Kelloggs

SALES & DISTRIBUTION MANAGEMENT

GROUP 4
Keshav|Tanay|Kham|Parth|Ulkrisht|Krishna

Kelloggs

FMCG Industry

Consumer Products Breakfast cereals/Pringles

Major Brands Chocos, CornFlakes, Special K

Distribution network of 4.6 million outlets

Turnover (2015-16) INR 6132 cr

Net Profit (2015-16) INR 725 cr

Largest Cereal
Manufacturer
in the world

Presence
across 140+
countries

Kelloggs Reach

4.6 million retail outlets services by its nationwide distribution network comprising

4 Regional Offices,

32 carrying & forwarding agents (CFAs)

5000 distributors and stockists.

Kelloggs distribution network has started covering almost every Indian town with
population over 20,000.
Urban

Rural

Sales Territories

160

55

Towns covered

4100

23000

Distributors

468

Super Distributors

60

Stockiest

2683

Distribution Channel Structure and margins

Urban

Company
Depot

Urban
Distributor
(5% margin)

Integrated
Kelloggs
software tracks
product from
company to
retailers unlike
Colgate or HUL
which tracks till
Stockists

Retailer
(10%
margin)

Distribution Channel Structure and margins

Rural
Company
Depot
Super
Distributor
s
(2%
margins)
Stockists
(4 %
margins)

Small distributors in
small towns
No transactions
with company

Retailer
s
(9%
margins

Integrated
Kelloggs
software tracks
product from
company to
retailers unlike
Colgate or HUL
which tracks till
Stockists

Source: JK Prasanna
Sr Manager, Retail

Distributors Selection

Criteria:

Financial soundness ( financial statements), Market knowledge,

Dependency on distribution business & Infra (godown space)

Urban: Distribution history

Rural: How quickly he can service the stockiest

468 Direct Distributors

Retailers

2 Factories
60 Super Distributors

2683 Stockists

Retailers

Revenue Share

Urban Rural Split

Share - 2010

Share - 2015

Urban

87%

85%

Rural

13%

15%

Channel Split :
Share 2015
General Trade

75%

Modern Trade

30%

CSD

5%

Kelloggs is different as it has a

significant portion of income
from MT unlike other FMCGs in
India
It hence has a separate sales
force for MT

Distributors Daily Schedule

Everyday log-in to
MyNet through Browser

Without any mechanism to

capture secondary sales in
rural segment on daily basis,
Kelloggs had very limited
information visibility.

Hence, rural market business

remained an information black
hole.

The company therefore chose

to built a mobile application for
PDA, named Mobile MIDAS

Uploads data from MIDAS touch to

MiNet

Tracks ordered, in-tansit and received

goods

The data is integrated with companys

BI portal through which the executives
have real time visibility of secondary
sales

Expanding Distribution Network in

Rural Market (1/3)
Stockis
ts

Van Sales representatives (VSR)

Takes stocks from stockiest
Sells it in a particular designated area
The stock which is left is delivered
back to stockiest
VSR picks up the stock and sells in
the same area every fortnight
~ 9000 Van Markets
Challenges
No advantage of economies of scale
due to low business volume
Cost of selling is ~12% of sales as
compared to ~9% in standard model

Areas where this model is adopted

Where consumer density is low (< 20,000 population of village)
Has been implemented in Bihar, Rajasthan, Madhya Pradesh, Uttar

Rural Sales
Contributes to ~34%
of companys total
India sale in FY2016

Expanding Distribution Network in North

East (2/3)

Lot of states where

distribution is weak
and its difficult to
retain distributors

Adopted Subsidy
model rather than
increasing margins.

Consequences
Ensures that
distributors breakeven.
Advantage over
margin model as it
doesnt ensure breakeven which is very
important for
distributors in that
region

Expanding Network in Urban & Unreachable

Areas (3/3)
Project ONE (Outlet Network
Expansion)

Expansio
n via
Cosmetics

,
Chemists
outlets

Expansion in Unreachable
(Naxalite)Area of Odisha

Outlet Listing

Industry
Trend

Urban New Channel Classification

P&G, HUL, Nestle, Dabur India

Ltd., Emami, Godrej, LOreal

Sub Channel- Premium Grocer

Condition for Premium Grocer
Condition 1

Condition 2

Condition 3

5 out of 9 category

3 out of 5 brands

Large Packs of all Category

Hair Color
Deo
Oats
Body Lotion
Hair Gel
Conditioner
Noodles
Hair Oil Sac
Hair Fall

Kellogg's cornflakes box

Olay Total Effects
Gillette Mach 3
Loreal casting crme gloss
Axe deos

Large pack cooking oil

Large pack toothpaste
Large pack detergents

IT in Sales
Kelloggs has made investment in IT to ensure:

Kelloggs MIS-Net

Merchandising
Kelloggs

basically ensures following 6 conditions while merchandising:

They

also have a team of MTM and ISP in Modern Trade outlets to push the products more

They

are also investing in Floor Standing units and end caps more for paid visibility

Channel Programs- Bandhan

Program Bandhan (X) clusive : Self Service outlets with BPM >
1.5 lakhs pm
Heads

Parameters

Bandhan X

Value Target

2 slabs of target achievement

1% / 0.5%

Primary Visibility

Category Branding

2%

Secondary Visibility

FSU / End Cap

1%

In store Execution

SOS (Share of Shelf)

1%/.5%(Non metro)

Channel Programs- Bandhan

Program Bandhan : Rest of Self Service outlets
Heads

Parameters

Rishta

Value Target

2 slabs of target achievement

1% / 0.5%

Primary Visibility

Category Branding

2%

Secondary Visibility

FSU / End Cap

In store Execution

Planogram

1% / .5%

Channel Programs- Bandhan

Program Bandhan Chemist( Bpm>5000)
Heads

Parameters

Rishta Chemist

Value Target

2 slabs of target
achievement

1% /0.5% ( Rs 100 min)

Primary Visibility

Modular BIW / Countertop

Secondary Visibility

FSU / End Cap

4%( Rs 400 min)/ 3%( Rs

300 min for non Metro)
X

In store Execution

SOS / Planogram

Channel Programs- Premium

Grocer
Program Udaan

Qualification Criteria

Premium Grocers Key Outlets with BPM

> 10k

Value Target

Slabs:
> 100%
95% - 100%

Primary Visibility

BIW 2 brands and

Countertop

Payout

1% / 0.5%
3% / 2.5% (Non Metro)

Channel Programs- Premium

Grocer
Program UMEED

Qualification Criteria

Others with BPM>6 k

Payout

Value Target

95% achievement

Rs. 300

Primary Visibility

BIW 2 brands and

Countertop

Rs. 500 / Rs.300 (Non

Metro)

Claims/Reimbursement and Credit

policies

Incentive Schemes

Scheme Structure - Primary and Secondary

Primary

Secondary

These get passed on in the invoice itself when products moving

from depot to the distributor are billed. The distributor then passes
it to the retailer.
These are passed on by the distributor to retailer/stockist and are
claimed later at the end of the next month.

All schemes are always passed on to the retailer

Sales Organization Structure

Regional Sales Head
Area Sales Manager

8
Divisional Sales Head 4

Urban

Sales &
Promotion Executive

Van Sales Rep

Rural

KAM
Area Sales Manager

ISP

Distributor Sales Rep

3
5

Chief Sales Officer

Modern Trade
Head

Territory Sales Officer

Sales &
Promotion Executive

Territory Sales Executive

Independent
Sales Rep
Pilot Sales Rep

Recruitment & Training

Recruiting

DSR recruited by TSO

TSEs or ISR recruited from Tier 3 B-schools and later promoted to TSOs

ASMs and KAM recruited from Management Trainee Pool

Training

ASM is given Fixed induction period for understanding role and then capability building training
like excel (most of it is online)

Relationship Management Program (RMP) to understand their leadership style

DSRs given basic training on products, channels, promotion programs, planning, PDA usage etc
by TSO

Compensation of Sales Force

Fixed component

Variable component (approx. 20% of fixed component)

Variable pay is decided on the basis of quarterly targets

Volumetric component Sales volume (portfolio level and at the

overall business level)

Non-volumetric components Man days worked (22 days), No. of

outlets covered, earnings of direct sales representatives

Performance (distribution and sales) of new brand/product also a

part of quarterly incentive structure

CONFLICT RESOLUTION

URBA
N
RURAL

Conflicts within Kelloggs majorly arises from the margin scheme it has incorporated.
Incentive for rural retailer to buy from Urban Distributor since more margin (gets it for 9.09 v/s 9.17)
Incentive for Urban retailer to buy from Rural S.Distributor again for lower price ( i.e. for 8.99 v/s 9.09
There is no fixed demarcation of geographies for stockists which is an open invitation for
encroachment
Kelloggs resolves issues majorly through intimidation (coercive power) and legal power
and on repeated offence, the defaulter is fired.

Conflict Resolution

Breaking the Market

Handling of FSU and End Caps by clients

Designing of the units is altered

Between the category manager and marketing manager of the same

retail chain

Discounts to MT limited

Negotiations

Shelf Space given to certain products

Logistics Benchmarking of Major

FMCGs

*Tried Reverse Auction in the past and reverted back to