Kelloggs
SALES & DISTRIBUTION MANAGEMENT
GROUP 4
Keshav|Tanay|Kham|Parth|Ulkrisht|Krishna
Kelloggs
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
Manufacturer
in the world
Presence
across 140+
countries
Kelloggs 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.
Kelloggs 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
Company
Depot
Urban
Distributor
(5% margin)
Integrated
Kelloggs
software tracks
product from
company to
retailers unlike
Colgate or HUL
which tracks till
Stockists
Retailer
(10%
margin)
Distribution Channel Structure and margins
Rural
Company
Depot
Super
Distributor
s
(2%
margins)
Stockists
(4 %
margins)
Small distributors in
small towns
No transactions
with company
Retailer
s
(9%
margins
Integrated
Kelloggs
software tracks
product from
company to
retailers unlike
Colgate or HUL
which tracks till
Stockists
Source: JK Prasanna
Sr Manager, Retail
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 :
Share 2015
General Trade
75%
Modern Trade
30%
CSD
5%
Kelloggs is different as it has a
significant portion of income
from MT unlike other FMCGs in
India
It hence has a separate sales
force for MT
Distributors Daily Schedule
Everyday log-in to
MyNet through Browser
Without any mechanism to
capture secondary sales in
rural segment on daily basis,
Kelloggs had very limited
information visibility.
Hence, rural market business
remained an information black
hole.
The company therefore chose
to built a mobile application for
PDA, named Mobile MIDAS
Uploads data from MIDAS touch to
MiNet
Tracks ordered, in-tansit and received
goods
The data is integrated with companys
BI portal through which the executives
have real time visibility of secondary
sales
Expanding Distribution Network in
Rural Market (1/3)
Stockis
ts
Van Sales representatives (VSR)
Takes stocks from stockiest
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
Where consumer density is low (< 20,000 population of village)
Has been implemented in Bihar, Rajasthan, Madhya Pradesh, Uttar
Rural Sales
Contributes to ~34%
of companys total
India sale in FY2016
Expanding Distribution Network in North
East (2/3)
Lot of states where
distribution is weak
and its difficult to
retain distributors
Adopted Subsidy
model rather than
increasing margins.
Consequences
Ensures that
distributors breakeven.
Advantage over
margin model as it
doesnt ensure breakeven which is very
important for
distributors in that
region
Expanding Network in Urban & Unreachable
Areas (3/3)
Project ONE (Outlet Network
Expansion)
Expansio
n via
Cosmetics
,
Chemists
outlets
Expansion in Unreachable
(Naxalite)Area of Odisha
Outlet Listing
Industry
Trend
Urban New Channel Classification
P&G, HUL, Nestle, Dabur India
Ltd., Emami, Godrej, LOreal
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
Body Lotion
Hair Gel
Conditioner
Noodles
Hair Oil Sac
Hair Fall
Kellogg's cornflakes box
Olay Total Effects
Gillette Mach 3
Loreal casting crme gloss
Axe deos
Large pack cooking oil
Large pack toothpaste
Large pack detergents
IT in Sales
Kelloggs has made investment in IT to ensure:
Kelloggs MIS-Net
Merchandising
Kelloggs
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
In store Execution
Planogram
1% / .5%
Channel Programs- Bandhan
Program Bandhan Chemist( Bpm>5000)
Heads
Parameters
Rishta Chemist
Value Target
2 slabs of target
achievement
1% /0.5% ( Rs 100 min)
Primary Visibility
Modular BIW / Countertop
Secondary Visibility
FSU / End Cap
4%( Rs 400 min)/ 3%( Rs
300 min for non Metro)
X
In store Execution
SOS / Planogram
Channel Programs- Premium
Grocer
Program Udaan
Qualification Criteria
Premium Grocers Key Outlets with BPM
> 10k
Value Target
Slabs:
> 100%
95% - 100%
Primary Visibility
BIW 2 brands and
Countertop
Payout
1% / 0.5%
3% / 2.5% (Non Metro)
Channel Programs- Premium
Grocer
Program UMEED
Qualification Criteria
Others with BPM>6 k
Payout
Value Target
95% achievement
Rs. 300
Primary Visibility
BIW 2 brands and
Countertop
Rs. 500 / Rs.300 (Non
Metro)
Claims/Reimbursement and Credit
policies
Incentive Schemes
Scheme Structure - Primary and Secondary
Primary
Secondary
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.
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
Area Sales Manager
8
Divisional Sales Head 4
Urban
Sales &
Promotion Executive
Van Sales Rep
Rural
KAM
Area Sales Manager
ISP
Distributor Sales Rep
3
5
Chief Sales Officer
Modern Trade
Head
Territory Sales Officer
Sales &
Promotion Executive
Territory Sales Executive
Independent
Sales Rep
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 Kelloggs 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
Kelloggs resolves issues majorly through intimidation (coercive power) and legal power
and on repeated offence, the defaulter is fired.
Conflict Resolution
Breaking the Market
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
Discounts to MT limited
Negotiations
Shelf Space given to certain products
Logistics Benchmarking of Major
FMCGs
*Tried Reverse Auction in the past and reverted back to
