Good Food, Good Life

Nestle

• Nestlé was founded in 1867 by Henri Nestlé in Switzerland

• Merged with the Anglo-Swiss Condensed Milk Company in 1905

• Today it is the world's largest and most diversified food Company, and is about twice the size of its nearest competitor in the food and beverages sector.

• Nestlé employ around 250,000 people from more than 70 countries and have factories or operations in almost every country in the world

Nestlé Principle

• Nestlé is based on the principle of decentralization, which means each country is responsible for the efficient running of its business - including the recruitment of its staff.

Nestle India Products Nestlé India - Famous brand names

Milk Products & Nutrition

Beverages

Prepared Dishes & Cooking

Aids

Chocolates & Confectionary

Nestle Milk Nescafe Classic MAGGI 2-MINUTE Noodles Nestle Kitkat

Nestle Slim Milk Nescafe Sunrise Premium

MAGGI Imli Pichkoo Nestle Munch

Nestle Dahi Nescafe Cappuccino MAGGI Sauces Nestle Bar One

Nestle Bhuna Jeera Raita Nescafe Sunrise MAGGI Healthy Soups Nestle Milky Bar

Nestea Nestea Iced Tea MAGGI CUPPA MANIA Nestle Polo

Nestle Milkmaid MAGGI Vegetable Atta Noodles

Nestle Eclairs

Nestle Everyday Whitener MAGGI Pazzta

Distribution System

• Competitive edge over its existing rivals.

• Nestlé has its own distribution networks equipped with all necessary transportation facilities.

• They transport their products at major regional sales offices, which are situated at different cities of India.

• These sales offices (distribution centres) have their own vans with sales people who sell and transport goods to the small retailers.

Inbound Logistics

Raw Cocoa

Processing

Cardboard/Material

manufacturer

Packaging

Outbound Logistics

Packaging

Transportation

Wholesaler Grocery Store Customer

Mother Godown

Carriage and Forwarding Agent

Distributor Super-Stockist

Wholesaler Retailer Re-distributor

Retailer

Nestle Distribution Channel

End Customer

Nestle Distribution Channel

• Products are sent to the C&F Agents of the company from its Manufacturing Unit.

• Later it flows from the Manufacturing Unit to Distributor and Super Stockist.

• The Distributor is responsible to manage the availability of products in his area

• Super Stockist supplies the goods to the Re-Distributor who is in charge of managing the availability outside the region of the Distributor.

• The Distributor and Re-Distributor, then supplies the products to Wholesaler and Retail in their respective region or area.

Nestle Distribution Channel

C & F Agent (Karnataka)

Distributors D1 (Bangaluru)

Distributors D2 (Mysore)

Super Stockist

Re-Distributors (Gokarna)

Re-Distributors (Kundapur)

Selection of Distributors

• The Criteria followed are: 1. Capital Investment

Depends on both present and future capital investments by distributors

Amount vary from Area-wise to marketwise

2. Relevant experience Prior experience in FMCG sector is preferred to save on training expenses

Distributor should not be dealing in Competitor’s product

Should handle entire range of Nestle products (Both fast and slow moving SKU’s)

3. Infrastructure Godowns / Storage space with appropriate refrigeration as per product needs

Delivery vehicles

Salesmen

4. Company’s discretion based on markets served

Terms of Operation

• Sales force of distributor is divided into 3 heads namely: 1. Milk Products

2. Chocolates

3. Other products

• All the 3 teams visit the retailers once in a week on different days

• Sales force is complimented by a weekly visit to the district by the sales executive of the company

• Idea is to supplement the lags in the distribution by wholesaler and in certain specific cases to push extra stock in the market

Terms of Operation

• Company policies

1. Credit Policy

• Distributors are termed as Cash Distributors because the company charges the distributors before the stock is delivered

• Company has connected the distributor online and the transactions happen online

• The distributor sells goods on credit; the period of credit ranges from 1-2 week

• The wholesaler allows discount of 1% on cash payment (policy followed by the wholesaler)

Terms of Operation

2. Stock Policy

As per the company regulations the distributor is supposed to maintain a stock of 3 weeks which in monetary terms equals to Rs. 30 lakh for the distributor.

Stock is formalized by the company; the dealer can negotiate on 3-4 end days, the stock policy is formed for the month

Distributor to push in slow moving SKU’s clubs them with fast moving SKU’s for the retailers

Company DUMPS significantly on the distributors, the distributor has to mange the supply by the company

Terms of Operation 3. Lead period

Lead periods in providing stocks to the dealers differs from the SKU and quantity ordered

Some SKU’s like dairy products are delivered correspondingly with taking order but some are sent from the warehouses

A higher quantity ordered has to be replenished from the warehouse

4. Return Policy

Company follows a policy of return when the product has past its expiry date, damaged or has a defect

Replenishment is done with cash and happens at the end of every six months

5. Return on Investment

Company does not give any guarantee to the distributor

Terms of Operation

6. Storage policy

Distributor maintains Cold Storages and Deep Freezers for the storage of the products

Distributor has to bear all expenses pertaining to Infrastructure requirements

7. Sales Force

The remuneration and all other expenses for sales force are borne by the distributor.

Incentives - Margins

Perfetti Cadbury Nestlé Lotte Wrigleys Colgate

Super

Stockist /

Distributor 2.5 2 5.7 2.5 2 2

Re-

Distributor

/

Wholesaler 4 4 3.7 6 5 5.6

TOTAL 6.5 6 9.4 8.5 7 7.6

Incentives - Schemes

• Specific schemes which spread over 2 ~ 3 months

• Encourage specific target achievements

• Targets are given as indexed growth rates based on weights

• For e.g.

– 10% growth for distributor having sales of Rs. 20000 will different from distributor having sales of Rs. 1 lakh

• Prizes in form of additional margins

• Certificate of acknowledgement for achieving the target

Motivation of Channel Partners

• “Proud to be Nestle – Super awards for super achievers”

– Open to

• Area Sales Managers

• Sales Officers

• Cash Distributors

• Distributor Salesman

• Merchandisers

• How does it Work?

1. Qualifying Criteria

1. 100% achievement of internal target for 3rd quarter (Invoicing)

2. Min. 10% RDBN turnover growth over last year 2nd quarter

Motivation of Channel Partners 2. Ranking

All ASM’s who fulfil above criteria are ranked on the basis of Index.

Top ASM’s(as fixed by the branch) win prizes

INDEX = %RD turnover growth * absolute value increase

The winning team comprise 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 ASM team also wins a TEAM TROPHY and certificates

Dealership in Practice (DIP) training

Training programs for C&F agents which includes modules on:

Nestle Quality System

Good Warehousing Practices (GWP)

Good Distribution Practices

Major aspects of the training program are;

1. Stacking as per norms

2. Good Warehousing practices

3. Accounting

4. Handling of Bad goods

5. Temperature control for chocolates and dairy products

Target setting

Target setting is a result of negotiation between Distributor and Company

Mid month targets for next month are set around 5th-10th of that month

Targets are set for Sales officers, ASM’s and branch managers which are driven down the hierarchy

Distributors can negotiate this targets in range of +/-10% by end of month

Confirmed sales are set as weekly targets

Target setting

Responsibility

1. Branch manager : Co-ordinating targets of factories and individual product managers

2. Sales officer : Focus is on the redistribution targets, also called as secondary invoicing (from cash distributor to the redistributors)

3. ASM : Primary invoicing ( From C&S to cash distributor) is more relevant

4. Company : Primary as well as secondary invoicing

Channel conflicts

• Conflicts due to:

1. Wholesalers

Wholesalers are not a part of the formal structure of Nestle India’s distribution network

Make bulk purchases from the distributors directly thereby leveraging on the margins

Typically the wholesaler gets a margin of about 2%-3% from the distributor , of this he retains 1 % and passes on the remaining 2% as discount to the retailer

This discount induces the retailers to buy from wholesalers

2. Sales Officers

Account of invasion of another’s sales area by a company’s sales officer under pressure of sales target

Physical distribution system

• Seven Manufacturing Facilities

1. Moga (Punjab)

2. Choladi (Tamil Nadu)

3. Nanjangud (Karnataka)

4. Samalkha (Haryana)

5. Ponda (Goa)

6. Bicholim (Goa)

7. Pantnagar (Uttarakhand)

Ownership Transfer

Factory

Mother Godown

C & S Agent

C & S Agent

C & S Agent

CD CD CD

Stockist

Transfer Chalan

Transfer DA

Invoicing against payment

Logistics Structure

• Logistics comprise of Road Transportation through Container trucks

• Distribution from point of Distributor warehouse to Retailer shops / Modern trade shops is handled by Distributor

• Distributor has fleet of mix of transport vehicles right from refrigerated vans to small tempos to supply to Pan shops

• Company is connected to Distributor / Super Stockist through SAP for online order booking and processing

• “Stock in Transit” module is installed at Distributors network systemsf or tracking the supply of goods

Thank you