SALES AND PLANNING 201

CAHNNEL OF DISTRIBUTION
(NESTLE)

SUBMITTED TO: Mr. RAMESH THAKUR

SUBMITTED BY: ANKUR TRIPATHI

1
 SALES AND PLANNING 201
1

DISTRIBUTION STRUCTURE OF NESTLE INDIA

(NCR ONLY)

Mother Godown at
Ghaziabad, Delhi –UP

Respective C&F Agents

Distributors as per
assigned territories

Wholesalers in their area. Retailers in their respective territories

End Consumer

FORMAL STRUCTURE

INFORMAL STRUCTURE

2
 SALES AND PLANNING 201
1

Note: Wholesalers are not a part of the formal structure of Nestle India’s distribution
network for NCR .They make bulk purchases from the distributors directly thereby
leveraging on the margins.

3
 SALES AND PLANNING 201
1

Stocks

OWNERSHIP TRANSFER

4
 SALES AND PLANNING 201
1

Stocks manufactured at the factories and co-packers reach the C&S through
mother Godowns. The stocks stored at C&S are the property of Nestle.
Encashment of stocks are done through Invoicing to Cash Distributors C&S as per
the guidelines given to them. They also receive and store support materials like
give aways, stickers and complementary items etc.

• Transportation
From the factory to the distributor stage the company ensures that there is
availability of cool chain for transportation. At the mother godown (Located at
Sahibabad) there is temperature control by hired cold storage.

For the purpose of transporting chocolates from the mother godown to the Cash
Distributor Dedicated Air Conditioned Vans are used (especially for the summer
seasons)

The following is the transportation system followed by the company:

5
 SALES AND PLANNING 201
1

Moga Factory

By Rail By Road

D irect Trucks

Sahi baba d Mother

Go down
D D elhi -U P bord er
ir
e
c Tran sh ipment God own
tb Indo re
y
ra
il
c
o H yderaba d
n
ta
in
e
rs Mostly by
Ro ad :
Patna/ Ca lcutta
Contain ers
/ trucks

Guwah ati

By trucks

C&S C&S C &S C&S

By Ca nte rs / Vns

6
C.D. C.D. C.D. C.D. C.D. C.D. C.D.
 SALES AND PLANNING 201
1
Company Policy and Guidelines
o The company has created two kinds of distributors, namely Trade and
Chocolate. The former deals with the Maggie range, Nestle dahi,
Aquafina etc. Chocolate deals with all confectionery items like
chocolates, sweets etc.

o A representative of each distributor goes to the various outlets, once

or twice a week (depending upon the area), takes the order and then
either delivers the goods there and then, or on the same day.

o It has been realized that a retailer has a limited pocket for a days
purchase. If one sales representative goes for an order with 50 SKU’s
the retailer will only buy what his pocket allows, for a one-time
purchase. Whereas, if two different sales people go, representing
different distributors there is a possibility both will get an order and
the company will witness better sales.

o The company has also taken an initiative for deeper reach and
penetration into the market with its operation “STING”. Whereby the
sales representatives on the company go on bicycles and try to fulfill
the order of small ignored and unserved outlets. For example the
panwallas, the kinara stores etc.

7
 SALES AND PLANNING 201
1

Incentives to the distributors

1) Margins
MARGIN LAYOUT (Kit Kat)

Company

5.8 %

Distributor

11.5 % Flexible

Retailers
Wholesalers

Negotiable

Retailers

2) Schemes spread over 2-3 months. These schemes encourage specific

target achievements. Targets are given as indexed growth rates based on weights.
For example the meaning of 10% growth for a distributor having sales of Rs.20000
will have a different meaning from one having sales of Rs. 1 lacks.

8
 SALES AND PLANNING 201
1

The prizes in the schemes can be monetary- for example additional 2% margin on
turnover
Or non monetary – for example free T.V. sets on achievement of targets. It is
attempted to keep in mind the monetary benefit to distributor in case he sells the
gift given in kind ( for example T.V.)

3) Certificates-
Certificates of acknowledgement for achieving the targets for a name like Nestle
are priced by the distributors. They frame them and display them in their offices.

Motivation of Channel Partners – “Proud to be Nestle”

The company consistently comes up with schemes for it channels partners to
motivate them. One of their successful schemes was “Proud top be Nestle –
Supper awards for super achievers!” launched on March 30, 2002. This contest
was open for the following:
i. Area Sales Managers
ii. Sales Officers
iii. Cash Distributors
iv. Pallet Salesmen (a S.O. may have 2-3 Pallet salesmen reporting to
him to enable him cover a wider territory.)
v. Distributor Salesmen (These salesmen are the employee of the
distributor, but are under indirect pay roll of Nestle, since their salary
is reimbursed by the company.)
vi. Merchandisers

How does it work

9
 SALES AND PLANNING 201
1
Step 1: The qualifying criteria for the contest is :
- 100% achievement of internal target for Qtr III (invoicing)
- Minimum 10% RDBN turnover growth over the last year Qtr II.
- Duration :
o Invoicing: 01/04/2002 – 29/06/2002
o RD: 02/03/2002 – 23/06/2002

Step 2: All ASMs who fulfill the above criteria were then ranked on the basis of an
Index
INDEX = % RD turnover growth * absolute value increase

Step 3: Top ASMs (as fixed by the branch) win prizes.

P.S. Cash Distributors and Sales Officers performance monitoring Sheets have
been attached as Annexure B & C.

The winning team comprises of:

- All SOs in the ASM team
- Two top ranked CDs in each SO Zone
(Index = %RD growth * absolute turnover increase)
- Two distributor salesmen in each of the top two CD
- One Merchandiser in each of the top two points ( performance will be
assessed by S.O. on quality of merchandising achieved)

The top ranked ASMs (Nos. as fixed by the Branch) and their teams take home the
following prizes:

10
 SALES AND PLANNING 201
1
RDBM T/O SO CD PS DS Merchandisers
growth
achieved
20% + 5500 3500 2300 2000 1200
15-19.99% 4500 2500 1800 1500 1100

10-14.99% 3500 1800 1300 1000 1000

The Top ranked ASM team also wins a TEAM TROPHEY and certificates.

Evaluation
Once a distributor is appointed the company generally does not take away
business from him, except when the underperformance has been observed over
long periods.
While evaluating his performance, his targets performance is studied relative to
that of other distributors in the nearby area (because growth patterns may by
regions)

Distribution in Practice (DIP) Training

There are proper training programs for the C&S agents as well as distributors.
Following are the modules included in the program:
- Nestle Quality System
- Good Warehousing Practices (GWP)
- Good Distribution Practices.
11
 SALES AND PLANNING 201
1

Major aspects of the program include:

1. Stacking as per norms:

FIFO basis of Inventory management is used.
Stocks are kept in pallets away from the walls. Godown. Stacking is done in
an orderly fashion and the different batches are visible. There must be
moving space between various stacks.

2. Good Warehousing Practices

 Security
 Fire Fighting: Appropriate provisions are made to handle emergency
caused due to breakage of a fire.
 Cleanliness
 Pest Control
 Temperature record and maintenance at A.C. Godown
 Proper ventilation
 The required Licenses as per the local laws have been obtained. For
Eg. Sales tax etc.
 Transportation: Effective, reliable and quick transport is available to
and from the warehouse.
 Proper Loading / unloading: The labours have been properly trained
to ensure that no damage to the goods take place at the time of
loading / unloading.
 Remittance: Timely deposits of remittances are ensured.
 Proper records are maintained with regard to Sales tax and
exemption certificates.

12
 SALES AND PLANNING 201
1

3. Accounting
A stock register is maintained to record receipts and dispatches with detail of
accompanying documents. Shortages (if any) are accounted for separately.
Sales tax and Octroi are handled by C&S.. A separate register is maintained
for materials which are meant for free distribution. All the related expenses
that are incurred are paid by C&S and are subsequently reimbursed by the
company.

4. Handling of Bad Goods:

The bad goods are separated and marked “saleable” or “unsaleable”
appropriately.

5. Temperature control for chocolates: is ensured not only at the time of

storage but also at the time of transit.

Forecasting and target setting

Target setting is a result of negotiation between the distributor and the company.
Mid month targets for the next month are given by the company at around 5 th -10th
of a month. These are set for the Sales officers, ASMs and Branch Managers in
the hierarchy and driven down by them.
At the month end the distributor can negotiate these targets in the range of +/-
10%.
The branch manager is responsible for coordinating targets of the factories and the
targets of the individual product managers.
Confirmed sales set as weekly targets.

13
 SALES AND PLANNING 201
1

For a sales officer, the focus is the redistribution targets, also called as secondary
invoicing (from cash distributor to the redistributors)
For an ASM, primary invoicing ( From C&S to cash distributor) is more relevant.
For the company as a whole, primary as well as secondary invoicing as adjusted
against “back” is important.

The company is now moving on to a statistical tool called “Winters model” for
demand forecasting” .This is done by the SCM and the inventory managers at the
corporate levels along with interactions with the sales and senior sales officers.

Under the winters model, the baseline demand curve is worked out, that is remove
the effects of other factors like sales promotions, unexpected variations like wars
etc. on sales. This is done by the sales officer by preparing a monthly log and
writing against each month the reason for any exceptional variation in sales, if any.
After negating from the past sales, the effect of these exogenous variances , trends
are calculated and sales of the next year are calculated. On these figures, the
effects of any planned promotions, any foreseeable variations etc, are imposed to
get the approximate forecasts. For example normally the effect of a TPP
(Temporary Price Promotion) on sales is that of a 150% sales. That is sales of 6
weeks are achieved in 4 weeks.

Inventory holding ( on an average 3 ½ weeks of inventory is held)

14
 SALES AND PLANNING 201
1

15