itc shampoo

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Study of Distribution Network of ITC Shampoos

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Page 1: Itc shampoo

Study of Distribution Network of ITC

Shampoos

Page 2: Itc shampoo

ITC HISTORYITC Limited

Parent Company ITC Limited

Category Consumer Products, Hotels & Services

Sector Public & Conglomerate

Tagline/ Slogan100 Inspiring years; 100 years 1 mission India first

Founder

Henry Overton Wills on August 24, 1910(as Imperial Tobacco Company of India)

STP

Segment Products and services for daily needs

Target GroupEvery Indian household especially the middle class

PositioningEnduring Value. For the Nation. For the Shareholder.

Page 3: Itc shampoo

ITC

Hotels Lifestyle Retailing

Information

TechnologyFMCG

Cigarettes Foods PCP

Soaps Shampoo

Vivel Fiama Di Wills Superia

Matches, Incense Sticks

Education and

Stationary

Agribusiness

Paperboards, Paper

and packaging

ITC Business Portfolio

Page 4: Itc shampoo
Page 5: Itc shampoo

A Brief Overview

• Rs. 2900 crore Shampoo Market in India

• Other Players : Dabur, Wipro

• Major Players : HUL and P&G

• Growth of Industry : 15% pa

• FMCG Revenues: 12,955 cr.

• ITC : a Rs.18,000+ cr. turnover company

• ITC’s Share : 5% (despite being a very late entrant)

• Rs. 145 cr. Revenue contribution through shampoos

Page 6: Itc shampoo

What is Channels of DistributionDistribution is the process of making a product or service available for use or

consumption by a consumer or business user, using direct means, or using

indirect means with intermediaries.

Product distribution (or place) is one of the four elements of the marketing mix

It can be of the following ways

Page 7: Itc shampoo

Distributors of PCP in India

The total number of distributors in India of ITC is 5027 in PCP products.

Some of the Major cities include the metro cities Nagpur, Ahmedabad, Kochi, Jaipur, Hyderabad . etc

In Mumbai it is divided into 3 regions Each region consists 6-8 distributors

having a total 25 distributors.

Page 8: Itc shampoo

Territory division in Mumbai

Mumbai divided into 3 sub cities : “City 1” , “City 2”, “City 3”

Every “City” consists of 4 regionsA total of 12 regions

6-8 distributors per region : A total of 23 distributors

Page 9: Itc shampoo

SWOT Analysis

Strength•ITC has a strong and experienced management•. Strong brand presence, excellent products

advertising•Diversified product and services portfolio •ITC limited employees over 25,000 people

Weakness•ITC is still dependant on its tobacco revenues and

people have cheaper substitutes and other brands•2.Hotel industry has not been able to create a

huge market share

Opportunity•Tap rural markets and increase penetration in

urban areas•Mergers and acquisitions to strengthen the brand•More publicity of hotel chains to increase market

share

Threat•Strict govt regulations and policies regarding

cigarettes•Intense and increasing competition amongst other

FMCG companies and hotel chains•FDI in retail thereby allowing international brands

Page 10: Itc shampoo

Distribution Channel Process

Page 11: Itc shampoo

Distribution Channel

Production at Haridwar

3rd Party WSPFee Based

Service CFA at Bhiwandi

Distributor

Unorganized Retail

End Customer

s

Organized Retail

Fixed Margin: 3.5%

TOT on Case to Case Basis : Decided by

Central OfficeDistributor pockets

3.5%

10% on Bottles24% on Sachets

Company Freight

Rs.100

Rs.103.5

Rs.113.85

Rs. 102Rs.100Rs. 95

Page 12: Itc shampoo

Credit flow across the Chain

No credit offered to distributor Goods delivered strictly on cash, cheque, RTGS

basis. Distributor offers 7-15 days credit to

retailers. Margins of Distributor includes an interest

component towards the credit he offers down the chain

Page 13: Itc shampoo

Flow of Damaged Products

ITC

Distributor

Retailer

Consumer

Only replacement of Damaged Products, No reimbursements Paid

Damaged Goods Moving Back to ITC

May ReplaceMay Reimburse

Page 14: Itc shampoo

Achieving Economies of Scope

Cigarettes

Food

PCP

Distributor

Sales Team PCP

Sales Team Food

Sales Team Cigarettes

Single distributor for all 3 verticals

Single Sales team for entire PCP: Soaps, Shampoos and Agarbattis

Page 15: Itc shampoo

Distribution of “Distribution” @ Kamla Enterprises

1600 retailers under this distributor- Malad & GoregaonDeals with 7 salesmen handle Soaps and Shampoos

1 Salesman handles 6 beats

1 beat per day

Page 16: Itc shampoo

Sales tracking sheet

Page 17: Itc shampoo

Sales persons use PDA to transfer information into the FORUM system. Database consolidation

happens every evening. Uses FORUM – IT system to monitor distribution

activities, link distributors with company, track orders, etc

The system helps to track inventory,

determine reordering levels other than

being a one-stop-shop for all the information about

salespersons and retailers

Linking “IT” FORUM system

Page 18: Itc shampoo

-Key Strategies

Page 19: Itc shampoo

Selection of Distributors Exclusivity of distributors is strictly maintained in

ITC Company leverages its brand and high inherent

demand of its products in the market to enforce exclusivity on distributors

Not possible for smaller manufacturers to force exclusivity, as they don’t enjoy bargaining power with distributors

Advantages No need to push products through distributors as

they have access to only ITC products Saves on extra margins company gives to

distributors to lure them in ITC’s favor

Page 20: Itc shampoo

Area Wise Strategy- Organised Retailers vs Unorganised Retailers

Mumbai

Areas with High standard of living

Bottles of Fiama Di Wills and Vivel

Distributor margin decided by company on the basis of no. of retail outlets of key A/Cs in

the territory

Areas with low standard of living

Sachets of Superia and Vivel selected as the key product

Distribution margin is fixed for all distributors

Area selection according to Standard of Living

SKU and key Products

Profit Margin

Share of Sachet by revenue

Share of Bottles by revenue

Superia 80 20

Vivel 60 40

Fiama Di Wills

20 80

Page 21: Itc shampoo

What is SKU

Stands for "Stock Keeping Unit," and is conveniently pronounced "skew.“

SKUs may be a universal number such as a UPC code or supplier part number or may be a unique identifier used by a specific a store or online retailer.

Mainly used to track the inventory using their own custom database system.

When shopping online or at retail stores, knowing a product's SKU can help you locate the exact product at a later time.

Page 22: Itc shampoo

Choice criteria of distributors/retailers (80-20 rule)

ITC is a late entrant in the shampoo market Currently enjoys 5% of the market share

Fiama Di Wills : Oct, 2007 Vivel : June, 2008 Superia : August, 2008

Strictly follows 80:20 principal to gain economies of scale first

Selects the first 20% of the most profitable retailers for ITC in a particular territory

Out of the total 1 lakh retailers in Mumbai, it today serves only 24000 retailers

Page 23: Itc shampoo

The Way Forward

• Small unbranded Salons a major consumer of Shampoos

• ITC under the process of exploring these sales outlets

Exploring New

Channels• Introduction of reward points at

retailer end• Highest points for Fiama Di

Wills, Lowest for Superia

Pushing High Margin

Products• Pilot Project in Mumbai• Retailer been incentivized to

stock only ITC products

Exclusive ITC Retail Outlets

Page 24: Itc shampoo

By group 8

Tripti Madhushree

NikeshCelistin

AlanAbhimanu Kumar

SinghAakash Thakkar