danon
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I want to tell you, why it is dangerousto introduce new business process by «copy-past»
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What is Danon?
*local brands within 22 countries
Avian Confectionary*Dairy
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In 1995 Danone purchased «Bolshevik»*and launched business optimization
*one of the oldest confectionary Russian plant
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Distributor bought refrigerator and cars
Payed salary to exclusive agents
Achieved break-even point within 2-3 years
DS3-model of Danone Dairy was:
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With it’s model Danone covered 2-3 cities annually*
* Mind that majority of the cities were already covered with exclusive sales agents
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And we started from scratch, and we need high-speed business model
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And we need to cover 80 cities within 2 years
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And our existing distributors did not want to invest heavily in our exclusive sales agents*
* And we need to return our investment in agents within 2 years
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At that time there we the following shared investments in salaries:
50% / 50% One pays the whole
(distributor or supplier)
Fixed and variable (producer pays fix, distributor –variable part of salary, or vice
versa)
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But no one model fit us
Because of time to market
Or by managability of agents
Or by return of investment within 2 years
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And we started the negotiations
Having a lot of trips across Russia, I developed the model, which suited both
Danone and Distributors
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Danone: How much do you pay to your agents?
Agent Salary
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3% of total turnover
Agent Salary
Danone: How much do you pay to your agents?
Distributor: 3% of total turnover
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Danone: How much do you pay to your agents?
Distributor: 3% of total turnover
Danone: so you can pay to our exclusive sales agent not less than 3% of turnover of Danone
Turnover of Danone
Agent Salary
3% of Danone’s turnover pays Distributor
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Distributor: Agreed. But 3% should not cover all the salary!
Turnover of Danone
Agent Salary
?
3% of total turnover pays Distributor
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Distributor: Agreed. But 3% should not cover all the salary!
Danone: Danone pays the difference.And we decide about fixed/variable,You job is to pay your 3%
Turnover of Danone
Agent Salary
Danone pays
3% of total turnover pays Distributor
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Within 2 years turnover of Danone grew and the 3% covered the whole salary of agent, and we did not invest any more but fully managed exclusive sales agents
3% cover Agent Salary
Turnover of Danone
Agent Salary
Turnover of Danone doubles
Danone
3%
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Distributor started to check validity of our agents’s sales, as he payd3% of their turnover.It was double-check of secondary sales
Pleasant discovery
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So, we hired exclusive sales agents ….
But there came an obstacle …
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It was not profitable for distributor to deliver our orders to shops — it was less than minimum delivery lot
Unprofitable logistik
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DS3 DS3mixed
3PD
Focus on sales
Strong Average Weak
Delivery lotSmall Average Big
There was the trick?
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Unfortunatelly, mixed team did not always provide profitable logistik
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And we obliged agents to add “ballas to the orderзаказу up to minimum lot. As a “ballast” we used«Chaka» peanuts»*
* In every region «Chaka» peanuts» were different products
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But I am payed for Danone only
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It seemed, that we considered everything …
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But … how to manage them
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Models, effective for 40 agents, Did not work for 400…
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Adaptation, on-boarding, mentoring, work with, recruitment
Annual Personal Development Review
Career ladder, strategik organizational development plan
And we started to set up business processes for our exclusive sales agents:
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There is no difference is sales agent on our payroll, or on distributors — when he sales our products exclusivelly, he gets all the benefits of Danone
General Manager, Danone-confectionary
Alexey Mekhanik
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As example, our agents on distributors payroll got their fix and var salary on the 3-rd day of the month
And it was not only words, it was strong processes
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As a result, in a two years
60.000retail outlets
40%Revenue growth*
400exclusive sales agents
*with the same EBIT in %
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Secondary logistik
Investments in salaries
People management
But in your case everything can be different …
We successfully turned around to DS3 due to 3 strategies
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And if you plan to introduce new business practice,
Think about your strategy !