Case Analysis

Topic – Working Capital Management & ROI

Case - An Irate Distributor
Submitted by – Srishti Joshi (PGFC1934)

Retail Trade Market in India:

The Indian retail market was one of the fastest- growing markets in the world with
an estimated revenue of $470 billion in 2011 to grow to $675 billion by 2016, at a
CAGR of 7.5%, it constituted a well-established distribution system of
approximately 6 million retail outlets with at least 4 or 5 levels of intermediaries
involved in distribution. Due to diverse geographical and cultural environment,
India had a multitude of retail formats that provided the ease of distribution such
as grocers, paan shops and hawkers, which co-existed with supermarkets and
teleshopping.
Company’s increased focus was on expansion in the rural sector of the country as
it accounted for almost two-thirds of the country’s total population. The key
challenge faced by the FMCG companies was to reach it’s consumers deep within
the country and ensure that its products were readily available.

Case Background
Amit Kumar had taken over as area sales manager at NutriPack India from Rahul
Ray which had a yearly turnover of INR 631.1 million. Rahul Ray has been
phenomenal in transforming NutriPack India’s business in central Maharashtra,
taking it from INR 300 million in 2008 to INR 631.1 million in 2011, with a
CAGR of 32 per cent against the rest of India at 21% making it more challenging
for Amit Kumar, to match up to the past growth. Kumar had to build infrastructure
and focus on expanding the retail coverage. With retail distribution in India being
complicated and the Jalgaon market which used to operate on thin margins and
high volumes.

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NutriPack India Ltd is a subsidiary of Nutri Pack Limited, a global U.S- based
food company which started it’s operations in India in 1994, headquartered at
Gurgaon. It has reached a turnover of 7.5 billion with an employee count touching
600. The company is successful name in processed food and nutritional food
industry very well known for it’s iconic brands of jams and health food drinks. 
Product Portfolio - NutriJams , NutriPower (both have 71% contribution of the
company’s revenue) , Glucolin and Honeybeez.
Perspective of Kumar
Kumar felt that the Jalgaon territory was performing below its potential and could
effectively contribute more. For this he wanted the master distributor to invest
more on infrastructure and increase presence in existing ones to generate volume.
He has chosen Jalgaon district for the expansion plan in his territory. Jalgaon ranks
2nd in the terms of population in Central Maharashtra districts. While on the other
hand when compared to their contribution (8.6%) that they add to company is
ranked at 4th level. The penetration level is low and it’s an opportunity for them to
enter into deeper market and create value for company.
The Annual Per Capita Income is 16210 million p.a. which is ranked at 3 rd in the
above 10 districts.India’s Tier 2 & 3 cities were developing and about to compete
with metropolitans. Also Jalgaon has got a single distributor (Sachin Agency)
which has got the potential to cater the whole area which will reduce the expense
and channel conflicts.
CENTRAL MAHARASHTRA DISTRICT COMPARISON

Populatio District Value Contribution

District Population Popula CONTRIBUTION Ranking
n
tion Ranking (%)
(%)
Aurangabad 3,695,928 14 3 15.53 3
Jalgaon 4,224,442 16 2 8.56 4
Dhule 2,048,781 8 5 6.18 5
Buldhana 1,888,039 7 4 4.93 10
Jalna 1,958,483 8 6 16.59 2
Nashik 6,109,052 24 1 26.94 1
Akola 1,818,617 7 8 5.23 8
Washim 1,196,714 5 9 5.39 9
Parbhani 1,835,982 7 7 5.59 6
Hingoli 1,178,973 5 10 5.07 7
Total 25,955,011 100.00

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Also the market share of Nutripower is increasing in central Maharashtra but on
the other hand the market share in Jalgaon in decreasing from the past 4 years.
Nutripower is ranked 3rd in terms of volume and value market share in central
Maharashtra and Jalgaon.
Nutri Jam is the market leader in central Maharashtra in jams category for the past
4 years but when it comes to Jalgaon the product is lagging behind Mazaa. There
is a decline in the volume and value market share of the product.
In the year 2008 the value market share is equal in top 2 brands but it had declined
in the last 4 years. Jalgaon being a major agricultural centre and a feeder market
for surrounding villages as the people from nearby towns and villages frequented
Jalgaon for business and to make purchases.
The Distribution of HFD in central Maharashtra the penetration is upto 70%
(8848/12710). The Weighted Distribution is highest too. But when we talk about
the distribution in Jalgaon the penetration is less than 50% i.e. 46% (729/1588)
in HFD. It shows the opportunity in the market to get more outlets connected.

Kumar focussed on these district specific reports and realized that NutriPack India
had coverage of 750 outlets in the Jalgaon district while its nearest competitors
already had a presence in over 1,800 outlets with a similar portfolio of products
making retail coverage the weakest link. Interior retail outlets were offered no
credit period and also complained about credit period, schemes & discounts were
not uniform.

Sachin Mandore’s Issues

Mandore’s concern was low profitability due to which there were no incentive to
work. He was working on a margin of just 4.5%, making a profit of just 2.6% after
deducting his expenses. While he extended credit for 15 days, the company gave
him 14 days of credit – making it not viable enough for him to extend large credit.

He believed in relationship market with large dealers – who could payback on time
and order high volume. He was in an investment dilemma as if he invests more, it
would increase his yearly expenses by about half a million. Another major
concerns for him was low returns, he stated that rather than increasing the

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investment with NutriPack he can invest in the bank and get a 10.5% return yearly
without the hard work.

Questions
1. If you were Kumar, how would you approach this issue

Problems –
There are complaints by dealers in large number regarding stock outs and non
delivery in case of failure to pay on delivery. Lack of reach of Sachin Agency
and reduced dealer intensity in Jalgaon district for Nutri products.
Sachin agency is facing pressure of credit cycle as Nutri offers him 14 day cycle,
but he extends 15 day cycle, hitting his liquidity and secondary claims are not
getting cleared timely further impacting their profitability

Increase Sachin Agency’s investment in NutriPack India as its potential is very

high. With a small investment, the considerable benefits are much higher. The
reach of the products would be amplified to make it comparable to the competitors.
With an increase in reach and improvement in infrastructure, NutriPack has the
potential to become the Market Leader in many sectors in which it is just a
challenger.

2. How would you convince Mandore to put in the required investment?

Market Scope For NutriPower

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 From above table we can see that availability of Nutri Power has decreased
from 50.87% (i.e. available in only 680 outlets out of total 1337 outlets) in 2009
to 45.90% (i.e. available in only 729 outlets out of total 1588 outlets) in
2011.Nutripower covers 45.9% of total outlets whereas Healthy is covering
89.3% of the outlets. Increase in infrastructure and investment will lead to
tapping of almost 50% untapped market in the Nutri Power product line.
Market Scope For Nutri Jam

From above table we can see that availability of Nutri Jam has decreased from
34.51% (i.e. available in only 369 outlets out of total 1069 outlets) in 2009 to
26.92% (i.e. available in only 342 outlets out of total 1270 outlets) in 2011.
Nutrijam covers 26.9% of total outlets whereas Mazaa covers 73.8% of the
outlets. Due to small infrastructure and inefficiency in production to cater large
number of outlets to keep their product, the company is losing its market share
to others.
By presenting the above facts, Kumar should convince Mandore to make further
investments to expand market coverage.

3. Draft an annual performance appraisal format that can be used by Kumar.

Value Contribution (INR million) Rewards

2012 2013 2014
70 75 85 Gift Cards
85 90 95 Bonus
90 105 110 Bonus + Free Holiday
Package for 2

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