pepsico sdm

8/10/2019 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


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



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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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Tha nkYou

pepsico sdm

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