DISTRIBUTION STRATEGY OF FRITO-LAY WITH RESPECT TO ITC SNACKS DISTRIBUTION IN VARANASI

Made BySudhir Mishra

Sales Trainee, ITC Limited

INDIAN SNACKS INDUSTRY AN OVERVIEW

According to the ministry of food processing, the snacks food industry is worth Rs 100 billion in value and over 4,00,000 tones in volume.

Almost 1,000 snack items and 300 types of savouries are sold across India. Branded snacks are sold at least 25% higher than the unbranded products.

The industry has been growing around 10% for the last three years, while the branded segment is growing around 25% per annum to stand at Rs 5,000-Rs 5,500 crores, due to various reasons like Multiplex culture, snacking at home while watching TV, pubs and bars .

CONTINUED Indian Foods market is a monopolistic

market. There are many competitors in all the categories and although they all have similar products available at similar prices, they are trying to prove themselves different through their marketing and promotional strategies.

Indian snack industry = 5000- 5500 crore. Frito Lays = 45%, Haldirams = 25% market share and ITC bingo = 16% share. Rest of the market is dominated by few regional players.

MAJOR PLAYERS IN THE SNACK INDUSTRY

Frito-Lay Inc. Bingo Parle’s Haldirams Others

FRITO-LAY Frito-Lay North America (FLNA) is a division of

PepsiCo, Inc. which manufactures, markets and sells a variety of corn chips, potato chips and other snack foods.

The company's current form is the result of a 1965 merger of Frito-Lay, Inc. and the Pepsi-Cola Company, which resulted in the formation of PepsiCo, Inc.

Products sold under the Frito-Lay name are now recorded by two PepsiCo divisions: Frito-Lay North America (North American sales) and PepsiCo International (international sales).

BINGO The launch of Bingo represents ITC Foods’

fifth major line of business after the highly successful staples, biscuits, ready-to-eat and confectionery products, Introduced in the market in March 2007.

The initial offerings from Bingo include an array of products in both Potato Chips & Finger Snacks segment.

The Potato Chips offerings comprise of different innovative variants inspired by the snacking habits of different parts of the country.

FRITO-LAY (PEPSICO.) AND BINGO (ITC)

Currently, the size of the snack food market is estimated to be Rs 4,500-5,000 crore of which branded players account for Rs 2,000 crore.

The snack food market is growing at 30 per cent annually and foods and beverage giant PepsiCo's Frito Lays is the dominant market leader.

Lays has revamped its branding strategy with new promotions featuring actress like Juhi Chawla, Kareena Kapoor etc.

CONTINUED

This was perhaps a move to outdo competition from ITC’s snack brand Bingo, which was launched in March 2007.

Since Bingo was a youth brand, digital media was used heavily for promotions.

The offerings under the Finger Snacks segment are equally unique presentations with innovative finger foods like Khakra inspired Mad Angles and the specially developed time pass snack in the form of Tedhe Medhe.

DISTRIBUTION Distribution refers to Physical Distribution. Physical

distribution (or place) is one of the four elements of the marketing mix. An organization or set of organizations (go-betweens) involved in the process of making a product or service available for use or consumption by a consumer or business user.

Chain of intermediaries, each passing the product down the chain to the next organization, before it finally reaches the consumer or end-user. This process is known as the 'distribution chain' or the 'channel.' Each of the elements in these chains will have their own specific needs, which the producer must take into account, along with those of the all-important end-user.

DISTRIBUTION CHANNEL AND STRATEGIES

Product availability where and when customers want them.

It Involves all activities from raw materials to finished products.

Distribution Objective Minimize total distribution costs for a given

service output. Determine the target segments and the best

channels for each segment. Objectives may vary with product characteristics

e.g. perishables, bulky products, non-standard items, products requiring installation & maintenance.

DISTRIBUTION CHANNEL

In the marketing channels there is transfer of product from the producer to the consumer. The intermediaries involved in this network are Warehouse, distributors, wholesaler and retailers. 

Manufacturing

Unit

Warehouse

DistributorRetaile

r

End User Or

Customer

Wholesalers

FRITO-LAY DISTRIBUTION NETWORK IN VARANASI

One C&F exists in Varanasi at Lahartara. In Varanasi, there are 4 Distributors of Lays :

3 Distributor deal in town markets and surrounding rural markets.

1 Distributor works for railway, key a/c and other consumption centers.

The stock is supplied to all distributor of Varanasi through this C&F. Distributors serve town markets, rural markets and Key a/c.

Total Monthly Turnover in Varanasi is around 43 Lakhs rupee Value or 21 tonnes on Volume basis.

SELLING, SUPERVISON & DISTRIBUTION SYSTEM

Company Personnel- 1) Mr. Neeraj Singh (Area Sales Manager)

2) Mr. Tushaar Baneerjee (Sales Officer)

3) Mr. Rakesh Srivastava (Sales Officer)

Distributors are - Shyam Agencies, Mahmoorganj Nishta Enterprises, Lahartara Barnawal Trading Co., Ordali Bajaar Surya Enterprises , Cantt.

CONTINUED….Segment Of Customers: 1) General Stores 2) Pan Shops 3) Kirana Shops 4) Bakeries 5) Dhaba 6) Theater 7) Malls 8) Restaurants 9) Petrol Pumps 10) College Canteens 11) Consumption Centers 

CONTINUED…. No. of SalesMan :- 1) Shyam Agencies – 7 DS

2) Nishta Enterprises – 5 DS

3) Barnawal Trading Co. – 8 DS

4) Surya Enterprises – 4 DS Three PSR in Varanasi town to look after rural &

upcountry markets. No. of Routes :- 1) Shyam Agencies – 7 DS X 6 = 42

2) Nishta Enterprises – 5 DS X 6 = 30

3) Barnawal Trading Co. – 8 DS X 6 = 48

4) Surya Enterprises – 4 DS X 6 = 24

CONTINUED… 1 PSR to look after the all Wholesale Market. 1 Sales Officer for Wholesale Market in

Varanasi, Allahabad and Gorakhpur. 4 Stockists in Varanasi to cater surrounding

upcountry and rural market. They are at Kachawan road, Mugulsarai, Chandwak and Jansa.

8 DS in Varanasi work on Order Capture Basis. 3 Route Trainer and 1 Growth Agent. Total Lays serviced outlet base in Varanasi is

3800. Frequency of visit of salesman is on weekly

basis.

FRITO-LAYS FACT FILE IN VARANASI

Route Type Town Retail Town Wholesale

No. of Routes 120 24No of Outlet per Route 35-40

25 approx

Coverage Once in a week Once in a week

Format Ready Stock Model

Ready Stock Model & Order Capture Model

Both

Delivery Same DaySame Day & Next

Day

Delivery Vehicle 8 Three Wheeler and 12

Trollys4 Three Wheeler

Salesman 20 DS 4 DS

FRITO-LAY WD REDISTRIBUTION FIXED EXPENSES @ SHYAM AGENCIES

Particulars No.s Cost/ UnitCost per Month in Rupees

Salesman 7 2400 16800

Driver 2 2500 5000

Trolly Man 5 3500 17500

Running Cost for 2 Three Wheelers

1 Route in a Day & 20 KM./ Route

Average Cost of 4 Rs/ Km

26*2*4*20 + 400

Rs. 6640 per month

Total Re-Distribution Fixed Expanses

Rs. 45940 Per Month

CONTINUED…. There are two types of DS –

1) Regular DS

2) FSC (Frito-Lay Star Outlet) DS {they only service Star Outlet of Lays}.

Salary Structure –

- Fixed Salary + Variable ( Variable contains Line Cut, Bill Cut,

Product Incentive& Target Achievement)

- Fixed Salary for 1) – Regular DS – Rs. 2400

2) – FSC DS – Rs. 3200 Salary of Route Trainer & Growth Agent – Rs. 8500

( Route Trainer plays the role of Team Leader and Growth Agent usually taking care of merchandising, maintenance & look after competition activities.)

BINGO’S DISTRIBUTION IN VARANASI One WSP present in Varanasi at Ramnagar. In Varanasi, there are 2 Distributors of ITC :

1 Distributor deal in town markets and surrounding rural markets.

1 Distributor works only for town market. The stock is supplied to both distributor of

Varanasi through this WSP. Distributors cater the needs of town markets, rural markets and Key a/c.

Total Monthly Turnover in Varanasi is around 11 Lakhs rupee Value or 6.6 tonnes on Volume basis.

SELLING, SUPERVISON & DISTRIBUTION SYSTEM

Company Personnel- 1) Mr. Ashish Kumar JHA ( Area Manager) 2) Mr. Kaushlendra Singh (Area Executive)

Distributors are – Mosaram Vyapar, Sidhgiribagh Shri Ganesh Trading Co., Jagatganj

Two Grocery 3 Team Leader , One is on one WD point.

Total 12 DS in two WD points.

CONTINUED….

Segment Of Customers: 1) General Stores 2) Pan Shops 3) Kirana Shops 4) Bakeries 5) Dhaba 6) Malls 7) College

Canteens 8) Consumption

Centers. 

CONTINUED…. No. of SalesMan :- 1) Mosram Vyapar – 6 DS

2) Shri Ganesh Trading Co. – 6 DS One PSR in Varanasi town to look after rural markets & Stock

Carrying Points for all categories. No. of Routes :- 1) Mosram Vyapar – 6 DS X 6 = 36

2) Shri Ganesh Trading Co. – 6 DS X 6 = 36 Total No. of Outlets in Varanasi = 2860 Grocery 3 Teamleader – There are 2 Grocery 3 Teamleader,

each at one WD point to look after

town markets & managing all 6 DS.

BINGO FACT FILE IN VARANASI

Route Type Town Retail No. of Routes 72No of Outlet per Route 30-35Coverage Once in a weekFormat Ready Stock ModelDelivery Same Day

Delivery Vehicle

4 Three Wheeler and 8 Trollys

Salesman 12 DS

BINGO WD REDISTRIBUTION FIXED EXPENSES @ MOSARAM VYAPAR

Particulars No.s Cost/ Unit

Cost per Month in Rupees

Salesman 6 2300 13800

Trolly Man (with Trolly)

4 3200 12800

Hiring Cost for 2 Three Wheelers

Hiring cost Rs 350/ Day

Hired for 26 Days

26*2*250Rs. 18200 per month

Total Re-Distribution Fixed Expanses

Rs. 44800 Per Month

CONTINUED…. The Re-distribution expanses comprises of three parts

1) Selling Expanse

2) Supervison Expanse

3) Freight Expanse In selling Expanse there are two parts –

a) Fixed Salary – Rs. 2300 per DS

b) Variable Expanse – It consists of Line cut, Bill cut,

Unique Bill cut, Target achievement.

Supervison Expanse also contains –

a) Fixed Salary

b) Variable Expanses Freight Expanse is the cost of distribution of stock in the

market.

MERCHANDISINGFrito-Lay – Merchandising is done in

form of providing racks, POSM

materials etc. Lays racks are Five Type – 1) Trimurti 2) FSC Rack 3) Snack Smart 4) Metal Rack 5) Antirodent Dealer boards of Uncle

Chips is also visible in the market.

Maintenance & availability of rack is governed by Growth agent.

Bingo – Merchandising is done in

form of providing racks , banners, posters etc.

Bingo Umbrella Placement to good location is also a merchandising activity.

Bingo Racks are – 1) Counter Top 2) Small Metal Rack 3) Large Metal Rack 4) Fibre Rack

D & D NORMS

Frito-Lay – D & D collected by the salesmen in the last week of every

month from the outlets. Collected D & D stock from all distributors sent to C&F

godown. D & D is verified by CA and destroyed in presence of WD,

ASM & SO. The claims are made on a monthly basis & submitted to the

company.

Bingo – D & D collected by the salesmen in the last week of every

month from the outlets. Collected stock is verified at the destruction point by CA and

destructed in the presence of AE & AM. The claims are made on a monthly basis & submitted to the

company.

MAJOR HURDLES FACED BY BINGO

Brand Loyalty of Lays customer is posing threat to Bingo.

Entry of new players in the market.

Rack Placement by Lays in most of the outlet.

Brand Promotional strategies taken by Lays.

Threats of local players.