Channel Related Competitive Edge of ACI Salt

Competitive edge means the advantage that a company has over its competitor companies. Channel
related competitive edge of ACI Salt shows the advantages that ACI salt is getting through its
deploying multiple distribution channel system to sustain in the market. ACI salt is a FMCG
product that contains white salt packed in polybags and marketed for the mass people. Their price
is also competitive, which makes them follow the cost leadership strategy.

ACI salt follows the Intensive Distribution Strategy where the company tries to sell its product
through as many outlets as possible. Intensive distribution strategy means distribution of a product
on a large-scale through display of the product in every possible places and ways, so that the sale
is high in volume due to large scale distribution. The chosen level of distribution generally depends
on different factors such as the production capacity, the size of the target market, pricing and
promotion policies as well as the seasonal requirement of the product by the end user.

This strategy covers all the possible outlets and display points that can distribute and sell the
products. So, for this kind of products, the key to success relies on the distribution strategy. The
easier it is to find the product for the customer, the more revenue the company will get in the long
run through extensive market coverage.

There are two generic distribution channels available for any organization-

1. Direct Distribution: Direct distribution involves distributing the product or service from
manufacturer to ultimate consumer. It does not have any intermediaries between
manufacturer and consumers. The benefit of this distribution is manufacturer can control
the whole process.
2. Indirect Distribution: Indirect Distribution involves distributing the product or service by
the use of an intermediary. In this process, manufacturer can sell their product to wholesaler
or retailer and consumers buy from them.
ACI as a FMCG manufacturer deploy both direct and indirect distribution strategy based on the
needs of the end users and the locational convenience.

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 Manufacturer Manufacturer

Wholesaler

Retailer

End User/Consumer End User/Consumer

Indirect Distribution Direct Distribution

Figure: Two Types of Distribution Channels

In terms of channel strategy ACI Salt predominantly focuses on Push-based strategy as salt is a
staple item and does not require any complex purchase decision from customer’s perspective.

A push strategy is where the manufacturer focuses on their marketing effort in promoting their
product to the next party in the distribution channel (retailer or wholesaler). It includes convincing
them to stock ACI’s product. Also, ACI conducts various promotional activities to connect with
the retailers and provides the salt to the retailers to sell it to consumers.

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ACI Salt uses several promotional mixes to create demand from downstream channel members
in the market:

1. Provide Discount Offers.

2. Product Bundling & Free gift.
3. Major Event Sponsorship.

Distribution Model 1: Generic Distribution Model

ACI Manufacturing
Plant

Central Warehouse

Territory Manager
Appoint Dealer
Complying Company's Find
Code of Conduct and Dealer or
manage Deport 3rd Party
Agent

YES NO

Independent
Company Owned Depot
Dealer

Sales Representative(SR)
Wholesaler

Retail Outlet Retail Outlet

End User/Consumer

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ACI’s distribution department upholds strategically located 26 company owned warehouses all
over the country. ACI is continuously expanding its distribution network with an aim to providing
better services to its customers.

They have over 500 trained delivery persons and a large fleet of over 150 vehicles. The distribution
system is capable of handling continuing volume of diverse range of products from the various
businesses.

ACI divided the country in different zones, which is maintained by Zonal Sales Manager (ZSM).
Within a particular zone there are several territories which are controlled by Area Sales Manager
(ASM). To provide better service they are divided into two teams, which are called GP (General
Product) and SP (Special Product) team. This team is strategically instructed by ASM. They lead
the root level Territory Officers (TO). Under TO there are number of SR (Sales representatives)
and DSR (Delivery Sales representatives) who are responsible to sell the product to the retailers.
ACI salt is under the GP category.

Typically, the salt produced in factories are sent to company owned warehouses located in 26
dispersed strategic locations. From there independent dealers take their allocated product paying
the price of the entire bulk, thus take title of the product and undertake ownership risk. In each
Upazila, there is at least one dealer, assigned for distributing the product who carries downstream
distribution cost; such as physical storage, payment of sales representatives, brand promotion and
vehicle transportation cost.

In some cases, finding appropriate dealer becomes difficult as initial investment to take the
regional dealership is significant. In rural areas where overall income-level is low ACI find it
challenging to appoint appropriate dealer who can smoothly run their activity without having any
financial issue. In those situations, alternative stream is introduced which is company owned depot
where each and every employee belong to ACI’s payroll and managed by the company’s HR
Department.

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Model 2: Rural Distribution Model

ACI Sub Retail

Factory Warehouse Dealer Consumer
Dealer Outlet
Plant

ACI Factory
Warehouse Dealer Wholesaler Retail Outlet End User
Plant

The above model (Model-2) has been adopted by ACI to establish deeper infiltration in rural
geographical area. The difference in rural and urban distribution starts with the addition of sub-
distributors under the distributors for deeper penetration into villages with 5000 or less population.

The wholesalers on the other hand cater to the underserved satellite areas where the company
distribution has not yet penetrated. ACI appoints renowned retailers as a wholesaler for every 5 to
8 villages who have the capacity to invest, has a large rural and satellite network and keep all
stocks. The logistics start with the distribution of stocks from the manufacturing units to
warehouse, and up to the distributors point at company expense using heavy vehicles by road. The
stock from warehouse to distributor is transferred on freight-paid basis. The sub-distributors cover
the market using a van at the expense of 1-1.5 percent of their business volume.

The permanent journey plan which is the route plan is framed in consultation of distributors and
the sales team to reduce expenses. The route plan is prepared for 6 days in a week keeping in mind
the haat days, distance and the number of outlets to be covered and the type of required vehicles.
The number of outlets covered per day are 30-40 of which 15-20 are successful. The area of
distribution per distributor is 50 km radius.

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Model 3 (B to B)

Catering Service Provider

Central Warehouse

Chain Super Shops: Shwapno,

ACI Factory Plant
Agora, Meena Bazar

Industrial User

The main advantages of selling direct are that, there is no need to share profit margins and the
producer has complete control over the sales process. Products are not sold nearby those of
competitors either.

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