Study of Sales and Distribution Channel of Marico

Group C6Avishek Nayak – 11P188

Henna – 11P194Prateek Maheshwari – 11P211

Vaibhav Sharma – 11P235Vikram Agrawal – 11P237

Marico (Company Overview)• One of the India's leading Consumer Products & Services companies in the beauty and

wellness space

• During 2010-11– Turnover of USD $ 695– Revenue grew by 17%– Volume grew by 11%– Higher growth rate in rural market, share of rural sales revenues increased to 30%

• Every year 70 Million Mario Consumer Products packs reaches 130 Million consumers across 23 Million households, through its distribution network of more than 3.5 Million outlets in India

• Portfolio includes Parachute Advanced Saffola Hair & Care Nihar Mediker

Set Wet Livon Zatak Manjal Revive

Company’s Distribution Channel

Company’s Distribution Channel (Contd…..)

• Manufacturer– Products are moved from 7 company

manufacturing units to depots in each state– Number of depots in each state is determined by

size of state. For example, Maharashtra and Uttar Pradesh have multiple depots to cater the demand of whole state.

– ASM sits at Depot and handles the operations– Also helps in evading taxes on movement of

Marico goods from one state to another

Company’s Distribution Channel (Contd…..)

• From depots goods are transported to distributor across various districts

• Parameters taken into consideration while appointing distributors Market Dynamics: Number of distributor in each district depends upon

size of market and number of outlet each distributor is required to cater Financial Factors: Depending upon availability of financially strong

distributor and his risk taking capacity, an independent or share distributor is appointed. Only those shared distributors are selected which does not stock products of competing brands

• Big markets like Hyderabad, Delhi and Mumbai might have multiple independent dealers while tier 2 and tier 3 towns might have shared distributors

Company’s Distribution Channel (Contd…..)

• Retailer– Stock is moved from distributor to retailer– Company does not select counter where Marico

product would be placed– Follow a policy of intensive distribution– Products are sole to consumers, forming fourth

and final level of distribution channel

Sales Force

Area Sales Manager (ASM)

Territory Sales Officer (TSO)

Distributor Sales Representative

(DSR)

Distributor Sales Representative

(DSR)

Territory Sales Officer (TSO)

Distributor Sales Representative

(DSR)

Distributor Sales Representative

(DSR)

Territory Sales Officer (TSO)

Distributor Sales Representative

(DSR)

Distributor Sales Representative

(DSR)

Sales Force (Contd….)

• Salesman are known as Distributor Sales Representatives, they are on company payroll and incentivized by Marico itself

• Their targets and daily beats are set by Territory Sales Officer (TSO)

• TSO deals with distributors on daily basis, address their concerns and report to Area Sales Manager.

Distribution Channel in Rural Area

• The rural channel is 5 level channel market• Wholesaler is added between distributor and retailer

to cater the largely the segregated market• The Stock is moved from the Company Depot to the

Super distributor from where it is moved to the Wholesaler who delivers the goods to the retailer

• The wholesaler is appointed by company itself and it caters to a cluster of village

• This helps in increasing penetration and also its cost effetive

Sales Force

Area Sales Manager

(ASM)

Territory Sales Executive

(TSE)

Territory Sales Executive

(TSE)

Independent Sales

Representative (ISR)

Pilot Sales Representative

(PSR)

Independent Sales

Representative (ISR)

Pilot Sales Representative

(PSR)

Sales Force (Contd….)

• The salesmen in this case are employed by the company at the wholesaler location and are known as Pilot Sales Representatives (PSR)

• PSR reports to the Independent Sales Representatives (ISR) stationed at the wholesaler location

• These ISRs report to the Territory Sales Representatives at Super Distributor Location

• The sales force is incentivized similar to the one in the urban setting.

Trade Promotion

• Margins– In urban areas Marico gives a margin of 5% to its distributor

and 10% to its retailer– Margins are in line with that of Industry Standards– Marico never increases margins, instead it plays on schemes

on trade promotion which are volume and SKU’s bases– The scheme passed on to distributor is known as Primary

Scheme, to Retailer is known as Secondary Scheme and to Customer as Tertiary Scheme

– In rural area Marico gives a margin of 7% to its super distributor, 3% to its wholesaler and 5% to retailer

Trade Promotion (Contd….)

• Credit Policy– Marico gives credit of 30 – 45 days to its

distributor – Retailer gets credit only for 1-2days– The restocking at retailer is either once in a week

or fortnight depending upon the area

Modern Trade

• The Modern Trade are big retail chains as volume purchase by such stores is very high

• These are handled by Key Accounts Managers • The price and margins are different from those

given to the other small distributors and retailers

• The transfer of stock takes place directly from the Depot to the Store location

Issues• Issue 1:

In past, company has launched products offering lower margins for the channel members. Also, the company did not focus much on promoting these products. Distributors were not happy with this approach of the company.

• Recommendation:– Promote new products in a better way– Offer trade promotions on new and premium products

• Rationale:– Since these are the premium brands of the company, the company needs to create pull for these

products. Promotion has to be effective to ensure that awareness is created about the product.

• Problems Company may face:– Investment required for carrying out the above suggested measures might not result in expected

returns

• Suggestive measures to tackle:– Marico can go for a pilot run in a specific region and carry out the above listed measures. The

company will be in a better position to assess the risks and benefits associated with implementing these measures after the pilot run.

• Issue 2: Modern trade conflict with retailer: Modern trade consists of multi-brand retailers like Big Bazaar, Reliance Fresh and Spencer’s which are able to avail greater margins due to their bulk buying from the Depot. They bypass the distributor and hence are able to get the products at a much cheaper price. This may lead to conflicts between retailer channel and the Modern trade channel due to the price differences.

• Recommendation:– Offer schemes to retailers.

• Rationale:– Modern trade is growing in India at a fast pace, especially in urban channels. With the possibility of FDI in multi-brand

retail being allowed in India anytime soon, Modern Trade just can’t be ignored and these big retailers will continue to use their bargaining power to extract discounts from the FMCG companies. However, retailer channel will continue to be a very important channel in future in the Indian context. So in this situation when Marico can’t afford to antagonize any of these channels, a possible solution could be to offer more schemes to the retailers so that they don’t feel that they are at a disadvantageous position

• Problems Company may face:– If the schemes will be available only at the retailers and not at the Modern trade outlets, it may create an inconsistent

image in the minds of the consumer

• Suggestive Measures to tackle: – Company should send DSRs to modern trade stores as customers to enquire about the real prices they are offering

• Issue 3Theft problem in rural areas: There is a serious problem of theft in rural areas. By the time the stock reaches the retailer, a number of SKU’s go missing. Company has taken action against distributors if problem persists. But, in general, company has to pay for the theft

• Recommendation:– At the time of renewal of contract with the distributors, put the clause of joint liability in case of theft

• Rationale: – Theft is a serious problem and should be dealt with seriously. Making the distributors jointly liable for the theft

will make them responsible and would reduce the occurrence of such cases. This step would force distributors to act to identify the gaps and do the necessary

• Problems Company may face:– This can deter new distributors from joining the company if theft cases are rampant and difficult to stop. This can

turn good distributors to the rival firms.

• Suggestive Measures to tackle:– It can be dealt on case to case basis. If theft cases are very rampant and there is nothing much a distributor can

do to stop it, Marico shouldn’t urge for the joint liability. However, if there is a scope of action by the distributor to reduce such cases, company should push for joint liability contract

• Issue 4:Similar packaging; local brands: Similar looking brands are available in the retail shops with same packaging. Company is facing difficulty in stopping the availability of such products in the same retail shops. Since most of the times these brands are cheaper, sales takes beating

• Recommendation:– Marico should try to come up with new and innovative packaging which is difficult to imitate regularly.– Use advertising at the retail outlets to make the consumers aware about the quality of Marico’s products and packaging of the

Marico product.• Rationale:

– Innovative packaging which is difficult to imitate will restrict this practice. Also, the private labels would require time to come up with similar looking packaging

– It is difficult to stop the distribution of similar packaged private brands since they offer competitive margins to the retailers. A reasonable way can be to use posters and banners at the retail outlets to make the consumer aware about the quality of the products

• Problems Company may face:– Cost of modifying the packaging regularly might be greater than the losses incurred due to counterfeit products.– Retailers might not agree to put such posters on their shops since it will reduce the incentives they are getting from selling these

private labels.

• Suggestive Measures to tackle:– Do proper cost-benefit analysis before modifying the packaging.– Try to persuade the retailers about the importance of communicating the new packaging to the consumers, which is required for

sales volumes to grow

• Issue 5:Distributor doesn’t take feedback from the retailers and the company is not taking feedback from the distributors frequently. So, there is a one way information flow. (Courtesy: Sharma Traders, Delhi)

• Recommendation:– Ensure that there is a two way information flow in the channel. DSRs should get

information regarding market realities from the distributors proactively.

• Rationale:– Since the company needs to be aware about the market realities, trends and what

the competitors are doing, information flow is critical and the above suggested measure should be implemented.

• Problems Company may face: None

• Suggestive Measures to tackle:None

• Issue 6:Company complains that payment realization takes more effort and a long time from the distributor’s side. This may be because of varying financial condition of different distributors. This poses a challenge to the company of choosing channel members properly. (Courtesy: TSO for Century Industries, Delhi)

• Recommendation:– Set a credit limit of each of the distributor depending upon their credibility

• Rationale:– This exercise will reduce the risks associated with extending the credit facility

• Problems Company may face:– This quantifying exercise is difficult and subjective.

• Suggestive Measures to tackle:– Past transaction records of the distributors should be available with the company to carry out

this quantifying exercise successfully.

• Issue 7:Inter-state and Inter- channel arbitrage rampant, especially in Rajasthan.

• Recommendation:– Clearly define territories. – Put labels manifesting the price of sale for different regions.

• Rationale:– It will specify different price for the same product in different areas which will legally

restrict arbitrage.

• Problems Company may face:None

• Suggestive Measures to tackle:None

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