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Candy and Chocolate India (CCI): Last Mile Distribution Challenge

Nikhil Joy PGP/16/034 Babita Pegu PGP/16/136 Febin Kovan PGP/16/259 Gurnoor PGP/16/318 Saumarjit Kamwar PGP/16/342

Situational Analysis
Year 1970 1980 2000 2007 Relevance CCI was founded Diversified into Beverages Expanded to prepared foods Reconfigured RIM
PER CAPITA CONSUMPTION OF CONFECTIONERY
Unorganized

CONFECTIONARY MARKET IN INDIA


Organized

Revenue: 6.5 M CAGR (Revenue) : 12% Estimated Sales by 2014: 11 B CAGR (Volume) : 6%

35% of Indias Total Confectionery Consumption

North 28%
West 32%
India 20 gms

MARKET PENETRATION

SALES
10% 15% Confectioner y Prepared Foods 75%

East 17%

Urban 75%

Rural 10%

South 23%

Situational Analysis
DISTRIBUTION OF CONFECTIONERY 10% PRODUCTS
14% 76% Kirana Stores Convenience Stores 5%

DISTRIBUTION PATTERN
15% 25% 2-8 yrs 8-25 yrs 25-64 yrs

55%

CCIS RECONFIGURED RTM


Modern Retail Retail sector through hypermarkets, supermarkets 7% of Sales

CONFECTIONERY MARKET
PRODUCT Chocolate Sugar Candies Gums GROWTH 20% 5% 9% MARKET SHARE 46% 34% 20%

Traditional Retail Focuses on Urban Areas 75% of Sales

Exclusive Rural Penetrate Rural Markets 23% of Sales

Problem Identification
Identify a Route-to-Market (RTM) which is cost effective, easy to operationalize
and scalable. The RTM objective of increase in Sales, decrease in number of days inventory and improved Customer Service should also be met.

Channel:
CCI

Alternative 1: Superstockist Model


Superstockist Substockist Wholesaler Retailer Customer

Superstockist Model
Price per monopack Retailer(12.5% margin) Wholesaler(11% margin) Substockist(5.5% margin) Superstockist(11% margin) 1 0.875 0.7787 0.7359 0.6549

Pros: Offers advantages of scalability and operational flexibility Sustainable option as there are no channel conflicts Cons: Expansion limited Requires vast resources and generates less revenues

CCI's revenues

65%

Alternative 2: Haats
Channel:
CCI Superstockist Substockist Wholesaler Haat Customer

Haats
Buyer spend / day for FMCG Buyer spend / day for confectionary Total buyer spend / day on confectionaries CCI market share Retailer revenues / day Retailer(12.5% margin) Wholesaler(11% margin) Substockist(5.5% margin) Superstockist(11% margin) CCI Revenues/Day 40 4 35200 12 4224 3696 3289.44 3108.5208

Pros: Weekly markets; 43000 Haats in India Haats were preferred over rural retail outlets Accessible by roads Single Haat would cater to 20-60 villages Had 5000-12000 visitors per day Cons: Temporary Haats moved from village to village How would channel be established

2766.583512

Alternative 3: Vans
Pros: Mobility from village to village Widely used in rural markets Used for creating brand awareness Cons:

Expensive option as Vans costed Rs.3,500 per day


Only 33% percent of villages had roads; limited scope

Alternative 4: SHGs
Channel:
CCI Superstockist SHG Retailer Customer

SHGs

Price per monopack Retailer(12.5% margin) SHG(0.5% margin) Superstockist(11% margin)

1 0.875 0.8706 0.7748

Pros: Higher Margins for CCI Personal selling possible Opportunity for CSR Cons: Volume sales would be limited Limited scope as SHG movement had not spread evenly across India

CCI's revenues

77%

Alternative 5: Mobile Traders


Channel: CCI Superstockist Mobile Trader Customer

Mobile Traders

Price per monopack Mobile Trader(12.5% margin) Superstockist(11% margin)

0.8750

Pros: Local knowledge Could sell at Haats and Rural retail stores Cost effective Can penetrate areas without road connectivity Prices could be reduced to increase penetration Cons: Lower sales volumes Can only sell value packs and low cost confectionary items

0.7787

CCI's revenues

78%

Alternative 6: Tie-Up with India Post


Pros:
Cost effective way to reach rural markets Deliver consignments directly to retailers Cons: Can only be used in conjunction with Retailers, Mobile Traders etc India post has huge bargaining power Nature of product denied tie-ups

Recommendation
Combine alternatives 2 and 5: Haats and Mobile Traders Mobile Traders would be able to serve villages with very low connectivity Higher volume sales at Haats would make up for the low volume of Mobile Trader sales Local knowledge of Mobile Traders coupled with lower prices would increase rural penetration

Thank You