SNACKO INDIA LIMITED

LEVERAGING TRADE PROMOTIONS FOR COMPETITIVE ADVANTAGE

ISSUE

In Nov 2010, Snacko India was evaluating the reasons for the decline in Market share &
marginal growth in sales for the previous year. The company heaving relied on trade promotion
schemes to achieve its sales targets.

The company was aware that there was no adequate effort to design & evaluate the performance
of these schemes. The company was looking at the possibility of improving these schemes &
also find some ways to evaluate the performance of the promotional schemes.

SNACKO FOOD INDUSTRY –

The processed snack market in India was us $3 billion & growing at 15 % per annum. The
organized market was about 46 % & growing at 25-30 % annually. Potato chips at about US $1.2
billion were contribution close top 80 % of branded snacks category. Close to 90 % of the
products were priced at or below US $ 0.22 price point. The market was dominated by small
sized packs & highly innovative. Mortality rates of new brands were as high as 70 %.almost 50
brands were launched in the first half o 2009 out of which only 10 % survived.

SNACKO –

Snacko was a local subsidiary of a European food giant. It entered India 15 years ago but did not
meet with success. Subsequently it acquired a local subsidiary of another European food giant in
other western snack sub categories in India to gain 20 % market share. It adopted aggressive
growth strategies aimed to becoming a market leader. It based its strategies on innovation,
packaging, advertisement, promotion & inorganic growth the M&A’s. It was an innovator in
using trade premium for capturing market share. It had set up an innovation centre in India to
monitor local formats & tastes. It intended to grow by increasing the frequency of consumption
in the metro markets & penetrating rural markets.

DSITRIBUTION NETWORK –

The goods were distributed through a multi-level distribution system. CFA ‘s were the first level
who transported merchandise from the factory to the stockiest or distributors The
stockiest/distributors were assigned definite geographies & maintained sales force to call on
wholesalers & large retailers in urban areas. The wholesalers provided the final link to the rural
& smaller retailers who did not purchase directly from the distributors. The overall distribution
cost worked out to 13-25 % with the breakup at various levels as below
 CFA’s 3- 3.5 %

Stockist/Distributors 5-12 %

Wholesalers 2-3 %

Retailers 5-15 %

The company appointed super stockiest in bigger town to serve a number of small traders in
satellite towns. The sub-stockist or the traders in these small towns were appointed by the
company. They were given relatively higher margins due to smaller value of sales in these
regions. The company adopted various means of promotions like shop contact programs, market
activation programs in weekly bazaars & trade excitement programs in wholesale markets. This
helped the company develop contact with the super stockiest & sub stockiest & teest the sales
potential as well as get feedback.

The retail structure was dominated by unorganized 3 million stores. Nearlyu two third of these
were located in rural areas. Unorganised retailing accounted for almost all of the sales of snack
industry.

Snacks contributed less than 5 % of the food sales in organized outlets. However this was a very
fast growing segment growing at the rate of 25-30 % and revenues expected to touch US $ 15
billion in the near future

SNACKO’s DISTRIBUTION CHANNEL –

Snacko distribution channel consisted of a CFA acting as a link between the company’s
warehouse & distributors. The distributors sold the products to wholesalers. They had their own
sales force. In addition they were supported by Sales Office (SO) of the company as well as
Merchandising Officer (MO) for installation of merchandising equipments at the point of
purchase & product stand. The retailers were the last leg in the network & were the interface
with the consumers. Snacko’s sales network was dependent on the distributor-sales person
network.
SNACKO’s SALES MANAGEMENT –

The Marketing Manager managed a team of Brand Manager & a Channel Manager.

Brand Manager – Brand Management, approval of Promotional campaigns, expense for each
brand.

Channel Manager – Merchandise design, execution of various trade promotions.

National Sales Manager - Managing National sales. Supervise regional managers & a channel
development Manager.

Regional Managers - Manager Sales for the region and merchandising through merchandising
managers.

Area Manager – manager merchandising activities with the help of Merchandising Managers &
Merchandising Officers.

Sales Officers - Frontline sales persons & responsible for sales in their territory.

Merchandising Managers – Responsible for merchandising related activities at the point of sales
including managing stands, banners & danglers at each retail outlets. Supported by
Merchandising Officers.

Merchandising Officers – Execution of merchandising tasks in a smaller area. Covers A class

retail outlets & relationship building with retailers. Manage Distributor’s Merchandiser. Targets
were for fixed installations per month..

Distributor’s Merchandisers – Clean merchandising equipments, replace stickers/posters, regular

dusting cleaning. Targets were for semi-permanent fixtures of merchandisers equipment per
month.

TRADE PROMOTIONS –

Snacko emphasized on below the line trade promotion activities to promote its products. While
introducing new products the objective was to improve visibility & availability.

For slow moving brands promotions were through discounts & bundling .
The main focus was on either increasing the stock at trade level or increase shelf space.
Distributors & retailers were given incentives to place large orders. Retailers were given
incentive to provide shelf space. The trade scheme was implemented through the distributor’s
sales force & company’s sales officers. The sales force was offered additional incentive based on
sales levels