PepsiCo SDM
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Transcript of PepsiCo SDM
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Sales & Distribution Management Project
IIM Kozhikode
Group No 7
istrib ution
Model
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Agenda
Marketing Channel Strategy
Distribution Network Design
Channel Members and their operations
Distribution Network Logistics
Asset Management
Company offers and incentives
Reverse Supply Chain
Issues & Challenges
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Distribution Channel Strategy
Global food & beverage leader with netrevenues of $65 billion. It entered India in 1989
38 Beverage plants, 3 food plants. Currentturnover is more than Rs. 1000 crore top 5markets of PepsiCo. Product portfolio in India 16 brands in Foods and Beverages.
Typical Soft drink supply chain
Pepsi Co distribution models
Direct StoreDelivery
Employees take directorders and deliver
previous orders
Vending &Foodservice
system
To make productsavailable in schools,colleges, canteens,
restaurants etc
BrokerWarehouseDistribution
Less perishableproducts like softdrinks. Third party
distributors areemployed
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Distribution Network Design
3 nearby manufacturing plants:Bangalore (Mysore Highway),
Palakad, Plachimada
3 distributors in Calicut Areawith turnover of about 2Cr.
Territories: Kozhikode,Koduvulley, Mukkar
2 wholesalers inKunnamangalam- Malabar, Minar
1500 retailers forProfile Enterprise.
Total 2800 retailersin Calicut area
500ml can, 600ml bottle, 1 litre,2 litre - 7Up, Mirinda, Pepsi
350 ml bottles Slice andNimbus 1ltr, 2ltr Aquafina and Lehar
Sample SKUs
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Retailers: Channel Members and their operations
Retailers: one who sells goods to customers. Items are purchased from manufacturers and wholesalersand sold at marked up price. Also known as merchant.
We observed three types of retailers in Kunnamanglam Organized retail: large retail outlets which stocks up large variety of products. We visited Reliance
Fresh and Day Mart. We observed that Pepsi freezers stocked up with Coke also. There wereweekly visits by the distributors who were not harsh on the retailers for doing so. They justadvised them to keep only Pepsi in those freezers.
Bakery : nearby bakeries and restaurants like KK Bakery, Spanish Bakery, Hotel Sangamam, ChickenChicago, Broast. They all talked about the schemes under which they order aerated drinks.
Restaurants: Both the restaurants(Broast & Sangamam) had Pepsi sponsored freezers. Even theykept coke stocks in them and no penalties was charged.
Reliance Fresh Broast Restuarant Day Mart
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Around 90% market share in almost all products (Only for Slice 60%)
Highest selling SKUs 600 ml, 250 ml, 2 ltr
Minimum inventory levels decided by Pepsi, separately fordifferent SKUs for different distributors Wholesalers are very few( about 1% of all the retailers) Season: August to May (Off season only 2 months in Kozhikode
area) Source of supply- Palakkad plant (Everything except Tropicana) Reliance gets directly from plant (company), rest all get through
distributors No schemes are offered to wholesalers and treated same as
retailers (trying to minimize wholesalers) Supply time for distributor (2 days from the order placing day)
and Supply time for retailer(1 day) Cold storage is given to new retailers also based on revenue
predictions Retailers get incentive in terms of extra PepsiCo items (mostly no
cash discounts)
Profile Enterprises, Ashokapuram, Kozhikode
Pepsi Cos exclusive distributor Turnover 1 Crore Employees 20 1 small warehouse Market coverage Kozhikode city area (60%
revenue)
Margin Rs. 23 average per case for allproducts (Higher for 2 ltr packs)
Empty glass bottle system The distributor pays separately for the glass bottles to the company in advance when placing first order Cycle is repeated unless the distributor moves out of business. At that time only the initial advance for glass bottles is
refunded The glass bottle collection depends on the market . In other parts of India, separate dedicated trucks are sent to collect the
bottles. But in Kozhikode the glass bottle market is very low, so the supply truck itself gets the glass bottles back fromretailers to distributors.
s r u ors o esa ers: anne em ers an e roperations
Observations
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Logistics
Through their use of the most modern technology, PepsiCo and its bottlerswere able to improve their distribution and logistics managementoperations significantly
To further improve the market penetration, PepsiCo launched two new
distribution methods in early 2000s - chilled DSD system and the hybridsystem The chilled DSD system was a relatively small distribution method, created
for items which required continuous refrigeration
Sold beverageconcentrate to
bottlers
Bottlers addedcarbon dioxide,
sweetener and waterto make beveragesand beverage syrup
Syrup was either solddirectly to thefountain accounts orwas combined with
carbonated water forbottling
Advanced Logistics System in place by PepsiCo
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Asset Management
Refrigerator
Refrigerator is provided to retailer by PepsiCo throughthe distributor on the first purchase order for free
Distributer and company representative present duringthe installation
Monitoring PepsiCo has hired a third party company to monitor the
products stored in the fridge Third party provides an unbiased evaluation report to
PepsiCo directly Surprise visits happen once in 7 days or 15 days
If other company products are found the fridge is takenback PepsiCo executives also visit the retail stores
occasionally prior to which the distributor visits theretailer shop and sets up shop as per PepsiCo guidelines
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Company offers Company offers vary with respect to season. The current offers are available in two
different categories:
Other incentives For displaying PepsiCo brands in display
retailer earns Rs. 500 per month
Company offers and incentives
7up, Pepsi, Mirinda: 1 case free withpurchase of 10 cases
Lehar, Aquafina: 3 cases free withpurchase of 10 cases
Mix of different SKUs within the category isallowed
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In order to build good relationship with the retailers andpush sales of PepsiCo products the company has come upwith a new scheme during Onam season named Joy ofOnam .
Scheme Period: 15 th September,2014 to 15 th October, 2014
Criteria:
Rewards: Invitation to evening party at Taj, Foreign holidays,
Samsung galaxy smartphones Tshirts, Bags. IPLtickets were given to top retailers in the previousyear
The retailer should sell 150 cases of any PepsiCo products
Refrigerator should be stocked with only PepsiCo products
50-100 units of PepsiCo products put on display in the store
Company offers and incentives
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Reverse Supply Chain
Damaged Goods
If products are damaged inside the case, it canbe returned to PepsiCo order delivery guy withfull refund
Glass Bottles
4 cases of glass bottles are given in advance For future transactions, number of cases that
can be ordered is equal to number of casesreturned by retailer
Same vehicle is used for both plastic and glassbottles
No refrigeration is present inside vehicle
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For Pepsi, 7up, Mirinda
For Aquafina and Lehar
Retailer Margins
Item Amount(Rs.)
Sales Revenue (1 Case) 840
Purchase Cost from Distributor 774
Profit per purchased case 66
Profit earned from free case 840
Total profit on sale of 11 cases 1500
Profit per case 136
Profit Margin per case 17.5%
Item Amount(Rs.)
Sales Revenue (1 Case) 240
Purchase Cost from Distributor 207
Profit per purchased case 33
Profit earned from free case 720
Total profit on sale of 11 cases 1050
Profit per case 81
Profit Margin per case 33.75%
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Challenges
Distributor often has to combine bills to two or more retailers to meet hisvolume or margin targets
Margin and Volume pressures
Many retailers buy solely based on schemes offered by the supplier hencecorrect and timely communication of schemes is important
Communication of schemes
Local brands compete for share of sales, are stocked by retailers and generallyhave higher margins as compared to Pepsi
Local brands/Duplicate brands
Health consciousness and the variety of available beverages leads to shiftingconsumer preferences that are difficult to track
Shifting consumer patterns
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