The food processing industry- “breakfast

cereal segment Kellogg’s”

Ankit Narang (123008)

SDRM 1: Group No. 8
Apoorva Joshi (123012) Sanyam (123046)
Nirmanyu Chavan (123037) Sukriti Shukla (123051)
Purti Mehta (123040) Jagdish Tanwar (014029)
 INTRODUCTION
Overview of the food processing industry
➢ A sunrise sector; gained prominence in recent years
➢ Platform for growth provided by- decent availability of raw material, changing lifestyles
and relaxation of policies
➢ Connecting link between agriculture and industrial segments of economy
➢ High share; 30% of today’s consumer basket

Breakfast Cereal Market

➢ Growing at more than 17% CAGR from the past five years
➢ 2 categories- Hot cereals & Ready-to-eat (RTE) cereals
➢ Major leaders in the market- Kellogg’s India, Bargery’s, Marico, PepsiCo.
➢ Includes majorly corn flakes, oats and muesli
 INDUSTRY GROWTH TRENDS
➢ Revenues of $288.8 million in 2018; CAGR of 16.7% between 2014-18
➢ Market consumption volume= 60.1 million kgs; Increased at a CAGR of 9.1%
between 2014-18
➢ Projected to touch $363.6 million in 2020 according to Euromonitor International

MARKET SHARE
➢ 37% Market share by value
➢ Dominates the Indian packaged breakfast cereal market
 INDUSTRY & CO. FORECAST (NEXT 3 YEARS)

➢ Market expected to grow

annually by 4.6% (CAGR
2019-23)
➢ Anticipated growth in the
market can be attributed to
increasing urban population
and growing corporate
culture, resulting in rising
demand for breakfast cereals.
➢ Volume expected to reach
374.4 mkg by 2023
 MAJOR CHANGES WRT TARGET MARKET
PROFILE AND CONSUMER BEHAVIOUR
➢ Intense competition from Oat-based breakfast and breakfast cereals increasingly
consumed throughout the day

➢ Urbanization and time pressures leading to the rise of convenience foods

➢ Continued strong regional preferences in food
➢ Portionisation
➢ Health and wellness focus driven by awareness, acceptability and trust
➢ Rising prevalence of online food and grocery retail
 Distribution Structure

❏ Kellogg’s follows a “multichannel” distribution approach.

❏ Following are number of levels involved: -

➔ Kellogg’s

➔ C&F Agent

➔ Distributor

➔ Retailer/Wholesaler

➔ Customers
 About C&F Agent, Distributor and other Players

❏ The company has only one distributor since this year, and that is Amazon.

❏ Amazon has 8 warehouses/branches in Delhi NCR region. They are located in Okhla, Shadra,

Patparjung,etc.

❏ These 8 warehouses haas branch managers, sales executives, HR team, Finance team,

Logistics, and System team, which manage these warehouses.

❏ C&F is also done by Amazon and it has its depot in Mundka, where the stock of both Kellogg's

and P&G is stored.

 About Retailers and Wholesalers

There are three different types of channels: -

❏ Small Channel - This consist of unorganized retail market, They purchase stock of less than

Rs 5000.

❏ Top Channel - This also mostly consist of unorganized retail market. They purchase stock of

Rs 5000-50000.

❏ Online Channel - Amazon, Maxsales, etc.

❏ Wholesalers / Modern Trade

 How all the players work together

❏ Sales team visit the market at day time. They have a particular route plan.
❏ For example, East Delhi has 12 sales executives. Shadra has 8 sales executives.
❏ In the evening, they submit orders in PDA, in which they show the no. of retail stores
visited, no. of orders taken, etc.
❏ PDA’s are submitted to system team and orders are combined from 8 different branches in
System Software and are sent to logistics team.
❏ So the overall requirement (market order) is sent to the logistics team the same evening.
 INFRASTRUCTURE
REQUIRED BY DISTRIBUTORS
❏ IT Softwares
➢ Company ERP Software (central software)
➢ Mobile Application (PDA)
❏ Delivery Vehicles
➢ Trucks - C&F to Warehouse
➢ Tempo travellers - Warehouse to Retailers)
❏ Warehouse - 3000 - 5000 Square Meters
❏ Damage Control in Warehouses
 SUPPORT PROVIDED TO DISTRIBUTORS BY THE
COMPANY
➢ Incentives to Sales Representatives - Sales Representatives, which are under the distributor,
are given incentives by the company. Sales representatives are less skilled people who are
assigned by the distributor to push sales at retail stores
➢ Training to Sales Representatives - sales training is also provided by the company to the
Sales Representatives
➢ Van Delivery Scheme - This scheme is given to the contracted distributors. Under this
scheme, if the distributor buys a vehicle for the distribution of Kellogg’s, then company gives
subsidy to them for every order
➢ Unsold Products Policy - If a retailer is not being able to sell all the products then the retails
have the power to return the product to the distributors and distributor return the product
to the company.
 MARGINS AT EACH LEVEL
❏ Kellogg’s gives its Distributor a margin of 5% and 12% to its retailer, whereas the
competitors give a margin of 10-15% to its distributors.
➔ Now here, we can see that competitors are giving a better margin than Kellogg’s, but
the thing to note is that Kellogg’s is a powerful brand. The retailers don’t have to
push the products to customers to buy it.
➔ In fact, customers themselves pick Kellogg’s over its competitors. So here the power
is in the hands of the company as there is a significant demand of the product.
 ROI
ROI= (Revenue-Expenses)/Investment

Revenue (Sales) = 32 lakhs per month

Investment = 25 lakhs

Expenses = Fixed expenses + Variable expenses

Fixed expenses = 13 lakhs

Variable Expenses = 12 lakhs

Total Expenses = 25 lakhs per month

=> ROI = (32 lakhs - 25 lakhs)/25 lakhs

ROI = 0.2 or 20%
 Major points of conflicts
➢ Retailers bargain for prices with distributors :

Distributors cannot fight with the retailers at any cost as it would lead to a loss
for the distributors.
➢ Infiltration :

Distributors of other territories dumps their product in some other territories to

generate their sales
➢ Difference in pricing between supermarkets and distributors :

As Modern Trade receives a lower rate, so to complete their targets, they sell
their unsold goods to retailers at a good price
 Plan for Conflict Management

➢ Assigning geographical exclusivity for the brand

Having well defined territorial boundaries for brand representation works around
eliminating channel conflict among brick and mortar distribution.

➢ Pricing products fairly across all the channels

Giving every party involved the chance to compete while being profitable.
➢ Not favoring one channel over another
Presenting the customers with all the options to purchase the product, and letting them
make the final decision.

➢ Being upfront with the existing distribution

Ensuring transparency and offering similar pricing to competitors in single channel.
 LOGISTICS
❖ Combines all the 8 branches order and send to C&F which is situated in
“Mundka”
● Logistics main work - “Supply”

Eg. - Today is your order and how you are supplying your route,
How it’s working ?

Branch Manager sits with DLO & plan Market.

● Distributor - Evening Market Visit -

● Salesperson - Morning Scheme Explore
Take orders from shopkeepers
● Before 11Am Supply Out
System Team - Billing, Support work start, Cut over Sold ( Morning)
Cut overSold - It’s in Morning only, basis on
Warehouse Inventory + Market order + C&F Receive

Sales Executive - Next day stock - market - market close - return

➢ Total Check - Warehouse + Inventory + C&F

send , Customer order not available.
Eg. - 100 cartons
C&F - 50
Warehouse - 25
25 cartons cut down, remaining 75
- will send to DSA, in the morning
❖ All warehouse people are on Amazon pay scale
 PAYMENT TERMS GIVEN BY DISTRIBUTOR
1) Small Channel - 0 Day Credit ( Same time Bill, Same time Money)
Schemes - Rs 500 - 10%

2) Top Channel - ( 0 - 7) Days, All small shops Rs 5000 - Rs 50,000

Monthly target 50,000 - 4% Extra month billing

Also, Particular product Rs 100

10% Scheme
Same day 100 target
15% Scheme

3) Roll Channel change - (0 -15) Days

We keep whole change in zero, some customers don’t give money, so credit is high.
Sales Team - Pressure a lot
 PAYMENT/CREDIT TERMS GIVEN BY
DISTRIBUTOR IN THE MARKET
❖ Company asks the distributor to give retailers the same amount of time that the company gives to
distributors

❖ It is usually 10 days but in reality, it exceeds that of 10 days

❖ Many times, it happens that to complete the sales targets, distributor gives the stock to retailers
but when it comes to get the payment back, it takes a very long time. So, recovering the credit in a
given time is a very important thing in this

❖ Therefore, when it comes to total sales generation, the money that is coming back should be
calculated, and not the number of products sold. This we the company will be able to calculate the
number of products sold and money it receives. Otherwise, salesmen will keep pushing the sales to
 PAYMENT/CREDIT TERMS GIVEN TO
DISTRIBUTOR BY THE COMPANY

❖ Credit is required as there is a time difference in purchasing the products and selling
them, So therefore, giving credit is a really important part when it comes to
generating sales

❖ Coming on the company policy, the company policy is to give credit time of 10 days
 USE OF TECHNOLOGY

Maintaining database-based distributor and channel information

➢ Enhancing flexibility which would offer the benefits of maintaining a balance with the

demand of the product and inventory levels.

➢ It can also lead to optimization of warehouse management

➢ Maximizing distribution efficiency.

➢ Integrating the flows of information between different levels such as marketing, sales,

logistics and distribution.

➢ Besides Kellogg’s deploy Oracle 11i based
ERP to enhance supply chain transparency
leading to lesser inventories and better
service levels
➢ Other locally developed systems help
monitor stocks and movement on a daily
basis
➢ However at the small retail outlets and mom
and pop stores level, very limited or no use
of technology is seen for keeping a track of
the inventory
 PROMOTIONAL SUPPORT
Kellogg’s uses certain below the line promotional techniques like on pack promotions and
free sampling for its distribution channel

❖ Initially the company offered specially designed 50 gm packs free to shoppers at

select retail stores in Delhi

❖ The company also offered free pencil-boxes, water bottles, and lunch boxes with
every pack

❖ Plastic dispensers offering the product at discounted rates were also put up in petrol
pumps, super markets, airports etc. to create awareness about the product
❖ In order to encourage impulse buying by the customers
the company provides for POP or POS displays
❖ In 2019 Kellogg’s aims to scale up direct distribution, to
allow a better control over inventory and the products
❖ Currently the retailer offer products from competitor’s
brand if he had no stock
❖ It is imperative for the Kellogg’s to find favor with the
retailers and come up with new promotional techniques
at the retail outlets so that they will push the brand
 RECOMMENDATIONS
● The first thrust area for Kellogg is to scale up direct distribution, which will allow the company a better
control over inventory and the products, besides helping in geographical expansion in India. Out of the
total 8 million FMCG outlets, around 750,000 outlets stock breakfast cereal products and Kellogg India
is able to service 600,000 outlets.
● Use of better technology in small rural outlets for inventory keeping
● Promotional schemes should be used to enhance impulse purchase : bundling of
goods,discounts,sampling(free samples at stores like 24*7 for new variants / flavours)
● Need for a better customer and market analysis
● Carter consumer disposable income
● Tie with the local market to penetrate in smaller towns and rural areas
● Reposition themselves as round the clock meal