Sample-Namkeen Report Group 2

CHIPS AND NAMKEEN INDUSTRY
INFINITY BUSINESS SCHOOL
(2013)
Page 1
TABLE OF CONTENTS
PREFACE
ii
EXECUTIVE SUMMARY
iii
Chapter 1: Industry overview
1.1 What are Fast Moving Consumer Goods (FMCG)?

1.2 Indian FMCG Sector
1.3 The Top 10 Companies In FMCG Sector
Chapter 2: Key Players
2.1 FRITOLAY
2.1.1 Major Brands
2.1.2 Manufacturing units
2.1.3 Distribution channel
2.1.4 Margins
2.1.5 No of Distributors in Gurgaon
2.1.6 Territory
2.1.7 Targets and Incentives for Anchor Sales Corp
2.1.8 Market coverage
2.1.9 Inventory Holding
Page 2
2.1.10 Market Credit
2.2 HALDIRAM
10
2.2.1 Major Brands

2.2.2 Manufacturing Units
2.2.3 Distribution Channel in Gurgaon
2.2.4 Margins
2.2.6 Territory
2.2.7 Target and Incentives
2.2.8 Market Coverage
2.2.10 Credit
Chapter 3 : Types of channels
18
3.1 A channel of distribution consists of three types of flows

3.2 Channels of distribution are broadly divided into four types
3.3 Cosiderations while choosing a distribution Channel
Page 3
Chapter 4: Importance of Distribution channel
25
Chapter 5: Alternate channels of distribution
28
Chapter 6: Channel Conflict
37
6.1 Types of conflicts

Chapter 7: Terms of Trade
41
References
iv
Page 4
PREFACE
For the purpose of this project we have chosen Fritolay and Haldiram as our
representatives for the Namkeen and chips industry. We have studied and
discussed the distribution channel and market coverage of both these companies.
To collect data we chose the method of primary and secondary data collection.
We personally met and interviewed ASM Gurgaon of Haldiram , SO Gurgaon of
Lays, Fritolay distributor Mr Sanjay Punia (Anchor Sales Corp) and Haldiram
Distributor Mrsanjay (PS enterprises).
This project also contains a detailed discussion around types of distribution
channels, major considerations while choosing a distribution channel, channel
conflicts and Role and importance of channel members.
Page 5
EXECUTIVE SUMMARY
The FMCG industry in India is Growing pie and all the major players have grown
in leaps and bounds owing a growth in the industry itself. The rising middle class
population in India, low per capita consumption, rising income levels and
increased exposure lay the perfect ground for FMCG industry growth.
For the purpose of this project we have chosen to Analyse the Namkeen and Chips
industry. We have taken two major players that is, Fritolay and Haldiram as
representatives of the industry. FritoLay has brands like Lays chips, Uncle Chips,
Leher, Kurkure, Aliva and Cheetos under its umbrella. Haldiram too is rising giant
in the namkeen and chips industry, specially in north India. This sector also faces
very tough competition from the unorganized sector. There is huge presense of the
unorganized sector in the Namkeen and chips industry.
In this project we have analyzed the Distribution channel and market coverage
models, beat plans, targets and incentives and stock holding and credit norms of
both companies. Also we have discussed about of the types of channels available
in the FMCG sector, Alternate channels of Distribution along with their advantages
and disadvantages, considerations while choosing a distribution channel, channel
conflicts and importance of channel members
Page 6
CHAPTER 1
INDUSTRY OVERVIEW
1.1 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.
1.2 Indian FMCG Sector:

The Indian FMCG sector is the fourth largest in the economy and has a market size
of US$13.1 billion. Well-established distribution networks, as well as intense
competition between the organised and unorganised segments are the
characteristics of this sector. FMCG in India has a strong and competitive MNC
presence across the entire value chain. It has been predicted that the FMCG market
will reach to US$ 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
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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.
1.3
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
Cadbury India
Britannia Industries
Procter & Gambler Hygiene and Health Care
Marico Industries
For the purpose of our project however, we restrict ourselves to RTE (Ready to
Eat) snack segment only, that is the Namkeen and Chips Industry. Some major
players in the Industry are fritolay, Haldiram, Bikano, ITC and Perfetti. For our
analysis of the Industry we have chosen Frito Lay with brands like Lays chips,
Cheetos, Kurkure, Leher, Aliva and Uncle chips under its umbrella, and the
Namkeen Giant Haldiram.
Page 8
CHAPTER 2
Key Players
2.1 FRITOLAY
2.1.1Major Brands - Cheetos, Leher, Kurkure, Aliva, Lays, Uncle chips
2.1.2Manufacturing units
Channo village in sangrur, punjab- 4000 tonnes per annum kurkure, lays, cheetos, uncle chips
Ranjangaon Pune - 3000 tonnes per annum-Aliva
Sankrail food park, Kolkata - 50000 tonnes kurkure, lays,
cheetos, uncle chips
Faridabad - Leher
Page 9
2.1.3Distribution channel
Distribution channel
Factory
CFA
(Kundli)
Distributor 2
Distributor 1
On
premise
Retail
wholesale
MT
SS
Page 10
2.1.4Margins
Distributor Margins Retail 5%, SS 4.5%, MT 5.5%, WS 4.5%
Retailer margin- 10% on Kurkure, cheetos, Uncle chips and lays
20% Namkeen in Traditional Trade
10% on Biscuits
2.1.5 No of Distributors in Gurgaon : 2, Anchor Sales Corp, Shiva Sales

2.1.6 Territory : Lays Allocates Distributors in Gurgaon on the basis of Codes.
There are a total of 5 codes.
1. SS
2. Wholesale
3. Modern trade
4. Traditional trade
5. On premise
Anchor Sales Corp 4 codes- SS (Sub stockiest), TT (Traditional Trade), MT

(modern Trade), WS (wholesale)
Page 11
Shiva sales 1 code OP (On Premise)
2.1.7 Targets and Incentives for Anchor Sales Corp

TARGET
City 50Lacs
DLF 43Lacs
Anchor Sales Corp
Wholesale 60Lacs
MT (Modern Trade) 27L
OP (On Premise) 45Lacs
Shiva Sales
INCENTIVE DESIGN FOR ANCHOR SALES CORP

.5% On total Sales
Rs 17 per Carton as expenses subsidy
Page 12
INCENTIVE DESIGN FOR SALESMEN

Basic Rs 7500
On completion of monthly target 4000
TLSD (total lines sold) 2500
2% over and above 100% of basic target
2.1.8 Market coverage For the purpose of market coverage in Traditional Trade,
Gurgaon has been divided into two categories, that are, DLF and City. Separate
Beat Plans are designed for DLF and City and there is a separate sales force for
both regions. Anchor sales corp has a total of 4 Codes which are divided into 17
routes. The company norms require them to keep one salesperson per route. The
method that they use to cover the markets is that of OB (order Booking) with stock
being delivered next day. There is no RSU (Ready stock Unit)
BELOW ARE THE BEAT PLANS ATTACHED OF ANCHOR SALES CORP
FOR GURGAON (DLF&CITY) FOR ALL 4 CODES.
Page 13
PSR NAME
Kartar
MONDAY
Phase 3-31
TUESDAY
Sushant Lok -24
WEDNESDAY
Phase 3-31
Tyagi
Qutub Plaza Sec 56-27
Sohna Road -31
Qutub Plaza Sec 56-27
Subhash
Raghav
Sonu
Sec 31/40/45/46-29
Chakarpur 1-22
Sushant Lok 2-18
Sec 31/40/45/46-29
Chakarpur 1-55
Sushant Lok 2-18
Girij
Sikanderpur -20
South City 2-23

Chakarpur 2-33
South City 1-26
Wazirabad,Ardee
City -33
PSR NAME
Kartar
THURSDAY
Sushant Lok -24
SATURDAY
Sushant Lok -24
Tyagi
Sohna Road -24
FRIDAY
Phase 3-31
Qutub Plaza, Sec 5627
Subhash
South City 2-23
Sec 31/40/45/46-29
South City 2-23
Raghav
Sonu
Girij
Sikanderpur -20
Sohna Road -24
Phase 3, Suncity, Sec

Phase 3, Part 2-21
Suncity , Sec 52-18
52-39
South City 1-26
Sushant Lok 2-18
South City 1-26
Wazirabad, Ardee City
Wazirabad, Ardee City
Sikanderpur- 20
-33
-33
Page 14
PSR/RSA
Mahaveer (PSR6)
Rohit(PSR7)
MONDAY
Railway Road
Palam Vihar
Pratap (PSR 8)
Sec -15
Mahendra(PSR10)
Sec 4-7 New Colony
Avinash(PSR11)
Shitla Colony
Nandram(PSR 12)
Rajendra Park 2
TUESDAY
Sec -14,17
Sec -21,22,23
Jaikum Pura,Nai
Basti, Shivaji Nagar
Basai Road
Patel Nagar, Gandhi
Nagar, Hira Nagar
Rajiv Nagar 1
Dilip (RSA2)
Dunda Hera
Kaitar Puri,Gurgaon
Ramniwas (RSA 3)
Gurgaon VLG
New Railway Road,
Sec-5
Laxman Vihar
Rajiv Nagar 2
Dhanwapur,
Daulatabad
Mata Road
Sec 14-17
Sec-15, Kaitar Puri
Pradeep (RSA5)
WEDNESDAY
Sukharali
Vyapar Kendra
Rajeev Nagar
Kadipur Road
Sec-18, Mulaheda
Vivek (RSA 6)
Khandsa Village
Arjun Nagar,
Madanpuri
Basai Road
Praveen (RSA 8)
4/8 Maria
Bhim Nagar,Gurgaon
Village
Jyoti Park, Krishna

Colony
PSR/RSA
Mahaveer (PSR6)
Rohit(PSR7)
Pratap (PSR 8)
THURSDAY
Railway Road
Palam Vihar
Jyoti Park
FRIDAY
Sec -14,17
Sec -21,22,23
Krishna Colony
Mahendra(PSR10)
Sec 4-7 New Colony
Sec 9-10, Khandsa
SATURDAY
Sukharali
Vyapar Kendra
Madanpur
4/8 Maria, Old
Railway Road
Udyog Vihar
Sec 18, Udyog Vihar,
Mulaheda
Rajendra Park 2
Pratap Nagar 2
Vyapar Kendra
Sec 4-7, New Colony
Avinash(PSR11)
Khandsa Village
Ashok Vihar
Aadarsh
Nandram(PSR 12)
Rajendra Park 1
Nagar,Jaikampura
Dilip (RSA2)
Rajendra Park 1
Saroi Gaon
Ramniwas (RSA 3)
Palam Road
Pratap Nagar
Pradeep (RSA5)
Sec -21,22,23
Sukhrali
Vivek (RSA 6)
Palam Road
Kadipur Road
Hira Nagar, Patel
Shitla Colony, Mata
Praveen (RSA 8) Nagar, Ghandhi Nagar,
Road
NH-8
Jaikum Pura, Nai

Basti, Shivaji Nagar
Page 15
2.1.9 Inventory Holding The requires the distributors to hold 1 week stock at
any given time. For example in case of Anchor Sales Corp, Monthly Turnover is 2
Cr and their average stock holding is Rs 50Lac, that is 1 week inventory holding.
2.1.10 Market Credit The company suggests the Distributors to extend 25% of
their Monthly TO in the form of market credit, bulk of which goes to Modern
Trade.
Page 16
2.2 HALDIRAM
2.2.1 Major Brands
AluBhujia
We
offer AluBhujia of
following
Packet
sizes
in
gms/mrp.
20gm/5.00
40gm/10.00
150gm/30.00
Moong Dal
We offer Moong Dal in Packet sizes having gms/mrp
as below:
20gm/5.00
40gm/10.00
150gm/30.00
Page 17
BhujiaSev
We offer BhujiaSev of following
gms/mrp.
Packet
sizes in
20gm/5.00
40gm/10.00
150gm/30.00
KhattaMeetha
We offer KhattaMeetha of following Packet sizes in
gms/mrp.
30gm/5.00
60gm/10.00
150gm/24.00
Page 18
Mixture Namkeen
We
are
providers
of Haldiram's
Mixture
Namkeen. The Mixture Namkeen is known for its
quality spiciness. These Mixture Namkeens are made
from
best
ingredients.
PhalhariChiwda
We
offer
qualitative Haldiram'sPhalhariChiwda that
a
are
very much demanding in the market. This product is

known for its taste and quality.
Page 19
Pancharatan Mixture
We offer Haldiram'sPanchratan Mixture which is
known for its taste and quality. HaldiramPanchratan
Mixture is made of different ingredients which add
extra taste to the snack. It is mostly liked by children
because it has both sweet and sour flavor in it.
Page 20
2.2.2 Manufacturing Units NOIDA 63, NOIDA 67, Manesar

2.2.3 Distribution Channel in
Gurgaon
Distribution channel (High Value

Manesar
Packs)
Factory
CFA
(Mohammad
pur)
Distributor 1
PS
enterprises
Distributor
2
Shiv Shakti
Wholesale,
Retail OUTER
Wholesale,
Retail OUTER
2.2.4 Margins
Distributor
3
Shree
Ganesh
MT
(Modern
Trade),
SAMT
Distributor Margin 6% in High Value Pack Namkeens, 7% in Low Value Packs

Wholesaler margin 3%
Retailer margin 12-15% in High Value Packs, 20-23% in Low Value packs
Page 21

High Value Packs 3 Distributors
PS enterprises High Value packs in TT(traditional trade) and wholesale for Outer
Gurgaon (left side of NH8)
Shiv Shakti Sales- High Value Packs for TT(traditional trade) and Whole in Inner
Gurgaon (right side of NH8)
Shree Ganesh Enterprises for MT (Modern Trade) and SAMT (Stand Alone
Modern Trade)
2.2.6 Territory For the purpose of distribution Haldiram has divided Distributor
on the basis of territory and on the basis of Customers. They have different
distributors for Inner (old) Gurgaon and Outer (new) Gurgaon. Also, The company
has different Distributers for Traditional Trade, that is Wholesale & Retail and for
Modern Trade.
2.2.7 Target and Incentives- targets and incentives of salesmen are designed by
the Distributor
BASE TARGET Differs from distributor to distributor depending on the market
potential- 18000 Kgs for PS enterprises (HVP in outer Gurgaon)
Page 22
Uptill 100% ie 18000 kg - .50 Re/Kg

110%
- 1 Re/Kg
115%
- 1.5Rs/Kg
120%
- 2 Rs/Kg
2.2.8 Market Coverage

HIGH VALUE PACKS
PS enterprises Wholesale and Retail in Outer gurgaon
Shiv Shakti wholesale and retail in inner gurgaon
Shree Ganesh enterprises MT (Modern trade) and SAMT (Stand Alone Modern
Trade)
LOW VALUE PACKS
the company has a total of 4 distributors in Gurgaon for low value packs. That is,
different distributors for even wholesale and Retail and for Outer gurgaon and
Inner Gurgaon.
Wholesale Daulat Ram, Ambajee
Retail Ambajee Retail, Mehta Agency
Page 23
BELOW IS THE BEAT PLAN OF PS ENTERPRISES FOR OUTER GURGAON
S.No.
Day's
Route
Monday
South City 2
Tuesday
Jharsa
3
4
5
6
Wednesday
Thursday
Friday
Saturday
DLF 3
M.G. Road
R.D. City
Sec 56
Route
Route
Sohna Road
Nirwana Country
Rajeev Chowk to Khrki Khrki Dhola to
Dhola NH-8 Rajeev Chowk NH-8
DLF 2
Nathupur
Chakkarpur
DLF 1
Sec-46,30
Sec-40,31
Sec 55
Wazirabad
Route
Malibu Town
Hans Enclave
Sikandarpur
Vypar Kendra
South City 1
DLF 5

80% of Turnover of Distributor should be Investment (stock + claims + market
credit)
Out of this 80%, 40% should be stock
Example
If TO = 60L -65Lacs
Total Investment = 60L*80%= 48Lacs
Stock = 48L*40%= 19.20Lacs or 20Lacs
Page 24
2.2.10 Credit- Distributors must extend 20% of their Monthly Turn Over as Credit
in the Market
CHAPTER 3
TYPES OF CHANNELS
A channel of distribution or trade channel is defined as the path or route along
which goods move from producers or manufacturers to ultimate consumers or
industrial users. In other words, it is a distribution network through which producer
puts his products in the market and passes it to the actual users. This channel
consists of :- producers, consumers or users and the various middlemen like
wholesalers,selling agents and retailers(dealers) who intervene between the
producers and consumers. Therefore,the channel serves to bridge the gap between
the point of production and the point of consumption thereby creating time, place
and possession utilities.
3.1A channel of distribution consists of three types of flows:
Downward flow of goods from producers to consumers
Upward flow of cash payments for goods from consumers to producers
Page 25
Flow of marketing information in both downward and upward direction i.e.

Flow of information on new products, new uses of existing products,etc
from producers to consumers. And flow of information in the form of
feedback on the wants,suggestions,complaints,etc from consumers/users to
producers.
A business has a number of alternative channels available to him for distributing

his products. These channels vary in the number and types of middlemen involved.
Some channels are short and directly link producers with customers. Whereas other
channels are long and indirectly link the two through one or more middlemen.
Manufacturers and consumers are two major components of the market.
Intermediaries perform the duty of eliminating the distance between the two. There
is no standardised level which proves that the distance between the two is
eliminated. Based on necessity the help of one or more intermediaries could be
taken and even this is possible that there happens to be no intermediary. Their
description is as follows:
3.2Channels of distribution are broadly divided into four types:
Zero level channel (Producer-Customer):- This is the simplest and shortest

channel in which no middlemen is involved and producers directly sell their
products to the consumers. It is fast and economical channel of distribution.
Under it, the producer or entrepreneur performs all the marketing activities
Page 26
himself and has full control over distribution. A producer may sell directly to
consumers through door-to-door salesmen, direct mail or through his own
retail stores. Big firms adopt this channel to cut distribution costs and to sell
industrial products of high value. Small producers and producers of
perishable commodities also sell directly to local consumers.
One level channel (Producer-Retailer-Customer):- This channel of

distribution involves only one middlemen called 'retailer'. Under it, the
producer sells his product to big retailers (or retailers who buy goods in large
quantities) who in turn sell to the ultimate consumers.This channel relieves
the manufacturer from burden of selling the goods himself and at the same
time gives him control over the process of distribution. This is often suited
for distribution of consumer durables and products of high value.
Two level Channel (Producer-Wholesaler-Retailer-Customer):- This is the

most common and traditional channel of distribution. Under it, two
middlemen i.e. wholesalers and retailers are involved. Here, the producer
sells his product to wholesalers, who in turn sell it to retailers. And retailers
finally sell the product to the ultimate consumers. This channel is suitable
for the producers having limited finance, narrow product line and who
needed expert services and promotional support of wholesalers. This is
mostly used for the products with widely scattered market.
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Three Level/Multi Level Channel (Producer-Agent-Wholesaler-RetailerCustomer):- This is the longest channel of distribution in which three
middlemen are involved. This is used when the producer wants to be fully
relieved of the problem of distribution and thus hands over his entire output
to the selling agents. The agents distribute the product among a few
wholesalers. Each wholesaler distribute the product among a number of
retailers who finally sell it to the ultimate consumers. This channel is
suitable for wider distribution of various industrial products.
3.3 Cosiderations while choosing a distribution Channel

A business has to choose a suitable channel of distribution for his product such that
the channel chosen is flexible,effective and consistent with the declared marketing
policies and programmes of the firm. While selecting a distribution channel, the
entrepreneur should compare the costs,sales volume and profits expected from
alternative channels of distribution and take into account the following factors:1. Product Consideration:- The type and the nature of products
manufactured is one of the important elements in choosing the
distribution channel. The major product related factors are:
Products of low unit value and of common use are generally sold
through middlemen. Whereas,expensive consumer goods and
industrial products are sold directly by the producer himself.
Perishable products; products subjected to frequent changes in fashion

or style as well as heavy and bulky products follow relatively shorter
routes and are generally distributed directly to minimise costs.
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Industrial products requiring demonstration, installation and aftersale

service are often sold directly to the consumers. While the consumer
products of technical nature are generally sold through retailers.
An entrepreneur producing a wide range of products may find it

economical to set up his own retail outlets and sell directly to the
consumers. On the other hand, firms producing a narrow range of
products may their products distribute through wholesalers and
retailers.
A new product needs greater promotional efforts in the initial stages

and hence few middlemen may be required.
2. Market Consideration:- Another important factor influencing the

choice of distribution channel is the nature of the target market. Some
of the important features in this respect are:
If the market for the product is meant for industrial users, the channel
of distribution will not need any middlemen because they buy the
product in large quantities. short one and may as they buy in a large
quantity. While in the case of the goods meant for domestic
consumers, middlemen may have to be involved.
If the number of prospective customers is small or the market for the

product is geographically located in a limited area, direct selling is
more suitable. While in case of a large number of potential customers,
use of middlemen becomes necessary.
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If the customers place order for the product in big lots, direct selling is
preferred. But,if the product is sold in small quantities, middlemen are
used to distribute such products.
3. Other Considerations:- There are several other factors that an

entrepreneur must take into account while choosing a distribution
channel. Some of these are as follows:
A new business firm may need to involve one or more middlemen in

order to promote its product, while a well established firm with a good
market standing may sell its product directly to the consumers.
A small firm which cannot invest in setting up its own distribution

network has to depend on middlemen for selling its product. On the
other hand, a large firm can establish its own retail outlets.
The distribution costs of each channel is also an important factor

because it affects the price of the final product. Generally,a less
expensive channel is preferred. But sometimes, a channel which is
more convenient to the customers is preferred even if it is more
expensive.
If the demand for the product is high,more number of channels may

be used to profitably distribute the product to maximum number of
customers. But, if the demand is low only a few channels would be
sufficient.
The nature and the type of the middlemen required by the firm and its
availability also affects the choice of the distribution channel. A
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company prefers a middlemen who can maximise the volume of sales

of their product and also offers other services like storage, promotion
as well as aftersale services. When the desired type of middlemen are
not available, the manufacturer will have to establish his own
distribution network.
Page 31
CHAPTER 4
IMPORTANCE OF DISTRIBUTION CHANNEL

The primary purpose of any channel of distribution is to bridge the gap between
the producer of a product and the user of it, whether the parties are located in the
same community or in different countries thousands of miles apart. The channel of
distribution is defined as the most efficient and effective manner in which to place
a product into the hands of the customer. The channel is composed of different
institutions that facilitate the transaction and the physical exchange. A channel
performs three important functions. Not all channel members perform the same
function. The functions are:
Transactional functions: buying, selling, and risk assumption
Logistical functions: assembly, storage, sorting, and transportation
Facilitating functions: post-purchase service and maintenance, information

dissemination, and channel coordination or leadership
Time, Place and possession utilities
Cost Savings in Specialization Members of the distribution channel are
specialists in what they do and can often perform tasks better and at lower
cost than companies who do not have distribution experience. Marketers
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attempting to handle too many aspects of distribution may end up exhausting

company resources as they learn how to distribute, resulting in the company
being a jack of all trades but master of none.
Reduce Exchange Time Not only are channel members able to reduce
distribution costs by being experienced at what they do, they often perform
their job more rapidly resulting in faster product delivery.
Promotion: Marketing intermediaries attract customers and persuade them
to buy goods and services. These intermediaries undertake sales promotion
activities through media and personal contacts.
Negotiation: Intermediaries or middlemen negotiate prices and other terms
and conditions between buyer and seller. No sale can take place without an
agreement on prices and other terms and conditions.
Information: Middlemen collect information about demand, competition,
etc., from consumers and pass on to manufacturers. They also provide
information to consumers about new products, changes in design, style,
prices, etc., of existing products.
Ordering: Intermediaries collect small orders from consumers and on that
basis place large orders with manufacturers.
Physical possession: Middlemen take possession of goods from producers
and pass on possession to consumers.
Transfer of title: Middlemen transfer ownership of goods from producers to
consumers.
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Financing: Intermediaries provide financial, assistances at different stages

of the marketing channel. They buy goods in cash from producers and sell
them to consumers on credit.
Risk taking: Intermediaries assume most of the risks involved in the
distribution of goods. They relieve producers from these risks and enable
them to concentrate on production.
Page 34
CHAPTER 5
ALTERNATE CHANNELS OF DISTRIBUTION
1.
Direct Distribution--Personal Selling
2.
Direct Distribution--Internet
3.
Direct Distribution--Telephone
4.
Direct Distribution--Mail
5.
Indirect Distribution--Retailers
6.
Indirect Distribution--Agents/Brokers/Reps
7.
Indirect Distribution--Distributors
DIRECT DISTRIBUTION--PERSONAL SELLING
POSITIVES
Personal, CRM
They have a relationship with the customer
Customer knowledge, esp. key customers
Better/expert/technical product knowledge
Loyalty, pride in company/product
better control
Very focused/total mind share
Possibly high ROI
Repeat business
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Can offer service
Control brand image, positioning
Faster communications
NEGATIVES
Very expensive, not suitable for most goods/services or for most customers
Limited coverage
Limited network
Salesman can leave with the business
Lacks overview
Might focus on incentives and bonus and not customer satisfaction
Cannot call on large customer base
Big commitment to recruiting and training
Large territories may limit contact
DIRECT DISTRIBUTION--INTERNET
POSITIVES
Low cost, overhead
Higher profit potential
Instantly global if desired, wide exposure
Always current
Can target segments
Instant access for the customer, convenient
Easy to use
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Can be cross-sold by other sites
Can obtain high visibility on right sites
Open 24/7/365
Good source of customer feedback/research
Better measurability and better security
Less data entry error
Free customer information
Cookies help you reach out to target customers and convert leads
Educates customers
Can be customer friendly
NEGATIVES
Limited audience (not everyone has it or will use it for shopping)
Lack of one-to-one interaction, impersonal
Spamming/laws
Security problems, trust
Over 65 misses the market
Requires a big logistics investment (inventory, warehousing, packing,
shipping, record keeping)
No human contact, not personal
So far limited to price-driven customers
Fear of fraud, ID theft, security
Product limitations
Lack of post-purchase service, returns an issue
May not reach late majority and laggards
Page 37
Cannot touch, feel, smell products, concerns about colors, not tangible
3.DIRECT DISTRIBUTION--TELEPHONE
POSITIVES
Direct contact
Inexpensive
Efficient
Quick
Can reach remote areas
Can be part of a CRM system
Easy
Personal contact
Can be a good source for leads
NEGATIVES
Cold calls
Actually is impersonal
Regulations
Unpopular with customers
Often outsourced, off-shore, comprehension issues
Intrusive
Page 38
Annoying
Unsolicited
Order-taking vs. selling
Poor follow-up
4.DIRECT DISTRIBUTION--MAIL
POSITIVES
Relatively inexpensive
Measurable results
Testable packages
Can reach a large audience
new customer acquisition is difficult
Can be altered segment by segment
Can be personalized
Introduce new products
Offer can foster goodwill
Catalog shopping is engaging
NEGATIVES
Low levels of response rate
Postage costs rising
Targeting may be questionable
Huge wastewill it be opened
Page 39
Low ROI
Not prestigious, negative image, junk mail
May foster emotional backlash
Not environmentally sound in view of growing CSR
INDIRECT DISTRIBUTION--RETAILERS
POSITIVES
Offers wide distribution, size, exposure, no. of outlets, volume. As
consumerbuyssmall quantities of a bundle of products.
Carry our inventory, cost sharing
Offers aggressive marketing, upsell opportunity.
Can offer personal consumer assistance, service
Data rich environment, market research
Create markets by offering clusters of competing brands
Post-sales service, added personal services
Trusted by consumer
Impulse purchase possible, and instant gratification
POP and can cross-merchandise
Assumes some overhead: sales, inventory, promotion
NEGATIVES
Long channellots of work, complexity
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Low level of control by us, they set price
Can be expensive, e.g., slotting, volume return, and promotional
allowances
Can return items that dont sell
Can use us as a loss leader and thus hurt our brand reputation
Also sells our competitors
Store reputation may be neutral or negative
May offer poor customer service
Can be demanding, controlling
High employee turnover
Customer must leave home to buy
We dont know the ultimate customer
Lose control of product presentation
Low margins
INDIRECT DISTRIBUTION--AGENTS/BROKERS/REPS
POSITIVES
Expertise
Broad network
Good relationships with customers
Personal, face-to-face
Pricing and competitive intelligence
Minimal distribution costs
Established channel
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Quick access to market, mores sales people
Regional expertise/location, penetrate markets and channels not covered
Can add sales force quickly, flexibility
They assume some promotional duties
NEGATIVES
Very independent, difficult to control
Expensive commissions
Expensive/difficult to train
Lack of product knowledge/less than captive
Loyalty to their biggest selling lines
No direct customer contact by you. If they leave, you lose the customer
They also represent othersfocus is limited
Less loyalty
Loss of brand image control
No control over their tactics
More sensitive to competitive pricing, customer price pressure
INDIRECT DISTRIBUTION--DISTRIBUTORS
POSITIVES
Focused customer base
Assume financial and inventory risk
Additional sales force
Cover more geography
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Assume final shipping expense
Technically trained
Can offer bundled pricing
NEGATIVES
Carry competitive products, less loyal
Control final pricing
Unmanageable and have own agenda and may result in channel conflicts
Control issues
Added costs
Dont know end-user
No control of product presentation
Training/education costs
Limited product focus
Love--Hate relationship
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CHAPTER 6
CHANNEL CONFLICT
Channel conflict is a situation in which channel partners have to compete against
one another or the vendor's internal sales department. Channel conflict can cost a
company and its partners money as partners try to undercut one another. It can also
lower morale within the channel and cause some partners to consider other
vendors.
Channel conflict may also occur among various segments of corporate
departments, such as the sales channel. For example, the direct contact component
of the sales department may have to compete with other sales channels, such as
telephone, online and mail campaigns.
6.1 Types of conflicts
1.vertical conflicts
2. horizontal conflicts
3. Multi channel conflicts
1.Vertical conflicts
occur due to the differences in goals and objectives, misunderstandings, and
mainly due to the poor communication
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Lack of role clarity and over dependence on the manufacturers. For e.g. Today the
large retailers dominate the market and dictate the terms. Hence there are often
conflicts between these giant retailers and the manufacturers.
Wholesalers expect manufacturers to maintain the product quality and production
schedules and expect retailers to market the products effectively. In turn, retailers
and manufacturers expect wholesalers to provide coordination functional services.
If they fail to conform each others expectations, channel conflict results
Some common areas for vertical conflict are Dual distribution i.e. manufacturers may bypass intermediaries and sell
directly to consumers and thus they compete with the intermediaries.
Over saturation, i.e. manufacturers permit too many intermediaries in a
designated area that can restrict, reduce sales opportunities for individual
dealer and ultimately shrink their profits
Partial treatment, i.e. manufacturers offer different services and margins to
the different channels members even at same level or favor some members.
New channels, i.e. manufacturers develop and use innovative channels that
create threat to establish channel participants.
Stipulation of ordering in advance, high stock holding and dumping the
stock at the intermediaries.
Delays in delivering the products or sometimes dispatching the products
without confirmed order.
Refusal to replace or take back the goods damaged in transit. Non cooperation in replacement of faulty goods, repairing services, and installations
Page 45
No co-operative advertisements. Manufacturers do not share any expenses of

advertisements.
No or inadequate credit offered to the intermediaries. Margins / commissions
are not sufficient and there is no periodic revision of commission and other
terms
2.Horizontal conflicts
Horizontal conflicts are the conflicts between the channel members at the same
level, i.e. two or more retailers, two or more franchisees etc. These conflicts can
offer some positive benefits to the consumers. Competition or a price war between
two dealers or retailers can be in favor of the consumers.
Common reasons for horizontal conflict Price-off by one dealer / retailer can attract more customers of other
retailers.
Aggressive advertising and pricing by one dealer can affect business of other
dealers.
Extra service offered by one dealer / retailer can attract customers of others.
Crossing the assigned territory and selling in other dealers / retailers /
franchises area.
Unethical practices or malpractices of one dealer or retailer can affect other
and spoil the brand image.
3.Multichannel conflict
Page 46
Multi-channel conflict occurs when the manufacturer uses a dual distribution

strategy, i.e. the manufacturer uses two or more channel arrangements to
reach to the same market.
Manufacturers can sell directly through their exclusive showroom or outlets.
This act can affect the business of other channels selling manufacturers
brands.
Manufacturers can bypass the wholesalers and sell directly to the large
retailers. Conflict becomes more intense in this case as the large retailers can
enjoy more customers and so the profit due to offering more variety and still
economical prices, which is possible due to a volume purchase.
Page 47
CHAPTER 7
TERMS OF TRADE
Terms of trade refer to the company norms that the channel members must adhere
to. In the FMCG sector some companies require their distributors or other channel
members to sign terms of trade. This generally happens in case of change of
distributor or appointment of a new distributor. Terms of trade generally pertain to
clauses and norms pertaining to the following
Minimum stock that the distributor must carry at any given point of time
Clauses pertaining to market credit
Sales force strength to be maintained
Minimum infrastructure to be maintained in terms of no. and types of
vehicles and area requirement for the warehouse
Margins and profit structure
Routes assigned to the distributor and geographical territory that comes
under him
Terms of trade also contain the actions that will be taken in terms of penalty
or cancellation of distributorship in case the stated norms are not complied
with.
Page 48

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CHIPS AND NAMKEEN INDUSTRY

CHIPS AND NAMKEEN INDUSTRY

INFINITY BUSINESS SCHOOL

INFINITY BUSINESS SCHOOL

CHIPS AND NAMKEEN INDUSTRY

Chapter 1: Industry overview

1.1 What are Fast Moving Consumer Goods (FMCG)?

Chapter 2: Key Players

CHIPS AND NAMKEEN INDUSTRY

2.1.10 Market Credit

2.2.1 Major Brands

Chapter 3 : Types of channels

3.1 A channel of distribution consists of three types of flows

INFINITY BUSINESS SCHOOL

CHIPS AND NAMKEEN INDUSTRY

Chapter 4: Importance of Distribution channel

Chapter 5: Alternate channels of distribution

Chapter 6: Channel Conflict

6.1 Types of conflicts

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CHIPS AND NAMKEEN INDUSTRY

INFINITY BUSINESS SCHOOL

CHIPS AND NAMKEEN INDUSTRY

INFINITY BUSINESS SCHOOL

CHIPS AND NAMKEEN INDUSTRY

1.2 Indian FMCG Sector:

CHIPS AND NAMKEEN INDUSTRY

THE TOP 10 COMPANIES IN FMCG SECTOR

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CHIPS AND NAMKEEN INDUSTRY

INFINITY BUSINESS SCHOOL

CHIPS AND NAMKEEN INDUSTRY

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CHIPS AND NAMKEEN INDUSTRY

2.1.5 No of Distributors in Gurgaon : 2, Anchor Sales Corp, Shiva Sales

Anchor Sales Corp 4 codes- SS (Sub stockiest), TT (Traditional Trade), MT

CHIPS AND NAMKEEN INDUSTRY

Shiva sales 1 code OP (On Premise)

2.1.7 Targets and Incentives for Anchor Sales Corp

Anchor Sales Corp

INCENTIVE DESIGN FOR ANCHOR SALES CORP

CHIPS AND NAMKEEN INDUSTRY

INCENTIVE DESIGN FOR SALESMEN

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Qutub Plaza Sec 56-27

Sohna Road -31

Qutub Plaza Sec 56-27

South City 2-23

Sohna Road -24

South City 2-23

South City 2-23

Sohna Road -24

Phase 3, Suncity, Sec

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Sec 4-7 New Colony

Sec-15, Kaitar Puri

Jyoti Park, Krishna