Kellogg’s

SALES & DISTRIBUTION MANAGEMENT

GROUP 4
Keshav|Tanay|Kham|Parth|Ulkrisht|Krishna
 Kellogg’s

 FMCG Industry
 Consumer Products – Breakfast cereals/Pringles
 Major Brands – Chocos, CornFlakes, Special K
 Distribution network of 4.6 million outlets
 Turnover (2015-16) – INR 6132 cr
 Net Profit (2015-16) – INR 725 cr

Largest Cereal Presence

Manufacturer across 140+
in the world countries
Kellogg’s Reach

 4.6 million retail outlets services by its nationwide distribution network comprising
 4 Regional Offices,
 32 carrying & forwarding agents (CFAs)
 5000 distributors and stockists.
 Kellogg’s distribution network has started covering almost every Indian town with
population over 20,000.
Urban Rural
Sales Territories 160 55
Towns covered 4100 23000
Distributors 468 -
Super Distributors - 60
Stockiest - 2683
Distribution Channel Structure and margins
Urban Integrated
Kellogg’s
software tracks
product from
company to
retailers unlike
Colgate or HUL
which tracks till
Stockists

Urban Retailer
Company
Distributor (10%
Depot
(5% margin) margin)
Distribution Channel Structure and margins
Rural Integrated
Kellogg’s
software tracks
product from
Company
company to
Depot
retailers unlike
Colgate or HUL
Super which tracks till
Distributor Stockists
s
(2%
margins)

Stockists • Small distributors in

small towns Source: JK Prasanna
(4 % • No transactions Sr Manager, Retail
margins) with company

Retailer
s
(9%
margins
Distributors Selection

 Criteria:
 Financial soundness ( financial statements), Market knowledge,
Dependency on distribution business & Infra (godown space)
 Urban: Distribution history
 Rural: How quickly he can service the stockiest

468 Direct Distributors Retailers

2 Factories

60 Super Distributors 2683 Stockists Retailers

Revenue Share

 Urban – Rural Split

Share - 2010 Share - 2015

Urban 87% 85%
Rural 13% 15%

 Channel Split :
• Kellogg’s is different as it has a
Share – 2015
significant portion of income
General Trade 75% from MT unlike other FMCGs in
India
Modern Trade 30%
• It hence has a separate sales
CSD 5% force for MT
Distributors Daily Schedule

Everyday log-in to  Without any mechanism to

MyNet through Browser capture secondary sales in
rural segment on daily basis,
Kellogg’s had very limited
Uploads data from MIDAS touch to information visibility.
MiNet

 Hence, rural market business

remained an information black
Tracks ordered, in-tansit and received
goods
hole.

The data is integrated with company’s  The company therefore chose

BI portal through which the executives to built a mobile application for
have real time visibility of secondary PDA, named “Mobile MIDAS”
sales
 Expanding Distribution Network in
Rural Market (1/3)

Van Sales representatives (VSR)

Stockis • Takes stocks from stockiest
ts • Sells it in a particular designated area
• The stock which is left is delivered
back to stockiest
• VSR picks up the stock and sells in
the same area every fortnight
• ~ 9000 Van Markets
Challenges
• No advantage of economies of scale
due to low business volume
• Cost of selling is ~12% of sales as
compared to ~9% in standard model
Areas where this model is adopted Rural Sales
Contributes to ~34%
• Where consumer density is low (< 20,000 population of village) of company’s total
• Has been implemented in Bihar, Rajasthan, Madhya Pradesh, Uttar India sale in FY2016
 Expanding Distribution Network in North
East (2/3)

Consequences
 Lot of states where
• Ensures that
distribution is weak
distributors break-
and its difficult to
even.
retain distributors
• Advantage over
margin model as it
doesn’t ensure break-
 Adopted Subsidy
even which is very
model rather than
important for
increasing margins.
distributors in that
region
Expanding Network in Urban & Unreachable
Areas (3/3)

Project ONE (Outlet Network Expansion in Unreachable

Expansion) (Naxalite)Area of Odisha

Expansio
n via
Cosmetics
,
Chemists
outlets
Outlet Listing Urban New Channel Classification

Industry P&G, HUL, Nestle, Dabur India

Trend Ltd., Emami, Godrej, L’Oreal
 Sub Channel- Premium Grocer

Condition for Premium Grocer

Condition 1 Condition 2 Condition 3

5 out of 9 category 3 out of 5 brands Large Packs of all Category

Hair Color
Deo
Oats Kellogg's cornflakes box
Body Lotion Olay Total Effects Large pack cooking oil
Hair Gel Gillette Mach 3 Large pack toothpaste
Conditioner Loreal casting crème gloss Large pack detergents
Noodles Axe deos
Hair Oil Sac
Hair Fall
IT in Sales

Kellogg’s has made investment in IT to ensure: Kellogg’s MIS-Net

Merchandising

Kellogg’s basically ensures following 6 conditions while merchandising:

They also have a team of MTM and ISP in Modern Trade outlets to push the products more
They are also investing in Floor Standing units and end caps more for paid visibility
Channel Programs- Bandhan

Program – Bandhan (X) clusive : Self Service outlets with BPM >
1.5 lakhs pm

Heads Parameters Bandhan X

Value Target 2 slabs of target achievement 1% / 0.5%

Primary Visibility Category Branding 2%

Secondary Visibility FSU / End Cap 1%
In store Execution SOS (Share of Shelf) 1%/.5%(Non metro)
Channel Programs- Bandhan

Program – Bandhan : Rest of Self Service outlets

Heads Parameters Rishta

Value Target 2 slabs of target achievement 1% / 0.5%

Primary Visibility Category Branding 2%

Secondary Visibility FSU / End Cap X
In store Execution Planogram 1% / .5%
Channel Programs- Bandhan

Program – Bandhan Chemist( Bpm>5000)

Heads Parameters Rishta Chemist

2 slabs of target
Value Target 1% /0.5% ( Rs 100 min)
achievement
4%( Rs 400 min)/ 3%( Rs
Primary Visibility Modular BIW / Countertop
300 min for non Metro)
Secondary Visibility FSU / End Cap X
In store Execution SOS / Planogram X
Channel Programs- Premium
Grocer

Program Udaan

Premium Grocers -
Payout
Qualification Criteria Key Outlets with BPM
> 10k
Slabs:
Value Target > 100% 1% / 0.5%
95% - 100%
BIW – 2 brands and 3% / 2.5% (Non Metro)
Primary Visibility
Countertop
Channel Programs- Premium
Grocer

Program UMEED

Qualification Criteria Others with BPM>6 k Payout

Value Target 95% achievement Rs. 300
BIW – 2 brands and Rs. 500 / Rs.300 (Non
Primary Visibility
Countertop Metro)
Claims/Reimbursement and Credit
policies
Incentive Schemes

 Scheme Structure - Primary and Secondary

 Primary –
 These get passed on in the invoice itself when products moving
from depot to the distributor are billed. The distributor then passes
it to the retailer.
 Secondary –
 These are passed on by the distributor to retailer/stockist and are
claimed later at the end of the next month.
 All schemes are always passed on to the retailer
 Sales Organization Structure

Regional Sales Head

8 Area Sales Manager Territory Sales Officer Distributor Sales Rep
Sales &
Divisional Sales Head 4 Promotion Executive
Urban

Chief Sales Officer 3

5
Modern Trade
Head Rural Van Sales Rep

KAM
Independent
Area Sales Manager Territory Sales Executive Sales Rep
ISP Sales &
Promotion Executive
Pilot Sales Rep
Recruitment & Training

 Recruiting
 DSR recruited by TSO
 TSEs or ISR recruited from Tier 3 B-schools and later promoted to TSOs
 ASMs and KAM recruited from Management Trainee Pool

 Training
 ASM is given Fixed induction period for understanding role and then capability building training
like excel (most of it is online)
 Relationship Management Program (RMP) to understand their leadership style
 DSRs given basic training on products, channels, promotion programs, planning, PDA usage etc
by TSO
Compensation of Sales Force

 Fixed component
 Variable component (approx. 20% of fixed component)
 Variable pay is decided on the basis of quarterly targets
 Volumetric component – Sales volume (portfolio level and at the
overall business level)
 Non-volumetric components – Man days worked (22 days), No. of
outlets covered, earnings of direct sales representatives
 Performance (distribution and sales) of new brand/product also a
part of quarterly incentive structure
 CONFLICT RESOLUTION

URBA
N

RURAL

Conflicts within Kellogg’s majorly arises from the margin scheme it has incorporated.
• Incentive for rural retailer to buy from Urban Distributor since more margin (gets it for 9.09 v/s 9.17)
• Incentive for Urban retailer to buy from Rural S.Distributor again for lower price ( i.e. for 8.99 v/s 9.09
• There is no fixed demarcation of geographies for stockists which is an open invitation for
encroachment

Kellogg’s resolves issues majorly through intimidation (coercive power) and legal power
and on repeated offence, the defaulter is fired.
Conflict Resolution

 Breaking the Market

 Discounts to MT limited
 Handling of FSU and End Caps by clients
 Designing of the units is altered
 Between the category manager and marketing manager of the same
retail chain
 Negotiations
 Shelf Space given to certain products
Logistics Benchmarking of Major
FMCGs

*Tried Reverse Auction in the past and reverted back to