Rural Expansion, Inorganic Growth in Punjab

A Summer Project Proposal for

Post-Graduate Diploma in Management

By

Imad Ahmad Khan140201054

26th June, 2015

Rural Expansion, Inorganic Growth in Punjab

By

Imad Ahmad Khan

Under the guidance of

Dr. Jayanthi Ranjan Mr. Mayank PandeyProfessor Branch Sales Manager Institute of Management Technology Perfetti Van MelleGhaziabad Gurgaon

26th June, 2015

Certificate of Approval

The following Summer Project Report titled "Rural Expansion, Inorganic Growth in Punjab" is hereby approved as a certified study in management carried out and presented in a manner satisfactory to warrant its acceptance as a prerequisite for the award of Post-Graduate Diploma in Management for which it has been submitted. It is understood that by this approval the undersigned do not necessarily endorse or approve any statement made, opinion expressed or conclusion drawn therein but approve the Summer Project Report only for the purpose it is submitted.

Summer Project Report Examination Committee for evaluation of Summer Project Report

Name Signature

1. Faculty Examiner _______________________ ___________________

2. PG Summer Project Co-coordinator _______________________ ___________________

Certificate from Summer Project Guides

This is to certify that Mr. Imad Ahmad Khan, a student of the Post-Graduate Diploma in Management, has worked under our guidance and supervision. This Summer Project Report has the requisite standard and to the best of our knowledge no part of it has been reproduced from any other summer project, monograph, report or book.

Dr. Jayanthi Ranjan Mr. Mayank PandeyProfessor Branch Sales ManagerInstitute of Management Technology Perfetti Van MelleGhaziabad Gurgaon26th June, 2015 26th June, 2015

Abstract

Rural Expansion, Inorganic Growth in Punjab By

Imad Ahmad Khan

Perfetti Van Melle India is a fully owned subsidiary with operations in India along with taking care of operations in South Asian countries. PVMI has an exceptional market share of approximately 25% in the Indian Confectionery Market. PVMI has been able to amass such a huge chunk of Market Share by innovation driven ideas in marketing and implementing them effectively. They are responsible for the launch of some of the most creative marketing campaigns and advertisements which have definitely boosted their brand image.

Perfetti Van Melle has some 15 odd brands under its confectionery portfolio with multiple flavors in each brand, each of these flavors has been developed to appeal and please the Indian taste buds. PVMI has always been known to adopt the polycentric approach towards marketing and product development. They believe in attracting the customers based on the tastes and preferences relevant in the host country.

The purpose of this study was to create a working model to derive the feasibility of approaching a new town/village for proposing a local Sub Distributorship. The research was focused to gain useful insight into the local market conditions of the FMCG sector as well as understanding the PVMI way of working.

The project brief was to create a model for identifying new towns for creating distribution footprint using the census town list, Nielsen hit list, Google maps and various elements of the surrounding habitat (number of households, feeder towns, towns/villages across important road networks etc).

The model was developed on the premise of certain variables and their importance to the whole process of opening new Sub Distribution Agencies. These variable were –

Population Number of Retail Outlets Presence of Wholesale Outlets Presence of Coke/Pepsi Distributorship Presence of any other FMCG brand’s Sub DB Distance from the Super Stockist

The major conclusions that were drawn from this study were in terms of the importance of these variables in the performance of the model.

Population – this was the most important variable for the town opening model. FMCG sales are determined majorly on the population size of the village/town. If the population is huge the demand generated from that town will also be huge. Hence we need to determine the correct population of a town before visiting it in order to rightly gauge the potential.

Number of Retail Outlets – this is the second most important variable factor in determining the potential of a town. It is hard to determine the actual number of retail outlets in a town/village without actually visiting one but for the initial potential analysis of a town we can use the calculation to find the number of town retail stores by dividing the total population by the population per retail calculation. In case of Rural Punjab it is close to 243 people per retail store.

i

Presence of Wholesale Outlets – this is an important variable but not one which has high impact on the opening of Sub Distributorship. Wholesalers usually don’t comply with the company’s policy of undertaking active distribution. Company requires the Sub DB to do regular market service whereas wholesalers tend to just sell from their shop and are reluctant to do market service. Hence they are not company’s first choice of Sub DB.

Presence of other FMCG brand’s Sub DB – This is one of the most important factors in determining the feasibility of visiting a new town to offer Sub Distributorship. If a village/town already has a working Sub DB of some other FMCG company then he is already aware of what will be required of him. He is already distributing goods for another company and Perfetti’s products will just enhance his product portfolio. It has also been noticed that these are the kind of people who are more open to taking company’s distributorship readily.

Data was collected from 44 towns and the research was done using a questionnaire. The methodology adopted was –

Analysis of the company data, i.e. Census Town List and Nielsen Hit List. Questionnaire building Collection of data Analysis of the collected data

ii

Table of ContentsAbstract...........................................................................................................................................iAcknowledgement..........................................................................................................................vList of Figures...............................................................................................................................viList of Tables................................................................................................................................viiAbbreviations..............................................................................................................................viii

Chapter 1........................................................................................................................................1Introduction....................................................................................................................................1Chapter 2........................................................................................................................................3Confectionery Industry.................................................................................................................3Chapter 3........................................................................................................................................4Literature Review..........................................................................................................................4Chapter 4........................................................................................................................................6Rural Expansion, Inorganic Growth in Punjab..........................................................................6

A. Objective..........................................................................................................................6B. Tools Used........................................................................................................................6C. Research Methodology...................................................................................................6D. Analysis............................................................................................................................8E. Success and Shortages..................................................................................................11

Chapter 5......................................................................................................................................12Conclusion and Recommendation..............................................................................................12

A. Conclusion......................................................................................................................12B. Recommendations.........................................................................................................12

References.....................................................................................................................................13

iii

Acknowledgement

I would like to express my deepest gratitude and special thanks to Dr. Jayanthi Ranjan, Professor, IMT Ghaziabad, for providing me with immense guidance and support throughout the duration of my summer internship and for the development of this project report.

I wish to express my sincere thanks to Mr. Mayank Pandey, Senior Branch Sales Manager, Perfetti Van Melle India, for his constant engagement in the project and for the way he taught me all the concepts involved and used in the making of this project report. He was always there for me and never once I felt out of place under his active guidance. Most importantly I would like to thank him for the time he provided me despite of his busy schedule.

I would also like to thank Mr. Ajay Singh (ASM), Mr. Sanjeev Kumar (DSE), Mr. Ashok Kumar (DSE), Mr. Rishi Mehra (DSE) and Mr. Sunil Nagpal (PSR) at Perfetti Van Melle India who I came in contact with over my tenure in Punjab, for giving me this wonderful opportunity of working with them and to achieve such a huge milestone in my professional as well as academic life.

Last but not the least I would like to thank IMT Ghaziabad, for providing me with this wonderful opportunity and the right platform to shape my career and excel in my academic knowledge through this summer internship. I wish to express my gratitude to all my fellow students, especially Farhan Habib who helped me in completing the project successfully.

Imad Ahmad Khan

140201054

PGDM-DCP

iv

List of Figures

Figure No. Description Page

Figure 1 – Hub and Spoke Model..................................................................................................................4

__________________________

v

List of Tables

Table No. Description Page

Table 1 – Survey Sheet..................................................................................................................................7Table 2 – Population per Retailer..................................................................................................................8Table 3 – Distributor/Sub DB of another company.......................................................................................9Table 4 – Population Rating..........................................................................................................................9Table 5 – Number of Retailers Rating...........................................................................................................9Table 6 – Wholesalers Present Rating...........................................................................................................9

Table 7 – Coke/Pepsi Distributor Rating 9

Table 8 – Distance from Super Stockist Rating.............................................................................................9Table 9 – New Town Opening Model.........................................................................................................10Table 10 – Total Retailers............................................................................................................................12

________________________________

vi

Abbreviations

PVMI – Perfetti Van Melle India

FMCG – Fast Moving Consumer Goods

SS – Super Stockist

Sub DB – Sub Distributor

DSE – Distribution and Sales Executive

PSR – Pilot Sales Representative

DPO – Display per Outlet

vii

Chapter 1

Introduction

About the company:

Pefetti Van Melle India Pvt. Ltd. is the manufacturer of various high quality confectionery products. PVMI undertakes manufacturing, distribution and marketing of various brands under its umbrella across various segments (i.e. hard boiled candies, chewing gums, functional gums and chewies). PVMI is a fully owned subsidiary of Perfetti Van Melle,  headquartered in Lainate, Italy and Breda (the Netherlands).

Center Fresh was the first brand launched by PVMI in 1994, when it entered the Indian market, followed by Alpenliebe and Big Babool. With several brands such as Alpenliebe, Alpenliebe POP, Centre Fruit, Juzt Jelly, Mangofillz/Creamfills, Chlormint, Chocoliebe, Happydent, Marbels and Mentos in its portfolio, PVMI has an estimated market size of Rs. 5,500 cr. and growing.

PVMI follows an aggressive approach to maintain its market position backed by its wide network of sales force and distributors (10,000 sub-stockists) covering 7,000 towns.

PVMI looks after operations in several neighboring countries including Bangladesh, Sri Lanka, Nepal, Bhutan, Pakistan, Maldives and Myanmar.

Vision Statement:

We will enhance our world leadership in confectionery by creating value for consumers through innovative and gratifying high-quality products.

Mission Statement:

We at PERFETTI VAN MELLE

Develop, manufacture and market high-quality and innovative products for our consumers through the efficient use of our resources and in collaboration with our business partners;

Create a fulfilling workplace for our employees built on trust, mutual respect, and appreciation of their diversity;

Value the role we play in our communities, as a socially and environmentally committed organization;

Generate economic value through superior growth and profitability.

Continuous focus on these principles will lead us toward Our Vision.

Some of the major brands:

Alpenliebe: PVMI’s flagship brand and a market leader in the confectionery sector. It is a milk-caramel based toffee which has a very rich flavor and texture. It was launched in 1995 in its original caramel flavor and is now available in Lollipop, Strawberry, Mangofillz and Creamfills variants.

Center Fresh: Another flagship brand from PVMI, was the first brand launched by PVMI in 1994. It is currently the most selling chewing gum in India and is a pioneer in the liquid filled chewing gums segment. Spearmint, Sweetmint, Peppermint and Endless are the four flavors Center Fresh is currently available in.

1

Center Fruit: Launched in 2006, it quickly gained the maximum market share in the Bubble Gum segment. Center Fruit also has a liquid filled center like Center Fresh. Tutti Fruity, Mingle, Strawberry, Maharaja Mango, Watermelon, Xplod are some of the most selling flavors. Out of these Tutti Fruity is the most selling PVMI bubble gum flavor.

Happydent: PVMI’s functional gum, it was launched in 2009. It is available in Wave and White variants. It contains baking soda which helps in maintaining white healthy teeth. It is more focused towards urban population with a very small rural market presence.

Mentos: Launched in 2004, it is PVMI’s chewy toffee for the Indian audience. It is available in Mint, Strawberry, Watermelon, Cola, Lemon and Orange. It is hard from the outside but chewy from the inside. PVMI changed the price from 50 Ps. to 1 Rs. recently which has resulted in considerable loss of market share to ITC’s Mint-O.

Juzt Jelly: Launched in 2012, it is PVMI’s jelly offering to the Indian market. Available in Guava, Litchi, Orange and Strawberry flavors.

Chapter 2

Confectionery Industry

2

Confectionery in India is categorically divided into three broad segments:

Chocolate confectionery Moulded Count Segment Panned Segment Éclairs Premium chocolate

Sugar confectionery Hard Boiled candies Toffees Gum-based confectionery Mints

Gum based confectionery Chewing gums Bubble gums Functional gums

Indian confectionery market is valued at close to INR 9000 cr. and is expected to grow at a constant rate of 8% each year. Sugar confectionery holds the major chunk of the confectionery market in India at around 46% followed by chocolate and gum segment.

Perfetti Van Melle’s Competitors:

Parle Products Pvt. Ltd. Candico India Ltd. Wrigley India Pvt. Ltd. Cadbury India Ltd. Lotte India Corporation Ltd. Godrej Hershey Ltd. Nestle India Ltd.

Chapter 3

Literature Review

A. Hub-Spoke Model

Hub-Spoke model is similar to a chariot wheel where the Super Stockist is the central base from which are connected various spokes, i.e. the Sub Distributors. The Super Stockists are appointed by the

3

company, they maintain a considerable level of the company’s stock and are responsible for the delivery of company’s products to various Sub Distributors in their region.

This particular form of distribution arrangement allows the company to farther its reach in the rural market as it cannot undertake direct supply to the local stores in the villages/towns due to time constraint and lack of transportation resources. For this very reason this Hub-Spoke Model becomes highly relevant for the company’s operations. FMCG companies can now ensure that their product reaches the market constantly and efficiently.

In a Hub-Spoke model, the company supplies the Super Stockist from its depot. This Super Stockist in turn supplies the Sub DBs from time to time. The supply to a Sub DB can also be done in a cluster, i.e. when a cluster of villages lying together can be supplied together so that the Super Stockist doesn’t have to service a single Sub DB which would be a waste of both time and resources. By catering to cluster of villages/towns the Super Stockist can avail the benefit of economies of scale.

(Figure 1)

A single Super Stockist will cater to its surrounding towns and hence will be centrally located to them, hence a Hub. In most of the FMCG companies, the Hub i.e. the Super Stockist is not allowed to sell the company’s products in the market, their sole purpose is to distribution to the spokes i.e. Sub Distributors. The Super Stockist gets a fixed margin on the products, in case of Perfetti Van Melle India Ltd. it was 2% margin. Super Stockists are also paid freight charges based on different fixed or percentage basis. In case of Perfetti Van Melle India it was 17 Rs. per carton.

The Sub DB’s responsibility is to distribute products to the retailers and wholesalers. Sub DB also get a fixed margin, which in case of Perfetti Van Melle India is 3.5%. The margin given to Sub DB is usually higher than the margin of a Super Stockist due to the difference in the volume.

B. Pilot Sales Representatives (PSR) and Distribution & Sales Executives (DSE)

The company usually has representatives appointed to assist the Sub Distributor in generating sales. These representatives are on the company’s payroll and are called PSRs (Pilot Sales Representatives).

4

PSRs are the company’s foot soldier and are a focal point of contact between the retailers/wholesalers and the company. They are allotted various towns and they have to visit them frequently to boost the sales of the retailers and wholesalers. Other than generating sales and acting as a link between the Super Stockist and the Sub DB they are also responsible for opening new towns and increasing the company’s reach. They have to stimulate the sales of focus brands and ensure range selling rather than booking sales for company’s flagship brands which already have a ready market.

DSEs on the other hand are responsible for organizing and controlling the PSR’s town visits. They are expected to review the PSR’s work and usually have between 3 to 5 PSR per DSE. The PSR carries out the market survey in case of new town openings and then the DSE visits the targeted town to finalize on any suitable Sub Distributor. DSE’s role is more of a managerial nature since he has to organize the Super Stockists activities also. Every Super Stockist has a DSE assigned to them to keep an eye on the PSR’s working and to increase the reach of the company by increasing the spokes i.e. creating more Sub Distributors.

C. 3P Distribution Model

While most big FMCG companies have footprints in rural towns and villages, they service the market only once a week through their PSRs. Whereas at Perfetti Van Melle, the product portfolio has been divided into three parts P1/2/3. Based on the potential of the town the company allots the portfolio. If it is a big town with a huge population base then there can be multiple Sub Distributors for different portfolio, i.e. one Sub DB will be allotted P1 portfolio and another will be allotted P2 and P3. This reduces the burden on one Sub DB in terms of billing and maintaining high inventory. It also serves another purpose which is multiple market service by their Sub DBs. This ensures that the market has been serviced atleast thrice, atleast once by each P1, P2 or P3 Sub DB. This increases the brand visibility and also helps in boosting sales at small retail shops such as Keryana stores and Paan/Bidi shops who though are responsible for majority of company’s sales but don’t have enough capital to keep all the products/flavors at once.

Chapter 4

Rural Expansion, Inorganic Growth in Punjab

A. Primary Objective

Create a model for identifying new towns for creating distribution footprint.

B. Tools used

1. Census Town List

5

2. Nielsen Hit List3. Google Maps 4. Local Survey

C. Research Methodology

The research was conducted in three phases:

1. Analysis of the company data, i.e. Census Town List and Nielsen Hit List: raw data was provided to us by the Perfetti Van Melle’ MIS team regarding the geographical area we were going to work in. In my case it was Rural Punjab. They gave us two reports, Census Town List and Nielsen Hit List. Census Town List provided us with the population of all the towns in Rural Punjab. This was very helpful since it helped in determining which towns to target. Nielsen Hit List on the other hand gave us hands on information about all the towns that were opened and the ones that were yet not opened along with crucial competitor’s information. With this we were able to get the basic understanding of the town before visiting the town.

2. Questionnaire building: Since my work required me to create a working model to benchmark data and to determine whether it is feasible to visit a town for creating Sub Distribution based on the data collected by the PSR, I had to design and develop a basic Questionnaire that would help in recording all the data about the town. This would help in collection of the data in a standardized manner and input of this collected data in the model would be easier. The survey conducted in the proposed towns would provide us with the required variable inputs proposed model. Some of the variable inputs for the model are- Population, Number of Retail Outlets, Presence of Wholesale Outlets, Presence of Coke/Pepsi Distributorship, Presence of any other FMCG brand’s Sub DB, Distance from the Super Stockist.

3. Collection of Data: After successfully designing a relevant questionnaire it became easier to collect data from the market. For this I had to set out in the market and survey local keryana stores. Based on the variables, information was collected. In this whole process some 44 towns were visited and surveyed. During these visits I was able to successfully open nine new Sub Distributors for Perfetti Van Melle India.

Survey SheetDateName of Town VisitedTehsilDistrictDistance from Super StockistFeeder TownPopulation Number of Retail outlets in the townNumber of Wholesale outlets in the town

6

Coke/Pepsi distributorDistributors/Sub DB of other companies met PVM brand seenSource of Purchase Key FMCG brands (Confectionery/Non Confectionery) seen in the townSource of purchase Telephone number of Retailers/Wholesalers/Distributors met1)2)3)4)5)6)7)8)9)10) Recommendation (Open Sub DB/Ignore)

(Table 1)

D. Analysis

Population of Punjab according to Census 2011 is approximately 27 million out of which approximately 65% (17 million) resides in rural Punjab. This just shows the potential of FMCG companies in rural India since majority reside in rural.

Below is the table for calculating Population per Dealer-

Markets CompanyTotal Retailers

Population per Dealer

PunjabCONFECTIONERY - SUPER CATEGORY 138389 200

Punjab PERFETTI VAN MELLE 102418  

7

Punjab – UrbanCONFECTIONERY - SUPER CATEGORY 67139 155

Punjab – Urban PERFETTI VAN MELLE 49716  

Punjab – RuralCONFECTIONERY - SUPER CATEGORY 71250 243

Punjab – Rural PERFETTI VAN MELLE 52702  (Table 2)

This table assisted in arriving at the number of retailers in a town since the population was readily available from the Census Town List. This was helpful in arriving at the prospective retail outlets before actual town visits. According to the calculations, there is approximately one retailer per 243 people in rural Punjab.

Below is the table which is the model that was developed after the data collected in the survey was entered and analyzed.

The variable taken for the model are- Population Number of Retail outlets in the town Wholesale Outlets present in the town Coke/Pepsi Distributors present in the town Distributors of other FMCG brands present in the town Distance from the Super Stockist

Each of these variables were assigned weights according to their importance to the model and their contribution to the successful opening of a new Sub Distributor in a town not already covered by Perfetti Van Melle India.

Each variable was categorically rated (between 1 to 5) for convenience according to their importance.

Distributors / Sub DB of other companies Rating

Yes 5

No 1

Table (3)

Population Rating<5000 1

5000-7500 27500-10000 3

10000-12500 412500< 5

8

(Table 4)

Number of Retailers Rating

<10 110-15 215-20 320-25 425< 5

(Table 5)

Wholesaler Present Rating

Yes 5No 1

(Table 6)

Coke / Pepsi distributor Rating

Yes 5No 1

(Table 7)

Distance from SS Rating<40 5

40-60 460-80 380-100 4

100< 1(Table 8)

Each rating was then multiplied to the weights assigned to the variable which gave us the credit rating for the variable. The Total Credit Rating was calculated by adding all the credits from each variable for a town. We could determine a threshold credit level using historical data as well as the data from the towns I had visited and collected information from. This threshold level would help the company’s DSE to decide whether it was feasible to visit the town in question. While working on the model I came to a successful credit level of 3, above this level I was able to successfully open a new Sub Distributor in a town not covered by Perfetti Van Melle. The Yellow highlighted area denotes the towns opened by me while the Green highlighted area is the historical data used to verify the model’s accuracy.

9

Weights

Town PopulationPopulation

Credit

No of retail

outlets in the town

Retail Credit

Wholesale outlets in the town

Wholesale Credit

Coke / Pepsi

distributorCoke/Pepsi

Credit

Distributors / Sub DB of

other companies

Other Distributor

CreditDistance from SS

Distance Credit

Total Credit

Shutrana 11000 0.8 28 1.5 No 0.1 Yes 0.5 Yes 1.25 110 0.05 4.2Kakrala 7000 0.4 18 0.9 No 0.1 Yes 0.5 No 0.25 50 0.2 2.35Ghular 4500 0.2 13 0.6 No 0.1 No 0.1 No 0.25 115 0.05 1.3Kularan 5800 0.4 16 0.9 No 0.1 Yes 0.5 Yes 1.25 80 0.1 3.25Alohran 3000 0.2 6 0.3 No 0.1 No 0.1 Yes 1.25 40 0.2 2.15

Said Kheri 4100 0.2 12 0.6 No 0.1 No 0.1 No 0.25 50 0.2 1.45Sehra/Sehri 2100 0.2 8 0.3 No 0.1 No 0.1 No 0.25 35 0.25 1.2Badrukhan 7800 0.6 20 1.2 No 0.1 Yes 0.5 Yes 1.25 90 0.1 3.75

Mehlan 7200 0.4 18 0.9 No 0.1 Yes 0.5 No 0.25 60 0.15 2.3Chhahar 5500 0.4 15 0.9 Yes 0.5 Yes 0.5 No 0.25 95 0.1 2.65Ubhawal 2400 0.2 6 0.3 No 0.1 Yes 0.5 No 0.25 85 0.1 1.45Kanjhla 4900 0.2 13 0.6 No 0.1 Yes 0.5 Yes 1.25 85 0.1 2.75

Sialba/Khizrabad 9000 0.6 25 1.5 Yes 0.5 Yes 0.5 Yes 1.25 50 0.2 4.55Gharuan 5000 0.4 15 0.9 No 0.1 Yes 0.5 Yes 1.25 65 0.15 3.3Sohana 9000 0.6 25 1.5 Yes 0.5 Yes 0.5 Yes 1.25 50 0.2 4.55

Joga 10000 0.8 28 1.5 No 0.1 Yes 0.5 Yes 1.25 60 0.15 4.3Sehna 15000 1 35 1.5 No 0.1 Yes 0.5 Yes 1.25 65 0.15 4.5Sekha 6000 0.4 15 0.9 No 0.1 No 0.1 No 0.25 75 0.15 1.9

Thikriwala 9000 0.6 22 1.2 No 0.1 Yes 0.5 Yes 1.25 70 0.15 3.8Bhai Rupa 15000 1 30 1.5 No 0.1 Yes 0.5 Yes 1.25 50 0.2 4.55

Guru Kotha 10000 0.8 20 1.2 No 0.1 Yes 0.5 No 0.25 40 0.2 3.05Mehma Sarja 5000 0.4 15 0.9 No 0.1 Yes 0.5 No 0.25 20 0.25 2.4

Kot Shamir 13000 1 27 1.5 No 0.1 Yes 0.5 Yes 1.25 13 0.25 4.6Kot Fatta 7000 0.4 17 0.9 No 0.1 Yes 0.5 No 0.25 20 0.25 2.4

Pakho 3000 0.2 7 0.3 No 0.1 No 0.1 No 0.25 55 0.2 1.15Langeana 4000 0.2 15 0.9 No 0.1 No 0.1 No 0.25 60 0.15 1.7

Singhanwala 5000 0.4 15 0.9 Yes 0.5 Yes 0.5 No 0.25 65 0.15 2.7Raoke 6500 0.4 15 0.9 No 0.1 No 0.1 No 0.25 85 0.1 1.85

Manuki 10000 0.8 25 1.5 Yes 0.5 Yes 0.5 No 0.25 80 0.1 3.65Chirak 7000 0.4 15 0.9 No 0.1 Yes 0.5 No 0.25 70 0.15 2.3Ronta 8000 0.6 19 0.9 No 0.1 Yes 0.5 No 0.25 95 0.1 2.45

Samadbhai 8500 0.6 18 0.9 No 0.1 Yes 0.5 No 0.25 85 0.1 2.45Lopon 10000 0.8 25 1.5 Yes 0.5 Yes 0.5 No 0.25 85 0.1 3.65Buttar 5500 0.4 16 0.9 No 0.1 Yes 0.5 No 0.25 75 0.15 2.3

Gholia Kalan 5000 0.4 15 0.9 No 0.1 Yes 0.5 No 0.25 75 0.15 2.3Gholia Khurd 3500 0.2 13 0.6 No 0.1 Yes 0.5 No 0.25 75 0.15 1.8

Bilaspur 5500 0.4 15 0.9 No 0.1 Yes 0.5 No 0.25 95 0.1 2.25Himmatpura 5000 0.4 15 0.9 No 0.1 Yes 0.5 No 0.25 100 0.05 2.2

Dhudike 6000 0.4 13 0.6 No 0.1 Yes 0.5 No 0.25 80 0.1 1.95Rode 6000 0.4 18 0.9 Yes 0.5 Yes 0.5 No 0.25 65 0.15 2.7

Ghal Kalan 8000 0.6 20 1.2 No 0.1 Yes 0.5 No 0.25 50 0.2 2.85Khokri Kalan 8300 0.6 25 1.5 No 0.1 No 0.1 No 0.25 75 0.15 2.7

Saidhoke 6000 0.4 18 0.9 No 0.1 Yes 0.5 No 0.25 95 0.1 2.25Machhike 5000 0.4 15 0.9 No 0.1 Yes 0.5 No 0.25 100 0.05 2.2

Bhagibandar 7000 0.4 15 0.9 No 0.1 Yes 0.5 No 0.25 25 0.25 2.4Bhalaiana 7000 0.4 15 0.9 No 0.1 No 0.1 Yes 1.25 42 0.2 2.95

Boha 12000 0.8 30 1.5 Yes 0.5 No 0.1 Yes 1.25 98 0.1 4.25Khoiya Sarwar 6000 0.4 25 1.5 Yes 0.5 No 0.1 Yes 1.25 115 0.05 3.8

Kot Bhai 13000 1 20 1.2 No 0.1 No 0.1 Yes 1.25 32 0.25 3.9Mehal Kalan 8000 0.6 15 0.9 No 0.1 Yes 0.5 Yes 1.25 92 0.1 3.45DHANOLA 20000 1 22 1.2 Yes 0.5 No 0.1 Yes 1.25 78 0.15 4.2Roranwali 2000 0.2 20 1.2 No 0.1 No 0.1 Yes 1.25 90 0.1 2.95

Ghallu 5000 0.4 20 1.2 No 0.1 Yes 0.5 Yes 1.25 94 0.1 3.55Rupana 9000 0.6 30 1.5 Yes 0.5 No 0.1 No 0.25 65 0.15 3.1

Sitto gunno 5000 0.4 20 1.2 Yes 0.5 Yes 0.5 Yes 1.25 78 0.15 4Raman mandi 22000 1 50 1.5 Yes 0.5 No 0.1 Yes 1.25 50 0.2 4.55

Bhikhi 18000 1 30 1.5 Yes 0.5 No 0.1 Yes 1.25 70 0.15 4.5

0.050.20 0.30 0.10 0.10 0.25

(Table 9)E. Success and Shortages of this Model

The model has delivered 75% positive response conducted on the data collected by me and has also verified all the data provided by a DSE. Out of the 24 towns shortlisted above the 3 credit, 18 have been successfully opened while I was unable to open 6. This only proves that the model can actually provide useful insight when deciding whether it would be fruitful for the DSE to visit a particular town to open a Sub Distributor network. Since all the variables taken for this model are highly relevant to the process of Sub Distributor appointment, it only signifies the importance of the model where currently the DSE’s working resembles a Hit/Miss approach where he has no prior knowledge about the town. With this

10

model he can be better prepared and will know what credit the town is and hence will perform better to achieve the expected results.

This model can act as a supporting tool for analyzing potential towns along with Nielsen Hit List and Census Town List.

Allocation of the weights is based on the importance of the factors and in each market different factors might be relevant. The factors chosen by me were relevant for the Punjab Rural Market and will not necessarily be relevant for any other market.

The model does not include Distance from Feeder Town, though this is an important deciding factor in some cases, it is unfortunately irrelevant in many others. In some cases the distance from a feeder town is a lot, in such a case the possibility to open a Sub Distributor of the company in that cluster would be easier since the local retail store owners would have to travel huge distance to buy company products. A local Sub Distributor hence would be a welcome change for them.

The local market conditions also play a huge role in determining the final outcome. Sometimes there is intense rivalry among the local retailers and as a result they refrain from purchasing stocks/products from each other, in such a case sub distributorship is bound to fail since all of them would go to big towns to purchase inventory.

Chapter 5

Conclusion and Recommendation

A. Conclusion

Below is a table showing the number of retail outlets in Punjab along with the number of outlets already covered by Perfetti Van Melle.

11

Markets Company Total Retailers

PunjabCONFECTIONERY - SUPER CATEGORY 138389

Punjab PERFETTI VAN MELLE 102418

Punjab - UrbanCONFECTIONERY - SUPER CATEGORY 67139

Punjab - Urban PERFETTI VAN MELLE 49716

Punjab - RuralCONFECTIONERY - SUPER CATEGORY 71250

Punjab - Rural PERFETTI VAN MELLE 52702(Table 10)

From the above calculations we can see that there is a clear advantage in terms of potential of opening new towns, especially in the Rural sector where the company has not been able to tap approximately 20,000 retail stores. Hence using the above model the company can derive the feasibility of a certain cluster of villages/towns and then target them accordingly.

B. Recommendations

1. Retail stores in small towns are incapable of affording Sub Distribution Agencies, they neither have the Financial resources nor the workforce to undertake distribution activity.

2. Towns like these should be catered by the Super Stockist directly since the retailers are willing to purchase company’s products but can’t afford dealership. Such practice has been successfully implemented by Coca Cola in which their dump supplies all the retail stores directly in case where the town has no company appointed Sub Distributor. This ensures the company’s footprint in even the remotest towns/villages.

3. Sales in Rural market is negatively affected by the delivery salesmen from the cities who provide extra margin. This is because they purchase their goods from the company’s modern trade centers like Best Buy and Big Bazaar where they get better margins. Most times the margin is more than what the company is offering through the distribution network. Hence they are able to pass on the benefit of better margin to the retailers. Rural market is lost in such a case and no one is willing to take up Sub Distributorship Agency of the company.

4. A clear decision should be taken regarding sales and price equity. So Perfetti Van Melle India must decide whether they want to sell cheap or sell more.

12

References

Businessteacher.org.uk,. (2015). Perfetti Van Melle Italian Global Manufacture. Retrieved 4 July 2015, from http://www.businessteacher.org.uk/essays/marketing/perfetti-van-melle-italian-global-manufacture.php

Perfettivanmelle.in,. (2015). Perfetti Van Melle » PVM in India. Retrieved 4 July 2015, from http://www.perfettivanmelle.in/about-us/pvm-in-india

IBEF.org,. (2015). Retrieved 4 July 2015, from http://www.ibef.org/download/Perfettivan_01feb08.pdf

13