PROJECT REPORT

ON

ldquoOpportunity in Soft drink industryrdquo

Submitted To Submitted By

Ms Anuradha tiwari sharad kumar singh RollNoJKBS083296

PGDBM 2ND SEM(MKT)

Session-2008-10

J K BUSINESS SCHOOL GURGAON

( HARYANA)

and value creation inthe soft drink industry Table of Contents

A view fromeloitte and SAPnsumer Business1-Acknowledgement

2-Objective

3-History of the pepsico

4-corporate profile

5-Introduction and objectives

6-Industry background and overview

7-Market trends and industry challenges

8-Soft drink industry process improvement opportunities

9-Solutions for the soft drink industry

10-Conclusion

11-Reference

12- Analysis and Interpretation

13- Questionnaire

ACKNOWLEDGEMENT

I am thankful to all the persons who are involved in this

project either directly or indirectly This project came into the existence under the

supreme guidance of RAJESH Sir who helped me when I needed them in case of

difficulties that came into the project He helped me solve all the problems without

any hesitation

I am also very thankful to my faculty guide Ms Anuradha tiwari who gave

me support to make such a project whenever I needed If any mistakes and

omissions are found in my project kindly bring them to my attention I am grateful

even to users of this application for the encouragement

Place Gurgaon Sharad kumar singh

OBJECTIVE

To know the present scenario of pepsi in Indian market

To know about the consumerrsquos product awareness

To know the opportunity in Indian market for betterment of sales and profits

To analyse the services provided by the company to retailers and customers

INDRA NOOYI CEO OF PEPSICO

History of the pepsico

PepsiCo Headquarters

PepsiCo World Headquarters is located in Purchase New York approximately 45

minutes from New York City The seven-building headquarters complex was

designed by Edward Durrell Stone one of Americas foremost architects The

building occupies 10 acres of a 144-acre complex that includes the Donald M

Kendall Sculpture Gardens a world- acclaimed sculpture collection in a garden

setting

The collection of works is focused on major twentieth century art and features

works by masters such as Auguste Rodin Henri Laurens Henry Moore Alexander

Calder Alberto Giacometti Arnaldo Pomodoro and Claes Oldenburg The gardens

originally were designed by the world famous garden planner Russell Page and

have been extended by Franccedilois Goffinet The grounds are open to the public and

a visitors booth is in operation during the spring and summer

Pepsi Cola North America headquartered in Purchase New

York is the refreshment beverage unit of Pepsi Company

Beverages and foods North America a division of Pepsi Company

Inc Pepsi Company Beverages and foods North America also

comprises Pepsi Companyrsquos Tropicana Gatorade and Quaker

Foods businesses in the United States and Canada

Pepsi Cola North Americarsquos Carbonated Soft Drinks including

Pepsi Diet Pepsi Pepsi twist Mountain Dew Mountain Dew Code

Red Sierra Mist and Mug Root Beer account for nearly One-Third

of Total soft drinks sales in the United States

Pepsi Cola North Americarsquos Non -Carbonated Beverage

portfolio includes Aquafina which is the number one brand of

bottled water in the United States Dole single serve juice and

SoBe which offers a wide range of Soft drinks with Herbal

ingredients The Company also makes and markets North

Americarsquos best selling ready to drink iced teas and coffees via

joint ventured with Lipton and Starbucks respectively

Pepsi Company Inc is one of the Worldrsquos largest food and

beverage companies

The Companyrsquos principal business includes

Frito-Lay snacks

Pepsi Cola Beverages

Gatorade sports Drinks

Tropicana Juices

Quaker Foods

Pepsi Company Inc is a diversified consumer products

company with 3 Major lines of Business

1 Beverages (Pepsi Cola)- It is Pepsirsquos oldest and largest

business Includes drinks like Pepsi Diet Pepsi

Mountain Dew Slice Mug 7UP etc available in 194

countries

2 Snack Foods - It includes the famous Frito-Lay Brand in

the United States and other International Brands

(Example Smith Crisps Ltd in the UK) ndash available in 40

Countries

3 Restaurants - Includes leading brands like Pizza Hut

Taco Bell and KFC (Operating in 94 Countries) and some

relatively lesser known ones

California Pizza Kitchen Chevyrsquos Mexican Restaurants

Hot n now mainly in the US

Pepsi Cola Company was founded in 1903 when Caleb D

Bradham a Pharmacist started to market his Beverage intention

in North Carolina Today Pepsi Cola is the second largest soft

drink producer in the world Also it has been ranked 10th most

recognized brand name in the world INDRA NOOYI is the present

Chairman of PepsiCo in USA

PepsiCo Inc was founds in 1965 through the merger of

Pepsi-Cola

Company and Frito-Lay Tropicana was acquired in 1998 in 2001

Pepsi Company merged with the Quaker Oats Company

Pepsi Companyrsquos success is the result of superior products

high standard of Performance distinctive competitive strategies

and the high level of integrity of their people

Pepsi Company had been in the Indian market during the

mid-1950 but pulled out because of the lack of profitability It

returned in 1990 by negotiating a Joint venture agreement with

Tata Industries and Government owned Punjab Agro Industries

realizing the rapidly growing incomes of Indian consumers Rajeev

Bakshi is the present Chairman of PepsiCo India Holdings Pvt Ltd

Pepsirsquos decision to enter Indian market was very wise

indeed The Company today enjoys a foothold of the Indian

Market and its market share surpasses its nearest rival Coca-Cola

The Indian soft drink market has been growing rapidly from a

billion in 1997 to about 5 billion bottles in 2003 Another thing

which needs not to be forgotten is that Indiarsquos middle class is

much large than China Further more many observers have

predicted that India will eventually become an economic giant

thus growing incomes should support more sales

Initially Pepsi Company had to accept some limitations

Limit ownership to 399 place the Local ldquoLeharrdquo Logo with its

logo and to export 75 of its concentrate among others But

later with liberalization of FDI these very limitations became

Pepsi Companyrsquos strengths being the very first to be in the Indian

Market much to the dismay of Coca-Cola

Entry of Pepsi in Indian Market

Pepsirsquos initial foray into the Indian Soft drink industry dates

way back to1956 However it withdrew from the country in 1961

due to bottling problems

Its second attempt into the Indian market was much better

planned On Nov 9 1987 the Government of Indiarsquos project

Approval Board (PAB) approved Pepsi Companyrsquos (PepsiCo)

second proposal to enter the country The then Government

regulations forbid the company from setting up a 100 owned

subsidiary hence it entered the market in collaboration with

VOLTAS INDIA and PUNJAB AGRO Later with the economic

liberalization in the country PepsiCo was allowed to acquire the

Stakes of both of its collaborates Since then Pepsi has gone to

become the largest selling soft drink brand in the country

The Indian business unit has an annual sales turnover of

Rs1100 Crore The Government of India while allowing the entry

of Pepsi had put forth a series of stringent conditions like

introduction of latest food

processing technologies high quota of exports local partnership

use of Indianised brand names etc Pepsi whose basic intention

was to consolidate its entry into the Indian market decide to cope

with the demand and approached the entire issue strategically

and finally succeeded in its mission

To quote Pepsi had to operate in difficult circumstances our

launch was patchy virulent anti-Pepsi lobby and competitive

propaganda made it difficult but like most big business Pepsi

foods has been keeping up its efforts to mobilize support among

influential politicians Pepsi managed to get quite a few well

wishers form among influential among the Member of the

Parliament and ministers friends of the project Pepsi had

embarked on a massive campaign among politicians of the

opposite parties the first of its kind by a foreign company in

India

Pepsi dispatched over 100 video cassettes to key political

personality across all major political parties The cassettes

containing recordings of the companys initial operations in the

states economic growth Along with the cassette recipients also

received a small booklet providing detail of Pepsis major

achievements and the future plans

In building political support Pepsi pledge equity and fairness

and to be judged on the fact and merit The entry of Pepsi into

Indian market is a good example of an MNC strategically unifying

its interest with the demand of the Government

PCI operates in India as

PepsiCo India Holdings Limited (PIHL)

Manufactures and distributes the beverages to the Up

Country Market

PepsiCo India Marketing Company Limited (PCIM)

Marketing and Distribution Sales to the local market

The beverage business is carried out through 3 channels

namely

COBO (Company Owned Bottling Operation)

1 UP (minus) Western UP

2 West Bengal

3 Karnataka (minus) NW Karnataka

4 Kerala +South Tamilnadu

5 Mumbai + Rest of Maharashtra

6 Gujarat

FOBO (Franchisee owned Bottling Operation)

1 Jammu and Kashmir

2 Rajasthan

3 Haryana + Delhi

4 Western UP

5 Goa

6 Punjab + Himachal Pradesh

7 Andhra Pradesh

JV (Joint Venture)

1 Bhutan

Brands

Segment Products

Cola Pepsi

Clear Lemon Flavor 7 Up Nimbooz

Cloudy Lemon Flavor Teem Miranda Lime

Orange Miranda Orange

Juice Slicetwister

Soda Leher soda

Corporate profile

PepsiCo In India

PepsiCo entered India in 1989 and has grown to become one of the countryrsquos leading food and beverage companies One of the largest multinational investors in the country PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India

PepsiCo India and its partners have invested more than US$1 billion since the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors PepsiCo India and its partners have invested more than US$1 billion since

the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors

PepsiCo nourishes consumers with a range of products from treats to healthy eats that deliver joy as well as nutrition and always good taste PepsiCo Indiarsquos expansive portfolio includes iconic refreshment beverages Pepsi 7 UP Mirinda and Mountain Dew in addition to low calorie options such as Diet Pepsi hydrating and nutritional beverages such as Aquafina drinking water isotonic sports drinks - Gatorade Tropicana100 fruit juices and juice based drinks ndash Tropicana Nectars Tropicana Twister and Slice Local brands ndash Lehar Soda Dukes Lemonade and Mangola add to the diverse range of brands

PepsiCorsquos foods company Frito-Lay is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG It manufactures Layrsquos Potato Chips Cheetos extruded snacks Uncle Chipps and traditional snacks under the Kurkure and Lehar brands The companyrsquos high fibre breakfast cereal Quaker Oats and low fat and roasted snack options enhance the healthful choices available to consumers Frito Layrsquos core products Layrsquos Kurkure Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets

The group has built an expansive beverage and foods business To support its operations PepsiCo has 43 bottling plants in India of which 15 are company owned and 28 are franchisee owned In addition to this PepsiCorsquos Frito Lay foods division has 3 state-of-the-art plants PepsiCorsquos business is based on its sustainability vision of making tomorrow better than today PepsiCorsquos commitment to living by this vision every day is visible in its contribution to the country consumers and farmers

Beverages

Pepsi Cola North America

Pepsi Cola International

Pepsi Wines and Spirits Snacks

Pepsi Food International

Pepsi Co

Frito-Lay

Food Services

Pizza Hut

KFC

Taco Bell

PepsiCo Products in India

Pepsi

Miranda Orange

Miranda Apple

Slice- Mango

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

and value creation inthe soft drink industry Table of Contents

A view fromeloitte and SAPnsumer Business1-Acknowledgement

2-Objective

3-History of the pepsico

4-corporate profile

5-Introduction and objectives

6-Industry background and overview

7-Market trends and industry challenges

8-Soft drink industry process improvement opportunities

9-Solutions for the soft drink industry

10-Conclusion

11-Reference

12- Analysis and Interpretation

13- Questionnaire

ACKNOWLEDGEMENT

I am thankful to all the persons who are involved in this

project either directly or indirectly This project came into the existence under the

supreme guidance of RAJESH Sir who helped me when I needed them in case of

difficulties that came into the project He helped me solve all the problems without

any hesitation

I am also very thankful to my faculty guide Ms Anuradha tiwari who gave

me support to make such a project whenever I needed If any mistakes and

omissions are found in my project kindly bring them to my attention I am grateful

even to users of this application for the encouragement

Place Gurgaon Sharad kumar singh

OBJECTIVE

To know the present scenario of pepsi in Indian market

To know about the consumerrsquos product awareness

To know the opportunity in Indian market for betterment of sales and profits

To analyse the services provided by the company to retailers and customers

INDRA NOOYI CEO OF PEPSICO

History of the pepsico

PepsiCo Headquarters

PepsiCo World Headquarters is located in Purchase New York approximately 45

minutes from New York City The seven-building headquarters complex was

designed by Edward Durrell Stone one of Americas foremost architects The

building occupies 10 acres of a 144-acre complex that includes the Donald M

Kendall Sculpture Gardens a world- acclaimed sculpture collection in a garden

setting

The collection of works is focused on major twentieth century art and features

works by masters such as Auguste Rodin Henri Laurens Henry Moore Alexander

Calder Alberto Giacometti Arnaldo Pomodoro and Claes Oldenburg The gardens

originally were designed by the world famous garden planner Russell Page and

have been extended by Franccedilois Goffinet The grounds are open to the public and

a visitors booth is in operation during the spring and summer

Pepsi Cola North America headquartered in Purchase New

York is the refreshment beverage unit of Pepsi Company

Beverages and foods North America a division of Pepsi Company

Inc Pepsi Company Beverages and foods North America also

comprises Pepsi Companyrsquos Tropicana Gatorade and Quaker

Foods businesses in the United States and Canada

Pepsi Cola North Americarsquos Carbonated Soft Drinks including

Pepsi Diet Pepsi Pepsi twist Mountain Dew Mountain Dew Code

Red Sierra Mist and Mug Root Beer account for nearly One-Third

of Total soft drinks sales in the United States

Pepsi Cola North Americarsquos Non -Carbonated Beverage

portfolio includes Aquafina which is the number one brand of

bottled water in the United States Dole single serve juice and

SoBe which offers a wide range of Soft drinks with Herbal

ingredients The Company also makes and markets North

Americarsquos best selling ready to drink iced teas and coffees via

joint ventured with Lipton and Starbucks respectively

Pepsi Company Inc is one of the Worldrsquos largest food and

beverage companies

The Companyrsquos principal business includes

Frito-Lay snacks

Pepsi Cola Beverages

Gatorade sports Drinks

Tropicana Juices

Quaker Foods

Pepsi Company Inc is a diversified consumer products

company with 3 Major lines of Business

1 Beverages (Pepsi Cola)- It is Pepsirsquos oldest and largest

business Includes drinks like Pepsi Diet Pepsi

Mountain Dew Slice Mug 7UP etc available in 194

countries

2 Snack Foods - It includes the famous Frito-Lay Brand in

the United States and other International Brands

(Example Smith Crisps Ltd in the UK) ndash available in 40

Countries

3 Restaurants - Includes leading brands like Pizza Hut

Taco Bell and KFC (Operating in 94 Countries) and some

relatively lesser known ones

California Pizza Kitchen Chevyrsquos Mexican Restaurants

Hot n now mainly in the US

Pepsi Cola Company was founded in 1903 when Caleb D

Bradham a Pharmacist started to market his Beverage intention

in North Carolina Today Pepsi Cola is the second largest soft

drink producer in the world Also it has been ranked 10th most

recognized brand name in the world INDRA NOOYI is the present

Chairman of PepsiCo in USA

PepsiCo Inc was founds in 1965 through the merger of

Pepsi-Cola

Company and Frito-Lay Tropicana was acquired in 1998 in 2001

Pepsi Company merged with the Quaker Oats Company

Pepsi Companyrsquos success is the result of superior products

high standard of Performance distinctive competitive strategies

and the high level of integrity of their people

Pepsi Company had been in the Indian market during the

mid-1950 but pulled out because of the lack of profitability It

returned in 1990 by negotiating a Joint venture agreement with

Tata Industries and Government owned Punjab Agro Industries

realizing the rapidly growing incomes of Indian consumers Rajeev

Bakshi is the present Chairman of PepsiCo India Holdings Pvt Ltd

Pepsirsquos decision to enter Indian market was very wise

indeed The Company today enjoys a foothold of the Indian

Market and its market share surpasses its nearest rival Coca-Cola

The Indian soft drink market has been growing rapidly from a

billion in 1997 to about 5 billion bottles in 2003 Another thing

which needs not to be forgotten is that Indiarsquos middle class is

much large than China Further more many observers have

predicted that India will eventually become an economic giant

thus growing incomes should support more sales

Initially Pepsi Company had to accept some limitations

Limit ownership to 399 place the Local ldquoLeharrdquo Logo with its

logo and to export 75 of its concentrate among others But

later with liberalization of FDI these very limitations became

Pepsi Companyrsquos strengths being the very first to be in the Indian

Market much to the dismay of Coca-Cola

Entry of Pepsi in Indian Market

Pepsirsquos initial foray into the Indian Soft drink industry dates

way back to1956 However it withdrew from the country in 1961

due to bottling problems

Its second attempt into the Indian market was much better

planned On Nov 9 1987 the Government of Indiarsquos project

Approval Board (PAB) approved Pepsi Companyrsquos (PepsiCo)

second proposal to enter the country The then Government

regulations forbid the company from setting up a 100 owned

subsidiary hence it entered the market in collaboration with

VOLTAS INDIA and PUNJAB AGRO Later with the economic

liberalization in the country PepsiCo was allowed to acquire the

Stakes of both of its collaborates Since then Pepsi has gone to

become the largest selling soft drink brand in the country

The Indian business unit has an annual sales turnover of

Rs1100 Crore The Government of India while allowing the entry

of Pepsi had put forth a series of stringent conditions like

introduction of latest food

processing technologies high quota of exports local partnership

use of Indianised brand names etc Pepsi whose basic intention

was to consolidate its entry into the Indian market decide to cope

with the demand and approached the entire issue strategically

and finally succeeded in its mission

To quote Pepsi had to operate in difficult circumstances our

launch was patchy virulent anti-Pepsi lobby and competitive

propaganda made it difficult but like most big business Pepsi

foods has been keeping up its efforts to mobilize support among

influential politicians Pepsi managed to get quite a few well

wishers form among influential among the Member of the

Parliament and ministers friends of the project Pepsi had

embarked on a massive campaign among politicians of the

opposite parties the first of its kind by a foreign company in

India

Pepsi dispatched over 100 video cassettes to key political

personality across all major political parties The cassettes

containing recordings of the companys initial operations in the

states economic growth Along with the cassette recipients also

received a small booklet providing detail of Pepsis major

achievements and the future plans

In building political support Pepsi pledge equity and fairness

and to be judged on the fact and merit The entry of Pepsi into

Indian market is a good example of an MNC strategically unifying

its interest with the demand of the Government

PCI operates in India as

PepsiCo India Holdings Limited (PIHL)

Manufactures and distributes the beverages to the Up

Country Market

PepsiCo India Marketing Company Limited (PCIM)

Marketing and Distribution Sales to the local market

The beverage business is carried out through 3 channels

namely

COBO (Company Owned Bottling Operation)

1 UP (minus) Western UP

2 West Bengal

3 Karnataka (minus) NW Karnataka

4 Kerala +South Tamilnadu

5 Mumbai + Rest of Maharashtra

6 Gujarat

FOBO (Franchisee owned Bottling Operation)

1 Jammu and Kashmir

2 Rajasthan

3 Haryana + Delhi

4 Western UP

5 Goa

6 Punjab + Himachal Pradesh

7 Andhra Pradesh

JV (Joint Venture)

1 Bhutan

Brands

Segment Products

Cola Pepsi

Clear Lemon Flavor 7 Up Nimbooz

Cloudy Lemon Flavor Teem Miranda Lime

Orange Miranda Orange

Juice Slicetwister

Soda Leher soda

Corporate profile

PepsiCo In India

PepsiCo entered India in 1989 and has grown to become one of the countryrsquos leading food and beverage companies One of the largest multinational investors in the country PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India

PepsiCo India and its partners have invested more than US$1 billion since the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors PepsiCo India and its partners have invested more than US$1 billion since

the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors

PepsiCo nourishes consumers with a range of products from treats to healthy eats that deliver joy as well as nutrition and always good taste PepsiCo Indiarsquos expansive portfolio includes iconic refreshment beverages Pepsi 7 UP Mirinda and Mountain Dew in addition to low calorie options such as Diet Pepsi hydrating and nutritional beverages such as Aquafina drinking water isotonic sports drinks - Gatorade Tropicana100 fruit juices and juice based drinks ndash Tropicana Nectars Tropicana Twister and Slice Local brands ndash Lehar Soda Dukes Lemonade and Mangola add to the diverse range of brands

PepsiCorsquos foods company Frito-Lay is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG It manufactures Layrsquos Potato Chips Cheetos extruded snacks Uncle Chipps and traditional snacks under the Kurkure and Lehar brands The companyrsquos high fibre breakfast cereal Quaker Oats and low fat and roasted snack options enhance the healthful choices available to consumers Frito Layrsquos core products Layrsquos Kurkure Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets

The group has built an expansive beverage and foods business To support its operations PepsiCo has 43 bottling plants in India of which 15 are company owned and 28 are franchisee owned In addition to this PepsiCorsquos Frito Lay foods division has 3 state-of-the-art plants PepsiCorsquos business is based on its sustainability vision of making tomorrow better than today PepsiCorsquos commitment to living by this vision every day is visible in its contribution to the country consumers and farmers

Beverages

Pepsi Cola North America

Pepsi Cola International

Pepsi Wines and Spirits Snacks

Pepsi Food International

Pepsi Co

Frito-Lay

Food Services

Pizza Hut

KFC

Taco Bell

PepsiCo Products in India

Pepsi

Miranda Orange

Miranda Apple

Slice- Mango

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

ACKNOWLEDGEMENT

I am thankful to all the persons who are involved in this

project either directly or indirectly This project came into the existence under the

supreme guidance of RAJESH Sir who helped me when I needed them in case of

difficulties that came into the project He helped me solve all the problems without

any hesitation

I am also very thankful to my faculty guide Ms Anuradha tiwari who gave

me support to make such a project whenever I needed If any mistakes and

omissions are found in my project kindly bring them to my attention I am grateful

even to users of this application for the encouragement

Place Gurgaon Sharad kumar singh

OBJECTIVE

To know the present scenario of pepsi in Indian market

To know about the consumerrsquos product awareness

To know the opportunity in Indian market for betterment of sales and profits

To analyse the services provided by the company to retailers and customers

INDRA NOOYI CEO OF PEPSICO

History of the pepsico

PepsiCo Headquarters

PepsiCo World Headquarters is located in Purchase New York approximately 45

minutes from New York City The seven-building headquarters complex was

designed by Edward Durrell Stone one of Americas foremost architects The

building occupies 10 acres of a 144-acre complex that includes the Donald M

Kendall Sculpture Gardens a world- acclaimed sculpture collection in a garden

setting

The collection of works is focused on major twentieth century art and features

works by masters such as Auguste Rodin Henri Laurens Henry Moore Alexander

Calder Alberto Giacometti Arnaldo Pomodoro and Claes Oldenburg The gardens

originally were designed by the world famous garden planner Russell Page and

have been extended by Franccedilois Goffinet The grounds are open to the public and

a visitors booth is in operation during the spring and summer

Pepsi Cola North America headquartered in Purchase New

York is the refreshment beverage unit of Pepsi Company

Beverages and foods North America a division of Pepsi Company

Inc Pepsi Company Beverages and foods North America also

comprises Pepsi Companyrsquos Tropicana Gatorade and Quaker

Foods businesses in the United States and Canada

Pepsi Cola North Americarsquos Carbonated Soft Drinks including

Pepsi Diet Pepsi Pepsi twist Mountain Dew Mountain Dew Code

Red Sierra Mist and Mug Root Beer account for nearly One-Third

of Total soft drinks sales in the United States

Pepsi Cola North Americarsquos Non -Carbonated Beverage

portfolio includes Aquafina which is the number one brand of

bottled water in the United States Dole single serve juice and

SoBe which offers a wide range of Soft drinks with Herbal

ingredients The Company also makes and markets North

Americarsquos best selling ready to drink iced teas and coffees via

joint ventured with Lipton and Starbucks respectively

Pepsi Company Inc is one of the Worldrsquos largest food and

beverage companies

The Companyrsquos principal business includes

Frito-Lay snacks

Pepsi Cola Beverages

Gatorade sports Drinks

Tropicana Juices

Quaker Foods

Pepsi Company Inc is a diversified consumer products

company with 3 Major lines of Business

1 Beverages (Pepsi Cola)- It is Pepsirsquos oldest and largest

business Includes drinks like Pepsi Diet Pepsi

Mountain Dew Slice Mug 7UP etc available in 194

countries

2 Snack Foods - It includes the famous Frito-Lay Brand in

the United States and other International Brands

(Example Smith Crisps Ltd in the UK) ndash available in 40

Countries

3 Restaurants - Includes leading brands like Pizza Hut

Taco Bell and KFC (Operating in 94 Countries) and some

relatively lesser known ones

California Pizza Kitchen Chevyrsquos Mexican Restaurants

Hot n now mainly in the US

Pepsi Cola Company was founded in 1903 when Caleb D

Bradham a Pharmacist started to market his Beverage intention

in North Carolina Today Pepsi Cola is the second largest soft

drink producer in the world Also it has been ranked 10th most

recognized brand name in the world INDRA NOOYI is the present

Chairman of PepsiCo in USA

PepsiCo Inc was founds in 1965 through the merger of

Pepsi-Cola

Company and Frito-Lay Tropicana was acquired in 1998 in 2001

Pepsi Company merged with the Quaker Oats Company

Pepsi Companyrsquos success is the result of superior products

high standard of Performance distinctive competitive strategies

and the high level of integrity of their people

Pepsi Company had been in the Indian market during the

mid-1950 but pulled out because of the lack of profitability It

returned in 1990 by negotiating a Joint venture agreement with

Tata Industries and Government owned Punjab Agro Industries

realizing the rapidly growing incomes of Indian consumers Rajeev

Bakshi is the present Chairman of PepsiCo India Holdings Pvt Ltd

Pepsirsquos decision to enter Indian market was very wise

indeed The Company today enjoys a foothold of the Indian

Market and its market share surpasses its nearest rival Coca-Cola

The Indian soft drink market has been growing rapidly from a

billion in 1997 to about 5 billion bottles in 2003 Another thing

which needs not to be forgotten is that Indiarsquos middle class is

much large than China Further more many observers have

predicted that India will eventually become an economic giant

thus growing incomes should support more sales

Initially Pepsi Company had to accept some limitations

Limit ownership to 399 place the Local ldquoLeharrdquo Logo with its

logo and to export 75 of its concentrate among others But

later with liberalization of FDI these very limitations became

Pepsi Companyrsquos strengths being the very first to be in the Indian

Market much to the dismay of Coca-Cola

Entry of Pepsi in Indian Market

Pepsirsquos initial foray into the Indian Soft drink industry dates

way back to1956 However it withdrew from the country in 1961

due to bottling problems

Its second attempt into the Indian market was much better

planned On Nov 9 1987 the Government of Indiarsquos project

Approval Board (PAB) approved Pepsi Companyrsquos (PepsiCo)

second proposal to enter the country The then Government

regulations forbid the company from setting up a 100 owned

subsidiary hence it entered the market in collaboration with

VOLTAS INDIA and PUNJAB AGRO Later with the economic

liberalization in the country PepsiCo was allowed to acquire the

Stakes of both of its collaborates Since then Pepsi has gone to

become the largest selling soft drink brand in the country

The Indian business unit has an annual sales turnover of

Rs1100 Crore The Government of India while allowing the entry

of Pepsi had put forth a series of stringent conditions like

introduction of latest food

processing technologies high quota of exports local partnership

use of Indianised brand names etc Pepsi whose basic intention

was to consolidate its entry into the Indian market decide to cope

with the demand and approached the entire issue strategically

and finally succeeded in its mission

To quote Pepsi had to operate in difficult circumstances our

launch was patchy virulent anti-Pepsi lobby and competitive

propaganda made it difficult but like most big business Pepsi

foods has been keeping up its efforts to mobilize support among

influential politicians Pepsi managed to get quite a few well

wishers form among influential among the Member of the

Parliament and ministers friends of the project Pepsi had

embarked on a massive campaign among politicians of the

opposite parties the first of its kind by a foreign company in

India

Pepsi dispatched over 100 video cassettes to key political

personality across all major political parties The cassettes

containing recordings of the companys initial operations in the

states economic growth Along with the cassette recipients also

received a small booklet providing detail of Pepsis major

achievements and the future plans

In building political support Pepsi pledge equity and fairness

and to be judged on the fact and merit The entry of Pepsi into

Indian market is a good example of an MNC strategically unifying

its interest with the demand of the Government

PCI operates in India as

PepsiCo India Holdings Limited (PIHL)

Manufactures and distributes the beverages to the Up

Country Market

PepsiCo India Marketing Company Limited (PCIM)

Marketing and Distribution Sales to the local market

The beverage business is carried out through 3 channels

namely

COBO (Company Owned Bottling Operation)

1 UP (minus) Western UP

2 West Bengal

3 Karnataka (minus) NW Karnataka

4 Kerala +South Tamilnadu

5 Mumbai + Rest of Maharashtra

6 Gujarat

FOBO (Franchisee owned Bottling Operation)

1 Jammu and Kashmir

2 Rajasthan

3 Haryana + Delhi

4 Western UP

5 Goa

6 Punjab + Himachal Pradesh

7 Andhra Pradesh

JV (Joint Venture)

1 Bhutan

Brands

Segment Products

Cola Pepsi

Clear Lemon Flavor 7 Up Nimbooz

Cloudy Lemon Flavor Teem Miranda Lime

Orange Miranda Orange

Juice Slicetwister

Soda Leher soda

Corporate profile

PepsiCo In India

PepsiCo entered India in 1989 and has grown to become one of the countryrsquos leading food and beverage companies One of the largest multinational investors in the country PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India

PepsiCo India and its partners have invested more than US$1 billion since the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors PepsiCo India and its partners have invested more than US$1 billion since

the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors

PepsiCo nourishes consumers with a range of products from treats to healthy eats that deliver joy as well as nutrition and always good taste PepsiCo Indiarsquos expansive portfolio includes iconic refreshment beverages Pepsi 7 UP Mirinda and Mountain Dew in addition to low calorie options such as Diet Pepsi hydrating and nutritional beverages such as Aquafina drinking water isotonic sports drinks - Gatorade Tropicana100 fruit juices and juice based drinks ndash Tropicana Nectars Tropicana Twister and Slice Local brands ndash Lehar Soda Dukes Lemonade and Mangola add to the diverse range of brands

PepsiCorsquos foods company Frito-Lay is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG It manufactures Layrsquos Potato Chips Cheetos extruded snacks Uncle Chipps and traditional snacks under the Kurkure and Lehar brands The companyrsquos high fibre breakfast cereal Quaker Oats and low fat and roasted snack options enhance the healthful choices available to consumers Frito Layrsquos core products Layrsquos Kurkure Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets

The group has built an expansive beverage and foods business To support its operations PepsiCo has 43 bottling plants in India of which 15 are company owned and 28 are franchisee owned In addition to this PepsiCorsquos Frito Lay foods division has 3 state-of-the-art plants PepsiCorsquos business is based on its sustainability vision of making tomorrow better than today PepsiCorsquos commitment to living by this vision every day is visible in its contribution to the country consumers and farmers

Beverages

Pepsi Cola North America

Pepsi Cola International

Pepsi Wines and Spirits Snacks

Pepsi Food International

Pepsi Co

Frito-Lay

Food Services

Pizza Hut

KFC

Taco Bell

PepsiCo Products in India

Pepsi

Miranda Orange

Miranda Apple

Slice- Mango

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

OBJECTIVE

To know the present scenario of pepsi in Indian market

To know about the consumerrsquos product awareness

To know the opportunity in Indian market for betterment of sales and profits

To analyse the services provided by the company to retailers and customers

INDRA NOOYI CEO OF PEPSICO

History of the pepsico

PepsiCo Headquarters

PepsiCo World Headquarters is located in Purchase New York approximately 45

minutes from New York City The seven-building headquarters complex was

designed by Edward Durrell Stone one of Americas foremost architects The

building occupies 10 acres of a 144-acre complex that includes the Donald M

Kendall Sculpture Gardens a world- acclaimed sculpture collection in a garden

setting

The collection of works is focused on major twentieth century art and features

works by masters such as Auguste Rodin Henri Laurens Henry Moore Alexander

Calder Alberto Giacometti Arnaldo Pomodoro and Claes Oldenburg The gardens

originally were designed by the world famous garden planner Russell Page and

have been extended by Franccedilois Goffinet The grounds are open to the public and

a visitors booth is in operation during the spring and summer

Pepsi Cola North America headquartered in Purchase New

York is the refreshment beverage unit of Pepsi Company

Beverages and foods North America a division of Pepsi Company

Inc Pepsi Company Beverages and foods North America also

comprises Pepsi Companyrsquos Tropicana Gatorade and Quaker

Foods businesses in the United States and Canada

Pepsi Cola North Americarsquos Carbonated Soft Drinks including

Pepsi Diet Pepsi Pepsi twist Mountain Dew Mountain Dew Code

Red Sierra Mist and Mug Root Beer account for nearly One-Third

of Total soft drinks sales in the United States

Pepsi Cola North Americarsquos Non -Carbonated Beverage

portfolio includes Aquafina which is the number one brand of

bottled water in the United States Dole single serve juice and

SoBe which offers a wide range of Soft drinks with Herbal

ingredients The Company also makes and markets North

Americarsquos best selling ready to drink iced teas and coffees via

joint ventured with Lipton and Starbucks respectively

Pepsi Company Inc is one of the Worldrsquos largest food and

beverage companies

The Companyrsquos principal business includes

Frito-Lay snacks

Pepsi Cola Beverages

Gatorade sports Drinks

Tropicana Juices

Quaker Foods

Pepsi Company Inc is a diversified consumer products

company with 3 Major lines of Business

1 Beverages (Pepsi Cola)- It is Pepsirsquos oldest and largest

business Includes drinks like Pepsi Diet Pepsi

Mountain Dew Slice Mug 7UP etc available in 194

countries

2 Snack Foods - It includes the famous Frito-Lay Brand in

the United States and other International Brands

(Example Smith Crisps Ltd in the UK) ndash available in 40

Countries

3 Restaurants - Includes leading brands like Pizza Hut

Taco Bell and KFC (Operating in 94 Countries) and some

relatively lesser known ones

California Pizza Kitchen Chevyrsquos Mexican Restaurants

Hot n now mainly in the US

Pepsi Cola Company was founded in 1903 when Caleb D

Bradham a Pharmacist started to market his Beverage intention

in North Carolina Today Pepsi Cola is the second largest soft

drink producer in the world Also it has been ranked 10th most

recognized brand name in the world INDRA NOOYI is the present

Chairman of PepsiCo in USA

PepsiCo Inc was founds in 1965 through the merger of

Pepsi-Cola

Company and Frito-Lay Tropicana was acquired in 1998 in 2001

Pepsi Company merged with the Quaker Oats Company

Pepsi Companyrsquos success is the result of superior products

high standard of Performance distinctive competitive strategies

and the high level of integrity of their people

Pepsi Company had been in the Indian market during the

mid-1950 but pulled out because of the lack of profitability It

returned in 1990 by negotiating a Joint venture agreement with

Tata Industries and Government owned Punjab Agro Industries

realizing the rapidly growing incomes of Indian consumers Rajeev

Bakshi is the present Chairman of PepsiCo India Holdings Pvt Ltd

Pepsirsquos decision to enter Indian market was very wise

indeed The Company today enjoys a foothold of the Indian

Market and its market share surpasses its nearest rival Coca-Cola

The Indian soft drink market has been growing rapidly from a

billion in 1997 to about 5 billion bottles in 2003 Another thing

which needs not to be forgotten is that Indiarsquos middle class is

much large than China Further more many observers have

predicted that India will eventually become an economic giant

thus growing incomes should support more sales

Initially Pepsi Company had to accept some limitations

Limit ownership to 399 place the Local ldquoLeharrdquo Logo with its

logo and to export 75 of its concentrate among others But

later with liberalization of FDI these very limitations became

Pepsi Companyrsquos strengths being the very first to be in the Indian

Market much to the dismay of Coca-Cola

Entry of Pepsi in Indian Market

Pepsirsquos initial foray into the Indian Soft drink industry dates

way back to1956 However it withdrew from the country in 1961

due to bottling problems

Its second attempt into the Indian market was much better

planned On Nov 9 1987 the Government of Indiarsquos project

Approval Board (PAB) approved Pepsi Companyrsquos (PepsiCo)

second proposal to enter the country The then Government

regulations forbid the company from setting up a 100 owned

subsidiary hence it entered the market in collaboration with

VOLTAS INDIA and PUNJAB AGRO Later with the economic

liberalization in the country PepsiCo was allowed to acquire the

Stakes of both of its collaborates Since then Pepsi has gone to

become the largest selling soft drink brand in the country

The Indian business unit has an annual sales turnover of

Rs1100 Crore The Government of India while allowing the entry

of Pepsi had put forth a series of stringent conditions like

introduction of latest food

processing technologies high quota of exports local partnership

use of Indianised brand names etc Pepsi whose basic intention

was to consolidate its entry into the Indian market decide to cope

with the demand and approached the entire issue strategically

and finally succeeded in its mission

To quote Pepsi had to operate in difficult circumstances our

launch was patchy virulent anti-Pepsi lobby and competitive

propaganda made it difficult but like most big business Pepsi

foods has been keeping up its efforts to mobilize support among

influential politicians Pepsi managed to get quite a few well

wishers form among influential among the Member of the

Parliament and ministers friends of the project Pepsi had

embarked on a massive campaign among politicians of the

opposite parties the first of its kind by a foreign company in

India

Pepsi dispatched over 100 video cassettes to key political

personality across all major political parties The cassettes

containing recordings of the companys initial operations in the

states economic growth Along with the cassette recipients also

received a small booklet providing detail of Pepsis major

achievements and the future plans

In building political support Pepsi pledge equity and fairness

and to be judged on the fact and merit The entry of Pepsi into

Indian market is a good example of an MNC strategically unifying

its interest with the demand of the Government

PCI operates in India as

PepsiCo India Holdings Limited (PIHL)

Manufactures and distributes the beverages to the Up

Country Market

PepsiCo India Marketing Company Limited (PCIM)

Marketing and Distribution Sales to the local market

The beverage business is carried out through 3 channels

namely

COBO (Company Owned Bottling Operation)

1 UP (minus) Western UP

2 West Bengal

3 Karnataka (minus) NW Karnataka

4 Kerala +South Tamilnadu

5 Mumbai + Rest of Maharashtra

6 Gujarat

FOBO (Franchisee owned Bottling Operation)

1 Jammu and Kashmir

2 Rajasthan

3 Haryana + Delhi

4 Western UP

5 Goa

6 Punjab + Himachal Pradesh

7 Andhra Pradesh

JV (Joint Venture)

1 Bhutan

Brands

Segment Products

Cola Pepsi

Clear Lemon Flavor 7 Up Nimbooz

Cloudy Lemon Flavor Teem Miranda Lime

Orange Miranda Orange

Juice Slicetwister

Soda Leher soda

Corporate profile

PepsiCo In India

PepsiCo entered India in 1989 and has grown to become one of the countryrsquos leading food and beverage companies One of the largest multinational investors in the country PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India

PepsiCo India and its partners have invested more than US$1 billion since the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors PepsiCo India and its partners have invested more than US$1 billion since

the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors

PepsiCo nourishes consumers with a range of products from treats to healthy eats that deliver joy as well as nutrition and always good taste PepsiCo Indiarsquos expansive portfolio includes iconic refreshment beverages Pepsi 7 UP Mirinda and Mountain Dew in addition to low calorie options such as Diet Pepsi hydrating and nutritional beverages such as Aquafina drinking water isotonic sports drinks - Gatorade Tropicana100 fruit juices and juice based drinks ndash Tropicana Nectars Tropicana Twister and Slice Local brands ndash Lehar Soda Dukes Lemonade and Mangola add to the diverse range of brands

PepsiCorsquos foods company Frito-Lay is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG It manufactures Layrsquos Potato Chips Cheetos extruded snacks Uncle Chipps and traditional snacks under the Kurkure and Lehar brands The companyrsquos high fibre breakfast cereal Quaker Oats and low fat and roasted snack options enhance the healthful choices available to consumers Frito Layrsquos core products Layrsquos Kurkure Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets

The group has built an expansive beverage and foods business To support its operations PepsiCo has 43 bottling plants in India of which 15 are company owned and 28 are franchisee owned In addition to this PepsiCorsquos Frito Lay foods division has 3 state-of-the-art plants PepsiCorsquos business is based on its sustainability vision of making tomorrow better than today PepsiCorsquos commitment to living by this vision every day is visible in its contribution to the country consumers and farmers

Beverages

Pepsi Cola North America

Pepsi Cola International

Pepsi Wines and Spirits Snacks

Pepsi Food International

Pepsi Co

Frito-Lay

Food Services

Pizza Hut

KFC

Taco Bell

PepsiCo Products in India

Pepsi

Miranda Orange

Miranda Apple

Slice- Mango

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

INDRA NOOYI CEO OF PEPSICO

History of the pepsico

PepsiCo Headquarters

PepsiCo World Headquarters is located in Purchase New York approximately 45

minutes from New York City The seven-building headquarters complex was

designed by Edward Durrell Stone one of Americas foremost architects The

building occupies 10 acres of a 144-acre complex that includes the Donald M

Kendall Sculpture Gardens a world- acclaimed sculpture collection in a garden

setting

The collection of works is focused on major twentieth century art and features

works by masters such as Auguste Rodin Henri Laurens Henry Moore Alexander

Calder Alberto Giacometti Arnaldo Pomodoro and Claes Oldenburg The gardens

originally were designed by the world famous garden planner Russell Page and

have been extended by Franccedilois Goffinet The grounds are open to the public and

a visitors booth is in operation during the spring and summer

Pepsi Cola North America headquartered in Purchase New

York is the refreshment beverage unit of Pepsi Company

Beverages and foods North America a division of Pepsi Company

Inc Pepsi Company Beverages and foods North America also

comprises Pepsi Companyrsquos Tropicana Gatorade and Quaker

Foods businesses in the United States and Canada

Pepsi Cola North Americarsquos Carbonated Soft Drinks including

Pepsi Diet Pepsi Pepsi twist Mountain Dew Mountain Dew Code

Red Sierra Mist and Mug Root Beer account for nearly One-Third

of Total soft drinks sales in the United States

Pepsi Cola North Americarsquos Non -Carbonated Beverage

portfolio includes Aquafina which is the number one brand of

bottled water in the United States Dole single serve juice and

SoBe which offers a wide range of Soft drinks with Herbal

ingredients The Company also makes and markets North

Americarsquos best selling ready to drink iced teas and coffees via

joint ventured with Lipton and Starbucks respectively

Pepsi Company Inc is one of the Worldrsquos largest food and

beverage companies

The Companyrsquos principal business includes

Frito-Lay snacks

Pepsi Cola Beverages

Gatorade sports Drinks

Tropicana Juices

Quaker Foods

Pepsi Company Inc is a diversified consumer products

company with 3 Major lines of Business

1 Beverages (Pepsi Cola)- It is Pepsirsquos oldest and largest

business Includes drinks like Pepsi Diet Pepsi

Mountain Dew Slice Mug 7UP etc available in 194

countries

2 Snack Foods - It includes the famous Frito-Lay Brand in

the United States and other International Brands

(Example Smith Crisps Ltd in the UK) ndash available in 40

Countries

3 Restaurants - Includes leading brands like Pizza Hut

Taco Bell and KFC (Operating in 94 Countries) and some

relatively lesser known ones

California Pizza Kitchen Chevyrsquos Mexican Restaurants

Hot n now mainly in the US

Pepsi Cola Company was founded in 1903 when Caleb D

Bradham a Pharmacist started to market his Beverage intention

in North Carolina Today Pepsi Cola is the second largest soft

drink producer in the world Also it has been ranked 10th most

recognized brand name in the world INDRA NOOYI is the present

Chairman of PepsiCo in USA

PepsiCo Inc was founds in 1965 through the merger of

Pepsi-Cola

Company and Frito-Lay Tropicana was acquired in 1998 in 2001

Pepsi Company merged with the Quaker Oats Company

Pepsi Companyrsquos success is the result of superior products

high standard of Performance distinctive competitive strategies

and the high level of integrity of their people

Pepsi Company had been in the Indian market during the

mid-1950 but pulled out because of the lack of profitability It

returned in 1990 by negotiating a Joint venture agreement with

Tata Industries and Government owned Punjab Agro Industries

realizing the rapidly growing incomes of Indian consumers Rajeev

Bakshi is the present Chairman of PepsiCo India Holdings Pvt Ltd

Pepsirsquos decision to enter Indian market was very wise

indeed The Company today enjoys a foothold of the Indian

Market and its market share surpasses its nearest rival Coca-Cola

The Indian soft drink market has been growing rapidly from a

billion in 1997 to about 5 billion bottles in 2003 Another thing

which needs not to be forgotten is that Indiarsquos middle class is

much large than China Further more many observers have

predicted that India will eventually become an economic giant

thus growing incomes should support more sales

Initially Pepsi Company had to accept some limitations

Limit ownership to 399 place the Local ldquoLeharrdquo Logo with its

logo and to export 75 of its concentrate among others But

later with liberalization of FDI these very limitations became

Pepsi Companyrsquos strengths being the very first to be in the Indian

Market much to the dismay of Coca-Cola

Entry of Pepsi in Indian Market

Pepsirsquos initial foray into the Indian Soft drink industry dates

way back to1956 However it withdrew from the country in 1961

due to bottling problems

Its second attempt into the Indian market was much better

planned On Nov 9 1987 the Government of Indiarsquos project

Approval Board (PAB) approved Pepsi Companyrsquos (PepsiCo)

second proposal to enter the country The then Government

regulations forbid the company from setting up a 100 owned

subsidiary hence it entered the market in collaboration with

VOLTAS INDIA and PUNJAB AGRO Later with the economic

liberalization in the country PepsiCo was allowed to acquire the

Stakes of both of its collaborates Since then Pepsi has gone to

become the largest selling soft drink brand in the country

The Indian business unit has an annual sales turnover of

Rs1100 Crore The Government of India while allowing the entry

of Pepsi had put forth a series of stringent conditions like

introduction of latest food

processing technologies high quota of exports local partnership

use of Indianised brand names etc Pepsi whose basic intention

was to consolidate its entry into the Indian market decide to cope

with the demand and approached the entire issue strategically

and finally succeeded in its mission

To quote Pepsi had to operate in difficult circumstances our

launch was patchy virulent anti-Pepsi lobby and competitive

propaganda made it difficult but like most big business Pepsi

foods has been keeping up its efforts to mobilize support among

influential politicians Pepsi managed to get quite a few well

wishers form among influential among the Member of the

Parliament and ministers friends of the project Pepsi had

embarked on a massive campaign among politicians of the

opposite parties the first of its kind by a foreign company in

India

Pepsi dispatched over 100 video cassettes to key political

personality across all major political parties The cassettes

containing recordings of the companys initial operations in the

states economic growth Along with the cassette recipients also

received a small booklet providing detail of Pepsis major

achievements and the future plans

In building political support Pepsi pledge equity and fairness

and to be judged on the fact and merit The entry of Pepsi into

Indian market is a good example of an MNC strategically unifying

its interest with the demand of the Government

PCI operates in India as

PepsiCo India Holdings Limited (PIHL)

Manufactures and distributes the beverages to the Up

Country Market

PepsiCo India Marketing Company Limited (PCIM)

Marketing and Distribution Sales to the local market

The beverage business is carried out through 3 channels

namely

COBO (Company Owned Bottling Operation)

1 UP (minus) Western UP

2 West Bengal

3 Karnataka (minus) NW Karnataka

4 Kerala +South Tamilnadu

5 Mumbai + Rest of Maharashtra

6 Gujarat

FOBO (Franchisee owned Bottling Operation)

1 Jammu and Kashmir

2 Rajasthan

3 Haryana + Delhi

4 Western UP

5 Goa

6 Punjab + Himachal Pradesh

7 Andhra Pradesh

JV (Joint Venture)

1 Bhutan

Brands

Segment Products

Cola Pepsi

Clear Lemon Flavor 7 Up Nimbooz

Cloudy Lemon Flavor Teem Miranda Lime

Orange Miranda Orange

Juice Slicetwister

Soda Leher soda

Corporate profile

PepsiCo In India

PepsiCo entered India in 1989 and has grown to become one of the countryrsquos leading food and beverage companies One of the largest multinational investors in the country PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India

PepsiCo India and its partners have invested more than US$1 billion since the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors PepsiCo India and its partners have invested more than US$1 billion since

the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors

PepsiCo nourishes consumers with a range of products from treats to healthy eats that deliver joy as well as nutrition and always good taste PepsiCo Indiarsquos expansive portfolio includes iconic refreshment beverages Pepsi 7 UP Mirinda and Mountain Dew in addition to low calorie options such as Diet Pepsi hydrating and nutritional beverages such as Aquafina drinking water isotonic sports drinks - Gatorade Tropicana100 fruit juices and juice based drinks ndash Tropicana Nectars Tropicana Twister and Slice Local brands ndash Lehar Soda Dukes Lemonade and Mangola add to the diverse range of brands

PepsiCorsquos foods company Frito-Lay is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG It manufactures Layrsquos Potato Chips Cheetos extruded snacks Uncle Chipps and traditional snacks under the Kurkure and Lehar brands The companyrsquos high fibre breakfast cereal Quaker Oats and low fat and roasted snack options enhance the healthful choices available to consumers Frito Layrsquos core products Layrsquos Kurkure Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets

The group has built an expansive beverage and foods business To support its operations PepsiCo has 43 bottling plants in India of which 15 are company owned and 28 are franchisee owned In addition to this PepsiCorsquos Frito Lay foods division has 3 state-of-the-art plants PepsiCorsquos business is based on its sustainability vision of making tomorrow better than today PepsiCorsquos commitment to living by this vision every day is visible in its contribution to the country consumers and farmers

Beverages

Pepsi Cola North America

Pepsi Cola International

Pepsi Wines and Spirits Snacks

Pepsi Food International

Pepsi Co

Frito-Lay

Food Services

Pizza Hut

KFC

Taco Bell

PepsiCo Products in India

Pepsi

Miranda Orange

Miranda Apple

Slice- Mango

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

The collection of works is focused on major twentieth century art and features

works by masters such as Auguste Rodin Henri Laurens Henry Moore Alexander

Calder Alberto Giacometti Arnaldo Pomodoro and Claes Oldenburg The gardens

originally were designed by the world famous garden planner Russell Page and

have been extended by Franccedilois Goffinet The grounds are open to the public and

a visitors booth is in operation during the spring and summer

Pepsi Cola North America headquartered in Purchase New

York is the refreshment beverage unit of Pepsi Company

Beverages and foods North America a division of Pepsi Company

Inc Pepsi Company Beverages and foods North America also

comprises Pepsi Companyrsquos Tropicana Gatorade and Quaker

Foods businesses in the United States and Canada

Pepsi Cola North Americarsquos Carbonated Soft Drinks including

Pepsi Diet Pepsi Pepsi twist Mountain Dew Mountain Dew Code

Red Sierra Mist and Mug Root Beer account for nearly One-Third

of Total soft drinks sales in the United States

Pepsi Cola North Americarsquos Non -Carbonated Beverage

portfolio includes Aquafina which is the number one brand of

bottled water in the United States Dole single serve juice and

SoBe which offers a wide range of Soft drinks with Herbal

ingredients The Company also makes and markets North

Americarsquos best selling ready to drink iced teas and coffees via

joint ventured with Lipton and Starbucks respectively

Pepsi Company Inc is one of the Worldrsquos largest food and

beverage companies

The Companyrsquos principal business includes

Frito-Lay snacks

Pepsi Cola Beverages

Gatorade sports Drinks

Tropicana Juices

Quaker Foods

Pepsi Company Inc is a diversified consumer products

company with 3 Major lines of Business

1 Beverages (Pepsi Cola)- It is Pepsirsquos oldest and largest

business Includes drinks like Pepsi Diet Pepsi

Mountain Dew Slice Mug 7UP etc available in 194

countries

2 Snack Foods - It includes the famous Frito-Lay Brand in

the United States and other International Brands

(Example Smith Crisps Ltd in the UK) ndash available in 40

Countries

3 Restaurants - Includes leading brands like Pizza Hut

Taco Bell and KFC (Operating in 94 Countries) and some

relatively lesser known ones

California Pizza Kitchen Chevyrsquos Mexican Restaurants

Hot n now mainly in the US

Pepsi Cola Company was founded in 1903 when Caleb D

Bradham a Pharmacist started to market his Beverage intention

in North Carolina Today Pepsi Cola is the second largest soft

drink producer in the world Also it has been ranked 10th most

recognized brand name in the world INDRA NOOYI is the present

Chairman of PepsiCo in USA

PepsiCo Inc was founds in 1965 through the merger of

Pepsi-Cola

Company and Frito-Lay Tropicana was acquired in 1998 in 2001

Pepsi Company merged with the Quaker Oats Company

Pepsi Companyrsquos success is the result of superior products

high standard of Performance distinctive competitive strategies

and the high level of integrity of their people

Pepsi Company had been in the Indian market during the

mid-1950 but pulled out because of the lack of profitability It

returned in 1990 by negotiating a Joint venture agreement with

Tata Industries and Government owned Punjab Agro Industries

realizing the rapidly growing incomes of Indian consumers Rajeev

Bakshi is the present Chairman of PepsiCo India Holdings Pvt Ltd

Pepsirsquos decision to enter Indian market was very wise

indeed The Company today enjoys a foothold of the Indian

Market and its market share surpasses its nearest rival Coca-Cola

The Indian soft drink market has been growing rapidly from a

billion in 1997 to about 5 billion bottles in 2003 Another thing

which needs not to be forgotten is that Indiarsquos middle class is

much large than China Further more many observers have

predicted that India will eventually become an economic giant

thus growing incomes should support more sales

Initially Pepsi Company had to accept some limitations

Limit ownership to 399 place the Local ldquoLeharrdquo Logo with its

logo and to export 75 of its concentrate among others But

later with liberalization of FDI these very limitations became

Pepsi Companyrsquos strengths being the very first to be in the Indian

Market much to the dismay of Coca-Cola

Entry of Pepsi in Indian Market

Pepsirsquos initial foray into the Indian Soft drink industry dates

way back to1956 However it withdrew from the country in 1961

due to bottling problems

Its second attempt into the Indian market was much better

planned On Nov 9 1987 the Government of Indiarsquos project

Approval Board (PAB) approved Pepsi Companyrsquos (PepsiCo)

second proposal to enter the country The then Government

regulations forbid the company from setting up a 100 owned

subsidiary hence it entered the market in collaboration with

VOLTAS INDIA and PUNJAB AGRO Later with the economic

liberalization in the country PepsiCo was allowed to acquire the

Stakes of both of its collaborates Since then Pepsi has gone to

become the largest selling soft drink brand in the country

The Indian business unit has an annual sales turnover of

Rs1100 Crore The Government of India while allowing the entry

of Pepsi had put forth a series of stringent conditions like

introduction of latest food

processing technologies high quota of exports local partnership

use of Indianised brand names etc Pepsi whose basic intention

was to consolidate its entry into the Indian market decide to cope

with the demand and approached the entire issue strategically

and finally succeeded in its mission

To quote Pepsi had to operate in difficult circumstances our

launch was patchy virulent anti-Pepsi lobby and competitive

propaganda made it difficult but like most big business Pepsi

foods has been keeping up its efforts to mobilize support among

influential politicians Pepsi managed to get quite a few well

wishers form among influential among the Member of the

Parliament and ministers friends of the project Pepsi had

embarked on a massive campaign among politicians of the

opposite parties the first of its kind by a foreign company in

India

Pepsi dispatched over 100 video cassettes to key political

personality across all major political parties The cassettes

containing recordings of the companys initial operations in the

states economic growth Along with the cassette recipients also

received a small booklet providing detail of Pepsis major

achievements and the future plans

In building political support Pepsi pledge equity and fairness

and to be judged on the fact and merit The entry of Pepsi into

Indian market is a good example of an MNC strategically unifying

its interest with the demand of the Government

PCI operates in India as

PepsiCo India Holdings Limited (PIHL)

Manufactures and distributes the beverages to the Up

Country Market

PepsiCo India Marketing Company Limited (PCIM)

Marketing and Distribution Sales to the local market

The beverage business is carried out through 3 channels

namely

COBO (Company Owned Bottling Operation)

1 UP (minus) Western UP

2 West Bengal

3 Karnataka (minus) NW Karnataka

4 Kerala +South Tamilnadu

5 Mumbai + Rest of Maharashtra

6 Gujarat

FOBO (Franchisee owned Bottling Operation)

1 Jammu and Kashmir

2 Rajasthan

3 Haryana + Delhi

4 Western UP

5 Goa

6 Punjab + Himachal Pradesh

7 Andhra Pradesh

JV (Joint Venture)

1 Bhutan

Brands

Segment Products

Cola Pepsi

Clear Lemon Flavor 7 Up Nimbooz

Cloudy Lemon Flavor Teem Miranda Lime

Orange Miranda Orange

Juice Slicetwister

Soda Leher soda

Corporate profile

PepsiCo In India

PepsiCo entered India in 1989 and has grown to become one of the countryrsquos leading food and beverage companies One of the largest multinational investors in the country PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India

PepsiCo India and its partners have invested more than US$1 billion since the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors PepsiCo India and its partners have invested more than US$1 billion since

the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors

PepsiCo nourishes consumers with a range of products from treats to healthy eats that deliver joy as well as nutrition and always good taste PepsiCo Indiarsquos expansive portfolio includes iconic refreshment beverages Pepsi 7 UP Mirinda and Mountain Dew in addition to low calorie options such as Diet Pepsi hydrating and nutritional beverages such as Aquafina drinking water isotonic sports drinks - Gatorade Tropicana100 fruit juices and juice based drinks ndash Tropicana Nectars Tropicana Twister and Slice Local brands ndash Lehar Soda Dukes Lemonade and Mangola add to the diverse range of brands

PepsiCorsquos foods company Frito-Lay is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG It manufactures Layrsquos Potato Chips Cheetos extruded snacks Uncle Chipps and traditional snacks under the Kurkure and Lehar brands The companyrsquos high fibre breakfast cereal Quaker Oats and low fat and roasted snack options enhance the healthful choices available to consumers Frito Layrsquos core products Layrsquos Kurkure Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets

The group has built an expansive beverage and foods business To support its operations PepsiCo has 43 bottling plants in India of which 15 are company owned and 28 are franchisee owned In addition to this PepsiCorsquos Frito Lay foods division has 3 state-of-the-art plants PepsiCorsquos business is based on its sustainability vision of making tomorrow better than today PepsiCorsquos commitment to living by this vision every day is visible in its contribution to the country consumers and farmers

Beverages

Pepsi Cola North America

Pepsi Cola International

Pepsi Wines and Spirits Snacks

Pepsi Food International

Pepsi Co

Frito-Lay

Food Services

Pizza Hut

KFC

Taco Bell

PepsiCo Products in India

Pepsi

Miranda Orange

Miranda Apple

Slice- Mango

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

Americarsquos best selling ready to drink iced teas and coffees via

joint ventured with Lipton and Starbucks respectively

Pepsi Company Inc is one of the Worldrsquos largest food and

beverage companies

The Companyrsquos principal business includes

Frito-Lay snacks

Pepsi Cola Beverages

Gatorade sports Drinks

Tropicana Juices

Quaker Foods

Pepsi Company Inc is a diversified consumer products

company with 3 Major lines of Business

1 Beverages (Pepsi Cola)- It is Pepsirsquos oldest and largest

business Includes drinks like Pepsi Diet Pepsi

Mountain Dew Slice Mug 7UP etc available in 194

countries

2 Snack Foods - It includes the famous Frito-Lay Brand in

the United States and other International Brands

(Example Smith Crisps Ltd in the UK) ndash available in 40

Countries

3 Restaurants - Includes leading brands like Pizza Hut

Taco Bell and KFC (Operating in 94 Countries) and some

relatively lesser known ones

California Pizza Kitchen Chevyrsquos Mexican Restaurants

Hot n now mainly in the US

Pepsi Cola Company was founded in 1903 when Caleb D

Bradham a Pharmacist started to market his Beverage intention

in North Carolina Today Pepsi Cola is the second largest soft

drink producer in the world Also it has been ranked 10th most

recognized brand name in the world INDRA NOOYI is the present

Chairman of PepsiCo in USA

PepsiCo Inc was founds in 1965 through the merger of

Pepsi-Cola

Company and Frito-Lay Tropicana was acquired in 1998 in 2001

Pepsi Company merged with the Quaker Oats Company

Pepsi Companyrsquos success is the result of superior products

high standard of Performance distinctive competitive strategies

and the high level of integrity of their people

Pepsi Company had been in the Indian market during the

mid-1950 but pulled out because of the lack of profitability It

returned in 1990 by negotiating a Joint venture agreement with

Tata Industries and Government owned Punjab Agro Industries

realizing the rapidly growing incomes of Indian consumers Rajeev

Bakshi is the present Chairman of PepsiCo India Holdings Pvt Ltd

Pepsirsquos decision to enter Indian market was very wise

indeed The Company today enjoys a foothold of the Indian

Market and its market share surpasses its nearest rival Coca-Cola

The Indian soft drink market has been growing rapidly from a

billion in 1997 to about 5 billion bottles in 2003 Another thing

which needs not to be forgotten is that Indiarsquos middle class is

much large than China Further more many observers have

predicted that India will eventually become an economic giant

thus growing incomes should support more sales

Initially Pepsi Company had to accept some limitations

Limit ownership to 399 place the Local ldquoLeharrdquo Logo with its

logo and to export 75 of its concentrate among others But

later with liberalization of FDI these very limitations became

Pepsi Companyrsquos strengths being the very first to be in the Indian

Market much to the dismay of Coca-Cola

Entry of Pepsi in Indian Market

Pepsirsquos initial foray into the Indian Soft drink industry dates

way back to1956 However it withdrew from the country in 1961

due to bottling problems

Its second attempt into the Indian market was much better

planned On Nov 9 1987 the Government of Indiarsquos project

Approval Board (PAB) approved Pepsi Companyrsquos (PepsiCo)

second proposal to enter the country The then Government

regulations forbid the company from setting up a 100 owned

subsidiary hence it entered the market in collaboration with

VOLTAS INDIA and PUNJAB AGRO Later with the economic

liberalization in the country PepsiCo was allowed to acquire the

Stakes of both of its collaborates Since then Pepsi has gone to

become the largest selling soft drink brand in the country

The Indian business unit has an annual sales turnover of

Rs1100 Crore The Government of India while allowing the entry

of Pepsi had put forth a series of stringent conditions like

introduction of latest food

processing technologies high quota of exports local partnership

use of Indianised brand names etc Pepsi whose basic intention

was to consolidate its entry into the Indian market decide to cope

with the demand and approached the entire issue strategically

and finally succeeded in its mission

To quote Pepsi had to operate in difficult circumstances our

launch was patchy virulent anti-Pepsi lobby and competitive

propaganda made it difficult but like most big business Pepsi

foods has been keeping up its efforts to mobilize support among

influential politicians Pepsi managed to get quite a few well

wishers form among influential among the Member of the

Parliament and ministers friends of the project Pepsi had

embarked on a massive campaign among politicians of the

opposite parties the first of its kind by a foreign company in

India

Pepsi dispatched over 100 video cassettes to key political

personality across all major political parties The cassettes

containing recordings of the companys initial operations in the

states economic growth Along with the cassette recipients also

received a small booklet providing detail of Pepsis major

achievements and the future plans

In building political support Pepsi pledge equity and fairness

and to be judged on the fact and merit The entry of Pepsi into

Indian market is a good example of an MNC strategically unifying

its interest with the demand of the Government

PCI operates in India as

PepsiCo India Holdings Limited (PIHL)

Manufactures and distributes the beverages to the Up

Country Market

PepsiCo India Marketing Company Limited (PCIM)

Marketing and Distribution Sales to the local market

The beverage business is carried out through 3 channels

namely

COBO (Company Owned Bottling Operation)

1 UP (minus) Western UP

2 West Bengal

3 Karnataka (minus) NW Karnataka

4 Kerala +South Tamilnadu

5 Mumbai + Rest of Maharashtra

6 Gujarat

FOBO (Franchisee owned Bottling Operation)

1 Jammu and Kashmir

2 Rajasthan

3 Haryana + Delhi

4 Western UP

5 Goa

6 Punjab + Himachal Pradesh

7 Andhra Pradesh

JV (Joint Venture)

1 Bhutan

Brands

Segment Products

Cola Pepsi

Clear Lemon Flavor 7 Up Nimbooz

Cloudy Lemon Flavor Teem Miranda Lime

Orange Miranda Orange

Juice Slicetwister

Soda Leher soda

Corporate profile

PepsiCo In India

PepsiCo entered India in 1989 and has grown to become one of the countryrsquos leading food and beverage companies One of the largest multinational investors in the country PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India

PepsiCo India and its partners have invested more than US$1 billion since the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors PepsiCo India and its partners have invested more than US$1 billion since

the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors

PepsiCo nourishes consumers with a range of products from treats to healthy eats that deliver joy as well as nutrition and always good taste PepsiCo Indiarsquos expansive portfolio includes iconic refreshment beverages Pepsi 7 UP Mirinda and Mountain Dew in addition to low calorie options such as Diet Pepsi hydrating and nutritional beverages such as Aquafina drinking water isotonic sports drinks - Gatorade Tropicana100 fruit juices and juice based drinks ndash Tropicana Nectars Tropicana Twister and Slice Local brands ndash Lehar Soda Dukes Lemonade and Mangola add to the diverse range of brands

PepsiCorsquos foods company Frito-Lay is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG It manufactures Layrsquos Potato Chips Cheetos extruded snacks Uncle Chipps and traditional snacks under the Kurkure and Lehar brands The companyrsquos high fibre breakfast cereal Quaker Oats and low fat and roasted snack options enhance the healthful choices available to consumers Frito Layrsquos core products Layrsquos Kurkure Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets

The group has built an expansive beverage and foods business To support its operations PepsiCo has 43 bottling plants in India of which 15 are company owned and 28 are franchisee owned In addition to this PepsiCorsquos Frito Lay foods division has 3 state-of-the-art plants PepsiCorsquos business is based on its sustainability vision of making tomorrow better than today PepsiCorsquos commitment to living by this vision every day is visible in its contribution to the country consumers and farmers

Beverages

Pepsi Cola North America

Pepsi Cola International

Pepsi Wines and Spirits Snacks

Pepsi Food International

Pepsi Co

Frito-Lay

Food Services

Pizza Hut

KFC

Taco Bell

PepsiCo Products in India

Pepsi

Miranda Orange

Miranda Apple

Slice- Mango

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

3 Restaurants - Includes leading brands like Pizza Hut

Taco Bell and KFC (Operating in 94 Countries) and some

relatively lesser known ones

California Pizza Kitchen Chevyrsquos Mexican Restaurants

Hot n now mainly in the US

Pepsi Cola Company was founded in 1903 when Caleb D

Bradham a Pharmacist started to market his Beverage intention

in North Carolina Today Pepsi Cola is the second largest soft

drink producer in the world Also it has been ranked 10th most

recognized brand name in the world INDRA NOOYI is the present

Chairman of PepsiCo in USA

PepsiCo Inc was founds in 1965 through the merger of

Pepsi-Cola

Company and Frito-Lay Tropicana was acquired in 1998 in 2001

Pepsi Company merged with the Quaker Oats Company

Pepsi Companyrsquos success is the result of superior products

high standard of Performance distinctive competitive strategies

and the high level of integrity of their people

Pepsi Company had been in the Indian market during the

mid-1950 but pulled out because of the lack of profitability It

returned in 1990 by negotiating a Joint venture agreement with

Tata Industries and Government owned Punjab Agro Industries

realizing the rapidly growing incomes of Indian consumers Rajeev

Bakshi is the present Chairman of PepsiCo India Holdings Pvt Ltd

Pepsirsquos decision to enter Indian market was very wise

indeed The Company today enjoys a foothold of the Indian

Market and its market share surpasses its nearest rival Coca-Cola

The Indian soft drink market has been growing rapidly from a

billion in 1997 to about 5 billion bottles in 2003 Another thing

which needs not to be forgotten is that Indiarsquos middle class is

much large than China Further more many observers have

predicted that India will eventually become an economic giant

thus growing incomes should support more sales

Initially Pepsi Company had to accept some limitations

Limit ownership to 399 place the Local ldquoLeharrdquo Logo with its

logo and to export 75 of its concentrate among others But

later with liberalization of FDI these very limitations became

Pepsi Companyrsquos strengths being the very first to be in the Indian

Market much to the dismay of Coca-Cola

Entry of Pepsi in Indian Market

Pepsirsquos initial foray into the Indian Soft drink industry dates

way back to1956 However it withdrew from the country in 1961

due to bottling problems

Its second attempt into the Indian market was much better

planned On Nov 9 1987 the Government of Indiarsquos project

Approval Board (PAB) approved Pepsi Companyrsquos (PepsiCo)

second proposal to enter the country The then Government

regulations forbid the company from setting up a 100 owned

subsidiary hence it entered the market in collaboration with

VOLTAS INDIA and PUNJAB AGRO Later with the economic

liberalization in the country PepsiCo was allowed to acquire the

Stakes of both of its collaborates Since then Pepsi has gone to

become the largest selling soft drink brand in the country

The Indian business unit has an annual sales turnover of

Rs1100 Crore The Government of India while allowing the entry

of Pepsi had put forth a series of stringent conditions like

introduction of latest food

processing technologies high quota of exports local partnership

use of Indianised brand names etc Pepsi whose basic intention

was to consolidate its entry into the Indian market decide to cope

with the demand and approached the entire issue strategically

and finally succeeded in its mission

To quote Pepsi had to operate in difficult circumstances our

launch was patchy virulent anti-Pepsi lobby and competitive

propaganda made it difficult but like most big business Pepsi

foods has been keeping up its efforts to mobilize support among

influential politicians Pepsi managed to get quite a few well

wishers form among influential among the Member of the

Parliament and ministers friends of the project Pepsi had

embarked on a massive campaign among politicians of the

opposite parties the first of its kind by a foreign company in

India

Pepsi dispatched over 100 video cassettes to key political

personality across all major political parties The cassettes

containing recordings of the companys initial operations in the

states economic growth Along with the cassette recipients also

received a small booklet providing detail of Pepsis major

achievements and the future plans

In building political support Pepsi pledge equity and fairness

and to be judged on the fact and merit The entry of Pepsi into

Indian market is a good example of an MNC strategically unifying

its interest with the demand of the Government

PCI operates in India as

PepsiCo India Holdings Limited (PIHL)

Manufactures and distributes the beverages to the Up

Country Market

PepsiCo India Marketing Company Limited (PCIM)

Marketing and Distribution Sales to the local market

The beverage business is carried out through 3 channels

namely

COBO (Company Owned Bottling Operation)

1 UP (minus) Western UP

2 West Bengal

3 Karnataka (minus) NW Karnataka

4 Kerala +South Tamilnadu

5 Mumbai + Rest of Maharashtra

6 Gujarat

FOBO (Franchisee owned Bottling Operation)

1 Jammu and Kashmir

2 Rajasthan

3 Haryana + Delhi

4 Western UP

5 Goa

6 Punjab + Himachal Pradesh

7 Andhra Pradesh

JV (Joint Venture)

1 Bhutan

Brands

Segment Products

Cola Pepsi

Clear Lemon Flavor 7 Up Nimbooz

Cloudy Lemon Flavor Teem Miranda Lime

Orange Miranda Orange

Juice Slicetwister

Soda Leher soda

Corporate profile

PepsiCo In India

PepsiCo entered India in 1989 and has grown to become one of the countryrsquos leading food and beverage companies One of the largest multinational investors in the country PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India

PepsiCo India and its partners have invested more than US$1 billion since the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors PepsiCo India and its partners have invested more than US$1 billion since

the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors

PepsiCo nourishes consumers with a range of products from treats to healthy eats that deliver joy as well as nutrition and always good taste PepsiCo Indiarsquos expansive portfolio includes iconic refreshment beverages Pepsi 7 UP Mirinda and Mountain Dew in addition to low calorie options such as Diet Pepsi hydrating and nutritional beverages such as Aquafina drinking water isotonic sports drinks - Gatorade Tropicana100 fruit juices and juice based drinks ndash Tropicana Nectars Tropicana Twister and Slice Local brands ndash Lehar Soda Dukes Lemonade and Mangola add to the diverse range of brands

PepsiCorsquos foods company Frito-Lay is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG It manufactures Layrsquos Potato Chips Cheetos extruded snacks Uncle Chipps and traditional snacks under the Kurkure and Lehar brands The companyrsquos high fibre breakfast cereal Quaker Oats and low fat and roasted snack options enhance the healthful choices available to consumers Frito Layrsquos core products Layrsquos Kurkure Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets

The group has built an expansive beverage and foods business To support its operations PepsiCo has 43 bottling plants in India of which 15 are company owned and 28 are franchisee owned In addition to this PepsiCorsquos Frito Lay foods division has 3 state-of-the-art plants PepsiCorsquos business is based on its sustainability vision of making tomorrow better than today PepsiCorsquos commitment to living by this vision every day is visible in its contribution to the country consumers and farmers

Beverages

Pepsi Cola North America

Pepsi Cola International

Pepsi Wines and Spirits Snacks

Pepsi Food International

Pepsi Co

Frito-Lay

Food Services

Pizza Hut

KFC

Taco Bell

PepsiCo Products in India

Pepsi

Miranda Orange

Miranda Apple

Slice- Mango

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

realizing the rapidly growing incomes of Indian consumers Rajeev

Bakshi is the present Chairman of PepsiCo India Holdings Pvt Ltd

Pepsirsquos decision to enter Indian market was very wise

indeed The Company today enjoys a foothold of the Indian

Market and its market share surpasses its nearest rival Coca-Cola

The Indian soft drink market has been growing rapidly from a

billion in 1997 to about 5 billion bottles in 2003 Another thing

which needs not to be forgotten is that Indiarsquos middle class is

much large than China Further more many observers have

predicted that India will eventually become an economic giant

thus growing incomes should support more sales

Initially Pepsi Company had to accept some limitations

Limit ownership to 399 place the Local ldquoLeharrdquo Logo with its

logo and to export 75 of its concentrate among others But

later with liberalization of FDI these very limitations became

Pepsi Companyrsquos strengths being the very first to be in the Indian

Market much to the dismay of Coca-Cola

Entry of Pepsi in Indian Market

Pepsirsquos initial foray into the Indian Soft drink industry dates

way back to1956 However it withdrew from the country in 1961

due to bottling problems

Its second attempt into the Indian market was much better

planned On Nov 9 1987 the Government of Indiarsquos project

Approval Board (PAB) approved Pepsi Companyrsquos (PepsiCo)

second proposal to enter the country The then Government

regulations forbid the company from setting up a 100 owned

subsidiary hence it entered the market in collaboration with

VOLTAS INDIA and PUNJAB AGRO Later with the economic

liberalization in the country PepsiCo was allowed to acquire the

Stakes of both of its collaborates Since then Pepsi has gone to

become the largest selling soft drink brand in the country

The Indian business unit has an annual sales turnover of

Rs1100 Crore The Government of India while allowing the entry

of Pepsi had put forth a series of stringent conditions like

introduction of latest food

processing technologies high quota of exports local partnership

use of Indianised brand names etc Pepsi whose basic intention

was to consolidate its entry into the Indian market decide to cope

with the demand and approached the entire issue strategically

and finally succeeded in its mission

To quote Pepsi had to operate in difficult circumstances our

launch was patchy virulent anti-Pepsi lobby and competitive

propaganda made it difficult but like most big business Pepsi

foods has been keeping up its efforts to mobilize support among

influential politicians Pepsi managed to get quite a few well

wishers form among influential among the Member of the

Parliament and ministers friends of the project Pepsi had

embarked on a massive campaign among politicians of the

opposite parties the first of its kind by a foreign company in

India

Pepsi dispatched over 100 video cassettes to key political

personality across all major political parties The cassettes

containing recordings of the companys initial operations in the

states economic growth Along with the cassette recipients also

received a small booklet providing detail of Pepsis major

achievements and the future plans

In building political support Pepsi pledge equity and fairness

and to be judged on the fact and merit The entry of Pepsi into

Indian market is a good example of an MNC strategically unifying

its interest with the demand of the Government

PCI operates in India as

PepsiCo India Holdings Limited (PIHL)

Manufactures and distributes the beverages to the Up

Country Market

PepsiCo India Marketing Company Limited (PCIM)

Marketing and Distribution Sales to the local market

The beverage business is carried out through 3 channels

namely

COBO (Company Owned Bottling Operation)

1 UP (minus) Western UP

2 West Bengal

3 Karnataka (minus) NW Karnataka

4 Kerala +South Tamilnadu

5 Mumbai + Rest of Maharashtra

6 Gujarat

FOBO (Franchisee owned Bottling Operation)

1 Jammu and Kashmir

2 Rajasthan

3 Haryana + Delhi

4 Western UP

5 Goa

6 Punjab + Himachal Pradesh

7 Andhra Pradesh

JV (Joint Venture)

1 Bhutan

Brands

Segment Products

Cola Pepsi

Clear Lemon Flavor 7 Up Nimbooz

Cloudy Lemon Flavor Teem Miranda Lime

Orange Miranda Orange

Juice Slicetwister

Soda Leher soda

Corporate profile

PepsiCo In India

PepsiCo entered India in 1989 and has grown to become one of the countryrsquos leading food and beverage companies One of the largest multinational investors in the country PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India

PepsiCo India and its partners have invested more than US$1 billion since the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors PepsiCo India and its partners have invested more than US$1 billion since

the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors

PepsiCo nourishes consumers with a range of products from treats to healthy eats that deliver joy as well as nutrition and always good taste PepsiCo Indiarsquos expansive portfolio includes iconic refreshment beverages Pepsi 7 UP Mirinda and Mountain Dew in addition to low calorie options such as Diet Pepsi hydrating and nutritional beverages such as Aquafina drinking water isotonic sports drinks - Gatorade Tropicana100 fruit juices and juice based drinks ndash Tropicana Nectars Tropicana Twister and Slice Local brands ndash Lehar Soda Dukes Lemonade and Mangola add to the diverse range of brands

PepsiCorsquos foods company Frito-Lay is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG It manufactures Layrsquos Potato Chips Cheetos extruded snacks Uncle Chipps and traditional snacks under the Kurkure and Lehar brands The companyrsquos high fibre breakfast cereal Quaker Oats and low fat and roasted snack options enhance the healthful choices available to consumers Frito Layrsquos core products Layrsquos Kurkure Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets

The group has built an expansive beverage and foods business To support its operations PepsiCo has 43 bottling plants in India of which 15 are company owned and 28 are franchisee owned In addition to this PepsiCorsquos Frito Lay foods division has 3 state-of-the-art plants PepsiCorsquos business is based on its sustainability vision of making tomorrow better than today PepsiCorsquos commitment to living by this vision every day is visible in its contribution to the country consumers and farmers

Beverages

Pepsi Cola North America

Pepsi Cola International

Pepsi Wines and Spirits Snacks

Pepsi Food International

Pepsi Co

Frito-Lay

Food Services

Pizza Hut

KFC

Taco Bell

PepsiCo Products in India

Pepsi

Miranda Orange

Miranda Apple

Slice- Mango

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

Approval Board (PAB) approved Pepsi Companyrsquos (PepsiCo)

second proposal to enter the country The then Government

regulations forbid the company from setting up a 100 owned

subsidiary hence it entered the market in collaboration with

VOLTAS INDIA and PUNJAB AGRO Later with the economic

liberalization in the country PepsiCo was allowed to acquire the

Stakes of both of its collaborates Since then Pepsi has gone to

become the largest selling soft drink brand in the country

The Indian business unit has an annual sales turnover of

Rs1100 Crore The Government of India while allowing the entry

of Pepsi had put forth a series of stringent conditions like

introduction of latest food

processing technologies high quota of exports local partnership

use of Indianised brand names etc Pepsi whose basic intention

was to consolidate its entry into the Indian market decide to cope

with the demand and approached the entire issue strategically

and finally succeeded in its mission

To quote Pepsi had to operate in difficult circumstances our

launch was patchy virulent anti-Pepsi lobby and competitive

propaganda made it difficult but like most big business Pepsi

foods has been keeping up its efforts to mobilize support among

influential politicians Pepsi managed to get quite a few well

wishers form among influential among the Member of the

Parliament and ministers friends of the project Pepsi had

embarked on a massive campaign among politicians of the

opposite parties the first of its kind by a foreign company in

India

Pepsi dispatched over 100 video cassettes to key political

personality across all major political parties The cassettes

containing recordings of the companys initial operations in the

states economic growth Along with the cassette recipients also

received a small booklet providing detail of Pepsis major

achievements and the future plans

In building political support Pepsi pledge equity and fairness

and to be judged on the fact and merit The entry of Pepsi into

Indian market is a good example of an MNC strategically unifying

its interest with the demand of the Government

PCI operates in India as

PepsiCo India Holdings Limited (PIHL)

Manufactures and distributes the beverages to the Up

Country Market

PepsiCo India Marketing Company Limited (PCIM)

Marketing and Distribution Sales to the local market

The beverage business is carried out through 3 channels

namely

COBO (Company Owned Bottling Operation)

1 UP (minus) Western UP

2 West Bengal

3 Karnataka (minus) NW Karnataka

4 Kerala +South Tamilnadu

5 Mumbai + Rest of Maharashtra

6 Gujarat

FOBO (Franchisee owned Bottling Operation)

1 Jammu and Kashmir

2 Rajasthan

3 Haryana + Delhi

4 Western UP

5 Goa

6 Punjab + Himachal Pradesh

7 Andhra Pradesh

JV (Joint Venture)

1 Bhutan

Brands

Segment Products

Cola Pepsi

Clear Lemon Flavor 7 Up Nimbooz

Cloudy Lemon Flavor Teem Miranda Lime

Orange Miranda Orange

Juice Slicetwister

Soda Leher soda

Corporate profile

PepsiCo In India

PepsiCo entered India in 1989 and has grown to become one of the countryrsquos leading food and beverage companies One of the largest multinational investors in the country PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India

PepsiCo India and its partners have invested more than US$1 billion since the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors PepsiCo India and its partners have invested more than US$1 billion since

the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors

PepsiCo nourishes consumers with a range of products from treats to healthy eats that deliver joy as well as nutrition and always good taste PepsiCo Indiarsquos expansive portfolio includes iconic refreshment beverages Pepsi 7 UP Mirinda and Mountain Dew in addition to low calorie options such as Diet Pepsi hydrating and nutritional beverages such as Aquafina drinking water isotonic sports drinks - Gatorade Tropicana100 fruit juices and juice based drinks ndash Tropicana Nectars Tropicana Twister and Slice Local brands ndash Lehar Soda Dukes Lemonade and Mangola add to the diverse range of brands

PepsiCorsquos foods company Frito-Lay is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG It manufactures Layrsquos Potato Chips Cheetos extruded snacks Uncle Chipps and traditional snacks under the Kurkure and Lehar brands The companyrsquos high fibre breakfast cereal Quaker Oats and low fat and roasted snack options enhance the healthful choices available to consumers Frito Layrsquos core products Layrsquos Kurkure Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets

The group has built an expansive beverage and foods business To support its operations PepsiCo has 43 bottling plants in India of which 15 are company owned and 28 are franchisee owned In addition to this PepsiCorsquos Frito Lay foods division has 3 state-of-the-art plants PepsiCorsquos business is based on its sustainability vision of making tomorrow better than today PepsiCorsquos commitment to living by this vision every day is visible in its contribution to the country consumers and farmers

Beverages

Pepsi Cola North America

Pepsi Cola International

Pepsi Wines and Spirits Snacks

Pepsi Food International

Pepsi Co

Frito-Lay

Food Services

Pizza Hut

KFC

Taco Bell

PepsiCo Products in India

Pepsi

Miranda Orange

Miranda Apple

Slice- Mango

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

embarked on a massive campaign among politicians of the

opposite parties the first of its kind by a foreign company in

India

Pepsi dispatched over 100 video cassettes to key political

personality across all major political parties The cassettes

containing recordings of the companys initial operations in the

states economic growth Along with the cassette recipients also

received a small booklet providing detail of Pepsis major

achievements and the future plans

In building political support Pepsi pledge equity and fairness

and to be judged on the fact and merit The entry of Pepsi into

Indian market is a good example of an MNC strategically unifying

its interest with the demand of the Government

PCI operates in India as

PepsiCo India Holdings Limited (PIHL)

Manufactures and distributes the beverages to the Up

Country Market

PepsiCo India Marketing Company Limited (PCIM)

Marketing and Distribution Sales to the local market

The beverage business is carried out through 3 channels

namely

COBO (Company Owned Bottling Operation)

1 UP (minus) Western UP

2 West Bengal

3 Karnataka (minus) NW Karnataka

4 Kerala +South Tamilnadu

5 Mumbai + Rest of Maharashtra

6 Gujarat

FOBO (Franchisee owned Bottling Operation)

1 Jammu and Kashmir

2 Rajasthan

3 Haryana + Delhi

4 Western UP

5 Goa

6 Punjab + Himachal Pradesh

7 Andhra Pradesh

JV (Joint Venture)

1 Bhutan

Brands

Segment Products

Cola Pepsi

Clear Lemon Flavor 7 Up Nimbooz

Cloudy Lemon Flavor Teem Miranda Lime

Orange Miranda Orange

Juice Slicetwister

Soda Leher soda

Corporate profile

PepsiCo In India

PepsiCo entered India in 1989 and has grown to become one of the countryrsquos leading food and beverage companies One of the largest multinational investors in the country PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India

PepsiCo India and its partners have invested more than US$1 billion since the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors PepsiCo India and its partners have invested more than US$1 billion since

the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors

PepsiCo nourishes consumers with a range of products from treats to healthy eats that deliver joy as well as nutrition and always good taste PepsiCo Indiarsquos expansive portfolio includes iconic refreshment beverages Pepsi 7 UP Mirinda and Mountain Dew in addition to low calorie options such as Diet Pepsi hydrating and nutritional beverages such as Aquafina drinking water isotonic sports drinks - Gatorade Tropicana100 fruit juices and juice based drinks ndash Tropicana Nectars Tropicana Twister and Slice Local brands ndash Lehar Soda Dukes Lemonade and Mangola add to the diverse range of brands

PepsiCorsquos foods company Frito-Lay is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG It manufactures Layrsquos Potato Chips Cheetos extruded snacks Uncle Chipps and traditional snacks under the Kurkure and Lehar brands The companyrsquos high fibre breakfast cereal Quaker Oats and low fat and roasted snack options enhance the healthful choices available to consumers Frito Layrsquos core products Layrsquos Kurkure Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets

The group has built an expansive beverage and foods business To support its operations PepsiCo has 43 bottling plants in India of which 15 are company owned and 28 are franchisee owned In addition to this PepsiCorsquos Frito Lay foods division has 3 state-of-the-art plants PepsiCorsquos business is based on its sustainability vision of making tomorrow better than today PepsiCorsquos commitment to living by this vision every day is visible in its contribution to the country consumers and farmers

Beverages

Pepsi Cola North America

Pepsi Cola International

Pepsi Wines and Spirits Snacks

Pepsi Food International

Pepsi Co

Frito-Lay

Food Services

Pizza Hut

KFC

Taco Bell

PepsiCo Products in India

Pepsi

Miranda Orange

Miranda Apple

Slice- Mango

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

PCI operates in India as

PepsiCo India Holdings Limited (PIHL)

Manufactures and distributes the beverages to the Up

Country Market

PepsiCo India Marketing Company Limited (PCIM)

Marketing and Distribution Sales to the local market

The beverage business is carried out through 3 channels

namely

COBO (Company Owned Bottling Operation)

1 UP (minus) Western UP

2 West Bengal

3 Karnataka (minus) NW Karnataka

4 Kerala +South Tamilnadu

5 Mumbai + Rest of Maharashtra

6 Gujarat

FOBO (Franchisee owned Bottling Operation)

1 Jammu and Kashmir

2 Rajasthan

3 Haryana + Delhi

4 Western UP

5 Goa

6 Punjab + Himachal Pradesh

7 Andhra Pradesh

JV (Joint Venture)

1 Bhutan

Brands

Segment Products

Cola Pepsi

Clear Lemon Flavor 7 Up Nimbooz

Cloudy Lemon Flavor Teem Miranda Lime

Orange Miranda Orange

Juice Slicetwister

Soda Leher soda

Corporate profile

PepsiCo In India

PepsiCo entered India in 1989 and has grown to become one of the countryrsquos leading food and beverage companies One of the largest multinational investors in the country PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India

PepsiCo India and its partners have invested more than US$1 billion since the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors PepsiCo India and its partners have invested more than US$1 billion since

the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors

PepsiCo nourishes consumers with a range of products from treats to healthy eats that deliver joy as well as nutrition and always good taste PepsiCo Indiarsquos expansive portfolio includes iconic refreshment beverages Pepsi 7 UP Mirinda and Mountain Dew in addition to low calorie options such as Diet Pepsi hydrating and nutritional beverages such as Aquafina drinking water isotonic sports drinks - Gatorade Tropicana100 fruit juices and juice based drinks ndash Tropicana Nectars Tropicana Twister and Slice Local brands ndash Lehar Soda Dukes Lemonade and Mangola add to the diverse range of brands

PepsiCorsquos foods company Frito-Lay is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG It manufactures Layrsquos Potato Chips Cheetos extruded snacks Uncle Chipps and traditional snacks under the Kurkure and Lehar brands The companyrsquos high fibre breakfast cereal Quaker Oats and low fat and roasted snack options enhance the healthful choices available to consumers Frito Layrsquos core products Layrsquos Kurkure Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets

The group has built an expansive beverage and foods business To support its operations PepsiCo has 43 bottling plants in India of which 15 are company owned and 28 are franchisee owned In addition to this PepsiCorsquos Frito Lay foods division has 3 state-of-the-art plants PepsiCorsquos business is based on its sustainability vision of making tomorrow better than today PepsiCorsquos commitment to living by this vision every day is visible in its contribution to the country consumers and farmers

Beverages

Pepsi Cola North America

Pepsi Cola International

Pepsi Wines and Spirits Snacks

Pepsi Food International

Pepsi Co

Frito-Lay

Food Services

Pizza Hut

KFC

Taco Bell

PepsiCo Products in India

Pepsi

Miranda Orange

Miranda Apple

Slice- Mango

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

2 Rajasthan

3 Haryana + Delhi

4 Western UP

5 Goa

6 Punjab + Himachal Pradesh

7 Andhra Pradesh

JV (Joint Venture)

1 Bhutan

Brands

Segment Products

Cola Pepsi

Clear Lemon Flavor 7 Up Nimbooz

Cloudy Lemon Flavor Teem Miranda Lime

Orange Miranda Orange

Juice Slicetwister

Soda Leher soda

Corporate profile

PepsiCo In India

PepsiCo entered India in 1989 and has grown to become one of the countryrsquos leading food and beverage companies One of the largest multinational investors in the country PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India

PepsiCo India and its partners have invested more than US$1 billion since the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors PepsiCo India and its partners have invested more than US$1 billion since

the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors

PepsiCo nourishes consumers with a range of products from treats to healthy eats that deliver joy as well as nutrition and always good taste PepsiCo Indiarsquos expansive portfolio includes iconic refreshment beverages Pepsi 7 UP Mirinda and Mountain Dew in addition to low calorie options such as Diet Pepsi hydrating and nutritional beverages such as Aquafina drinking water isotonic sports drinks - Gatorade Tropicana100 fruit juices and juice based drinks ndash Tropicana Nectars Tropicana Twister and Slice Local brands ndash Lehar Soda Dukes Lemonade and Mangola add to the diverse range of brands

PepsiCorsquos foods company Frito-Lay is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG It manufactures Layrsquos Potato Chips Cheetos extruded snacks Uncle Chipps and traditional snacks under the Kurkure and Lehar brands The companyrsquos high fibre breakfast cereal Quaker Oats and low fat and roasted snack options enhance the healthful choices available to consumers Frito Layrsquos core products Layrsquos Kurkure Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets

The group has built an expansive beverage and foods business To support its operations PepsiCo has 43 bottling plants in India of which 15 are company owned and 28 are franchisee owned In addition to this PepsiCorsquos Frito Lay foods division has 3 state-of-the-art plants PepsiCorsquos business is based on its sustainability vision of making tomorrow better than today PepsiCorsquos commitment to living by this vision every day is visible in its contribution to the country consumers and farmers

Beverages

Pepsi Cola North America

Pepsi Cola International

Pepsi Wines and Spirits Snacks

Pepsi Food International

Pepsi Co

Frito-Lay

Food Services

Pizza Hut

KFC

Taco Bell

PepsiCo Products in India

Pepsi

Miranda Orange

Miranda Apple

Slice- Mango

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

Segment Products

Cola Pepsi

Clear Lemon Flavor 7 Up Nimbooz

Cloudy Lemon Flavor Teem Miranda Lime

Orange Miranda Orange

Juice Slicetwister

Soda Leher soda

Corporate profile

PepsiCo In India

PepsiCo entered India in 1989 and has grown to become one of the countryrsquos leading food and beverage companies One of the largest multinational investors in the country PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India

PepsiCo India and its partners have invested more than US$1 billion since the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors PepsiCo India and its partners have invested more than US$1 billion since

the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors

PepsiCo nourishes consumers with a range of products from treats to healthy eats that deliver joy as well as nutrition and always good taste PepsiCo Indiarsquos expansive portfolio includes iconic refreshment beverages Pepsi 7 UP Mirinda and Mountain Dew in addition to low calorie options such as Diet Pepsi hydrating and nutritional beverages such as Aquafina drinking water isotonic sports drinks - Gatorade Tropicana100 fruit juices and juice based drinks ndash Tropicana Nectars Tropicana Twister and Slice Local brands ndash Lehar Soda Dukes Lemonade and Mangola add to the diverse range of brands

PepsiCorsquos foods company Frito-Lay is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG It manufactures Layrsquos Potato Chips Cheetos extruded snacks Uncle Chipps and traditional snacks under the Kurkure and Lehar brands The companyrsquos high fibre breakfast cereal Quaker Oats and low fat and roasted snack options enhance the healthful choices available to consumers Frito Layrsquos core products Layrsquos Kurkure Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets

The group has built an expansive beverage and foods business To support its operations PepsiCo has 43 bottling plants in India of which 15 are company owned and 28 are franchisee owned In addition to this PepsiCorsquos Frito Lay foods division has 3 state-of-the-art plants PepsiCorsquos business is based on its sustainability vision of making tomorrow better than today PepsiCorsquos commitment to living by this vision every day is visible in its contribution to the country consumers and farmers

Beverages

Pepsi Cola North America

Pepsi Cola International

Pepsi Wines and Spirits Snacks

Pepsi Food International

Pepsi Co

Frito-Lay

Food Services

Pizza Hut

KFC

Taco Bell

PepsiCo Products in India

Pepsi

Miranda Orange

Miranda Apple

Slice- Mango

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

the company was established in the country PepsiCo provides direct and indirect employment to 150000 people including suppliers and distributors

PepsiCo nourishes consumers with a range of products from treats to healthy eats that deliver joy as well as nutrition and always good taste PepsiCo Indiarsquos expansive portfolio includes iconic refreshment beverages Pepsi 7 UP Mirinda and Mountain Dew in addition to low calorie options such as Diet Pepsi hydrating and nutritional beverages such as Aquafina drinking water isotonic sports drinks - Gatorade Tropicana100 fruit juices and juice based drinks ndash Tropicana Nectars Tropicana Twister and Slice Local brands ndash Lehar Soda Dukes Lemonade and Mangola add to the diverse range of brands

PepsiCorsquos foods company Frito-Lay is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG It manufactures Layrsquos Potato Chips Cheetos extruded snacks Uncle Chipps and traditional snacks under the Kurkure and Lehar brands The companyrsquos high fibre breakfast cereal Quaker Oats and low fat and roasted snack options enhance the healthful choices available to consumers Frito Layrsquos core products Layrsquos Kurkure Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets

The group has built an expansive beverage and foods business To support its operations PepsiCo has 43 bottling plants in India of which 15 are company owned and 28 are franchisee owned In addition to this PepsiCorsquos Frito Lay foods division has 3 state-of-the-art plants PepsiCorsquos business is based on its sustainability vision of making tomorrow better than today PepsiCorsquos commitment to living by this vision every day is visible in its contribution to the country consumers and farmers

Beverages

Pepsi Cola North America

Pepsi Cola International

Pepsi Wines and Spirits Snacks

Pepsi Food International

Pepsi Co

Frito-Lay

Food Services

Pizza Hut

KFC

Taco Bell

PepsiCo Products in India

Pepsi

Miranda Orange

Miranda Apple

Slice- Mango

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

Beverages

Pepsi Cola North America

Pepsi Cola International

Pepsi Wines and Spirits Snacks

Pepsi Food International

Pepsi Co

Frito-Lay

Food Services

Pizza Hut

KFC

Taco Bell

PepsiCo Products in India

Pepsi

Miranda Orange

Miranda Apple

Slice- Mango

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

7 Up

Mountain DewAquafina

Performance With Purpose

Performance with Purpose articulates PepsiCo Indias belief that its businesses are intrinsically connected to the communities and world that surrounds it Performance with Purpose means delivering superior financial performance at the same time as we improve the world

To deliver on this commitment PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

1 Introduction

Soft drinks are gradually overtaking hot drinks as thebiggest beverage sector in the world with consumptionrising by around 5 percent a year according to a recentreport from Zenith International But while the USremains the biggest market for now Asia is likely to bethe main driver of sales growth in the future

This paper provides insights on the market trends facingthe soft drink industry It outlines the specific challengesconfronting the companies operating in this arenasuch as ever-changing consumer tastes a growingemphasis on product safety and the increasing powerof global retailers This paper explores opportunities forprocess improvement and cites specific solutions thatcan empower soft drink companies to meet industrychallenges both today and tomorrow and driveprofitability and growth

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

2 Industry background and overview

The business environment for the soft drinkindustryTo understand the soft drink industry one must firstlook at the beverage industry as a whole In recentyears the beverage industry has been faced with newopportunities and challenges Changing consumerdemands and preferences require new ways ofmaintaining current customers and attracting new onesAmid ever-increasing competition beverage companiesmust intensely court customers offer high-qualityproducts efficiently distribute them ensure safety andkeep prices low ndash all while staying nimble enough toexploit new markets by launching new products In thisenvironment success depends on a companyrsquos ability toquickly capitalize on emerging opportunities

The beverage industry is extremely competitive withprivate labels greatly influencing the environment Afew global ldquobeverage giantsrdquo produce many brands butthose brands fall into self-contained categories as wellThus the ldquobeveragerdquo market is not really one marketit is a collection of markets with many different typesof products processes and requirements The beveragemarket includes several different products that can begrouped into two main categories alcoholic (beer winespirits) and non-alcoholic (carbonated soft drinks juicewater sports drinks etc) Each category and ofteneach type of beverage has its unique issues and needs

Within the beverage industry the soft drink market hasbeen showing significant growth in most countries inthe recent years particularly in the emerging marketsWhile the US represents the largest overall soft drinkmarket and has the highest per capita consumptionlevel most markets are showing double-digit growth

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

both in terms of volume and value For instance Mexicoand Poland are two markets in particular that stand out

Within the soft drink sector carbonated soft drinks(CSD) continue to dominate the market encompassingtraditional flavored beverages as well as sugar- andcaffeine-free drinks which have soared in popularitySimultaneously manufacturers are focusing oninnovation in order to maintain growth New productcategories are emerging swiftly and many are alreadyconsolidating as consumer demand continues to shifttoward healthier products such as bottled water juicesand juice drinks sport drinks ready-to-drink teas andfunctional beverages

Recent trends in the food and beverage market centeron product safety quality consumer demand andchannel complexity (including the growing influenceof retailers on the supply chain) These trends haveimpacted the beverage industry in general and the softdrinksector in particular

In this paper we will focus on the issues relevant formiddle-market soft drink companies defined as softdrink producers or bottlers with an annual turnover of$500 million to $2 billion USD Nonetheless the majorityof the points raised in the paper will be applicable to allsoft drink companies regardless of size

_ Business performance improvement prioritiesthe path to valueAgainst the backdrop of these market challenges howcan soft drink companies drive profitable growth andcreate value for their owners or shareholdersIn practical terms there are four areas on whichcompanies in the soft drink business need to focus-Revenue protection and enhancement ndash forexample as driven by product and packaginginnovation differentiated quality improved product

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

availability and better management of customerrelationships

- Cost reductionmargin improvement ndash for examplethrough improved operational efficiency lower laborcosts reduced waste and the capture of operationalsynergies from acquisitions

-Improved asset utilization ndash for example throughreduced inventory levels of soft drinks held in coldstorage and faster turnaround of re-usable transitpackaging in the supply chain-Regulatoryassurance ndash for example throughdemonstrating quality by participating in retailerassurance schemes and assisting trade customersin achieving full compliance with new traceabilitylegislation

3 Market trends and industry challenges

In order to survive in this environment companiesmust consider the market trends that will likely shapethe industry over the next few years This will help softdrink companies to understand the challenges theywill encounter and to turn them into opportunitiesfor process improvement enhanced flexibility andultimately greater profitability

Market trends for the soft drink industry can besummarized by six fundamental themes1-Changing consumer beverage preferencesfeaturing a shift toward health-oriented wellnessdrinks2-Growing friction between bottlers andmanufacturers in the distribution system3-Continually increasing retailer strength

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

4-Fierce competition5-Complex distribution system composed of multiplesales channels6-Beverage safety concerns and more-stringentregulationsConsumers turn to wellness and healthy drinksIn much of the developed world a significant portionof the population is overweight or obese This includestwo-thirds of Americans and an increasing number ofEuropeans Consequently many people have started toactively manage their weight and change their lifestylesa shift that is reflected in their choices in the beverageaisles-Demand has increased for beverages that areperceived to be healthy-Energy drink consumption has also climbed due tothe increasingly active lifestyles of teenagers

This trend towards healthier drinks has created a numberof new categories and changed the consumption trendsof the beverage industry as a whole While previouslydominated by carbonated soft drinks the industry isnow more evenly balanced between carbonates andproduct categories with a healthier image such asbottled water energy drinks and juice

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

Overview of globel non-alcohlic beverage industry source Datamat

bottled waterNew age DrinkJucesEnerjy drinkCarbonet

While carbonates are still the largest soft drink segmentbottled water is catching up fast with an averageof 58 liters consumed annually per capita Amongindividual countries Italy ranks number one in bottledwater consumption with the average Italian drinking177 liters per year Overall bottled water representsthe fastest growing soft drink segment expanding at 9percent annually This growth is being partially driven byincreasing awareness of the health benefits of properhydrationThe industry has responded to consumersrsquo desire forhealthier beverages by creating new categories suchas energy drinks and by diversifying within existingones For example the leading carbonated soft drinkcompanies have recently introduced products with 50less sugar that fall mid-way between regular and dietclassifications Similarly a South African juice companyhas recently released a fruit-based drink that contains afull complement of vitamins and nutrients

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

Beverage companies and bottlers areconflictingIn the soft drink markets of Europe and the USbeverage companies use bottlers to package anddistribute products This structure often causes conflictsof interest between manufacturers and bottlersNevertheless the supply chain must consistently delivervalue to the market in order for the segment to prosperDespite any dissonance the concept of ldquoone face to thecustomerrdquo must be maintained

Many factors are contributing to the friction betweenbottlers and beverage companiesBeverage companies often profit from increasedconcentrate sales at the expense of bottlersrsquomargins-Beverage companies have historicallyhad higher returns and lower capitalrequirements-Bottlers have historically had lower returnsand higher capital requirements for buildingand maintaining production and distributionnetworks-Bottlers continue to consolidate in an attempt tooffset margin pressure through cost reductionSpecifically size helps them to-Spread fixed costs over greater volume-Make larger investments in automatedproduction lines-Contain the costs of acquiring newcustomers-Increase customer loyalty-Declining prices have further reduced bottlersrsquoMargins

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

-Soft drink manufacturers continue to developnew products and packaging which increasesoperational complexity and therefore expenses forbottlers-More new soft drinks have been introducedin the last two years by the top beveragecompanies than were introduced in theentire decade of the 1990s Examplesinclude Coke with Lemon Vanilla CokeDr Pepper Red Fusion Pepsi Blue DnLFanta Berry SoBe MrGreen Sierra Mistand Mountain Dew Code Red-While manufacturers view these newproducts as a way to build a portfolio ofoptions to hedge against product successesor failures bottlers see them as a burdensince they often require additional capitalexpendituresRetailersrsquo power continuously increasesWith Wal-Mart leading the charge the worldrsquosdominant retailers are demanding better serviceand shorter order-to-delivery cycles from soft drinkcompanies This is dramatically reshaping the industryforcing soft drink companies to become more efficientwhile taking pricing power out of their hands Thedual need for improved supply chain agility and costefficiencyis challenging suppliers to reevaluate the waysin which they plan and manage their supply chains asthey constantly search for approaches that will helpthem achieve the rock-bottom prices and operationalexcellence now expected in the industry

Furthermore the growth of private-label products isencouraging manufacturers to take a number of stepsto compete more effectively Increasingly they areturning to innovation and new product introduction as ameans to achieve real differentiation as well as growthBranded manufacturers are also looking to get closerto the consumer with many of the larger ones piloting

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

direct-to-consumer marketing approaches They arealso trying to better understand the in-store consumerexperience by monitoring the execution of in-storeactivitiesNevertheless many suppliers are losing brand equityIn recent years a couple of factors have been fuelingthe growing competition between manufacturers andretailers-Retailers are using their power to set higherstandards for marketing and operational excellenceincluding escalating demands for improved servicequality and shorter order-to-delivery cycles frommanufacturers and distributors Many of thesedemands such as RFID not only squeeze marginsbut also require significant capital investments-Because of their direct relationships with consumersretailers have a deeper knowledge of consumerbehaviorCompetition is becoming more and moredifficultIn the beverage manufacturing industry competition isgrowing due to the following factors-Constant demand for new niche products relatedto consumer preferences for healthier and morediversifiedofferings-Industry consolidation which has significantly raisedthe bar for the ldquoscale needed to competerdquo-The growth of private-label productsThese competitive pressures have led to-SKU proliferation - number of SKUs in a typicalbeverage company has doubled from 1991 to 2001A plethora of new product failures-Only 20 are effective-Only 10 generate significant revenue-Most fail within the first two years

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

-Further consolidation and rationalization tocapture cost savings by improving operations andeliminating redundancy-Industry leaders are acquiring small highgrowthCompanies

-Mid-market players are vertically integrating-Declining soft drink prices-Profitability can only be improved throughgreater efficiency in the supply chain orthrough more-effective trade promotionswhich usually require considerableexpendituresSales channels are very complexThe macro environment in which soft drinkmanufacturers operate has several uniquecharacteristics-Market to consumerssell to retailers throughwholesalers-Must have the ability to communicate directly withretailers-Multiple distribution channels-Seasonal demands

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

The beverage industry is a multi-channel industryTherefore soft drink companies have several types ofcustomers with diverse characteristics

manufacturinng

Wholesale ldquowallrdquo

product

product

Retail

consumer

product

Market to consumer Sell to retail

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

-Modern TradeLarge Chain Retailers-Greater power in negotiating purchases ofconcentrations and merges-Direct access to the consumer and a-tendency to protect this relationship from-manufacturer intrusion-Request contributions and discounts frombrand companies-Small Individual Retailers-Huge number of small point sales-Sometimes buy products directly through-cash and carry or modern trade-Indirect Channel (wholesalers)-Medium-sized organizations as aconsequence of aggregation throughconsortia and merging-Playing a fundamental role in beveragedistribution-Possess critical information regardingindividual points of sale in terms of volumeassortment presence of competitorrsquosbeverages etcDue to the complexity of the marketplace the entirelogistical chain must be able to sustain brands productsand services coherently within the various channelstaking into account differing points of sale anddiverse customer needs Additionally each beveragemanufacturer must provide customers with an extensiveset of packaging options including-Tracking product in various package sizes-Special labeling requirements for customers-Internationaldomestic packaging- Tracingrecall capabilities

Statutory regulation is increasing

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

Governments around the world are concerned aboutfood safety and quality Periodically safety failuresmake big news in the global press Amid this growingconcern regulators are cracking down on sanitation anda variety of other food-safety requirementsWhile food safety is the major focus in Europe theemphasis in the US is more on bio-terrorism andfood security However the provisions in the 2005traceability legislation in the US which stemmed fromthe Bioterrorism Act of 2002 and those in the EUDirective 178 Articles 18 and 19 are very similar TheUS Food and Drug Administration (FDA) is proposingthe registration and tracking of almost all domestic andimported food articles but some are concerned that thecomplexity of the rules will overwhelm both the foodindustry and the FDAEach soft drink company must take these industrychallenges into consideration as well as its ownstrengths and market position when looking for waysto drive innovation accelerate growth and increasemargins The next section outlines where some of themost promising opportunities for accomplishing theseobjectives can be found4 Soft drink industry processimprovement opportunities

Improve customer relationships with DirectStore DeliveryBranded beverage manufacturers are attempting to getcloser to the consumer with many larger manufacturerspiloting direct-to-consumer marketing approachesThese include active monitoring of in-store activity andin some markets a significant move back to direct storedelivery (DSD)Direct Store Delivery is a business process used in thebeverage industry to sell and distribute goods directly tothe customerrsquos point-of-sale With DSD the soft drinkcompany gets in direct contact with retailers restaurantsand pubs and other outlets where consumers can obtain

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

the product Manufacturers can use DSD to

-Make beverage goods available to stores andcustomers quickly-Optimize process settlement in sales and distributionthrough complete coverage of the supply chain-Improve customer retention and build customerrelationships through personal service-Realize additional sales opportunities-Obtain first-hand information about the market-Better position brands against competitorsEnsure product quality up to the point of saleBest in class DSD companies couple the process of directdelivery with a cultural change in how they view theiremployees and how their delivery personnel operateThey are not just drivers but they have sales skillscommunication skills and a global view of the companyrsquosofferings commercial priorities and initiatives

Direct Store Delivery is characterized by variable ordersand deliveries Consequently the process should involvemore than just bringing goods to the point of sale Itshould eventually encompass taking additional orderspicking up empties collecting money and more Bestin-class DSD operations typically include many valueaddedactivities such as

-Merchandising activities - Enables the company toleverage frequent delivery visits to the point of saleThese activities include tracking merchandising ofother entities (suppliers wholesalers etc) reportingon in-store merchandising activities carrying outcompetitive intelligence (competitive productsproduct mixes prices displays etc) and monitoringstoreaccount execution May also include somepreventive maintenance

-Additional sales opportunities - Allows a companyto sell goods ldquooff the truckrdquo without any preceding

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

order The mix of products on the truck isdependent on what is most likely to be sold on acertain trip Support provided by handheld devicesenables drivers to skip back-end paperwork and toclose the process through printed invoices

Enhance relationship with indirect partnersIndirect sales is the process of selling to an end customerthrough a third party and tracking that sale as suchDue to the complexity of the beverage supply chainconflicts of interest frequently arise between beveragemanufacturers and beverage distributors

direct sales

indirect sales

-Soft drink manufacturers profit from increased salesat the expense of distributorsrsquo margins-Soft drink distributors profit from positive localpricing environments which if exploited reducevolume sales-Soft drink distributors continue to consolidate inan attempt to offset margin pressure through costreductionDespite these conflicting interests it is crucial thatbeverage manufacturers and beverage distributorsmaintain ldquoone face to the customerrdquo These companiesjointly market and sell the product in the marketplace

manufacturer distrib

uterstore

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

and close co-operation yields benefits for both partiesThe indirect relationship is a partnership that must benurtured by both the supplier and the distributor Thestakes are high for everyone For the manufacturera poor relationship with a distributor may cause it togive a competitor ldquogreater share of mindrdquo in the localmarketplace For the distributor a negative relationshipwith a supplier means constant threats of contracttermination and reduced marketing dollars spent in thelocal marketA strong manufacturerdistributor relationship is alsoimportant because consumers are becoming moredifficult to capture and classify It is not only aboutsales it is also about information But how can strategicinformation flow freely between partners Althoughsharing is implied in the word partnership the realityis that companies are still uncomfortable aboutexchanging strategic information Nevertheless it iscritical for companies to share information regardingsales volume and market intelligence on both themicroscopic and macroscopic levelsThe importance of the distributorrsquos role in the indirectchannel for beverage distribution suggests that it wouldbe beneficial to establish a common understandingbetween distributors and manufacturers regarding-Coding (products channels customers)-Technology-Data interpretation-Marketing and sales actionsIn some cases distributors are small- to medium-sizedcompanies that only dedicate a few people full-time tooperational activities As a result of this structure theyare rarely open to implementing a truly ldquocollaborativerdquoenvironment Recently however mergers betweendistributing companies and acquisitions of distributingcompanies by manufacturers have significantlymodified many operating and ownership structuresConsequently a few well-structured and manageddistributors have emerged that possess a better

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

understanding of the value of collaboration Thesedistributors have been at the forefront of facilitatingpartnership initiatives

Increase sales force effectiveness throughincentives managementIn the beverage industry the critical path to a companyrsquossuccess is the effectiveness of its sales force No matterhow efficiently the company runs its manufacturingprocesses or how well it markets its products abeverage company cannot succeed without an effectivesales force that ensures product placement on the storeshelves

A beverage manufacturerrsquos sales force typicallycomprises 17-25 of the companyrsquos cost basisBeverage distributors have an even higher percentageof their total costs allocated to their sales forces Yethow can beverage companies get the most out oftheir investments and ensure that their sales forces areoperating optimally

Properly managed commission programs allow beveragecompanies to effectively motivate their sales forcesto increase or maintain volume by brand or packageA commission could be a rebate discount or otherpayment to a third party or in-house employee Inorder to actively manage sales behavior it should bepaid when the internal or external sales representativemeets a pre-established benchmark for a tracked metricThe commission could take the form of either a cashpayment or an item

While commissions are usually paid based on salesvolume best-in-class companies take a more holisticview of commission metrics Some other important

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

measures include-Account revenue growth-Profit results-Number of new accounts-Customer service metrics-Account retention

Manage safety requirements through trackingand traceabilityAs recent history has shown the ability to trackinventory accurately ndash and to perform a timely andcost-effective product recall ndash is critical in the beverageindustry Inventory items need to be tracked monitoredand controlled in different ways and at very detailedlevels In each individual plant or warehouse eachresource requires a different level of controlanalysisFood safety legislation such as EU Directive 178 impactsthe whole process flow Traceability is a goal that mustbe achieved over the entire value chain requiring abatch control system that is able to track and documentall related characteristicsActivity Type of QuestionsTrack and inquire on inventoryby characteristics

How many kilos of syrup doI have

Record inventory activities(receipts shipmentsadjustments etc)

ldquoHow many different batchesof diet soda do I have in myinventoryrdquo

Recall productsldquoWhat batches will I have torecall from the retailerrdquo

Inventorytraceability information

ldquoWhat went into a specificbatchrdquo

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

Answered

At the batch level it is now possible to assign differentproduct attributes when searching for the productincluding-Manufacturing Expiration Dates-Shelf Life DatesClassifying production lots into batches allowscompanies to identify specific inventory andautomatically record its history including the history ofthe raw materials (and their associated batch numbers)used in its production In other words it allows full recallof the materials that have been involved in the overallmanufacturing process These improvements reduce thecompanyrsquos exposure to litigation and regulatory finesIn addition track and trace improvements helpcompanies to maintain high quality standards which isoften a selling point that differentiates one brand fromanother and that can command a price premium withthe consumer Recording and tracking that quality iscritical In the final analysis soft drink companies muststrive for the highest quality standards they can achievendash ones that are superior to those of their competitors

Optimize the extended supply chain

In a business environment characterized by strongcompetition changing consumer preferences a complexdistribution channel and conflicting relationshipsbetween soft drink manufacturers and distributors thebeverage supply chain is under significant pressureMoreover the worldrsquos dominant grocery retailers(with Wal-Mart paving the way) continue to demandincreasingly better service quality and shorter orderto-delivery cycles from manufacturers This confluenceof factors is forcing manufacturers to become moreefficient while taking pricing power out of their hands

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

The need for both improved supply chain agility andcost-efficiency is challenging suppliers to re-assess howthey plan and manage their supply chains

The logistic chain must be able to sustain brandsproducts and services cohesively while taking intoaccount different channels customers points of saleand customer needs Accordingly companies shouldconsider taking the following steps to improve theirsupply chainsEnsure product availability on-shelf ndash On-shelfavailability is becoming a critical issue for bothmanufacturers and retailers A system that avoidsout-of-stocks improves consumer value buildsbrand and store loyalty increases sales and ndash mostimportantly ndash boosts category profitability Thetraditional practice of filling out-of-stocks with otherproducts is no longer sufficient ndash particularly fromthe manufacturerrsquos point of view If consumerscannot find the brand they want their loyalty tothat brand suffers A 2002 GMA study found thatout-of-stocks jeopardize $6 billion in retail salesevery year Less conservative estimates put thisfigure as high as $20 billionFlexible ordering flexible delivering ndash Mostretailers are demanding increased flexibility in orderlead-times and delivery methods putting additionalpressures on the supply chains of manufacturersand distributors To withstand these pressurescompanies need to streamline product movementthrough programs such as store-specific shipmentsThey must also meet the strategies of progressiveretailers which require flow-through distributionand cross-dockingAccurately forecast demand ndash Properly forecasteddemand drives two of the primary metrics used tomeasure the efficiency of a beverage companyrsquossupply chain customer service and inventoryAccurate forecasts are essential to achieving

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

improved customer service and lower inventorylevels Even with recent success in developingand maintaining efficient supply chain processesforecasting inaccuracy remains a significant industryproblem According to the 2003 GMA LogisticsStudy more than one-third of all forecasts areinaccurate at the national level This figure jumpsto almost one out of every two at the regional(distribution-center) level Meanwhile at thestore level differences in store formats and sizeshamper the forecasting process and few havethe tools to accurately manage the sheer volumeof data generated by forecasting Furthermoremany manufacturers do not have the technologyto properly support their planning and forecastingefforts Many manufacturers are still forecastingsales in months although their plants run on weeklyplans That means they have to squeeze weeklytotals out of monthly boxesImplement a fully integrated emptiesmanagement process ndash Empties managementis the process of managing returnable containersincluding kegs CO2 tanks bottles and crates(an essential part of direct store delivery) Asuccessful empties management system givesthe manufacturer a detailed picture of the entireempties lifecycle including the location and statusof a companyrsquos assets This process-Lowers costs by controlling high-valueempties assets-Increases control by managing empties atcustomer locations-Decreases manufacturing issues by trackingemptiesReduce time-to-market for new productsAn efficient new product development system isessential in the beverage industry New products needto be brought to market quickly in order to capitalize onchanging consumer preferences and competitive threats

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

However new products must be developed tacticallyand the productrsquos potential must be understood andanalyzed before it hits the market Currently successrates for new products are astonishingly low ndash droppingfrom 75 to 25 in the last decade according toAMR ndash and most fail within the first two years afterintroduction

The companies that are best able to execute thewhole product development cycle will clearly have anadvantage This requires reducing time-to-market as wellas making effective use of scarce internal resources andimproving collaboration with partners In addition greatattention must be paid to aligning the related marketinginitiatives (eg advertising sales promotions etc) withthe new product introductionsInnovation is one of the primary growth drivers forbeverage companies and it can involve changes to theproduct itself or to the productrsquos packaging

Product innovation ndash Focuses on providing newtastes and flavors to demanding consumersPackaging innovation -ndash Emphasizes developingdifferentiated packaging according to theconsumption situation Often beveragemanufacturers use packaging innovation to increaseproduct shelf lifeTo ensure new product success beverage companiesmust oversee the integration consolidation and reuseof knowledge from all involved parties (includingbeverage manufacturers and bottlers) from R amp Dthrough production and down to sales marketing andfinancialsBy emphasizing greater collaboration and implementingWeb-based workflow beverage companies can reducelead-time from concept to shelf by 25 - 40 and atthe same time better integrate safety controls into thedevelopment process

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

Increase customer retention through effectivetrade promotionsIn an environment characterized by strong retailers anddiscriminating consumers beverage companies mustutilize processes and tools to protect their market sharesTo do this they must make a favorable impact at thepoint of sale through promotional activityTrade promotions have become a necessary andexpensive cost of doing business With a sizablepercentage of volume being driven through a smallerbase of retailers the competition for shelf space hasnever been higher If a beverage company fails toexecute a trade promotion at Wal-Mart a competitorwill Furthermore as trade promotions have proliferatedover the past few years they have also become moretargeted In response beverage companies must createpromotions for specific demographics channels andretailers which make the sales process more costly andcomplex

Trade promotions vary widely in terms of methodapproach and structure Many local promotions are runad-hoc with marginal capital investments by field salesassociates while others require significant investmentand involve pre-scheduling in co-operation with nationalchainsTwo of the most commonly used trade promotions inthe beverage industry are coupons and rebates Couponand rebate management are critical to enhancingrelationships between the beverage manufacturer andwholesalers customers and in the case of couponsconsumersCoupon programs which are in essence tradepromotions addressed to the final consumer aremainly executed via discounts at large retailers Thecoupon a certificate with a stated value can be applied

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

immediately or reserved for the next purchase Aproperly executed coupon program enables beveragecompanies to pass savings directly to the end consumerOn the other hand rebate programs are tradepromotions addressed to the retailer Thereforecontractual terms and conditions between themanufacturer and the retailer must be monitoredand executed Rebates are often part of special tradepromotions and management of the rebates typicallyfollows one of the following flows

Figure N - Rebate management in direct sales

Direct rebate agreement

Bevrage manufacturer

customer

distributor Report sales

Beverage manufacturer

customer

order

delivery

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesaleschannelFor a large number of companies in the beverageindustry telephone sales is the primary method oforder taking and customer interaction An effectivetelesales process can increase revenues and complementother sales processes such as DSD and field assetsmanagement This is accomplished by integratingthe phone sales function with the companyrsquos otheroperations

When correctly executed inbound and outboundtelesales functionality enables companies to manageeffectively and efficiently all contacts related to salesand customer services In addition it helps build clientrelationships sell new business and expand and retainthe current customer baseWell-implemented telesales functionality also enablesbusiness processes to be integrated and standardizedThis effectively ldquocloses the looprdquo creating a consistentexperience for customers within a multi-channelenvironment1048658104865810486581048658Some of the key benefits that a company can gain

Indirect rebate ageement

Billing

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

through telesales include-Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and needImplementing closed-loop processes between thetelesales operations and other departments can provideagents with a comprehensive view of all customerinteractions across the enterprise ndash in real time Inorder to optimize the telesales channel agents musthave tools to manage the entire sales process fromgenerating leads planning calls and prioritizing salesopportunities and activities to managing contacts andplacing orders quickly5 Solutions for the soft drink industryIn order to respond effectively to changing markettrends and challenges soft drink companies mustsupport their improvement efforts with industry-specificsolutions These solutions should have the followingcharacteristics and provide the following capabilitiesBasic processesPre-configured processes with clearlydefined implementation scope ndash A streamlinedimplementation strategy is necessary to minimize

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

disruptions to the business while maximizing enterprisewideadoption When a world-class solution tailored tothe specific needs of the soft drink industry is coupledwith a rapid implementation approach it can deliverimmediate business value generating a high overallreturn on investment and a low total cost of ownershipManage financials including cost management ndash Aneffective solution must provide an integrated financesystem capable of handling cost management meetinginternal and external reporting requirements providingreal-time data access and drilling-down to greater levelsof detail

Manage procurement process ndash Necessary capabilitiesfor efficient procurement include supporting vendorprice comparisons and flexible pricing processes forthe actual value of the raw ingredients It should alsosupport quotation handling contract management andbatch handlingMeet customer expectations for managing TheirOrders ndash An effective solution should be able toeffectively manage the entire process for handlingcustomersrsquo orders encompassing variable pricingdelivery invoicing and payment It should supportbeverage companies in shortening order cycle timesmaking on-time and in-full deliveries and providingoptimal payment methods for customersOptimize planning and manufacturing to suitspecific business requirements ndash Solutions in thisarena should support a multi-step manufacturingprocess This includes the ability to perform automaticbatch determination based on expiration date duringproduction-order processing

Provide efficiencies in integrated inventorymanagement ndash Integrated inventory managementcapabilities are crucial The system should be able toautomatically update all stock figures after material

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

movements have been posted These figures should beaccessible in real-time for decision supportManage product safety ndash As food safety requirementsbecome more advanced across the beverage industrytrack and trace capabilities are a prerequisite Aneffective solution should have the functionality to finda defective batch that has already been delivered to acustomer

Beverage-specific processesPlan deliveries ndash Effective solutions feature powerfultools that businesses can use to efficiently loaddispatch and track any number of deliveries Anemphasis should be placed on eliminating redundanttrips and matching the appropriate vehicles and driversto customers for each delivery By extending routemanagement into the order management systemcompanies could reap potential cost savings of 25 to50Monitor route business ndash Beverage companies mustbe able to account for every item delivered and takequick action to resolve item discrepancies Best-in-classsolutions provide powerful check-in and check-outfunctions that record all deliveries and returned goodsThey should also provide tools to monitor quickly andaccurately the entire transportation operation or that ofa transportation supplier from loading and delivery toaccounting and settlement of returned goodsThe system as a whole should ensure complete loadson-time deliveries solid inventory control and seamlessinvoicingKeep track of empties ndash Best-of-breed beverageindustry solutions paint a detailed picture of the entireempties situation showing the location and status ofcrates kegs or pallets and helping optimize returnlogistics It should also permit quick access of eachcustomerrsquos empties account as well as print deliverynotes or invoices recording the empties involved in adelivery

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

Manage rebates and bonus agreements ndash Rebateand bonus agreements are critical to enhancingrelationships among beverage manufacturerswholesalers and customers Yet the task of managingrebate programs is becoming increasingly difficultas current rebate arrangements often involvenumerous parties including many that are not directlyinvolved in the initial transactions Effective beveragesolutions provide companies with the tools needed tomanage easily and accurately large complex partnerconstellations with any number of bonus or rebatearrangements They should also provide couponmanagement These functions apply both to direct andindirect customers

Manage commissions ndash In the beverage industrycomplex commission structures are needed to motivatethe sales force and to encourage them to push certainbrands and to develop specific markets Best-in-classsolutions allow companies to complete commissionbasedtransactions make payments both to internal andexternal sales forces and track the payment of thesecommissions over time

6 Conclusion

The relative market share of the soft drink sub-sectors(carbonates juices bottled water energy drinks) varywidely across Europe America and Asia due to thedifferences in consumption habits brand awarenessand lifestyles On the aggregate the total value of softdrink consumption is expected to reach about $347billion USD by 2006 Despite its size annual growth isoften limited to increases in the worldrsquos population base

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

especially expansions in the middle-class In maturemarkets such as North America and the EuropeanUnion where population growth is limited achievingreal profitable growth requires specific strategies fortruly differentiated business performance

While all beverage businesses start from differentbaselines there are common themes in their potentialpaths to success-Better understanding the consumer ndash Beverageand related businesses will need to keep an eye onfast-moving changes in consumer requirementsGrowing consumer expectations for quality andvariety more diverse populations and risingconcerns over beverage safety will require firmsto introduce new products targeted to morespecialized markets and to rethink their productionprocesses and supply chains-Effective innovation and new product introductionThe ability to respond with agility to changingcustomer and consumer demands is essential and itmust be accomplished via the introduction of newproducts and formats that are successfully plannedand executed This represents the largest singleopportunity to drive profitable growth-Closer customer relationships ndash As retailersrationalize their supply base across all productcategories beverage companies will need to workmore closely with a smaller number of customerseach of whom represent a growing portion of theirbusiness-Operations Excellence ndash An agile cost-effectivesupply chain is vital to the success of a modernbeverage company Requests from the trade foroutstanding service quality and reduced order-todeliverycycles are challenging suppliers to re-assesstheir approaches to planning and managing theirsupply chains Ensured product availability deliveryflexibility and improved forecasting are the most

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

important elements for success in the beverageaindustry-Actionable information to manage the businessExamining accurate and timely data about salesand consumer behavior allows companies to gain atrue picture of product and customer profitabilityThis provides the foundation upon which to makegood management decisions and to take the properactions in the marketCompanies that can successfully address these issueswill be those that prosper The key to managing thesechallenges and ultimately to driving profitable growthlies in designing and implementing effective processesand supporting them with a flexible integratedinformation system capable of meeting the distinct andconstantly evolving needs of the soft drink industry

Reference

wwwpepsicocom

wwwpepsiworldcom

wwwadexindiacom

wwwenwikipediaorgwikipepsi-cola

wwwcocacolacom

wwwpepsizonemusiccom

wwwpepsicomhomephp

wwwpepsiarenacom

wwwkotlermarketingcom

Company details Records of PepsiCo

Brochures

Files

Philip kotler ndash Marketing book

Analysis and Interpretation

1 How many members are their in your family

A B C D E

0

5

10

15

20

25

30

35

40

Series1

A- 0

B- 8

C- 22

D- 30

E- 40

2 How many members of your family drink soft-drink

A B C D E0

5

10

15

20

25

30

35

40

45

Series1

A- 5

B- 10

C- 15

D- 30

E- 40

3 Among the following drinkswhich one you prefer the most

ABCDE

A- 20

B- 25

C- 40

D- 15

E- 0

4 Which one among the following you prefer to buy for your family

A B C D E0

5

10

15

20

25

30

35

40

45

Series1

A- 0

B- 5

C- 15

D- 38

E- 42

5 When do you consume soft drink

ABCD

A- 25

B- 20

C- 45

D- 10

6 Will you buy soft drinksif available at your door step

A B0

10

20

30

40

50

60

70

80

90

100

Series1

A- 0

B- 100

7 Among the following promotion schemes which five you prefer the most

A

B

C

D

E

F

G

H

I

0 5 10 15 20 25 30 35

Series1

A- 20

B- 25

C- 8

D- 32

E- 15

F- 0

G- 0

H- 0

I- 0

8 Among the following which one is best door to door delivery channel of

pet pls rank

ABCD

A- 20

B- 26

C- 38

D- 16

9 What do you think soft drink industry is making use visual merchandising

to increase their sales

A

B

C

D

0 5 10 15 20 25 30 35

Series1

A- 35

B- 30

C- 15

D- 20

10 Are you aware of all products of pepsico

A B0

10

20

30

40

50

60

70

80

90

100

Series1

A- 100

B- 0

CONSUMER QUESTIONNAIRE

(1) How many members are there in your family

(a) One (b) Two (c) Three (d) Four (e) more than four

(2) How many members of your family drink soft-drinks

(a) One (b) Two (c) Three (d) Four (e) more than four

(3)Among the following drinks which one you prefer the most

(a) Pepsi (b) Coca-cola (c) Fruit juice (d) lemon juice (e) Others

(4) Which one among the following you prefer to buy for your family

Plz Rank as per your Choice

(a) 200 Ml Glass Bottle ( )

(b) 300 Ml Glass Bottle ( )

(c) 500 Ml PET Bottle ( )

(d) 15 Lts PET Bottle ( )

(e) 2 Lts PET Bottle ( )

(5) When do you consume soft drink Please rank the following

(a)At the time of watching TV ( )

(b) With the meal ( )

(c) When you go out for movies ( )

(d) Whenever you feel like consuming it ( )

(6)Will you buy soft drinks if available at your door Step

(A)no

(b)yes

(c)if no then why

(7) Among the following promotion schemes which five you prefer the

most

(a) Coupons (b) premium (gifts) (c) Price off (d) Prizes

(e) Samples (f) Cash refunds (g) Co-Branding (h) free liquid

(i) any other

(8) Among the following which one is the best door to door delivery

channel of PET please rank

(a) Vegetable vendor

(b) Hawkers

(c) The milk man

(d) Others (please specify)

(9) what you think soft drink industry is making use of visual merchandising to

increase their sales

(a) excellent

(b) very good

(c) good

(d) fair

(10) are you aware of all product of pepsico

(a) yes

(b) no

(c)if no then why

(11)give your comment

Personal Details

Name

Age

Qualification

Address

• Submitted To Submitted By
• Ms Anuradha tiwari sharad kumar singh RollNoJKBS083296
• PGDBM 2ND SEM(MKT)
• Session-2008-10
• J K BUSINESS SCHOOL GURGAON
• ( HARYANA)
• • I am thankful to all the persons who are involved in this
  • • PepsiCo Headquarters

A B C D E0

5

10

15

20

25

30

35

40

45

Series1

A- 5

B- 10

C- 15

D- 30

E- 40

3 Among the following drinkswhich one you prefer the most

ABCDE

A- 20

B- 25

C- 40

D- 15

E- 0

4 Which one among the following you prefer to buy for your family

A B C D E0

5

10

15

20

25

30

35

40

45

Series1

A- 0

B- 5

C- 15

D- 38

E- 42

5 When do you consume soft drink

ABCD

A- 25

B- 20

C- 45

D- 10

6 Will you buy soft drinksif available at your door step

A B0

10

20

30

40

50

60

70

80

90

100

Series1

A- 0

B- 100

7 Among the following promotion schemes which five you prefer the most

A

B

C

D

E

F

G

H

I

0 5 10 15 20 25 30 35

Series1

A- 20

B- 25

C- 8

D- 32

E- 15

F- 0

G- 0

H- 0

I- 0

8 Among the following which one is best door to door delivery channel of

pet pls rank

ABCD

A- 20

B- 26

C- 38

D- 16

9 What do you think soft drink industry is making use visual merchandising

to increase their sales

A

B

C

D

0 5 10 15 20 25 30 35

Series1

A- 35

B- 30

C- 15

D- 20

10 Are you aware of all products of pepsico

A B0

10

20

30

40

50

60

70

80

90

100

Series1

A- 100

B- 0

CONSUMER QUESTIONNAIRE

(1) How many members are there in your family

(a) One (b) Two (c) Three (d) Four (e) more than four

(2) How many members of your family drink soft-drinks

(a) One (b) Two (c) Three (d) Four (e) more than four

(3)Among the following drinks which one you prefer the most

(a) Pepsi (b) Coca-cola (c) Fruit juice (d) lemon juice (e) Others

(4) Which one among the following you prefer to buy for your family

Plz Rank as per your Choice

(a) 200 Ml Glass Bottle ( )

(b) 300 Ml Glass Bottle ( )

(c) 500 Ml PET Bottle ( )

(d) 15 Lts PET Bottle ( )

(e) 2 Lts PET Bottle ( )

(5) When do you consume soft drink Please rank the following

(a)At the time of watching TV ( )

(b) With the meal ( )

(c) When you go out for movies ( )

(d) Whenever you feel like consuming it ( )

(6)Will you buy soft drinks if available at your door Step

(A)no

(b)yes

(c)if no then why

(7) Among the following promotion schemes which five you prefer the

most

(a) Coupons (b) premium (gifts) (c) Price off (d) Prizes

(e) Samples (f) Cash refunds (g) Co-Branding (h) free liquid

(i) any other

(8) Among the following which one is the best door to door delivery

channel of PET please rank

(a) Vegetable vendor

(b) Hawkers

(c) The milk man

(d) Others (please specify)

(9) what you think soft drink industry is making use of visual merchandising to

increase their sales

(a) excellent

(b) very good

(c) good

(d) fair

(10) are you aware of all product of pepsico

(a) yes

(b) no

(c)if no then why

(11)give your comment

Personal Details

Name

Age

Qualification

Address

• Submitted To Submitted By
• Ms Anuradha tiwari sharad kumar singh RollNoJKBS083296
• PGDBM 2ND SEM(MKT)
• Session-2008-10
• J K BUSINESS SCHOOL GURGAON
• ( HARYANA)
• • I am thankful to all the persons who are involved in this
  • • PepsiCo Headquarters

ABCDE

A- 20

B- 25

C- 40

D- 15

E- 0

4 Which one among the following you prefer to buy for your family

A B C D E0

5

10

15

20

25

30

35

40

45

Series1

A- 0

B- 5

C- 15

D- 38

E- 42

5 When do you consume soft drink

ABCD

A- 25

B- 20

C- 45

D- 10

6 Will you buy soft drinksif available at your door step

A B0

10

20

30

40

50

60

70

80

90

100

Series1

A- 0

B- 100

7 Among the following promotion schemes which five you prefer the most

A

B

C

D

E

F

G

H

I

0 5 10 15 20 25 30 35

Series1

A- 20

B- 25

C- 8

D- 32

E- 15

F- 0

G- 0

H- 0

I- 0

8 Among the following which one is best door to door delivery channel of

pet pls rank

ABCD

A- 20

B- 26

C- 38

D- 16

9 What do you think soft drink industry is making use visual merchandising

to increase their sales

A

B

C

D

0 5 10 15 20 25 30 35

Series1

A- 35

B- 30

C- 15

D- 20

10 Are you aware of all products of pepsico

A B0

10

20

30

40

50

60

70

80

90

100

Series1

A- 100

B- 0

CONSUMER QUESTIONNAIRE

(1) How many members are there in your family

(a) One (b) Two (c) Three (d) Four (e) more than four

(2) How many members of your family drink soft-drinks

(a) One (b) Two (c) Three (d) Four (e) more than four

(3)Among the following drinks which one you prefer the most

(a) Pepsi (b) Coca-cola (c) Fruit juice (d) lemon juice (e) Others

(4) Which one among the following you prefer to buy for your family

Plz Rank as per your Choice

(a) 200 Ml Glass Bottle ( )

(b) 300 Ml Glass Bottle ( )

(c) 500 Ml PET Bottle ( )

(d) 15 Lts PET Bottle ( )

(e) 2 Lts PET Bottle ( )

(5) When do you consume soft drink Please rank the following

(a)At the time of watching TV ( )

(b) With the meal ( )

(c) When you go out for movies ( )

(d) Whenever you feel like consuming it ( )

(6)Will you buy soft drinks if available at your door Step

(A)no

(b)yes

(c)if no then why

(7) Among the following promotion schemes which five you prefer the

most

(a) Coupons (b) premium (gifts) (c) Price off (d) Prizes

(e) Samples (f) Cash refunds (g) Co-Branding (h) free liquid

(i) any other

(8) Among the following which one is the best door to door delivery

channel of PET please rank

(a) Vegetable vendor

(b) Hawkers

(c) The milk man

(d) Others (please specify)

(9) what you think soft drink industry is making use of visual merchandising to

increase their sales

(a) excellent

(b) very good

(c) good

(d) fair

(10) are you aware of all product of pepsico

(a) yes

(b) no

(c)if no then why

(11)give your comment

Personal Details

Name

Age

Qualification

Address

• Submitted To Submitted By
• Ms Anuradha tiwari sharad kumar singh RollNoJKBS083296
• PGDBM 2ND SEM(MKT)
• Session-2008-10
• J K BUSINESS SCHOOL GURGAON
• ( HARYANA)
• • I am thankful to all the persons who are involved in this
  • • PepsiCo Headquarters

A B C D E0

5

10

15

20

25

30

35

40

45

Series1

A- 0

B- 5

C- 15

D- 38

E- 42

5 When do you consume soft drink

ABCD

A- 25

B- 20

C- 45

D- 10

6 Will you buy soft drinksif available at your door step

A B0

10

20

30

40

50

60

70

80

90

100

Series1

A- 0

B- 100

7 Among the following promotion schemes which five you prefer the most

A

B

C

D

E

F

G

H

I

0 5 10 15 20 25 30 35

Series1

A- 20

B- 25

C- 8

D- 32

E- 15

F- 0

G- 0

H- 0

I- 0

8 Among the following which one is best door to door delivery channel of

pet pls rank

ABCD

A- 20

B- 26

C- 38

D- 16

9 What do you think soft drink industry is making use visual merchandising

to increase their sales

A

B

C

D

0 5 10 15 20 25 30 35

Series1

A- 35

B- 30

C- 15

D- 20

10 Are you aware of all products of pepsico

A B0

10

20

30

40

50

60

70

80

90

100

Series1

A- 100

B- 0

CONSUMER QUESTIONNAIRE

(1) How many members are there in your family

(a) One (b) Two (c) Three (d) Four (e) more than four

(2) How many members of your family drink soft-drinks

(a) One (b) Two (c) Three (d) Four (e) more than four

(3)Among the following drinks which one you prefer the most

(a) Pepsi (b) Coca-cola (c) Fruit juice (d) lemon juice (e) Others

(4) Which one among the following you prefer to buy for your family

Plz Rank as per your Choice

(a) 200 Ml Glass Bottle ( )

(b) 300 Ml Glass Bottle ( )

(c) 500 Ml PET Bottle ( )

(d) 15 Lts PET Bottle ( )

(e) 2 Lts PET Bottle ( )

(5) When do you consume soft drink Please rank the following

(a)At the time of watching TV ( )

(b) With the meal ( )

(c) When you go out for movies ( )

(d) Whenever you feel like consuming it ( )

(6)Will you buy soft drinks if available at your door Step

(A)no

(b)yes

(c)if no then why

(7) Among the following promotion schemes which five you prefer the

most

(a) Coupons (b) premium (gifts) (c) Price off (d) Prizes

(e) Samples (f) Cash refunds (g) Co-Branding (h) free liquid

(i) any other

(8) Among the following which one is the best door to door delivery

channel of PET please rank

(a) Vegetable vendor

(b) Hawkers

(c) The milk man

(d) Others (please specify)

(9) what you think soft drink industry is making use of visual merchandising to

increase their sales

(a) excellent

(b) very good

(c) good

(d) fair

(10) are you aware of all product of pepsico

(a) yes

(b) no

(c)if no then why

(11)give your comment

Personal Details

Name

Age

Qualification

Address

• Submitted To Submitted By
• Ms Anuradha tiwari sharad kumar singh RollNoJKBS083296
• PGDBM 2ND SEM(MKT)
• Session-2008-10
• J K BUSINESS SCHOOL GURGAON
• ( HARYANA)
• • I am thankful to all the persons who are involved in this
  • • PepsiCo Headquarters

ABCD

A- 25

B- 20

C- 45

D- 10

6 Will you buy soft drinksif available at your door step

A B0

10

20

30

40

50

60

70

80

90

100

Series1

A- 0

B- 100

7 Among the following promotion schemes which five you prefer the most

A

B

C

D

E

F

G

H

I

0 5 10 15 20 25 30 35

Series1

A- 20

B- 25

C- 8

D- 32

E- 15

F- 0

G- 0

H- 0

I- 0

8 Among the following which one is best door to door delivery channel of

pet pls rank

ABCD

A- 20

B- 26

C- 38

D- 16

9 What do you think soft drink industry is making use visual merchandising

to increase their sales

A

B

C

D

0 5 10 15 20 25 30 35

Series1

A- 35

B- 30

C- 15

D- 20

10 Are you aware of all products of pepsico

A B0

10

20

30

40

50

60

70

80

90

100

Series1

A- 100

B- 0

CONSUMER QUESTIONNAIRE

(1) How many members are there in your family

(a) One (b) Two (c) Three (d) Four (e) more than four

(2) How many members of your family drink soft-drinks

(a) One (b) Two (c) Three (d) Four (e) more than four

(3)Among the following drinks which one you prefer the most

(a) Pepsi (b) Coca-cola (c) Fruit juice (d) lemon juice (e) Others

(4) Which one among the following you prefer to buy for your family

Plz Rank as per your Choice

(a) 200 Ml Glass Bottle ( )

(b) 300 Ml Glass Bottle ( )

(c) 500 Ml PET Bottle ( )

(d) 15 Lts PET Bottle ( )

(e) 2 Lts PET Bottle ( )

(5) When do you consume soft drink Please rank the following

(a)At the time of watching TV ( )

(b) With the meal ( )

(c) When you go out for movies ( )

(d) Whenever you feel like consuming it ( )

(6)Will you buy soft drinks if available at your door Step

(A)no

(b)yes

(c)if no then why

(7) Among the following promotion schemes which five you prefer the

most

(a) Coupons (b) premium (gifts) (c) Price off (d) Prizes

(e) Samples (f) Cash refunds (g) Co-Branding (h) free liquid

(i) any other

(8) Among the following which one is the best door to door delivery

channel of PET please rank

(a) Vegetable vendor

(b) Hawkers

(c) The milk man

(d) Others (please specify)

(9) what you think soft drink industry is making use of visual merchandising to

increase their sales

(a) excellent

(b) very good

(c) good

(d) fair

(10) are you aware of all product of pepsico

(a) yes

(b) no

(c)if no then why

(11)give your comment

Personal Details

Name

Age

Qualification

Address

• Submitted To Submitted By
• Ms Anuradha tiwari sharad kumar singh RollNoJKBS083296
• PGDBM 2ND SEM(MKT)
• Session-2008-10
• J K BUSINESS SCHOOL GURGAON
• ( HARYANA)
• • I am thankful to all the persons who are involved in this
  • • PepsiCo Headquarters

A B0

10

20

30

40

50

60

70

80

90

100

Series1

A- 0

B- 100

7 Among the following promotion schemes which five you prefer the most

A

B

C

D

E

F

G

H

I

0 5 10 15 20 25 30 35

Series1

A- 20

B- 25

C- 8

D- 32

E- 15

F- 0

G- 0

H- 0

I- 0

8 Among the following which one is best door to door delivery channel of

pet pls rank

ABCD

A- 20

B- 26

C- 38

D- 16

9 What do you think soft drink industry is making use visual merchandising

to increase their sales

A

B

C

D

0 5 10 15 20 25 30 35

Series1

A- 35

B- 30

C- 15

D- 20

10 Are you aware of all products of pepsico

A B0

10

20

30

40

50

60

70

80

90

100

Series1

A- 100

B- 0

CONSUMER QUESTIONNAIRE

(1) How many members are there in your family

(a) One (b) Two (c) Three (d) Four (e) more than four

(2) How many members of your family drink soft-drinks

(a) One (b) Two (c) Three (d) Four (e) more than four

(3)Among the following drinks which one you prefer the most

(a) Pepsi (b) Coca-cola (c) Fruit juice (d) lemon juice (e) Others

(4) Which one among the following you prefer to buy for your family

Plz Rank as per your Choice

(a) 200 Ml Glass Bottle ( )

(b) 300 Ml Glass Bottle ( )

(c) 500 Ml PET Bottle ( )

(d) 15 Lts PET Bottle ( )

(e) 2 Lts PET Bottle ( )

(5) When do you consume soft drink Please rank the following

(a)At the time of watching TV ( )

(b) With the meal ( )

(c) When you go out for movies ( )

(d) Whenever you feel like consuming it ( )

(6)Will you buy soft drinks if available at your door Step

(A)no

(b)yes

(c)if no then why

(7) Among the following promotion schemes which five you prefer the

most

(a) Coupons (b) premium (gifts) (c) Price off (d) Prizes

(e) Samples (f) Cash refunds (g) Co-Branding (h) free liquid

(i) any other

(8) Among the following which one is the best door to door delivery

channel of PET please rank

(a) Vegetable vendor

(b) Hawkers

(c) The milk man

(d) Others (please specify)

(9) what you think soft drink industry is making use of visual merchandising to

increase their sales

(a) excellent

(b) very good

(c) good

(d) fair

(10) are you aware of all product of pepsico

(a) yes

(b) no

(c)if no then why

(11)give your comment

Personal Details

Name

Age

Qualification

Address

• Submitted To Submitted By
• Ms Anuradha tiwari sharad kumar singh RollNoJKBS083296
• PGDBM 2ND SEM(MKT)
• Session-2008-10
• J K BUSINESS SCHOOL GURGAON
• ( HARYANA)
• • I am thankful to all the persons who are involved in this
  • • PepsiCo Headquarters

A

B

C

D

E

F

G

H

I

0 5 10 15 20 25 30 35

Series1

A- 20

B- 25

C- 8

D- 32

E- 15

F- 0

G- 0

H- 0

I- 0

8 Among the following which one is best door to door delivery channel of

pet pls rank

ABCD

A- 20

B- 26

C- 38

D- 16

9 What do you think soft drink industry is making use visual merchandising

to increase their sales

A

B

C

D

0 5 10 15 20 25 30 35

Series1

A- 35

B- 30

C- 15

D- 20

10 Are you aware of all products of pepsico

A B0

10

20

30

40

50

60

70

80

90

100

Series1

A- 100

B- 0

CONSUMER QUESTIONNAIRE

(1) How many members are there in your family

(a) One (b) Two (c) Three (d) Four (e) more than four

(2) How many members of your family drink soft-drinks

(a) One (b) Two (c) Three (d) Four (e) more than four

(3)Among the following drinks which one you prefer the most

(a) Pepsi (b) Coca-cola (c) Fruit juice (d) lemon juice (e) Others

(4) Which one among the following you prefer to buy for your family

Plz Rank as per your Choice

(a) 200 Ml Glass Bottle ( )

(b) 300 Ml Glass Bottle ( )

(c) 500 Ml PET Bottle ( )

(d) 15 Lts PET Bottle ( )

(e) 2 Lts PET Bottle ( )

(5) When do you consume soft drink Please rank the following

(a)At the time of watching TV ( )

(b) With the meal ( )

(c) When you go out for movies ( )

(d) Whenever you feel like consuming it ( )

(6)Will you buy soft drinks if available at your door Step

(A)no

(b)yes

(c)if no then why

(7) Among the following promotion schemes which five you prefer the

most

(a) Coupons (b) premium (gifts) (c) Price off (d) Prizes

(e) Samples (f) Cash refunds (g) Co-Branding (h) free liquid

(i) any other

(8) Among the following which one is the best door to door delivery

channel of PET please rank

(a) Vegetable vendor

(b) Hawkers

(c) The milk man

(d) Others (please specify)

(9) what you think soft drink industry is making use of visual merchandising to

increase their sales

(a) excellent

(b) very good

(c) good

(d) fair

(10) are you aware of all product of pepsico

(a) yes

(b) no

(c)if no then why

(11)give your comment

Personal Details

Name

Age

Qualification

Address

• Submitted To Submitted By
• Ms Anuradha tiwari sharad kumar singh RollNoJKBS083296
• PGDBM 2ND SEM(MKT)
• Session-2008-10
• J K BUSINESS SCHOOL GURGAON
• ( HARYANA)
• • I am thankful to all the persons who are involved in this
  • • PepsiCo Headquarters

ABCD

A- 20

B- 26

C- 38

D- 16

9 What do you think soft drink industry is making use visual merchandising

to increase their sales

A

B

C

D

0 5 10 15 20 25 30 35

Series1

A- 35

B- 30

C- 15

D- 20

10 Are you aware of all products of pepsico

A B0

10

20

30

40

50

60

70

80

90

100

Series1

A- 100

B- 0

CONSUMER QUESTIONNAIRE

(1) How many members are there in your family

(a) One (b) Two (c) Three (d) Four (e) more than four

(2) How many members of your family drink soft-drinks

(a) One (b) Two (c) Three (d) Four (e) more than four

(3)Among the following drinks which one you prefer the most

(a) Pepsi (b) Coca-cola (c) Fruit juice (d) lemon juice (e) Others

(4) Which one among the following you prefer to buy for your family

Plz Rank as per your Choice

(a) 200 Ml Glass Bottle ( )

(b) 300 Ml Glass Bottle ( )

(c) 500 Ml PET Bottle ( )

(d) 15 Lts PET Bottle ( )

(e) 2 Lts PET Bottle ( )

(5) When do you consume soft drink Please rank the following

(a)At the time of watching TV ( )

(b) With the meal ( )

(c) When you go out for movies ( )

(d) Whenever you feel like consuming it ( )

(6)Will you buy soft drinks if available at your door Step

(A)no

(b)yes

(c)if no then why

(7) Among the following promotion schemes which five you prefer the

most

(a) Coupons (b) premium (gifts) (c) Price off (d) Prizes

(e) Samples (f) Cash refunds (g) Co-Branding (h) free liquid

(i) any other

(8) Among the following which one is the best door to door delivery

channel of PET please rank

(a) Vegetable vendor

(b) Hawkers

(c) The milk man

(d) Others (please specify)

(9) what you think soft drink industry is making use of visual merchandising to

increase their sales

(a) excellent

(b) very good

(c) good

(d) fair

(10) are you aware of all product of pepsico

(a) yes

(b) no

(c)if no then why

(11)give your comment

Personal Details

Name

Age

Qualification

Address

• Submitted To Submitted By
• Ms Anuradha tiwari sharad kumar singh RollNoJKBS083296
• PGDBM 2ND SEM(MKT)
• Session-2008-10
• J K BUSINESS SCHOOL GURGAON
• ( HARYANA)
• • I am thankful to all the persons who are involved in this
  • • PepsiCo Headquarters

A

B

C

D

0 5 10 15 20 25 30 35

Series1

A- 35

B- 30

C- 15

D- 20

10 Are you aware of all products of pepsico

A B0

10

20

30

40

50

60

70

80

90

100

Series1

A- 100

B- 0

CONSUMER QUESTIONNAIRE

(1) How many members are there in your family

(a) One (b) Two (c) Three (d) Four (e) more than four

(2) How many members of your family drink soft-drinks

(a) One (b) Two (c) Three (d) Four (e) more than four

(3)Among the following drinks which one you prefer the most

(a) Pepsi (b) Coca-cola (c) Fruit juice (d) lemon juice (e) Others

(4) Which one among the following you prefer to buy for your family

Plz Rank as per your Choice

(a) 200 Ml Glass Bottle ( )

(b) 300 Ml Glass Bottle ( )

(c) 500 Ml PET Bottle ( )

(d) 15 Lts PET Bottle ( )

(e) 2 Lts PET Bottle ( )

(5) When do you consume soft drink Please rank the following

(a)At the time of watching TV ( )

(b) With the meal ( )

(c) When you go out for movies ( )

(d) Whenever you feel like consuming it ( )

(6)Will you buy soft drinks if available at your door Step

(A)no

(b)yes

(c)if no then why

(7) Among the following promotion schemes which five you prefer the

most

(a) Coupons (b) premium (gifts) (c) Price off (d) Prizes

(e) Samples (f) Cash refunds (g) Co-Branding (h) free liquid

(i) any other

(8) Among the following which one is the best door to door delivery

channel of PET please rank

(a) Vegetable vendor

(b) Hawkers

(c) The milk man

(d) Others (please specify)

(9) what you think soft drink industry is making use of visual merchandising to

increase their sales

(a) excellent

(b) very good

(c) good

(d) fair

(10) are you aware of all product of pepsico

(a) yes

(b) no

(c)if no then why

(11)give your comment

Personal Details

Name

Age

Qualification

Address

• Submitted To Submitted By
• Ms Anuradha tiwari sharad kumar singh RollNoJKBS083296
• PGDBM 2ND SEM(MKT)
• Session-2008-10
• J K BUSINESS SCHOOL GURGAON
• ( HARYANA)
• • I am thankful to all the persons who are involved in this
  • • PepsiCo Headquarters

A B0

10

20

30

40

50

60

70

80

90

100

Series1

A- 100

B- 0

CONSUMER QUESTIONNAIRE

(1) How many members are there in your family

(a) One (b) Two (c) Three (d) Four (e) more than four

(2) How many members of your family drink soft-drinks

(a) One (b) Two (c) Three (d) Four (e) more than four

(3)Among the following drinks which one you prefer the most

(a) Pepsi (b) Coca-cola (c) Fruit juice (d) lemon juice (e) Others

(4) Which one among the following you prefer to buy for your family

Plz Rank as per your Choice

(a) 200 Ml Glass Bottle ( )

(b) 300 Ml Glass Bottle ( )

(c) 500 Ml PET Bottle ( )

(d) 15 Lts PET Bottle ( )

(e) 2 Lts PET Bottle ( )

(5) When do you consume soft drink Please rank the following

(a)At the time of watching TV ( )

(b) With the meal ( )

(c) When you go out for movies ( )

(d) Whenever you feel like consuming it ( )

(6)Will you buy soft drinks if available at your door Step

(A)no

(b)yes

(c)if no then why

(7) Among the following promotion schemes which five you prefer the

most

(a) Coupons (b) premium (gifts) (c) Price off (d) Prizes

(e) Samples (f) Cash refunds (g) Co-Branding (h) free liquid

(i) any other

(8) Among the following which one is the best door to door delivery

channel of PET please rank

(a) Vegetable vendor

(b) Hawkers

(c) The milk man

(d) Others (please specify)

(9) what you think soft drink industry is making use of visual merchandising to

increase their sales

(a) excellent

(b) very good

(c) good

(d) fair

(10) are you aware of all product of pepsico

(a) yes

(b) no

(c)if no then why

(11)give your comment

Personal Details

Name

Age

Qualification

Address

• Submitted To Submitted By
• Ms Anuradha tiwari sharad kumar singh RollNoJKBS083296
• PGDBM 2ND SEM(MKT)
• Session-2008-10
• J K BUSINESS SCHOOL GURGAON
• ( HARYANA)
• • I am thankful to all the persons who are involved in this
  • • PepsiCo Headquarters

(1) How many members are there in your family

(a) One (b) Two (c) Three (d) Four (e) more than four

(2) How many members of your family drink soft-drinks

(a) One (b) Two (c) Three (d) Four (e) more than four

(3)Among the following drinks which one you prefer the most

(a) Pepsi (b) Coca-cola (c) Fruit juice (d) lemon juice (e) Others

(4) Which one among the following you prefer to buy for your family

Plz Rank as per your Choice

(a) 200 Ml Glass Bottle ( )

(b) 300 Ml Glass Bottle ( )

(c) 500 Ml PET Bottle ( )

(d) 15 Lts PET Bottle ( )

(e) 2 Lts PET Bottle ( )

(5) When do you consume soft drink Please rank the following

(a)At the time of watching TV ( )

(b) With the meal ( )

(c) When you go out for movies ( )

(d) Whenever you feel like consuming it ( )

(6)Will you buy soft drinks if available at your door Step

(A)no

(b)yes

(c)if no then why

(7) Among the following promotion schemes which five you prefer the

most

(a) Coupons (b) premium (gifts) (c) Price off (d) Prizes

(e) Samples (f) Cash refunds (g) Co-Branding (h) free liquid

(i) any other

(8) Among the following which one is the best door to door delivery

channel of PET please rank

(a) Vegetable vendor

(b) Hawkers

(c) The milk man

(d) Others (please specify)

(9) what you think soft drink industry is making use of visual merchandising to

increase their sales

(a) excellent

(b) very good

(c) good

(d) fair

(10) are you aware of all product of pepsico

(a) yes

(b) no

(c)if no then why

(11)give your comment

Personal Details

Name

Age

Qualification

Address

• Submitted To Submitted By
• Ms Anuradha tiwari sharad kumar singh RollNoJKBS083296
• PGDBM 2ND SEM(MKT)
• Session-2008-10
• J K BUSINESS SCHOOL GURGAON
• ( HARYANA)
• • I am thankful to all the persons who are involved in this
  • • PepsiCo Headquarters

(d) Whenever you feel like consuming it ( )

(6)Will you buy soft drinks if available at your door Step

(A)no

(b)yes

(c)if no then why

(7) Among the following promotion schemes which five you prefer the

most

(a) Coupons (b) premium (gifts) (c) Price off (d) Prizes

(e) Samples (f) Cash refunds (g) Co-Branding (h) free liquid

(i) any other

(8) Among the following which one is the best door to door delivery

channel of PET please rank

(a) Vegetable vendor

(b) Hawkers

(c) The milk man

(d) Others (please specify)

(9) what you think soft drink industry is making use of visual merchandising to

increase their sales

(a) excellent

(b) very good

(c) good

(d) fair

(10) are you aware of all product of pepsico

(a) yes

(b) no

(c)if no then why

(11)give your comment

Personal Details

Name

Age

Qualification

Address

• Submitted To Submitted By
• Ms Anuradha tiwari sharad kumar singh RollNoJKBS083296
• PGDBM 2ND SEM(MKT)
• Session-2008-10
• J K BUSINESS SCHOOL GURGAON
• ( HARYANA)
• • I am thankful to all the persons who are involved in this
  • • PepsiCo Headquarters

(9) what you think soft drink industry is making use of visual merchandising to

increase their sales

(a) excellent

(b) very good

(c) good

(d) fair

(10) are you aware of all product of pepsico

(a) yes

(b) no

(c)if no then why

(11)give your comment

Personal Details

Name

Age

Qualification

Address

• Submitted To Submitted By
• Ms Anuradha tiwari sharad kumar singh RollNoJKBS083296
• PGDBM 2ND SEM(MKT)
• Session-2008-10
• J K BUSINESS SCHOOL GURGAON
• ( HARYANA)
• • I am thankful to all the persons who are involved in this
  • • PepsiCo Headquarters

• Submitted To Submitted By
• Ms Anuradha tiwari sharad kumar singh RollNoJKBS083296
• PGDBM 2ND SEM(MKT)
• Session-2008-10
• J K BUSINESS SCHOOL GURGAON
• ( HARYANA)
• • I am thankful to all the persons who are involved in this
  • • PepsiCo Headquarters