AProject Report On Sales and Distribution of Zydus Wellness

SUBMITTED IN PARTIAL FULLFILLMENT OF THE POST GRADUATION DIPLOMA IN MANAGEMENT AT BIRLA INSTITUTE OF MANAGEMENT TECHNOLOGY

Submitted to:Prof. R.J. Masilamani

Submitted by-Amrit Raj14DM028Animesh Kumar14DM038Ankush Mehendiratta14DM041Dishant Gupta14DM078Jitender Badiyal14DM104Lovedeep Bansal14DM118

Date: 31 March 2015

ACKNOWLEDGEMENTSWe are sincerely thankful to Prof. R.J. Masilamani, under whose guidance we have successfully completed this project and had a great learning experience. I think his constant encouragement, warm responses and for filling every gap with valuable ideas has made this project successful. He made it possible for us to put all our theoretical knowledge to work out on the topic: Sales and Distribution of Zydus WellnessA mammoth project of this nature calls for intellectual nourishment, professional help and encouragement from many people. We are highly thankful to all of them for their help and encouragement. We wish to acknowledge our great debt to all of them whose ideas and contribution influenced us to complete the project work.Thank you.

TABLE OF CONTENT

1. INTRODUCTION42. COMPANY OVERVIEW..3. PRODUCT LINE4. OBJECTIVES.5. INDIAN HEALTH AND WELLNESS INDUSTRY6. SWOT ANALYSIS..7. BUSINESS MODEL8. SALES..9. SALES DISTRIBUTION10. DISTRIBUTION CHANNEL11. CONCLUSION12. REFERENCES

IntroductionThe world around us is changing fast and so is our life and our lifestyles. Given the kind of active lifestyles we are leading the concern for health and making healthier choices has become even more critical. Today, we all are on lookout for newer, healthier and more wholesome options to lead healthier lives.

Zydus Wellness combines the best of healthcare, nutrition and cosmeceuticals to bring to you an array of the best wellness products to enrich your life. Our products - Sugar Free, Nutralite, Everyuth and Actilife will help nourish and nurture your life and making healthier and better you.

At Zydus Wellness we are always working towards newer, healthier and more wholesome options to lead healthier livesZydus Wellness Limited (Zydus Wellness) is an India-based company. The Company operates in the Consumer Products segments. The company sells its products in India. The Companys brands in the healthcare include Sugar Free, EverYuth, Nutralite and Actilife, which was launched during the fiscal year ended March 31, 2012 (fiscal 2012). ActiLife is a nutritional milk additive for adults. The Companys business consists of manufacturing and marketing of consumer wellness products in India. During the fiscal 2012, the Companys Ever Yuth entered into the male skincare market with the launch of EverYuth Menz. The Sugar Free product includes two product types in its portfolio: Sugar Free Gold and Sugar Free Natura. Nutralite offered by the Company is an alternative to butter. The Company supplies Nutralite in both retail, as well as institutional segments.

Company OverviewZydus Wellness Ltd. - Listed as Asias 200 Best under a Billion company by Forbes With growing health awareness and wellness revolution among consumers, a definite shift in consumer preferences and attitudes across India is being witnessed. Continuously increasing pursuit of healthier lifestyles and rising willingness to spend more on fitness and well-being has resulted in a surging demand for products that provide additional health and nutritional benefits. This has created a promising market, with health conscious consumers willing to try better alternatives and make informed choices. Zydus Wellness Ltd. (ZWL) spearheads the Zydus groups presence in the fast growing consumer healthcare market. The company was listed as Asias 200 Best under a Billion by Forbes (2010). With iconic brands like Sugar Free, EverYuth and Nutralite, the company has a strong brand equity in niche segments of sugar substitutes, skincare and table spreads.In fact Sugar Free, the largest selling sweetener brand in the country with over 93% market share, has now become more of a lifestyle brand rather than just a sugar substitute for diabetics. The skincare range of products sold under the umbrella brand EverYuth has been able to retain its leadership position despite increasing competition and an influx of international brands.Nutralite, Indias largest selling table spread, was added to its portfolio through the acquisition of Carnation Nutra Analogue Foods Ltd. in 2006-07. It has gained widespread consumer acceptance as a healthier substitute to butter. Zydus Wellness product, Everyuth Naturals 3 in 1 Neem Face Pack and Nutralite Yummy Spread bagged the Product of the year Award 2014 in their respective categories. The Product of the Year Award is an internationally recognized certification that celebrates and rewards the best innovations in consumer products and services. With a continuous thrust on strengthening its brands portfolio, ZWL plans to reach out to more consumers by launching newer variants within the existing categories and exploring possibilities of entering newer categories in the wellness domain. In 2013-14, ZWL registered sales of Rs. 4,296 million.

Product LineNUTRALITEFACE WASH, SCRUB, FACE PACK, SOAP, PEEL-OFF MASKS, FOOT-SCRUB EVERYOUTHSUGAR FREE GOLD, SUGAR FREE NATURABUTTER, MAYONNAISE LITEACTILIFESUGAR FREEPROTEIN SHAKE

ZYDUS WELLNESS

Indian Health & Wellness industry Valued at over INR 590 bn, growing at CAGR of 18% - 20% p.a. Growth expected to continue. Industry growth being driven by: Increasing per capita spend on wellness from Rs.300 in 2008 to more than Rs. 480 in 2012. Rapid urbanization Improvement in overall standard of living though with a compromised quality of life Mounting health problems attributed to high pressure lifestyle Growing health consciousness and aspiration for a better life Increasing willingness to explore new solutions and make informed choices

Making Indians healthier since 1988 Advocating healthy living and anticipating the emerging day-to-day need for health foods and healthy personal care Present in niche segments with strong brands A healthier alternative to sugar - leading the market with over 94% share in share of the sugar substitutes category Skincare range - market leader in facial scrub and facial peel off and a strong presence in face-wash Indias largest selling table spread - a healthier alternative to butter First Nutritional drink fortified with Prebiotic Actifibres that help manage cholesterol, improve digestion and build immunity. Direct reach to all 50k+ population towns through strong field force Endeavouring to improve quality of life through continuous innovation

SWOT ANALYSIS:STRENGTH:- Zydus wellness has a well-built image of excellence and innovation. It has a well logistics and distribution channel network. High brand image of Zydus in the market. Offering new products to the customers continuously.

WEAKNESS:-

Trade schemes and margin of some competitors are better. No regular audit of the distributors. No training schedules for training of distributors salesman. Equal importance is not given by distributors to all retailors. Lagging much behind in advertisements and promotional activities.

OPPORTUNITIES:- There is a phenomenal scope for value addition in innovations in product development, packaging and presentation. By solving the replacement problem they can maximize the attention of retailors about selling the product.

THREATS:-

Cut throat competition in the market. Amul focuses more on advertisement, as ads can be seen often. Customer are brand loyal , Customer are not well informed.

COMPETITORS IN THE INDUSTRY: AMUL BRITANNIA MARIGOLD VEELITE NUTDELIGHT NUTRELLASales HierarchyVice President

Sales Manger

Zonal Sales Manager

Territory Manager

Marketing Executive

Distribution NetworkZydus Wellness

Manufacturing Hub (7)

CFAs (22)

Stockist/ Dealers (2200)

Retailers (50000)

Zydus Wellness distribution in India has witnessed a paradigm shift. Before 1990, pharmaceutical companies established their own depots and warehouses. Now they have been replaced by clearing and forwarding agents (CFAs). CFAs: These organizations are primarily responsible for maintaining storage (stock) of the companys products and forwarding SKUs to the stockist on request. Most companies keep 13 CFAs in each Indian state. On an average, a company may work with a total of 2535 CFAs. The CFAs are paid by the company yearly, once or twice, on a basis of the percentage of total turnover of products. Stockist: is the distributor, who can simultaneously handle more than one company (usually, 515 depending on the city area), and may go up to even 3050 different manufacturers. They pay for the products directly in the name of the pharmaceutical company after 30 to 45 days. The retail Store obtains products from the stockist or sub stockist through whom it finally reaches the consumers (patients).

Typical Supply chain structure

Margin Structure in Distribution1. Margins are represented as% on the MRP (Maximum Retail Price)2. A sample cost structure is shown for a product with MRP of INR 100DISTRIBUTION TO MODERN RETAIL STORES: Modern Retailing in IndiaIn a sharp contrast to the Retail sector in developed economics, retailing in India though large in terms of size is highly fragmented and unorganized. With close to 12 million retail outlets the country has one of the highest retail densities worldwide. Retailers include street vendors, supermarkets, department stores, restaurants, hotels .Where the ownership and management rest with one person are classified as traditional or unorganized retail outlets. These formats typically require employees with low skills and account for around two-third sectors output.TRADITIONAL FORMATS: Kirana stores Grocery Exclusive/Multiple Brand outlet Bakery shops

MODERN FORMATS: Supermarkets Hypermarkets Departmental Stores

Channel Design

Zydus Wellness has two types of channel selling i. Regular (traditional) retail channel, ii. Direct Selling Channel in the name of Zydus Wellness Network.

Zydus Wellness has a well-entrenched high distribution model which comprises of C&FAs, Redistribution Stockists, wholesalers and retailers (as shown earlier). Zydus Wellness distribution network is recognized as one of its key strengths. Its focuses on Product availability, Brand communication, and higher levels of brand experience.Channel Structure (Special Focus is on NCR)

Typically, the goods produced in each of the ZYDUS WELLNESS's 40 factories are sent to a depot with the help of a carrying and forwarding agent (C&FA). The company has its depot in every state of the country. The C&FA is a third party and gets servicing fee for stock and delivery of the products. In each town, there is at least a redistribution stockist (RS) who takes the goods from the C&FA and sells them to retail outlets.

Redistribution Stockists:

The ZYDUS WELLNESS management realized certain problems with the existing sales model. First, the model was not viable for small towns with small population and small business. ZYDUS WELLNESS found it expensive to appoint one stockist exclusively for each town. Secondly, the retail revolution in the country has changed the pattern the customers shop. Large retail self-service shops are becoming commonplace.Total number of RS in NCR = 3 (at Gurgaon, Delhi, Ghaziabad). This is going to be reduced to only one with effect from next month of this year. Sales Margin: 4.76% which includes cash discount, unloading expenses from depot, distribution expenses to retailers, incentive schemes & other incidental expenses.

Modes of transport used: Rickshaw, tempo, truck. Incentive schemes: Before 2000 holiday packages and tours but after 2000 no nonmonetary incentive for RS. Software systems and Information System: UNIFY 8.3 (Developed by IBM & CMC). This software needs to be synchronized daily and the system updates any information/ incentive schemes / sales figures etc. to and from the common shared platform.

Areas of Operations: Marked for each of the RS. Selling Operations: RSs sells the goods to Wholesaler (gets 1.5 % max. discount from RS).Retailers (gets 1.0% max. discount from RS)

Wholesaler:

Gets cash discounts and other schemes promoted by ZYDUS WELLNESS

Retailers: Total retailer base in NCR: Approximately 570. Sales Margin: Depends on the product Face wash 8% on MRP Sugar free 10% on MRP Nutralite 8% on MRP

Incentive schemes: Company programs (Scheme Discounts + Cash Discounts) TPR schemes based on Sales (1 % to 4 %)

Field Sales Force:

To meet the everchanging needs of the consumer, ZYDUS WELLNESS has set up a distribution network that ensures availability of all their products, in all outlets, at all times. This includes, maintaining favourable trade relations, providing innovative incentives to retailers and organizing demand generation activities among a host of other things. The important activities that ZYDUS WELLNESS field sales force does are (i) target chasing and (ii) reporting on a daily basis. Account information is maintained on palmtops given by ZYDUS WELLNESS. During our research and informal survey of ZYDUS WELLNESS field sales force, we came to know that for the last two years, training is not being given at all to the sales force. ZYDUS WELLNESS has limited the network channel selling to categories of Home & Personal Care with exclusive brands for this channel. That is, these particular brands (products) are all exclusive to specifically developed for the Direct Selling channel, and not available in the retail channel. The general trade comprises grocery stores, chemists, wholesaler, kiosks and general stores. Hindustan Unilever services each with a tailormade mix of services.

Analytical Framework We tried to analyse ZYDUS WELLNESSs distribution network in the light of 20 most significant variables that affect the distribution part of channel management for any organization in the business of marketing & selling of goods. The variables, their explanations and their impact on the ZYDUS WELLNESSs distribution network are given below 1. Number of ConsumersIn retail business dominated by traditional stores like Kirana Stores etc (Indian retail business falls in this category), higher the no. of consumers, higher will be the no. of channel intermediaries. The implication of this is that there will be many layers in the channel in such a situation and managing such a complex distribution network by keeping tabs on every player will be a huge task. Moreover, Transport & Logistics (T&L) support provided by the organization needs to be well organized.2. Geographic Dispersion of Consumers Again, this is closely related with the previous variable, more so in a large, geographically diverse country like in India. With the increase in this dispersion level, more intermediaries and more layers are required in the distribution network so as to effectively reach the length & breadth of the country. Obviously the T&L management for such an organization would be critical to accomplish this. For a country as geographically diverse as India, panIndian presence & market leadership can only be possible when products reach even the remotest parts of the country. ZYDUS WELLNESS is very successful in achieving and maintaining this reach due to its distribution network. 3. Frequency of Purchase If the frequency of purchase is high, then transport intensity in the last mile (i.e., from distributor to retailers) increases manifold. For FMCG products, as a thumb rule we can take that the mean time between two purchases is ~ 90 days. With the introduction of smaller form factor packaging for FMCG goods (Re.1 / shampoo sachets being a very good example), the transport intensity increased further. ZYDUS WELLNESS has about 2000 redistribution stockists, who supply to approx. 4.3 million outlets across India. Since manufacturing is done at 40 plants around the country, rationalizing the logistics and planning is a huge task. An innovative step in that regard has been the formation of the Mother Depot and Just in Time System (MDJIT). Certain C&FAs were selected across the country to act as mother depots. Each of them has a minimum number of JIT depots attached for stock requirements. All brands and packs required for the set of markets which the MD and JITs service in a given area are sent to the mother depot by all manufacturing units. The JITs draw their requirements from the MD on a weekly or biweekly basis and supply to stockists in that area, who, in turn, supply to retailers.

4. Tendency to Postpone Purchase If the tendency to postpone purchase is lesser, then the product will be easier to distribute. For example, products/services like Fire Extinguishers, Life Insurance etc. are such that though these are needed, the overall tendency for the consumers is to postpone the purchases these products/services can be termed as necessary evil. For this kind of products, regular reinforcement in the minds of consumers becomes necessary, sales field force becomes critical and use of expert field force is commonplace. Since FMCG products are used regularly and these products are not necessary evils, distribution network of ZYDUS WELLNESS does not require any expert field force to sell its products. Only the recent diversification of ZYDUS WELLNESS into Home Water Purification business (Pure It brand) needs dedicated field sales force.

Scope of Improvement

Launch of Zydus Related Products:Zydus should launch more Nutralite butter and other products, since consumer want more butter related product. Reward To Good Retailers:Zydus should give the rewards to the good retailers who are giving good sales. The small retailers who are not giving good sales, Achievable targets should be given and should be rewards in terms of gifts on achieving the targets. Improvement in Supply:Improvement in supply is required as Distribution frequently get stock out from a particular type of butter which is having more sales. This should not be a repetitive condition. The company should send exactly that what is required by the Distributor. Sending some others flavours which are not demanded can reduce the sales of the popular brand lead to decrease in transparency between the Distributor and the Retailers as the Distributor is going to avail the same policy with the retailers as the company is availing with him. Sending proper supply can strengthen the relation of the company. Distributor and the Retailers. Improvement in Packaging:Packing can be made more attractive by using cartoons to influence the person. As per the consumer survey, the packaging of product related the best. Should adopt more flexible Replacement policies:The major reason of dissatisfaction among the other retailers was replacement policy of expired products. It was also the reason for many of the closed outlets. The Distributors gets replacement of 1.4% of total sales by the company. This percentage can be increased to provide more flexibility to the Distributor. The Distributer gets replacement from the company twice in a year. The Distributor should get the replacement monthly so that he can also replace expire products of retailers regularly. Regular Audit of all the Distributors:A regular audit to all the Distributors should be made by the company officials to check the condition of all the supply vehicles so that proper delivery of butter is made to the retailers. It was observed that some of the supply vehicles of the Distributor were not working properly and the supply was made in boxes.

References

A. http://www.researchandmarkets.comB. http://www.store.globaldata.com/.../zydus-cadila-healthcare-limited-cadilahc-financiaC. http://www.zyduswellness.in/D. http://www.zyduswellness.in/investor.html

BibliographyA. CMIE Prowess DatabaseB. Google scholarC. Journals and Research papersD. Magazines

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