AprilMay

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Nestle SummerInternship

ProjectGuide:Mr.P.Ganesh

Submitted By: Abhay Negi 2008PGP003D

IndianInstituteofManagement,Indore

ACKOWLEDGEMENT
IwouldliketothankMr.P.Ganesh,myprojectguideforhisguidanceandsupportthroughout the tenure of the internship. Without his efforts and review, the project would not have encompassedsomanyaspectsofmarketingandwouldnthavebeensuchawonderfullearning experience. I also wish to thank to the sales officers, distributors and the area sales managers at all the distributor points I visited for their help, guidance and cooperation. Since it was a first time experience entering the FMCG space, it would but have been quite challenging without their guidanceandcooperation. I also extend my thanks to Ms. Richa Nandwani for making sure the internship went through smoothly. Finally,IwouldliketoexpressmydeepestgratitudetoNestleIndiaLimitedandIndianInstitute of Management, Indore for giving me an opportunity to undertake this project. It was a wonderfullearningopportunityandIlookforwardtoassociationswithNestleIndiaLtd.inthe futureaswell.

AbhayNegi IIMIndore
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TableofContents
ACKOWLEDGEMENT ObjectivesofStudy Methodology AboutNestle Introduction History PresentStatus NestleIndia Productportfoliofourkeysegments PreparedDishes&CookingAids(20%ofsales) TheoriesandConceptsInvolved PricePoint Oligopolypricing DistributorSalesmanIncentives Chocolates&Confectionary Introduction ConsumptionofChocolatesinIndia Nestl:Chocolates&Confectionary MarketResearchAndProblemIdentification Introduction MarketResearchandFindings Observations ConsumerSurveyResults Factormostinfluencingbuyingdecision MostImportantAttribute TestMarket Methodology TeenKiKranti Results Recommendations AppendixConsumerQuestionnaire

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ObjectivesofStudy
ThechocolateandconfectionarybusinessinIndiaisanimportantrevenuegeneratorforIndia. Butwhileitisaleaderinmostotherbusinessessuchasculinaryandbabyfoods,itstillhasnot beenabletoseriouslychallengethemarketleaderinthechocolateandconfectionarybusiness. Nestleiskeeninfindingoutthereasonswhicharedraggingtheirgrowthinthissegmentand areaggressivelytryingtofindstrategieswhichwouldhelpthemcompeteinthissegment. Ourstudyaimsatstudyingtwofactorswhichthecompanybelievesplayavitalimportantinthe chocolatesandconfectionarybusiness. Theobjectivesofthestudyare: o ImportanceofpricepointsinthechocolatesandconfectionarybusinessinIndia:With an increase in price out of the picture, companies are forced to use tactics such as tweakingtheproductbyremovingfrills/features.Thisisaimedtosavingoncostsaswell asprovidingmaximumvaluetotheconsumer.Consumersrarelybuyproductsbasedon the prices/ discounts; instead they are looking at the maximum value they can get. Hence, a product with stripped down features at a lower price can provide a more attractivevalueproposition. Thechocolatesandconfectionarybusinessisaverycompetitiveindustrywithanumber ofcompetitorsprovidingavarietyofproductsateachpricepoint.Noneoftheplayers can afford to vacate a price points without losing a large share of its market. Confectionarybusinessistheworsthitbythisphenomenon. Nestleisbattlingahugedropinsalesinitschocolatesfollowingthehikeinpricesofone of its most selling and wellknown brands, Kitkat. The sale of Kitkat has been affected mainly because of it trying to move away from an established price point. The movement of its Rs 2 SKUs to Rs 3 also has met with strong resentment and sharp declineinsales. o Effectiveness of the distributor salesman incentive schemes in improving the organizational sales: The dangling of the proverbial carrot is an ancient art that is commonly understood to be at the heart of human behavior, psychology, motivation, and, in particular, business. Manufacturers and distributors commonly use this techniquewiththeirchannelpartnersinanefforttoadduniquemotivationalvalueto movespecificproductsorservices.
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Allcompanieshavebeenusingthismethodsuccessfullyovertheyearsforkeepingtheir workforce motivated and implementing their marketing and sales strategy at the grassrootslevel. Nestle has also used all these techniques but the management is unclear if these schemes are having the desired effect. Some feedback is warranted on the kind of schemescurrentlybeingrunandsomesuggestionsforimprovement.

Methodology

Thefirstpartoftheprojectwastoconductamarketstudyinordertolearntheworkingofthe market and develop the concepts required for the task. The initial few days were spent understanding the problems from the retailer, distributor and the consumer points of views. Surveyquestionnaires,personalinterviewsandobservationswereusedastoolstogatherthe necessary data. The process was carried out in diverse markets such as Delhi, Jaipur, Ajmer, Kotaetc.eachmarkethavingadifferentcharacteristiccontributingtoholisticallyunderstanding theproblem. AtestmarketwasconductedbasedonthedataandfeedbackinMeerut.Theresultsofthetest market were analyzed and recommendations were made based on these results and other observations.

AboutNestl

Introduction

NestleSA,Switzerlandisamongsttheworldslargestfoodandbeveragescompanies.The companyisprogressivelyevolvingfromarespected,trustworthyfoodandbeveragecompany toarespected,trustworthyfood,beverage,nutrition,healthandwellnesscompany.This objectiveisencapsulatedinGoodFood,GoodLife.Theprincipleactivitiesofthegroup encompass:beverages,milkproducts,nutritionandicecream;prepareddishesandcooking aids;chocolate,confectioneryandbiscuits;water;andpetcare.Ithas511factoriesin86 countriesaroundtheworld. HenriNestlfoundedNestlin1866inSwitzerland.NestlmeanslittlenestinSwissGerman. Nestlfirstcustomerwasaprematureinfantwhocouldtolerateneitherhismothersmilknor anyotherconventionalsubstitute.Thus,Henrisultimategoalwastohelpfighttheproblemof infantmortalityduetomalnutritionforwhichhedevelopedaproductcombiningvariouscows milk,wheatflourandsugarandnameitFarineLacteeNestl,whichwasthefirstproductof NestlbeingmarketedinEurope.

History
ThehistoryofNestleincludesthedevelopmentofmanydifferentproductsaswellas acquisitions,mergersandthepurchasingofsharesincompanies,mainlyabroad.Overthe courseoftheyears,thisenabledittobroadenitsrangeofproductsanddiversifyitsoperations, whileatthesametimestrengtheningtheeconomicfoundationsofthecompany.Amongstthe mostimportantacquisitionswereCarnationinLosAngeles(milk,culinaryproductsandpet foods)andmorerecentlyRowntreeMackintoshinYork(chocolateandconfectionery),Buitoni inPerugia(pasta)aswellasPerrierinFrance(mineralwater).Nestle,whichdoes98%ofits businessoutsideSwitzerland,alsohasinterestsinnonfoodsectors,incosmetics(alargeshare holdinginL'Oreal)andophthalmicproducts(acquisitionofAlconLaboratoriesInc.)while continuingtogiveprioritytofoodproducts.

PresentStatus
Nestleisnowtheworld'slargestfoodcompany.Itispresentonallfivecontinents,hasan annualturnoverof74.7billionSwissfrancs,runs509factoriesin83countriesandemploys about231,000peopletheworldover. TheCompanyowesitscurrentstatustothepioneeringspiritinheritedfromitsfounderswhich continuestoinspireit,toitsconcernwithqualityandtoitsconstantsearchfornewwaysof satisfyingman'snutritionalneeds. Whereverpossible,itsetsupfactorieslocally,employspersonnelfromthecountryconcerned
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andreliesonindigenousrawmaterials.Itsagriculturalservicesprovideassistancetoimprove thequalityandyieldoftherawmaterialsituses.Muchattentionisdevotedtoprofessional trainingandtotheintegrationoftheCompanyinitseconomicandsocialenvironment.

NestleIndia
NestleIndiaisasubsidiaryofNestleS.A.ofSwitzerland.Thecompanyinsistsonhonesty, integrityandfairnessinallaspectsofitsbusinessandexpectsthesameinitsrelationships.

Withanemployeestrengthofover3000andturnoverofUS$497millionin2003,NestleIndia is one of the leading companies in the FMCG space in India. The company is acknowledged amongstIndiasMostRespectedCompaniesandamongsttheTopWealthCreatorsofIndia. Beginning with its first investment in Moga in 1961, Nestls regular and substantial investments established that it was here to stay. In 1967, Nestl set up its next factory at Choladi(TamilNadu)asapilotplanttoprocesstheteagrownintheareaintosolubletea.The Nanjangudfactory(Karnataka),becameoperationalin1989,theSamalkhafactory(Haryana),in 1993andin1995and1997,NestlcommissionedtwofactoriesinGoaatPondaandBicholim respectively.NestlIndiaisnowputtingupthe7thfactoryatPantNagarinUttaranchal. It produces a wide range of products including beverages, prepared dishes and cooking aids, milkproductsandnutrition,chocolateandconfectionery.Milkproductsandnutritionaccount for around 45 per cent of Nestl Indias total revenues. The companys beverage products generate22percentofthecompanystotalrevenues,whileprepareddishesandcookingaids generate18percent,andchocolateandconfectionery15percent.
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NestlIndiahasovertheyearsbuiltstrongbrandslikeMAGGI,NESCAFE,CERELAC,LACTOGEN, KITKATandPOLO.NestleismajorplayerinmanysegmentsoftheFMCGsectorsuchasnoodles andsauces[MAGGI],instantcoffee[NESCAFE]andweaningfoods.

Productportfoliofourkeysegments
Nestlehasawellbalancedproductportfolio,withfourkeysegments.MilkProducts&Nutrition isthelargestsegment,with42%contributiontosales(27.5%comesfromBabyFoods&
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Nutritionand14.5%fromvalueaddedMilkProducts).Beveragescontributes21%,Chocolate& Confectionery17%,andPreparedDishes&CookingAids20%.Thusnosingleproductsegment isaverybigpartofthetotaltopline.

PreparedDishes&CookingAids(20%ofsales) PreparedDishes&CookingAidsincludesproductssuchasMaggiNoodles,Ketchups,Soups,and otherCookingAids. InstantNoodlesfocusonvalueaddedvariants:MaggiNoodleshasrevolutionizedtheIndian snackfoodmarketwithits2minutecampaignincorporatingthepunchline'Easytocookand Goodtoeat'.Thecompanyhaslittlecompetitioninthesegmentandleadsthemarketwith 90%marketshare.TopRamenhasnearly10%shareinthemarket. The product category has witnessed the influx of local brands as well as private labels in organizedretail,butMaggihasbeenabletomaintainitsswayinthemarket.A100gmMaggi2 MinuteNoodlepackavailableinfourvariantsMasala,Curry,ChickenandTomatoforRs10isa valueformoney (VFM) offering catering to the taste of all ages. The excise exemption on

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instantnoodlesinFY05hasledtodemandaccelerationasthecompanypassedontheexcise benefittoconsumers. NestlehasbeensuccessfullyextendingthisbrandtonewervariantsandproductssuchasDal Atta Noodles, Rice Mania in three flavors (Lemon Masala, Chilli Chow and Shahi Pulao). The companylaunchedseveralproductvariantsinthepastfewyears,positionedatthepremium end,withrealizationshigherby4080%.SomeofthesevariantslikeRiceManiaandVegetable AttaNoodleshaveevokedgoodresponse.Successofthesevariantshascreatedahugeproduct gapwithothercompetitors.Thiswillnotonlyensurehighermarginsbutimprovedbrandrecall, enablingthecompanytomaintainmarketshare. Ketchups: Maggi sauces continue to maintain their leadership with 39% share by creating excitementaroundnewvariants.Theketchupmarkethasbecomeincreasinglycompetitivedue toaggressivepricingbyHeinzandtherisingnumberofprivatelabelsinorganizedretail.This hasresultedinvariousdiscountschemesandpriceundercutting.Nestlehasadoptedastrategy ofproductdifferentiationwiththelaunchofvariantslikeMaggiTomatoChatpat,MaggiPudina Mix, Maggi Teekha Masala, Maggi Oriental Cheese and Garlic Sauce and Maggi Pizza Maaza positionedacrosstheflavorsusedintraditionalIndianfoods.ThishasresultedinMaggibeing aheadofcompetitionintermsofbrandrecall.Also,pricingthenewvalueaddedvariantsat15 20%premiumtothebasictomatoketchupwillenablethecompanytoprotectmargins. Soups:Duringtheyear,NestlehaslaunchedanewrangeofMaggiHealthSoupsSanjeevni cateringtothetraditionalIndiantaste,madebyusingingredientslikeamla(Indiangooseberry), badam (almond), spinach, dal (pulses) and tomato. These are instant soups available in convenientsinglepacks.TheMaggiHealthrangeofsoupswithninevariantswillbenefitfrom removal of excise duty in the recent budget. The soups market has seen rising interest with brands like Knorr, MTR etc. launching new flavors and variants. We expect the competitive intensity to sustain but high doubledigit growth in the segment will ensure there is enough roomforgrowthforexistingplayers. MilkProducts&Nutrition(42%ofsales)hugegrowthpotential:MilkProducts&Nutrition hastwosegmentsi.e.BabyFoodsandDairyProducts. Baby Food: Nestle leads the Baby Food category with brands such as Cerelac, Nestum and Lactogen. The Infant Milk Substitutes Feeding Bottles and Infant Foods Act, 1992 has banned advertisingofinfantnutritionproductsinIndia.Inaddition,thefocusofthemedicalfraternity hasshiftedtolactationratherthanbabyfood.Thishasimpactedthehighgrowthratesinthis segment.Thecompanymarketsinfantnutritionproductsthroughmedicalrepresentativeswho
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reachthemtopediatricians.TheparentssuperiorR&Dcapabilitiesinthissegment,hashelped NestleIndiarevisetheformulaeforitsnutritionproducts,whichincludeLactogen1,2and3, Nan1,Nan2,NestumandNestogen1and2. Thebanonadvertisingandthelowgrowthratesinthisproductcategoryhaveensuredthatthe markethasbeenaduopolywithNestleandHeinzasthetwoestablishedplayers. Dairy Products highly competitive; new variants drive volumes: The companys traditional dairyproductssuchastheEverydayrangeandMilkmaidhavebeengrowingsteadily.However, thecompanyhadtowithdrawproductssuchasbutter,UHTmilk,etcduetostiffcompetitionin apricesensitivemarket.Thereafter,thecompanyhasfocusedonproductssuchasdahi(curd), ghee (semifluid cooking medium), dairy whitener, condensed milk and yogurt, which offer scopeofpremiumpricinginlinewithvalueaddition. The company has extended these product lines by launching variants such as Slim Dahi, Everyday Slim Whitener and Slim Milk to tap rising awareness and demand for products positionedonthehealthplatform.Theseproductsarepricedat1525%premium,offeringthe possibilityofearninghigherprofitmargins.Whiledemographics andsocialchangehavebeen positive;establishmentofacoldchainbythemodernretailersshouldresultinhighergrowthin the dairy products business in forthcoming years. We do not expect any let up in the competitive intensity in the milk products segment particularly from players like Amul and MotherDairy. MilkProducts&Nutritionhasreportedslackvolumegrowthof2.7%and2.9%duringCY05and CY06.The low growth rates can be attributed to: (i) withdrawal of certain nonperforming products from the market; (ii) prevalence of a smaller share of highgrowth products in total sales mix. Sales volume growth has jumped to 8% (16% excluding defocused items) during 1QCY07. Our estimates factor in volume growth of 6% during CY07 and CY08. Competition is expectedtobeintensewhilematerialpricesarelikelytosoftenonlyafter3QCY07. Chocolates&Confectionery(17%ofsales):TheChocolate&Confectionerysegmentincludes NestleKitKat,NestleMunch,NestleMilkyBar,NestleBarOne,Funbar,MilkChocolate,Polo, and Eclairs. The company has been attempting to grow the markets with VFM offerings such Polomintatthe50paisepricepoint,FunbaratRs2,CrunchyMunchandKitKatatRs5.Asa result, Nestles chocolate volumes seem to be gaining momentum over the past few years. Sales volumes have accelerated from 4.7% in CY03 to 15.8% during CY06. The Chocolates & Confectionerysegmentoffershugegrowthpotentialasproductpenetrationisasyetlow.The

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semiurbanandruralareasoffersubstantialgrowthpotentialastheproductshave,inthepast fewyears,startedmakinginroadsspurredbylaunchofsmallpacksandcheapervariants. We expect competition in Chocolates to increase owing to the increasing interest of players such as Hersheys and Cadburys; simultaneously, we also expect the rising competition to resultinfastermarketdevelopmentandgrowthforthesegment. Beverages(21%ofsales):TheBeveragesbusinessofNestlecomprisesNescafe(InstantCoffee business), Milo (malted drink), and Nestea (ice tea). Nestle is the market leader in Instant Coffee with 55% market share. The company has variants such as Nescafe Classic, Nescafe Sunrise, Nescafe 3in1 in its coffee range. HUL has been gaining market share in coffee segmentwithBrurecordinghighergrowth.Bru,whichispositionedasamixtureofcoffeeand chicory has been able to tap the growing demand of coffee with innovative flavors and attractivepricing.A200gmpackofBruisavailableatRs155versusNescafeClassicatRs255and Nescafe Sunrise at Rs155. Nestle has positioned Sunrise Premium as Nescafe Sunrise, which competesdirectlywithBru,buttheupwardmarchofBruisexpectedtocontinueastherecent riseinpricesofcoffeewillshiftmoreconsumerstowardsacheapervariant. NestlescoffeeexportshavetakenahitastheparentcompanyhadsetupaunitinRussiafor thesame.Exportsareunlikelytoemergeasagrowthdriverforthisbusiness.Milohasbeena nonperformerinIndia,despiteitbeingtheNo.1malteddrinkbrandglobally.NestlsOutOf Home segment offers huge potential to leverage Nestls product portfolio. The company continues to increase Nescafe Coffee Corners, Nestle Consumption Zones and vending machinesinschools,colleges,andotherlocationsthatexperiencehighfootfalls.
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TheoriesandConceptsInvolved

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PricePoint1
Price points are prices at which demand is relatively high. In introductory microeconomics, a demandcurveisdownwardslopingtotherightandeitherlinearorgentlyconvextotheorigin. The first is usually true, but the second is only piecewise true, as price surveys indicate that demand for a product is not a linear function of its price and not even a smooth function. Demandcurveslookmorelikeaseriesofwavesthanastraightline.

PointsA,B,andCinthediagramarepricepoints.Byincreasingthepricebeyondapricepoint (saytoapriceslightlyabovepricepointB),salesvolumedecreasesbyanamountmorethan proportionaltothepriceincrease.Thisdecreaseinquantitydemandedmorethanoffsetsthe additional revenue from the increased unit price. As a result, total revenue (price * quantity demanded),decreaseswhenafirmraisesitspricebeyondapricepoint.Technically,theprice elasticityofdemandislow(inelastic)atapricelowerthanthepricepoint(steepsectionofthe demandcurve),andhigh(elastic)atapricehigherthanapricepoint(gentlyslopingpartofthe demand curve). It is a common marketing strategy for a firm to set prices at existing price points.

http://en.wikipedia.org/w/index.php?title=Price_point
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Thereare3mainreasonsfortheexistenceofpricepoints: 1. Substitutionpricepoints a. pricepointsoccuratthepriceofaclosesubstitute b. when an item's price rises above the cost of a close substitute, the quantity demandeddropssharply 2. Customarypricepoints a. peopleareusedtopayingacertainamountforatypeofproduct b. increasingthepricebeyondthisamountwillcausesalestodropdramatically 3. Perceptualpricepoints a. also referred to as psychological pricing or oddnumber pricing raising a price above 99 cents will cause demand to fall disproportionally because $1.00 is perceivedtobeasignificantlyhigherprice.

Oligopolypricing
Oligopolyisakindofamarket,whichischaracterizedbyalimitednumberofcompetitors.Itis notaperfectmarketbutnoplayerisbigenoughtoexertmonopolisticcontroloverthemarket. ThechocolateindustryinIndiaismarkedbyanoligopolisticmarketwithtwomajorplayersi.e. CadburysandNestlecontrollingmorethan90%ofthemarket.Therestoftheplayerssuchas Amul,Hersheysetchaveafairlyinsignificantmarketsharetoexertanysignificantcontrol. Pricepointscanalsobecreatedbyoligopoly.Thesearenotnecessarilytheresultofcollusion butcanbeanemergentpropertyofoligoplies:whenallfirmsaresellingatthesameprice,any firmwhichattemptstoraiseitssellingpricewillexperienceadecreaseinsalesandrevenues (preventing firms from raising prices unilaterally) and any firm which lowers its prices will mostlylikelybematchedbyitscompetitors,resultinginsmallincreasesinsalesbutdecreases in revenues (for all the firms in that market). This effect can potentially produce a kinked demandcurvewherethekinkliesatthepointofthecurrentpricelevelinthemarket.These resultsaredependantontheelasticityofthedemandcurveandpropertiesofeachmarket.

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DistributorSalesmanIncentives
Thedanglingoftheproverbialcarrotisanancientartthatiscommonlyunderstoodtobeatthe heart of human behavior, psychology, motivation, and, in particular, business. Manufacturers and distributors commonly use this technique with their channel partners in an effort to add uniquemotivationalvaluetomovespecificproductsorservices.Often,incentiveprogramsfail miserablybecauseofinnatecomplexitieseitherintheirrecordingandreportingsystemsorin howrewardsarewon. Afewsalesmenwhoarewellmotivatedandhighlyskillfulintheartofsellingmakemostofthe sales and profits. The incentive schemes are aimed to reward such people and motivate the otherstotaketheirlead.Someofthefeaturesofaneffectivedistributorsalesmanschemeare: 1. 2. 3. 4. Clearcommunicationsaboutthekindandvaluetothesalesmenoftheincentives Incentiveprogramshouldbesimpleandattainable Focusshouldbeawayfromthemonetaryvalue Recognition among peers can be used as an additional motivator through which incentive 5. Rewardimmediately;avoidanydelays

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Chocolates&Confectionary
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Introduction
The first mention of chocolate being eaten in solid form is when bakers in England began addingcocoapowdertocakesinthemid1600s.Thenin1828aDutchchemist,Johannesvan houten, invented a method of extracting the bitter tasting fat or cocoa butter from the roastedgroundbeans,hisaimwastomakethedrinksmootherandmorepalatable,however heunknowinglypavedthewayforsolidchocolateasweknowit. Chocolate as we know it today first appeared in 1847 when fry & sons of Bristol, England mixedsugarwithcocoapowderandcocoabutter(madebythevanhoutenprocess)toproduce thefirstsolidchocolatebarthenin1875aSwissmanufacturer, Danielpeters,foundawaytocombine(somewouldsayimprove,somewouldsayruin)cocoa powderandcocoabutterwithsugaranddriedmilkpowdertoproducethefirstmilkchocolate. Chocolatesandcandiesareoneofthebestlovedfoodseverywhereintheworld.Theseareone oflife'slittlepleasures.Theattractivetastesandtexturesofchocolateandcandiesdelightthe sensesofallages. As far as Nestle chocolate Kit Kat is concerned, the product developed as Wafer Crisp, was initiallylaunchedinLondon,UKinSeptember1935asRowntree'sChocolateCrisp.Itbecame 'KitKat'in1937,twoyearsbeforetheSecondWorldWar. Within two years of launch Kit Kat was established as Rowntree's leading product, a position thatithasmaintainedeversince.DuringtheSecondWorldWarRowntreeKitKatwasseenasa valuablewartimefoodandadvertisingdescribedthebrandas'Whatactivepeopleneed'. FormostofitslifeRowntreeKitKathasappearedinthewellknownredandwhitewrapper.It did,however,changetoabluewrapperin1945,whenitwasproducedwithaplainchocolate covering due to a shortage of milk following the war. This blue packaging was withdrawn in 1947whenthestandardmilkchocolateKitKatwasreintroduced.

ConsumptionofChocolatesinIndia
ChocolateconsumptioninIndiaisextremelylow.Percapitaconsumptionisaround160gmsin theurbanareas,comparedto810kginthedevelopedcountries.Inruralareas,itisevenlower. Chocolates in India are consumed as indulgence and not as a snack food. A strong volume growthwaswitnessedintheearly90swhenCadburyrepositionedchocolatesfromchildrento adult consumption. The biggest opportunity is likely to stem from increasing the consumer
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base. Leading players like Cadbury and Nestle have been attempting to do this by value for moneyofferings,whichareaffordabletothemasses.

Nestl:Chocolates&Confectionary
The chocolate industry in India is estimated to be around Rs 1,900crore with nestle having around27%oftheshare.ThemarketleaderinthissegmentisCadburyswithmorethan60%of the market. The company, which currently offers six brands of chocolates Munch, Kit Kat, Milkybar,MilkChocolate,BarOneandSelection,hasaddedtwomorevariantstoitspopularKit Katrangetoboostthegrowthmomentum. ConfectioneryisvaluedatoverRs2,000crore,withanoutletbaseofover40lakhoutlets.More than80%oftheconfectionerysoldinIndiaisatthe50paisapricepoint.Majorconfectionary playersarePerfetti,Parle,Nestle,HLLandCadburys.Nestlesellseclairsandpoloinvarious variants.Confectionaryisthemostimportantsegmentforthestudyofpricepointbecauseof thetargetbeingmostpricesensitive.

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NESTLKITKATaredeliciouscrispwaferfingerscoveredwithchocolayer.Ourspecial tropicalizedrecipeensuresthatNESTLKITKATispreservedeveninwarmerclimates.

NESTLMILKYBARisadeliciousmilkytreatwhichkidslove.WithitsCalciumRichrecipe, NESTLMILKYBARisafavouritewithparentstotreattheirkidswith. ExtremelypopularinIndia,NESTLMUNCHiswaferlayercoveredwithdeliciouschocolayer.A crispylightirresistiblesnack!

NESTLMilkChocolateisamilkchocolatewithadelicioustasteforyoutosavour.

NESTLBARONEisalusciousnougatandcaramelcorecoveredwithadeliciouschocolayer.

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NESTLoffersabouquetofthreeexcitingclairvariants:NESTLEclairsarerichmilkycaramel Eclairswithasoftcenter.NESTLChocolateEclairsareadeliciousdelightwithlusciouscreamy chocolateinside.NESTLMILKYBAREclairsaredelightfulEclairswithacreamymilkychocolate center.

POLOisamintrollpopularlydescribedasTheMintwiththehole.Nowalsointhenewextra strongsinglesformatasPOLOPowermint.

Theconfectionarybusinessisfacinghugedifficultybecauseofthe50paisepricepointbarrier.Dueto thelackofcoinage,60paiseor75paisewon'tworkbutthenextusefulpricepointwouldbeRe1butit's doubletheprice.Tocounterthismoderntradeiscomingupwheretheydon'tsellbypiecetheysellby stick,fliptopandbags. Thebusinessisgettingconcentratedamidstbigcompetitorsandcompetitionisbecomingmoreand moreaggressive.They'rereadytoinvestnotjustinadvertisingbutalsoinpromotion.Keepingthisin mindandthefixedpricepoint,thereisaseriousproblemofbottomline. 22

MarketResearch And ProblemIdentification

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Introduction
Marketing decisions are based on assumptions or forecasts about consumer behavior. But human behavior is hard to predict accurately. Complex marketing modeling techniques have givemanagerswaystomanipulateandanalyzehugedatawhichaidsthemindecisionmaking. No matter how much you try you will be unable to accurately predict how men will behave. Theimportanceofintuitivejudgmentscannotbeundermined.Inmanagerialsituationsthebest approach is to tread the middle ground. Research should be used to test, enrich and extend intuitive,experiencebasedjudgments. The term market research refers to any kind of systematic and objective investigation that producesinformationaboutamarket.Primaryandsecondaryaretermsdenotingtheoriginof theresearchdata.Qualitativeandquantitativearetermsappliedtohowdataisanalyzed.

MarketResearchandFindings
The first half of the internship period was spent in the market studying the dynamics of the market. We spent time at different distributors accompanying their distributor salesmen on theirrespectivebeats.Weobservedthedistributorsalesmenandtheretailerandtriedtolearn aboutthesellingprocessandalienatetheunderlyingreasonoftheproblemtheywerefacing. We interviewed the distributor salesmen, sales officer and the distributors at each of the distributorpointwewentto.

MarketResearch
The marketing research included both primary and secondary research work. The primary researchworkincludedactualfieldworkatdifferentdistributorpointsofNestleandconducting aconsumersurveythroughaquestionnairewhilethesecondaryresearchincludedresearching the web on the topic to get a thorough understanding about the origin and history of the problemathand. AspartofourprojectworkIcoveredseveraldistributorpointinDelhiandoutside.Thishelped me study different markets and get an idea of the problem from a broader perspective. The distributorpointsIvisitedaspartofmymarketresearchwere: o Delhi o CPLDistributor (MasjidMoth,SouthDelhi) o SuderAgencies(VasantKunj,SouthDelhi) o BangaSalesCorporation(FatehNagar,WestDelhi)
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o OutsideDelhi o J&SMarketing(BarkatNagar,Jaipur) o GulatiEnterprises(Ajmer) o SaiEnterprises(Meerut) o S.K.Enterprises(Meerut) During my market research I got a chance to interact with the distributor salesmen, merchandisers,routetomarketexecutives,salesofficers,distributorsandretailers.Discussions withthemabouttheproblemsathandgavemeabetterunderstandingoftheproblemandthe chocolateandconfectionarymarket. TheconsumersurveywasconductedthroughaquestionnaireIdrafted.Thiswasmainlyaimed togainthecustomerperspectiveaboutthepriceriseofKitkat.

Observations
Duringmyinternship,Ivisitedthemarketanumberoftimes.Someofmyobservationsfrom thosevisitsare: DistributionChannel:ThecompanyhasatypicalFMCGdistributionchainincludingtheCarrying andforwardingagents,distributors,retailersandwholesalers. DistributionChannel:ThecompanyhasatypicalFMCGdistributionchainincludingthe Carryingandforwardingagents,distributors,retailersandwholesalers.
Carrying & Forwarding Agents: These may be appointed at two or more State(s) of operation of the company. Carrying & Forwarding agents work on a commission basis 3% (industry norms) of the goods handled. It is recommended that the country keep about 4 to 6 weeks of inventory at the C&F level and a commission structure that is in keeping with the industry norm. Therefore a 3 percent commission on the invoice value may be provided to the agents. Stockist: A stockiest provides a local delivery point for the manufacturer/marketer. They store the products, break bulk, and distribute to the retailers. With greater no. of retailers now seeking credit from the retailer, efficient management of collection has become a vital part of the stockiest job. The Merchandiser concept: Merchandisers may be appointed by the company (salary to be borne by the Co.) in order to keep a constant touch, and to feel the pulse of the market. These merchandisers would also facilitate implementation of various schemes of the co. Regular job would include: o to check if products have reached expiry, o Proper setting of shelf space o POP material displays, etc. 25

Wholesaler: Whole sellers prime concern is buy in bulk and sell at the fastest rate.
The aim of any distribution chain of mass-market product category like chocolates would be to expand its reach i.e. the no. of outlets storing its products. This may not be possible even with a well-established stockiest network. Hence, wholesellers play a significant role in supplementing the stockiest effort send in providing a better reach to the product.

More transparent and clearer claims handling policy

LowBrandLoyalties:ChocolatesConfectionarieshavelowbrandloyaltieswithveryfew strong brands: The chocolates and confectionary market in India has very few strong brands,whichdemandstrongbrandloyalties.ApartfromCadburyssDairyMilkandFive StarandNestlesKitkatnoneofthebrandshavestrongfollowings. Changing face of the Indian confectionary business: The business is getting concentrated amidst big competitors and competition is becoming more and more aggressive.They'rereadytoinvestnotjustinadvertisingbutalsoinpromotionandwith thisfixedpricepoint,thereisaproblemofbottomline.Moreover,thetargetsegmentis changingfrombeingonlyforkidstotheadultsectionalso. Cadburys clearly a stronger brand: Cadburys enjoys around 70% market share of the chocolate market mainly because it has a stronger marketing focus. Nestle matches Cadburys in its sales and distribution network, but is no match for Cadburys in marketing. Cadburys has over the years built up its brands backed up with strong marketingthemes.ItsDairymilkisthesinglemostsellingSKUandthestrongestandthe most popular brand. Kitkat is the strongest brand for Nestle followed by Munch. No competitionofferedtoCadburysatthehigherpricepointswhereitisfacingverylimited competitionfromtheimportedchocolatebrandsonly. Price rise at the lower price points not accepted well: Nestle increased the price of MilkybarChoo,ChhotaMunchandKitkatMinifromRs2toRs3.TheRs2pricepointis prettysensitivewithrespecttochangesinprices,whichledtodrasticfallsinsalesfor theseSKUsinthesubsequentmonths.Salesfellaslowto40%ofthesalesinthesame periodlastyear.Evenaftertheincreasedpricestherevenuesshowedaserioussetback. Kitkatpricehike:ThepriceofKitkathasbeenincreasedacrossalltheSKUs. Rs2 Rs3 Rs5 Rs6 Rs10 Rs12 Thispricerisehasfacedstiffresistancefromcustomersandretailersalike.Themosthit inthiscategoryistheRs5SKUwhichwasthehighestcontributing.TheRs5pricepoint hascompetitorproductspresentingareadyalternativetothecustomers.Moreoverthe retailersareunwillingtostockbecauseoftheproblemofchangetheyarefacing.
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Kitkat is still able to maintain an audience among the brand faithful category who are readytodishoutaReextrabutthenumberisquitelow. Theway Nestle Confectionary Business: Nestle is just a fringe player in the confectionary businesssellingonlyeclairsandpolo.Theeclairsareavailablein3variants o PricePointEclairs 50p o ChocolateEclairs Re1 o MilkybarEclairs Re1 while Polo is available in Rs2 and Rs5 packs with Polo Extra strong available in a 50p pack.Someoftheobservationsabouttheconfectionarybusinesswere: o Nestle is facing strong competition from ITC at the Panwallahs who are the mainchannelforconfectionary.Couplingtheconfectionarywiththeircigarette business they are forcing the Panwallahs sell their products only by overstockingthemwiththeirconfectionary. o Sting boys who visit the smaller panshops, kirana shops not covered by the regularsalesmanandhavemuchsmallernetvalueorderswithreadystockare animportantchannelforsellingconfectionary. o Localbrandsimitatingthebrandedconfectionariesavailableathalfthepriceare eating into the share. The retailers receive a good return selling these brands andhencearemoreinterestedsellingtheselocalbrands. o Nestle Eclairs faces a strong competition from Cadburys and Candico with Cadburysbeingthechoiceofboththeretailersandtheconsumers. o Thepolypacksforclairsaremucheasiertosellthanthejarswiththeretailers reluctanttostockthebiggerjars. Distributor Incentive schemes help to focus energies towards a particular product: Nestle has a wide variety of products ranging from culinary, chocolates and confectionary, baby foods, milk products, beverages etc. Each salesman in his beat covers 3040 outlets in his daily beat. Considering the waiting time and the transportationdelaysinvolved,thereisnotenoughtimetoadequatelystressuponeach product.Eachkindofoutleti.e.bakery,smallretail,largeretailhasthusbeenallocated a set of must sell SKUs which the salesmen necessarily have to push. The rest of the productstendtobeignored. The incentive schemes play an important role in refocusing the sales force energies towardstheSKUs,whichareconvenientlybeingignored. FeaturesofasuccessfulDSscheme:DSincentivesaredependentonthesalesmanand hisrelationswiththeretailersforsuccess.SinceaDSincentiveisrunmostlyonproducts
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thatarestrugglingtocreateastrongholdinthemarketandthereisaresistanceagainst these products from the retailers. It is hence a tougher task for the salesmen pushing theseproducts.Theyhavetorelyontherelationshiptheyhavecultivatedovertheyears toselltheschemetotheretailers.AcarefullycraftedDSschemecanhencebeagreat helptothesalesmeninachievingtheirtargetssatisfactorily.Someofthefeaturesofa goodDSincentiveschemeare: o Clear communications about the kind and value to the salesmen of the incentives o Incentiveprogramshouldbesimpleandattainable o Focusshouldbeawayfromthemonetaryvalue o Rewardimmediately;avoidanydelays o Recognitionamongstpeersisanquiteessentialmotivator
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ConsumerSurvey Results
29

Factormostinfluencingbuyingdecision

100 90 80 70 60 50 40 30 20 10 0 Adverzsing WordofMouth A{raczve Packaging Dealer ShopDisplay Family,friends, relazves

Reasonofpurchase

Occasionled Asagi| CasualPurchase EnergySnack

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MostImportantAttribute

800 700 600 500 400 300 200 100 0 Taste Quality Price Flavour Packaging Addons BrandImage

BestSuitedPricefor40gchocolate

BelowRs.10/ BetweenRs.14/&Rs.20/ GreaterthanRs.20/ BetweenRs.10/&Rs.14/

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HastheavailabilityofKitkatbeenaected acerthepricerise?

Yes No Can'tSay

DoeschangeinpricesofKitkataect buyingdecision?

Yes No

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TestMarket
33

Methodology

Studyingthemarketdynamicsforoveramonth,wecameupwithsomesuggestions,whichwe felt, would help boost the sale of chocolates and confectionary. These suggestions were pertaining to both the distributor incentives schemes and the sales strategy for products at price points. These suggestions were based on our observations from our fieldwork at distributorpointsinDelhiandtheupcountrylocationsofJaipur,AjmerandKota. To practically test out our suggestions in real market conditions, conducting of a test market wassuggested.Anupcountrytownwithmanageablevolumeswasselectedforrunningthetest market.Meerut was selected forrunning thetest marketfor 10 daysfrom 20thMay to 29th May. We drafted a sales strategy which was implemented at the two distributor points in Meerut. The strategy consisted of two parts: a) Distributor Salesmen Incentive Scheme b) Trade PromotionScheme.ThedrivewasnamedTeenKiKranticapturingtheessenceoftheplace andthescheme.Thedetailsofthestrategyhasbeendiscussedbelow.

TeenKiKranti
RunningatestmarkettotestasalesstrategytopushthesalesofthelowermovingSKUsfor nestle in the chocolate and confectionary segment. The sales strategy aims at running the distributor salesman incentive in conjunction with a retail incentive scheme and studying its impactonthesubsequentsaleoftheproducts. Date:20th30thMay2009 Place:Meerut,UP Distributors:SaiEnterprises,S.K.Enterprises SomeoftheSKUssingledoutforthisincentiveschemeare: o o o o Pricepointclair(50p) ValueAddedclair(Rs.1) Polo(Rs.2) MilkybarChoo(Rs.3)

IncentiveswillbegivenonsalesoftheseSKUsaccordingtothecriteriaspecifiedbelow.
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DistributorSalesmenIncentive
o TheschemeisaimedatimprovingthecoverageofthelowermovingSKUsinthe chocolateandconfectionarybusiness. o Asalesmaniseligibleforanincentiveifheisabletoplaceajarofany3ofthe4SKUs aboveinaparticularoutlet,hewillgetanincentiveofRs.15/outlet. o Additionalincentivesforoutletpenetration o 75%outletpenetration Rs100 o 90%outletpenetrationRs150 o 100%outletpenetrationRs200

RetailerIncentive
o Theretailerisentitledfora5%discountinthebillforthetotalamountdueforthe chocolatesboughtunderthisscheme

TestMarketRun
o TherunissupposedtostartonWednesday20thMay09atthetwotradebased distributorpointsinMeerut. o Ameetingofallthesalesofficers,distributorsalesmenandthedistributorsshouldbe calledatoneofthedistributorpointsontheafternoonofTuesday19thMay09. o Theschemewillbecommunicatedtoallconcernedpartiesalongwiththeprecise instructionsofhowtotrackprogress. o Areadystockcoverageofthemarketshouldbearrangedforthefirst2daysi.e.20th and21stMay. o Theschemewillbeopentill29thMay09. o Theprogressoftheschemewillbetrackeddailybythesalesofficer.

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Results
Thedistributorpointswherethetestmarketwasrunhaddismalconfectionarysales.Theprice pointeclairshadanotexistentmarketwithhardlyanyofftake. Thefollowingfigureshowsthesalesfiguresforthetwodistributorpoints.Distributorsalesmen incentives/tradepromotionshavebeenconstantlygiventoboostthesaleofeclairs.Thisleads to a very uneven pattern of sales with salesmen stocking the retailers in months when a schemeisrunning.Thisincreaseinsaleisnotsustainableandleadstoalmostzerosaleinthe subsequentmonths.

SAIEnterprises
70 60 50 40 2008 30 20 10 0 January February May 2009

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S.K.Enterprises
80 70 60 50 40 30 20 10 0 January February May 2008 2009

The DS incentive scheme we devised was thus aimed at not pushing the sale but placing as manySKUsofconfectionarytoasmanyoutletsaspossible.Thiswouldensurethattheretailers haveastockofourconfectionaryatalltimeswithoutoverstockingthem.Thewaywedesigned our scheme, it made sure that there was no extra incentive for the salesmen to push excess stocktotheoutlets. Inthe10daystheschemewasrun,mixedresultswereobservedatthetwodistributorpoints. WhileS.K.Enterprisesshowedsubstantialnumberofschemessold,Saihowevermadehardly any progress on this front. The possible reasons for the apparent failure of the DS incentive schemeatSaiareunclear. S.K. Enterprises showed a great deal of enthusiasm towards the scheme and it shows in its results.Duringthe10daysatotalof150schemesweresoldoutoffatotalof351callsmade. This gives a strike rate of .43 keeping in view the type of market and the operating market dynamicsinsuchamarket. SaiEnterprisesontheotherhandhashardlybeenabletosellanyschemesatall.Outofatotal of more than 400 calls made, they have been able to just sell just 6 schemes. Although the market had been already stocked, this clearly shows a lack of application on the part of the salesmen and the sales officer in communicating the scheme. Keeping in mind that the two
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distributorpointshavealmostthesamekindsofmarkets,theirperformanceorthelackofitisa causeofseriousconcern.

VariationbetweenCallsmadeandSchemesSold
400 350 300 250 200 150 100 50 0 S.K.Enterprises SaiDistributors SchemesSold CallsMade

Variationbetweensalesofficerestimateandactual
250

200

150 Eszmated 100 Actual

50

0 S.K.Enterprises SaiDistributors

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Eachschemesoldmeansthatonejarofvalueaddedeclairs,pricepointeclairsandpolohave beenplacedintheoutlet.ItmeansthatS.K.hasbeenabletoeasilysurpassitsmonthlytarget onlyinthe10daysonwhichtheschemeisbeingrun.Saiontheotherhandhasbeenunableto delivertheresultsexpectedofthemarketitwascovering.Thereasonforthiscanbealackof thefocustowardsthedistributorsalesmanincentivescheme.

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Recommendations

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Nestle has a great distribution network with products which are leaders in their respective categories. The variety of product offerings makes it one of the largest players in the Indian FMCG industry. But chocolate and confectionary is a business where there still is a lot of potentialforthecompanytoimprove.Thereareafewareasthatneedtobelookedatifithas topresentseriousthreattothemarketleadersinthesecategories. The recommendations below are based on my research of the markets in Delhi, Jaipur and Ajmer. Based on the primary and secondary research of the market and study of Nestles distributionandsaleschain,IhaveidentifiedsomeproblemsthatNestleshouldlookinto.Each oftheidentifiedproblemsalongwithsomepossiblesolutionsarelistedbelow. I. Lossofmarketshareduetopricehike Nestleiscurrentlyfacingaseriousdropinsalesbecauseofitsrecentincreaseinpricesofits productsinchocolates.MostofitsSKUshavefacedserioushitsinsales.Thereasonismainly because they underestimated the importance of price points in the industry segment. Nestle can still claw back some of its lost market by acting quickly and judiciously. Some of the strategiesthatcanbefollowedare: a) Inculcate the habit in the customers to spend more: The Rs2 and Rs5 are the perceptualpricepointsforthechocolateconsumers.Afterthepricehikethecustomers were unwilling to spend extra because they felt a decrease in thee value proposition. Hence,consumerpromotionsshouldbeusedtopushtheperceptualpricepointhigher. Theyneedtomaketheconsumerwanttospendtheextrarupeeinreturnfortheextra valueheisgetting.Aluckydrawcouponoracollectorcard/tattoocanbeusedtoappeal tothecustomersegment. Customersareattractedtoaproductnotbyitspricebutbythevalueitpresentstothe customer.Aconsumerpromotionschemewillallowthemtomaintainthesamevalue evenafterthepriceincrease.Thiswillhelpmovetheperceptualpricepointtoahigher level. b) Filltheemptypricepointwithadifferentproduct:TheRs5Kitkathasbeenthesingle mostsellingSKUforNestle.Afterthepricehike,NestlehasvacatedtheimportantRs5 price point that has resulted in the loss of sale for Nestle. The customers unwilling to shellouttheextrarupeehaveareadyalternativeinCadburys(notincreasedtheprices). Nestle should introduce a similar but smaller SKU at the Rs 5 price point which will provideanalternativefromwithinNestletothecustomernotwillingtospendarupee extra.
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c) Reducethepricestotheearlierlevels:Commoditypricesaroundtheworldhavefallen sincelastDecember.NestlecanhencegenerateprofitsevenbysellingtheSKUsatthe earlierpricelevels.Nestlecanhencerevertitspricesbackandtrytogainbacktheirlost marketshare. II. Handlingthe50ppricepointintheconfectionarybusiness The50ppricepointisthemostimportantpricepointintheconfectionarybusiness.Noneofthe playersintheconfectionarybusinessarereadytovacatethepricepointforfearoflosingout onthemarketshare.Thepricesoftherawmaterialhavegoneupanditistoughtomaintain margins.Butduetothelackofcoinage,60paisaor75paisawon'twork.Thenextusefulprice pointwouldbeRe1butit'sdoubletheprice.Thefollowingapproachcanbefollowedtohandle thisdilemma. a) Vacatingthe50ppricepointishardlyanoption:Ifpricesareraisedfrom50paisatoRe 1thatshouldhappenacrossthemarketotherwisethosewhostayat50paisawillgain. Itshouldwaitandwatchfortheotherplayerstomaketheirmove.Nestleshouldnottry tomakeprofitsatthe50ppricepointandjustuseittomaintaintheirmarketshareand presenceinthesegment. b) Introduce newer premium products: Premium products at higher price points can be introducedwhichcancrosssubsidizethe50pclair. c) Usingmoderntradetools:Confectionarythesedaysarebeingsoldasstickswhichhelp themakersfreethemselvesfromthegripofthepricepointhandicap. III. Overallgrowthinthechocolateandconfectionaryindustrymarketshare Nestlesstrengthisthestrongsalesanddistributionnetworktheyhavesetup.However,Nestle has not been able to build big brands in chocolates and confectionary. Chocolates and confectionaryareimpulsebuyingproductswiththeproductswhicharetopofthemindhaving the best chance of being picked off the shelf. The importance of the pull marketing can generateinthiscategoryhasbeenunderminedgreatlywiththefocusrelyingwhollyonsales anddistribution. a) BuildingBrands:Nestleneedsvigorousadvertisingforitsbrandsandtobeestablished as big brands in the market. There hasnt been adequate focus on marketing to generatetherequiredpullfortheproducts.KitKatandpoloaretheonlybigbrandsin thissegment.
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A celebrity campaign aimed at conveying a lasting message should be very useful in achievingthedesiredresults.CadburyshasusedAmitabhBachhanverywellasabrand ambassadorandleveragedhisiconicstatustobuildtheDairyMilkbrand. b) Broadertargetsegment:Chocolatesarenolongeronlyforkidsandyouth.Thesedays chocolates have been promoted as a treat for all substituting the much larger sweet industry. Cadburys has promoted this theme with Bas meetha ho jaaye, where it is showntobereplacingthetraditionalsweetintimesofhappiness.Thistargetsegmentis notadequatelytargetedbyNestle. c) Diversificationofofferings:Nestlecurrentlyisofferingverylimitedproductsatonlythe lowerpricepoints,whereasthemarginsaremuchlargerinthepremiumSKUs.Cadbury haslittlecompetitionfromtheotherplayersatthehigherpricepointsanditpresents Nestletheopportunitytointroduceitspremiumproductshere. d) Finally, while deciding onto the selling outlets, certain unconventional outlets may be considered. These include a. Sweet Shops: The product may be kept at traditional Sweet Shops. More so, duringfestivaltimes. b. GiftShops:Astheideaofgiftingchocolateisbecomingmorepopularamongthe targetedsegment,itwouldbeprofitabletoensuretheavailabilityofchocolate chocolatesatvariousgiftshops. c. Stationary/Book Shops: Teenagers, is a lucrative segment with a high consumption rate. They frequent book shops and magazine stores quite often. Hence,makingchocolateavailableattheseoutletsmaybeconsidered. d. IceCreamParlors:InIndia,icecreamistreatedasafunproductandasweet dish or a desert after meals. Both these attributes match with chocolate consumption habits. Hence, ice cream parlors may prove to be beneficial in providinggreaterreachtotheproduct.Hereagain,chainslikeDollops,etc.may beusedinordertofacilitategreaterreach.Astrategicdistributiontieupmaybe reached with ice cream companies such as Kwality Walls, Vadilals etc for distributionofchocolatesalongwiththedistributionoficecreamsthroughthe VendingTrolleys. e. Fastfood Joints/Restaurants:As a discussed above that on our country the chocolatescanbeservedasasweetaftermeals,henceseparatecountersmay be installed at various fast food joints such as Mac Donalds, Nirulas etc. This wouldprovidethebrand,notjustgreatervisibilitybutalsovaluablesales.Also, theseoutletspossessadequateinfrastructuretostorechocolates. f. ExclusiveChocolateParlors:Ascanbeseeninthefindings,therehasbeenan overwhelming response to the idea of buying chocolates from exclusive
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chocolate outlets. Hence, development of exclusive chocolate parlors may be considered.

IV. Improvingtheeffectivenessofitsdistributorsalesmenincentives The importance of keeping the distributor salesmen motivated towards the job is very important for aneffectivesales network.Sincethey arethepeoplewhovisitthemarket and arethefirstcontactwiththeretailers,theirperformancemostdeterminestheperformanceof thecompany.Itishenceabsolutelynecessaryforthemtobetotallymotivatedandcommitted tothecause. Nestle understands the importance of the distributor salesmen and hence regularly runs incentiveschemesforthem.Althoughthemotivesarenoble,thekindofincentiveschemesare notalwaysthebestdrafted.Someofthepoints,whichshouldbekeptinmindwhilecreatinga DSincentivescheme,are: a) Achievable targets: The product incentive schemes for Nestle along with the fixed targets are sent from the regional office. The targets are common across all markets irrespective of the market potential. The targets are too steep for salesmen in some marketsthattheygiveupbeforetryingwhiletheothersmakethetargetswithoutany extraeffort.Thisdefeatsthepurposeoftheschemebeingrun. Targets should be set keeping the market potential in mind such that each salesman getsenoughbenefitforworkinghard.Incentivesshouldbelikethedanglingcarrotthat continuouslydrivesthesalesmantotryharder. b) Schemes should not cannibalize other products: The extra incentive given to the salesmen pushes them to go that extra mile towards pushing the product. This sometimeshappensatthecostofsomeotherproduct.Salesmensometimespushthe retailerstoreplaceaparticularSKUwiththeincentiveSKU.Thiscanadverselyaffectthe availabilityandsaleoftheotherSKU. Care should be taken to design schemes that do not encourage such behavior. The companyasanentityderivesnovalueifoneofitsproductssalesiscannibalizedtopush salesoftheother. Focusshouldbeawayfromthemonetaryvalues:Themonetaryincentivesshouldnot be overused as a motivator. Other techniques such as recognition among peers and promotioncanalsobeusedasmotivators.

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The salesmen value being part of a big brand like Nestle and yearn of being on its payroll.Apolicylikepromotingsomeofthebestsalesmentoarolewithinthecompany willactasaperennialmotivatorforthesalesmen.Itwillconstantlydrivethemtobethe bestbecausetherewardissomethingtheylookupto.
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Appendix
46

AppendixA ConsumerQuestionnaire
Name:___________________________________________________________________________ Age:__________________________ Occupation:_________________________

1. Doyouconsumechocolates? 2. Ifyes,whatallbrandsdoyounormallybuy? 3. Howoftendoyoubuychocolates? 4. Whatbrandsofchocolatesareyouawareof? 5. Pleaserankthefollowingattributesinachocolateonascaleof17accordingtotheir importancetoyou?(1mostimportant,7leastimportant) Taste Quality Packaging Price Flavour Addons(Wafers,nuts,etc.) BrandImage
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YES/NO

6.Ifaparticularbrandisnotavailablewiththeretailer,youwill Droptheideaofbuyingachocolate Gotoanotherretailoutlet Tryanother(competitors)brand 7.Statetheadvertisementsofchocolatesthatyoucanrecollect. 1. 2. 3. 4. 8.Youliketheadvertisementsbecauseof: Trendysetup Goodtheme,models,music Seemsnearertolife&moodelevator Anyother(Pleasespecify) 9.Yourpurchase(ofachocolate)is: Occasionled(sayonaBirthday,etc.) Asagift Casualpurchase Energysnack

Anyother(PleaseSpecify)
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10.Whatsizeofachocolatedoyounormallybuy? 15gms. 30gms.

SuperSaverPacks

11.Whataccordingtoyouisthesuitablepricefora40gm.chocolatewhichisofgoodquality andflavour(whichwillbeavailableforthefirsttime). BelowRs.10/ BetweenRs.10/to14/ MorethanRs.20/

Rs.14/toRs.20/

12.IfyourfavouritebrandisafewRs.expensivethanitis,youwouldstillgoforit.YES/NO 13.KitKatpriceshavebeenrevisedtoRs6(forsmallerpacket)andRs12(forbiggerpacket). 14.DoesitaffectthedecisionofbuyingKitKat? YES/NO

ifyes,whyandtowhatextent______________________________________________________ _______________________________________________________________________________ 15.Doyoufaceaproblemofchangefromtheshopkeeperwhenyouarebuyingchocolates/items whicharepricedsay@Rs6/Rs12 Yes No Sometimes

16.Ifyouwanttobuyawaferchocolate,sayKitKatandifitisnotavailableyouwouldsettle foraBar/Mouldedchocolate,suchas5StarorCadburysDairyMilk.YES/NO

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