Table
of
Contents
NESTLE’S
DISTRIBUTION
CHANNEL
..............................................................................................................
3
CASH
DISTRIBUTORS
.................................................................................................................................................................
4
SUPER
STOCKISTS
......................................................................................................................................................................
4
REDISTRIBUTORS
.......................................................................................................................................................................
4
RETAILERS
..................................................................................................................................................................................
4
SALES
FORCE
AT
CD
POINT
......................................................................................................................................................
4
SALES
OFFICER
...........................................................................................................................................................................
5
ACTIVATION
OFFICER
...............................................................................................................................................................
5
ROUTE-?TO-?MARKET
OFFICER
.................................................................................................................................................
5
WHY
SUCH
A
CHANNEL?
....................................................................................................................................
6
NESTLE’S
SALES
FORCE
......................................................................................................................................
7
DISTRIBUTOR
SALESMAN
(DS)
...............................................................................................................................................
7
Tasks
and
Responsibilities
..................................................................................................................................................
7
Salary
and
Incentives
...........................................................................................................................................................
7
Workload
...................................................................................................................................................................................
8
Performance
Evaluation
.....................................................................................................................................................
8
MERCHANDISER
.........................................................................................................................................................................
9
Tasks
and
Responsibilities
..................................................................................................................................................
9
Salary
and
Incentives
........................................................................................................................................................
10
Workload
................................................................................................................................................................................
10
Performance
evaluation
..................................................................................................................................................
10
CHALLENGES
IDENTIFIED
IN
NESTLE’S
DISTRIBUTION
CHANNEL
...................................................
11
DISTRIBUTOR
SALESMAN
WORKLOAD
................................................................................................................................
11
DISTRIBUTOR
SALESMAN
INCENTIVES
...............................................................................................................................
11
POOR
VISIBILITY
OF
NESTLE
PRODUCTS
AT
CERTAIN
OUTLETS
.....................................................................................
11
COMPLAINTS
FROM
RETAILERS
............................................................................................................................................
12
LOWEST
MARGINS
IN
THE
INDUSTRY
..................................................................................................................................
12
COMPETITOR
:
CADBURY
................................................................................................................................
13
ANNEXURE
...........................................................................................................................................................
14
Nestle’s
Distribution
Channel
The
company
has
a
Regional
Sales
Manager
(RSM)
who
generally
covers
one
state.
There
may
be
more
than
one
RSM
in
a
state
depending
on
the
size
of
the
market
and
state.
There
is
Area
Sales
Managers
(ASM)
working
under
a
RSM.
They
control
smaller
areas
compared
to
an
RSM.
Cash
Distributors
The
company
supplies
goods
to
the
Cash
Distributor
(generally
called
CD
points
in
Nestle).
These
are
exclusive
Nestle
distributors.
They
get
a
margin
of
5.8%.
Cash
distributors
further
supply
the
goods
to
the
retailer
or
the
redistributors.
Super
Stockists
The
cash
distributors
who
also
supply
to
redistributors
are
also
called
as
Super
Stockists
at
Nestle.
Redistributors
Redistributors
(generally
referred
to
as
RD
points
in
Nestle)
are
usually
present
in
smaller
towns
such
as
Manesar
where
it
is
not
feasible
for
the
cash
distributor
to
directly
supply
to
the
retailer.
The
redistributors
supplies
to
the
retailers
in
these
small
towns.
The
margin
for
the
redistributors
is
4%
and
this
1.8%
is
accounted
for
the
transportation
and
other
expenses
for
the
Super
Stockists.
Retailers
Retailers
are
generally
the
outlets
Nestle
sell
to.
At
Nestle,
the
retailers
are
also
classified
under
various
channels
like,
Grocery
Large
outlets,
Grocery
Small
outlets,
Supermarkets,
Convenience
stores,
Pan-?Plus
stores
et
cetera.
Sales
force
at
CD
point
The
distributors
have
their
own
Distribution
Salesmen
(DS)
who
have
a
fixed
beat
plan
to
follow
every
week.
The
salesperson
we
spoke
to
in
Gurgaon
has
to
cover
nearly
30
retailers
in
a
day.
In
a
week,
he
has
a
different
beat
plan
every
day
thus
covering
almost
150
retailers
in
the
week.
This
cycle
repeats
every
week.
He
has
an
order
book
with
all
the
SKUs
(125
for
the
person
we
spoke
to)
written
on
it.
He
takes
order
for
each
SKU
at
every
retailer.
The
book
has
a
page
for
every
retailer.
The
delivery
boy
delivers
the
orders
on
the
next
day
morning.
The
company
has
a
merchandiser
who
visits
the
retailers
according
to
a
different
beat
plan.
He
does
not
visit
all
the
retailers
but
only
those
where
there
is
a
need
for
merchandising
and
the
company
has
bought
some
shelf
space.
He
is
responsible
for
the
visibility
of
the
product
inside
the
stores.
60%
of
his
salary
is
paid
by
Nestle
while
the
rest
is
paid
by
the
distributor.
Nestle
has
certain
employees
who
are
responsible
for
the
proper
functioning
of
the
channel.
Sales
Officer
A
sales
officer
is
the
point
of
contact
for
a
distributor.
He
works
along
with
the
distributor
to
ensure
smooth
functioning
of
supply
to
the
retailer.
He
is
also
responsible
for
handling
any
issues
that
might
arise
in
the
channel.
Some
of
the
problems
handled
by
a
sales
officer
are:
• • • • • Issues
arising
from
delay
in
supply
of
goods
from
the
company
to
the
distributor
Issues
arising
in
delivery
of
goods
to
the
retailer
Issues
with
respect
to
the
beat
plan
of
salesmen
Handling
conflicts
between
retailers
and
salesmen
Issues
with
respect
to
billing
Activation
Officer
The
purpose
of
an
activation
officer
is
to
improve
the
visibility
of
Nestle
in
a
region.
He
handles
brand
activation
by
organizing
various
events.
To
the
person
we
spoke
to,
who
was
handling
the
free
trial
of
Coffee
made
with
coffee
shaker,
he
would
let
the
public
interact
with
the
product
thus
increasing
the
visibility
of
both
Nestle
and
the
new
product.
He
had
also
done
the
promotion
in
schools
for
Maggi
Fun
Aloo.
There
is
generally
one
Activation
Officer
for
a
region
under
an
ASM.
Route-?to-?Market
Officer
A
Route-?to-?market
officer
(RTM
officer)
is
the
officer
responsible
for
locating
newer
avenues
where
Nestle’s
products
can
be
sold.
His
job
is
to
identify
new
markets
and
new
outlets
in
the
region
he
supervises
where
the
Distributor
salesman
can
book
orders.
There
is
generally
one
Route-?to-?Market
Officer
for
a
region
under
an
ASM.
Why
such
a
channel?
The
channel
followed
by
Nestle
is
the
most
popular
channel
for
FMCG
companies.
Nestle
has
exclusive
distributors.
Exclusive
distributors
are
more
focused
and
penetrate
the
market
much
faster.
The
channel
push
is
higher
in
case
of
exclusive
distributors.
This
helps
Nestle
in
having
a
better
control
over
the
channel.
On
the
other
hand,
Nestle
can
afford
to
have
exclusive
distributors
because
it
is
a
large
company
with
high
sales
volume.
Therefore,
it
is
viable
for
a
distributor
to
sell
only
Nestle
products.
Nestle
doesn’t
have
direct
selling
as
it
is
not
feasible
for
an
FMCG
company
of
such
size
to
reach
directly
to
the
retailers.
The
present
channel
also
helps
in
sharing
the
risk
with
other
channel
members.
Direct
selling
is
considered
more
feasible
for
high
involvement
products
where
selective
distribution
is
suitable.
FMCG
products
are
always
better
to
be
distributed
through
intensive
distribution
because
the
consumers
are
not
willing
to
travel
long
distances
for
these
products.
For
intensive
distribution,
the
company
cannot
do
direct
selling
efficiently.
The
margins
given
by
the
company
are
somewhat
lower
than
other
large
FMCG
companies.
One
reason
could
be
the
good
reputation
of
the
company.
The
distributors’
salesmen
have
a
beat
plan
according
to
which
they
visit
every
retailer
once
a
week.
The
frequency
of
visit
is
suitable
for
an
FMCG
company
because
these
products
move
fast.
Therefore,
it
is
important
to
replenish
the
stock
frequently.
Nestle’s
Sales
force
Distributor
Salesman
(DS)
A
DS
is
a
distributor-?appointed
salesperson
who
is
on
the
payroll
of
distributor
and
is
responsible
for
servicing
the
retailers.
Tasks
and
Responsibilities
Every
DS
has
a
market
beat
plan
under
which
he
is
given
the
different
regions/
markets
he
has
to
cover
by
himself.
A
DS
works
for
6
days
in
a
week
and
each
day
he
has
to
cover
a
beat.
Beat
is
the
collection
of
30
-?40
shops
in
a
particular
region(s),
which
have
to
be
covered
by
retailer
daily
for
the
purpose
of
seeking
the
orders
from
retailers.
For
every
beat
DS
has
to
carry
a
separate
Dealer
Card,
which
consists
of
the
record
of
every
outlet
within
that
area.
Currently,
Nestle
is
having
125
live
SKU
and
a
DS
has
to
ask
about
the
orders
for
these
SKU
from
the
retailer
and
accordingly
the
Dealer
card
is
to
be
filled
for
every
retailer.
Salary
and
Incentives
Typically,
a
DS
is
paid
Rs.
4000-?5000
per
month.
It
is
the
fixed
income
which
a
DS
gets
and
is
not
linked
to
the
volumes
that
he
delivers
in
that
month.
Nestle
on
a
monthly
basis
runs
a
push/
activation
scheme
where
all
DS
are
guided
to
push
4
products
chosen
by
the
company
out
of
the
entire
portfolio.
For
achieving
the
targets
for
the
4
chosen
products,
DS
gets
Rs.250
each
for
every
product.
These
products
keep
on
changing
for
different
months.
So,
every
month
there
is
a
different
motivation
for
DS
to
get
incentives.
The
problem
with
this
kind
of
compensation
system
is
that,
a
DS
has
no
incentive
to
generate
high
volumes
for
the
entire
portfolio
of
Nestle.
Every
month
he
is
on
a
new
mission
to
push
4
different
products.
Due
to
this,
his
focus
is
to
meet
the
target
for
those
products
only.
Workload
Every
day
a
DS
has
to
visit
30-?40
shops
in
some
markets,
which
may
not
be
very
close
and
accordingly
require
time
for
commutation
from
one
place
to
another.
At
every
shop
he
is
supposed
to
ask
the
order
for
125
SKU,
which
means
approx.
4375
SKU
orders
per
day.
The
numbers
clearly
show
that
a
DS
has
a
very
heavy
workload.
This
may
lead
to
retailers
asking
for
the
orders
for
selected
SKU
which
they
feel
are
bought
by
the
stores
generally
which
may
lead
to
a
loss
in
sales
for
other
SKU
which
could
have
been
purchased.
Probably,
the
products
which
have
a
good
pull
in
Nestle’s
portfolio
get
ordered
by
retailers
more.
The
products
which
require
push
by
DS
may
lose
out
due
to
heavy
workload
for
a
DS.
Performance
Evaluation
Performance
evaluation
of
DS
is
done
regularly
by
the
immediate
superior.
Nestle
follows
two
concepts
of
measuring
the
performance
of
DS
i.e.
productivity
and
effectivity
(efficiency).
Productivity
means
how
many
shops
within
a
particular
beat
the
DS
could
visit.
Often,
there
are
times
when
certain
shops
in
a
beat
are
closed
due
to
afternoon
time
or
any
other
reason.
So,
these
shops
are
left
uncovered
by
DS
during
his
market
visit.
Let’s
say
a
DS
visited
20
out
of
30
shops
in
a
beat,
so
his
productivity
would
be
66%
for
that
beat
on
a
particular
market
visit.
Effectivity
(Efficiency)
means
from
how
many
shops
he
could
actually
take
the
order
for
supply.
Certain
stores
may
not
place
order
because
of
underlying
inventory,
low
sales
etc.
So,
these
shops
may
order
next
time
when
the
DS
covers
that
beat
again.
The
effectivity
is
dependent
on
how
many
retailers
actually
placed
the
orders
with
the
DS.
So,
if
10
out
of
20
shops
visited
in
a
beat
ordered
for
the
products,
then
effectivity
of
the
DS
will
be
50%
for
the
beat
during
a
particular
market
visit.
Merchandiser
Merchandiser
is
the
person
responsible
for
putting
up
the
displays
in
the
selected
shops
and
maintaining
them.
He
works
six
days
a
week
and
everyday
he
has
a
different
beat
plan
which
is
to
cover
a
certain
number
of
shops
and
ensure
that
displays
are
in
proper
shape.
Though
they
are
at
the
bottom
in
the
designation
pyramid,
they
are
responsible
for
a
very
valuable
activity,
that
is,
in-?store
promotional
activities.
Tasks
and
Responsibilities
Te
main
task
of
a
merchandiser
is
to
set
up
the
displays
in
the
selected
shops
in
a
particular
area
for
that
a
beat
plan
is
prepared
which
is
to
select
few
shops
in
a
particular
area
(as
there
may
be
30-?40
outlets
in
a
given
area
where
one
CD
is
supplying
the
stocks
but
some
of
them
might
be
too
small
to
consider
for
in-?store
promotional
activities
plus
it’s
not
economically
viable
also
to
choose
every
shop
for
displays).
At
Nestle,
there
are
generally
six
different
beat
plans
for
each
day
in
a
week
and
thus
all
the
selected
outlets
under
one
CD
can
be
covered.
Now
there
can
be
two
kind
of
tasks
for
a
merchandiser;
first
is
to
maintain
the
existing
displays
in
an
outlet
second
is
to
put
the
displays
in
newly
selected
outlets.
Three
important
factors
which
a
merchandiser
keeps
in
mind
while
maintaining
the
existing
displays
are:
Hygiene:
To
see
that
all
products
are
in
proper
order
and
that
a
competitor’s
product
is
not
in
the
shelf
space
bought
for
the
company’s
products.
FIFO:
To
make
sure
that
products
which
are
coming
first
are
also
getting
out
first.
This
we
can
understand
by
the
following
example,
suppose
one
product
is
kept
at
the
front
part
of
the
shelf,
now
suppose
the
new
stock
of
the
same
product
and
same
SKU
has
arrived
so
what
generally
happens
is
that
shopkeeper
put
the
new
stock
at
the
front
of
same
shelf
space.
Now
the
old
stock
would
be
at
the
back
part
of
the
shelf
and
when
a
customer
comes,
shopkeeper
would
give
him
product
from
the
front
part
and
thus
chances
of
old
stock
not
being
sold
would
increase.
This
is
the
reason
merchandiser
has
to
make
sure
that
stocks
which
are
coming
first
should
go
out
first.
Planogram:
It
is
a
plan
which
specifies
which
product
should
cover
more
space
and
which
should
less.
Suppose
if
company
has
decided
that
visibility
of
“maggi”
should
be
60%
and
that
of
“everyday”
should
be
40%
(considering
that
these
are
the
only
two
products
available
in
a
particular
shop)
then
merchandiser
has
to
make
sure
that
visibility
is
according
to
the
planogram.
Salary
and
Incentives
Salary
is
structured
in
such
a
way
that
60%
of
the
salary
is
borne
by
the
company
while
CD
bears
the
remaining
amount.
Salary
is
around
INR
2500-?INR
3000
which
is
very
less
considering
the
time
and
efforts
put
in
by
the
merchandiser.
Workload
A
merchandiser
has
to
cover
around
10-?15
outlets
among
30-?40
outlets
in
an
area
in
a
given
day.
Generally
new
set
up
takes
around
45-?60
min
and
maintaining
an
old
display
takes
15-?20
minutes.
Traveling
time
contributes
most
in
the
overall
time
as
outlets
are
not
very
close
to
each
other
also
a
merchandiser
is
suppose
to
have
his
own
vehicle
and
company
don’t
pay
for
traveling
so
almost
all
the
merchandisers
have
their
cycles
as
its
most
economical.
Thus
a
merchandiser
works
more
than
8
hours
in
a
day.
Performance
evaluation
There
is
no
strong
mechanism
so
that
the
performance
of
a
merchandiser
could
be
judged
as
it’s
practically
not
possible
for
a
sales
officer
to
visit
each
outlet
to
see
how
merchandiser
is
carrying
out
his
job.
Though
there
are
occasional
visits
by
the
sales
officer
but
those
don’t
show
much.
Challenges
identified
in
Nestle’s
distribution
channel
Distributor
Salesman
workload
Analyzing
the
workload
of
the
Distributor
Salesman
(DS),
the
number
of
active
Stock
Keeping
Units
(SKUs)
in
Gurgaon
are
130
SKUs/outlet.
Also,
the
average
outlets
in
market
beat
plan
of
a
distributor
salesman
are
35
outlets/day
with
the
range
being
between
20
and
40
depending
upon
the
kind
of
market
he
is
given.
From
this
information,
the
DS
workload
turns
out
to
be
around
4550
SKUs
per
day,
which
means
that
he
has
to
read
out
4550
SKUs
from
the
dealer
card
to
the
retailers.
From
our
market
working
with
a
Distributor
Salesman,
we
realized
that
he
is
overloaded
with
work
and
is
unable
to
read
out
the
whole
SKU
list
to
the
retailers.
üHence,
the
focus
of
the
DS
is
on
the
products
with
a
pull
from
the
market,
rather
than
products
requiring
push
as
that
would
take
more
effort
and
time,
without
any
benefits
for
the
salesman.
Distributor
Salesman
Incentives
Currently,
each
Cash
Distributor
receives
an
input
sheet
from
the
sales
officer
which
specifies
the
incentives
to
be
given
to
the
Distributor
salesman.
Currently,
Nestle
has
incentive
of
Rs.250
for
volume
achievement
for
4
products
each
month.
They
are
not
given
any
incentives
for
the
overall
sales
achievement
or
on
the
basis
of
their
evaluation
by
the
sales
officer.
From
our
market
working,
we
realized
that
generally
the
DS
are
not
motivated
enough
to
push
the
sales
of
the
whole
range
of
products
of
Nestle
and
are
concentrating
on
the
products
which
have
incentive
in
that
particular
month.
The
incentive
schemes
for
other
competing
FMCG
companies
had
a
component
for
the
total
turnover
as
well
as
number
of
bills
generated
by
the
company.
Poor
visibility
of
Nestle
products
at
certain
outlets
From
our
visits
in
retail
outlets
in
Gurgaon,
we
realized
that
the
displays
bought
by
Nestle
were
not
maintained
properly
and
they
scored
low
on
hygiene
and
adherence
to
planogram.
Merchandiser
is
the
person
responsible
for
putting
up
the
displays
and
maintaining
them,
week-?in
and
week-?out.
As
the
merchandiser’s
performance
is
not
measurable,
it
is
not
possible
to
make
his
work
accountable
which
results
in
slack
of
work
among
some
merchandisers.
Hence,
the
main
challenge
lies
in
the
fact
that
the
merchandiser’s
productivity
and
effectivity
is
currently
not
measured
hence
his
performance
cannot
be
measured
unlike
Distributor
Salesman
whose
turnover
is
an
important
input
for
performance
evaluation.
Complaints
from
retailers
Retailer
drives
the
growth
for
Nestle
as
he
is
the
seller
to
the
customer.
This
makes
focus
on
the
retailer
very
critical.
From
our
market
working
and
interaction
with
the
retailers,
we
realized
that
the
retailer’s
expired
and
damaged
goods
were
not
returned
timely
at
various
retailers.
The
main
reason
cited
by
them
was
that
low
expired
goods
translate
to
a
good
performance
for
Sales
Officer,
which
drove
them
to
reduce
the
expired
goods
taken
back
by
the
salesman.
Also,
the
merchandising
display
payments
to
retailers
were
delayed
at
several
outlets.
This
was
mainly
due
to
the
fact
that
distributors’
claims
were
not
being
cleared
timely
which
was
in
effect,
delaying
payments
to
the
retailers.
Lowest
margins
in
the
industry
Nestle
gives
out
the
lowest
margins
to
the
distributor
in
the
industry.
Hence,
the
margins
to
the
retailers
are
also
reduced.
Super
Stockist
Sub
Stockist
Total
Perfetti
Cadbury
Nestle
Lotte
Wrigley’s
Colgate
Palmolive
Reckitt
Benckiser
2.5
4
6.5
2
4
6
2
3.8
5.8
2.5
6
8.5
2
5
7
2
5.62
7.62
2
5
7
If
we
consider
the
motivation
of
the
retailers
to
keep
Nestle’s
products,
the
throughput
or
off
take
of
Nestle’s
products
is
very
high
and
most
retailers
would
be
keen
to
maintain
they
baskets
of
goods,
the
low
margins
are
a
dampening
factor,
as
mentioned
by
a
few
retailers
in
our
interactions.
Competitor
:
Cadbury
The
distribution
strategy
of
Cadbury
is
entirely
different
from
Nestle.
The
various
features
of
Cadbury
Distribution
Network
are
mentioned
below
:
• Unlike
Nestle,
Cadbury
supplies
its
most
of
the
products
directly
to
the
wholesalers
and
retailers.
• This
helps
them
to
reduce
the
time
spent
on
making
the
product
available
from
factory
to
end
user.
• • • Margins
paid
to
wholesalers
and
retailers
are
much
better.
This
network
includes
over
2100
wholesalers
and
450000
retailers.
They
follow
an
intensive
distribution
network.
Annexure
Name
of
Student
Roll
Nos.
1.
Tarun
Bansal
2.
Jatin
Batra
191016
191027
191029
191030
191038
191045
3.
Mahima
Gupta
4.
Manan
Batra
5.
Nitish
Taneja
6.
Pulkit
Kaushik
1.
Name
of
Company
Visited
:
Duggal
Enterprise
Role
in
Channel
(Manufacturer,
Distributor
etc.)
:
Distributer
Name
of
Person
Contacted
:
Mr.
Rajan
Designation/Status
:
Owner
Address
:
R
505,
New
Rajinder
Nagar,
Delhi.
doc_939657129.pdf