Distribution Channel

Organizations and companies use distribution channels to bring their products to

market and consumer. A distribution channel is a method of interdependent
organization which helps the marketers delivers their products to consumer. Because
of it being part of marketing mix it can be direct or indirect. Due to expended use of
internet, companies and organizations are able to sell their products directly to
consumer leaving the middleman out, thus reducing their cost. Indirect distribution
uses two or more level of channels. Some of these channels include wholesalers,
retailers, agents and brokers. Companies use the indirect distribution best suited for
their product in order to obtain market share.
There are various kinds of channels:
1. Conventional Marketing System: In this structure there is one or more
independent wholesaler and retailer.
2. Multichannel marketing system/Hybrid Marketing Channel: In this
arrangement a company selects two or more channels to reach two or more
customer segment base.

Zotters Distribution Channel

From the company's early days, Zotter faced significant distribution challenges. For
instance, the chocolates' six-month shelf-life required timely distribution. As the
company grew, Zotter needed to rethink the regionally focused distribution model.
Instead of distributing through supermarket chains and other mass-market channels,
Zotter decided to target gourmet stores exclusively. While this decision slowed
diffusion, it allowed Zotter to preserve the high-quality brand image and a
correspondingly high price tag.
Two channels dominated food retailing in Austria: smaller mom-and-pop stores
(about 40% of stores had a sales area of less than 400 sqm m) and grocery retail
chains. While the smaller stores were generally independently run and operated,
the retail chains were heavily consolidated. In 2008, three groups (REWE Group,
Spar, and Aldi/Hofer) had a combined food retailing market share of 78.5%.
Consolidation had increased since 2006, with nearly all players outside the top
three losing market share. Discount supermarkets had invested in the Austrian
market, and by 2008, they held 23.3% of the market and were among the fastestgrowing players.
Grocery retail chains were the largest channel for chocolate, accounting for
approximately 30% of chocolate sales. Discounters (16%) and mom-and-pop stores
(9%) accounted for a further quarter of sales. Because chocolate was an impulse
purchase, nontraditional food channels, including kiosks, confectioners, convenience
stores, and gas stations, accounted for approximately 45% of sales.

Two groups mainly dominate Austrias market:

- Rewe Austria (German origin) has a 30.2% market-share and is the market leader in the food
distribution.
- Spar (Austrian origin) has 28.2% of the market-share.
Discount stores also constitute a huge market as they account for 25.6% of the total turnover of
the retail food market. Hofer controls 16.2% of the market-share which is far beyond Lidl with
only 2.6%.
Besides we can also supply in these renowned retailsDepartment stores: Woolworth F W Co GesmbH (in German),
Steffl

Supermarkets and hypermarkets: Billa, MPreis, Interspar

Convenience stores: Metro Cash and carry
Discount stores: Hofer, Tengelmann
Today, the Austrian market is saturated in all major sectors and in order to penetrate
this market advertising is a must; all the more so because Austrian consumers are
becoming less price sensitive and care more about in-store customer service. And
thats why we are going to focus in these renowned shops.
The distribution component refers to marketing mix, which emphasize on the decisions and
actions contain in making products available to customers when and where they want to
purchase. Zotter chocolate company in order to operate the products through more than 70 retail
stores around world, and developed a wide distribution through comprehensive retail and
renowned channels. Zotter chocolates have two kinds of distribution channels that depend on
sold in large or small retailers. For larger retailers such as Woolworth and MPreis, the frequent
choice of distribution is that may deliver products directly from producer to retailers, and then
offer to customers. On the other hand, small retail like seven-eleven and some corner stores may
use a long-standing channel that deliver products through the producer to a wholesales and then
deliver to retailer, and provide to customers at last.
Besides we can distribute and expand to the web in the world. Such as developed countries like
France and UK, it would be highly achievable and profitable as well.

Offer premium line of Zotter to UK and France markets.

Allows one to gauge user interest in brand
Top sellers can be rolled out in these countries
Already creates a buzz and is in keeping with word of mouth advertising

Zotters Distribution Channel through innovation

At the beginning, Zotter didnt decide clearly what he should to grow his business. He had just
concentrated on making a new type of chocolate. Meanwhile, he recognized some problems in
distributions, competitiveness, legislation and communication. Among them, Zotter started
shifting current distribution systems. Rather than relying on the supermarket channel, he decided
to launch Mitzi Blue, his high-end product for mass market, on his specialized distribution route.
For example, through chocolate theatres or luxurious chocolate boutiques, Zotter has sought
differentiation with Godiva, the main ultimate competitor in his first foreign market. It could be
innovative change of strategy, because the existing chocolate of Zotter was distributed through
mainstream channel.