[Year]

A STUDY OF DISTRIBUTION CHANNEL OF WAGH BAKRI

SUBMITTED TO PROF. GARIMA SHARDA OF L J INSTITUTE OF MANAGEMENT STUDIES (AFFILIATED TO GUJARAT TECHNOLOGY UNIVERSITY) TOWARDS THE PARTIAL FULFILLMENT OF THE PRACTICAL STUDIES OF MBA

SHRUTI SADANANDAN - 79 DARSHIL SHAH- 85

MARKETING CHANNEL
Most producers do not sell their products directly to the final users; between them stands a set of intermediaries performing a variety of functions. These intermediaries constitute a marketing channel also known as Trade Channel or Distribution Channel. Marketing Channels are set of interdependent organizations involved in the process of making a product or service available for use or consumption. They are set of pathways a product or service follows after production, culminating in purchase and use by the final end users. The intermediaries include wholesalers, retailers, merchants, brokers, manufacturers representatives, sales agent. While transportation companies, independent warehouses, banks and advertising agencies are facilitators who assist in distribution process.

MARKETING CHANNEL SYSTEM

A marketing channel system is the particular set of marketing channels a firm employs and decisions about it are among the most critical ones management faces. The channel members of any marketing channel collectively have earned margins that account for 30% to 50% of the ultimate selling price. The more the channel members, more would be the selling price. The channels chosen affect all other marketing decisions. The companys pricing depends on whether it uses mass merchandisers or high- quality boutiques. The channel decision needs long term commitments with other firms as well as a set of policies and procedures. The

channel choices depend on companys targeting, and positioning.

marketing strategy with respect to segmentation,

CHANNEL LEVELS
The producer and the final customers are part of every channel. There are different levels that a company would follow. They are: y Zero Level Channel : consists of a manufacturer selling directly to the final customer. y One Level Channel : contains one selling intermediary, such as retailer. y Two Level Channel :contains two intermediaries- a wholesaler and a retailer. y Three level Channel : contains three intermediaries.

CHANNEL DESIGN DECISIONS

In designing the marketing channel, the marketer must understand the service output levels its target customers want. Marketers should state their channel objectives in terms of targeted service output level. Under competitive conditions, channel institution should arrange their functional tasks to minimize total channel costs and still pr0vide desired levels of service output. Effective planning requires determining which market segments to serve and choosing the best channels for each. A number of other factors affect channel objectives, like while entering a new market the firm may closely observe what other firms from their home markets are doing in those markets.

y Establishing Objectives and Constraints y Identifying and evaluating major channel alternatives y Evaluating the Major Alternatives

CHANNEL MANAGEMENT DECISIONS

After a company has chosen a channel system, it must select, train, motivate and evaluate individual intermediaries for each channel. It must also modify channel design and arrangements over time. To customers, the channels are the company. In case the outlets of the company appear dirty, inefficient or unpleasant then it would affect the companys image. The following are certain steps the company needs to follow:

y Selecting Channel Members y Training and motivating Channel Members y Evaluating Channel Members y Modifying Channel Design and Arrangements

Introduction of the Wagh Bakri group

Wagh Bakri started Tea Company in the yr 1892, which then was represented by small company retail shop at kalupur Ahmadabad, Gujarat. Since then the growth of the endeavor has been phenomenal and presently Wagh Bakri Tea Company has an employee base of more than 400 professional managers and skilled personals with ever increasing space for more, to tend to the expanding group enterprise in India and abroad. Wagh Bakri tea house markets various tea brands in loose leaf cartons and tea bags for tea lovers all over the globe the finest certified black teas from Darjeeling tea estates, Assam and Nilgiri. The company sells organic black and green tea for the health conscious. The production base is at Dholka (Dist. Ahmedabad) in an impressive spread of 14 acres with a modern manufacturing plant and state of art production and packaging unit that conforms to International norms in producing, blending and packaging of the finest tea lea

History of Wagh Bakri group

Wagh Bakri Tea House Global Presence With blessings from Mahatma Gandhi, Sir Narandas Desai set foot on Indian soil in the year 1892 after gaining experience in tea business as an owner of tea garden in South Africa which then was mired in racial misgivings that made the continuity of his business a futile endeavor there. He started Wagh Bakri Tea Company in the year 1892 which then was represented by small company retail shop at Ahmadabad, Gujarat. Since then the growth of the endeavor has been phenomenal and presently Wagh Bakri Tea Company has an employee base of 400 Professional managers and skilled personals with ever increasing space for more, to tend to the expanding group enterprise in India and abroad.

Wagh Bakri tea house markets various tea brands in loose leaf cartons and tea bags for tea lovers all over the globe the finest certified black teas from Darjeeling tea estates, Assam and Nilgiri. The company sells organic black and green tea for the health conscious. The production base is at in an impressive spread of acres with a modern manufacturing plant and state of art production and packaging unit that conforms to International norms in producing, blending and packaging of the finest tea leaf for worldwide consumption.

WaghBakris Products:
WaghBakri Company provides a variety of tea products to satisfy the wants of different customers. The following are the types: 1. ORGANIC TEA 2. GOOD MORNING PREMIUM TEA 3. WAGHBAKRI 4. DLING 5. MILI

The products can be differentiated from point of view of its, color- ORANGE, logo that shows a GOAT and a TIGER. This symbolizes co-existence. The GOAT symbolizes the lower class of the society and the TIGER symbolizes the upper class of the society.

Packaging strategy of WaghBakri:

The tea can be stored up to period of 2 years as stated on the package. But depending upon the quality of tea, it could be even stored for few more years. The tea products are available im different sizes and packaging to cater to the needs of different customers. It also provides variety within a particular type of tea like Dust, Leaf, Fenni,etc. The packaging for different products is different but at the same time it is hygienic packaging like Plastic air tight Bags, Pet jars, attractive cheddars wodden chestlets and lined cartoons.

Pricing strategy of WaghBakri:

The pricing of different products of WaghBakri are different. The prices of the product are kept in such a way such that the company can cater to different segment of customers.

Promotion:
The company has been exclusively promoting its products with different advertisements in newspapers, on hoarding, pamphlets,etc. Mostly the company advertises in print media. The company outsources marketing communication of its company to various company agencies.

SALES AND DISTRIBUTION NETWORK

A need was felt in the last 70s by Wagh Bakri group to make available fresh tea in convenient packs to the discerning consumers of Gujarat, as a result, GTPPL as a part of Wagh Bakri group was founded in 1980 with a objective to market sealed more packet and tea in Gujarat. Since a then period GTPPL of has satisfied due Total to the its need of

more in

customers and

over strong

years system.

unmatched sale of

consistency

quality

distribution

average

GTPPL is approx 19.5 lac kgs per month. The company is operating in four states across India i.e. Gujarat,

Rajasthan, Madhya Pradesh and Maharashtra .The following is the operational procedure of delivering the goods to different states:

ORDER: A scheduled day in a week is fixed to receive the orders from all the 4 States, subsequently order-wise production takes place at DHOLKA factory

DESPATCH: The company delivers material on fixed day in a week across all 4 states

DISTRIBUTION CHANNEL SYSTEM:

WaghBakri observes different marketing channels for different market places. WaghBakri has entered the markets in Gujarat, Rajasthan, Madhya Pradesh and recently entered Maharashtra. Thus the channels observed in different states are as follows: For Gujarat, Rajasthan and Madhya Pradesh:
GTPPL L
SUPER STOCKIES

DISTRIBUTION

TRADE CHANNELS

RETAILERS

CUSTOMER

For Maharashtra:
GTPPL
SUPER STOCKIES DISTRIBUTION TRADE CHANNELS

C&F

RETAILERS

CUSTOMER

The company follows a multi level channel system which includes Gujarat Tea Processor and Packers Ltd.(GTPPL) from where the products are send to Super Stockist
and C & F(the

one

who stocks company's product to further supply to the wholesalers, dealers, retailers) after which it is supplied to Distributor of different districts. Then with the help of trade channels the products are supplied to the Retailers.

Here the main problem is that the there are too many channel members in the channel system which makes the distribution more expensive. There is a need to decrease the channel members such that controlling the system becomes easier.

The following are the details of number of distributors and retailers the company has:

STATES GUJARAT RAJASTHAN MADHYA PRADESH

DISTRIBUTOR 200+ 70 50

STATES GUJARAT RAJASTHAN MADHYA PRADESH

RETAILERS 60,000 20,000 30,000

Decision of selecting the distributors

 The distributors and retailers of the company have been catering Gujarat market since years and there by a mutual trust and understanding has been formed. While WaghBakri has been catering the markets in other states since just last few years. There it has adopted the strategy of Intensive distribution in order to penetrate into the new markets. This helps in increasing the product availability in the market.  The sales of the company have been increasing due to the intensive distribution of the channel members which can be seen clearly while the company entered the Rajasthan and Madhya Pradesh market. Wagh Bakri has a 20 per cent share in Rajasthan market and 10-15 per cent share Madhya Pradesh. With an annual turnover of Rs 260 crore the sales have been increasing and the company is even able to compete with the local players of the regions. The company launched its product in a very strong local dominated markets like Jalna(dominated by Vikram tea) and Kolhapur(dominated by hp tea) and got reasonably good response.  As it was stated earlier in this project, To customers, the channels are the company. Having a good motivated distribution system is the strength of WaghBakri which has helped them to compete against the local as well as national players.
 Trade promotion is being given traditionally as a helping hand for the sale of the product

and to get the self space in a particular retail outlet. This what exactly the company is doing to maintain its channel members. It is like getting a licence from a retailer to enter their shops. This kind of motivation is known as reward power to stimulate channel members.

Decision of selecting the Retailers

 Trade promotion is being given traditionally as a helping hand for the sale of the product

and to get the self space in a particular retail outlet. This what exactly the company is doing to maintain its channel members. It is like getting a licence from a retailer to enter their shops. This kind of motivation is known as Reward Power to stimulate channel members.

 The company employs the conventional channel - Kiranas (small grocery retailers),
Supermarkets and Malls which account for over 90% of the sales of tea.  WaghBakri has gone one step forward and entered in the service arena of serving all forms of teas from single platform which they have discovered as Tea Lounge. They have opened one tea lounge in Mumbai in November 07 and have received an over whelming response and are looking forward to go ahead with this idea on pan India basis.

Other Marketing Channels

The company, other than just using the conventional channel also has used zero level channels to distribute their products. It includes Door- to-Door selling and internet selling.  The company has its Online Portal to cater to the customers seeking tea online. Their online selling portal have all the enmities required for the online selling portal.  The company is trying to expand its wings by tapping huge potential in Institution Business. In this process the company has appointed distributors and distribution networks. It has coordinated with railways and authorized vendors in IRCTC, organized segments like corporate by setting up vending machines and also Hot Tea Shop and Highway Restaurants.

CONCLUSION:
WaghBakri has been in the Tea Industry since many decades. The company has been growing day by day. The growth rate of the company is 10 to 12% annually, while the growth of the industry is 6% annually. The marketing channels chosen by the company has a great share in this high level growth of the company. Having employed the best channel members, the company has been able to achieve the 3rd position after TATA and HLL in the national market. Thus with the help of a well designed and well executed strategy any company can attract consumer demand. On the other hand, without at least some consumer interest, it can be very difficult to gain much channel acceptance and support. Thereby it can be concluded that decisions of choosing marketing channels as well as marketing communication activities go hand in hand.

SOURCES OF INFORMATION :
y www.wbgroup.com y www.encyclopedia.com y www.google.in y An interview with the General Manager of WaghBakri group y Marketing Management Book 13e Philip Kotler, Kevin Keller, Abraham Koshy and Mithileshwar Jha