final report vibhav pachori - 07bs4792-1

8/8/2019 Final Report Vibhav Pachori - 07BS4792-1

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A Project Report

On

Market Research On

BINGO with

ITC Ltd Foods business

By:

Vibhav Pachori

07BS4792

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Summer Internship Project

A Project Report On

Market Research On BINGO

With ITC Ltd

In partial fulfillment of the requirements of

MBA program of

ICFAI Business School, Bangalore.

Under the guidance of:

SIP Faculty Guide: CompanyGuide:

Prof. Sharon Jose Mr.Govind Raj ICFAI Business SchoolArea Manager BangaloreITC LTD, FOODS

Submitted By

Vibhav Pachori

07BS4792

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Table of contents

DECLARATION...........................................................................................04

Acknowledgement........................................................................................05Abstract...........................................................................................................06

INTRODUCTION........................................................................................08 Objectives of theProject...............................................................................08Scope of theproject.......................................................................................10Limitations of theStudy...............................................................................11Proposed

Methodology................................................................................12

ABOUT THE INDUSTRY.14

ABOUT THE COMPANY.....16Product Lifecycle of Bingo 19

PRODUCT At A GLANCE21

VALUE ENHANCEMENTS THROUGH DISTRIBUTIONCHANNEL26

HOW LOGISTICS IS MAINTAINED BT ITC

FOODS.27DISTRIBUTION CHANNELS . 28

PROMOTIONS...30

POSITIONING OR CONFUSED POSITIONS..33

CREDIT POLICIES OF BINGO...35

USE OF CIGARETTE HAWKERS TO SUPPLY BINGO-IS IT REALLY

HELPING..38

ADEQUACY OF STOCK...41

COVERAGE OF FREQUENCY....42

SOURCE OF SUPPLY-DISTRIBUTOR OR WHOLESALER 43

SNOT ANALYSIS OF ITC LTD45

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SNOT ANALYSIS OF FRITO LAYS46

LEARNINGS....47

FINDINGS....48

SUGGESTIONS...49

BIBLIOGRAPHY50

DECLARATION

I declare that the project entitled Market Research On BINGO conductedat ITC Ltd foods division. is a record of independent work carried out by me duringthe academic year 2007-08 under the able guidance of my faculty guide ProfessorSharon Jose of ICFAI Business School, Bangalore, and my project guide Mr.Govind Raj, AM Marketing (Bingo), ITC Ltd Foods Business.

(www.itcportal.in)

I also declare that this project is the result of my effort and has not beensubmitted to any other University or Institution for the award of any degree, orpersonal favor whatsoever. All the details and analysis provided in the report holdtrue to the best of my knowledge.

Place: Bangalore Vibhav Pachori

Date: 24th May 2007 ICFAI

Business School

Bangalore

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ACKNOWLEDGEMENT

Gratitude is the best sentiment of the heart. The euphoria and contentment that isadjunct to the successful completion of the project would be incomplete without themention of the people who made it possible. After all, success often comes to those whohave the aptitude to see way down the road; success is the result of steady accretion,the epitome of hard work, perseverance, determination and most of all encouragingguidance. So, with immense gratitude, I acknowledge all those whos guidance andencouragement has helped me in the successful completion of my project.

At the onset I would sincerely and whole-heartedly like to thank Mr. Sunil ShankarNarayan, Regional Sales Manager ITC Ltd and Mr. Siddharth Jain, Branch Manager ITC Ltd, Bangalore.for their support and assistance in getting this project. This projecthas indeed been a great learning process for me and will help me in the long run. I wouldlike to extend my gratitude to Mr. Prashant, A.S.M ITC LTD for his encouragementand co-operation. Their moral support will always be appreciated.

I sincerely thank my company guide Mr. Govind Raj, A.M. - Marketing ITC Ltd - Foods.for giving me an opportunity to take up this project. I thank him for being a constantsource of inspiration, mentor and above all for his patience for guiding me through thenuances of the project. His rich experience in the field of Marketing was itself a greatsource of knowledge for me. Despite his demanding schedule, he assisted me constantlyproviding me support to carry on the project work without any encumbrance.

I would like to express my profound sense of gratitude to my faculty guide ProfessorSharon Jose- ICFAI Business School, Bangalore, for constantly guiding me and providing

me support during this project. Her motivation and constant guidance assisted me incrossing many hurdles during the course of my project.

With a deep sense of gratitude I would also like to thank all the salesmen and thewholesale distributors for assisting me valuable suggestions and advice throughoutthe execution of the project. I would also like to thank Mr. Pranesh, Area Executive ITC Ltd - Foods for his valuable inputs. This project would not have been concluded

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successfully without their support and help. I whole-heartedly thank my fellowcolleagues and the staff team at ITC Ltd for their help and support.

Vibhav Pachori

ICFAI BusinessSchool

Abstract

Distribution channels and subsequent strategies are probably the mostvisible aspect of any companys marketing efforts. A recent estimate putsthe number of retail outlets in India at 5 million. This industry provideslivelihood to more than 15 million people in the country. With this kind of

contribution to the economy, the sector is far too significant to ignore. Thekind of contribution in terms of critical services it renders to the societycannot be ignored. While the manufacturing sector is always given the creditfor the accelerating the rate of economic growth and encouragingdevelopment activities, what is often ignored is the indispensability of thedistribution sector in sustaining the manufacturing sector.

In the recent times the Indian retailing market is going through process ofrenovation backing aside the traditional retailing to the concept of malls,super and hyper markets to suffice the existing demand of the consumer.

This change in consumer demand gives the way to the ready-to-eat snacks.The Indian snack industry was initially dominated by homemade snacksand chips which has a lot to do with the eating habits of Indians who preferhomemade snacks.

I have been working as the Project Trainee under the food division of ITC i.e.ITC Foods. My job as a project trainee is to perform a market research onthe guidelines provided by the company which comprises a very exhaustiveresearch. The research is on the Distribution ofBINGO on various guidelinesnamely

Promotions

Credit policies

Discounting Policies

Coverage Frequency

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Sales man ratings

Credit and Cash sales

The basic aim is to draw a comparative analysis between Lays and

Bingo on the above mentioned bulleted points. Compare businessgenerated by the salesman of Lays and Bingo recommend any role plays ifrequired for enhancing the skills of the salesman.

For the fulfillment of the above mentioned objectives a Questionnaire hasbeen framed which is used to gather the responses from the retailers allaround Bangalore. The sample size of the study to be conducted is around400 with at most care has been taken that the sample is representative ofthe entire population technically known as cluster analysis. Along with thequestionnaire a sales tracker is used to record the sales done, type of sale

credit or cash for the completion of the objective.

Along with the above mentioned objectives the major objective is to do aSWOT analysis of the 6 distributors of Bangalore and finding the loop holesif any in their operation and recommend the best practices to strengthen thesales of BINGO. Along with the SWOT analysis of ITC which may help inidentifying the strengths which the company holds and which can be used toboost the sales of BINGO as well as the weakness which may be rectified tohelp ITCs objective of becoming the market leader also the weakness ifidentified will be beneficial as only the strengths can be used and steps can

be taken to remove the word weakness

Basically the project involves in identifying the intricacies involved in thedistribution system. To find out any loophole that exists in the distribution ofBINGO.

The ultimate aim is to increase Bingos sale through a channel which haspractices that pleases the retailers as well as are in best interest of thecompany.

As we know that in the FMCG sector it is truly the survival of the companywith the best distribution system, channel levels and kind of service offeredto its customer decides the survival of the company in the industry.

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INTRODUCTION

OBJECTIVES OF THE PROJECT

Personal Objective

To study, analyze and evaluate the strategies adopted by the distributorsto market Bingo and Lays and to recommend the bestpractices for theITC Ltd to score over competitor.

Company Objective

To study and recommend which promotion strategy should be adopted

by the distributor.

To study and recommend the ideal credit period that should beoffered to retailers and what is present trend in terms of credit beingoffered by Bingo and Lays.

To study and recommend the ideal discounting policies and detailsof the same.

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To study the present scenario in terms ofcoverage frequency andthe ideal for the same.

To evaluate the salesman in terms of service offered, the averagedaily sales made by each salesman and further classified into credit

sales and cash sales.

To do the SWOT analysis of all the six distributors of Bangalore.

This can be done in following ways:

Promotions

Evaluation of Promotions carried by Distributors to promote Bingo aswell as their acceptability among the retailers. Evaluation of nationallevel promotions and their impact on the target audience. There are

basically two types of promotions distributors operate on i.e. Buy 12packets get 1 packet free and cash discounts where slabs have beenmade and cash purchase upto or beyond this slab make the retailereligible for the discount. The idea here is to record the retailerspreference as which offer attract the retailer more.

Credit Policies:

Reflects how the company does business with its retailers. Thoughpredominantly the business is carried out in credit but with theadvancement of technology mode of payment has changed. The idea isto draw a comparative analysis between Frito Lays and Bingos creditperiod and the retailers requirements and comments.

Discounting Policies

The product is available for the retailers in a varied price range. This

differentiation in pricing is termed as Differential Pricing. The aim is tostudy how these discounts are classified for the retailers. Whetherthese classifications are proper or not. The idea is to find out whichcompany offers better discounts to the retailers.

Coverage Frequency

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This parameter helps in understanding the frequency of the visit of thesalesman. The idea is to understand the frequency of requirement ofstock by the retailer which can give us the idealized coveragefrequency.

Service on Request :

Damaged Stock - Explains how the damaged stocks are handled.How often do the products get replaced?

Adequacy of Stock - Adequacy of Stock reports the data ofwhether the stock of any product was exhausted before the nextdelivery date and which are the products that got exhausted beforethe next delivery.

Out of Turn Supply - In case of an emergency or due to suddenincrease in demand how the company is able to maintain its stocklevel across the retail universe.

Sales Personnel: Salesman Rating Overall,Supervisor/Merchandiser Visit, Auditing the performance of thesalesman and the supervisor with respect to the work done insales and distribution of the products.

SCOPE OF THE PROJECT

The scope of this project extends to learning about the various facets that gointo building and maintaining the distribution channels for a business. Itcovers the importance of a strong and clear distribution channel that isneeded to ensure smooth flow of goods to the retailers. Also the significanceof relating the products with the vision, mission and strengths of a companyso that the values are reflected in its brand identity in order to avoidconflicting messages to the target market. It helps understanding the various

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elements of sales & distribution, promotion, coverage frequency, creditpolicies, discounting policies and how each element plays a vital role inbrand building which eventually translates in the success of the product inthe market. The importance of various dimensions that need to beconsidered in the re launch of a product such as packaging, advertising etc is

also identified. Lastly the project also throws light on the magnitude ofimportance that a customer perception holds in the success of an FMCGproduct

To rate the promotion strategies the retailers choice.

To determine how the salesman works in tandem to the service levelagreement with the company.

Research target retailers value proposition, needs, and desiresregarding promotion, discounts, credit, coverage frequency andsalesman.

To determining which strategies of the snack industry has the highestpotential in terms market penetration.

To examine the performance of the companys and competitorsexisting distribution system in relation to the retailer choice.

Finding service output gap that need corrective action.

To gather information about potential and current retailers,competitors, and other forces in the marketing environment.

To do the SWOT analysis.

LIMITATIONS OF THE STUDY

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This project is being conducted with the aim of providing accurate, authenticinformation however the research is subject to a few practical constraintswhich constitute the limitations of this report.

The respondents are assumed to have parted with authenticinformation.

Data collected from the sample respondents may have certainvariation

Reliability & validity of the data collected from the sampling.

Forecasting tools based on assumptions.

Significance of the data points.

Reliability of the data resources and its repercussions.

The scope and scale of the project is large and time consuming.

METHODOLOGY

The data is collected from following sources:o Primary Data

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A questionnaire will be used to understand the retailerperception about the company with respect to itscompetitors.

Primary data is collected by visiting the sales route on adaily basis with the salesman.

Data is tracked by a sales tracker which will have allinformation about the salesman visit, credit sales, cashsales etc.

o Secondary Data Journals Internet

Field WorkField work includes visiting the sales route all across Bangalorecity with a salesman. Administering the questionnaire, the salestracker, and eliciting information from them.

Plan of analysis

Use of statistical and quantitative analysis tools usingtools M.S.Excel.

Use of questionnaire to find out the retailers perceptionabout Bingo and Lays.

Use of Sales tracker to analyze the sales and credit andcash sales.

Process i.e. systematic approach towards achieving theobjectives is stated below:-

1) The process starts with learning how the company is operatingpresently be aware of all the operations carried out in the company.

2) The second step is the generation of objectives.3) Once the objective is formulated objective statements were

made so that our objective is very clear.4) Now comes the most important part the research design. The

success of the research depends on the research design.5) Research design constitutes all the steps From generation of the

objective to presentation of the result and also the tools used foranalyzing the data thus obtained.

6) The research design for this project was prepared and followingsteps were planned:-o Preparation of the Questionnaire. The Questionnaire contains

questions that are capable of answering the objectivestatement.

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o Along with questionnaire a sales tracker is used which givesthe information regarding the salesman visit, amount ofpurchase, amount of credit and cash sales that is required forfulfilling the above stated objectives.

o The sample size required for the study is around 600

constituting around 100 samples from each distributors areaknowing the fact there are six distributors all around Bangalorecity, at most care has been taken that the sample thusobtained is representative of the entire population.

o The data thus obtained is analyzed by using MS Excel.o MS Excels wide range of graphical representation will be used

to represent the results in a format that can be easilyunderstood.

o Mostly Bar graphs and Pie charts will be used to represent theresults.

o F test will be used to check the authencity of the data thus

obtained.

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About The Industry

By the turn of the 20th century, the face of the Indian retailing industry had

changed significantly. The retailing industry, which, until the early 1990s,was dominated by the unorganized sector, witnessed a rapid growth in theorganized sector with the entry of corporate groups such as Tata, RPG, ITCand Bennett Coleman into the retailing sector.

With the liberalization and growth of the Indian economy since the early1990s, the Indian customer witnessed an increasing exposure to newdomestic and foreign products through different media, such as televisionand the Internet. Apart from this, social changes such as increase in thenumber of nuclear families and the growing number of working couplesresulting in increased spending power also contributed to the increase in theIndian consumers' personal consumption.

These changes had a positive impact, leading to the rapid growth in theretailing industry. Increased availability of retail space, rapid urbanization,and qualified manpower also boosted the growth of the organized retailingsector.

Food retailing was a key area that saw some action at the national level, withplayers like Foodworld and Subhiksha, establishing stores all over India.While supermarket and departmental chains replaced traditional grocery andgeneral store formats, introduction of fast foods (McDonalds, K.F.C, PizzaHut), packaged foods (MTR, Namma MTR, ITC, gourmet foods Kitchens of

India), vending machines and specialty beverage parlors (Nescafe, Tata Tea,Caf Coffee and Barista) brought about significant changes in the eatinghabits of Indian consumers.

The Indian FMCG industry was also witnessing significant changes throughthe 1990s. Many leading FMCG players such as Hindustan Lever Ltd. (HLL) ,Procter & Gamble India Ltd. (P&G), and Indian Tobacco Company (ITC ltd)have been facing severe problems on account of increased competition fromsmall and regional players and from slow growth across its various productcategories. As a result, many of these companies were forced to revamptheir product, marketing, distribution and customer service strategies to

strengthen, their position in the market.The realization of the customer's growing awareness and the need to meetchanging requirements and preferences on account of changing lifestylesalso contributed to the formulation of customer-centric strategies. HLL ledthe way in

Revolutionizing the product, market, distribution and service formats of theFMCG industry by focusing on rural markets, direct distribution, creating new

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product, distribution and service formats such as Sangam, Ayush AyurvedicCenter and Lakme Salons.

Again companies like ITC Ltd have ventured into new business over theyears other than the traditional business of manufacturing and sales &distribution of cigarettes. They have ventured into the branded foodsbusiness similar to other companies like HLL, General Mills, and Britanniaindustries ltd.

At the macro level, the evolution of the FMCG industry would continue to bedriven by a number of factors. These include economic growth, which wouldimpact large proportions of the population thus leading to more money inthe hands of the consumer. Changes in demographic composition of thepopulation and thus the market would also continue to impact the FMCGindustry.

For example: In a recent survey conducted by a leading business weekly,approximately 47 per cent of India's one billion people were under the age of20, and teenagers among them numbered about 160 million. Together, theywielded INR 14000 Cr worth of discretionary income, and their families spentan additional INR 18500 Cr on them every year. By 2015, Indians under 20are estimated to make up 55% of the population - and wield proportionatelyhigher spending power. Obviously, companies that are able to influence andexcite such consumers would be those that win in the market place.

Food retailing was a key area that saw some action at the national level, with

Frito Lays dominating the market right from the word go what helpedFrito Lays was the Vacuum in the branded chips market with only a few localcompetitors but they dealt only in small areas with no significant turn over orbrand value. Frito Lays enjoyed monopoly but recently there have been 1 or2 big companies in the branded chips market which has shown stiffcompetition to Frito lays obviously the only major threat that Frito Lays facesis from Bingo of ITC Ltd.The only other player that shows some promise isHaldirams Halke Phulke. Haldirams though still a far way down to poseany threat to Frito Lays yet Bingo shows promise and the steady increase inBingo sales confirm the fact that ITC is committed towards its aim of beingthe market leader in next three years. Frito Lays are quite clear that theyhave to face the challenge from Bingo as it has come in with a completelycustomized Indian taste which has helped Bingo attract the customers andsatisfy their taste buds with a mouth watering combination.

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About the Company

The ace up the sleeve of ITC's newest foods venture is itsextensive distribution reach.

Taking stock of the FMCG block is tobacco and hotels giant ITC Ltd. A fewyears ago it climbed onto the retail bandwagon, leveraging existingstrengths to diversify into areas from greetings and gifts to lifestyle retail.

The game plan is all about Foods, moved into the branded packagedfoods market and is leveraging the parent company's strategic synergy.

ITC Limited is divided into two sectors ITC tobacco and ITC non Tobaccodivision.

A leading Business Daily quoted-

ITC Foods is adopting a patient but ambitious approach to grab achunk of every sector it operates in.

The company is presently operating with 6 wholesale distributors situated

all around the cosmopolitan city Bangalore.The Distributors and their locations are as under-

BEENA enterprises Nagvara main road

Vijay agencies Domlur

Vijay agencies extension Jalahalli

M.D. & Sons KR Market

M.A. associates Kormangala Sapphire agencies - Kempegowda

For Fast moving consumer goods the success of a brand is depended uponits sales volume followed by its shelf life and its visibility in an outlet. Knowwith the changing consumer needs and desires their fancies in life have beenfulfilled by smart retailing techniques adopted by the retailers. The retail

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outlets in a market have been broadly categorized into 4 channels which canbe illustrated as follows:

1) Convenience stores: These are some of the latest form of storeswhich will basically carry an assortment of products and product lines.

Normally these kinds of stores carry products which are for immediateconsumption. Impulse purchasing is also witnessed in these kinds ofoutlets products like deodorants, chocolates, skin care solutions arenormally the ones that sells most.

2) Groceries: this kind of retail outlet is the traditional kind of shops thatwe haven seen in India over years. These kinds of stores have plannedpurchase. It has been observed that these groceries stores constitutethe maximum sales for any F.M.C.G. company. These kinds of storesnormally have set working hours and normally cater to a larger

customer base in a particular area. This kind of store provides itscustomers with credit facilities and has fixed customers as well.

3) ISS & KEY Accounts: I.S.S. stands for independent self service andis one of the most modern forms of retail outlet. In this kind of outletthe customer has to help himself as in he has a plethora of products tochoose from the store that will suffice his needs. The products areneatly arranged on the shelf and the display and visibility of everyproduct is high. The customer simply picks his products and makes thepayment for their purchase at the cash point.

Key accounts are basically the big form of I.S.S such as subhiksha4) HORECA: Hotels, resorts and canteens are again key retail outlets

from where ITC Ltd is able to capture a substantial amount ofsales. A major chunk of ITCs cigarettes sales come in from thischannel so the company keeps its options open through thesechannels.

BINGO the success story

Bingo is newly-launched ready-to-eat snacks but ITC that hit the market inMarch this year. In mid-March, ITC announced its foray into the Rs 2,000-crore (Rs 20 billion) fast-moving branded snack market that has one majorcompetitor - Frito-Lay. After biscuits and pasta, the company is now eyeingthis segment, which is growing at 30 per cent every year.

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After spending months researching the consumption habits and consumerbehavior, ITC has based its campaign on solid research insights - like it haddone earlier when it entered biscuits.

The company's in-house research team of eight people travelled extensively

across the country, studying typical home-made snacks such as bhel,khakras, gol gappas and so on. The verdict: as many as 70 per cent of thosesurveyed confirmed that they would like to have snacks which are slightlyfamiliar yet have variations in taste.

To achieve this, the company turned to the chefs from its restaurantbusiness to dish out new and tasty combinations of existing delicacies. Theycreated 16 different varieties inspired from regular snacks such as potatochips, khakra andpakodas.

Chips come in experimental flavours such as bindas masti chaas, chatkila

nimbu acharand tandoori paneer tikka. Yet another product launched is"Mad Angles", which according to the company, is inspired by the Gujaratisnack khakra and comes in tomato and chilli flavours.

The company has set up a completely new unit to manufacture Bingo, at itsexisting facility in Haridwar. But that's not all. To make sure the consumersare informed of their choices, the company has launched not one or two butfive, 30-second commercials at the same time.

Thus, apart from what the flamingo has and lacks, a certain prof SunderRaman talks about tangy lemon pickle and chips between Tamil-speaking

lessons. Similarly, a spoof of tele-marketing ads dubbed in Hindi - completewith staccato voice and pretentious excitement about the product - talksabout Mad Angles; two friends get confused between five liars and thecompany's "Live Wires"; and a CBI inspector clarifies the difference betweenthe criminal Zango and Bingo Potato wafers.

All this for better brand recall. "We are trying to play with similar soundingwords to get the brand name Bingo to register in consumers' minds," saysRavi Naware, chief executive, foods division, ITC.

The commercials were created by O&M, which was selected by ITC after the

company called for a pitch in June last year. "This being the first campaignfor the product, we have focused on the products and the brand name to aidrecognition. Also our tag line emphasises that we have many combinationsto offer," says Malvika Mehra, senior creative director, O&M, who wrote thecreatives along with colleague and senior creative director Amit Akali.

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The advertisements were then shot by Rajesh Krishnan of Foot Candle onspecially created sets in Mumbai and a bungalow in Alibaug. Thereafter, thecompany has left no stone unturned to make sure it reaches to its audience.

Since the company's target audience is people in the age group of 20-35, the

company began with Internet. It created a website www.bingeonbingo.com,which has free offers, games, downloads and even mobile games. The sitehas been advertised with banners on websites such as Yahoo, rediff and Sify.It's betting big on television, too.

ITC aims to be the market leader in the segment within three years. Nowthat the company is clearly on a promotion binge, will the consumers join theparty?

Product Life Cycle for BINGO

GROWTH STAGE

Bingo is in the growth stage ofthe product life cycle. The growthstage is crucial for the productssurvival in the market because thereaction of the competitors to theproducts success will affect theproducts life expectancy. This stageis characterized by increase in sales,heavy demand for products andpeaking of profits. New firms enterthe market in the growth stage,attracted by the promisingopportunities in the market.

Strategies at growth stage

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Improvement in quality is required as well as addition of new featuresand models

Emphasize the products benefits in order to create a competitive nichein the market.

Increase the promotional expenditure to meet the competition.

Aggressive marketing, including price cuts can be used to attract pricesensitive customers.

PRODUCT MIX FOR ITC FOODS

Product mix is a set of all the products that ITC Ltd offers to itscustomer. This new business of the company has nine broadcategories:

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PRODUCTS AT A GLANCE

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PRODUCT LINE DEPTH PRODUCT MIX WIDTH

COSMETICS Vivel, Fiamadwills

CONFECTIONARIES Candyman HBC, Candyman clairs, Minto Fresh, Mint o,Cafetino.

STAPLES Ashiwaad Atta, Ashirwaad Salt.

BISCUITS Sun feast Glucose, Sunfeast Marie, Sun feast DreamCream,Snacky, Sweet n Salt, Fit Kit, Golden Bakes, DarkFantasy

SPICES Ashirwaad Chilli Powder, Ashirwaad TurmericPowder,Ashirwaad Coriander Powder

GOURMET FOODS Kitchens Of India, Ready to Eat, Instant Mix, Curry Paste,

Conserves & Chutneys

SNACK FOODS Sunfeast Pastas, Bingo

INCENSE STICK Mangaldeep, Madhur, 3 n 1

MATCHBOX Aim, Mangaldeep, Homelights.


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STAPLES RANGE AASHIRWAAD ATTA & SALT

SNACK FOOD RANGE BINGO.

CONFECTIONARY RANGE CANDYMAN.

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Fiamadwills

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READY TO EAT AND INSTANT MIX RANGE AASHIRWAAD READY MEALSAND KITCHENS OF INDIA

BISCUITS RANGE - SUNFEAST

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SNACK FOOD AND SPICES RANGE SUNFEAST PASTA TREAT AND

AASHIRWAAD SPICES.

AGARBATTIS AND MATCH BOX RANGE MANGALDEEP AGARBATTI AND

MANGALDEEP MATCH BOXES

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VALUE ENHANCEMENT THROUGH THE DISTRIBUTION

FUNCTION

The distribution function adds immense value to the end product. Theproduct function can only provide the form utility to the customers when itproduces the product. The distribution function complements the form utilityby providing the time and possession utility. Time utility is defined asthe utility enjoyed when a customer buys a product as and when the needarises and does not have to buy and store the product anticipating animpending need. This convenience is often not felt till one encounters ascarcity of supply resulting in customer hoarding products fearing that theunavailability of goods would continue and hence the product would not beavailable when the need arises.

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Place Utility is defined as the utility enjoyed by the customers whenproducts are available at a convenient location to them. The extreme case ofplace utility is home delivery. Possession Utility is the facility providedby the distribution channels to actually transact a deal by exchanging moneyto take possession of the products. The value provided by a distributionchannel often goes beyond the three utilities provided. When we interpret aproduct as a bundle of benefits, it should also be remembered that thisbundle would also invariably include the benefits offered by the distributionchannel. Imagine the situation when ITC foods confectionary beingmanufactured and is available for masses all across the country and anyother local confectionary making company whos presence is felt inBangalore City only. The value proposition for the former will be moreattractive than the latter because of the fact the distribution is uniform andwidespread. The value provided by the distribution channel is not directly

visible but can only be perceived only via extensive distribution.

HOW LOGISTICS IS MANAGED BY ITC FOODS

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Figure 2.

Figure 3.

The above figure illustrates how the products flow from the manufacturer tothe end user i.e. the customer. Basically explaining how the supply chain forITC Foods works.

DISTRIBUTION SYSTEM

ITC Foods adopts intensive distribution which is a form of distribution in

which the manufacturer distributes his products through as many outlets aspossible. This is adopted because the products are characterized by lowinvolvement of the customer and he looks for location convenience. Productsfrom the ITC foods like biscuits, staples, gourmet foods, instant mix, ready toeat, snack foods and confectionary are distributed in this manner. So thatthe products are available to the customer at their nearest location.

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ITC Foods has a dual system of distribution:

Foods salesman. Cigarettes salesman

Both these salesman helps the companys products to be available in asmany as stores as possible.

ITC Ltd entered the retailing business a few years ago and since then hasbeen trying to enhance its business by leveraging its brand equity andstrong distribution channel structure. It was only in 2002, the companys newdivision, ITC foods, started manufacturing packaged foods.

The company distributes its products to more than a million outlets acrossthe country with the help of its distribution centers which are located in

major states and geographically arranged so that logistics costs areminimized. The company distribution system constitutes ofe-choupals, a twoway sourcing and distribution system established for farmers in remotevillages. The company even uses the services of the paanwalas fordistributing its brands.

The distribution philosophy is that of channel- tailored support. The companyand its distributors use the services of different sales forces to cater toconvenience outlets, groceries, and supermarkets. Sales for confectionaryproducts such as Minto fresh come from convenience outlets and that of

staples like atta and salt comes from groceries. The company has adopted asupervision process that ensures that over stocking and stock outs do notoccur at the retail level. This is possible because of the online ERP- basedlogistics system developed by the company that links distributors,warehouses and marketing branches to its head office and factories, whichcontinuously feeds the data regarding sales and stock positions across theentire supply chain.

IMPUSE BUYING

The purchase of snacks is mainly through IMPULSE Buying. Impulse Buying issimply purchase which is not planned. People generally tend to purchase

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impulsively when they find a new product on display. Thus the display parthas to be given immense consideration to gain the benefits of Impulsivenessof the customers. Also packaging of the product attracts the impulsivebuying decision thus attractive colors can help in increase of sales.

A recent study which analyzed 30000 purchases by 4200 customers,revealed that 68% of the purchases are unplanned.

Does this promo promote impulse buying???

You wonder what "Planet Earth" is when a flock of flamingos fill the TVscreen. The camera closes in on one of them and the narrator goes on togive a description of the flamingo and its features in a monotone.

Bored? Just hang on for the twist in the tale: the voice-over explains thatwhile flamingos have a long beak to help them find food, they do not havethe mouth-watering combination oftandoori paneer tikka and potato chipsthat Bingo has to offer. A pack shot appears next, with the tag line, "Bingo -No confusion. Great combination."

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PROMOTIONS

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What type of offers the retailersprefer ??

This data has been collected from 400 retail outlets across thecosmopolitan city Bangalore.

Out of 400 only 72 prefer offers such as buy 12 packets get 1packet they constitute a mere 18% of the sample population,these are basically the small outlets which do not qualify for thediscount slabs made available to the bulk purchasers. Remaining82% prefer cash discounts as they have higher turnover.

Bingo was initially launched with free packet offer which most of

the retailers dont prefer.

Cash discount is what the retailers prefer thus the cash discountsis the possible promotional strategy to boost sales and also cashdiscounts can increase the percentage sales collected in cash.

Outlets can be classified and then both of these strategies canbe operated in tandem as Bingo is in the growth stage of the

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Product Life Cycle and heavy promotions are required to sustainthe growth.

Are Promotions Like Chala ChangeKa Chakkar Hampering The SalesOf BINGO ??

The data has been collected from 400 retail outlets acrossBangalore.

Out of 400 samples 332 said that Bingo has not been responsive tothe promotional strategies adopted by Lays which constitute 83% of

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the sample while 17% feels that promotions by sales are notaffecting Bingo sales.

Bingos national level campaigns are under talks as they areadjudged for not able to position Bingo. The concept is called

confused positioning discussed in the next page.

Lays has been operating a consumer offer as well as retailers offerwhich is lucrative enough to attract customers. Lays being themarket leader set trends which if not responded by Bingo woulddent the BINGOs aim of being the market leader in next threeyears.

POSITIONING Or CONFUSED

POSITIONING

The word positioning dates back to 1972 was coined by Al Ries and JackTrout. According to them positioning is not what you do to the product,

rather it is what you do to the mind of the customer. In other words, productpositioning refers to all the activities undertaken by a marketer to create andmaintain the concept of value regarding its brand in the minds of thecustomer as against competitors brands.

With the boom in the retail industry, store shelves are becoming moreorganized and sophisticated by the day, providing a wide range of productsto customers. Customers are happy as it gives them immense choice, butmarketers are worried. They have to face the challenge of positioning theirproducts effectively because most brands carry the same product attributes.A greater challenge lies in deciding whether to place the product alongside

competitive brand or whether to opt for an end-of-aisle display.

How would you rate the positioning when you see this commercial

You wonder what "Planet Earth" is when a flock of flamingos fill the TVscreen. The camera closes in on one of them and the narrator goes on togive a description of the flamingo and its features in a monotone.

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Bored? Just hang on for the twist in the tale: the voice-over explains thatwhile flamingos have a long beak to help them find food, they do not havethe mouth-watering combination oftandoori paneer tikka and potato chipsthat Bingo has to offer. A pack shot appears next, with the tag line, "Bingo -No confusion. Great combination."

This commercial is considered as a classic example of CONFUSEDPASITIONING.

Hoardings and DisplaysThere are no Hoardings, Banners, Displays, Cut-outs associated with Bingo.There is no display cost associated as the retailers use them as shade to rainand direct sunlight. During the study a large number of retailers requested

for hoardings as they can use them as shades. This is helpful for thecompany as well as these hoardings can be a source of free promotion.

Another concept is planning of royal corners at the consumption centers.This concept can be used initially near colleges and schools and latertransformed to other parts. This can be used to attract a large number ofyouth towards Bingo royal corner.

Celebrity EndorsementBingo is also hampered by the lack of celebrity endorsement. Almost allother products of ITC have a celebrity endorsing the brand, moreover themajor competitor Frito Lays have three Brand ambassadors in MS Dhoni, SaifAli Khan and Juhi Chawla.

Many researchers have proved that use of celebrity to endorse a brandincreases brand recognization as well as when we go by the sales aconsiderable sales increase is recorded by every brand after they adoptedcelebrity endorsement.

Thus sales can be boosted by use of celebrity endorsement.

Television Commercials

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Television commercials are the most important form of promotion with thepenetration of this form of media to the remotest corners of the countrythere is a need of considering the cultural and regional boundations. Withthese boundations comes the Language boundation which poses a need ofcommercials planned in local language.

If we go by the internet sources Bangalore itself has higher viewers ofKannada channels than hindi channels thus commercials in local languagecan ce used to Boost Sales.

Credit Policies of BINGOCredit days

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Lays offers a credit period of 15 days to 60% of their retailers on theother hand Bingo offers a credit period of 7 days to the bulk of theirretailers

After all Lays is the market leader when Lays is offering 15 days creditperiod Bingo if not more should offer at least 15 day credit period.

The major reason being in 15 days most of the stock with the retailer is

exhausted hence they have earned their investment back thus itseasier for them to pay.

Also when the retailers are given time they feel that the companybelieves in them and thus a more social image of the company isconveyed and more relations can be built thus maintaining a statusquo among retailers.

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Which Company offers youbetter Discounts

Out of 400 samples 312 stated Bingo offers them better discountsconstituting 78% of the entire population remaining 22% preferreddiscounts given by Lays.

Lays having first mover advantage has higher movement i.e. moreaverage sales thus benefiting the retailer with equal profit thoughBingo have higher discounts on offer.

Sales personnel Rating & Average

Business Generated by Sales manDistributors all around Bangalore have 5-12 sales man visiting different salesroutes planned on a weekly basis. These sales man visits retail shops once aweek. Sales man plays a major role as effectiveness of the sales man helpsin increasing the sales. Sales man has to be good at maintaining relationshipwith the retailers thus the rating of the salesman becomes very important.

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Salesman Ratings

Most of the retailers feel there is a scope of improvement and thuscertain role plays and training is required to hone their skills.

Now out of 400 more than 300 have rated the salesman as good and

above.

Performance Based IncentivesThere is no provision for performance based incentives for salesman.Performance appraisal plays a key role in motivating the employees. Aproperly planned compensation plan should be there for the salesman.These incentives can boost the salesman to generate more sales leading to astep forward towards the vision of the company to be the market leader innext three years.

Alternative Arrangements

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There is no alternate arrangement in case a salesman is absent. Due to thisabsenteeism there is no supply on the route allotted to the salesman whichis done only next week when the schedule for the same route comes in nextweek. This creates Inadequacy of stock in the market. This provision is veryimportant to ensure smooth operations.

Use of cigarette hawkers tosupply Bingo is it reallyhelping??Using cigarette hawkers to supply Bingo is it a step in the right direction.There are many reasons which do not signify so. The reasons being-

The cigarette salesman has no personal interest or any incentives in

selling Bingo and thus this supply is not done with full efficiency.

The cigarette salesman forces the retailer to buy Bingo as they wantcigarettes and the retailer who needs cigarettes is under pressure thatonly if he buys Bingo he would get cigarettes. Due to this pressure thesalesman buys Bingo but not with any personal interest to do businesson Bingo but just to have cigarette. This is denting a retailer friendlyimage of ITC. Thesepaanwala shops are backbone of ITC strength,when we talk about supply chain these shops are the strength for ITCwhich no other company has in its kitty.

This pressurized purchase by retailers lead them to dump the stockand next time when the hawker comes the retailer shows the stockwhich has not moved. Hence

Also supply of Bingo through Cigarette salesman deprives theseretailers of the service which a specialized Bingo salesman has to offerto the retailers.

Provision for Out Of Turn supplyOut of turn supply is in case of an emergency or due to sudden increase indemands how the company is able to maintain its stock level across theretail universe. There is no provision to face such a situation.

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Lack of supply of all the variants is a major problem. This is hurting thecompany in two ways firstly the retailers purchase lesser than they wouldhave done if all the variants are available as they have all the variantsavailable secondly the consumers have lesser options to choose from.

More importantly lack of fast moving variants like Mad Angles is a majorconcern. This proper variant supply can boost sales

Average sales per day Bingo VsLays

Average cash sales done by a Bingo salesman is worth Rs.3700compared to an average sales of 5500 done by a Lays salesman

Average credit sales worth Rs.1800 by a Bingo salesman as compared

to Rs.3000 done by his Lays counterpart

This is dependent on the movement i.e. sales of the product.

Lack of supply of fresh stocks

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Another major problem is supply of fresh stock. Many of the retailers andeven consumers expressed their concern regarding the supply of fresh stock.In the modern era there are a large number of health buffs thus this problemshould be given extreme importance as we have already seen companieslike Coca-Cola paying heavily due to quality problems.

Business generated by salesman interms of quantity of Rs.5, Rs.10 &s.20

Around 42% of the business generated by salesman comes from 5rspacket popularly known as Ladi.

Around 37% of the business comes from 10rs packet while theremaining 21% comes from 20rs packet.

An impressive amount of 5rs sales is done by cigarette salesman also.

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Lack of supply of other variantsWhile visiting the sales routes with the salesman it was observed thatimproper supply of other ITC products also affect sales of Bingo. It sohappens people associate companys product to each other, as ITC has alarge product line discrepancies in supply of one product affect the sales ofother product.

It so happened in Banshankari that retailers were not happy with the supplyof Sunfeast and thus they stopped purchasing all ITC products till propersupply of Biscuits was resumed.

Adequacy of stock

Out of 400 shops surveyed 289 respondents rated Bingos adequacy ofstock above 3 i.e. above good. Though 28% feel there is a scope ofimprovement.

Lays also have 70% of the respondents rating it as good.

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Exchange of Damaged & Expiredstock

Out of 400 respondents mere 8% were not satisfied while most of theretailers were very happy with the service provided.

Both Bingo and Lays scored high on this service.

There were no complaints in this part.

Coverage Frequency

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More than 80% of the retailers prefer supply once a week with a mere9% requiring supply twice a week. They can be given order bookingfacility where they can be given extra supply if they need in betweenthe week.

The coverage frequency should be idealized to once a week.

Distributor Vs WholesalerOne of the major problems the Distributors are facing is the undercut.Distributors who are supplying a 5rs packet at 4.46rs are nowhere near thewholesalers who are supplying at a price band of 3.50-4rs to the market.

The fact to be considered is this stock with wholesale distributor is suppliedby one of the distributors only.

This under cut also hampers supply through the distributors.

Source of supply Distributor orWholesaler

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Out of 400 almost all i.e. 97% of the retailers prefer supply by the

Distributor both in case of Bingo and Lays.

The major advantage that supply through Distributor has is

replacement of damaged and expired stock. Also there is a

convenience factor associated as stock is delivered at their outlets.

Payment terms-Credit or Cash

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This chart represents the payment terms on which the retailers do

business with the distributors via these salesmen.A typical characteristic

of any business is that it is carried out mostly on credit. So in case of

F.M.C.G industry it is more prominent.

From the above chart we can conclude that 76% of the businesstakes place in credit. A whooping 398 stores chooses to keep credit

terms with the company.

While a small percentage of 19% has chosen to do business in cash.

Normally these stores are super markets, A Class stores, I.S.S stores

and in some case a few grocery stores.

We see that 5% of the stores are on the defaulters list these are

normally small retail outlets like bakery stores or stores that arereally small and have less business potential.

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Strength

Parent support Brand strength

Product innovation Product Quality First Mover Advantage Brand recognization Supply of fresh stocks and

complete variants

WeaknessSupply chain

Opportunities Expansion Product offerings Global hub

Threats Changing consumer trends Competition Increasing market share of

Bingo

LEARNINGS

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On venturing into the market accompanied by a salesman, I haveunderstood about the marketing strategies adopted by ITC Foods. Over theweeks I have learnt how the order taking process for ITC Foods businessworks. The salesman plays a vital role in this whole process. This can behighlighted as follows:

Normally every salesman has six routes to cover in a week startingfrom Monday through Saturday. These sales routes are determined bythe wholesale distributor who employees them. Normally a wholesaledistributor would have eight to twelve salesmen working for him onlyfor the foods business.

In total the salesman has to do around two hundred services in a weeki.e. he has to visit approximately 200 retail outlet. But this figure isdependent on the sales route and the efficiency level of the salesman.He would have on average 30 35 stores in a day in a particular salesroute.

The availability & visibility of ITC Foods product line is theresponsibility of the salesman. Apart from being an order taker he alsohas to undertake various other responsibility including - how theproducts are displayed, weather all the product lines are available andmake sure that there is no possible chance of a stock out.

One gets to know of how the salesman take the order, how much timeis he able to spend with the retailer, weather is he able to convey allschemes for various product lines from the ITC Foods line.

The salesman is supposed to take order from the retailer based on hisneeds which is normally the products that is the fastest moving in hisarea. He is also supposed to do a stock check for any damaged orexpired goods. This should be exchanged for new ones in the nextdelivery.

Normally if the salesman is to take an order on his Monday sales routethe goods should be normally delivered with in the next 24hrs. But attimes the delivery exceeds beyond this benchmark which has been setby the company. For example recently after the year ending thedelivery of goods were hit severely. Orders that were taken onSaturday were delivered only on next week Friday. This was noticed in

the sales route of Hosa road. These sales routes are under the supervision of a supervisor who in the

past used to be a salesman and after spending enough time on thefield have been promoted. His job is to check what the salesman doeson a time to time basis he would randomly visit any of the sales routewith the salesman any day of the week.

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Promotions are not done in Local languages.

Bingo has been hampered by confused positioning.

There is a need of celebrity endorsement.

Bingo has been caught by lack of responsiveness to Lays moves.

There are no display schemes for retailers though the snack market is

mostly driven by Impulse Buying.

The promotion schemes operated by distributors are not customized

thus entire population of retailers are not benefited.

There are no banners or hoardings which is necessary to increase the

brand recognisation.

Lack of supply of all the variants is hampering the sales of Bingo.

Supply of Bingo through cigarette salesman is not preferred by

retailers.

There is no provision for out of turn supply.

There is no alternative if a salesman is absent.

There is a need of training program for the salesman.

There is still scope of improvement in terms of numerical market

availability.

There is a need to idealize the coverage frequency.

Fresh stock is not available.

Lack of properly designed compensation plan for the salesman. If at all

hey are designed they are not executed.

There are no performance based incentives.

Lack of supervision on salesman.

Delaying to the sales routes a common trend.

There are no day to day targets allotted to salesman.

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Suggestions Promotions in Local languages should be planned to increase brand

recognization.

Celebrity endorsement should be planned.

Consumer offers should be to tackle with the moves of Frito Lays.

Outlets should be classified and low turnover shops should be offered

free packets while high turnover shops should be offered cash

discounts.

The coverage frequency should be idealized to once a week

throughout Bangalore.

Certain training sessions should be imparted to the salesman to hone

their skills.

All the variants should be made available.

Care should be taken that fresh stock is made available to the market.

Only Bingo salesman should be used for the supply of Bingo, the

cigarette hawkers should not be used.

A properly designed performance appraisal is required for the

salesman.

Provision for out of turn supply and should be planned as well as

alternative arrangements for stock supply in cases of absenteeism.

There should be provision for coping with Inadequacy of stock.

The credit period offered to retailers should be increased from 7 days

to 14 days.

Hoardings, Banners and cut outs should be used for promotion.

Display schemes should be introduced.

Schemes like Royal corners should be introduced at consumption

centers.

Day to Day targets should be allotted to salesman.

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BIBLIOGRAPHY

Books

Business Research Methods ICFAI University Press. Marketing Management ICFAI University Press. Marketing management Philip Kotler and Kevin Lane Keller. Sales & distribution I.C.F.A.I publications. Sales & distribution management Tapan K. Panda & Sunil Sahadev.

Cases on

Distribution techniques adopted by H.L.L. Re organizing the distribution system at Nestle India. Distribution channels for Marico.

Internet sources

www.itcportal.com www.google.com www.ciionline.com www.hll.com www.mycandymanclub.com www.nestle.com www.bingeonbingo.com www.quickmba.com

Magazines & Print Media

The Business world. ITC Ltd News. India Today. The Hindu business line.

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Projects

Project on quality of distribution of ITC foods by Mirage AnandanICFAI Business School

Project on Distribution Efficiency of Coca Cola by Gaurav Madan IBSBangalore

final report vibhav pachori - 07bs4792-1

Documents