Assignment 3

REAC HING THE BOTTOM: U NIGLO BE’S S MALL LO C AL

S TO RES DILEMMA

Case Submission by: Group 6

S A D M A N
CASE BACKGROUND
● UniGlobe: A consumer goods company serving wide array of products, operating in Philippines (Headquartered
in US)
● UniGlobe’s Sales Operations
○ Whole Trade Division
○ Small wholesale Trade division
○ International Supermarket Trade division
○ Small Local Stores Division
● Small Local Stores Division
○ Designed to create new distribution channel to cater hard to reach retailers and thus consumers
○ Managed by 3 national distributors, who had exclusive contract with UniGlobe
○ Distributors were required to make all capital investments, UniGlobe assisted in training salesforce and
effective management

S A D M A N
 PROBLEM AT HAND
Stakeholder Problems

1. Low Profitability, in spite of huge volumes.

UniGlobe 2. Not successful in moving customers from small to large
SKUs.
3. Low Profit Margin

1. High capital investment and low margins are keeping

Distributor profits low.

1. Small shop size.

Retailer 2. No "stocking fees" from UniGlobe.
3. Frequent restocking.

S A D M A N
 REASONS FOR THESE PROBLEMS
Incentive structures
● The distributors are incentivized to sell brands with low awareness, making it difficult to sell high volumes.
● SLS is designated as the medium for selling new brands, however these brands have no ‘pull’ value and hence
sell in low volumes.
Retail Presence
● Retailers are not paid ‘stocking fees’ which means the products are not stocked at noticeable locations and
since these are new brands the customers don't ask for them.
Low Margins
● Usually a channel for smaller SKUs which have low profit margins.
● Payment of higher margins to the retailer than the small scale wholeseller also cuts into the margin.
Distributor Conflict
● The channel is a set up in a way where the distributor is incentivized to make the least amount of capital
investment and get as much margin as possible while the firm is incentivized for the exact opposite.

S A D M A N
 Wholesale Trade Division Small Wholesale Trade International Supermarkets Small Local Stores
Division Trade Division

Nature of Retail Served Medium/Large Sized Stores Small Retail Shops Supermarket Retailers Tiny and Rural Shops,
not dispersed Kiosks and Pushcarts

Target Group Middle Class and Lower Middle and Lower class Upper Middle and High People from very isolated
class looking for choices looking for convenience Class People areas

Buyer Need Monthly Ration Emergency need or Small Monthly Ration Daily Ration and consumer
purchases goods in small packs

Retailer Need Margins, Variety, Technical Margins, Trade Discounts Margins, More Variety, Margins, Smaller Sized
Support, Trade Discounts Technical and Design Packagind
Support

Reach Cities and Towns Small Town Supermarkets of Urban Dispersed Areas
areas

Function Pull, Monthly consumer Emergency Pull, Small Monthly consumer goods Daily needs in small
goods demand purchases demand, Pull, Variety, portions
Complete, Market Shopping
Experience

H AV I N G S L S C H A N N EL W H I C H S U P P L I ES TO T I N Y A N D RU R A L S H O P S M A K ES S E N S E
 SOLUTION SUGGESTED: CHANNEL MANAGEMENT
• Stick with the current structure with
modification as suggested further
• Redistributing SLS volumes to other
wholesellers would again require them to
build capabilities of distribution, Shifting
volumes from other trade channels to SLS
would be met with unsettling of relations
with wholesellersm Distributing lower
margin SKUs would further lower margins
through SLS, Incorporating the SLS
operation in-house would require heavy
capital investment and would lower ROI and
increase personnel costs (Control is not the
absolutely desired attribute) and spinning off
doesn’t make sense as large proportion of
sales comes through SLS channels.
• Tiered Trade Promotion for SLS
S A
• Change Return of Investment to be the
metric instead of margins inside the
company and when discussing with
distributors about outcomes of their
investment
• As SLS model has very low capital
investment, ROI should be focussed on
rather than margins
• Change incentive structure - new products
through wholesale and mid-awareness
through SLS with higher margins
• Incentivize SKU wise selling. Segregate
brand incentive SKU wise incentives with
larger SKU having Higher Margins. Make
non-cash incentives e.g. gift schemes for SLS
• POS Advertising should be promoted
D M A N