUM
?
Sales persons use PDA to transfer information into the FORUM system. Database consolidation happens every evening.
The system helps to track inventory, determine reordering levels other than being a one-stop-shop for all the information about salespersons and retailers
?
-Key Strategies
Selection of Distributors
Exclusivity of distributors is strictly maintained in ITC ? Company leverages its brand and high inherent demand of its products in the market to enforce exclusivity on distributors ? Not possible for smaller manufacturers to force exclusivity, as they don’t enjoy bargaining power with distributors Advantages ? No need to push products through distributors as they have access to only ITC products ? Saves on extra margins company gives to distributors to lure them in ITC’s favor
?
Area Wise Strategy- SKUs vs Retailers
Mumbai Area selection according to Standard of Living
Areas with High standard of living
Areas with low standard of living
SKU and key Products
Bottles of Fiama Di Wills and Vivel
Sachets of Superia and Vivel selected as the key product
Selection of target outlets
Target outlets to target people with high standard of living
Target outlets to target people with low standard of living
Share of Sachet by revenue
Share of Bottles by revenue
Superia
80
20
Vivel Fiama Di Wills
60 20
40 80
Choice criteria of distributors/retailers (80-20 rule)
?
?
ITC is a late entrant in the shampoo market Currently enjoys 5% of the market share
Fiama Di Wills : Oct, 2007 ? Vivel : June, 2008 ? Superia : August, 2008
?
?
?
?
Strictly follows 80:20 principal to gain economies of scale first Selects the first 20% of the most profitable retailers for ITC in a particular territory Out of the total 1 lakh retailers in Mumbai, it today serves only 24000 retailers
Organized versus Unorganized Distribution
Organised Retail
End Customer
Retailer has the freedom to give any discounts on MRP Distributor margin decided by company on the basis of no. of retail outlets of key A/Cs in the territory Company decides on the prices for the key accounts. Differs from A/C to A/C.
Unorganised Retail
End Customer
Retailer has freedom to give discounts on MRP Distribution margin is fixed for all distributors No discrimination on price by the company
The Way Forward
Exploring New Channels
Pushing High Margin Products Exclusive ITC Retail Outlets
• Small unbranded Salons a major consumer of Shampoos • ITC under the process of exploring these sales outlets • Introduction of reward points at retailer end • Highest points for Fiama Di Wills, Lowest for Superia
• Pilot Project in Mumbai • Retailer been incentivized to stock only ITC products
doc_403407571.pptx