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ITC Distribution in FMCG Sector

GROUP 15 SECTION D

Contents
Motivation
ITC Business Distribution System Of ITC Market Research Recommendations Conclusion

Motivation

FMCG major ITC Ltd posted 21 per cent rise in its second quarter 2012 net profit to a total of Rs 1,836 crore whereas non-cigarette FMCG business was still reporting a loss of Rs 30 crore.

Source: The Hindu, Oct 19

ITC Business
Branded Apparel Stationery Hotel

Packaged Food

Cigarettes

Paper Boards

ITC 1910-2012

Incense Sticks

Information Technology

Personal Care

Agriculture Industry

Safety Matches

Distribution System of ITC

MARKET RESEARCH
Do you know ITC?
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Total Urban Rural Yes No

Almost every retailer in Urban Areas knows about ITC. 5 Retailers in Urban Area, who didnt know, did not sell any ITC products. In Rural areas, whatever visibility was primarily due to E-Choupal initiative and Cigarettes selling, people hardly knew about any other products like Bingo, Vivel, Superia etc.

MARKET RESEARCH
Do you sell ITC products?
80 70 60 50 40 30 20 10 0 Total Urban Rural 8 5 3 40 27 Yes No 67

Many retailers in Rural India did not know that the respective product was from the ITC even though selling it.

Which products do you sell?


60
50

MARKET RESEARCH
40

50

40

38

30

30 25 25 21 27

30

Total Urban
21

Rural

20
12

15 12 9 3

13 9

10
0

0 Sunfeast Bingo

Superia

Mangaldeep

Cigarettes

Others

Sunfeast was the best known sold product Bingo was suffering from non-visibility issue along with Superia as margin being less compared with Lays, Haldiram etc and Lux respectively. Others include Vivel, Aim, Fiama Di Wills etc. In rural areas, retailers sold all FMCG product in a single shop, hence Cigarette was also sold in the same shop.

MARKET RESEARCH
Do you get the product on time?
60 50 40 30 20 12 10 0 Total Urban Rural 3 18 9 37 Yes No 55

Many retailers in rural areas used an urban retailer to get their orders. Interestingly, very less retailers used Choupal Sagar as their distribution link.(Retailers complained that they get the same price as end consumer in Choupal Sagar, so it does not make sense to use it as a medium.) Some retailers who were not satisfied with ITC Distributor opted for Bharti Walmart BestBuy and other wholesalers

MARKET RESEARCH
What are the reasons provided by distributor for late delivery? Observations: The usual reason was the non-delivery of the products from warehouse. In rural areas, retailers complained that distributor was less motivated to get a smaller quantity order. Other Issues observed: Considering HUL market penetration as their distribution yardstick Non availability of lower quantity ordering Entry of Low-Cost Carriers like Bharti Walmart BestBuy

RECOMMENDATIONS
Delink Cigarettes from other FMCG products Distributors as business partners were not much enthusiastic selling all the FMCG products as they were able to make more than sufficient profit through Cigarette sales and were not at all concerned about rest of the product lines. Hence, delink the Cigarette from other FMCG products.

Increase TLSD(Total Lines Sold) Making the targets for all the company employees(TSIs) on the line and not on the overall FMCG division. After the cigarettes are delinked, targets will be set for each product line. This will help increase the efforts towards individual products and hence, more sales can be achieved.

RECOMMENDATIONS
Encourage Distributors to sell focused brands Here, first step would be to identify the focus brand. A brand which is not performing as per its merit and is not giving desired sales will be considered as focused brand.

Thereafter, we will provide special incentives and margins esp. to distributors and company TSIs for selling focuses brands.
The market performance will be monitored carefully and will be ensured that there is no shortage of focused brand. Increase Brand visibility It is important to continue to build brand by communicating with the market regularly. Consistent communication will ensure that the brand appeals to consumers on an emotional level, and increase their awareness of it. Online reviews (CNET, Techcrunch, etc.), Display advertisements, Paid ads, Organic search engine visibility (Google, Yahoo), the social sphere (Facebook, Twitter, etc.) will help in brand visibility.

RECOMMENDATIONS
Use E-Choupals and Choupal Sagars as a Distribution point for rural Areas The biggest issue concerning rural areas is that although they sell ITC products, they usually need products in small quantity due to low sales. Consequently, if an end-consumer asks for a particular product and if the retailer does not have it, it is a big loss from companys perspective. For some rural shops, distance between city and respective area is so huge that the retailer does not get product on time. Hence, we can use the already established E-Choupal network to get product request from a shop and directly deliver it to the shop. Choupal Sagar can be used (wherever it is there) as distribution point. Since, it is the company outlet; special discount will be given on bulk purchase.

CONCLUSION
Although there is no problem with the overall distribution of the FMCG channel, but still the brand ITC Limited is reeling under The non-visibility issues Apathetic distributors Amalgamation of Cigarettes sales and Non-Cigarettes FMCG sales HUL, P&G, Godrej which are denting its market

FMCG market is continuously increasing in India and with rising urban population and MNREGA scheme in rural area; people now have increased purchasing power to satisfy their demand. So it is still possible for ITC to bring about a change and become a market leader instead of chaser. We are convinced that ITC has the potential to reach new heights if they provide attention to individual product lines and here, we think that our recommendations can greatly impact companys performance in the future.

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