Group Project Report: Marico

A report submitted to
Prof. Srinivas Govindrajan

In partial fulfillment of the requirements of the course

Sales & Distribution Management

By
Ashish Vijay (166027)
Joydeep Sil (166059)
Mrinmoy Choudhury (166084)
Rishabh Nagaich (166133)
Satpal Singh Pundeer (166152)
Tuhin Gayen (166185)
On
29/08/2017
Contents
Company Overview.....................................................................................................................................3
Channel Design...........................................................................................................................................3
Channel Member Management....................................................................................................................7
Field Force Management...........................................................................................................................10
Transportation & Logistics........................................................................................................................13
The Analytical Framework........................................................................................................................13
The Financial Aspect.................................................................................................................................17
Bibliography...............................................................................................................................................21
Company Overview
Marico is a consumer goods company based out of Mumbai, India. It provides products and
services majorly in Health and Beauty care segments. The company holds a number of brands
under its banner which includes Kaya, Sundari, Parachute, Nihar, Oil of Malabar, Saffola,
Hair&Care, Mediker, Revive, Manjal, Livon, Sweekar, Set Wet, Zatak, Shanti, Fiancee,
HairCode, Eclipse, X-Men, Hercules, Caivil, Thuan Phat, Code 10, Ingwe, Grace and Black
Chic. Its distribution is spread across 25 countries in Asia and Africa including India,
Bangladesh, Egypt, Malaysia, Middle East, South Africa and Vietnam [ CITATION Mar \l 1033 ].

Marico Industries Ltd. started its journey in the year 1990, when the consumer products division
of Bombay Oil Industries Ltd. (BOIL) was spun off into a separate company. During that year
Marico had signed an agreement with its parent company BOIL to use the Parachute and the
Saffola brands. The company did its IPO in 1996. In 1999, it had entered a 3 year alliance with
P&G, to distribute its Oldspice brand products, Pampers diapers and Ariel detergent soap bars.
After 2000, Marico started acquiring products divisions from other FMCG companies. It
acquired jam, sauce, other fruits and vegetables product division from Kanmoor Foods. It
acquired the controlling stake of Sundari LIC, an US based Ayurvedic skincare products
company [CITATION Awa \p 151 \l 1033 ]. In 2012, it acquired the Halite Personal Care brand of
Paras Pharma from Reckitt Benckiser. Very recently it acquired major stake in Beardo, a men’s
grooming company.

Financially, Marico has been able to maintain a 4% YOY volume growth. Its international
business has been able to contribute 23% of its total revenue. In FY 2016-17, the company
recorded a 24.3% operating margin and 12% PAT with a CAGR of 18%. Its debt/equity ratio is
low at 0.13 and it has a net cash surplus of Rs.522 crores [CITATION Ann17 \y \l 1033 ].

Channel Design
Marico has three broad distribution channels to cater to its customers. They are as given below.

1. Modern Retail. The flow of goods is usually as follows. Factory – Depot – Modern
Trade Retails like Supermarkets, Convenience Chain, etc. – Customers
 2. In Urban Market. The flow of goods in urban market is as follows. Factory – Depot –
Distributor – Urban retailers like Kiranas, etc. – Customers. To cater to retailers which
are not catered by wholesalers.
3. In Rural Market. The flow of goods in the rural market is as follows. Factory – Depot –
Super Stockists – Wholesalers – Rural retailers – Customers. In areas where it is feasible,
there is existence of sub-stockists to cater to the retailers.

As of 2005, the distribution network of Marico was as follows.

Source: Singh, A. K. (2005). Rural Marketing: Indian Perspective Retrieved from http://ebookcentral.proquest.com

The diagram below shows the distribution network of Marico.

Each of this channel has difference in the buying behavior of customers, degree of control and
competitive strategies.
Channel 1

In this channel, the goods flow directly from the company depots to the retailers. The volume
purchased by the modern trade retails like Big Bazaar, Spencers, etc. are huge. This is the reason
why there is no distributor present. Instead, each of these retailers are considered as Key
Accounts for the company and are handled by Key Account Managers.

While
Projected future % contribution

90%
79%
80% considering both
69%
70% general trade and
60% 58% 55%
50%
50% 42% 45% modern trade for
40% 31% Marico, it has
30%
21% been found out
20%
10% that both are
0%
5 10 15 18 20 equally
Years from now important and
Kirana Modern Retail cannot be
compromised at
cost of one
another. The below diagrams show the current and future contribution of each of them in
Marico’s revenue.

Current Contribution to business

While Kirana has a CAGR of
14% 23.7%, Modern Retail is growing
at a CAGR of 36.7%.
Kirana
Modern Retail Channel 2

This is the classical FMCG

distribution channel. It starts with
86%
the goods being transferred from
the company factories to the
depots (C&F Agents) in various states. The company has 8 factories in India located at
Pondicherry, Perundurai, Kanjikode, Jalgaon, Paldhi, Dehradun, Baddi and Paonta Sahib
[ CITATION Wik \l 1033 ] . The number of depots in a state is not fixed. It is determined by the size
of the State. For example big states like UP, Maharastra has multiple depots. The company’s
ASM sits in these depots. After that the goods flow to the distributors catering to the different
regions under each ASM. Usually the distributors are spread across various districts. For big
markets like the metropolitan cities, the number of distributors may be more than one. For
smaller markets in Tier 2 and Tier 3 cities, there are shared distributors. The distributor sales
force ensures the flow of goods to the retailers. The beat plan followed by Marico is either
weekly or fortnightly, depending on demand. The customers buy goods from the retailers.

The distributor sales force usually cover the big shops on the main roads of a regions. The small
shops in the by lanes and outside the distributors reach, buy from the wholesalers.

Channel 3

In rural India, the market is widely dispersed. And the order quantity for the retailers is also
much less. In such scenario, the company didn’t find it economically feasible to employ
distributor sales force. Instead it applied indirect distribution. It employs super-stockist or super
distributor. It ensures cost sharing as the super-stockist does truck space sharing with 5-6 other
companies. The goods then flow to the wholesalers who further sells to rural retailers. The
customers buy from the retailers. In areas where it is more feasible, the company employs sub-
stockists who sell directly to retailers.

The flow of information in each of these channels is only limited to direct distribution. In places
where there are majorly indirect distribution market trends, and company’s performance data
may not be readily available. The company has widely implemented IT infrastructure to store
and retrieve real time data for planning and decision making. Mi-Net a platform for B2B sales
force helps the company with the information and data from Modern retail. For the distributors,
the company has implemented MIDAS, a transaction processing software.

Usage of E-commerce
Marico has been using E-Commerce as a prototype testing platform for some time now. One
such example is the launch of SetWet brand. The company had launched the brand through
ecommerce much before launching it through general and modern trade channels [CITATION Bus \l
1033 ]. According to the company’s EVP and Business Head, e-commerce sites are great ways to
test if the product is going to work in the market or not.

Other than product testing, the company is also considering the e-commerce sites for its niche
products. Unlike India, Parachute is considered as a niche brands in the US market. The
company is trying to sell its products through Amazon. Similarly, the company is also using this
channel to sell its niche products like Livon hair gain, SetWet hair wax and Bio Oil in various
markets in India. After the recent acquisition of Beardo, the company has started boosting its
online sales. It expects to draw 10% of its revenue from this channel [ CITATION Bus171 \l 1033 ].

Channel Member Management

As given above. Marico has the following channel members in its 3 channels combined.

 Distributors in urban market

 Super-Stockists / Super-Distributors and sub-stockists for its rural market
 Wholesalers
 Retailers (both urban & rural)
 Modern Trade Accounts

For each of these members, the company’s involvement with respect to Monetary/Non-Monetary
rewards, incentives, target setting mechanism, monitoring mechanism, trainings and HR
practices are different. They are as given below.

Distributors in Urban Market

 Monetary Methods to reward: The Company looks into ROI of the distributor for
rewards. In urban areas Marico gives 5% margin to its distributors. The margins are in
line with the industry standard. The company never increases its margin. The company
also gives a credit period of 30-45 days to its distributors.
  Non-Monetary Methods to reward: The Company gives the distributors schemes on
trade promotion. Marico also have contests and awards for Distributors such as Retail
Product push winner award.
 Target-Setting Mechanism: The ASM does the target setting for the distributors
depending on the expectations of the management. The factors considered are gross profit
margin, break-even point, sales strategies like customer loyalty, new customer
acquisition, and upsell.
 Monitoring Mechanism: The quarterly statements from the stockists help the ASM
monitor if the stockist is over-trading or under-trading. The ASM can effectively analyze
underutilization of resources, inefficiency in operations, low sales level, lack of interest,
poaching, etc.
 Training & HR Inputs: The Company has training programs and conferences with the
distributors. These usually involve the ASMs and top management coming together with
the distributors, sharing the company’s goals, addressing the ROI of the distributors,
aligning the distributor interests with the company’s motives, etc.

Super-Stockists/Distributors and Sub-stockists in Rural Market

 Monetary Methods to reward: The Company gives a margin of 7% and a credit period
of 30-45 days to all super distributors. The sub-stockists who directly supplies to the
retailers gets margin of 5%.
 Non-Monetary Methods to reward: The Company has similar distributor schemes and
awards for the super-stockists and sub-stockists as in the case of urban distributors.
 Target-Setting Mechanism: The ASM does the target setting for the super-distributors
depending on the expectations of the management. The factors considered are similar to
that of urban distributors. Often category penetration and category growth for the rural
markets are also considered.
 Monitoring Mechanism: The monitoring mechanism for the rural market is quite similar
to that of the urban market.
 Training & HR Inputs: It is same as that of urban distributors.
Wholesalers

 Monetary Methods to reward: The Company gives a margin of 3% to wholesalers. The

wholesalers get bulk discounts for buying above certain quantities.
 Non-Monetary Methods to reward: The wholesalers also get vouchers and free goods
for buying above certain quantities.
 Target-Setting Mechanism: There are no targets as the wholesalers are not appointed or
employed by the company.
 Monitoring Mechanism: The PSRs stationed in the wholesale markets look into the
sales converted by the wholesalers. Primary and secondary trade promotion schemes are
applied on how the wholesalers are performing.
 Training & HR Inputs: There are no training or HR inputs for the wholesalers.

Retailers (Urban & Rural)

 Monetary Methods to reward: The Company gives a margin of 5% to the retailers in

rural setting and a margin of 10% to the retailers in urban setting. Most retailers get credit
only for 1-2 days. Allowances for carrying special product display.
 Non-Monetary Methods to reward: Retailers serviced by the company’s salesforce
benefits under trade promotion scheme called Secondary Scheme. There are also loyalty
programs like MERA, Super MERA and UNNATI for the retailers. Marico also have
contests and awards for Retailers such as Retailers meeting the celebrity contest.
 Target-Setting Mechanism: The company/distributor salesforce tries to push products
on to the retailers through schemes and advocacy. The targets are usually set by the
numbers that can be pushed on to the retailers, and the shelf space the retailer is willing to
give to the company’s product.
 Monitoring Mechanism: Because of salesforce automation, the field person update
entries on the internet linked company apps and the item is immediately updated on the
company’s information system. This helps the company to actively track secondary sales
data.
  Training & HR Inputs: There is hardly any training or HR inputs for the retailers.

Modern Trade Accounts

 Monetary Methods to reward: The prices and margins in very different from those in
the classical distribution setting. These sales come under B2B sales for the company and
is handled by Key Account Manager.
 Non-Monetary Methods to reward: Non-monetary rewards can be of type club dinners,
loyalty programs and other benefits.
 Target-Setting Mechanism: Targets can be based on Quantity and value. The targets for
Modern retail can be SKU wise or Brand wise. The targets are defined for specific date
range and specific brands.
 Monitoring Mechanism: The Key Account Manager monitors the performance at
various zones. A thorough analysis is done at the end of each month and based on that
weak products or those for which the demand has declined, are identified.
 Training & HR Inputs: Sometimes the company engage in training the retail sales
personnel to promote in-store sales.

Field Force Management

The area covered by a single depot or C&F Agent of every state comes under the purview of an
Area Sales Manager (ASM). For each of the territories under ASM, there is a Territory Sales
Officer (TSO). And each TSO controls Distributor Sales Representatives or DSRs. The
following diagram shows the hierarchical structure of Marico Sales force.
 Area Sales
Manager (ASM)

Territory Sales Territory Sales Territory Sales

Officer (TSO) Officer (TSO) Officer (TSO)

Distributor Sales Distributor Sales Distributor Sales Distributor Sales Distributor Sales Distributor Sales
Representative Representative Representative Representative Representative Representative
(DSR) (DSR) (DSR) (DSR) (DSR) (DSR)

For the rural market, the sales force network is different. The salesman in this case are called
Pilot Sales Representatives or PSRs. The PSRs are employed by the company at the wholesaler
location. Each PSR reports to an Independent Sales Representative (ISR), who is supervising an
entire wholesaler network. These ISRs further reports to TSRs or Territory Sales Representatives
at the Super-stockist or Super-Distributor location. TSRs comes under the supervision of Area
Sales Manager or ASM. Below is how the structure looks for the rural market.
 Area Sales Manager
(ASM)

Territory Sales Territory Sales

Executive Executive
(TSE) (TSE)

Independent Sales Independent Sales

Representative Representative
(ISR) (ISR)

Pilot Sales Pilot Sales

Representative Representative
(PSR) (PSR)

 Monetary Methods to reward: The salesforce is on company’s payrolls and not on

distributor payrolls. The sales force people also get commission on their achieving or
exceeding their targets. In the year 2017, Marico gave Rs.6.06 crore as commission to its
selling agents. The salesforce incentives are same in both rural and urban setting.
 Non-Monetary Methods to reward: Other than commissions and monetary incentives,
the salesforce also look for appreciation, promotion and gifts. Often company recognizes
star performers through awards, and send them on trips or gives them expensive gifts at
annual gatherings.
 Target-Setting Mechanism: The targets and the daily beats of the DSRs are set by the
TSO in the urban market and in the rural market, the same for PSRs are set by ISR. The
targets are decided by the ASMs on the basis of management’s expectations and market
situations.
 Monitoring Mechanism: The Company has implemented salesforce automation to track
sales. Further supervisors tracks movements of the salesmen by asking them to send
pictures of shop visits through WhatsApp or by asking them the shopkeepers themselves.
 Training & HR Inputs: Marico continuously invests in training and improvement of its
field force. It believes that training is necessary for upgrading skillsets and adapting to
the changing market conditions. As the FMCG market moves towards modern retail and
 E-Commerce, the salesforce needs to be upgraded. Further they need digital
transformation as means of sales management.

Transportation & Logistics

 Marico engages third party warehousing and logistics agencies to ensure efficient and timely
delivery of its products to the retail outlets. Both full truckload and part truckload
consignments are transferred from the company to the warehousing units through trucks.
The distribution from warehousing to the retail outlets is carried out using light commercial
vehicles in the transportation.
 Marico has made significant investments in IT to scale up the supply chain efficiencies and
to enhance the reliability of sales & distribution by ensuring that the required SKUs are
made available to the distributors and retailers at the right time and in desired quantity.
Marico’s MIS system has enhanced their capacity to make decisions based on real time data.
 In order to ensure that the sales & distribution channels of Marico reap maximum benefits
for the company, they introduced an Internet based application named MI-Net in 2002. The
application, through a web interface, connects the company and its distributors, thereby
providing real time information to the company about the delivery of products to the
distributors and retailers. The application also helps the company in making better demand
estimations, as the information about the quantity required is received without delay. The
application has brought down the communication costs, improved the penetration of sales
force, decreased the working capital requirements of the channel members etc.

The Analytical Framework

Impact of variables on Marico’s distribution network:

1. Number of consumers and their geographic distribution:

Marico, being an FMCG company, serves a huge chunk of Indian population. Since a
significant number of these people reside in rural areas where the retail stores are
fragmented in nature, the company has engaged multiple layers in the distribution system as
mentioned in the previous sections. In order to reach such a large fragmented population on
a regular basis the company has to ensure an efficient logistics and transportation network.
 The company often engages third party for warehousing and transportation activities in order
to ensure easy and timely availability of products.
2. Higher frequency of purchase:
FMCG products have a high rotation rate round the year. Therefore, the company has to
ensure that the products are made available to the retailers either on a weekly or once in two
weeks basis. This again necessitates an efficient logistics and transportation network.
3. Tendency to postpone purchase:
Since customers rarely exhibit a tendency to postpone purchase for FMCG products,
therefore the company cannot do much on this front.
4. Level of familiarity:
For the product portfolio offered by Marico, the familiarity level with the existing product
categories is quite high. And since most of these are low involvement product categories,
therefore the importance of having a robust field force is reduced. On the contrary, the
company focuses more on the channel network and members to ensure timely availability of
products.
5. Brand Loyalty:
The product portfolio of Marico involves brands such as Saffola, Parachute, etc. for which
customer loyalty is fairly high. This provides the opportunity of engaging wholesalers in
their distribution channel. High brand loyalty also justifies the low margins given to the
distributors (5-6%) and wholesalers (3-4%) since brands have significant pull from the
market.
6. Level of Involvement:
The products offered by Marico do not demand a high level of involvement for purchase;
hence what becomes important for the company is to ensure that products are regularly
available in the market. This increases the importance of having a robust distribution
channel, on which the company adequately focuses.
7. Purchased as a ‘Basket of Goods’:
Product categories offered by Marico involves those which are purchased by households
during their monthly grocery purchase. This makes it important for the company to ensure
that brands such as Parachute, Saffola etc. are available at small retail stores as well as
super-markets, both of which facilitate monthly grocery shopping for customers.
8. Role of influencer:
Other than edible oil, remaining product offerings of Marico do not involve much role of an
influencer in purchase. For the edible oil category, field force ensures that retailers are
passing on a coherent message to the customers in line with their media advertising. Also,
the field force ensures retailer advocacy, to some extent, particularly to tap in customers
looking for a healthy oil option.
9. Value/Volume Ratio:
FMCG products usually have low value/volume ratio, hence the company ensures that
product distribution at the retail outlets happens either on a weekly or once in two weeks
basis. This, in turn, ensures that the retailers are not dumped with stock and can maintain
higher ROI/sq.ft.

Deployment of IT

As IT Infrastructure becomes more and more relevant for the FMCG sector, companies have
started deploying ERP solutions to integrate its widespread supply chain networks,
manufacturing tasks, dealers and retailers actions to optimize process. The timely availability of
real time information at each departments becomes very crucial for planning and decision
making. Marico was the first FMCG Company in India to go on SAP R/3 suite of products, APO
and BIW; that too in a record period of 9 months implementation time.

Marico’s IT infrastructure comprises of –

 SAP suite of R/3, Business Warehouse and APO – A supply chain solution
 Mi-Net, an internet enabled B2B platform for the salesforce.
 MIDAS, a transaction processing software for Marico’s distributors
 A state of art connectivity network comprising of VSATs, VPNs, Leased Circuits, and
Internet VPNs that connect all of its factories, all regional offices, depots, and the
subcontractors that Marico has appointed. All of them connected to the central datacenter
in Mumbai.
 Citrix solutions that help the company to reduce network traffic.
 Data storage technologies like NAS and SAN, that helps the company reduce storage
costs.
  Security systems and firewall for data and information protection.
 HCL Comnet, that manages Marico’s network and security infrastructure, links
procurement systems to management, helps in troubleshooting and implements vendor
management to improve efficiency and productivity.

Below is the IT architecture diagram for Marico

The Financial Aspect
Sales & Advertising Expenses of Marico:

Marico(Crores) FY 17 FY16 FY15 FY14 FY13

Revenue 5,936 6,024 5,741 4,693 4,599
Advertising and sales promotion 659 786 650 561 598
A&S Expense/Revenue 11.1% 13.0% 11.3% 12.0% 13.0%
Distribution charges 239 254 219 197 187
Distribution charges/Revenue 4.0% 4.2% 3.8% 4.2% 4.1%
Commission to Selling agents 6.06 6 5 5 9
Communication expense 10 10 9 8 11
Total Sales & Distribution Charges 914 1055 883 770 805

Sales & Advertising Expenses of Competitor (HUL):

HUL(Crores) FY 17 FY16 FY15 FY14 FY13

Revenue 35,759 34,616 33,903 30,797 28,487
Advertising and sales promotion 3470 3396 3875 3614 3232
A&S Expense/Revenue 9.7% 9.8% 11.4% 11.7% 11.3%
Distribution charges 1457 3518 1412 1298 1143
Distribution charges/Revenue 4.1% 10.2% 4.2% 4.2% 4.0%
Commission to Selling agents 37 32 31 30 57
Communication expense 62 55 51 50 70
Total Sales & Distribution Charges 5026 7001 5368 4991 4503
 Revenue of HUL and Marico
40,000
35,759 34,616
35,000 33,903
30,797
30,000 28,487

25,000
20,000
15,000
10,000
5,936 6,024 5,741 4,693 4,599
5,000
0
FY 17 FY16 FY15 FY14 FY13

HUL Marico

Source: Company reports

HUL breakup of Average Selling & Distribution expenses over last 5

years
1%1%

Advertising and sales promotion

33% Distribution charges
Commision to Selliing agents
Communication expense

65%

Source: Company reports

 Marico breakup of Average Selling & Distribution expenses over
last 5 years
1%1%

25% Advertising and sales promotion

Distribution charges
Commision to Selliing agents
Communication expense

73%

Source: Company reports

After analyzing the data of Selling and distribution of both the companies it has been observed
that for Marico share of distribution charges out of total Selling and distribution charges stands at
25% and advertising and selling share stands at close to 73%. While for HUL distribution share
is at 33% and advertising and selling share is at 65%.

When compared to HUL, in terms of percentage share spent advertising and selling expense,
Marico is spending more towards advertising and selling out of its total selling and distribution
cost . While HUL is spending more towards its distribution network.

As HUL is spending more in distribution network than Marico this can be attributed to the
highest retail coverage of HUL which is cost significant chunk of money. Also HUL is more
focused on increasing its reach in to the rural market with the projects like Shakti Amma which
has added a new layer in the distribution channel of HUL hence increasing the cost of
distribution of it products.
Source: Annual Reports & Nielsen

The percentage share of commission to selling agent and communication expense in total selling
and distribution expense is similar for both the companies close to 1 %. Hence it can be inferred
that both the companies are following industry standards.
Bibliography
(n.d.). Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Marico

(2017). Annual Report 2016-17. Marico.

Business Line. (2014, June 26). Retrieved from Marico to use E-commerce sites:
http://www.thehindubusinessline.com/companies/marico-to-use-ecommerce-
sites/article6152336.ece

Business Line. (2017, May 5). Retrieved from Marico eyes e-commerce route for 10% of sales:
http://www.thehindubusinessline.com/companies/marico-eyes-ecommerce-route-for-10-of-
sales/article9682995.ece

Marico Brands. (n.d.). Retrieved from Company Website: http://marico.com/india/brands

Rural Marketing : Indian Perspective. (n.d.). In A. K. Singh, Rural Distribution Channels (p. 151).