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Study of Sales and Distribution

Channel of Marico

Group C6
Avishek Nayak 11P188
Henna 11P194
Prateek Maheshwari 11P211
Vaibhav Sharma 11P235
Vikram Agrawal 11P237
Marico (Company Overview)
One of the India's leading Consumer Products & Services companies in the beauty
and wellness space

During 2010-11
Turnover of USD $ 695
Revenue grew by 17%
Volume grew by 11%
Higher growth rate in rural market, share of rural sales revenues increased to 30%

Every year 70 Million Mario Consumer Products packs reaches 130 Million
consumers across 23 Million households, through its distribution network of more
than 3.5 Million outlets in India

Portfolio includes
Parachute Advanced Set Wet
Saffola Livon
Hair & Care Zatak
Nihar Manjal
Mediker Revive
Companys Distribution Channel
Companys Distribution Channel
(Contd..)
Manufacturer
Products are moved from 7 company
manufacturing units to depots in each state
Number of depots in each state is determined by
size of state. For example, Maharashtra and Uttar
Pradesh have multiple depots to cater the
demand of whole state.
ASM sits at Depot and handles the operations
Also helps in evading taxes on movement of
Marico goods from one state to another
Companys Distribution Channel
(Contd..)
From depots goods are transported to distributor across
various districts

Parameters taken into consideration while appointing


distributors
Market Dynamics: Number of distributor in each district depends upon
size of market and number of outlet each distributor is required to
cater
Financial Factors: Depending upon availability of financially strong
distributor and his risk taking capacity, an independent or share
distributor is appointed. Only those shared distributors are selected
which does not stock products of competing brands

Big markets like Hyderabad, Delhi and Mumbai might have


multiple independent dealers while tier 2 and tier 3 towns
might have shared distributors
Companys Distribution Channel
(Contd..)
Retailer
Stock is moved from distributor to retailer
Company does not select counter where Marico
product would be placed
Follow a policy of intensive distribution
Products are sole to consumers, forming fourth
and final level of distribution channel
Sales Force

Area Sales
Manager (ASM)

Territory Sales Territory Sales Territory Sales


Officer (TSO) Officer (TSO) Officer (TSO)

Distributor Sales Distributor Sales Distributor Sales Distributor Sales Distributor Sales Distributor Sales
Representative Representative Representative Representative Representative Representative
(DSR) (DSR) (DSR) (DSR) (DSR) (DSR)
Sales Force (Contd.)
Salesman are known as Distributor Sales
Representatives, they are on company payroll
and incentivized by Marico itself
Their targets and daily beats are set by
Territory Sales Officer (TSO)
TSO deals with distributors on daily basis,
address their concerns and report to Area
Sales Manager.
Distribution Channel in Rural Area
The rural channel is 5 level channel market
Wholesaler is added between distributor and
retailer to cater the largely the segregated market
The Stock is moved from the Company Depot to
the Super distributor from where it is moved to
the Wholesaler who delivers the goods to the
retailer
The wholesaler is appointed by company itself
and it caters to a cluster of village
This helps in increasing penetration and also its
cost effetive
Sales Force
Area Sales
Manager
(ASM)

Territory Sales Territory Sales


Executive Executive
(TSE) (TSE)

Independent Sales Independent Sales


Representative Representative
(ISR) (ISR)

Pilot Sales Pilot Sales


Representative Representative
(PSR) (PSR)
Sales Force (Contd.)
The salesmen in this case are employed by the
company at the wholesaler location and are
known as Pilot Sales Representatives (PSR)
PSR reports to the Independent Sales
Representatives (ISR) stationed at the wholesaler
location
These ISRs report to the Territory Sales
Representatives at Super Distributor Location
The sales force is incentivized similar to the one
in the urban setting.
Trade Promotion
Margins
In urban areas Marico gives a margin of 5% to its
distributor and 10% to its retailer
Margins are in line with that of Industry Standards
Marico never increases margins, instead it plays on
schemes on trade promotion which are volume and
SKUs bases
The scheme passed on to distributor is known as
Primary Scheme, to Retailer is known as Secondary
Scheme and to Customer as Tertiary Scheme
In rural area Marico gives a margin of 7% to its super
distributor, 3% to its wholesaler and 5% to retailer
Trade Promotion (Contd.)
Credit Policy
Marico gives credit of 30 45 days to its
distributor
Retailer gets credit only for 1-2days
The restocking at retailer is either once in a week
or fortnight depending upon the area
Modern Trade
The Modern Trade are big retail chains as
volume purchase by such stores is very high
These are handled by Key Accounts Managers
The price and margins are different from
those given to the other small distributors and
retailers
The transfer of stock takes place directly from
the Depot to the Store location
Issues
Issue 1:
In past, company has launched products offering lower margins for the channel members. Also, the
company did not focus much on promoting these products. Distributors were not happy with this
approach of the company.
Recommendation:
Promote new products in a better way
Offer trade promotions on new and premium products

Rationale:
Since these are the premium brands of the company, the company needs to create pull for these
products. Promotion has to be effective to ensure that awareness is created about the product.

Problems Company may face:


Investment required for carrying out the above suggested measures might not result in expected
returns

Suggestive measures to tackle:


Marico can go for a pilot run in a specific region and carry out the above listed measures. The
company will be in a better position to assess the risks and benefits associated with implementing
these measures after the pilot run.
Issue 2:
Modern trade conflict with retailer: Modern trade consists of multi-brand retailers like Big Bazaar,
Reliance Fresh and Spencers which are able to avail greater margins due to their bulk buying from the
Depot. They bypass the distributor and hence are able to get the products at a much cheaper price. This
may lead to conflicts between retailer channel and the Modern trade channel due to the price
differences.
Recommendation:
Offer schemes to retailers.

Rationale:
Modern trade is growing in India at a fast pace, especially in urban channels. With the possibility of
FDI in multi-brand retail being allowed in India anytime soon, Modern Trade just cant be ignored
and these big retailers will continue to use their bargaining power to extract discounts from the
FMCG companies. However, retailer channel will continue to be a very important channel in future in
the Indian context. So in this situation when Marico cant afford to antagonize any of these channels,
a possible solution could be to offer more schemes to the retailers so that they dont feel that they
are at a disadvantageous position

Problems Company may face:


If the schemes will be available only at the retailers and not at the Modern trade outlets, it may
create an inconsistent image in the minds of the consumer

Suggestive Measures to tackle:


Company should send DSRs to modern trade stores as customers to enquire about the real prices
they are offering
Issue 3
Theft problem in rural areas: There is a serious problem of theft in rural areas. By the time the stock
reaches the retailer, a number of SKUs go missing. Company has taken action against distributors if
problem persists. But, in general, company has to pay for the theft
Recommendation:
At the time of renewal of contract with the distributors, put the clause of joint liability in case of
theft

Rationale:
Theft is a serious problem and should be dealt with seriously. Making the distributors jointly liable
for the theft will make them responsible and would reduce the occurrence of such cases. This step
would force distributors to act to identify the gaps and do the necessary

Problems Company may face:


This can deter new distributors from joining the company if theft cases are rampant and difficult to
stop. This can turn good distributors to the rival firms.

Suggestive Measures to tackle:


It can be dealt on case to case basis. If theft cases are very rampant and there is nothing much a
distributor can do to stop it, Marico shouldnt urge for the joint liability. However, if there is a scope
of action by the distributor to reduce such cases, company should push for joint liability contract
Issue 4:
Similar packaging; local brands: Similar looking brands are available in the retail shops with same
packaging. Company is facing difficulty in stopping the availability of such products in the same retail
shops. Since most of the times these brands are cheaper, sales takes beating
Recommendation:
Marico should try to come up with new and innovative packaging which is difficult to imitate
regularly.
Use advertising at the retail outlets to make the consumers aware about the quality of Maricos
products and packaging of the Marico product.
Rationale:
Innovative packaging which is difficult to imitate will restrict this practice. Also, the private labels
would require time to come up with similar looking packaging
It is difficult to stop the distribution of similar packaged private brands since they offer competitive
margins to the retailers. A reasonable way can be to use posters and banners at the retail outlets to
make the consumer aware about the quality of the products

Problems Company may face:


Cost of modifying the packaging regularly might be greater than the losses incurred due to
counterfeit products.
Retailers might not agree to put such posters on their shops since it will reduce the incentives they
are getting from selling these private labels.

Suggestive Measures to tackle:


Do proper cost-benefit analysis before modifying the packaging.
Try to persuade the retailers about the importance of communicating the new packaging to the
consumers, which is required for sales volumes to grow
Issue 5:
Distributor doesnt take feedback from the retailers and the company is not taking
feedback from the distributors frequently. So, there is a one way information flow.
(Courtesy: Sharma Traders, Delhi)
Recommendation:
Ensure that there is a two way information flow in the channel. DSRs should get
information regarding market realities from the distributors proactively.

Rationale:
Since the company needs to be aware about the market realities, trends and what
the competitors are doing, information flow is critical and the above suggested
measure should be implemented.

Problems Company may face:


None
Suggestive Measures to tackle:
None
Issue 6:
Company complains that payment realization takes more effort and a long time from the
distributors side. This may be because of varying financial condition of different distributors. This
poses a challenge to the company of choosing channel members properly. (Courtesy: TSO for
Century Industries, Delhi)
Recommendation:
Set a credit limit of each of the distributor depending upon their credibility

Rationale:
This exercise will reduce the risks associated with extending the credit facility

Problems Company may face:


This quantifying exercise is difficult and subjective.

Suggestive Measures to tackle:


Past transaction records of the distributors should be available with the company to carry out
this quantifying exercise successfully.
Issue 7:
Inter-state and Inter- channel arbitrage rampant, especially in Rajasthan.
Recommendation:
Clearly define territories.
Put labels manifesting the price of sale for different regions.

Rationale:
It will specify different price for the same product in different areas which will legally
restrict arbitrage.

Problems Company may face:


None
Suggestive Measures to tackle:
None
Thank You