How to Sell FMCG in Iran -...
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How to Sell FMCG in Iran Sales and In Store Activation June 2016
Transcript of How to Sell FMCG in Iran -...
How to Sell FMCG in Iran Sales and In Store Activation
June 2016
THE IRANIAN GROCERY RETAIL IS DOMINATED BY TRADITIONAL TRADE
300,000 Traditional Trade outlets 800 Modern Trade stores 91.5% of total market sales value 8.5% of total market sales value
Source: Euromonitor
THE STORE UNIVERSE IS HUGE AND HIGHLY FRAGMENTED
Total Traditional Trade outlets ≈ 300,000
Hypermarkets (12)
Discounters (328)
Supermarkets (438)
Coops (19)
Total Modern Trade outlets ≈ 800
Food/Drink/
Tobacco Specialists (117,814)
Other Grocery Retailers (4,537)
Small Grocers (175,825)
Source: Euromonitor & Certius
KEY FACTS ABOUT TRADITIONAL TRADE
Source: Certius
SHOPS Small stores - average 48 m2
sales area Limited assortment depth and crowded shelves
SHOPPER Daily shopping trips
Often follow shop keeper’s recommendation
SHOP KEEPER Is main decider and influences shopper decisions
Decides based on margin and payment terms
Brands mostly run push-in discount promos
POS Chaotic shelf layout and brand presentation
POSM limited due to space restrictions
Difficult to run sell-out consumer promotions
KEY FACTS ABOUT MODERN TRADE
• Main player Hyperstar (Carrefour)
• Owner: Majid Al Futtaim Hypermarkets LLC
• Market share in MT: 22.9 %
• Branches: 5
The three main MT shop formats in Iran are hypermarkets, supermarkets and discounters
• Key player Refah • Owner: government owned
banks
• Market share in MT: 20.5 %
• Branches: 215 branches
• Key player Ofogh Koorosh • Owner: Golrang Industrial
Group
• Branches: 277
Source: Euromonitor & Certius
Hypermarkets Supermarkets Discount
• Key player Shahrvand • Owner: Tehran Municipality • Market share in MT: 13,3 % • Branches: 32
THE TWO MAIN CHALLENGES FOR BRANDS ARE ACHIEVING COVERAGE AND MANAGING THE POS
Source: Euromonitor & Certius
• Difficult to have high coverage due to huge number of outlets and geography (wide distances, dispersed rural shop universe)
• High distribution costs
• Biggest Iranian Distributors cover a part of the universe
Golpakhsh Aval: 145,000 outlets Sayesaman: 120,000 outlets
Daya Group: 102,000 outlets Golestan: 100,000 outlets
Coverage
Brand Activation at
the POS
• Small sized stores, crammed shelves, uncooperative shop keepers and the big number of stores make it difficult to properly activate brands at the POS
• This results in low brand visibility, lack of impulse triggers, and difficulties in running sell-out promotions to shoppers
Outlets (Modern Trade, Traditional Trade, Discounters, Food/Drink/Tobacco, Horeca etc.)
PRINCIPAL
Third Party Distribution Mixed Direct
MT only
PRINCIPAL PRINCIPAL DISTRIBUTOR
General Distributer
Distributors Local Wholesalers
Sub-Distributors
Local Wholesalers
Distributors Local Wholesalers
Local Wholesalers
TO ACHIEVE ADEQUATE COVERAGE FMCG PRODUCERS FOLLOW FOUR DIFFERENT ROUTE-TO-MARKET MODELS
Source: Certius
THE MODELS DIFFER REGARDING REQUIRED RESOURCES AND CONTROL OVER OPERTIONS
SALES & DISTRIBUTION
National distributer
TPD ¹)
Mixed
Direct
STRENGHTS WEAKNESSES EXAMPLES
• Simple, fast
• Tight control • Low investment
except for training and monitoring
• Tight control • National alignment • Wide coverage
• Full control
• Little control • Dependence/risk/conflict management • Local knowledge needed • Own structure and resources
on the ground needed • Transparency can be an issue • Difficult to drive sales at
required speed and intensity
• Local knowledge needed • Substantial structure &
resources on the ground needed
• Local knowledge needed • Substantial structure &
resources on the ground needed
1) Third Party Distribution
Source: Certius
THERE ARE SIMPLE RULES AND TOOLS TO ACTIVATE BRANDS WELL ON THE POS
Visibility Category plan Trade Terms Sound understanding
• Understand the shopper • Understand the
shopkeeper
• Competitive margin • Competitive commercial
terms
• Shelf rental, fridges • Shelf devices • TT adequate in-store
displays • Promoters in A customers • Sales incentives tied to
visibility
• Must-stock-SKU list per customer class
• Simple planogram • Merchandising in stores • Sales incentives tied to
category plan specifics
Source: Certius
SUCCESS DEPENDS ON CHOOSING THE RIGHT PARTNER AND EVOLVING YOUR RTM MODEL OVER TIME
Deploy needed resources:
your partner/distributor and your
own structure
Agree business KPIs & Service
Level Agreement Monitor execution
via KPIs
Adapt or change RTM model
according to evolving business
strategy and market conditions
Clarify business ambition &
strategic objective Define clear market
entry strategy Sales and
distribution strategies
Choose adequate RTM model
Source: Certius
SUMMARY • The Iranian retail universe for FMCG is highly fragmented and complex. • Brands face two key challenges (among many others):
• How to achieve sufficient coverage (numeric distribution) • How to activate brands on the point of sale to generate sell out
• There are four basic route-to-market models which require differing levels of resources and capabilities and which in turn convey varying levels of control over the sales and distribution operation.
• The choice of the right RTM model must be routed in a clear business vision and strategies.
• Some simple tools are at producers’ disposition in order to activate brands at the POS. The main challenge is getting execution right within the limitations of your RTM model.
• Evolve your sales & distribution approach and change your RTM model as your business ambition and market conditions change. You might enter Iran with a general distributor and end up with your own direct sales & distribution system.
We will be happy to help you.
