CCI Case Study

Vaibhav Yadav EPGCMM11- 045

Questions.
1: Why CCI should invest in rural? What are the opportunities in rural markets
for CCI?
Ans. CCI reconfigured its Route to Market (RTM) That delivered growth & effective
competitive advantage. However, they knew that future sales of CCI would heavily rest on
the way RTM will be executed specially expanding channels to rural market. Rural Market
offered a huge opportunity for CCI in confectionery and chocolate segments. As per CCI,
penetration of chocolate is very poor in rural markets (10%) when compared to urban
markets. Rural market holds the tremendous growth potential for CCI products.
2. What are the barriers for CCI to distribution in rural markets?
Rural India infrastructure was significantly underdeveloped & inefficient. Only 33% of the
villages had roads, while only 1.2% of villages were connected by rail. Landline coverage
was only 18%. Moreover, the gestation period for ROI is longer and they have to
compromise with the profit margins as competing with unorganized players will require
them to offer products at low prices.

3: Describe confectionery market in India. How is the market different in urban and
rural India?
The confectionery market was included of chocolates, sugar candies & gums each growing
at 20%, 5 % and 9% respectively. Market shares of these 3 products categories were:
Chocolate- 46%, Sugar Candies- 34% & Gums, 20%. The top 4 players accounted for 75%
market share with Kraft foods at 30%, CCI, 15%, Nestle 15% and perfetti 15%.
The Indian confectionary market was primarily driven by monopacks offering value to the
customers and driving growth for companies.
The per capita consumption of confectionery in India was as low as 20 grams when
compared with global average of 3000 grams.
In terms of the value, distribution of the confectionery products through kirana
stores accounted for 76% and convenience stores distributed 13.5%.
Western India was the largest confectionery consuming region of the country with 32%
followed by North India 28%, South India 23% & Est India 17 %.
Urban and Rural penetration of confectionery products were at 75% and 10 % respectively.
In Rural markets sugar candy penetration was more than 15 % while chocolate penetrating
was more than 2%.
Urban consumers were drawn to brand quality; rural consumers were driven by price.
The chocolate category was growing faster in rural market then in urban centres.
4: Does the case have any hero (case protagonist), a dilemma or potential solutions?
Ans Implementation of Effective distribution system provided major set through for CCI
which involved major channel conflicts.
As they were aware that investment in rural market may pay off after a log Gestation period
or after a period of product customization and on the ground communication. A number
of business has tough time adapting to rural market but these business have a tough time
adapting to rural market.
CCI Aimed to increase the chocolate and candy consumption in rural market by expanding
the reach of its distribution network.
To move ahead they have identified 6 alternatives that may enable them to achieve the
objective.
5: Identify the criteria on the basis of which evaluation and comparison of
alternatives (or potential solutions) for distribution should be made?
Ans Broadly the Population Size with presence of retail outlet were key factors to set the
criteria
1. cost of servicing: CCI business objective of building brand, enhancing the product reach,
high revenue with minimum cost
2. sales potential: Option chosen and potential solution must be workable and practical
3. profit potential: How limited resources of CCI are utilized, easy of operable model, growth
with time for high cash flow, profitability and the scalability
4. Less intermediaries and overhead in distribution channel

6: Evaluate the alternatives for distribution on the basis of chosen criteria and find
out which among the available options is best for CCI.
Ans. There were 6 alternatives which were considered.

1. Super stockist Model

2. Haats
3. Van Sales
4. Micro Entrepreneurs – Self Help Group
5. Micro Entrepreneurs – Mobile Traders
6. Tie-up with India Post

1 Super stockist

Pros:

• Offers advantages of scalability and operational flexibility

• Sustainable option as there are no channel conflicts

Cons:

• Expansion limited
 • Requires vast resources and generates less revenues

An Existing super stockist in the nearby region can cater to the newly appointed sub stockist and if the
economies permit a new super stockist can be permitted.

2 Haat

Pros:

• Weekly markets; 43000 Haats in India

• Haats were preferred over rural retail outlets

• Accessible by roads

• Single Haat would cater to 20-60 villages

• Had 5000-12000 visitors per day

Cons:

• Temporary Haats moved from village to village

• How would channel be established

3Van Sales

Pros:

 Mobility from village to village

 Widely used in rural markets
 Used for creating brand awareness

Cons:

 Expensive option as Vans costed Rs.3,500 per day

 Only 33% percent of villages had roads; limited scope

4Micro Entrepreneurs – Self Help Group

Pros:

• Higher Margins for CCI

• Personal selling possible

• Opportunity for CSR

Cons:

• Volume sales would be limited

• Limited scope as SHG movement had not spread evenly across India
5Micro Entrepreneurs – Mobile Traders

Pros:

• Local knowledge

• Could sell at Haats and Rural retail stores

• Cost effective

• Can penetrate areas without road connectivity

• Prices could be reduced to increase penetration

Cons:

• Lower sales volumes

• Can only sell value packs and low cost confectionary items

6Tie-up with India Post

Pros:

 Cost effective way to reach rural markets

 Deliver consignments directly to retailers

Cons:

 Can only be used in conjunction with Retailers, Mobile Traders etc

 India post has huge bargaining power
 Nature of product denied tie-ups

Recommendation

 Combine alternatives 2 and 5: Haats and Mobile Traders

 Mobile Traders would be able to serve villages with very low connectivity

 Higher volume sales at Haats would make up for the low volume of Mobile Trader sales

 Local knowledge of Mobile Traders coupled with lower prices would increase rural
penetration