CHAPTER-I

INTRODUCTION

1.1 INTRODUCTION

Ice cream, a most palatable and nourishing food, which was once considered to be a
sophisticated item, is becoming more and more popular among all sections of the people in
recent times. The popularity and higher consumption of ice cream could be attributed to its
refreshing, cool and delightfully sweet characteristics. The per capita consumption of ice creams
in India is a paltry 250 ml per annum while the average global consumption is 2 liters.
As the mercury rises nobody is happier than the ice-cream manufacturers who are
already filling their iceboxes with dollops of new, mouthwatering flavors. Amul is the market
leader in this frozen category with a 27 per cent share. It is followed by Kwality- Wall's at 8 per
cent, Vadilal and Mother Dairy, Noida at 7 per cent each with Dinshaw and Arun each having a
4 per cent share of the market. The rest of the cone is filled up by regional brands.
1.2 MARKETING CHANNELS

1.2.1 INTRODUCTION

In the modern world, production and distribution have become very complex. Goods
are produced in a far away place, whereas consumers are scattered throughout country and
abroad. Under the circumstances, the producer will not be able to sell goods directly to the
ultimate consumers. The reasons are many : the producer lacks the financial resources, he has
to maintain a large sales force, the products may not justify the establishment of separate sales
outlets, problems of management and control arise, instead of spending a lot of time and energy
on distribution, one can concentrate on production.
The task of distribution involves transfer of ownership and physical possession of
products and services from the manufacturer to the consumers. Transfer of ownership is an
exchange process and it comprises the channels of distribution. Transfer of possession involves
problems of warehousing and transportation, called physical distribution.
1.2.2 DISTRIBUTION CHANNELS

The distribution of goods is the most important activity in the process of marketing.
 We can define the distribution channel as the set of marketing institutions participating in the
marketing activities in the movement or the flow of goods or services from the primary producer
to the ultimate consumer.
Distribution channels are grouped into two major groups: (i) Direct and (ii) Indirect.
In a direct channel or route, there are no middlemen and marketing functions are performed by
the producer or manufacturer and goods directly pass on from him to the consumer. In an
indirect channel or route, there is more than one middleman in distribution, linking producer
and consumer. They perform the marketing functions.

1.2.3
CHANNELS OF DISTRIBUTION IN MARKETING OF ICE CREAM

The most common routes for bringing the products to the market i.e. from the producer to

the consumer are shown in the figures show below:

DIRECT CHANNEL

PRODUCER CONSUMER

INDIRECT CHANNEL
 PRODUCER WHOLESALER CONSUMER

PRODUCER WHOLESALER RETAILER CONSUMER

PRODUCER CONSUMER
AGENT WHOLESALER RETAILER

PRODUCER CONSUMER
RETAILER

DIAGRAM OF DISTRIBUTION CHANNEL

1.2.4 FUNCTIONS OF MARKETING CHANNELS:

The channels of distribution perform the following functions:

 Channels provide the route to the link the producers and users. Goods produced in far away places

are made available to the users.

 Goods are stored by the middlemen in the channel and released to the market depending on

demand. They facilitate storage of goods.

1.2.5 CHANNEL CHOICE

The problem of selecting the most suitable channel of distribution for a product is a

complex one. A number of factors have to be considered such as the nature of a product, market

trends, competition outlook, pricing policies, typical consumer goods and the needs of the

manufacture himself.

1.2.5.1 PRODUCT CONSIDERATIONS

a) If a commodity is perishable or fragile, a producer prefers a few controlled levels of distribution.

For perishable goods, a speedy movement needs a shorter route of distribution.

b) For durables and standardized goods, a longer and diversified channel may be necessary
 c) For a custom made product, direct distribution to a consumer or an industrial user may be desirable

d) For a technical product requiring specialized selling and serving talent, we have the shortest

channel

e) Products of a high unit value are sold directly by traveling salesmen and not by middlemen

1.2.5.2 MARKET CONSIDERATIONS

a) For the consumer goods market, retailers are essential, but from the industrial market we may

eliminate the retailer

b) If the market size is larger, we have many channels; in a small market, direct selling may be

profitable

c) For highly concentrated markets, direct selling is adequate enough; but for widely scattered and

diffused markets we must have many channels

d) The size and average frequency of consumer’s orders influence the decision about the use of a

particular channel of distribution

For the sale of food products, we need both the wholesaler and retailer. A market implies

people who have money and who are willing to purchase want satisfying goods. The age, income

group, sex, vocation, and religion of the customers will have to be studied to secure adequate

information about market segments or target markets. The buying habits of customers and dealers

will also influence our choice of a channel.

1.2.5.3 MIDDLEMEN CONSIDERATION

a) Services provided by middlemen

b) Availability of desired middlemen

c) Attitude of middlemen towards producer’s policies

1.2.5.4 COMPANY CONSIDERATIONS

a) Desire for channel control

b) Ability of management

c) Services provided by seller

d) Financial resources

1.2.8 CHANNEL DECISION

A unit must choose whether to attempt extensive, selective or exclusive distribution or a

combination of all the three. The decision is taken after a careful analysis of the product, consumer

preference, dealers, company objectives and policies, competition and other relevant factors. The

company must solve the conflict within the channels and bring its product profitability to the

market.

Once a unit has determined its basic channel design and levels of distribution, it has to

select middlemen, appoint them, motivate their efforts, and evaluate their utility periodically.

Each channel of distribution performs the typical marketing functions, which are

exclusively assigned to it. Retailing, wholesaling and physical distribution (transport, storage and

inventory control) are treated as separate entities in distribution for purposes

 of easier understanding. From the viewpoint of marketing management, the whole process is a

continuous one and constitutes the distribution system in which the ownership and possession of

goods flow to consumers. To locate customers, meet their demand and offer them service and

satisfaction- these are the basic tasks of the manufacturers, wholesalers and retailers who combine

for an integrated channel of distribution. Joint co-operative and united efforts alone will ensure

the successful distribution of a product.

1.3 MARKET COVERAGE

Once a unit decides on the general channels to be used, it has to determine the number of

middlemen it needs in each channel, i.e., the intensity of distribution. There are three alternatives:

a) INTENSIVE DISTRIBUTION:

The strategy of intensive distribution, seeks to obtain maximum exposure of product at

retailer level or wholesaler level. Ultimate consumers will not go out of their way to purchase a

product or will readily accept substitutes, when brand is not available. The appropriate strategy is

to saturate every suitable retail outlet with the brand.

b) SELECTIVE DISTRIBUTION

At the retail level, a strategy of selective distribution restricts the sale of the product to a

limited number of outlets. Each store selected must meet the company’s performance standard

while appealing to select target market. As distribution becomes more selective, the manufacturer

may expect a greater effort on the part of retailer. Retailers are expected to be more willing to

accept the manufacturers’ suggestions and

 control on marketing strategy. If the product has a long and useful life and if consumer brand

preference can be established, Selective distribution will be very profitable.

c) EXCLUSIVE DISTRIBUTION

When a product requires aggressive personal selling, a complete inventory of the product

line, repair service, or other special effort on intermediary may be granted to an exclusive area

under exclusive distribution. The manufacturer can have greater control over prices and markets

and he can get the maximum co-operation from middlemen.

AMUL means "priceless" in Sanskrit. Amul products have been in use in millions of homes

since 1946. Amul Butter, Amul Milk Powder, Amul Ghee, Amul spray, Amul Cheese, Amul

Chocolates, Amul Shrikhand, Amul Ice cream, Nutramul, Amul Milk and Amulya have made

Amul a leading food brand in India. Today Amul is a symbol of many things:

 Of high-quality products sold at reasonable prices.

 Of the genesis of a vast co-operative network.

 Of the triumph of indigenous technology.

 Of the marketing savvy of a farmers' organization.

 And have a proven model for dairy development.

Gujarat Co-operative Milk Marketing Federation (GCMMF) is India’s largest dairy food

product marketing organization. The federation supplies liquid milk to Mother

 Dairy, Delhi; which is an important step in establishing a national grid. It has adopted standards

and specifications that conforms to the most stringent standards the world over. Co-operatives in

Gujarat, which aims to provide remunerative returns to the farmers and also serve the interest of

consumers by providing milk products which are good value for money. For the 7 Th consecutive

year federation has received the award for being the Nation’s largest exporter of the dairy

products.

The brand loyalty and commitment of the wholesale dealers and retailers have made it

possible for the products to reach consumers in the remotest parts of our country. The Amul

ice cream business is currently growing at the rate of more than 20 percent. It has now adopted a

scheme called ‘Hamara Apna Deep Freezer’ for strengthening the retail network.

1.4 DISTRIBUTION

Providing place, time, form and possession utilities to consumers is the essence of

distribution management. The Ice-Cream distribution channel typically consists of a distributor /

stockiest and the retailer. Since its perishable period is high it requires relatively short distribution

channels – ideally suited to using intermediaries such as retailers.

Most players have regional operations with production facilities located near the market as

adequate cold chain facilities for transportation over long distances is not available. Distribution

of national brands is done through owned or leased cold storage facilities located in the major

consumption centers from where the suppliers are sent to distributors or directly to retailers.
 The retail network for Ice-cream consists of exclusive Ice-cream parlors, which may be

company owned or franchise outlets and retail outlets like provision stores, supermarkets, bakery,

etc; Today most of the companies in the industry are opening these Ice- cream parlors to cater to

retail segment. Moreover with retail margins being in the range of 18-20 % coupled with

urbanization the companies are emphasizing on this from of retailing.

1.5 MAJOR PLAYERS

The Indian Ice-cream market is dominated by a large number of small local manufacturers

and regional players. There are nearly 150 manufacturers in the organized segment, which

accounts for 30-35% of sales i.e. about 2000 units.

In the organized segment, the significant brands are Kwality Walls, Vadilal, Amul, Mother

Dairy and Baskin Robbins.

Table no-1.1 : Major National players in ice cream market in India

S MAJOR BRANDS
. NATIONAL
N PLAYERS
o
1 Hindustan Lever Kwality
Limited
Walls, Dairy
Classic, Max,
Cornetto,
Magnum
2 Vadilal International Vadilal, Dairy
Fresh
3 GCMMF / Other milk Amul, Mother
Co-operatives dairy
4 Maharashtra Dairy Baskin Robbins
Products
 Introduction of new products / merchandising is made easier. They bring to

the notice of their customers new products and help the manufacturer in

demand creation. They also act as good salesmen in promoting new products.

 Channel members “break the bulk” i.e; products are offered in small

quantities to the buyers.

 Channels provide the financing function. They advance money to the

manufacturers and render credit facilities to the retailers.

 Physical possession and transfer of title to goods are made easier.

 They provide market information to the buyers

 They bring products nearer to the consumer