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FMG 19 A ( Group 3 )
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.
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
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.
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.
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.
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).
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.
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.
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, 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.
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.
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.
Annexure
Name of Student Roll Nos.
Designation/Status : Owner