CHAPTER I

INTRODUCTION
FMCG IN INDIA
SCOPE OF THE SECTOR
GROWTH PROSPECT
BUISCUITS INDUSTRY IN INDIA
MARKET SHARE OF ITC, PARLE &
BRITANNIA
OB1ECTIVE OF THE STUDY
LIMITATION OF THE STUDY
1
INTRODUCTION OF FMCG SECTOR
FMCG is an acronym for Fast Moving Consumer Goods, which refer to things that we buy
from local supermarkets on daily basis, the things that have high turnover and are relatively
cheaper.
A major portion of the monthly budget of each household is reserved for FMCG products.
he volume of money circulated in the economy against FMCG products is very high, as the
number of products the consumer use is very high.
!arious FMCG Products and Categories are as follows"
Competition in the FMCG sector is very high resulting in high pressure on margins.
FMCG companies maintain intense distribution network. Companies spend a large portion of
their budget on maintaining distribution networks. #ew entrants who wish to bring their
products in the national level need to invest huge sums of money on promoting brands.
2
Manufacturing can be outsourced. A recent phenomenon in the sector was entry of
multinationals and cheaper imports. Also the market is more pressuri$ed with presence of
local players in rural areas and state brands.
FMCG in INDIA
he Fast Moving Consumer Goods %FMCG& sector in 'ndia has been growing at a healthy
CAG( of )) * over the last decade (iding on the back of increasing demand and changing
consumer preferences, thanks to higher disposable incomes and the retail revolution, the
sector has been posting double +igit growth over the past couple of years
he 'ndustry is volume driven and is characteri$ed by low margins. he ,roducts are branded
and backed by skilled marketing, heavy advertising, slick packaging and strong distribution
networks
Also, (aw material prices play an important role in determining the pricing of the final
product Modern (etail formats too have contributed in major way in pushing the growth in
the FMCG -ector. .ith (ising income levels and the spread of modern retail, the FMCG
industry/s future prospects look bright which is e0pected to further boost sales. Growth 'n the
sector is led by higher urban and rural demand Going Forward he government/s growing
support to agriculture will drive long term growth in consumption from the rural sector 'n 1ur
view, amongst all the FMCG segments, the food segment will outperform over the coming
years.
Scope of the Sector
he 'ndian FMCG sector with a market si$e of 2-3)4.) billion is the fourth largest sector in
the economy. A well5established distribution network, intense competition between the
organi$ed and unorgani$ed segments characterizes the sector. FMCG -ector is e0pected to
grow by over 67* by 87)9. hat will translate into an annual growth of )7* over a 95year
period. :air care, household care, male grooming, female hygiene, and the chocolates and
3
confectionery categories are estimated to be the fastest growing segments, says an :-;C
report. hough the sector witnessed a slower growth in 87785877<, it has been able to make a
fine recovery since then.
BISCUIT INDUSTRY IN INDIA- an overview
he total production of biscuits in 'ndia is estimated to be around 47 lakh M, the
organi$ed sector accounts for 69* and the unorgani$ed sector accounts for 49* of the
total industry volume.
he organi$ed sector is valued at above (s =777 crores.
he biscuit industry is estimated to grow over )95)>* in the ne0t few years.
he per capita consumption of biscuits in 'ndia is 8.7 kg.
'ndia is ranked 4rd after 2- and China amongst the global biscuits producers.
he imports are not significant amount as compared to the total consumption.
he penetration of biscuits in urban and rural market is =9* and 99* respectively.
he ;iscuit industry employs almost 4.9 lakh people directly and 47 lakh people
indirectly.
Annual Growth
he biscuit industry in 'ndia witnessed annual growth as below"5
877<579 5 )<*
8779576 5 )<*
877657> 5 )4*
877>57= 5 )<*
877=57? 5 )6*
4
877?5)7 5 )<*
87)75)) 5 ))*
87))5)8 5 ))*
87)85)4 5 7?* %April5-eptember 87)8&
.hile the growth rate has been stagnating during last < years, it picked up momentum during
the 877=57? mainly on account of e0emption from Central @0cise +uty on biscuits with M(,
up to (s.)77Aper kg, as per 2nion ;udget for 877>57=. :owever growth further declined from
877?5)7 to 87))5)8 and the first half of 87)85)4.
Annual Production:
he organi$ed biscuit manufacturing industryBs annual production figures are given below"
%'n Cakh Metric onnes&
877<579 5 )8.99
8779576 5 )<.8?
877657> 5 )6.)<
877>57= 5 )6.=9
877=57? 5 )>.97
877?5)7 5 )=.97
87)75)) 5 )?.77
87))5)8 5 87.97
87)85)4 5 )7.97%April to -eptember 87)8&
Segments:
5
he organi$ed and unorgani$ed sector of the biscuit industry is in the proportion of
>7*"47* ratio.
EXPORTS of ;iscuit was )<* of the annual production during the year 87)75)) which
declined to around )8.9* in 87))5)8.

D IMPORTS of biscuits into 'ndia %mainly high end products& has not shown any
significant growth during the last five years and has not affected productionAsales by the
'ndian ;iscuit industry.
Rural-urban penetration of Biscuit"
E 2rban Market " >9* to =9*
E (ural Market " 97* to 69*
E Marketing:
.holesale and (etail marketing in the ;iscuit industry is carried out with a network of C F
F Agencies %for -tates and specific +istricts&, +ealers A .holesalers and (etail shops.
I!" IN C#S$ #F P%#D&C$I#N
;iscuit 'ndustry especially the -mall F Medium -ector, consisting of around 8>9 units are
facing erosion in their profitability and competitive capability, due to steep hike in cost of
production on account of increase in prices of major raw materials, i.e. .heat Flour !eg. 1il,
-ugar, Milk, ,ackaging Materials, Fuel. .ages, etc. (ecent increase in prices of
,etrolA+iesel in May 877= has further resulted n cost push
P"% CAPI$A C#NS&MP$I#N of ;iscuits in the country is only ).= kg, as compared to 8.9
kg to 9.9 kg in -outh @ast Asian countries and @uropean countries, and >.9 kg 2-A
Pattern of 'iscuit Consumption(#n )onal *asis+ in the country are as below"
6

Consumption of biscuits is even across the regions
#orthern Gone 5 89*
.estern Gone 5 84*
-outhern Gone 5 8<*
@ast and #orth
@ast Gone 5 8=*
%'ncluding #.@ast&

Market share of I$C, 'ritannia - Parle
.
'ndian ;iscuits 'ndustry seems to be the largest among all the food industries and has a
turnover of around (s.4777 crores. 'ndian subcontinent is known to be the second largest
manufacturer of biscuits, the first being 2-A. he industry is classified under two sectors"
organi$ed and unorgani$ed.
ORGANISED
SECTOR
UNORGANISED
7
SECTOR
>7* 47*
Fig" Market share sector wise
,arle, whose dominance of the glucose category was under threat from -unfeast and iger, is
now regaining market share. .hile ;ritannia/s market share in the glucose category %value
terms& has fallen to ? per cent in the year 87)8 from )).6 per cent two years ago, 'C has
seen its market share drop in the glucose segment to =.6 per cent in 87)8 from ?.< per cent in
87)7. As glucose segment has been growing significantly lower than biscuit market growth
rates in the last couple of years. Consumers are upgrading to better options 5 superior in
sensorial delivery or superior in nutrition delivery to the ordinary glucose biscuit. Growth
rates for the glucose segment are around a third of the biscuit market growth rates.
Meanwhile, ,arle ,roducts has seen an increase of market share in glucose category to >= per
cent in 87)8 from ><.> per cent in 87)7.

8

Fig" ,ercentage of market share in revenues of 87))5)8
;ritannia enjoys four times relative market share of its ne0t competitor in health5focused
biscuits %#utrichoice& and is neck to neck with 'C in the premium cream segment. 'n
volume terms in glucose segment, ;ritannia has seen a drop in market share to =.6 per cent in
the year 87)8 from )8 per cent in 87)7. -imilarly, 'C has seen a dip in share to eight per
cent in 87)8 from ?.8 per cent in 87)7. ,arle ,roducts has increased in market share %volume&
to >?.4 per cent from >9 per cent in 87)7.
'n value terms, glucose category has increased by >.9 per cent in 87)8, cream and cookies
have increased by 4? per cent and )9.9 per cent respectively. .hile glucose category has
declined ).9 per cent in 87)8 %in volume term&, cream and cookies categories have increased
by 8).= per cent and 9.9 per cent, respectively.
DIFF"%"N$ 'ISC&I$S
Britannia ITC Ltd Parle Priyagold
9
iger
#utrichoice Hunior
Good +ay,
97 97,
reat
,ure Magic,
Milk ;ikis
Good Morning.
-unfeast
Marie
+ream cream
Milky Magic
Fit kit
Choco #ut
;utter #ut
,arle5g
Irack5Hack
Monaco
Ireams
:ide and -eek
Milk -hakti
;utter ;ite
Classic Cream
;utter Cite
;ig ;oss
Marie Cite
Magic Gold
#'."C$I/"S #F $" P%#."C$
PRIMARY OB1ECTIVE
o study distribution practices of 'CF contrast with ;ritannia 'ndustries Cimited.
SECONDARY OB1ECTIVES
@nsure visibility and availability of -unfeast ;iscuits in the retail shops
o identify factors influencing retailers/ brand choice.
o e0amine comparative service Juality across retailer base.
o provide suitable recommendations to enhance working of 'C .+s.
o provide suitable recommendations to increase retailer base of 'Cs -unfeast biscuits
0IMI$A$I#N #F $" S$&D1
1ut of the total respondents surveyed some of them were not cooperative due to
which accurate prediction was not possible
10
he responses given by the respondent are assumed to be true however chance of
getting false and biased information can/t be over look fully
ime constrain is the big limitation of the study. A comprehensive study could not be
made due to paucity of time. All the data and information had to be collected within
the limited days.
#ot all type of retailers could be covered, kiranawalas and other small retailers were
not considered in the report. his could lead to wrong result as major pie of retail
sector is still unorgani$ed.
S2#$ ANA01SIS #F FMCG S"C$#%
11
Strengths"
). Cow operational costs
8. ,resence of established distribution
networks in both urban and rural areas
4. ,resence of well5known brands in
FMCG sector
Weaknesses"
). Cower scope of investing in technology and
achieving economies of scale, especially in small
sectors
8. Cow e0ports levels
4. KMe5tooK products, which illegally mimic the
labels of the established brands. hese products
narrow the scope of FMCG products in rural and
semi5urban market.
Opportunities"
). 2ntapped rural market
8. (ising income levels, i.e. increase in
purchasing power of consumers
4. Carge domestic market5 a population
of over one billion.
<. @0port potential
9. :igh consumer goods spending
Threats"
). (emoval of import restrictions resulting in
replacing of domestic brands
8. -lowdown in rural demand
4. a0 and regulatory structure
CHAPTER II
LITERATURE REVIEW
MECHANISM OF DISTRIBUTION
IN FMCG
DISTRIBUTION CHANNEL OF ITC
FLOW CHART OF ITC
12
DISTRIBUTION SYSTEM OF ITC
LITERATURE REVIEW
Titus R., Sengupta D. (2013) conducted a research work to get an understanding of the
distribution process of 'C and also that of its competitors. he distribution process, although
being Juite similar, differs in the schemes and offers provided to the retail outlets. he tough
competition in the FMCG sector makes it important to constantly revise the schemes as per
the market conditions. 2nderstanding the taste and preference of the consumers provide the
useful insight into the market conditions and helps companies devise their schemes
accordingly.
he taste of the consumers change constantly and they need a change or newness in the
products that they use. hey also look for value for their money and want the companies to
provide them with the best deals possible. Cittle differences in the products make the
consumer choose one product over the other and so the companies need to provide their
consumers with the best deals so that they increase their customer loyalty towards their
product and get more and more consumers to choose their product.
'n the biscuit segment the major players are ;ritannia, ,arle, Cadbury and 'C. ;ritannia and
,arle have the advantage of time as they have been in this sector for a very long time and
people relate to their brand due to this. 'C is a fairly new company to enter this sector but
their products have gained popularity and continue to do so.
he major findings based on information collected from the distributors, projects that
;ritannia has a good hold on the market in terms of distribution strategies and also that
13
;ritannia has managed to get a good market share in the biscuits category. ,eople also
perceive ;ritannia as a very reliable brand. hey provide the retail outlets with better offers
and also they have popular biscuits in the healthy snack section. .hen it comes to a
comparison with competition, the distribution process of ;ritannia, ,arle and Cadbury is
pretty much the same as that of 'C. 1rders are taken daily and the delivery is done the ne0t
day. +aily remittances are paid to the company. he credit period allowed to the outlets is
also roughly a week. he distributors give training to the salesmen for their better
performance. he salesmen are taught how to talk to the outlet owners and how to convince
them on buying larger Juantities of goods. here are a few stores that get more profit for the
companies as compared to the others and they are paid more attention to. ;ritannia takes
order twice a week for them and gives special discounts. Cadbury is focusing on only one
biscuit variant i.e. 1reo. 't is mainly targeting the kids. .hereas ;ritannia and ,arle have a
lot of variants, targeting people of all ages, and they also have B#utri Choice/ and BActifit/
which is more of a healthy snack made out of ingredients like .heat and (agi. ;ritannia and
,arle also have milk cream biscuits whereas the competitors like 'C and Cadbury do not
have milk cream biscuits. he brand B;ritannia/ is very popular and the consumers already
have a positive perception about it. 't is the most popular biscuit brand at present.
1ain M. (2012) in his research paper aims to study the ;rand preferences and the factors
affecting ;rand preferences of the age group 7>5)< years. Findings of this research paper will
help marketers of FMCG industry in understanding behavior of the age group 7>5)< years as
consumers and to design suitable marketing strategies.
;ased on research most preferred brands among following product categories i.e. oothpaste
L pepsodent, ;iscuits L sunfeast, :ealth drinks L bournvita, Chips L lays. ,rominent factors
driving brand choices in different product categories are advertisements, packaging, taste,
flavour and brand image. Iids today are e0posed to plenty of brands through peer pressure,
kid/s empowerment %parents providing them enough pocket money to spend&, and
advertisements whose objectives are" building brand preference, encouraging switching to
your brand F changing customer perceptions of product attributes.
14
Dala M. (2013) in his article, M'C Foods e0panding distribution network in small towns F
villagesM describes the various opportunities e0ist in the rural 'ndia. 'C Foods, the fastest
growing business of cigarette maker 'C Ctd, is aggressively e0panding distribution in small
towns and villages, where it trails rivals such as ;ritannia 'ndustries Ctd and ,arle ,roducts
Ctd. 't makes -unfeast biscuits and ;ingo chips, e0pects increased distribution in rural areas
and new product launches in biscuits and snacks to help it grow sales by 8=547* this year.
According to Chitaranjan +ar, chief e0ecutive 'C Foods, N.e/re going to make products
available in small towns and rural areas, which were earlier confined only to cities. For
e0ample, if we had ),777 stocking points in a region, we/ll now have 4,777 stocking pointsM.
.e/re appointing new wholesalers, stockiest. 1ur strategy is to intensely market our products
in rural areas.'C Foods gets about 47549* of its business from the villages. he number
would increase to 495<7* in two years. 't/s not that growth in urban is saturated, it/s just that
the opportunity in rural areas is immense and consumers there are premium $ing %trading up&.
:e also added, the increasing distribution in rural areas is important for 'C Foods, which
likely accounted for over ))* of 'C/s sales last year, to keep up its strong growth rate as
,arle and Good +ay maker ;ritannia are aggressively promoting their brands. 'C is 'ndia/s
third5largest biscuits maker after ,arle and ;ritannia. For distribution clout, 'C Foods can
also tap into its parent company/s e5Choupal network, which involves working directly with
farmers on obtaining materials and delivering products.
Apart from -unfeast and ;ingo, 'C Foods/ brands include Iitchens of 'ndia packaged food,
Aashirvaad flour, minto and candyman sweets and -unfeast #oodles. hese brands likely
brought in sales of over (s.<,>77 crore in the year ended March.
+ar said the unit will launch this year new brand variants under -unfeast biscuits, its largest
business. 't will also launch new products in chips and confectionary.he whole idea behind
launching new products in biscuits is to strengthen the -unfeast brand at the premium level.
hey are also looking at getting into the dairy business, which will be launched in a year from
now.
15
Bhushan R. (2010) in his article on N,arle surges ahead of ;ritannia to become leader in the
'ndian biscuit marketM describes ,arle stronger distribution and ability to reach consumers
faster at lower distribution costs than ;ritannia.
'ndians spend more on biscuits than on toothpastes, skin5care products, shampoos and instant
noodles put together, and ,arle ,roducts has surged ahead of ;ritannia 'ndustries to become a
clear leader in the (s )),7775crore5plus market, say #ielsen data. he country spent (s
)),8?9 crore on biscuits in the )8 months ended March 87)7 compared with (s 8,477 crore
on toothpastes, (s 4,977 crore on skin5care products, (s 8,<77 crore on shampoos and (s
),477 crore on instant noodles. And in the first half of the current financial year, it has already
spent (s 6,487 crore on biscuits, according to he #ielsen Company, the countryOs largest
market researcher.
,arle ,roducts has played a better volumes game, backed by stronger distribution, especially
in rural markets, and more competitive pricing. ,arle has had stronger distribution and has the
ability to reach consumers faster at lower distribution costs. hey have also converted single
pack si$e consumption into snacking options. he (s )),777 crore5plus and growing 'ndian
biscuit market is set for increased competition with an assortment of brands entering the
category, from established players such as ,arle, ;ritannia and 'C, to new entrants such as
Gla0o-mithIline and 2nited ;iscuits, the worldOs third5largest biscuit maker. Companies
have been targeting volumes and aggressively pushing biscuits priced at (s 9 and (s )7 to
counter inflationary pressures and prevent consumers from switching to cheaper brands.
A low5margin business, price hikes in the category are rare because even a marginal increase
negatively impacts consumer off take. Glucose is the largest5selling biscuit segment, followed
by cookies and cream.
MECHANISM OF DISTRIBUTION CHANNELS IN FMCG
he FMCG sector is witnessing demand growth again, driven by improving reach, organi$ed
retail and innovative channels, higher usage L driven by affordability and rising incomes
driving aspiration levels.
16
he supply chain of products in the FMCG market in 'ndia is one of the longest supply chains
an industry could really have. here are as many as 9 levels of intermediaries involved in the
entire supply chain through which a product passes before reaching the end consumer.
.hat has been observed is that even though these FMCG companies are big multinationals
and 'ndian but face a major challenge of making their products available in the market in the
right Juantities and in the right time. his is simply because these companies don/t really
have a wide network of sales agents and other force which is reJuired and is ideal for catering
their products to the markets. his aspect is taken over by distributors, wholesalers and
retailer whose margins on these products actually double the price of these products when a
final consumer buys it.
he margins kept by these intermediaries range from 8* to 9*.
he products in this industry are transported from manufacturing units via c F f agencies or
warehouse to distributors who further sell the same to wholesalers or stockiest who finally
sell it to the retailers in the market. hese products are transported either via roadways or
railways within the domestic markets and normally don/t take more than a week to reach the
retailers.
FMCG products are normally a high volume ball game and products have to essentially be
available in the market at all given points of time and at all given points of purchase and
therefore the distribution activities are highly volatile and dynamic.
-ince it/s a volume game, manufacturers make all possible efforts to boost sales and promote
their distributors to earn more and more orders from the retailers and wholesalers.A close
check is maintained on the flow of the products on a daily, weekly, fortnightly and monthly
basis to determine the trend in the business and flow of products and consumption. his
activity also helps to find out drawbacks of the distribution system, if any, and rectify them
within time.
17
DISTRIBUTION CHANNEL OF ITC
'C provides products and services of superior Juality and value by sourcing its technologies,
eJuipment and inputs from reputed international and 'ndian manufacturers and suppliers.
Common values, relating to human rights performance, are shared across the entire supply
chain because 'C is committed to the importance of a socially responsible and accountable
supply chain.
As a large and multi5product enterprise whose products are benchmarked nationally and
internationally, 'COs main supply chains can be grouped as follows"
). For all its operations, technology, machinery and eJuipment are sourced from reputed
and globally benchmarked suppliersAvendors who are e0pected to follow
internationally accepted norms and standards on human rights.
8. 'COs major businesses are vertically integrated across several +ivisions. A substantial
part of the supply chain is therefore internal through strategic backward linkages.
Common values relating to human rights performance are shared across this supply
chain.
4. ;eing a major agric5based company, the agriculture sector is a major supplier of
inputs for its operations. he bulk of agricultural commodities are procured from state
controlled trading platforms and the open market.
18
A very small proportion of 'COs business consists of supply chains comprising local vendors
and suppliers. he policy framework for such entities is enunciated separately in O,olicy to
@nsure (espect for :uman (ights across the -upply ChainO.
DISTRIBUTION CHANNEL OF ITC
19
F0#2 DIAG%AM
20
DISTRIBUTION SYSTEM
'C uses F'F1 method to reduce the wastage of goods due to e0piry.
hey also keep the good on constant move from low sales area to high sales area.
he company collects all the e0pired goods four times a year, and destroys them.
(etailers must return e0pired or damaged products within si0 months after the date of
e0pire.
Adjustment for them is done in three months time.
'C provides their retailers with racks, hangers, etc to display the products.
he benefits received by the retailers depend upon their sales volume and also the
location of their shops.
21
'C has hired 'M(; to do the market research.
$he ace up the slee3e of I$C4s newest foods 3enture is its e5tensi3e distri*ution reach
aking stock of the FMCG block is tobacco and hotels giant 'C Ctd. A few years ago it
climbed onto the retail bandwagon, leveraging e0isting strengths to diversify into areas from
greetings and gifts to lifestyle retail. .hile itOs got a long way to go to challenge :industan
Cever, 'C is banking on the two mainstays of consumer goods that it does possess 5 a strong
brand eJuity and a wide distribution network.
he game plan is all about strategic synergy. A year ago the companyOs newest division,
;angalore5based 'C Foods, moved into the branded packaged foods market and is
leveraging the parent companyOs agricultural products division for sourcing, as well as 'C
.elcome groupOs specialist cuisine knowledge and its packaging division.
he ace up 'COs sleeve, however, is the companyOs established distribution network that
includes the e5choupal system 5 a two5way sourcing and distribution system for farmers in
remote villages, as well as its cigarette and paan network.
.ith this infrastructure in place 'C Foods has launched into four branded foods areas 5
ready5to5eat, staples, snacks and confectionery. 'ts Iitchens of 'ndia brand sells packaged
gourmet 'ndian cuisine, which offers recipes from 'C .elcome group :otels. K.e picked
up popular recipes and put them into cansK, says C@1 (avi #aware. Khis is five5star food
prepared by our chefs and targeted at connoisseurs of good foodK. he brand is marketed
through upmarket retail chains in +elhi, Mumbai, ;angalore, Chennai and Ahmadabad, and
select clubs in Iolkata.
he selling point is that no preservatives are added, and through OretortingO technology the
shelf life of these foods is close to one year. 'C Foods has a contract manufacturing facility,
where Juality is supervised with focus on ingredients and recipe. A panel tastes it and
approves it before processing takes place. he canned Iitchens are present in <= towns %of
22
over 977,777 population& and the group plans to e0port its products after is has established
the brand nationally.
he group sees high growth potential in the staples segment. Khe consumption of aata is <9
million tonnes in 'ndiaK. K1nly 8 per cent of this is brandedK. 'COs branded aata is
customised to cater to different tastes, to suit markets in the north, west, and south. o
differentiate each type, the package is colour5coded 5 the main variant in each area is coded
red, while its Ashirwad -elect is coded orange. @ssentially an urban phenomenon, it covers
8> cities in 'ndia. he company plans to have its staples available all over 'ndia by March this
year 5 and ne0t on the agenda is branded rice and salt. KhereOs a need to consolidate, to
establish the business and the brand, and then fill up the portfolioK, says #aware. Gopal
G.!.(., a supervisor at Foodworld in ;angalore, notes" KPou just canOt compete with CeverOs
Annapurna or GodrejOs ,illsburyK. :owever, he does point out that the awareness and demand
is picking up for 'COs aata. Iitchens of 'ndia, on the other hand, are doing well with an elite
segment of consumers, while the orange Minto confection is taking off.
Minto helped to generate Juick volumes in four months, says #aware. AcJuired from
Candico in March 8778, Minto was reengineered and the flavour variant 5 orange 5
introduced. K.e got into the untapped potential of the mint marketK, says #aware. K.e
brought novelty to this segment 5 orange mint is 97 per cent of consumptionK. 'C FoodsO
product development centre in ;angalore is working at bringing added5value products across
segments. he bid to be different Kto create a bu$$ in the marketK, says #aware, also led to
the wild banana variant in the Candyman range of sweets. he flavour was one of the two
%the other being mango& chosen after a sampling of si0 flavours by 4,677 schoolchildren.
:ere the distribution makes use of the tobacco network" 'C services ).) million outlets at
average freJuency of three days down to villages of population 8,777, and has ),777
wholesale dealers.
K'COs distribution philosophy is that of channel5tailored support. 'C and its distributors use
different sales forces to cater to the separate channels of convenience outlets, grocers, and
supermarketsK, says #aware. K'C services trade channels and not specifically one kind of
outlet alone. hus for impulse purchases like confectionery, the bulk of our sales come from
23
convenience outlets. :owever, categories like aata, ready5to5eat foods, and snack foods are
directly distributed to grocers and key accounts, in addition to some convenience outletsK.
'C directly services more than a million outlets all over 'ndia. 't has depots in key states and
the depots are geographically dispersed to optimise logistics costs, according to #aware. :e
points out that for high5bulkQ low5weight items %such as the most recent launch of snack brand
' ;ischips&, specific retail stocking and display solutions use floor and air space for ease of
placement and high visibility.
he other advantage is 'COs backward integration with the parent companyOs 3)99 million
international business division %';+&, which markets agricultural products abroad. ';+Os e5
choupal system, which sources directly from the farmers through ),8=6 kiosks across ?,777
villages, also helps to develop markets and brands for 'COs consumer goods. As a
distribution channel, the two5way5functioning e5choupal is cost effective, with the added
scope of increasing in range as more kiosks and more farmers are tagged on to the sourcing
network. he e5choupals and the storage hubs 5 the company has a strategically located hub in
each state 5 function as centres where 'C and the firms it partners can market FMCG goods
that range from agricultural products to household items.
he company also uses local paanwalla networks to help to boost its brands. Cash5rich and
networked, the company is cashing in on the potential of a 8.9 million5strong force of such
retailers. he groupOs e0perience in cigarettes has sensitised the system to fine5tune stock
control mainly because cigarettes are a high5value product with high inventory carrying costs.
At an individual retail outlet level the company has a supervision process that ensures stock
outs overstocking do not take place.
'COs freJuency of retail servicing is one of the highest in the consumer5goods business.
ConseJuently it does not need to resort to dumping of stocks at an outlet as an insurance
against stock out situations but can sell only as much as the retailer can dispose of and top up
stocks whenever and wherever necessary. his also makes the group manage its working
capital better.
24
iming and data5gathering regarding stocks is crucial. K.e have a fully online @(,5based
logistics system linking our distributors, godowns, and marketing branches to head office and
factories, continuously feeding in data of sales and stock positions across the entire supply
chainK, says #aware. Khis enables us to track pipelines and sales in real time and keep
control over all elements of the supply chain, be it raw material, packaging material, work5in5
process inventory, or finished goods.K
o leverage its network and distribution reach, and to centralise the data flow between
various divisions, 'C has installed ,roject 'nfobahn, a companywide hybrid network using a
virtual private network %!,#& through an 'nternet service provider. his comprises 6? leased
lines, )74 '-+# lines, )7 radio freJuency devices, and four new !-A links. his lets staff,
wholesale dealers, and partner companies access data and transact business over the 'nternet.
't also leverages the e0isting network to Ocross5sellO and Oup5sellO the companyOs own business
offering and enables it to market offers from other business houses through a secured
distribution network. he network spans ))7 locations and all 'C divisions.
'C complements its distribution effort with consumer research. According to #aware, it
spends (s)8 crore on consumer research. :e says that a study showed that <= per cent of
annual household e0penditure goes on buying food. ;randed food comprises 9 per cent of this
and the percentage will increase as the economy improves. #aware believes e0penditure on
food will touch (s)77 core in five yearsO time.
Meanwhile, how is 'C gearing up to take on :industan Cever, #estle, and others in the
foods businessR -ays #aware " KCompetitive advantage will come from distribution strength,
servicing of outlets, product Juality, relevance, and differentiation. hese constitute the
mainstay of our business strategy. .e hope to leverage our brand development capabilities
and establish ourselves in the market place.K #aware also points to 'COs abilities in Kbuilding
consumer brands, in distribution, in unmatched servicing of retail in 'ndia to even villages of
8,777 population as well as its ability to deal with agricultural productsK.
Clearly, with branded packaged foods emerging as a focus area of growth for companies like
:industan Cever, well5eJuipped 'C still has a tough battle ahead.
25
The Distribution Channel Network: Parle
The Channel Members of the Distribution Network of Parle
he ,arle distribution network for biscuits has essentially four levels as enlisted below"
,arle +epots
26
Manufacturing Unit of Parle at Various
Locations
Parle Depots
Wholesalers and Distributors
Retailers
Procurement: Customers
.holesalers and +istributers
Carry Forward Agents %if reJuired&
(etailers
The Channel Members and Logistics
,arle has nearly )977 wholesalers, catering to <89777 retail outlets directly or indirectly. A
two hundred strong dedicated field force services these wholesalers and retailers.
Additionally, there are 4) depots and CFF agents supplying goods to the wide distribution
network. ,arle has level ), level 8, level 4 distribution channels levels.
Level 1:
Availability of ,arle biscuits at all departmental stores across the length and breadth of the
country.
Level 2:
-ince itOs an FMCG product this channel e0ists for customers scattered throughout the
country.
Level 3:
Mass consumption and suitable for #ational and 'nternational coverage. For e.g. ,arleOs
international operations consist of serving markets in the Middle @ast, Africa, -outh America,
-ri Canka, Australia and #orth America for which the 4 level distribution channel e0ists.
Supply Chain Entities
he -upply Chain entities of ;ritannia can be shown through the following5
27
CM2
%Central Manufacturing 2nit&
+epot
+istributor
(etailer
Customer
Britannia: Supply Chain
he supply chain of ;ritannia is primarily based on two products. hese are
28
A& 'mported products ;& +omestic products. he 'mported product -upply chain can be
e0plained by taking the following e0ample 5
Crude Palm oil comes from
Indonesia and Malaysia
Shipped to Kandla Port
Refining of Crude Oil
Traders supply refined
palm oil to Britannia
he +omestic product -upply Chain can be illustrated by the following e0ample 5
Supplier
(Wheat)
Procurement
Cycle
Replenishement
and
manufacturing
Cycle
Supplier Supplier
(Sugar) (Butter)
Company/ CP
C NF
agent
istri!utors
Wholesaler
Retailers
Customer
Cycle
Customers
Distribution Model
29
he distribution system of ;ritannia can be well illustrated through the following5
Distribution Sstem
;ritannia Factory
+istributor
%'nstitutional&
'nstitutions
@g. :ospitals
+istributor
%(etailer&
(etailer
Customer
Britannia - An Intensive Distribution Framework
;ritannia follows intensive distribution as biscuits and cakes need to reach the consumer at
their nearest locations so this type of distribution channel is issued. his type of distribution
helps customer looks for location convenience.
;ritannia two different kinds of distribution networks one is for dairy products and other one
is ;akery products. :ere distribution network of bakery products has been discussed. 'n
;akery products ;ritannia applies two kind of distribution system. hese are given below"
)& Mass +istribution 8&-elective +istribution
1. Mass Distribution
;ritannia use to produce general FMCG products which are in form of packaged food and
which need not to have very special kind of distribution strategy. Cike other FMCG
companies ;ritannia also use mass distribution system. -ince all almost all the products of
;ritannia are of low price, repeat purchase items, and does not reJuire much of effort from
customer side. -o ultimately these products are sold on mass distribution basis.
here are four CFF of ;ritannia in #C( region"
)&Mudka L ;ahadurgarh
8&;akoli
4&Ga$iabad
<&Iundali5 -onipat
30
<? distributors are working under these four CFF.
Distribution Network
he distribution network of ;ritannia/s products from top to bottom is given below"
First of all stock is sent to these CFF, and then this stock is sent to the various distribution
canters of ;ritannia. All of these distribution centres do not contain products of any other
brand. #ow this supply of stock is based on full e5network. his system has been provided a
particular terminology i.e. N2+AA# ,ACIAG@M. 'n this system the accountant who is in
distribution centre submits an online order to the CFF. hen in CFF the order for a particular
distribution centre is automatically generated and further fulfills by CFF.
;ritannia has established these CFF at very appropriate locations. As soon as there is a
demand generated in any distribution centre hese CFF are able to fulfill the demand within
four to si0 hours. -o it is clear that CFF provides Juick delivery to the distribution centre.
;ut in order to meet this demand the CFF also has to keep some inventory with it.
#ow if we talk according to the distribution point of view we will find that +istribution
Centre has to also make some inventory in order to meet any kind of scarcity or instant
demand. 2nder this distributor five sales men work and they cover the entire area which is
mentioned above. :ere the distribution is again divided into two parts 5
A). General Shops
+istribution to general shops is done by two sales men. hey cover 47 to <7 outlets every
day. #ow the number of these outlets is not content, it varies time by time as they are not very
loyal to the company and also does not contribute to very prominent sale.
B). Key Account Outlets (KAT)
hese outlets are covered by two sales men and they take order from these outlets biweekly.
hese sales men visit twenty to twenty five outlets every day. hese outlets are very much
loyal to the company and provide prominent business to the company. -o from the sales point
of view these outlets are very important. #ow the stock is moved from distributor to the
retailers. For selling the stock on the retail outlets there are two processes"
a). Order Booking
here are separate sales teams who perform this task. For e0ample one sales team has to go
for order booking. 'n this process the salesman first go to shop to shop and book the orders
from there. 1n the other day or some times on the same day the delivery van goes every
where in order to fulfill the orders. #ow due to this method distributor not only gains the
sales as well as looses the sale. 1rder booking process is done in ;ritannia on ;iweekly or
.eekly basis. -ometimes 1rder ;ooking and (eady -tock both the task are performed by the
same sales man.
Benefits of Order Booking
'n this process the distributor always remains in better position to forecast the demand. As the
sales man has already an order list. his helps not only to the distributors but also to the CFF
as well as finally to the factory in order to make more realistic demand. -ince the sales man
does not have to do more but to book the order, it enables the sales man to search out the new
31
opportunities in the market. 't helps not only to the company but also to the sales man as sales
man gets special rewards from the company side. -ince during this process the sales man gets
e0tra time in which heAshe gets enough time to interact with the retailer which is again very
important. Actually the retailer does not want only profit but also a better respect and
courtesy from the salesman. -o in such situations if the retailer is getting good time with the
salesman, surely he will be more loyal to the company. Also during this period the sales man
could increase the visibility of its products in the shelves of the shop keeper.
Drawbacks of Order Booking
Along with all these benefits there are some drawbacks also involved in this advance booking
process. -ome times sales man takes orders from the shopkeeper and assures him that the
order will be fulfilled on ne0t day. ;ut during this period the sales man of other company
comes and provides the same product at some discounts or with some schemes in this
condition the shopkeeper takes the stock from that sales man.
b). Ready Stock
'n this process the sales man carry the team along with him which contain a delivery van, a
driver, and one or two helpers. he sales man takes order from the shops and also places the
order at the spot. here are following benefits and drawbacks of this method. Almost thirty to
forty outlets are visited by this way.
Benefits of Ready Stock
he retailer gets stock on the spot without any delay. he sales man does not give a chance to
the retailer to switch any other brand. he defected stock is replaced on the spot.
Drawbacks of Ready Stock
he sales man does not get enough timeQ he simply dumps the stock and moves from one
store to another store. @ven then he does not cover many retailers, as the delivery process
takes a lot of time. .hat amount of stock should be carried by the sales man is also can not be
predicted. he sales man moves to pre decided path and could not find new shops, so the
market penetration by the sales man is also very rare in this case.
2. Selective Distribution
-elective distribution is done for premium products of ;ritannia. here are eight -I2s, for
which ;ritannia uses selective distribution. hese brands are"
a& Chochlor 'nto0ication
b& Almond Addiction
c& Chocolus Addiction
hese products are very costly and lie between the prices ranges of (s. )97 to (s. 877. #ow
these products are not supplied by the distribution centre but directly from CFF. hese
distributions are done through the Merchandiser eam.
32
C:A,@( '''
OB1ECTIVES
RESEARCH METHODOLOGY
METHOD
SAMPLE SIZE
33
PRESENTATION TOOLS
LIMITATIONS
%"S"A%C M"$#D#0#G1
3.1 Research Objectives
Primary Objective
o study distribution practices of 'C in contrast with ;ritannia and ,arle 'ndustries Cimited.
Secondary Objective(s)
o identify factors influencing retailers/ brand choice.
o e0amine comparative service Juality across retailer base.
o provide suitable recommendations to enhance distribution practices of 'C,
;ritannia and ,arle.
o provide suitable recommendations to increase retailer base of 'C, ;ritannia and
,arle.
34
o know how the distribution strategies of 'C, ,arle and ;ritannia are effective in
comparison to each other.
3.2 Type of Research: Descriptive
A descriptive design was followed. ,arameters were derived from the personal
interaction with the retailers. ,arameters were also derived from the secondary data analysis
of various research papers. 'n this the research process was formal and structured set of
Juestions in the form of Juestionnaire was there.
3.3 Methods of Data Collection
here are two types of data collection method L Primary and Secondary.
Primary Data
his data is original in nature and is generated from results of personal interaction with
various retailers or respondents %in case of Juestionnaire&.
Secondary Data
-econdary data was acJuired through various research publications done in this particular
area.
Area Covered
#oida sec59)
#oida sec5<<
Atta market
#oida sec597
3.4 Sample Design
Sampling Unit: -
+epartmental -tores
35
Iirana -tores
Convenience -tore
Sample Size: - he sample si$e is 97.
Sampling Technique: - #ormal Convenience sampling techniJue was followed.
3.5 Instruments Used
Suestionnaire "
#ominal scale
-tructured Juestions.
Analysis "
,ie Charts
;ar Graphs
ables
3.6 Limitations
hough this study was taken up with sincere efforts to accomplish the objectives,
there were certain factors which created hurdles in accomplishing the work.
hese factors are"5
). 1ut of the total respondents surveyed some of them were not cooperative due to
which accurate prediction was not possible
8. he responses given by the respondent are assumed to be true however chance of
getting false and biased information can/t be over look fully
36
4. ime constrain is the big limitation of the study. A comprehensive study could not be
made due to paucity of time. All the data and information had to be collected within
the limited days.
<. ,eople were hesitant to disclose the true facts.
9. @nvironmental constraint.
6. (etailers did not cooperate when asked about their policies regarding credit policies
with the direct salesmen.
37
C:A,@( '!
DATA ANALYSIS &
INTERPRETATION
FINDINGS AND ANALYSIS OF
QUESTIONNAIRE
Que.1. Which brand of biscuits do you stock in your store?
38
Inference:
he chart e0plains that 1ut of the total 97 retailers visited. -unfeast was present in ?8* F
,arle was present in ?< * of total stores visited. ;ritannia is ==* in stores because of low
demand in some areas. All of them presence was highest being ?? * of the total visited
stores.
Ques.2. Product Portfolio:
ITC (Sunfeast) BRITANNIA PARLE
Glucose 97597 ,arle5G
#ice iger Irack Hack
Mikly Magic Good +ay Milk -hakti
+ark Fantasy reat :ide F -eek
+ream Cream Marie Gold Monaco
39
-nacky Cittle :earts Coconut
Marie Cight #ice ime Marie
(ank the companies according to your preference which has the best varieties of biscuitsR
%) T ;est, 8 T Good, 4 T Average&
Inference:
1ut of 97 samples surveyed, <8* retailers consider 'C as best in varieties of biscuits
because of the large variety of biscuits in its product line. .hile 4=* considers ;ritannia F
87* considers ,arle as best in varieties of biscuits.
40
Inference:
1ut of 97 samples surveyed, <<* retailers consider ;ritannia as good in varieties of biscuits.
.hile <7* considers 'C F )6* considers ,arle as good in varieties of biscuits.
41
Inference:
1ut of 97 samples surveyed, 97* retailers consider ,arle as average in varieties of biscuits.
.hile 47* considers ;ritannia F 87* considers ,arle as average in varieties of biscuits.
Ques.3. How often does a Distributor salesman visit you?
Inference:
he chart shows that the +istributor salesman of every company visits the (etailers 1nce a
.eek. ;ut on some shops the +istributor salesman of both 'C F ;ritannia visits once in
wo .eeks. .hereas +istributor salesman of ,A(C@ visits twice a week in some areas,
while distributor salesman of 'C F ;ritannia visits some retailers on fortnightly basis.
<. (ank the following companies according to the easiness in placing the order. Give reasons
%) T Most easy, 8 T @asy, 4 T somewhat easy&
42
C:A,@( !
CONCLUSIONS
SUGGESTIONS
43
CONCLUSION:
All +- should be provided with the mobile phones so that in case of -tockouts in
retail shops the retailers can contact +- and place their orders. -o buying of substitute
products by the retailers can be avoided.
'C needs to improve its working primarily on the service and delivery front. he
company is also suffering as 1'F levels are very low, and this lack of regular supply
is turning retailers against our products.
+uring the visit into the market, it was found that in most of the shops, the complaints
against old stock being delivered were registered, which constitute a major portion of
the +F+ stock. -o, to get rid of it, 'C should work upon their logistic system and
stock reach the market soon and will also reduce dissatisfaction level among the
retailers as well as consumers against e0pired stock.
,1, F +isplay activities should be on regular basis.
't was also found during the market5visit that many retailers complained that they are
not getting the stock what they ordered previous day, so before the market5visit, it
should be strictly checked that +-/ palm5top are feed with proper -1:.
'C is facing still competition from parle G in particular because of its low price and
high awareness in lower segment of customers.
SUGGESTIONS
Work Processes
A daily attendance record to be maintained for salesman at the .+ point. his would
help in tracking the time the +- spends at the .+ point before leaving for the market
and help to minimi$e the wastage of time and inefficiencies while issuing stocks.
A daily stock chart should be displayed and feed into the ,alm5top carried by +-, that
would provide information as regard the -1: for various categories and the e0pected
44
arrival time for the ne0t set of deliveries. his would make the +- aware of -1: of
various categories and facilitate accurate order booking. his is important, as a large
number of respondents feel that our +- undertake orders without being aware of
supply of stocks and hence we have low 1'F levels at retail outlets.
+elivery chart to be prepared the previous evening and stocks to be sorted
accordingly. his would help to minimi$e time for loading of stocks into the delivery
vehicle the ne0t morning.
+- 'ncentive should be at the end of the month on basis of C-+, especially for slow
moving categories.
+F+ tracking should be undertaken for retail outlets also. his would help to
ascertain outlets where are stocks are not moving and also help to understand the
stock trends for particular routes.
+-( should be monitored on a weekly basis by the A@.
+isplay space should be purchased in big retail outlets and volume class A F ;
outlets. hese outlets have a high visibility potential and also have higher off take for
slower movers such as creams and Marie.
%ecruitment - $raining of DS
Care needs to be taken as regards recruitment of +- and also their training as the salesman is
the face of the company at the retail outlet.
;asic guidelines should be provided for recruitment of new +-. Also the minimum
criteria should be specified for Jualification.
Area @0ecutive should play a supervisory role in the recruitment and selection of new
+-.
A@ to provide training inputs to new +- on the following aspects "
(ange5selling
Merchandising
ime5planning
1bjective setting
arget setting
45
(apport building with trade
Accurate order capture
BIBLIOGRAPHY
2"'SI$"S
www.google.com
http://www.naukrihub.com/india/fmcg/overview/cosmetics-toiletries/
www. itc portal.comAfoodsAfoodsUsunfeast.html
economictimes.indiatimes.comA...AITC...biscuit...A<<?46)?.cms
www.financiale0press.comA...Aitc...biscuits...A48=<9?A 5 Angola
www.fle05news5food.comA...A ITC Aitc 5foods5plans 5own5facility5 biscuits .html
http://im.rediff.com/money/2006/jun/28spec.htm
en.wikipedia.orgAwikiAITCUCimited
N"2SPAP"%S
The Times of India
The Economic times
46

ANNEXURE
Retailer questionnaire
1utlet #ame" UUUUUUUUUUUUUUU Cocation" UUUUUUUU

). .hich brand of biscuits do you stock in your storeR
'C ;ritannia ,arle ,riyagold 1thers
8. Which brand of biscuits you prefer to stockR
;ritannia ,arle 'C ,riyagold 1thers
.hyR %Give triggers" consumer demand, schemes, price differential, variants, etc&
UUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUU.
4. :ow often does a +- visit youR
47
ONCE A
WEEK
TWICE
A WEEK
THRICE A
WEEK
OTHERS
ITC
Britannia
Parle
<.'s the +- knowledgeableR Able to answer all your Jueries about the productR
Yes No
ITC
Britannia
Parle
9. +oes the +- redress your grievances satisfactorilyR
Yes No
ITC
Britannia
Parle
6. .hat is the time gap between order capture and deliveryR
Same Day 1 Day 2 Day 3 Day More than 3 days
ITC
48
Britannia
Parle
>. :ow is the order delivered to youR
ITC:
:awker +elivery !an 1thers
Britannia:
:awker +elivery !an 1thers
Parle"
:awker +elivery !an 1thers
=. Are there any other company products being carried by the +-A+elivery !anR
Pes #o
'f Pes, then which productsR UUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUU
?. Are your orders always received 1'FR
Yes No
ITC
Britannia
Parle
'f #o, then what is the delay in receiving complete order
49
1 Day 2 Day 3 Day More than 3 days
ITC
Britannia
Parle
)7. .hat are the payment terms you get from the companyR
Only Cash Only Credit Cash + Credit
ITC
Britannia
Parle
'f Cash, do you get Cash +iscountR
Pes #o
'f yes, then how much C+ you getR UUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUU
'f Credit, then what is the Credit periodR
1 Week 2 Weeks 3 Weeks 4 Weeks More than 4 Weeks
ITC
Britannia
Parle
)). :ow long does the stocks lastsR
1 Week 2 Weeks 3 Weeks 4 Weeks More than 4 Weeks
ITC
50
Britannia
Parle
)8. +o the companies provide any stock replacementR
ITC: Britannia: Parle:
Pes #o Pes #o yes
#o
'f yes, what are the replacement normsR UUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUU
UUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUU
)4. :ow do you manage stock outsR
Contact +- Contact .+ directly ;uy from -.+ 1thersUUUUUUUUUU
:ow long does the replenishment takeRUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUU
51