Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
Sunsilk, Dove, Clear, Clinic Plus, Tres Emme
Head & Shoulders, Pantene, Wella
Chik, Meera, Nyle, Karthika
Vatika, Total Protect
• Heightened awareness about personal grooming• Gender specific shampoo products are becoming increasingly popular• Increasingly diverse portfolio of shampoos• Smaller SKUs/shampoo sachets at reduced prices increase new product trials• Distribution networks to expand their reach in rural India• Increasing middle class in urban areas have higher disposable income and are
willing to buy premium products• Increasingly brand conscious and benefit-conscious consumers
Growth Drivers
• Rs4.5 Billion market in 2015• Rural penetration low at 12% only• Urban penetration level is 36%• Urban areas contribute to 80% of shampoo sales• 40% of volumes are in sachets• 50% of consumers use toilet soap for washing hair
Market features
Low capital intensity
Simple technology
Indian demographics
Low export levels
Me-too products
High excise duty
Low penetration of the industry in India
Increasing disposable incomes of families
Weakening rupee
Increase in awareness about shampoos
Untapped rural market
Removal of import restrictions may flood the Indian markets
Slowdown in rural demand
Intensive competition
Entry of spurious goods into the market
Strengths Weaknesses
Opportunities Threats
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
• Bargaining power of customers Moderate
• Bargaining power of suppliers Low
• Threat of New entrants Low
• Threat of substitutes High
• Competitive Rivalry High
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
• Government spending on infrastructure, power, and transportation infrastructure.• Tax exclusion in sales and excise duty• Restrictions on import policies• Privatization is influenced by government which encourages free business• Flexible regulations on international trade• If GST bill is passed it is going to benefit FMCG sector with tax savings
• Reduction in industrial licensing, liberalization of foreign capital resulted in better economic environment• Consistent growth of the industry with Indian economy.• Increase in disposable income • Urbanization in India has lead to people good exposure and knowledge of brands • Poor diet and nutrition can not only slow the growth rate of the body’s hair, but can actually cause it to fall out. Here
arises a need for a hair fall control shampoo.
• Due to urbanization changes in lifestyle,, social mobility, increasing per capita income has lead people to new opportunities for business
• FMCG market also now focusing on rural areas for more penetration • Literacy levels increased leading to awareness in safety issues related to products• The increase in hair growth products and hair appliances purchase • Due to increased hair issues, the demand for hair care products like regular and expert shampoos, conditioners, hair
colors and hair oils are increasing rapidly, thereby providing high growth to the Indian hair care market
Political
Economic
Social
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
• Technology enables the incorporation of new ingredients in shampoos, leaving hair cleaner and better conditioned• Shampoo technology will also improve as new ingredients are developed by raw material suppliers. Some important
advances are being made in the development of compounds such as polymers, silicones, and surfactants. These materials will be less irritating, less expensive, more environmentally friendly, and also provide greater functionality and performance.
• Production optimization along with equipment standardization is helping to reduce investments in factories.• Packaging innovation is ensuring lightweight bottles o as to reduce the quantities of plastics used• The multi stage Viscoprop impellers are helping in mixing different densities of constituents decreasing mixing time• Investment in IT is reducing costs in supply chain by easing information access
• Product Information Package is to be provided as per Law.• Drug and Magic Remedies (Objectionable Advertisement) Act, 1954
Technological
Legal
• Dryness care & Heat defence emphasis due to climatic changes• When there is very little humidity in the air and conditions are very dry breakage is common• Desalinated water can cause harmful scalp build-up that leads to hair breaking off above the external root sheath. • Other environmental factors such weather, climate changes affect industry• Due to global warming environmental laws and regulations are getting tougher which affects firm’s production
procedures, steps taken for remedies• Greenwashing is increasingly a common trend• Shampoo bottles made from sugarcane are the newest development in sustainable packaging. It uses 70% less fossil
fuel in its production. P&G reports that using plant-based material for plastic bottles decreases greenhouse gas output by 170%.
Environmental
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
Excessive fragmentation
New product development
Salon services
Demand for professional shampoos
Herbal shampoos
Penetrative pricing- value packs
Selling online
Digital marketing
Current Trends
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
P&G is headquartered in downtown Cincinnati, Ohio
Started n 1837 by William Procter and James Gamble
Markets 250+ brands to 5billion consumers in 140 countries
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
Manufacturing Plant: Baddi, Solan, Himachal Pradesh
Distribution Center: Mandideep, Bhopal
Distributor: Pride Distributor’s Mother Warehouse, Indore
Distributor’s Branch Warehouses in Ujjain, Jhabua, Dewas etc
14000 Wholesalers and large retailers in Western MP
Retailers and Point of Sales Across Western MP
Pantene’s journey to
your bathroom
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
• After failing to challenge HUL, P&G changed its strategy. It found out that its current volumes did not justify its large distributor network
• A large distributor network meant that no single distributor had large enough volumes to achieve an attractive return on investment
• This resulted in each distributor trying to extend its reach to push up volumes• With P&G's portfolio of high-margin, low volume products, merely extending reach only increased the
cost of servicing, not the purchases per outlet
• P&G reduced costs by knocking down direct coverage, cut down its number of distributors to about one-tenth of the size that time
• With 1-3 distributors in 1 state P&G could then replenish its distributors more frequently and hence reduce their average stock-level
• It used the money saved into advertising and brand building• P&G also removed C&F agents. The distributors were expected to invest in storage and warehousing
space, so that the stock transfer from the company could take place as soon as the stocks were shipped into the warehouse
Project Golden Eye
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
Wholesalers and retailers pointed out that margins are same for products of both the companies. They also mentioned that frequency of visits by sales people are also same
As HUL has higher number of products, it takes up a larger shelf space compared to P&G’s products
P&G pays higher slotting fee to give sufficient to its limited portfolio
Wholesalers mentioned that demand for HUL products are more as they have more products and variants within Shampoos
Undercutting is common for HUL products
There are only 2 promoters from P&G that are associated with a supermarket and are taking care of all product lines. HUL has 1 promoter for each product line
P&G’s sales staff is on distributor’s payrolls unlike HUL
vs
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
HUL Supply Chain
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
P&G designs incentives for every player in the value chain maintaining control
P&G uses a daily sales information reporting system to track the movement of its goods across the geography
Transfer of goods from P&G warehouse to distributor and from distributor to retailers takes place daily
Distributor collects margin of 4% on the product
Distributors are responsible for running marketing schemes for products and handling local sales incentives
Pride Distributor has 300 staff, with a sales force of 150 people, covering towns/cities within 300km radius around Indore
Pride Distributors is one of P&G’s 3 distributors in
MP
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
Regional Sales Manager (MP, CG, GJ)
Sales Managers
Sales Team Leaders
Sales Executives
Distributor’s Sales Staff (150)
Delivery & Collection Co-ordinators
Sales Hierarchy
Variable pay is based on an index decided on percentage of target achieved
Sales men have a fixed component and a variable component
New sales person spends about 8-10 days in the warehouse gaining product knowledge and interacting with experienced sales men. Next 15-20 days, are spent in field training
Monthly sales targets are set by P&G for each distributor who then divides it among the hierarchy
Index is brand dependent (Eg. If a sales person is selling 3 brands, he will have 3 separate indices under variable pay and will be compensated accordingly)
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
They were delighted to meet Ronak and Abhinav
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
12 Wholesaler areas in Indore
Ranipura is one such area with 30-40 FMCG wholesalers
Wholesalers get products from:
•P&G Authorised Distributor
•Wholesale supermarkets like Bestprice, Metro Cash & Carry, Reliance mart.
Wholesaler targets : Decided by the company and if achieved, 10% higher targets are set for the next month
Margin : 1.5% and Credit Period : 15 days
Salesman visit the area twice a week to take order of stock to be replenished
Stock outs are not very common. Urgent requirements are met by buying from wholesaler supermarkets
Ali & Ali Brothers
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
Volume wise sales
• Sachets : 70%
• Bottles :30%
Typical customers for wholesalers
• Local kirana stores
• Medical stores
Typical customer buys about 10 -15 sachets of Pantene and Head& Shoulders
Wholesalers pass on parts of discounts/incentives to retailers
Quantity based incentive schemes are run by P&G to encourage wholesalers to meet targets
Ali & Ali Brothers
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
Stores Visited : MORE Mega Store , Big Bazaar – C21 Mall
Margins : 20-25 %
Order :Directly places order to the company and Distributor supplies
the products
Store Visits by Salesperson: Weekly
Inventory replenishment interval :1 month
Stock-outs :occur only a few times in a year - New stock arrives in
2-3 days.
Discounts :
• Primary Schemes - negotiated with the company while placing
orders
•. Secondary Schemes - some % amount is reimbursed when huge amount is sold during festive periods
Stores Visited : Shiv Kirana Store -Vijay Nagar ;
Asha general Store, Varlakshmi General Store- Rau;
Pi-Shop , KK Traders – IIM Campus
Margins : 6- 7 % for 5ml, 7.5 ml and 80 ml packs
8-10 % for > 100 ml bottles
Order: Either buys from the wholesale market directly or the
salespeople come and provide products every 15 days
Store Visits by Salesperson: every 15 days in Rau , varies from 10-
15 days in Indore stores.
Inventory replenishment interval :1 – 2 weeks
Stock-outs :generally do not occur as sales are low in Rau and in
Indore products are procured from wholesale market easily
Discounts : Wholesalers provide discounts based on the amount
bought by the retailer
Modern Trade/Supermarkets M&P/ Kirana Stores
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
HUL has one promoter per product line while P&G has one promoter for all products. Promoters need to be increased
P&G should introduce more product lines and variants in the herbal segment
Tres Emme overtook Pantene in Modern Trade(P&G’s strength) in 2015. P&G needs to re-evaluate its strategy
P&G needs to introduce formal training for its salesmen to make them more effective
P&G would have to find a cost effective way to reach out to rural markets sooner or later
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