I want to tell you, why it is dangerousto introduce new business process by «copy-past»

What is Danon?

*local brands within 22 countries

Avian Confectionary*Dairy

In 1995 Danone purchased «Bolshevik»*and launched business optimization

*one of the oldest confectionary Russian plant

Distributor bought refrigerator and cars

Payed salary to exclusive agents

Achieved break-even point within 2-3 years

DS3-model of Danone Dairy was:

With it’s model Danone covered 2-3 cities annually*

* Mind that majority of the cities were already covered with exclusive sales agents

And we started from scratch, and we need high-speed business model

And we need to cover 80 cities within 2 years

And our existing distributors did not want to invest heavily in our exclusive sales agents*

* And we need to return our investment in agents within 2 years

At that time there we the following shared investments in salaries:

50% / 50% One pays the whole

(distributor or supplier)

Fixed and variable (producer pays fix, distributor –variable part of salary, or vice

versa)

But no one model fit us

Because of time to market

Or by managability of agents

Or by return of investment within 2 years

And we started the negotiations

Having a lot of trips across Russia, I developed the model, which suited both

Danone and Distributors

Danone: How much do you pay to your agents?

Agent Salary

3% of total turnover

Agent Salary

Danone: How much do you pay to your agents?

Distributor: 3% of total turnover

Danone: How much do you pay to your agents?

Distributor: 3% of total turnover

Danone: so you can pay to our exclusive sales agent not less than 3% of turnover of Danone

Turnover of Danone

Agent Salary

3% of Danone’s turnover pays Distributor

Distributor: Agreed. But 3% should not cover all the salary!

Turnover of Danone

Agent Salary

?

3% of total turnover pays Distributor

Distributor: Agreed. But 3% should not cover all the salary!

Danone: Danone pays the difference.And we decide about fixed/variable,You job is to pay your 3%

Turnover of Danone

Agent Salary

Danone pays

3% of total turnover pays Distributor

Within 2 years turnover of Danone grew and the 3% covered the whole salary of agent, and we did not invest any more but fully managed exclusive sales agents

3% cover Agent Salary

Turnover of Danone

Agent Salary

Turnover of Danone doubles

Danone

3%

Distributor started to check validity of our agents’s sales, as he payd3% of their turnover.It was double-check of secondary sales

Pleasant discovery

So, we hired exclusive sales agents ….

But there came an obstacle …

It was not profitable for distributor to deliver our orders to shops — it was less than minimum delivery lot

Unprofitable logistik

DS3 DS3mixed

3PD

Focus on sales

Strong Average Weak

Delivery lotSmall Average Big

There was the trick?

Unfortunatelly, mixed team did not always provide profitable logistik

And we obliged agents to add “ballas to the orderзаказу up to minimum lot. As a “ballast” we used«Chaka» peanuts»*

* In every region «Chaka» peanuts» were different products

But I am payed for Danone only

It seemed, that we considered everything …

But … how to manage them

Models, effective for 40 agents, Did not work for 400…

Adaptation, on-boarding, mentoring, work with, recruitment

Annual Personal Development Review

Career ladder, strategik organizational development plan

And we started to set up business processes for our exclusive sales agents:

There is no difference is sales agent on our payroll, or on distributors — when he sales our products exclusivelly, he gets all the benefits of Danone

General Manager, Danone-confectionary

Alexey Mekhanik

As example, our agents on distributors payroll got their fix and var salary on the 3-rd day of the month

And it was not only words, it was strong processes

As a result, in a two years

60.000retail outlets

40%Revenue growth*

400exclusive sales agents

*with the same EBIT in %

Secondary logistik

Investments in salaries

People management

But in your case everything can be different …

We successfully turned around to DS3 due to 3 strategies

And if you plan to introduce new business practice,

Think about your strategy !