An Irate Distributor

Case Analysis

Amritha | Christo Milton | Dharani Babu | Rachitha | Vivekanandan

 NutriPower and NutriJam products from NutriPack have entrenched
themselves strongly in the Indian FMCG market with significant market
shares FMCG Value Chain
Market Share of NutriPower Market Share of NutriPower
and NutriJam in India and NutriJam in Maharashtra
(in percentage) (in percentage)
NutriPack

Others
Northrange
Junior Healthy
Mazaa
NutriPower (12%) NutriJams (10%)
Big n Strong
Kid Energy
CFA
Keswani
Healthy

Others
Bonny Distributor
Others

Nutripower NutriJam

Wholesaler

 NutriPower has a market share of 12% in Health  In Maharashtra, NutriPower has the third largest
Food Drinks category and a CAGR of 25% market share with 19%
 NutriJam has a market share of 10% in a market  NutriJam has a value market share of 42% that is Retailer
with a size of INR 10 billion the second largest in the state

Source : Case Exhibit 1 and 2

 Jalgaon has 16% of Central Maharashtra’s population but generates
less than 10% of sales, thus there is significant unpenetrated market
potential
Population by Districts in District Value Contribution in
Central Maharashtra Central Maharashtra
(in percentage) (in percentage)
30 30

25 25
Discussion
20 20
 Need to increase
15 15
product
penetration
10 10  Exploit untapped
market potential
5 5 in district of
Jalgaon
0 0
Nashik Jalgaon Aurangabad Jalna Nashik Jalna Aurangabad Jalgaon

 Jalgaon has 16% of Central Maharashtra’s
population with a density of 359 persons per sq km
 Jalgaon’s per capita income of Rs 16,210 is 8 th
highest in the state implying that the district is a
potential market for Nutripack
Source : Case Exhibit 5
 Despite a high share of population, the district
value contribution is only half that of Jalna that has
a population only half of Jalgaon.
 There is scope for improving penetration in Jalgaon
given the potential market size
 While the value share of NutriPower and NutriJam have been
increasing in Central Maharashtra, Jalgaon’s value shares have been
declining
Value Market Share trends Value Market Share trends
for NutriPower from 2008-11 for NutriJams from 2008-11
(in percentage) (in percentage)
20 44

42
19
40 Discussion
18 38  Need to arrest the
downward trend
36
17

34  Improve value
16 share of products
32 in major central
district
15 30
2008 2009 2010 2011 2008 2009 2010 2011
Central Maharashtra Jalgaon Central Maharashtra Jalgaon

 The value share of NutriPower has increased over
the last 4 years in Central Mahrashtra while the
value share of the same in Jalgaon has declined
 The downward indicates the pressing need to
improve sales in the district
Source : Case Exhibit 7 and 8
 The value share of NutriJams has increased over
the last 4 years in Central Mahrashtra while the
value share of the same in Jalgaon has declined
 The downward indicates the pressing need to
improve sales in the district
 NutriPack has a strong distribution coverage in Central Maharashtra,
but Jalgaon has not been effectively covered and this needs to be
redressed
Brand share in Retail Outlets Brand share in Retail Outlets
carrying Health Food Drinks carrying Jams The lack of sufficient
(in percentage) (in percentage) distribution outlets
100 80
has also resulted in
90 low weighted
70 distribution
80
60 Discussion
70
50  Need to increase
60

50 40
distribution of
NutriPack in
40 Jalgaon
30
30
20  Improve weighted
20
10
distribution in
10 Jalgaon
0 0
Central Maharashtra Jalgoan Central Maharashtra Jalgoan
NutriPower Healthy Bonny KidEnergy Mazaa NutriJams Keswani Northrange
 Close to 70% of retail outlets in Central Mahrashtra  NutriJams has close to 60% coverage in Central
carry NutriPower health drink Maharashtra
 However, the corresponding number in Jalgaon is  However, the distribution in Jalgaon is less than
below 50% indicating that close to half the market 30% leaving a market of over 70% untapped in the
is untapped jams product range
Source : Case Exhibit 9 A-D
 The pressing needs to increase penetration, value market share and
distribution make Jalgaon attention-worthy and require Kumar to act

Need to  With only 8% of sales coming from a district with 16% of

increase Central Maharashtra population, there is a need to increase
Penetration penetration and hence make the district attention worthy

Need to  With value market share trends moving in the opposite

increase Value direction to that of Central Mahrashtra there is a strong need
market Share to buck the trend

Need to  The number of distribution outlets need to be increased and

increase this requires the attention from Kumar in order to increase
distribution penetration and value market share

Source : Group Analysis

 Another factor that makes Jalgaon interesting is the exclusive
distribution by Sachin Agency that allows for easier change due to
minimal channel conflict

Good
District Number of Distributors relationship
with
Focus on
Channel
Extra
Partners
Jalgaon 1 Margin

Shrewd
Nashik 5 Minded

Jalna 3

Aurangabad 3
Sachin Mandore
Exclusive Distributor for
NutriPack in Jalgaon

Source : Case Exhibit 5

 While of Kumar wants to expand coverage in the market, Mandore
does not wish to undertake additional investments and focus on the
existing market

Source : Look before you leap : McKinsey Quarterly

The requirements of distributors and principals vary in the value chain
and fulfillment of these requirements is essential to achieve their
respective goals

Reach

Market
Control Manufacturer
Share

Brand
Visibility
Kumar wants to increase the retail coverage of NutriPack products in
Jalgaon and is challenged by Mandore as it create channel conflict and
impact return

Financial
Gain

Product Distributor Territory

Relationship
and
Recognition
While there are no product concerns and distribution is exclusive, the
burning question concerning Sachin Mandore is financial gain vs
increased reach

Reach

Market
Control Manufacturer
Share

Brand
Visibility
Careful analysis reveals that Mandore earns a return of 36% by doing
business with NutriPack that is 3 times higher than the return from
People’s Bank of India

 Sachin Agency has a return of 36% from doing

Financial Gain business with NutriPack that is higher than the
return from bank

 The products distributed by Sachin Agency -

Product NutriPower and NutriJams are both doing well in
India with healthy market shares and growth

 Unlike other territories, Jalgaon has an exclusive

Territory distributor for its products. Thus there is no
horizontal channel conflict issues

Source : Case Exhibit 11

With Sachin Mandore reassured of financial gain, the next step is to
convince Mandore of additional investment to increase reach and market
share in Jalgaon

Financial
Gain

Product Distributor Territory

Relationship
and
Recognition
 The large proportion of untapped market in Jalgaon shows that there is a
huge potential for expansion for NutriPack with positive and high returns
for Mandore Business Case 1 : Increase in market share by 25% Business Case 2: Increase in market share by 50%
Retail Outlets carrying
NutriPower Add Investment : 20.6 lakh | Return : 35% Add Investment : 37.4 lakh | Return : 35%

Nutripower 2008 2011

No of outlets selling 662 729

Total Outlets 1325 1588

Percentage Share 50% 46%

Untapped 50% 54%

Retail Outlets carrying

NutriJams
NutriJam 2008 2011

No of outlets selling 419 342

Total Outlets 1060 1270

Percentage Share 40% 27%

Untapped 60% 73%

Source : Case Exhibit 11 Note: The number of vans and salespeople has not been linearly scaled with the increase in revenue. Unit in INR
 To implement the plan for increased retail coverage, there is a need for
crafting compatible channel incentives to realize channel objectives

• Identify reseller’s requirements for high performance

Step 1

• Based on the requirements, recognize possible bases

Step 2 for incentive rejection

• Consider all performance- related factors that may lead

Step 3 to rejection

• Design incentives such that channel control categories

Step 4 match the bases for rejection

Source : D.J Gilliland/Industrial Marketing Management 33

Mandore’s wanted to maintain stability in the existing system where he
had good retailer relationship and wanted to get the maximum gains
out of it

Mandore’s Kumar’s
requirements Requirement

The two parties should have

goals that are aligned and do
not conflict with each other.
The increased retail coverage will guarantee high returns for Mandore
and Nutripack should aid Mandore in channel activities and pledge its
commitment

Rather than increase Assured Return that is

margins, provide gifts on greater than return from
achieving milestones People’s Bank of India

Computerized payment Coordinated Development

handling system which will Efforts with respect to
ensure that retailers pay investments to be made, eg
the distributor regularly : Salesforce training

Partial Investment by the

Relationship Certification programme
Capability Pledging company for channel
Concern with for resellers to boost their
Incentives Incentives activities which will show
supplier confidence to invest.
its commitment
 The collaboration between NutriPack and Sachin Agency should shift
from a
“Tug of Wars” relationship to a “Strategic Partnership”

Branded Tug of Wars Strategic

Manufacturer STRONG Bulldozers Partnerships

WEAK Opportunistic Shelf – Assortment

Mating Space Bidders Fillers

WEAK STRONG & ADVERSARIAL STRONG & COOPERATIVE

Reseller/Distributor

Source : Look before you leap : McKinsey Quarterly

The key to a successful manufacturer-reseller relationship lies in
understanding the needs of the re-seller and incentivising them to achieve
goals of both parties

 Manufacturers and re-sellers have different requirements

 Incentives have to be matched with re-seller requirements

 Factors affecting incentive rejection need to be identified by channel principal to design

better incentives

 Aligning goals of principal and re-seller results in a strategic partnership that is beneficial
for both parties