Case Solution An Irate Distributor Sanchit PGPX

Case Questions- Solutions: An Irate Distributor
Q1. What is the background on the retail trade in India and the situation in which Amit
Kumar has taken over his territory?
Ans.
Background of Retail trade in India:
 The Indian retail market was estimated to be at $470 billion in 2011 and was one
of the fastest- growing markets in the world. It was expected to grow to $675
billion by 2016, at a CAGR of 7.5 %
 India had a well-established distribution system of approximately 6 million retail
outlets. There were likely to be at least 4 or 5 levels of intermediaries involved in
distribution.
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 There was diversity not only in geography but also in culture, as well as in the
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channels used to reach customers. Due to these reasons and the large
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geography, India had a multitude of retail formats that were required for ease of
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distribution.
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 India is a nation of comparatively small family-managed shops, it also had unique
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retail formats such as grocers, paan shops and hawkers, which co-existed with
supermarkets and teleshopping.
 Company’s increased focus on expansion in the rural sector of the country, which
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accounted for almost two-thirds of the country’s total population.

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 The key challenge for any FMCG company was to reach its consumers deep within
the country and ensure that its products were readily available.
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Intermediaries in FMCG Distribution in India

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Situation in which Kumar has taken over territory:
 Amit Kumar had taken over from Rahul Ray last quarter which had a yearly
turnover of INR 631.1 million.
 Rahul Ray had been instrumental in building NutriPack India’s business in central
Maharashtra, which had increased from INR 300 million in 2008 to INR 631.1
million in 2011, with a Compound annual growth rate (CAGR) of 32 per cent
against the rest of India at 21%.
 For Amit Kumar, it would be a challenging task to the growth. Shyam Sharma, his
boss (RSM), cautioned him against making major changes to more than one
territory at a time and wanted him to keep the risk exposure of the business to
manageable levels.
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 Kumar had to build infrastructure and focus on expanding the retail coverage.
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 Retail distribution in India was complicated and the Jalgaon market was known to
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operate on thin margins and high volumes.
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 Kumar was convinced that Sachin Mandore, the distributor for the Jalgaon district
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had to increase his investment with NutriPack India and justify reasons for
increased investments as well as distributor profitability.
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Q2. Why did Kumar choose Jalgaon district for the expansion plan in his territory?
Ans.
 Jalgaon ranks 2nd in the terms of population in Central Maharashtra districts
(Exhibit-6)
 While on the other hand when compared to their contribution (8.6%) that they
add to company is ranked at 4th level (Exhibit-6).
 The penetration level is low and it’s an opportunity for them to enter into deeper
market and create value for company.
Exhibit 6: CENTRAL MAHARASHTRA DISTRICT COMPARISON
Populatio District Value Contribution

District Population Popula n Ranking CONTRIBUTION (%) Ranking
tion (%)
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Aurangabad 3,695,928 14 3 15.53 3
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Jalgaon 4,224,442 16 2 8.56 4
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Dhule 2,048,781 8 5 6.18 5
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Buldhana 1,888,039 7 4 4.93 10
Jalna 1,958,483 8 6 16.59 2
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Nashik 6,109,052 24 1 26.94 1
Akola 1,818,617 rs e 7 8 5.23 8
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Washim 1,196,714 5 9 5.39 9
Parbhani 1,835,982 7 7 5.59 6
Hingoli 1,178,973 5 10 5.07 7
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Total 25,955,011 100.00

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 Annual Per capita income is 16210 million p.a. (Exhibit-4) which is ranked at 3 rd in
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these above 10 districts.

 India’s Tier 2 & 3 cities were developing and about to compete with metropolitans
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 Jalgaon has got a single distributor (Sachin Agency) which has got the potential to
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cater the whole area which will reduce the expense and channel conflicts.
 The market share of Nutripower is increasing in central Maharashtra but on the
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other hand the market share in Jalgaon in decreasing from the past 4 years.
Nutripower is ranked 3rd in terms of volume and value market share in central
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Maharashtra and Jalgaon.

 Nutri jam is the market leader in central Maharashtra in jams category for the past
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4 years but when it comes to Jalgaon the product is lagging behind Mazaa.
 There is a decline in the volume and value market share of the product.
 In the year 2008 the value market share is equal in top 2 brands but it had declined
in the last 4 years
 Jalgaon being a major agricultural centre and a feeder market for surrounding
villages as the people from nearby towns and villages frequented Jalgaon for
business and to make purchases.
 The Distribution of HFD in central Maharashtra the penetration is upto 70%
(8848/12710).The Weighted Distribution is highest too.
 But when we talk about the distribution in Jalgaon the penetration is less than
50% i.e. 46% (729/1588) in HFD. It shows the opportunity in the market to get
more outlets connected.
 Kumar also focussed on district specific reports showing untapped potential in
the region. Hence, Potential is high and untapped market is huge hence Kumar
needs to choose Jalgaon district for the expansion plan in his territory.
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Q3. Analyze the different perspectives of the company and the distributor regarding their
approach to going to market?
Ans. Perspective of Kumar:
• Kumar felt that the Jalgaon territory was performing below its potential and could
effectively contribute more. Needed more efforts from intermediaries especially in
Jalgaon region.
• For this Kumar wanted the master distributor to invest more on infrastructure to
appoint more dealers and increase presence in existing ones to generate volume.
• While analyzing the previous year’s data for his territory, Amit Kumar realized that
as NutriPack India had coverage of 750 outlets in the Jalgaon district — while its
nearest competitors already had a presence in over 1,800 outlets with a similar
portfolio of products — retail coverage was the weakest link.
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• No credit period- Interior retails complained about credit period, schemes &
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discounts were not uniform.
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• The data supporting Kumar’s view is presented in as below in table . The data shows
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that whereas the market share of Nutri’s HFD and Jams has increased overall, it has
fallen in Jalgaon market.
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Overall Market Share (%)
Central
Maharashtra 2008 2009 2010 2011
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HFD % 12.5 13.4 14.5 15.6
Growth 7.20% 8.21% 7.59%

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JAMS % 32 32.5 33.1 34.0

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Growth 1.56% 1.84% 2.72%
Jalgaon Market
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HFD 15 14.4 14 13.8
Growth -4.00% -2.78% -1.43%
JAMS 26 25.4 24.7 23
Growth -2.31% -2.76% -6.88%

Perspective of Mandore:
• Low profitability due to which there is no incentive to work. Working on a margin of
just 4.5%, he is able to make a profit of just 2.6% after deducting his expenses.
• While he extended credited for 15 days, the company gave him 14 days of credit –
not viable for him to extend large credit
• His second discounts were delayed by long – reducing profitability and adding more
dealers
• Believed in relationship market with large dealers – who could payback on time,
order high volume
• Investment dilemma- If he invests more, it would increase his yearly expenses by

about half a million.
• Low returns- Rather than increasing the investment with NutriPack he can invest in
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the bank and get a 10.5% return yearly without the hard work
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• Mandore was visibly upset and was contemplating on exiting the relationship with
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Nutripack.
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Q4. If you were Kumar, how would you convince Mandore to put in the required
investment?
Ans.
Market scope of Nutripower
 Availability of Nutri Power has decreased from 50.87% (i.e. available in only 680
outlets out of total 1337 outlets) in 2009 to 45.90% (i.e. available in only 729
outlets out of total 1588 outlets) in 2011.
 Nutripower covers 45.9% of total outlets whereas Healthy is covering 89.3% of
the outlets.
 Increase in infrastructure and investment will lead to tapping of almost 50%
untapped market in the Nutri Power product line
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Market scope of Nutri Jam
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 Availability of Nutri Jam has decreased from 34.51% (i.e. available in only 369
outlets out of total 1069 outlets) in 2009 to 26.92% (i.e. available in only 342
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 Nutrijams covers 26.92% of total outlets whereas Mazaa covers 73.8% (937
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 Due to small infrastructure and inefficiency in production to cater large number

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of outlets to keep their product, the company is losing its market share to
others.
By presenting the above facts, Kumar should convince Mandore to do the following:
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 Increase Sachin Agency’s investment in NutriPack India as its potential is very

high.
 With a small investment, the considerable benefits are much higher.
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 The reach of the products should be reached to make it comparable to the

competitors.
 With an increase in reach and improvement in infrastructure, NutriPack has the
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potential to become the Market Leader in many sectors in which it is just a

challenger.
Q5. Based on the case facts, what should Kumar’s recommendations be for strengthening
Sachin Agency for tapping into the potential of Jalgaon district?
Ans.
Recommendation to Sachin Agency from Kumar:
• Uniform schemes and cash discounts across all outlets of similar value.
• Increase personal visits to retailers
• Invest and expand the business
• Discretion of offering discounts should be with Mandore, not with salesman
• Credit period should be increased.
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• Because of low margin product, sales should be increased by giving more offers to
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customers
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• Clear all the dues with Mandore to gain his trust.
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Case Questions- Solutions: An Irate Distributor

Background of Retail trade in India:

accounted for almost two-thirds of the country’s total population.

Intermediaries in FMCG Distribution in India

Exhibit 6: CENTRAL MAHARASHTRA DISTRICT COMPARISON

Populatio District Value Contribution

Total 25,955,011 100.00

these above 10 districts.

Maharashtra and Jalgaon.

Ans. Perspective of Kumar:

Overall Market Share (%)

HFD % 12.5 13.4 14.5 15.6

Growth 7.20% 8.21% 7.59%

JAMS % 32 32.5 33.1 34.0

Growth 1.56% 1.84% 2.72%

HFD 15 14.4 14 13.8

Growth -4.00% -2.78% -1.43%

JAMS 26 25.4 24.7 23

Growth -2.31% -2.76% -6.88%

• Investment dilemma- If he invests more, it would increase his yearly expenses by

 Due to small infrastructure and inefficiency in production to cater large number

 Increase Sachin Agency’s investment in NutriPack India as its potential is very

 The reach of the products should be reached to make it comparable to the

potential to become the Market Leader in many sectors in which it is just a

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