Identification of Issues

The companys core ideology is not Brand or Marketing driven, but focused on
Distribution Model. Table highlights major differences between Kerala and Karnataka
spices market model as identified through case.
Kerala

Karnataka

Direct distribution model.

Majority rural market and few urban centers.
Small provision stores.

Trying to replicate direct distribution model.

Urban majority (main focus on Bangalore).
Targeted small retailers as they were Malayali and

Low shelf life of spices

not urban superstores.

High shelf life due to multiple brands and low

brand awareness.
Direct interaction: Top management to sales team No direct interaction and weekly sales review
Accurate demand forecast and planned inventory Forecasting demand is difficult and thus, problems
weekly
with planning inventory
Routes were developed one at a time keeping Lack of consumer focus
consumer needs in focus
Trust established with retailors with scheduled No trust and relationship factor as salesman
delivery and less inventory
Highly disciplined and experienced task force

frequently changed.
Less experienced sales force which frequently

crossed earmarked territory to pull up business.

Aggressive training plan for sales force
No training module for sales force
Rewards for sales team and also punishment in No reward and punishment mechanism. High
front of whole team
attrition and both cash and stock missing
Hired salesman from known family relations, so More employment opportunities, less trust and
more trust and less attrition rate due to incentives more disruptions due to trade union.
from outside
Sales force was motivated to perform.

Higher

High brand awareness

commission on sales made sales force lazy.

Low brand awareness and consumer pull

fixed

Analysis of operating expenses

salary

component

and

more

Kerala
Component
Salesmen fixed salary
Salesmen daily allowance
Sales asst fixed salary
Sales asst daily allowance
Driver fixed salary
Driver daily allowance
Running expenses
Holding cost/Inventory
Commission cost to company
Total
No of retailers
No. of Trucks
Truck Capacity
Total sales in kg
Operating cost per kg/yearly
Average purchase by retailers

Monthly
64500
200*25*119 = 595000
535500
361958.33
337500
228125
2625000
535890.4
108667
5982140.73

Yearly
7854000
60,000*119=7140,000
6426000
4343500
4050000
2737500
31500000
6430685
0.001(1304000000)= 1304000
71785685

40,000
75
6000 Kg
75*52*600= 2340000
30.677
58.5 kg/year
Karnataka

Component
Salesmen fixed salary
Salesmen daily allowance
Commission cost to company
Driver fixed salary
Driver allowance
Running expenses
Opportunity cost/Inventory
Total
No of retailers
No. of Trucks
Truck Capacity

Monthly
165000
75000
290000
120000
63875
210000
190685
1114560

Yearly
1980000
900000
3480000
1440000
766500
2520000
2288219
13374719
11000
30
600 Kg

Recommendations
Based on the above analysis, we can see that the Sales for Kerala are 11 times more while
operating costs is only 7 times as compared to Karnataka. Thus, Karnataka model needs
to be more cost efficient by increasing sales with same operating cost. Even after
removing driver and increasing commission to 7% in Karnataka as suggested by Anjan,
operating costs remains same. Below are the suggested steps which Eastern can
implement to increase sales:

1. Use Push strategy to bring bigger distributors on board- who are not Malayali. In
Bangalore, majority population is urban; they might prefer supermarkets over
mom and pop centers, unlike Kerala. Giving distributors higher margins and
promotion money as well as using sales force to push products would be helpful.
2. Keep profit margins variable for both sales force and distributor. Products which
have slow movement off the shelf should have higher margins to induce sales.
3. For slow-moving products, company may consider adopting a buyback policy so
that distributors feel safe about unfinished inventory.
4. Use push strategy to create brand awareness and consumer pull in Bengaluru area.
Kerala, being less competitive, was an easy market for Eastern. Presence of
multiple brands in Karnataka makes it important to create brand awareness
through advertisement and promotion.
5. Have hybrid marketing channel based upon the distributor size. For small traders,
relationships are important whereas large traders are more business oriented. The
goals of sales force must be aligned accordingly.
6. Move one of the senior members for Kerala to Karnataka for some time, so that
they can establish an effective distribution system and forecast demand accurately.
This will help in reduce inventory holding cost and knowing demands of each
retailer.
7. Keep daily reporting system intact but have review meeting once/twice in a week,
similar to what happens in Kerala. This will help in building strong relationship
between sales force and senior management and reduce attrition rate.
8. Make salesman owner of the vehicle by removing driver. Also, reducing his fixed
component and increasing variable component might help. This will increase
ownership