Good Food, Good Life

Nestle
• Nestlé was founded in 1867 by Henri Nestlé in Switzerland

• Merged with the Anglo-Swiss Condensed Milk Company in

1905

• Today it is the world's largest and most diversified food

Company, and is about twice the size of its nearest competitor
in the food and beverages sector.

• Nestlé employ around 250,000 people from more than 70

countries and have factories or operations in almost every
country in the world
Nestlé Principle

• Nestlé is based on the principle of decentralization, which

means each country is responsible for the efficient running of
its business - including the recruitment of its staff.
 Nestle India Products
Nestlé India - Famous brand names

Milk Products & Nutrition Beverages Prepared Dishes & Cooking Chocolates &
Aids Confectionary
Nestle Milk Nescafe Classic MAGGI 2-MINUTE Noodles Nestle Kitkat

Nestle Slim Milk Nescafe Sunrise MAGGI Imli Pichkoo Nestle Munch
Premium

Nestle Dahi Nescafe Cappuccino MAGGI Sauces Nestle Bar One

Nestle Bhuna Jeera Raita Nescafe Sunrise MAGGI Healthy Soups Nestle Milky Bar

Nestea Nestea Iced Tea MAGGI CUPPA MANIA Nestle Polo

Nestle Milkmaid MAGGI Vegetable Nestle Eclairs

Atta Noodles

Nestle Everyday Whitener MAGGI Pazzta

 Distribution System

• Competitive edge over its existing rivals.

• Nestlé has its own distribution networks equipped with all

necessary transportation facilities.

• They transport their products at major regional sales offices,

which are situated at different cities of India.

• These sales offices (distribution centres) have their

own vans with sales people who sell and transport goods to
the small retailers.
Inbound Logistics

Packaging

Processing

Cardboard/Material
Raw Cocoa manufacturer
Outbound Logistics

Packaging

Transportation

Wholesaler Grocery Store Customer

Nestle Distribution Channel
Mother Godown

Carriage and Forwarding Agent

Distributor Super-Stockist

Retailer Wholesaler Re-distributor

End Customer Retailer

Nestle Distribution Channel
• Products are sent to the C&F Agents of the company from its
Manufacturing Unit.
• Later it flows from the Manufacturing Unit to Distributor
and Super Stockist.
• The Distributor is responsible to manage the availability of
products in his area
• Super Stockist supplies the goods to the Re-Distributor who is
in charge of managing the availability outside the region of
the Distributor.
• The Distributor and Re-Distributor, then supplies the products
to Wholesaler and Retail in their respective region or area.
Nestle Distribution Channel
C & F Agent
(Karnataka)

Distributors D1 Distributors D2
Super Stockist
(Bangaluru) (Mysore)

Re-Distributors Re-Distributors
(Gokarna) (Kundapur)
Selection of Distributors
• The Criteria followed are:
1. Capital Investment
 Depends on both present and future capital investments by distributors
 Amount vary from Area-wise to marketwise

2. Relevant experience
 Prior experience in FMCG sector is preferred to save on training expenses
 Distributor should not be dealing in Competitor’s product
 Should handle entire range of Nestle products (Both fast and slow moving SKU’s)

3. Infrastructure
 Godowns / Storage space with appropriate refrigeration as per product needs
 Delivery vehicles
 Salesmen

4. Company’s discretion based on markets served

Terms of Operation
• Sales force of distributor is divided into 3 heads namely:
1. Milk Products
2. Chocolates
3. Other products
• All the 3 teams visit the retailers once in a week on different
days
• Sales force is complimented by a weekly visit to the district by
the sales executive of the company
• Idea is to supplement the lags in the distribution by
wholesaler and in certain specific cases to push extra stock in
the market
Terms of Operation
• Company policies
1. Credit Policy

• Distributors are termed as Cash Distributors because

the company charges the distributors before the stock
is delivered
• Company has connected the distributor online and
the transactions happen online
• The distributor sells goods on credit; the period of
credit ranges from 1-2 week
• The wholesaler allows discount of 1% on cash
payment (policy followed by the wholesaler)
Terms of Operation
2. Stock Policy

 As per the company regulations the distributor is supposed to

maintain a stock of 3 weeks which in monetary terms equals to
Rs. 30 lakh for the distributor.

 Stock is formalized by the company; the dealer can negotiate on

3-4 end days, the stock policy is formed for the month

 Distributor to push in slow moving SKU’s clubs them with fast

moving SKU’s for the retailers

 Company DUMPS significantly on the distributors, the distributor

has to mange the supply by the company
Terms of Operation
3. Lead period
 Lead periods in providing stocks to the dealers differs from the
SKU and quantity ordered
 Some SKU’s like dairy products are delivered correspondingly
with taking order but some are sent from the warehouses
 A higher quantity ordered has to be replenished from the
warehouse

4. Return Policy
 Company follows a policy of return when the product has past its
expiry date, damaged or has a defect
 Replenishment is done with cash and happens at the end of
every six months

5. Return on Investment
 Company does not give any guarantee to the distributor
Terms of Operation
6. Storage policy
 Distributor maintains Cold Storages and Deep Freezers for the
storage of the products
 Distributor has to bear all expenses pertaining to Infrastructure
requirements

7. Sales Force
 The remuneration and all other expenses for sales force are
borne by the distributor.
 Incentives - Margins

Perfetti Cadbury Nestlé Lotte Wrigleys Colgate

Super
Stockist /
Distributor 2.5 2 5.7 2.5 2 2
Re-
Distributor
/
Wholesaler 4 4 3.7 6 5 5.6

TOTAL 6.5 6 9.4 8.5 7 7.6

Incentives - Schemes
• Specific schemes which spread over 2 ~ 3 months

• Encourage specific target achievements

• Targets are given as indexed growth rates based on weights

• For e.g.
– 10% growth for distributor having sales of Rs. 20000 will different from
distributor having sales of Rs. 1 lakh

• Prizes in form of additional margins

• Certificate of acknowledgement for achieving the target

Motivation of Channel Partners
• “Proud to be Nestle – Super awards for super achievers”
– Open to
• Area Sales Managers
• Sales Officers
• Cash Distributors
• Distributor Salesman
• Merchandisers

• How does it Work?

1. Qualifying Criteria
1. 100% achievement of internal target for 3rd quarter (Invoicing)
2. Min. 10% RDBN turnover growth over last year 2nd quarter
Motivation of Channel Partners
2. Ranking
 All ASM’s who fulfil above criteria are ranked on the basis of
Index.
 Top ASM’s(as fixed by the branch) win prizes
INDEX = %RD turnover growth * absolute value increase

 The winning team comprise of;

 All SOs in the ASM team
 Two top ranked CDs in each SO Zone
(Index = %RD growth * absolute turnover increase)
 Two distributor salesmen in each of the top two CD
 One Merchandiser in each of the top two points ( Performance will
be assessed by S.O. on quality of merchandising achieved)
 The Top ranked ASM team also wins a TEAM TROPHY and
certificates
Dealership in Practice (DIP) training
 Training programs for C&F agents which includes modules on:
 Nestle Quality System
 Good Warehousing Practices (GWP)
 Good Distribution Practices

 Major aspects of the training program are;

1. Stacking as per norms
2. Good Warehousing practices
3. Accounting
4. Handling of Bad goods
5. Temperature control for chocolates and dairy products
Target setting
 Target setting is a result of negotiation between Distributor and
Company

 Mid month targets for next month are set around 5th-10th of that
month

 Targets are set for Sales officers, ASM’s and branch managers which
are driven down the hierarchy

 Distributors can negotiate this targets in range of +/-10% by end of

month

 Confirmed sales are set as weekly targets

Target setting
 Responsibility

1. Branch manager : Co-ordinating targets of factories and individual

product managers

2. Sales officer : Focus is on the redistribution targets, also called

as secondary invoicing (from cash
distributor to the redistributors)

3. ASM : Primary invoicing ( From C&S to cash distributor)

is more relevant

4. Company : Primary as well as secondary invoicing

Channel conflicts
• Conflicts due to:

1. Wholesalers
 Wholesalers are not a part of the formal structure of Nestle
India’s distribution network
 Make bulk purchases from the distributors directly thereby
leveraging on the margins
 Typically the wholesaler gets a margin of about 2%-3% from the
distributor , of this he retains 1 % and passes on the remaining
2% as discount to the retailer
 This discount induces the retailers to buy from wholesalers

2. Sales Officers
 Account of invasion of another’s sales area by a company’s sales
officer under pressure of sales target
Physical distribution system
• Seven Manufacturing Facilities
1. Moga (Punjab)
2. Choladi (Tamil Nadu)
3. Nanjangud (Karnataka)
4. Samalkha (Haryana)
5. Ponda (Goa)
6. Bicholim (Goa)
7. Pantnagar (Uttarakhand)
Ownership Transfer
Factory

Transfer Chalan

Mother Godown
Transfer DA

C&S C&S C&S

Agent Agent Agent
Invoicing against payment
CD CD CD

Stockist
Logistics Structure
• Logistics comprise of Road Transportation through Container trucks

• Distribution from point of Distributor warehouse to Retailer shops /

Modern trade shops is handled by Distributor

• Distributor has fleet of mix of transport vehicles right from refrigerated

vans to small tempos to supply to Pan shops

• Company is connected to Distributor / Super Stockist through SAP for

online order booking and processing

• “Stock in Transit” module is installed at Distributors network systemsf or

tracking the supply of goods
Thank you