INDIAN INSTITUTE OF MANAGEMENT

CALCUTTA

SALES & DISTRIBUTION MANAGEMENT

INDUSTRY PROJECT: ITC Ltd.

Akhil Phirani 120/45

Kautilya 155/45
Rohan Mahajan 302/45
Aman Goel 403/15
Piyush Mehta 439/15
Rohit Kwatra 448/15
Saurabh Gupta 451/15

1
 Table of Contents

ITC Introduction......................................................................................................... - 3 -

ITC Divisions............................................................................................................. - 5 -

FMCG................................................................................................................... - 5 -

Hotels................................................................................................................... - 7 -

Paperboards & Packaging........................................................................................... -

8-

Agri-Business.......................................................................................................... - 9
-

Information Technology..................................................................................... - 10 -

Market Representation................................................................................................ -
11 -

Other FMCG – Convenience channel........................................................................... -

14 -

Other FMCG – Grocery channel................................................................................. -

15 -

WD selling and supervision infrastructure........................................................................

- 16 -

Special Outlet Types – Grocery Channel.......................................................................

- 19 -

Outlet Classification strategy (upto TLP).........................................................................

- 20 -

Market coverage for Cigarettes and other

FMCG’s.............................................................- 25 -

MARKET VISITS..................................................................................................... - 27 -

Market visit : CIGARTTES....................................................................................... - 27

-

MARKET VISIT - PAMS......................................................................................... - 27 -

MARKET VISIT- FOODS........................................................................................ - 28 -

ISSUES IDENTIFIED................................................................................................ - 30 -

PLAN OF ACTION................................................................................................... - 31 -
ITC Introduction
ITC is India's well known private sector company with a market capitalization of nearly US $ 19
billion and a turnover of over US $ 5 billion. ITC employs over 26,000 people at more than 60
locations across India. ITC has a vision of sustaining its position as one of India's most valuable
corporations through world class performance and creating growing value for the Indian economy.

ITC is a market leader in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and
Agri-Exports. It is rapidly gaining market share in its nascent businesses of Packaged Foods &
Confectionery, Branded Apparel, Personal Care and Stationery.

ITC Businesses

ITC has a corporate strategy aimed at creating multiple drivers of growth anchored on its time-tested
core competencies: unmatched distribution reach, superior brand-building capabilities, effective
supply chain management and acknowledged service skills in hoteliering.

ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC is one of the
country's biggest foreign exchange earners (US $ 3.2 billion in the last decade). ITC’s e-Choupal
initiative has greatly benefitted Indian agriculture by empowering Indian farmers through the power
of the Internet. This strategy is expected to progressively create for ITC a huge rural distribution
infrastructure, significantly enhancing the Company's marketing reach.

ITC’s strong Network

 74,000 markets in India

 1,200,000 Retail outlets

 10000+ Dealer sales force

 1500+ field marketing & promotion teams

 900+ wholesale dealers

ITC’s Future Growth strategy rationale

 Blend multiple competencies residing within the ITC Group to create new avenues of growth

 Best fit between internal capabilities and emerging market opportunities

 Each segment enhances the depth and width of ITC’s FMCG distribution capability

 Business model retains critical elements of value chains within ITC with other elements
outsourced

 Contributing to the competitiveness of SMEs

ITC Divisions
The various businesses that ITC is into are as follows:

 FMCG
 Hotels
 Paperboards & Packaging
 Agri-Businesses
 Information Technology

FMCG

 Cigarettes
ITC is the market leader in cigarettes in India. It ows its leadership position to it wide variety of
brands which seek to address all the segments of Indian consumers. It's portfolio of brands
includes Insignia, India Kings, Classic, Gold Flake, Silk
Cut, Navy Cut, Scissors, Capstan, Berkeley, Bristol and
Flake.ITC has world class facilities in product design,
innovation, manufacturing technology, quality, marketing
and distribution which give it a long term competitive
advantage. This strategic focus on the consumer has paid
ITC handsome dividends.ITC has also forayed into
overseas markets In the extremely competitive US market,
ITC offers high-quality, value-priced cigarettes and
Roll-
your-own solutions. In West Asia, ITC has become a key player in the GCC markets through
growing volumes of its brands. ITC's cigarette factories are located at Bengaluru, Munger,
Saharanpur and Kolkata. These factories are known for their high levels of quality, contemporary
technology and work environment.

 Foods

ITC made its entry into the branded & packaged Foods business in August 2001 with the launch
of the Kitchens of India brand followed by brand launches in June 2002 in the Confectionery,
Staples and Snack Foods segments. The Foods business carries forward this proud tradition to
deliver quality food products to the consumer. All products of ITC's Foods business available in
the market today have been crafted based on consumer insights developed through extensive
market research. ITC's state-of-the-art Product Development facility located at Bengaluru
contributes to developing new variants and SKUs. ITC’s unmatched capabilities in supply chain
management and its market reach has helped this division garner significant market shares in a
very short time duration. The Foods business is today represented in 4 categories in the market.
These are:
 Ready To Eat Foods

 Staples

 Confectionery

 Snack Foods

The brands owned by this division are:

 Kitchens of India
 Aashirvaad

 Sunfeast

 mint-o

 Candyman

 Bingo!

 Lifestyle Retailing
ITC also has a presence in Lifestyle Retailing through its Wills Lifestyle chain of exclusive
specialty stores. Wills Lifestyle, the Retail store, offers a tempting choice of Wills Classic work
wear, Wills Sport relaxed wear, Wills Clublife evening wear, fashion accessories and Essenza Di
Wills – an exclusive range of fine fragrances and bath & body care products and Fiama Di
Wills - a range of premium shampoos and shower gels. Wills Lifestyle has also introduced Wills
Signature designer wear, designed by the leading designers of the country. To cater to the mass
segment John players was launched in December 2002 followed by Miss Players. John
Players offers a complete and vibrant wardrobe of Casual wear, Party wear, Work wear, Denims,
Outer wear and Suits & Jackets, incorporating the most contemporary trends, an exciting mix of
colors, playful styling, trendy textures and comfortable fits. The brand is available across the
country through a nation-wide network of over 240 exclusive stores and over 1500 multi-brand
outlets. ITC aims to be the number one player in this segment in the coming few years.

 Personal Care
In line with ITC's aspiration to be India's premier FMCG company ITC forayed into the Personal
Care business in July 2005. ITC has already launched an array of brands, each of which offers a
unique and superior value proposition to discerning consumers. This is supported by ITC’s
commitment to strong R&D and consumer understanding. The business has quickly garnered
major shares in some categories and is poised to contribute substantially to profits in coming
years.

ITC's Personal Care portfolio under the 'Essenza Di Wills', 'Fiama Di Wills', 'Vivel Di Wills'
'Vivel UltraPro', 'Vivel' and 'Superia' brands has received encouraging consumer response and is
being progressively extended nationally.

 Education & Stationary

ITC made its entry into the stationery business in the year 2002 with its premium range of
notebooks, followed in the year 2003 with the more popular range to augment its offering.

ITC's Education and Stationery Products are marketed under the brands "Classmate" which is
targeted at students and young adults and "Paperkraft" which is focused on Office stationary
needs.

The Classmate range includes Notebooks, Math Instruments, Scholastic Products as well as
Writing Instruments.The Paperkraft range includes Paperkraft includes Premium Business Paper,
Paper Stationery, Markers & Highlighters.

 Safety Matches
Based on the logic of complementary products that can be distributed through the same channel,
ITC forayed into Safet matches as well.ITC’s range of Safety matches include popular brands
like i Kno, Mangaldeep, Aim, Aim Mega and Aim Metro. The Aim brand is the largest selling
brand of Safety Matches in India. ITC also exports regular and premium safety matches brands
to markets such as Middle East, Africa and the USA.

 Agarbattis
As part of ITC's business strategy of creating multiple drivers of growth in the FMCG sector, the
Company commenced marketing Agarbattis (Incense Sticks) sourced from small-scale and
cottage units in 2003. This Business leverages the core strengths of ITC in nation-wide
distribution and marketing, brand building, supply chain management, manufacture of high
quality paperboards and the creation of innovative packaging solutions to offer Indian consumers
high quality Agarbattis. Mangaldeep Agarbattis are available in a wide range of fragrances like
Rose, Jasmine, Bouquet, Sandalwood, Madhur, Durbar, Tarangini, Anushri, Ananth and Mogra.
 Hotels
Launched on October 18, 1975 ITC Welcomegroup has come a long way to become one of
India’s finest luxury destinations. Seeking to diversify into other high growth areas, ITC forayed
into this business with the opening of its first hotel - Chola Sheraton in Chennai. Since then
the ITC-Welcomgroup brand has become synonymous with Indian hospitality with over 100
hotels in more than 80 destinations. The business contributes substantially to ITC’s bottomline.
ITC-Welcomgroup's properties are classified under four distinct brands:

 ITC Hotels - Luxury Collection

 WelcomHotels
 Fortune Hotels
 WelcomHeritage

Paperboards & Packaging

 Paperboards & Specialty Papers

ITC's Paperboards and Specialty Papers Division is India's largest, technologically advanced and
most eco-friendly, paper and paperboards business. The business caters to a wide spectrum of
packaging, graphic, communication, writing, printing and specialty paper requirements through
its four world-class manufacturing units, 6 sales offices and a network of more than 50 dealers in
India, along with an international trade network of 15 distributors / agents.

Having pioneered many specialty applications like cigarette tissues, opaque papers, food grade
packaging boards and tele-card boards, ITC's Paperboards and Specialty Papers business enjoys
market leadership in the value-added paperboards segment, and also has a significant share of the
Indian fine papers market. It is the largest exporter of coated boards from India.

 Packaging

ITC's Packaging & Printing Business is the country's largest convertor of paperboardinto
packaging. It converts over 50,000 tonnes of paper and paperboard per annum into a variety of
value-added packaging solutions for the food & beverage, personal products, cigarette, liquor,
cellular phone and IT packaging industries. It has also entered the Flexibles and Corrugated
Cartons business.
The Division, which was set up in 1925 as a strategic backward integration for ITC's Cigarettes
business, is today India's most sophisticated packaging house. State-of-the-art technology, world-
class quality and a highly skilled and dedicated team have combined to position ITC as the first-
choice supplier of high value added packaging.

Agri-Business

 Agri Commodities & Rural Services

ITC's Agri Business Division is the country's second largest exporter of agri-products with
exports of over Rs. 1000 Crores (Rs. 10 billion). Its domestic sales of agri-products are in excess
of Rs. 1500 Crores (Rs. 15 billion). It currently focuses on exports and domestic trading of:

• Feed Ingredients – Soyameal

• Food Grains - Rice (Basmati & Non Basmati), Wheat, Pulses
• Edible Nuts - Sesame Seeds, HPS Groundnuts, Castor oil
• Marine Products - Shrimps and Prawns
• Processed Fruits - Fruit Purees/Concentrates, IQF/Frozen Fruits, Organic Fruit
Products, Fresh Fruits
• Coffee & Spices - Coffee, Black Pepper, Chilly, Turmeric, Ginger, Celery and
other Seed Spices

 Leaf Tobacco, Spices & Agri Inputs

ITC’s visions to provide decent livelihood to India’s farming community let it to pioneer the
cultivation and development of Leaf Tobaccos in India. ITC is the largest buyer, processor and
exporter of leaf tobaccos in India. The processes followed are benchmarked against the best in
class.

Seeking to leverage its capabilities in Leaf Tobacco business and venturing into new areas of
high growth ITC's Leaf Tobacco business has successfully ventured into spices and has made
inroads into various other streams of business. ITC's foray into the spices business is an
endeavour to provide quality differentiation across the value chain from the farmer to the
customer. This business aims to help the farmers by providing latest technology and information
to help them improve the quality of produce. ITC’s Agri Inputs business focuses on the entire
crop cycle with a wide range of products under the following three brands: Wellgro, Wellpro and
Wellsto.
Information Technology
ITC Infotech, a global IT services company, was envisioned to provide inhouse solutions to ITC
for its various divisions. It has come a long way to become one of India’s fastest growing IT
company. Based out of Bangalore ITC Infotech now provides cutting edge solutions and IT
services to leading global customers. ITC Infotech offers IT services and solutions across five
key industry verticals: Banking, Financial Services & Insurance (BFSI), Consumer Packaged
Goods (CPG) & Retail, Manufacturing & Engineering Services, Travel, Hospitality &
Transportation and Media & Entertainment. ITC Infotech conforms to the highest standards in
international process quality, with ISO 27001, ISO 9001, SEI CMM Level 5 and BS 7799
accreditations
Market Representation
Market representation is the key to providing sharper focus in servicing and managing the
diversities and complexities in the FMCG space. ITC follows it through the following means:

 Wholesale Dealers (WD)

 WD branches
 WD Stockists

WD WD branches WD Stockists
Definition Firm/Company which Full fledged distribution Firm/individual
purchases stocks in bulk operation of a WD. located away from
from ITC WD market.
Purchases from a WD.
Sells to Retailers, wholesalers, Retailers, Wholesalers in Surrounding areas
consumers the town and surrounding including rural
village markets markets
Market
All markets up to 50k pop All markets up to 50k pop All markets between
Criterion
group group 10k - 50k pop group
Main
Ensure the presence of ITC Optimization of WD Same as WD along
Objective
products across all profitability with leveraging local
categories encompassing relation with trade for
distribution objectives of growing business
freshness, availability and
visibility

CIGARETTES

These are ITC’s forte and are distributed through the following channels:

 Convenience
 Super Premium and Light (SP&L) outlet coverage
 HoReCa Strategy
Cigarettes – Convenience Channel

Market Coverage: Markets serviced by WD salesman for active retail/ wholesale or markets
serviced by WD stockists. The norms are decided based on the sales on each state, and a few
other factors. For example in Kerala all markets above 1k while in Haryana all markets above 2k
are classified to be under convenience channels. Besides that markets serviced by competition,
present on national/state highways and tourist markets also fall under this.

Frequency coverage for retailing varies from once to thrice depending on the market size and
location.

Outlet Coverage: Aim was to maximize coverage for markets below 20k pop group. For markets
above 20k pop group outlets accounting for 80% industry volume or 10packs a day, whichever is
higher is to be directly serviced.

Availability Norms are also fixed in advance based on the brand, bench mark brand of the
competition and the geography.

Visibility: Superior cigarette visibility is imperative in driving brand salience and imagery.

For the sake of deciding upon the visibility norms the outlets are divided into a matrix with the
following dimensions:

1. Volume Classes(6) from 1-6 depending on the packs per day sale
2. Location types (3) from excellent to average depending on whether the outlet is located
on a junction, fixed/temporary structure etc.

The emphasis in visibility is on:

 Right brand in the Right outlet

 High quality execution at the outlet level
o Within the outlet, the display unit is kept at the hot-spot which is easily visible
and does not have any visual obstruction
o The packs are arranged from highest price point to the lowest from top to bottom
o They are arranged from Regular to Lights from Left to Right in all places except
the Western part of India where the consumption patterns are different
o Colour coding for shelving and pack placement norms are also followed
stringently
 Tracking and monitoring of the visibility inputs
o Wholesale dealer level tracker with photograph to be updated every quarter
o Convenience team leader to capture all the details
o Trade marketing calls are made once in a week in outlets of volume class 1 and
2, while for volume class 3 it is once in two weeks
o Distribution calls are done on all outlets once a month
  Quality standards are maintained throughout the input cycle
o Convenience team leader responsible for execution and maintenance of inputs and
face of display
o Cleanliness, pack presence, stock rotation of input packs and overall look are
given importance

Cigarettes – Super Premium and Light (SP&L) Outlet Strategy

These outlets require a differentiated strategy to provide enhanced focus on Super Premium
king size filter (KSFT) and Lights brands. These outlets are of strategic importance for
building superior salience and imagery and countering both national and international
competition in KSFT and Lights brands.

Classification of outlets into Super Premium and Lights outlets is based on the kind of stocks
it maintains, the retail price of the brands, selling volume per day and the geographical
location. Norms for the frequency and person visiting are decided at the beginning of the year
depending on the complete year’s plan.

SP&L availability and visibility norms clearly stipulate the kind of brands that should be
available and the face of display (FOD) at a particular outlet depending on various
parameters.

Cigarettes – HORECA Outlet Strategy

The universe of Hotels, Restaurants and Clubs (HORECA) is defined on the consumption of
bottled beverage. Markets in Delhi, Mumbai, Pune, Bangalore, Kolkata, Hyderabad, Goa and a
few other identified cities are covered under this. The broad objective for this domain is:

 ITC’s share on all 3 segments of cigarettes (SP, KSFT, KSFT lights) to be greater
here than in the total market and SP&L outlets
 ITC’s share on all the segments in this domain to be greater than the competition

Outlet Classification:

 Age based – High, Medium, Low depending on number of people above, between or
below 30%
 Traffic profile – High, Medium, Low depending on the percentage of men and women
visiting the place
 Spends – High, Medium, Low depending upon the amount spent on beer and cola
Now, hotels, restaurants and clubs are divided based on the above parameters. The availability
norms for these 9 categories are also stipulated so that maximum revenue can be generated with
focus on specific outlets.

Emotional Connect Program (ECP)

Under this scheme the various trades, marketing and distribution officials are supposed to meet
up with the owners/bartenders of the outlets under HORECA. This acts as a channel for
relationship building and feedback on the performance of cigarette brands.

Temporary Local Gatherings: Identification and participation in all temporary large gatherings
HoReCas during events like New Years, Valentine day etc through stall operation and sales at
MRP.

Airport and Snack Food Outlets: All outlets stocking cigarettes inside airports and snacks food
sellers are treated as HoReCa outlets.

Other FMCG – Convenience channel

Some of the other FMCG in the convenience channel includes Biscuits, Confectionary, Bingo,
Shampoos, Matches and Agarbattis.

One of the major factors for ITC in this channel is that it has a high competitive advantage as
compared to its peers. The company’s convenience DS across the markets ensure that the
company’s FMCG products are available amongst convenience category handlers but at the same
time, other FMCG is sold only to those category handlers which are not a part of the grocery
target sales. Another aspect of the convenience DS is that they carry other FMCG for sale and
replenishment basis on two focus days every wek for each of the category set which includes 3
different categories:

 Biscuits and Confectionary

 Bingo
 Personal care, Matches and Agarbatti

The accountability for distribution objectives for other FMCG though lies with the Convenience
Team Leaders.

Convenience Delivery Model (CDM)

Whenever a particular route potential is high, i.e. the deliverycost doesn’t exceed 3.5% of other
FMCG turnover generated on the route for that day, the carrying capacity of a convenience DS
can be enhanced through a delivery vehicle across all markets. However, the focus day concept is
not applicable to convenience DS with CDM. All other FMCG convenience sales are summary
billed category wise by convenience DS in the customer information system (CIS). The report
from CIS is split accordingly as convenience CDM DS sales by categories and Balance
convenience DS sale by categories.

Some of the other FMCG sales measures include convenience DS and convenience CDM DS for
the WD every month and WD wise total other FMCG sales tracker by category and split between
CDM DS sales and balance DS sales to be compiled at branch and communicated to district by
10th of the next month.

Other FMCG – Grocery channel

One of the most important aspects here is the focus on availability. The continuous availability of
right products, in the right markets and in the right outlets goes a long way in helping the
company garner a large portion of the market share.

The market coverage includes the markets serviced by WDsalesman for active retail/wholesale
or markets serviced by WD stockists.
WD selling and supervision infrastructure
Taking into account the wide diaspora of ITC’s FMCG categories and the large number of
SKU’s, the infrastructure required to cover the grocery channel is split according to category
groups, which helps the company in maintaining a sharper focus and a much better quality of
serving.

The category groups are as follows:

Grocery 1:

 Staples
 Biscuits
 Confectionary
 Ready to eat

Grocery 2:

 Shampoos
 Soaps
 Agarbatti
 Matches

Common:

 All foods (includes Bingo)

 All personal care
 Agarbatti
 Matches

Grocery 3:

 Bingo
Depending on the pop group, outlets from each category group are serviced by:

 Grocery 1, Grocery 2 and Common DS on an order capture model, i.e. delivery is done next
day
 Grocery 3 DS on a ready stock model, i.e. delivery vehicle accompanies the DS
 WD Stockist

The roles for different positions involve different responsibilities, some of which are detailed
below:

Grocery DS – He has to ensure that the product is continuously available in the right outlets and
in the right quantities. He must strive to maximize the range of sell in to an outlet and try to grow
business from each different outlet. He should ensure that every call to an outlet is productive
while at the same time adhering to the call frequency norms. Also, he must try to maximize
customer facing time and maintain trade relationships while creating good credit management at
an outlet level.

Grocery Delivery Unit – The de livery for any orders taken has to be done on the very next day,
something which is absolutely mandatory. It has to ensure that deliveries are done on time in full
(OTIF). Minimize the delivery time through efficient zoning and use public transport wherever
possible. At the same time, utilization of cost-effective non-merchandised delivery units based
on requirement as well as utilization of existing spare capacity both in terms of absolute capacity
and spare van days.

Grocery Team Leader – He has to ensure proper training, development and motivation of his DS
team. He is directly responsible for DS performance and supports the DS in driving category/
range/ focus SKU’s availability. He must try to improves the distribution measures in the
channels and provide effective allocation and utilization of visibility and shelving solutions.
Finally, he has to manage conflict resolution at an outlet level and try prospecting for new high
potential outlets.

Outlets Coverage

It is very important to identify the right target outlets so as to:

 Service right outlets for relevant categories

 Maximise weighted numeric distribution
 Aid in planning of WD infrastructure
 Estimating the cost of servicing a market
 Mapping all key competition outlets

However, one thing that has to be taken care of is that each group needs to be serviced by the
respective grocery DS/WD stockist. While grocery target outlets need to be covered by grocery
DS and convenience target outlets by convenience DS, the common outlets targets for both
grocery and convenience are covered both by grocery DS and convenience DS.

Visibility:
Again of the most important aspects along with availability, it is absolutely essential to ensure
superior visibility through high quality execution and rigorous evaluations systems.

Some of the tasks involve identifying key outlets for differentiated merchandising packs,
ensuring quality execution and quick changeover of displays. ITC plans to have a dedicated third
party merchandising team in 8 metros to begin with, which will be extended across balance
markets in a phased manner.

Visibility has two aspects: Unpaid visibility and Paid visibility

Some guidelines for unpaid visibility include:

 category adjacency: To locate the ITC products next to their relevant category
 Facings: The products need to have adequate front face visibility
 The grocery DS should strive to achieve share of facings that is greater than the market share
of the concerned ITC product at the particular outlet
 Aiding the retailer: Retailers are to be provided with shelving solutions to enhance their
outlet space and for more effective stacking and visibility

Some guidelines for paid visibility include:

 Right category inputs in right outlets: relevant brand inputs for the outlets should be decided
keeping in mind the availability of category, importance of outlet for category and the
location type of the outlet
 High quality execution at the outlet level: This requires that positioning of the products is
correct i.e. all paid visibility is in an outlet hot-spot and that overall look of display is of the
highest standards and impactful. Also, the stability of the display is very important
 Quality standards are maintained throughout the input cycle: The grocery team leader
is responsible for execution and maintenance of inputs as well paying a visit to all paid
visibility outlets fortnightly during the input cycle
 Rigorous tracking and monitoring of the visibility inputs: The grocery team leader needs to
capture the photo with date and time stamp along with other details. The tracker also needs
to be updated every quarter at the WD point

Freshness:

Freshness is required to ensure that products are made available to the customer in the desired
form and frechness.

This can be a very important source of competitive advantage for a company. To ensure the
desired form of freshness, its important to focus on:
 Accurate forecasting
 Stock control
 Timely stock rotation

Some Freshness guideline:

 Category wise monthly freshness tracker with ITC freshness vs competition stock freshness
 Weekly update provided to the field team on the ‘Ageing status of stocks’ in their respective
WSPs/Hubs
 Third party audit of D&D at WD level instituted to verify and confirm on value before
destruction towards the dual purpose of accuracy and ease of operations.

Special Outlet Types – Grocery Channel

Chemist and Cosmetic stores: This set of outlets is strategic in the context of ITC’s personal care
portfolio and requires a differentiated servicing approach and superior merchandising solutions.

Bakeries: They are key outlets for ITC’s portfolio of Biscuits, Snacks and Confectionary. Here,
the Focus is specially on

 Higher customer facing time

 Availability of entire ITC relevant category portfolio
 High levels of visibility for all categories
 Provision of shelving solutions

Consumption centres: A consumption centre is defined as a place for on-premise, out-of-home

snack consumption like amusement parks, cinema halls etc. Consumption centres are critical for
ITC’s snacks portfolio. Here the focus has to be on:

 All consumption centre outlets to be racked

 Maximize variant and SKU availability on rack
 Strive for Hot-spot visibility of rack
 Maintain cleanliness of stock on rack
 Outlet Classification strategy (upto TLP)
Classification is necessary for

 Providing differentiated service packs to the top outlets

 Focused visibility inputs
 Designing and implementing trade loyalty programs
 Robust review and action standards basis different

clusters Grocery 1 target outlet classification

Competition
Union of ITC top outlets loyalty outlets
source CIS Market
Outlet class
First club food outlet accounting for 50% of ITC biscuits + confectionery Britannia
outlets (A) turnover in a quarter profit club
outlet accounting for next 30% of ITC biscuits +
B confectionery turnover in a quarter
outlet accounting for next 20% of ITC biscuits +
NA
C confectionery turnover in a quarter

D Non productive outlet in 3 month

FCF outlets will be prospective Trade loyalty outlets

Grocery 2 target outlet classification

Competition
loyalty
Union of Industry top outlet ITC top outlets outlets
source New retail census CIS Market
Outlet class
Premium grocery outlets accounting outlet accounting for top 50% of ITC HUL ~ SVS
and chemist for top 20% of soap + Shampoo turnover in a quarter and P&G ~
 outlets (A) shampoo turnover Star sellers
outlet accounting for next 30% of
ITC soap + shampoo turnover in a
B quarter
outlet accounting for next 20% of
NA NA
ITC soap + shampoo turnover in a
C quarter

D Non productive outlet in 3 month

Outlet
First club universe
food outlet

X Y Z

PG & C
outlet

X+Y+Z =prospective trade

loyalty outlet

Infrastructure for prospective trade loyalty outlets

Servicing of prospective trade loyalty outlet has begun for mid MAY 2009

serviced by
exclusive exclusive
region Definition FCF DS PG&C DS
FCF outlet which are handler of soap and
P shampoo T T
FCF outlet which are NOT handler of soap and
Q shampoo T F
R common FCF and PG&C outlet T T
S PG&C outlet which are NOT handler of FOODS F T
T PG&C outlet which are handler of FOODS T T
Infrastructure for FCF outlet

 Al l FCF outlet will be serviced by exclusive FCF DS

 Also there can be certain PG&C outlet which handlers of ITC relevant foods categories but
do not belong to the set of FCF outlet
 The exclusive FCF DS is expected to service these outlets as well
 Hence the exclusive FCF DS will service ALL HANDLERS of FOODS categories amongst
ALL prospective Trade loyalty outlet

Infrastructure for PG&C outlet

 Al l PG&C outlet will be serviced by exclusive PG&C DS

 Also there can be certain FCF outlet which handlers of ITC relevant foods categories but do
not belong to the set of PG&C outlet
 The exclusive PG&C DS is expected to service these outlets as well
 Hence the exclusive PG&C DS will service ALL HANDLERS of soap and shampoo
categories amongst ALL prospective Trade loyalty outlet

Selling infrastructure guidelines

Prospective trade loyalty outlets

 The best grocery DS will be made into FCF/PG&C DS

 An FCF/ PG&C DS is expected to cover minimum 18 outlets daily with 85% productivity
 Predefined minimum range of sell in of relevant club categories to each outlet.
 6 FCF / PG&C DS will have an exclusive FCF / PG&C team leader.
 Frequency of servicing to be once a week

Non - Prospective trade loyalty outlets

 Regular grocery DS in each category is expected to cover at least 40 outlets with a call
productivity of minimum 70%.
 Frequency of servicing to be once a week

Delivery infrastructure

Delivery infrastructure to be split between following

Prospective trade loyalty outlets

 Dedicated delivery infrastructure for these outlet to deliver the orders captured the previous
day
 Deliveries for both FCF and PG&C prospective trade outlet to be done through a common
service vehicle
Non - Prospective trade loyalty outlets

 Dedicated delivery infrastructure for these outlet to deliver the orders captured the previous
day
 Deliveries for both Grocery 1 and 2 outlet to be done through a common service vehicle

A BINGO outlet classification (HYD PILOT)

Classification of Bingo is based on the following

Union of ITC top outlets strategic outlet

Source CIS Market
Outlet class
Golden route outlet outlet accounting for top 60% of Bingo turnover in a bingo racked
(A) quarter outlet
outlet accounting for next 20% of Bingo turnover in a
B quarter
outlet accounting for last 20% of Bingo turnover in a NA
C quarter
D Non productive outlet in 3 month

Servicing for golden routes outlets

 An exclusive golden routes DS will service these outlets

 These outlets will be serviced weekly on a ready stock model
 The DS is expected to cover at least 30 outlets daily with 80% productivity

Servicing for balance outlets

 Regular grocery 3 DS will service these balance outlet

 Balance outlets will be serviced weekly basis on ORDER capture model
 The DS is expected to cover 40-50 outlets daily per day with 60% productivity
 There will be an exclusive delivery vehicle for delivery of orders taken the previous day

Prospective trade loyalty outlets handling Bingo

 There will be a set of prospective trade loyalty outlets(FCF union PG&C) which will also be
handlers of Snack food categories but are not part of golden route outlets
 These outlets will be serviced by the FCF DS for Bingo on an order capture model
 The delivery of Bingo will take place along with the rest of FCF/ PG&C orders

Wholesale Strategy

Importance of wholesale channel

 Complements direct retail distribution

 Enables product availability in lower pop group markets
 Cost of servicing is optimal for the distribution reach achieved
 Category imperatives – certain key and carrier SKU’s are driven by this channel like glucose,
shampoo sachet’s
Market coverage for Cigarettes and other FMCG’s
Market coverage norms are same for wholesaling as it is for retailing. Frequency of coverage for
all markets is maintained at once a week.

Outlet coverage

Exclusive FMCG SWD: a wholesaler who handles some of ITC’s other FMCG categories but
not cigarettes

Exclusive tobacco SWD: wholesaler who handles ITC’s cigarettes but not any of the ITC’s other
FMCG categories

market pop
grp SWD type serviced for serviced by
grocery SWD
exclusive FMCG + dual all FMCG categories DS
>500 K exclusive tobacco + dual Cigarettes cig. Van DS
grocery retail
exclusive FMCG + dual respective category grp DS
100 to 500 K exclusive tobacco + dual Cigarettes cig. Van DS
grocery retail
exclusive FMCG in 7 states respective category grp DS
exclusive FMCG in balance
states all FMCG categories common DS
all FMCG categories +
50 to 100 K exclusive tobacco + dual cigarettes cig. Van DS
exclusive FMCG all FMCG categories WD stockist
all FMCG categories +
10 to 50 K exclusive tobacco + dual cigarettes cig. Van DS
all FMCG categories +
<10 K any relevant SWD cigarettes cig. Van DS

Category focus days

Upto FLP markets, where a dedicated grocery SWD DS is present, the Ds will work basis
category Focus Days

 Each Grocery SWD DS will have a maximum of 3 routes only

 Each route will be serviced twice a week
 It will sell only foods(including Bingo) on 3 days of a week and only personal care, agarbatti
and matches (PAM) on the remaining 3 days
 Hence a SWD which is both a handler of PAM’s and Foods will be visited twice a week by
the SWD DS
 SWD’s who are exclusive handlers of PAM’s or Foods will be serviced only once a week on
focus day

Cigarette van DS strategy

Objective: to leverage cigarette van DS’s relationship with SWD’s to sell other FMCG categories
in lower pop group markets.

As specified in outlet coverage norms, all exclusive tobacco and dual wholesalers in below OLP
markets will be serviced by Cigarette van DS on a ready stock model. To effectively leverage,
following needs to be done

 Each WD to have a list of exclusive tobacco and dual wholesalers with their
respective categories handled
 Designing an appropriate SKU mix for each van DS route basis above list. The spare capacity
of the van to be utilized for this SKU mix
 Evaluate rerouting and vehicle optimization for effective coverage of all categories and
higher capacity utilization

Category van DS is incentivized with variable pay to successfully implement this strategy.
 MARKET VISITS
Market Visit : Cigarettes
Distribution Centre visited: Ridhi Sidhi Distribution Centre

Objective: To understand the sales and distribution structure being followed for sales division and
identify major issues which are being faced by the cigarettes division in that aspect.

Methodology: We accompanied the Distributor Salesman (DS) to all the retail stores that he covered
in one given day, which comes out to be about 30. Both the retailer and the DS surveyed in order to
understand the process and the challenges.

Learnings:

 From the sales and distribution pint ensuring the availability of cigarttes at the shops if of
utmost importance. The demand is already there so primary question how much can we meet
it. In keeping with this view the actions are taken
 The cigarettes are distributed form the WD point to both the wholesalers and retailers.
 The salesman delivers the cigarettes and matches to the kirana/pan stores on daily basis
through bicycle. Twice weekly the salesman delivers other items i.e biscuits, chips, soaps,
shampoo to these same stores. This is also called the shadow model.
 The payment for these cigarettes and other item is done on the spot and no credit period is
given to them.
  The display at the stores is given utmost importance and the supervisor who visits the stores
makes sure that the display conforms to the ITC norms. These are called FOD (face on
display) norms.
 Each shopkeeper has to keeps a minimum number of SKUs of all the brans available to them.
 The shopkeepers are given monetary incentives for the hoardings and the sign boards put up
at their shops by ITC

Market Visit - PAMS

Distribution centre visited: Ridhi Sidhi Distribution centre (Near South Citi Mall) in Kolkata was
visited. This distribution centre caters to 845 outlets and has a team of 5 sales persons and 1 TSI
(Territory Sales Man). Each sales man has around 125-150 outlets under him. He makes 20-25 trips
each day and covers all the outlets once a week. Each outlet is visited 4 times a month. TSI covers
A+ category outlet. Around 54 outlets fall under A+ category. For A+, outlet should have sale of Rs.
40000 or above for that product in a month.

Objective: To understand the sales and distribution structure being followed for sales division and
identify major issues which are being in PAMS.

Methodology: We accompanied the Distributor Salesman (DS) to all the retail stores that he covered
in one given day. Both the retailer and the DS surveyed in order to understand the process and the
challenges.

Brands under PAM

1. Personal Care: Essenza Di Wills, Fiama Di Wills, Vivel Di Wills, Vivel UltraPro and
Vivel
2. Safety matches: i Kno, Mangaldeep, Aim, Ship, Homelite
3. Aggarbattis: Mangaldeep

Learnings

 ITC provides a margin of approximately 8% on soaps, 10% on shampoo bottles and 22% on
sachets to the retailers.
 Major competitors are Lux, Dove, Sunsilk, Pantene, Head & Shoulders
 ITC offers 2% discount to cooperative stores.
 Unlike Cigarettes for PAM products orders are taken in advance by salesman. The delivery
person goes the next day for delivery. The orders are taken using a palmtop which was
launched about a year back. It has arrangement like Suggested Order Quantity (SOQ),
Actual Order Quantity, summary of the bill, previous orders etc.
 1 week credit is offered for PAM products for bigger shops. Though credit varies
depending upon the relationship of the salesman with the outlets. Some outlets pay the
money to
 deliveryman next day, majority of outlets give money next week to sales man and some even
have credit period of even 2-3 weeks.
 Sales man on reaching stores visually checks the availability of various products and record
availability as low, medium and high on palmtop. Sales man also carries previous bills.
 1st week of the month is usually a busy day for the DS since shopkeepers give bigger orders
etc.
 Initially the DS for cigarettes, bingo, foods, PAM etc were the same but now it has been
changed and handed over to different DS.
 Company runs various competitions for sales man to encourage competition and increase
sales. Currently it is running Project Dhanush.
 Schemes are decided by the Area Executive.

Market Visit- Foods

Distribution Centre visited: Ridhi Sidhi Distribution Centre

Objective: To understand the sales and distribution structure being followed for sales division and
identify major issues which are being faced by the foods division in that aspect.

Methodology: We accompanied the Distributor Salesman (DS) to all the retail stores that he covered
in one given day, which comes out to be about 30. Both the retailer and the DS surveyed in order to
understand the process and the challenges.

Learning

 The average number of shops covered by DS in one day is approximately 30.

 The stores are covered once a week by the DS. He takes the orders on his palmtop and the
delivery is made the next day. The use of palmtops has made DS more efficient by giving
instant bill, details of previous orders etc., although they require some more practise to
become completely comfortable with it.
 Except taking orders, the salesman carries the bill for the previous week for collection of
payments. The credit period is normally 7 days, but depending on the relationship of the
salesman with the retailer, it may also go up to one month.
 The task of the salesman is to inform the retailer about the new schemes which have been
launched by the company and push for more orders. At times, he also checks the available lot
himself and suggests what else should be ordered by the retailer.
 In most of the cases, the DS has maintained good relations with the retailers and has a small
chat with him about his family or any other news.
 Although the margins provided by ITC is on par with most of the major brands, some local
brands are able to provide more margins to the retailers, especially in case of Atta, salt, spices
etc.
  In case of most brands of food (except biscuits), majority of the sales occurs in the first week
of the month.
 In the market covered, the frequency and quantity of return from the retailers to the WD is
not very high.
 Although Sunfeast biscuit has many variants and SKUs, the fastest moving variants are Kaju,
Butter and Cream, all 5 Rupee packs.
 The main competitors in case of biscuits are Britannia, Parle and Priya, in case of Atta they
are Ganesh, Pillsberry and MPS, in case of salt they are Annapurna, Tata Salt etc while in
case of spices, they are mostly the local players.
 The biggest challenges being faced in the Foods category is the Supply Demand mismatch,
with the in demand SKUs out of stock, no supply during peak sales, comparatively smaller
display shelves etc. (The details will be provided in the issues identified section).

Issues Identified
PAMS: Scheme Administration, Visibility

 Less number of schemes for retailers: As per retailers though ITC gives better margin than
competitors but it introduces less number of schemes for retailers and more for customers.
Retailers believe that as ITC’s products are newer they have to do a lot of pushing to
customers. Thus they should be rewarded for this service. Competitors like Margo have been
offering a piece of soap free on buying 12 pieces. Retailers also think that whenever any new
product is launched in the market then its trial product should be given to them.

 Fewer displays: ITC’s displays at retail outlets were less as compared to competitors.
Retailers were keen to partner with ITC and give dedicated shelf spaces for display of ITC
products.

 Longer duration of schemes: ITC’s scheme runs for a longer duration as compared to
competitors. Competitors keep introducing schemed at short intervals and remove them
within weeks as compared to ITC schemes which run for months. As per retailers, customers
are attracted by new schemes. When customers come to buy a product, then they check if
there is a better scheme running on competitive brands. And even change their buying
preferences by getting influenced by exciting new offerings.

 Mismatch between advertisement and product availability: Lots of times ITC introduces its
products in mass media such as radio, television, etc. and they are not available on retail
 outlets. This creates a negative image in the minds of the customers both for the company as
well as the retailer.

Foods: Supply-chain mismanagement/ inefficiencies

 Bingo has poor visibility as compared to Lays: Bingo’s biggest rival Lays overshadow its
presence in the retail outlets. In most of outlets Lays has twice the visibility as compared to
Bingo.

 Bingo products out-of-stock: Bingo’s distribution department is not able to deliver the right
quantity of products at retail outlets. Lot of retail outlets are facing out of stocks situations
and have empty racks of Bingo lying at their shops. Even in shops having good quantity of
Bingo, not all variants of Bingo are present.

 Lesser shelf space: Sunfeast display is less as compared to competitors such as Britannia,
Parle and Priya. Retailers are not able to get all the variants of Sunfeast.

 Concentrated demand for Aata at month beginning: Aata is sold maximum at beginning of
the month and during that period lots of retailers faces product shortage. Smaller SKUs have
a much higher shortage.

Plan Of Action
We have proposed to take up specific WD points for running pilot projects. As part of that project, we
plan to work on the major issues which were identified by us, i.e. supply-demand mismatch, scheme
design and salesman motivation.

For supply demand mismatch, we plan to study the exact issue being faced and explore the various
members and components of the supply chain in order to find out the exact point where the problem
starts. Then we will try to find ways and means to handle the challenge.

For the scheme design issue, we propose to run pilot projects with the selected WDs in order to test
whether the new schemes being proposed by us can be effective or not.

For the salesman motivation part, we will have to do a comparative analysis with the competitors of
ITC to find out what are the factors where we are lagging behind, what motivational competitions or
incentives are being run for outperforming salesmen etc. again, they can be launched as pilot projects
to check their feasibility and the benefits.