Report on

Exploring the Distribution Channel:

Coca Cola

Institute of Business Administration

Jahangirnagar University

Savar, Dhaka-1342, Bangladesh

Report on

Exploring the Distribution Channel: Coca Cola

Submitted to:

Mr. Baktiar Rana

Course Instructor

Marketing Channel Management (MKT 403)

Submitted by:

Group: 2

Sudipto Chakraborty- 1979

Kaiser Mahmud - 1983

Md. Jashim Uddin- 2157

Shajedul Islam- 2264

Md. Ashraful Alam- 2296

Submission Date: February 22, 2014

Institute of Business Administration

Jahangirnagar University

Savar, Dhaka-1342

February 22, 2014

Mr. Baktiar Rana

Course Instructor, MKT-403

Institute of Business Administration, Jahangirnagar University

Savar, Dhaka-1342

Subject: Submission of report for the partial fulfillment of MKT-403 course.

Sir,

It is our pleasure to submit you the report on Exploring the Distribution Channel: Coca

Cola. The Report is submitted as the partial fulfillment of BBA program.

We have studied about Distribution channel system in our course Marketing Channel

Management (MKT 403). This Paper gave us unique opportunity to gain some practical

knowledge on how distribution channel works & creates a huge impact on an organization like

Coca Cola. This paper aims to discuss about different alternative distribution channels of Coca

Cola, conflicting areas among the distribution channel members, power structure of channel

system & some recommendations for Coca Cola. We believe that, this Paper will help to get

some ideas about the distribution channel system of our soft drinks industries.

We are pleased to be granted this vital opportunity and grateful for your versatile assistance. And

we hope that our work will please you.

We want to have the privilege to give answers to your quires, if any.

Sincerely

Kaiser Mahmud

On the behalf of Group-2, 20th batch, BBA

iii

Acknowledgement

Firstly, we would like thank Almighty creator.

We express our heartiest gratitude to our course instructor Mr. Baktiar Rana, Course Instructor,

Marketing Channel Management (MKT 403), for his valuable guidance, scholarly direction and

unconditional support during the preparation of this Report. We have learnt a great deal from

him.

We would also like to express our sense of gratitude and appreciation to Mr. Nazmul Islam,

Director, Institute of Business Administration, Jahangirnagar University.

We would like to thank Mr. Arafat Rahman, batch manager, 20th batch.

Finally, We would like to thank Mr. Arifur Rahman, Assistant Sales Manager, Coca Cola

Bangladesh Limited, for giving us his valuable time & also some valuable information regarding

distribution channel system of Coca Cola.

iv

Table of Content

Content Page

Executive Summary vii

Chapter 1- Introductory part 8

1.1 Introduction 9

1.2 Objectives 10

1.3 Methodology 10

1.4 Source of Data 11

1.5 Conceptual Framework 11

Chapter 2- Literature Review 12

2.1 Distribution Channel 13

2.2 Types of Distribution 14

2.3 Channel Structure 15

Chapter 3- Overview of Coca-Cola 16

3.1 Coca-Cola 17

3.2 Brief history of Coca-Cola 17

3.3 Introduction of Coca-Cola in

Bangladesh

18

3.4 Legal Entity of the Company 18

3.5 Products of Coca-Cola 19

Chapter 4- Distribution Channel of Coca-Cola

in Bangladesh

20

4.1 Distributors of Coca-Cola in Bangladesh 21

4.1.2 Company profile of Abdul Monem Ltd 21

4.2 Distribution Channel of Coca-Cola 22

4.3 No of Distributors, Sales Person and

Transport

25

4.4 Delivery System 26

4.5 Distribution Network 27

4.6 Geographical Coverage 28

4.7 Supply Output Demanded by the

Customers

28

4.8 Channel Flows 29

4.9 Ancillary Structure in Channel System 31

Chapter5- Others Regarding Distribution

Channel of Coca-Cola

32

5.1 Channel Conflict in Coca-Cola 33

5.2 Reasons behind of Channel conflict 33

5.3 Suggestions for resolving the conflicts 34

5.4 Power Structure of Channel System 35

5.5 Control over Channel System 36

5.6 Merger & Acquisition 36

5.7 Major Strength of the closest company 36

5.8 Effect of Technological Advancement 37

Chapter6- Recommendations & Conclusion 38

6.1 Recommendations 39

6.2 Conclusion 41

Bibliography 42

Executive Summary

Soft Drinks Industry like other developing and developed countries is getting much popularity in

Bangladesh. The number of firms operating in this industry is getting increased. The market is

also increasing in a greater portion. Today most of the people in both urban and rural areas are

taking soft drinks in a large amount. Coca Cola is one of the largest soft drinks suppliers in

Bangladesh. Though they are not Bangladeshi company, they are in the leading position

comparing with others in this industry. Behind of their achieving the leading position, there are

some points which are giving them the number one position. A very strong distribution channel

system is one of the reasons behind of their success. They entered in this country through Abdul

Monem Limited which bottles the coke. After achieving the success & due to having a very

strong distribution channel system, now they are building their own bottling plant in our country.

Our aim is to discuss about the distribution system of Coca-cola in Bangladesh. A distribution

channel is a set of practices or activities necessary to transfer the ownership of goods, and to

move goods from the point of production to the point of consumption and as such which

consists of all the institutions and all the marketing activities in the marketing process. Coca-

Cola has their distribution channel. This company has a generally channel behavior of vertical

marketing system that all the manufacture. Manufacturer, wholesaler, retailer, customer is the

channel members of Coca-Cola. But by the company they also use three types of channel. Those

are: (i.) Zero level Channel, (ii.) One level Channel,(iii.) Two level Channel. They have divided

the whole country into 4 zones & there more than 1500 sales persons are working. Manufacturer

virtually holds all the powers of channel system. They always try to supply product according to

supply output demanded by customers. Though they are the largest soft drinks company, there

are some conflicting areas among channel members such as- between customer & retailer,

between supplier & manufacturer & so on. Moreover, there is less chance of creating alternative

or breakdown of channel system due to technological advancements. Though they are the market

leader, their closest competitor Pepsi has some advantages comparing with them like in pricing,

product varieties & so on. To make the distributors happy they need to do survey, keep an eye on

the distributors want, making joint sells, creating distributors council, increasing sales

commission & so on. Satisfied distributors can ensure their success in the market.

vii

CHAPTER-1

INTRODUCTORY PART

1.1 Introduction:

Soft Drinks Industry like other developing and developed countries is getting much popularity in

Bangladesh. The number of firms operating in this industry is getting increased. The market is

also increasing in a greater portion. Today most of the people in both urban and rural areas are

taking soft drinks in a large amount.

To capture this market many global brands are competing with local brands now. However the

local brands (Mojo and Pran) are much successful even if the global brands (Coca Cola, Pepsi)

are present.

Our soft drinks industry follows some innovative, strong and continuous improving production

and marketing techniques. Although quality is not the prime concern of our people, they mainly

prefer cost effective soft drinks. The local companies are competing with global brands on the

basis of lower cost. They are capturing the urban markets by offering some innovative marketing

plan and offer. In rural areas they are very strong in distribution strategy and price effectiveness.

Our local brands understand the psychology of our people more than the global brands. Thats

why they are showing much more effectiveness in this sector. Besides, local brands are using

technology based production plant with mass production and order to stock basis. Skilled and

lower paid manpower, and innovative marketing projects are also the factors that are associated

with success of these firms acting in this industry.

Coca Cola is one of the largest soft drinks suppliers in Bangladesh. Though they are not

Bangladeshi company, they are in the leading position comparing with others in this industry.

Behind of their achieving the leading position, there are some points which are giving them the

number one position. A very strong distribution channel system is one of the reasons behind of

their success. They entered in this country through Abdul Monem Limited which bottles the

coke. After achieving the success & due to having a very strong distribution channel system,

now they are building their own bottling plant in our country.

9

1.2 Objectives:

General objectives:

This study intends to explore the total distribution channels that are used by Coca

Cola in Bangladesh.

Specific objectives:

1. To find out the different distribution channels used by Coca Cola.

2. To find out whether they are using any alternative distribution channel or not.

3. To find out if there exist any channel conflict in distribution channel.

4. To Channel flows performed by the channel participants. Identify which flow involves

the significant costs.

5. To find out strengths & weakness of Coca Cola in distribution system comparing with the

closest competitors.

1.3 Methodology:

The mode of methodology selected for this research is qualitative data analysis.

Qualitative Analysis:

The sample data gathered in qualitative research are analyzed and categorized into patterns as the

primary basis for organizing and drawing results for the report. Qualitative research for this

report involved three methods for gathering information:

Direct observation

in depth interviews and

analysis of documents and materials.

The key methods to be used for data collection are the analysis of documents and materials and

Depth Interview.

10

1.4 Sources of Data:

The primary sources of data are:

1. Books

2. Journals

3. Interview of employee.

1.5 Conceptual Framework:

Scope:

Due to several unavoidable situation and reality, the extent of this report has been compromised

up to certain limit. The boundaries of this report are thus :

This report focuses only on the distribution channel system of Coca Cola, the other business

fronts of Coca Cola are not covered in this report.

This report will focus on how Coca Cola manage its distribution channel.

Limitations:

The extent and limit of the report were constricted due to some of the following considerations:

The time allocated for the report was limited which constricted the extent of this report.

The beverage industry of Bangladesh is not well documented, so no strict facts and figures

were found from the enterprise respondents or any other secondary sources.

11

CHAPTER-2

LITERATURE REVIEW

2.1 Distribution Channel:

A distribution channel is a set of practices or activities necessary to transfer the ownership of

goods, and to move goods from the point of production to the point of consumption and as such

which consists of all the institutions and all the marketing activities in the marketing process. A

distribution channel is a useful tool for management.

Roles of distribution channel in marketing strategies

Links producers to buyers.

Performs sales, advertising and promotion.

Influences the firm's pricing strategy.

Affecting product strategy through branding, policies, willingness to stock.

Customizes profits, install, maintain, offer credit, etc.

There may be a lot of channel members in different organizations. It depends on how effectively

the firm thinks to reduce cost & availability of product to the customers in a shortest possible

time as well. A general overview of a distribution channel is given below:

Figure : Distribution Channel 13

2.2 Types of Distribution :

There might be several types of distribution system. Such as:

1. Exclusive distribution.

2. Intensive distribution.

3. Selective distribution.

(1) Exclusive distribution

The use of a single or very few outlets.

Creates high dealer loyalty and considerable sales support.

Provides greater control.

Success of the product is dependent upon the ability of a single intermediary.

(2) Intensive distribution

The manufacturer attempts to get as many intermediaries of a particular type as possible to carry

the product.

Provides for increased sales volume, wider consumer recognition, and considerable

impulse purchasing.

Low price, low margin, and small order sizes often result.

Extremely difficult to stimulate and control the large number of intermediaries.

(3) Selective distribution

An intermediary strategy, with the exact number of outlets in any given market dependent upon

market potential, density of population, dispersion of sales, and competitors' distribution policies.

Contains some of the strengths and weaknesses of the other two strategies.

It is difficult to determine the optimal number of intermediaries in each market.

It is up to the channel manager to evaluate these alternatives with respect to some use of

criteria.

14

Company factors, environmental trends, reputation of the reseller, experience of reseller are just

a few examples when selecting the type of intermediaries and channels.

2.3 Channel Structure:

Channel structure is a very wide issue which cannot be explained in a sentence. A typical

channel structure of food manufacturer is given below:

Figure: A channel structure for food manufacturer.

15

CHAPTER-3

OVERVIEW OF COCA-COLA

3.1 Coca-Cola:

Coca-Cola is a carbonated soft drink sold in stores, restaurants, and vending machines

throughout the world. It is produced by The Coca-Cola Company of Atlanta, Georgia, and is

often referred to simply as Coke. Originally intended as a patent medicine when it was invented

in the late 19th century by John Pemberton, Coca-Cola was bought out by businessman Asa

Griggs Candler, whose marketing tactics led Coke to its dominance of the world soft-drink

market throughout the 20th century.

The company produces concentrate, which is then sold to licensed Coca-Cola bottlers throughout

the world. The bottlers, who hold territorially exclusive contracts with the company, produce

finished product in cans and bottles from the concentrate in combination with filtered water and

sweeteners. The bottlers then sell, distribute and merchandise Coca-Cola to retail stores and

vending machines.

The Coca-Cola Company has, on occasion, introduced other cola drinks under the Coke brand

name. The most common of these is Diet Coke, with others including Caffeine-Free Coca-Cola,

Diet Coke Caffeine-Free, Coca-Cola Cherry, Coca-Cola Zero, Coca-Cola Vanilla, and special

versions with lemon, lime or coffee. In 2013, Coke products could be found in over 200

countries worldwide, with consumers downing more than 1.8 billion company beverage servings

each day.

3.2 Brief history of Coca-Cola:

The Coca Cola beverage was invented by pharmacist John Stith Pemberton in 1886. The formula

and brand was bought in 1889 by Asa Candler who incorporated the Coca Cola Company in

1892. In 1916, the company began manufacturing its famous bottle, which remains signature

shape of Coca Cola today. In 1928, Robert Woodruff, whom was the company's president at that

time, led the expansion of Coca Cola overseas when introduced the Coca Cola to the Olympic

Games for the first time.

17

In the 1960s the company decided to expand with new flavors- Fanta, Sprite and Fresca, In

addition it acquired the Minute Maid Company, adding an entirely new line of business juices to

the company. The 1980s was a time of much change and innovation at the company by the

introduction of Diet Coke, which become the top law-calorie drinks in the world. The company's

presence worldwide was growing rapidly and year after year Coca Cola found a home in more

and more places in the world. As for today, Coca Cola has grown to be the world's most

ubiquitous brand, with more than 1.8 billion beverage servings sold each day.

3.3 Introduction of Coca-Cola in Bangladesh:

Two independent Bangladesh bottlers of Coca-Cola employing over 1,500 Bangladeshis and

providing a source of income for over 35,000 retailers have and who dedicated their men,

material and machines for a refreshing, delicious drink that is made in Bangladesh.

The relationship between the Coca-Cola Company and its bottlers is a partnership which links

the worldwide skills, experience, technology and resources of the Coca-Cola Company with the

local knowledge and entrepreneur-ship in each country.

In Bangladesh this partnership, established in 1972, now includes 2 franchise bottling operations

and one canning plant all wholly owned and operated by Bangladeshis. The Coca-Cola Export

Corporation is committed to providing its bottlers with ongoing assistance in management,

production, marketing, promotion and others areas related to an efficient bottling operation.

Quality control, testing and inspection procedures are integral to every step of producing high

quality soft drinks and are monitored constantly by the Coca-Cola Company.

3.4 Legal Entity of the Company:

The Company is a private company. Coca-Cola has two franchises which are operation allover

Bangladesh for bottling and distribution Coca-Cola products. The two franchises are Tabani

Beverage Company Ltd. an enterprise of Bangladesh Freedom Fighters Welfare Trust and K.

Rahman & Company, an enterprise of Abdul Monem . 18

3.5 Products of Coca-Cola in Bangladesh:

The main products of Coca Cola in Bangladesh are:

1. Coca-Cola

2. Sprite

3. Fanta

Coca-Cola:

Coca-Cola is one of the oldest companies in the beverage market. According

to their present situation they are in the maturity stage. In this stage their profit level is not

satisfactory .To keep their position in this stage they have to spend a lot of money for the

advertisement of the product.

Sprite:

Sprite is one of the oldest Product in the beverage market. According to

their present situation they are in the maturity stage. To keep their position in this stage they

sould increasing their promotional policy and activities.

Fanta:

Fanta is also an old Product in Bangladesh . But It is not as popular as coke.

Fanta is now in maturity stage.

19

Chapter-4

Distribution Channel of Coca-cola in

Bangladesh

4.1 Distributors of Coca-Cola in Bangladesh:

Coca-Cola has two franchises which have operations allover Bangladesh for bottling and

distribution Coca-Cola products. The two franchises are Tabani Beverage Company Ltd. an

enterprise of Bangladesh Freedom Fighters Welfare Trust, and K. Rahman & Company, an

enterprise of Abdul Monem Ltd. However, Abdul Monem Limited is the main distributor of

Coca Cola in Bangladesh.

4.1.2 Company Profile of Abdul Monem Limited:

Abdul monem limited started the business line as the infrastructure development contractors.

Over the decades Abdul monem limited has successfully accomplished many projects including

projects aided by the World Bank and Asian Development Bank. In recognition to our

commitment for work excellence we have able to initiated projects in joint ventures and receive

many rewards for the achievements.

Abdul Monem Limited is the authorized bottler for the Coca-Cola, Fanta and Sprite. AML

started its bottling operation by acquiring the plant of the K. Rahman & Company in 1982. In

1987 the Company made an aggressive move to expand the market by installing a new H&K

bottling line with an installed capacity of 450 Bottles Per Minute (BPM) bottling capacity at

Comilla. With this move, the Company immediately gained the market leadership position from

the Pepsi which was the leader for more than 27 years. Long term planning and aggressive

marketing approach rewarded the Company with the market leadership position for the brands

that remains till to-day. In 1991 the Company was awarded with the Presidents Turtle Award by

the President of The Coca-Cola Company for recognition of its contribution for positioning the

brand. This is the most prestigious reward to the Bottlers from The Coca-Cola Company

(TCCC).

In 1994, the Company established another bottling plant at Chittagong. This state of the art

bottling plant with an installed capacity of 600 BPM is the most modern plant in the Country

equipped with the straight-line-technology from KHS Germany. This plant was established to

expand the market further in order to ensure that the Coca-Cola Companys quality products

reach the consumers door-step even to the remote places to uphold the motto ALWAYS

COCA-COLA. Abdul Monem Limited is strived to be a good neighbor, consistently shaping its

business decision to improve the quality of life in the communities in which the company do the

business. Its a special thing to have billons of friends around the world and the company never

forgets it.

The bottling plants of AML for bottling Coca Cola are located in Dhaka, Comilla and

Chittagong. However, at present, the operation of Dhaka plant is suspended and the total bottling

operation is constricted to the other two plants. The details of the Chittagong and Comilla plant

are given below :

Chittagong- Comilla

Site :Area 10 Acres- 6 Acres

Year of operation :1997 -1987

Line: KHS Germany

(PLC Controlled-Fully Automated): H&K / KHS Germany

Capacity: 600 BPM- 450 BPM

6.5 Mill. cases/Yr- 4.5 Mill. cases/Yr

Packages 250 ml, 1000 ml 175 ml, 250 ml, 1000 ml

Capability Plastic- cases

Fill height detector

4.2 Distribution Channel of Coca-Cola:

Coca-Cola has their distribution channel. This company has a generally channel behavior of

vertical marketing system that all the manufacture. Wholesale; retailer and consumer work

together, like-

22

Figure-: Coca-Cola distribution Channel

But by the company they also use three types of channel. Those are

(i.) Zero level Channel

(ii.) One level Channel

(iii.) Two level Channel

The three level of channel are described in the below-

Zero Level Channels:

Implementing Zero level channels in selling Coca-Cola soft drink to the consumers is directly

supported with valuable information from the consumers. This channel is used for Coca-Cola

Post Mix drink.

Figure- Zero Level Channel of Coca-Cola. 23

One Level Channel:

One level channel is organized and systematic channel to meet the Coca-Cola demand for the

existing market. In this channel there is one intermediary to reach the final customers. Coca-Cola

Tabani Beverage Company uses this channel for its Post Mix drink.

Figure-: One level Channel of Coca- Cola.

Two Level Channel:

Distribution system consists of 2 intermediaries and company complex. In this channel the

Coca-Cola products are delivered from the sales force to sales distributor to retailers to

customers. Implementing a number of channel levels and intermediaries in distribution-Poses

losing control on the intermediaries and also affects the profit margin of the company initially

but it will in fact cover the unexplored market and will increase the existing sales. It is proposed

to implement two level channels in distribution considering the existing limited support facilities

as a lack of trained salesman, inadequate logistic support. Tabani Beverage uses this Channel for

its BOTTLE drink and Post mix.

Coca-Cola Company deliver to the outlets 7 days a week are minimum one trip per day.

24

4.3 No of Distributors, Sales Person and Transport:

The company has more than 1500 sales people working throughout the country. They also have

8 market supervisors who are market representatives. This company has 39 distributors currently

and has 26 vehicles, 40-50 pickups in Dhaka City.

Coca-Cola firstly divides the whole Bangladesh into four zones those are:

(i.) Dhaka,

(ii.) Chittagong,

(iii.) Rajshahi and

(iv.) Khulna.

In each of these zones two zonal distributors are selected. They can also be mentioned as

wholesalers. Coca-Cola supplies their soft drinks these distributors by their own transportation

service. It can be mentioned here that for transportation purpose they have 30 trucks. Retailers of

each separate zone contact with the zonal distributor and ask them to supply according to their

demand. To be a distributor of PepsiCo Limited an individual or organization must have some

criteria that given bellow

(i.) The person or company must have experience or to relate with dealership business.

(ii.) He or it must have to be financially solvent with TK.1,00,0000 (10 Lakh).

(iii.) Must have auto vehicles and employees.

(iv.) Regular goods order must have to be maintained.

(v.) A security of TK.1,000,00 Have to keep to Pepsi for six (6) months.

25

Zonal distributors sometime appoint more distributors on a locality basis such as in Dhaka and

Chittagong. These distributors supply the product according to the retailers demand. Mostly this

transportation is done by the distributors own vehicles such as van, pickup etc. they visit each

retailers shop usually twice a week. But in case of summer season suppliers can provide the

product even seven days a week based on sales of the retailers.

Coca-Cola applies some motivation system to motivate their distributors. These includes if the

distributors makes a good regular goods order and sale exceeds above target then Pepsi gives

financial rewards to them and also some cases of goods are given free to them. But if there is any

mismanagement there is also some punishment for the distributors such as if distributors fail to

make minimum target of order or a least target of sale then Pepsi cancels their distributorship.

4.4 Delivery System:

The delivery system of Coke is given below.

Company to Distributor

26

Coke distributes their products to the distributors by using their own trucks. Company bears the

cost up to this part of the distribution process.

4.5 Distribution Network:

In Bangladesh, Tabani Beverage Company and Abdul Monem Ltd (Beverage Section) are the

main two-bottler companies. They bottle the soft drinks and distribute it through the whole

country. Tabani Beverage Company only bottles the Return & Glass bottle (RGB) for

distributing in Dhaka City and the Rajshahi zone. Abdul Monem Ltd (Beverage Section) covers

the Dhaka City and the rest of the country by Return & Glass Bottle (RGB) and PET Bottle.

Sales Force:

The sales forces under the Abdul Monem Ltd (Beverage Section) and Tabani Beverage

Company contribute in the sales of the country. The activities of sales forces are the main thing

of a company to increase their sales volume. The sales force under Abdul Monem Ltd (Beverage

Section) and Tabani Beverage Company play an important role in selling and distributing the

Coca-Cola product.

27

Distributor to Consumers:

Distributors use their vehicles to distribute the products. The distributors, in this stage have to

bear all the cost.

Deposit System:

The distributors have to deposit 1, 00,000 Tk. to become a distributor and have their own 3 to 4

vehicles, which have the red the logo on it.

The distributors have to buy certain amount of bottles or crates and often they have to buy only

liquid for the company. Deposits to the retailer are that the retailers have to pay for the bottles.

Credit Facility

The Coca-Cola Company usually does not give any credit facilities but sometimes these facilities

depend upon the distributors.

4.6 Geographical Coverage:

Coca-Cola is the largest soft drinks supplier at present in Bangladesh. About 43% of total

beverage sectors are dominated by Coca-Cola. So, its obvious that, Coca-Cola has the total

coverage in Bangladesh due to its excellent distribution system in our country. Coca-Cola is

found in each & every district of Bangladesh.

4.7 Supply output demanded by customers:

The following supply outputs are demanded by customers to the different channel members of

Coca-Cola:

28

1. Bulk-breaking:

Consumers need the availability of Coca-Cola in every retailer shop as its a very famous

name in soft drinks industry.

2. Product information:

Consumers need to know the name of ingredients of the product & also other features

from the retailers

3. Tagging:

While purchasing any product of Coca-Cola, consumers want to see the price, date of

expire, date of manufacture & some other information in the upper portion of bottle

provided by manufacturer.

4. Fair price of product:

Customers are also very much concern regarding the price of Coca-Cola comparing with

other soft drinks.

5. Innovation & customization:

Customers always expect some new innovations &customization of the product from the

manufacturer of Coca-Cola.

6. Promotional Activities:

Customers are also very much concern regarding the promotional campaign offered by

the manufacturers & distributors.

4.8 Channel Flows:

Channel flows provide the links that tie channel members & other agencies together in the

distribution of goods & services. Coca-Cola also has its own channel flow system.

1. Product Flow

2. Negotiation Flow

3. Ownership Flow

4. Information Flow

5. Promotion Flow

29

Figure: Marketing flow in channels of Coca-Cola.

The arrows above show of activity in the channel. Each carries a cost.

Market Flow Cost Represent for Coca-Cola

Physical Possession Storage & delivery cost

Ownership Inventory carrying cost

Promotion Personal selling, advertising, sales promotion,

publicity

Negotiation Time & legal cost

Financing Term & condition sells

Risking Price guarantees, warranties, insurance, repair

Ordering Order processing cost

Payment Collection

Chart: Marketing flow cost

30

Each & every flow is very much important for Coca-Cola. However, among the upper flows,

Coca-Cola has to incur a very significant cost in physical possession & promotion cost. As

Abdul Monem Ltd & Tabani Beverage Ltd are the bottlers distributor of Coca-Cola in

Bangladesh, they have to use a huge investment in case of distribution. They use both

independent & own channel members in case of product distribution. Thats why they have to

incur a significant amount of money for physical possession & promotion of the product.

4.9 Ancillary Structure in Channel System:

The nonmember participants or facilitating agencies that work on behalf of the manufacturer

instead of channel members to distribute products are belonged to the ancillary structure of the

marketing channel. Coca-Cola also uses some agencies or retailers or institutions as ancillary

structure of the channel system. They are:

1. Merchant Wholesaler

2. Commission Merchants

3. Super shops.

4. Independent advertising agencies

5. Agents & brokers

6. Independent transportation agencies

31

Chapter 5

Others Regarding Distribution Channel

Of Coca-Cola

5.1 Channel Conflict:

Channel conflict can arise when one intermediary's actions prevent another intermediary from

achieving their objectives. There are mainly 2 kinds of channel conflict. They are-

1. Vertical Channel Conflict

2. Horizontal Channel Conflict

Vertical channel conflict occurs between the levels within a channel and horizontal channel

conflict occurs between intermediaries at the same level within a channel.

5.1.1 Channel Conflict in Coca-Cola:

As Coca-Cola has a big channel structure than its very common that it has channel conflicts

among the channel members. Both vertical & horizontal channel conflicts are seen in the channel

system of Coca-Cola. The areas are:

1. Between supplier & manufacturer

2. Between manufacturer & other channel members

3. Among channel members of same level or others.

4. Between consumer & retailer

5.2 Reasons behind of Channel Conflict:

There are several reasons behind of channel conflict in Coca-Cola. These are briefly explained

here:

1. Excess demand of product:

Every year in some specific times the demand of Coca-Cola may increase due to some

marketing policies or some natural phenomenon. At that time a conflict arises between

retailers, manufacturers & suppliers due to excess pressure of product demand. This

creates conflict between channel members.

33

2. Competition between distributors

Hence Coca-Cola is a big company, so its number of channel members is very high. As a

result there are a lot of conflicts seen among the channel members. Each & every channel

members want to have the best position in the channel system. So, it creates problem

among the channel members & thus conflicts arise.

3. Communication Difficulties:

As there are so many channel members in Coca-Cola distribution system, there is

presence of lack of communication among the channel members. The information may or

may not interpret by the lower channel members correctly which creates a huge conflict

among the manufacturers & other channel members.

4. Lack of motivations:

Lack of motivation is another thing which creates channel conflict among the channel

members. The distributors of Coca-Cola get only 4% to 6% commissions from the

manufacturers which seems to be very less to the channel members & for that reason

some of them have lost their motivation on selling the product.

5.3 Suggestions for resolving the conflicts:

The suggestions that our team provide for Coca-Cola are:

1. Company may do regular basis survey among the channel members regarding their

performance.

2. In case of independent & fully owned channel members, company may create channel

members council which will work to eradicate the conflicts.

3. In case of goal setting, manufacturers can hold meeting with major channel members to

have a perfect goal for the company distribution.

4. Company may do something that will encourage the channel members to attain the goal

company like increasing their commissions with the increase of sales.

34

5.4 Power Structure of Channel System:

In a marketing channel context, power means the capacity of a particular channel member to

control or influence the behavior of other channel members. There are some bases of a power

structure. They are-

1. Reward Power

2. Coercive Power

3. Legitimate Power

4. Referent Power

5. Expert Power

Coca-cola has all the power bases in their channel system.

1. Reward Power:

Abdul Monem Ltd provides a better reward system to the following channel members of

them. It depends on the sales of product. Generally they provide 4-6% commission on

achieving the goals by the channel members. Other distribution channels offer some sort

of small reward for the lower channel members.

2. Coercive Power:

Coercive power is just opposite of reward power. Coca-cola do not use this kind of power

but they stop giving commission on sales if the targeted goals are not achieved by the

channel members.

3. Legitimate Power:

By the power of hierarchy system in the distribution channel of Coca-Cola, each & every

channel member is bound to its upper channel members.

4. Referent Power:

Coca-Cola uses some of their strong & leading channel members as their referent group

which has a good performance. They influence the other channel members work.

35

5. Expert Power:

Coca-Cola uses some distributors which are much experienced in case of distributing

products to influence the other members.

5.5 Control over Channel System:

As Coca-Cola is run by Abdul Monem Ltd & Tabani Beverage Company in Bangladesh, they

hold all the powers shown in power structure of Coca-Cola. They first use the power on their

immediate channel members & also set target for other channel members also. Though they use

some distributors to hold powers on the lower members, these two companies virtually hold all

the powers of the channel system.

5.6 Merger and Acquisition:

Though no record for merger was found in the history of AML, the entrance of AML in beverage

industry was the result of a huge acquisition of cotemporary scenario. Till 1982, the authorized

bottler of Coca Cola for Bangladesh was entitled to K. Rahman & Company. AML took over its

bottling operation by acquiring the plant of the K. Rahman & Company in Chittagong in 1982. It

has set up two more bottling plants, one in Dhaka and other in Comilla, till then.

5.7 Major strengths of the closest competitors:

In Bangladeshi market Coca-Colas main competitor is Pepsi. The major strengths of these

competitors are given below:

1. Company like Pepsi, they are working more on product & research development, whereas

Coca-Cola has less product & research development for innovation.

2. Pepsi is continuously redesigning & restructuring their products whereas Coca-cola is

stacked on their old products.

36

3. Promotional campaign of Pepsi is much better than Coca-Cola.

4. The price of 500 ml Pepsi is 30 taka whereas the price of coca-cola is 38taka. Here,

Pepsi is providing the product in fewer prices than coca-cola.

5. Pepsi has 250ml bottle but coca-cola do not have it.

6. The distributors of Pepsi get more sales commission than Coca-cola.

5.8 Effects of Technological Advancement:

Technological advancement has less effect on the distribution channel of Coca-Cola. As Coca-

Cola is performing their business through two franchisees in our country, so they need the

distribution channel we mentioned in distribution channel system of coca-cola. Due to its strong

brand image & strong positioning strategy there are less opportunities to break down or creating

alternative distribution channel system for the product.

37

CHAPTER-6

RECOMMENDATIONS & CONCLUSION

6.1 Recommendations:

After studying the overall distribution channel of Coca-cola, we have some specific

recommendations for the company. They are-

Adequate or Superior Commission/margins:

Nothing can motivate and satisfy a distributor except superior monetary commission or profit

margins. The very first thing a distributor asks is how much money is I going to make with your

(manufacturer) product line? Coca-cola gave around 4% to 6% commission for their distributors

and maximum numbers are not satisfied with the commission. So this is the easiest way to satisfy

the distributors by increasing their commission. Now the time has come to increase the monetary

commission for the distributors.

Joint sales calls:

Joint sales calls are a win-win situation. Manufacturer also benefited because direct access to the

distributors force lets manufacturer increase distributors salespeoples knowledge about

manufacturer product and helps them feel more comfortable selling it. By this way sales will be

higher, so distributors can generate more profit and the manufacturer as well.

Sales force management:

Sales force management can help the distributors to do business with a comfortable environment.

Sales force management runs by the manufacturer field sales people and management.

Manufacturer salespeople are literally the last lines of communication and management between

the manufacturer and the distributor, and they are responsible for implementing manufacturer

business policies and procedures. A manufacturer sales person needs to be company

representatives, channel defenders, trainers, and field sales managers, all wrapped up in one

convenient package.

39

Uses pull strategy to motivate and satisfy distributors:

Pull strategy motivates end user to approach manufacturer channel of distribution and call out

for manufacturer product. So, distributors sales will be increased. A customer than asks for a

specific manufacturer product wont be satisfied with anything else. So distributors must sell

manufacturer product and make more profit.

Aware the distributors at the right time:

Before arranging any program or promotional activity manufacturer should give the massage to

the distributors. Sometime company doesnt provide their giving promotional information to

their distributors. Distributors aware about different program just before start it. Otherwise, they

must face problems in the market.

Monitor retailers satisfaction and motivation:

After every six month all Beverage company can arrange survey program for understanding

retailers satisfaction level. After conducting survey, different program can be arranged for

increasing retailers satisfaction level which can also motivate retailers to make them loyal for

company.

Increase non-monetary enticements:

Non-monetary enticements always motivate a distributor, because non-monetary enticements are

supporting help from the manufacturer. Non-monetary enticement can be anything except cash.

Some companies only served free cost delivery for their distributors. The result was dissatisfied

middlemen. By giving dress for the distributors sales personnel, transportation support in case

of problem, give a fridge for distributor point, arrange training program for the salesmen or give

some free product during any festival period can increase distributors level of satisfaction and

motivate them for giving more effort for the channel of distribution.

40

6.2 Conclusion:

Coca-Cola is one of the largest soft drinks providers in Bangladesh. Their distribution system is

very strong. For that reason, they are having the first position in the soft drinks industry of

Bangladesh. As they are doing business in our country by Abdul Monem Ltd & Tabani Bavarage

Company, they should also provide them good facilities. Moreover, these two franchisees,

especially Abdul Monem Ltd is doing a very good business through a strong distribution

channel. However, to hold the market share, they should keep their eyes always in channel

members as the success of business is much more dependent on them. By motivating the channel

members in proper ways they can assure the best performance by the retailers & the other

channel members. Overall, Coca-cola is doing well at present with their distribution channel in

our country.

41

Bibliography:

1. www.coca-cola.com.bd

2. www.edupedia.educarnival.com/the-current-market-scenario-of-beverage-industry-

in-bangladesh/#Pepsi_in_Bangladesh

3. www.lawyersnjurists.com/

4. Rosenbloom B., Marketing Channels A Management View, 7th Edition, Thomson

south-western, 2007.

5. Anne T. Coughlan, Erin Anderson, Louis W. Stern, & Adel I. El-Ansary, Marketing Channels, 7th Edition, Prentice-Hall, Inc. (ATC).

42