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SALES AND DISTRIBUTION
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MANAGEMENT

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DISTRIBUTION CHANNEL OF ITC’S VIVEL
SOAPS (FMCG)

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PRATEEK GOEL

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ABOUT THE COMPANY:
ITC is one of India's foremost private sector companies with a market capitalisation of
nearly US $ 14 billion and a turnover of over US $ 5 billion.* ITC is rated among the
World's Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies
by Forbes magazine, among India's Most Respected Companies by BusinessWorld and
among India's Most Valuable Companies by Business Today. ITC ranks among India's `10
Most Valuable (Company) Brands', in a study conducted by Brand Finance and published
by the Economic Times. ITC also ranks among Asia's 50 best performing companies
compiled by Business Week.

ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers,
Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology,
Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products.
While ITC is an outstanding market leader in its traditional businesses of Cigarettes, Hotels,
Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its
nascent businesses of Packaged Foods & Confectionery, Branded Apparel, Personal Care
and Stationery.

In 2005, ITC expanded its FMCG business by launching a range of personal care products
which included soaps, shampoos, conditioner under brand name of Fiama d wills , Vivel
and Superia

ITC's diversified status originates from its corporate strategy aimed at creating multiple
drivers of growth anchored on its time-tested core competencies: unmatched distribution
reach, superior brand-building capabilities, effective supply chain management and
acknowledged service skills in hoteliering. Over time, the strategic forays into new
businesses are expected to garner a significant share of these emerging high-growth markets
in India.

THE PRODUCT
Vivel Di Wills and Vivel are high quality ranges of soaps and shampoos for the upper-mid and mid-
market consumer segments. All products offer a unique value proposition of bringing together
ingredients that provide the benefit of Nourishment, Protection and Moisturisation through one
product, hence providing the ever discerning consumer complete care, which makes her beautiful
and confident.

DISTRIBUTION CHANNEL OF VIVEL SOAP FROM ITC

NEED:
Distribution channels are sets of interdependent organizations involved in the process of
making a product or service available for use or consumption. From the point of view of
making available products and services, the existence of intermediaries between the
products and the ultimate end users is inevitable. This inevitability is primarily due to the
fact that producers can exploit the economies of scale only if they produce in bulk, which in
turn results in the production function getting concentrated in a single location. It is noticed
that channels are created for reaching out to different customers who are spread wide across
territories.

Each channel addresses the needs of the customer. The mass retail and key retail segments
address the convenience aspect as they are located in proximity to residential areas. The
Modern Retail outlets might address the same customer but provides a different value
proposition. It addresses a different need of providing a wide array of products under one
roof when the customer values a shopping experience, and would like to have an experience
of picking up his groceries and personal care products.

For example in case of VIVEL soap, ITC towards making this product reach the end user
had to employ the right channel, and ensure proper strategies are in place towards
maximizing the off take of the product through the channel by the target customers. Now
the availability of the same product at different channel members is different. The product
may be available in boxes and in large quantity at the wholesalers point targeting the
retailers whereas the same product is available in the base pack with the retailers, here
targeting the retailers. Even at this part of the channel, there is a difference. The product at a
local kiryana shop may be available with no offer whereas the same product at a big
departmental store might be available with an offer. This is how each channel member acts
differently with the same motive of increasing sales and profit.

DISTRIBUTION CHANNEL STRUCTURE:

DISTRIBUTION CHANNEL PLAYERS

1) Factories: ITC Limited has two manufacturing facilities of soaps in India. These are located one
each at Bangaluru and Haridwar. Apart from these two there are four other units which manufacture
soaps and other personal care products for ITC. The goods from the factories goes directly to the
Wholesale service providers. These factories are well connected with the branch offices. From here
exchange of information takes place which guides the flow of products to the Wholesale service
providers.

2) Wholesale service providers (WSP):

The role of the WSPs is to simply take delivery of the goods from the factories that the ITC have at
six different locations across India and forward it to the Wholesale Dealers. They are almost the
same as C&F agents in the other companies. They are given commissions for their handling of the
goods. They in turn have to see that the goods reach the next point of the channel that is the
Wholesale dealers in time and safely. They also have to maintain their stock level and see that the
distributor is maintaining their stock as per the norms of the Company.

The stock norms are maintained in ITC as a real time basis. ITC have software named SIFY Forum
for the same. This is a real time software, by the use of which the WSP agent can know the stock
level maintained by the Distributor and vice versa. It also helps in ordering of the stock for the
Distributor and the other channel members.

3) Wholesale Dealer:

A Wholesale Dealer is a channel member in the distribution system which plays a vital role
in the reach of the products of a company to the customers. They buy the products from the
company and in turn deliver to the further channel members at their own cost. They have to
maintain their own Sales force as well all other necessary infrastructure or the manpower necessary
for them so that the goods pass on smoothly and in time to the customers at the POP.

The efficiency of the Distributors can be judged by the ROI that they achieve.ROI or Return on
Investment is the net profit that a Distributor saves for himself. It is determined by the total
Investments made divided by the total expenses. It takes into account all the expenses for a
particular company including the cost of the stock norms that they have to maintain for a particular
company. It also takes into account the rotation of the money made by the distributors, the working
capital maintained and the credit policy given by the Company and the credit policy they applies
further. It also takes into account the Manpower that they have to keep for the smooth functioning of
the channel members. In FMCG industry the healthy ROI is said to be anything between 18%-24%.
But in some cases the Distributors can only maintain a ROI of <15%. It is mainly because of the
inefficiency of the distributor in his distribution of the Goods from the company to the other
members of the Distribution channel. A distributor reduces his ROI if he maintains a high credit
period and his rotation of the working capital is very less. If the rotation is twice a month then the
ROI is said to be 24%. This can be achieved by maintaining a credit period of 10-15 days.

To carry out operations, a WD needs to recruit effective manpower. The manpower includes the
salesman (DS), suppliers, supervisors and computer operators. The salesman goes to the market and
represents the company, hence he needs to be smart and well mannered. It becomes essential for the
WD point to recruit a staff which is capable of effective sell in. The WD point is also required to
recruit suppliers for supplying the goods in the market. Again the suppliers must be well mannered
with good knowledge of the market. The WD point must ensure enough storing place for the
products at the point.

The products from the WD point moves to the retailers and the secondary wholesellers.

4) Wholesalers:

Any product category which is high selling will have wholesalers. Same is in the case of ITC. In the
product category - cigarettes or the next family of product categories - Personal care products, all
have a combination of wholesale and Retail Sale. The only difference between the two is the off
take levels, financial capacity and sometimes infrastructure to deliver to retailers. Normally the rates
for wholesale is cheaper than retail, as it is in bulk. This sometimes led to price cutting in market.
Both retail and wholesale have a role to play. It’s always good to have high retail throughput (Total
Retail Sales/ Total Sales) to have higher control of organization over the retailers. This will help the
organization to launch new brands in future, increase visibility at the outlets, which is just because
of relationship of organization salesman with Trade. At the other end, in case of insufficient supply
from factories or WSPs, there will be sufficient stock to deliver to outlets to serve the conserve.
Also, there are many markets which are practically and financially not possible for much
organizations to cover like less than 10K markets, Here these small retailers in smaller markets get
the stock from these wholesalers which are located at some distance from them.

5) Retailers

These include the retail channels for Personal Care products under the General Trade
category. Key Retail outlets are other large kirana shops which are not wholesalers. They too cater
to residents largely and visitors and passerby’s. The average sale of these stores could vary between
Rs 10000 per month and Rs 40000 per month. These again are serviced once or twice a week
depending on the BPM and the company and the range of products it deals with. The mass retail
outlets are typically serviced once a week and cater to the local populace. Their reach & ability to
cater to the occasional customer mandate their existence. They generally stock those products which
are in demand from the customers and have a good consumer pull. The smaller SKU’s such as
sachets are popular. The company replenishes the stocks on a fortnightly/ weekly basis and has little
influence over the portfolio maintained by the retailers. These outlets are the largest in number and
are key points for the company in terms of reaching the masses.

THANK YOU