Research paper ON

IDENTIFICATION OF BUSINESS OPPORTUNITIES IN PUNE

FOR H.J HEINZ INDIA PVT. LTD., PUNE SINHGAD INSTITUTE OF MANAGEMENT VADGAON (Bk) PUNE-4

Under the guidance of PROF. SATISH PAWAR By ROHIT MAHAJAN MBA (MARKETING)

Abstract: This paper deals with the concept of Identification of Business opportunities in PUNE for H.J Heinz India Pvt. Ltd. It aims to evaluate the current distribution model of Heinz, and also that of the distribution model of various other big players in the market like Nestle, Cadbury, GSk etc. After evaluation, comparison of distribution model of all these companies. The research questions are utilized to compare the distribution model of various companies and finally after analysis arrived at the plan for sales and distribution model for Heinz which would assist them in increasing their market share, getting competitive advantage, and finally in increasing their sales and profit. For this purpose two separate questionnaire with 20 questions and 9 questions is applied to note down the opinions of retailers through one questionnaire and to understand the competitors distribution model through second questionnaire. Data was obtained from 492 retail outlets and analyzed to arrive at some findings and then giving them suggestions. Results indicate that the distribution model with which it is operating is not giving them competitive advantage and more over retailers are not happy with the services of the distributors of Heinz. For practitioners, it is worth noting that Retailers are exclusively concerned with the frequent service from the Distributor also greater margins and more trade discounts. The paper contains material relevant to the Distribution Model of FMCG company, and implications are discussed and recommended are offered for improving distribution service.

Introduction: What are Fast Moving Consumer Goods (FMCG)? Products which have a quick turnover, and relatively low cost are known as Fast Moving Consumer Goods (FMCG). FMCG products are those that get replaced within a year. Examples of FMCG generally include a wide range of frequently purchased consumer products such as toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper products, and plastic goods. FMCG may also include pharmaceuticals, consumer electronics, packaged food products, soft drinks, tissue paper, and chocolate bars. A subset of FMCGs are Fast Moving Consumer Electronics which include innovative electronic products such as mobile phones, MP3 players, digital cameras, GPS Systems and Laptops. These are replaced more frequently than other electronic products. White goods in FMCG refer to household electronic items such as Refrigerators, T.Vs, Music Systems, etc. In 2005, the Rs. 48,000-crore FMCG segment was one of the fast growing industries in India. According to the AC Nielsen India study, the industry grew 5.3% in value between 2004 and 2005. Indian FMCG Sector The Indian FMCG sector is the fourth largest in the economy and has a market size of US$13.1 billion. Wellestablished distribution networks, as well as intense competition between the organised and unorganised segments are the characteristics of this sector. FMCG in India has a strong and competitive MNC presence across the entire value chain. It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015 from US $ billion 11.6 in 2003. The middle class and the rural segments of the Indian population are the most promising market for FMCG, and give brand makers the opportunity to convert them to branded products. Most of the product categories like jams, toothpaste, skin care, shampoos, etc, in India, have low per capita consumption as well as low penetration level, but the potential for growth is huge.

The Indian Economy is surging ahead by leaps and bounds, keeping pace with rapid urbanization, increased literacy levels, and rising per capita income. The big firms are growing bigger and small-time companies are catching up as well. According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands, and 27 of these are owned by Hindustan Lever. Pepsi is at number three followed by Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola (8) and Parle (9). These are figures the soft drink and cigarette companies have always shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest categories in FMCG. Between them, they account for 35 of the top 100 brands. THE TOP 10 COMPANIES IN FMCG SECTOR S.NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Companies Hindustan Unilever Ltd. ITC (Indian Tobacco Company) Nestle India GCMMF (AMUL) Dabur India Asian Paints (India) Cadbury India Britannia Industries Procter & Gamble Hygiene and Health Care Marico Industries

Outlook There is a huge growth potential for all the FMCG companies as the per capita consumption of almost all products in the country is amongst the lowest in the world. Again the demand or prospect could be increased further if these companies can change the consumer's mindset and offer new generation products. Earlier, Indian consumers were using non-branded apparel, but today, clothes of different brands are available and the same consumers are willing to pay more for branded quality clothes. It's the quality, promotion and innovation of products, which can drive many sectors. INTRODUCTION TO COMPANY: The H.J. Heinz Company, headquartered in Pittsburgh, Pennsylvania, is the most global of all U.S.-based food companies. Famous for our iconic brands on five continents, Heinz provides delicious, nutritious and convenient foods for families in 200 countries around the world. In more than 50 of those countries, we enjoy the number-one or number-two market position. Heinz in India Heinz came to India in 1994 by taking over the Family Products Division of Glaxo with powerful brands such as Complan, Glucon-D, Nycil and Sampriti.

Literature Review: Distribution plays an important role in all organizations, due to globalization many companies entered into now economies. Title-1: CREATING A DISTRIBUTION ADVANTAGE IN INDIA S0urce:www.bcg.com/ / Creating Distribution Advantage in Indi a May07 Authors: Vikram bhalla, Abheeksinghi, Sharad varma. India has became worlds largest markets for consumer goods. The countrys market for consumer durables stood at $4.8billion in 2005, it is going to be expecting $ 9.7 billion by 2010. India is attracting attention of consumer companies around the around the world. The consumer durable stood at $4.8billion in 2005, is expected to grow $9.7billion by 2010.Appearal,at$20billion in 2005,is expected to grow to more than $9.7 billion by 2010.Apparel,at$20 billion in 2005,is expected to grow approximately 18%per year, around 46 billion. The overall retail market worth more than $230 billion in 20005 and growing 6%per year, is projected to reach almost$308 billion by2010. Due to fast growing of retail sector, India has been host to consumer multinational companies for several decades. Indeed, quite a few Indians think of Unilever, Nestle &Philips electronics as Indian companies. Still India is relatively new territory with a number of inter related factors that make distribution channel challenging. Retailing density with more than 12billion retail outlets, India has highest retailing densities in the world.

Channel Intermediaries: Most distribution models India involve many inter me diaries between companies and their retailers. Other distribution involves both retailers and Wholesalers are served directly by the manufacturer. Infrastructure complexity. In India only few full service distribution companies operates. Example: a soap manufacturers do manufacturing in India where it is cheaper ,first shipment is stored in C&f agent at a ware house next it is transported to district head quarters, later it is transported to village retailers, the village retailers buys few packs from wholesalers. Distribution in India varies in number of layers. Choosing right distribution and managing channels carefully are key succeeding Indias complex retail environment. Plan to have more than 1 distribution model for different segments or regions.

Objective and scope of the Research:

OBJECTIVE AND SCOPE OF THE PROJECT Submit Business Plan for Sales & Distribution in Heinz for competitive advantage in 1. Distribution 2. Rapid Business Growth 3. Enhanced Sales Productivity

To conduct the following Analysis for Arriving at the Business Plan. 1. Evaluate Current Distribution Model of Heinz across channels and across town class. 2. Compare Heinz Model with other players in the category/ Competition/ other industries. 3. Understand various Channel Partners and their role and evaluate their current performance. 4. Understand the role of the sales team position (DSR) in driving the sales/distribution and evaluate their current productivity. 5. Conduct SWOT Analysis of Present S&D Model of Heinz.

Scope:

The research is done with in the boundaries of Pune.

The operational scope is limited to distribution channel of various companies in Pune.

Research Methodology: The research design is descriptive in nature. The universe consists of all the Retailers Of Pune. Here each retailer was considered as a sample unit of the study. Sample selection was based on convenience Sampling (Nonprobability sampling). Considering the time and resource constraints only 492 retailers were finally selected as the sample. The Sampling Technique used is Convenience Sampling (Non-probability sampling).The tool used for data collection is questionnaire and personal interview method. A survey was conducted to evaluate the Current Sales and Distribution Channel Of Heinz. Primary data used for the current study has been collected through the survey method by using the self-structured questionnaire consisting of close ended questions. The questionnaire consists of two sections: First section deals with the personal information of the retailers & the about their retail outlet . Second section deals with the questions related to Distributors Service.

Data Analysis: Qno1 What is the number of each of the types of outlet visited?

Outlet Type Medical shop Super Markets Total

Number 217 275 492

Qno2. Do you sell Heinz Product? Yes No

Out of 492 outlet surveyed: 72% i.e. 355 were selling Heinz Products. And 28% i.e 137 were not selling Heinz Products.

Qno3 If no, what is the reason? Lack of Demand Lack of availability If any other, explain Low margin Low Promotional Scheme

The reason Behind not selling of Heinz Products are: 56% i.e. 74 out of the 137 Retailer dont sell because of unavailability. 22% i.e. 31 out 137 say due to Low Promotional schemes 16% i.e. 22 out of 137 say they dont due to Low Margin. And remaining 6% say 9 retailers say they dont sell due to Lack Of Demand.

Qno4 From where you Purchase the Heinz Products? Distributor Wholesaler

Other, If any, Please mention: _________________________

75% i.e. 267 Retailers make purchases from Distributor. And 25% i.e 88% Retailers purchase stock from Wholeseler.

Qno5 What is the frequency of DSR visit? Once in a week More than 10 days Twice in a Week Dont come.

182 retailers had said that the DSR visit once in a Week. 22 retailers had said the DSR visit Twice in a week 123 retailers had said the DSR come after 10 days. And 165 retailers had said DSR dont come to their outlets.

Qno6 Are you satisfied with the current service of the Distributor? Yes No

269 out of 492 had siad they are satisfied with the service of the distributor. where as 223 had said they are not satisfied with the service of the distributor.

Qno.7 COMPARISION OF CURRENT MODEL WITH OTHER PLAYERS IN THE CATEGORY:

POPULATION OF PUNE IS: 35,08,529 COMPANY HEINZ NESTLE DABUR CADBURY GSK R&B KALLOGS NUMBER OF RETAIL OUTLET 2450 13,745 11,000 8,500 5,000 5,500 4,000 POPULATION/OUTLET 1432 255 318 413 702 638 877

The above table shows the number of Retail Outlets of the respective companies as well as the 1 outlet for how much population. Example: The total number of Outlets selling Heinz Products in Pune is 2450, and the Population of Pune is 3,508,329, so for 1432 people of Pune , Heinz has one outlet and similar for all.

Qno9 ON THE BASIS OF SERVICE:

COMPANY HEINZ NESTLE DABUR

NUMBER OF RT OUTLETS 2,450 13,745 11,000

NUMBER OF RT. DISTRIBUTOR 3 7 7

AVERAGE OUTLET/DISTRIBUTOR 817 1,964 1572

NUMBER OF DSR 11 50 48

AVERAGE OUTLET/DSR 223 275 230

CADBURY GSK R&B KALLOGS

8,500 5,000 5,500 4,000

7 2 8 6

1214 2,500 688 667

40 22 31 18

213 227 177 222

The above Table shows, the average number of outlets each Distributor is serving as well average number of Outlets which DSR has to cover in 1 WEEK. Example : One Distributor of Heinz is serving on an average 817 outlets. Also Each DSR has to cover 223 outlets on an average in a week.

Qno.10 BASIS OF PERFORMANCE OF DSR:

NAME OF THE DSR LAXMAN DEEPAK KUCHEKAR MAHENDRA PATODAR SABBIR

BEAT NAME CHAMP2 KOTHRUD WADGAON SHERI HADAPSAR3 SALUNKI VIHAR KARVE NAGAR

OUTLETS IN THE BEAT 33 32 47 31 36 44

TOTAL CALLS 32 24 30 31 29 30

EFFECTIVE CALLS 29 22 25 27 19 22

PRODUCTIVITY 87% 68% 53% 87% 52% 50%

It is clear from the above table that, in a beat where the number of OUTLET is more than 35, the productivity is very low as compared to areas having outlets up to 30.

Qno20 ON THE BASIS OF SALARY: COMANY NESTLE DABUR CADBURY GSK R&B KALLOGS HEINZ 5,500-6,500 5,000 5,500-7,500 5,500 DSR'S SALARY 6,000 - 14,000 10,000 7,000

Heinz is paying lowest salary to its DSR as compared to other players in the market.

Findings:

The main reason behind not selling of Heinz Product is Lack of Availability of Products. 28% Outlets among the Target Outlets are still not selling Heinz Products. 75% of the outlets purchase stock from Distributor .

34% of the retailer say DSR dont come to their outlets. Number of outlets of Cadbury and GSk are 3.5 times and 2 time respectively more than Heinz in Pune. . Productivity is Low in the Beats where outlets are more than 35. Heinz is paying lowest salary to its DSR as compared to other players in the market. DSR are not satisfied with their current salary.

The average calls attended by DSR per Day is25-30.

Suggestions and Recommendations:

A Scientific Approach to Beat Restructuring

With the help of each DSR outlets of Pune were mapped online in order to find out uncovered areas and restructure beats in the following way:

1) A new DSR can be ideally deployed in the pockets not serviced by the current DSRs.

As marked in the above diagram the black squares show the pocked ideal to deploy new DSRs. (The blue place marks show each outlet and the blue boundaries show beat region)

2) It is ideal to have 40 outlets per beat so that the DSR can service the beat properly, In order to decide which
outlets would be best suitable , the maps help in the following way:

The upper beat has 44 outlets and the lower beats have 33 outlets, in order to optimize the number the shops from the upper bear marked in the black square can be included in the lower beat.

3) Further Shops which are ideal for Displays and Promotions which will give maximum visibility can be identified. As shown in the image below the shop at near Railway Station is readily identified with the Map.

B Time motion study of DSR Capturing the time data for the market visit it has been found that: Average time taken for a call by DSR (per outlet): 5 mins. To cover 40 outlets a minimum of 4 hours is required (3.5 hours + 0.5 hours of travelling) DSRs mostly start the markets by 10:30 am and shops start to close by 2:00 pm, hence with only 3.5 hours, only 2833 shops are covered. This brings down the effective coverage to only 83%. It was observed that on an average 23-25 productive calls were made per beat. Recommendations for ensuring effective coverage At the end of the day each DSR sends an SMS stating the number of call made and the number of productive calls. At end of each day knowing that 33 calls are sufficient to make 25 productive calls ,a DSR can be tracked for effective coverage

C Use of parallel software A DSR bills the order at the end of the day in IRIS. A print of the bill is taken and then a load is taken out from another software at the distributor point. At points where the load is generated by DSRs, due to unavailability of operator who takes out the load, it in turn affects the productivity of the DSRs since the load generation takes a long time. This in turn makes the DSRs to make lesser number of call so that they have lesser number of orders for load generation. Recommendation for parallel software The Distributor should be convinced to have an operator who would be doing the load for all the bills, this was done in Pune and issue of the DSRs was addressed.

D Use of Product Catalogue and Service Register It was observed that most of the DSRs were not using the Product Catalogue, the SKUs are normally just called out and the order is taken. More often some of the SKUs are not called and also the Brand recall amongst the retailer is affected. This affects LBPC. Recommendation for Product Catalogue and Service Register During the visit with DSR it has to be ensured that the register and product catalogue are used, at the end of the call calculating LBPC and the productivity should be used to convince the regular use of catalogues and registers.

Limitations: 1 The sample size is Limited to only 492 outlets and also Outlets are chosen randomly. 2 While doing my tasks assigned to me in my internship practice I faced the following limitations: Time was the main constraint for me being very short. Some customers have not given proper information. Some customers were not interested to give any kind of information. Behaviour of some was very variant. Some shopkeepers were very busy too so I couldnt visited them. The other companies information provided by respective company person might not be exact.

References:

Websites Referred www.heinz.co.in www.google.com www.gpi.com www.marketportfolio.com

Books

Kothari,C.R Research methodology Methods and techniques. New Delhi: Wiley Eastern Ltd.,1991. Aaker,Kumar and Day Market Research .New Delhi :Wiley Dreamtech.,2006.

Other references: H.J Heinz India Pvt. Ltd. manual.