Candy and Chocolate India:

Last Mile Distribution Challenge

Group 5 (Section A)
Anisha Goyal
B Abhishek Sharma
Jonathan
Saurabh
Varsha Murali

MARKET ANALYSIS

PRODUCTS

MARKET
STRUCTUR
E

INDIAN CONFECTIONARY MARKET

Organized:

Unorganized:

CAGR (Revenue): 12%

Expected Sales by 2014: 11
billion
Market Volume: 193 million kg
CAGR (Volume): 6%

Chocolates:

Sugar Candies

Gums:

CAGR : 20%
Market Share: 46%
Monopack pricing: Rs.
2.00-10.00

Penetration:

MARKET
LAYOUT

Market Share: 35% of

Indias supply of
confectionery consumption

Urban: 75% Rural: 10%

CAGR : 5%
Market Share: 34%
Monopack pricing: Rs.
0.50-1.00

Per Capita Consumption

(20gm): 28
%
17
%

32
%
23

CAGR : 9%
Market Share: 20%
Monopack pricing: Rs.
1.00-5.00

Distribution:

Age Demographics:

Kirana Stores: 76%

Convenience Stores:
13.5%
Medical Stores,
Paan/Beedi Stores, Other

2-8 yrs: 15%

8-25 yrs: 25%
25-64 yrs: 55%

CCI ANALYSIS
CCI TIMELINE
2012: Evaluation of RTM
Option for rural reach

2000s: Entered Prepared Foods

Category

1970: Founded

1980s: Introduction of
beverages

2007: Reconfiguration of RTM

RECONFIGURED RTM
Objective: Effective and
efficient model that delivered
growth and sustainable
competitive advantage

Modern Retail Route (MRR):

Formed post the FDI relaxation by
government
Uses modern retail stores
(hypermarkets, supermarkets and
the army)
Opportunity to increase sales
Sales contribution: 7%

Traditional Retail Route (TRR):

Focuses on urban areas
Uses distributors, wholesalers and retail
intermediaries
Value provided: Credit, reduce transaction
costs, convenience
Sales Contribution: 75%

Exclusive Rural Route (ERR):

Taps the potential in difficult to penetrate
rural market
Uses a superstockist - substockist model
Disadvantages: Increases cost, time and
other sources
Sales contribution: 23%

Drivers + Challenges
Drivers
Growth Rate: Rural- 30% Urban- 18%
Current market penetration is very low 10% compared to 85% in urban centers
50% of Indias GDP from rural markets
Branded confectionery market in India CAGR 12% by value.
Challenges
Engaging customer interest
Making candy and chocolates available at rural retail counters/accessible to rural
population
Long break-even period
Need for product customization adapting to rural markets

Option 1: Superstockist Model

Approach

Villages with population > 10,000 and smaller villages will be the target of this model
About half of the villages had more than 16 retail outlets
Clustering of retail outlets on the basis of cost of servicing, sales potential and profit potential

CCI

Superstocki
st

Substockist

Wholesaler
/ Retailer

Advantages

Ability to reach remaining 63% of the villages with

population >10,000
Scalability and operational flexibility
Sustainable model considering reuse of superstockist

Retailer

Customer

Disadvantages

Limit to numerical expansion

Viability- required more resources and generated less
revenue per stockist

Channel Player
Margin (%) Cost (in Rs.) Number (2012)
Retailer
12.5
0.875
500000
Wholesaler
11
0.765
45000
Substockist
4.5
0.72
1800
Superstockist
2
0.7
50
CCI
70

Annual channel sales (Number) 282352941

Sales for CCI (Rs)

197647059

Margin for CCI

175147059

Option 2: Haats
Approach

Weekly markets in Indian village business center- did not have any permanent fixtures and could be relocated from
village to village as per the need
Rural haats were preferred to rural retailers because of the wider choice of products
Seen as a platform for trial generation and brand activation- served both distribution and promotion purposes
Piloted using activation agencies for promoting and selling products in haats
CCI

Activation
Agency

Wholesaler

Haat

Advantages

Disadvantages

Cost-effective and ability to reach villages

Rural haats were preferred to rural retailers because of
the wider choice of products
Better customer pull and wider coverage
Number of Haats
Number of small Haats
Number of Large Haats
Average number of visitors per
day
Average spending per customer
(Rs.)
Confectionary (candy &
Chocolate) share (Rs.)
CCI share (10%)

Customer

Temporary fixtures would mean that location is not

fixed
Demand cannot be estimated accurately

43000
38700
4300
268320000
40
0.4
0.04

Total number sold per year

Sales for CCI (Rs)
Margin for CCI

391747200
0
274223040
0
273089040
0

Option 3: Van Sales

Approach

Widely used in rural markets

Equipped with audio / video facilities to attract markets
Vans were used for distribution of products at rural retail centres

CCI

Wholesaler

Vans

Advantages

Customer

Disadvantages

Quick mobility
Ability to cover 2-3 villages in a day
Trust is built by ensuring that there is timely delivery

Total Number of villages

Total number of vans required
Cost per van
Total cost

Highly expensive
Road infrastructure is weak in villages

593615
197872
1134000
1285956000000

Option 4: SHGs
Approach

Group of 10-15 women from similar socio-economic backgrounds form SHGs

Investment of savings by members to purchase products from the NGOs and sell them to the customer
Proper use of credit and timely payment by use of social pressure

CCI

Wholesaler

SHG

Advantages

Low margins
Strong rural presence and organized retail
Proven method- used by large FMCGs
Scalability and fulfillment of CCI objective
Number of villages
SHG Penetration (assumption)
No of SHG
No of members per SHG
Margin
Annual Sales per SHG member
Total Sales

Retailer
/Customer

Disadvantages

Sales revenue would be limited

Requirement of training facilities for SHG members
Social factors can hamper SHG penetration
SHG model success mainly in South

593615
5
2968075
12
5%
24000
854805600000

Option 5: Mobile Traders

Approach

Micro-entrepreneurs connect to customers using bicycles or by foot

Customers can be households, retailers or haats
Mobile traders were provided with necessary equipment to attract customers

CCI

Distributor
/Superstoc
kist

Mobile
Trader

Retailer
/Customer

Advantages

Disadvantages

Cost-effective and ability to reach smaller villages

Mobile traders were from the community and hence wellconnected
Other FMCG goods being sold through this method
Ability to cover atleast 2 villages a day

Channel Player
Mobile Trader
Distributor/Superstocki
st
CCI

Requirement of huge force to be able to cover the rural

market
Sales revenue would be limited
Requires efficient planning and monitoring facilities
Ability to upgrade customer preferences
Margin
(%)
12.5
11
78

Option 6: Tie up with India Post

Approach

Distributors in urban markets could send products to rural retailers through the Post method
Product delivery and cash collection is done by the postmen and handled accordingly
Monthly payment of logistics bills and delivery charges

CCI

Distributor

India Post

Advantages

Largest and widest network in India

90% of the branches in rural area leading to wider rural
reach
Several schemes for brand activation in a cost-effective
way
Best way to reach villages with population <5,000

Retailer
/Customer

Disadvantages

Possibility of becoming vulnerable to a partner with

huge bargaining power
Non-exclusive distribution channels- potential use by
competitors

Recommendations
Hybrid of haats and mobile traders

Ability to reach a wider rural market, especially ones with lower population and
less infrastructure

Haats- Cost-effective market place environment

Mobile traders- Door-to-door delivery will be feasible considering they are

form the community
Leverage mobile traders to increase penetration by better understanding of the
local flavour and effective communication of the same to the wholesalers could
lead to better product development
High sales from haats would complement the low sales from mobile traders

Microsoft Excel
Worksheet

THANK
YOU