NESTLE:

By: Hussain Tiewala – 7333

Jai Anjaria – 27274
 Nestlé was founded in 1866 by Henri Nestlé and is
today the world's biggest food and beverage
company. Sales at the end of 2009 were $
91 billion, with a net profit of $ 8 billion. Nestlé
employ around250,000 people from more than 70
countries and have factories or operations in almost
every country in the world
 Nestlé is based on the principle of
decentralization, which means each country is
responsible for the efficient running of its business
- including the recruitment of its staff.
 Nestlé India manufactures products of international
quality under famous brand names such as
NESCAFÉ, MAGGI, MILKYBAR, MILO, KIT
KAT, BAR-ONE, MILKMAID and
NESTEA and in recent years the Company has also
introduced products of daily consumption and use
such as NESTLÉ Milk, NESTLÉ SLIM Milk,
NESTLÉ Fresh 'n' Natural Dahi and NESTLÉ Jeera
Raita.
 Distribution system of Nestlé is one of major
source of competitive edge over its existing rivals.
Nestlé has its own distribution networks equipped
with all necessary transportation facilities. They
transport their products at major regional sales
offices, which are situated at different cities of
India. These sales offices (distribution
centres) have their own vans with sales people
who sell and transport goods to the small retailers.
The Nestle Distribution Channel
 In general Nestlé follows the above sequence for
distribution of its products. By the above
diagram, we can understand that the products are
sent to the C&F Agents of the company from its
Manufacturing Unit. Then at later stage it’s been
sent to Distributor and Super Stockist. Here, the
Distributor is responsible to manage the availability of
products in his area, whereas Super Stockist supplies
the goods to Re-Distributor who is responsible to
manage the availability of outside the region of
Distributor. Then the Distributor and Re-Distributor
supply the products to Wholesaler and Retail in their
respective region or area.
 There will be a single C&F Agent for every state
who supplies the goods to the Distributor. Now, a
distributor will be appointed by the company for
every urban city. That distributor will have the
responsibility to maintain the proper flow of goods
in his region. Whereas on the other hand there will
be a Super Stockist in the same city who will
supply the products to the Re-Distributor who will
be there in the surrounding areas of that city.
Visit Details
 We visited various retail outlets in M.G Road and
Koregoan Park in Pune and interacted with the
retailers. We identified the problems which
the retailers are facing and also provided possible
suggestions for the company to resolve
these issues.
What is Channel conflict ?

 Occurs when manufacturers (brands) dis-

intermediate their channel partners, such as
distributors, retailers, dealers, and sales
representatives, by selling their products direct to
consumers through general marketing methods.
 ‡Channel conflict can also occur when there has
been overproduction. This results in a surplus of
products in the market place.
Margins

Cadbur Wrigley
  Perfetti y Nestlé Lotte s Colgate

super
stockist 2.5 2 2 2.5 2 2

sub
stockist 4 4 3.8 6 5 5.6

TOTAL 6.5 6 5.8 8.5 7 7.6

Problem:
  From the above chart, we can see that Nestlé gives
the lowest margin to its distributors in the industry
 Hence, the margins to the retailers are also reduced.
If we consider the motivation of the retailers to
keep Nestlé’s products, the throughput or off take
of Nestlé’s products is very high and most retailers
would be keen to maintain their baskets of goods,
the low margins are a dampening factor,
as mentioned by a few retailers in our interactions.
Recommendation
 Considering the low motivation of the Nestlé
retailers, due to lower margins on products sold by
them, company should try to compensate them or
give them an opportunity to increase their profits
by extending better percentage incentive schemes
on purchase in bulk. Instead of harming the
profitability of the company by extending greater
margins, these schemes would lead to high volume
purchase by retailer, thereby increasing the
profitability of the company
Issues in Implementation
 The problem which could emerge while
extending greater percentage schemes are that once
the retailers get used to higher schemes on a
particular product, it becomes very difficult for
the company to change/ reduce the scheme on the
product.
 Apart from that, profitability of the company is
definitely affected if the scheme is extended in an
unplanned manner.
 In order to implement the schemes, the company needs
to identify on which products this scheme is suitable.
The products which already have a very good pull
effect like Maggi need not be given incentivised
schemes. Some products which require pull effect are
Everyday tetra pack milk cartons, coffee, etc and
should be a part of such incentive schemes.
 In order to have better control over the channel
and prevent retailers resistance while
changing the scheme, the company should also device
a strategy of rotation.
PROBLEM :
 We realized that the displays bought by Nestlé were
not maintained properly and they scored low on
hygiene and adherence to the company’s
plan. As the merchandiser’s performance is not
measurable, it is not possible to make his work
accountable which results in slack of work
among some merchandisers. Hence, the main challenge
lies in the fact that the merchandiser’s productivity
and effectiveness is currently not measured unlike
Distributor Salesman whose turnover is an input for
performance evaluation.
RECOMMENDATION:

 Every Distributor will have some merchandisers who are

responsible for putting up the displays and maintaining them, week-
in and week-out. Merchandiser beat plan covers around 40-50
outlets per week and generally, there are 1-3 merchandisers per
distribution point. From our market visit, we observed that the slack
of work by merchandisers cannot be gauged and there is lack of
motivation among the merchandisers to excel in their work.
 Our recommendation for this, is to have incentives for
merchandisers based on their work. The merchandiser’s
productivity and efficiency can be measured by the Sales Officers
by more frequent visits and taking feedback from the distributor
salesman. Incentives of Rs. 400-500 would motivate the
merchandisers and put proper effort into his job.
Issues in Implementation
 The performance evaluation of merchandisers is very
subjective and incentivizing on the basis of visits
and feedback of Distributor Salesman may lead to
discontent for certain merchandisers and probable
conflict with the Distributor Salesman
 Tackling Implementation Issues: To ensure that
the incentives structure does not cause
any discontent among merchandisers, it should be the
Sales Officer’s responsibility that he keeps the
feedback from Distributor Salesmen as private so that
there is no conflict of interest and be in
constant communication with the merchandisers about
their market beats and performance.
Thank you