Coca Cola Sales And Distribution 1k2u3h

Distribution Structure of Coca Cola in India Sales and Distribution Management Project Project Submitted by: Group 2 212011 HARSH VARDHAN VYAS 212025 RAJDEEP ROY CHOWDHURY 212029 SABYASACHI GUHA RAJA 212034 SUBHA SAHA 212036 SUNANDO MUKHERJEE

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Table of Contents Introduction .................................................................................................................................................. 3 Role of each intermediary - Distribution & Retail......................................................................................... 4 Coca Cola System .......................................................................................................................................... 5 Sales Structure of Coca Cola ......................................................................................................................... 6 Territory Design in NCR ................................................................................................................................. 6 Margins ......................................................................................................................................................... 6 Infrastructure Required by Distributors........................................................................................................ 8 Coverage Plan Followed by Distributors ....................................................................................................... 8 Provided to Distributors by the Company ...................................................................................... 9 Performance Evaluation of Distributors ....................................................................................................... 9 Major Problems Faced by Distributors ......................................................................................................... 9 Logistics ....................................................................................................................................................... 10 Coca Cola’s Focus on Rural India Demands ................................................................................................ 11 Coca Cola Launches Online Store in India ................................................................................................... 12 Recommendations ...................................................................................................................................... 13 Conclusion ................................................................................................................................................... 14 References .................................................................................................................................................. 15

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Introduction The Coca-Cola Company re-entered India through its wholly owned subsidiary, Coca-Cola India Private Limited and re-launched Coca-Cola in 1993 after the opening up of the Indian economy to foreign investments in 1991. Since then its operations have grown rapidly through a model that s bottling operations, both company owned as well as locally owned and includes over 7,000 Indian distributors and more than 2.2 million retailers. Today, Coca Cola’s brands are the leading brands in most beverage segments. The Coca-Cola Company's brands in India include Coca-Cola, Fanta Orange, Limca, Sprite, Thums Up, Burn, Kinley, Maaza, Minute Maid Pulpy Orange, Minute Maid Nimbu Fresh and the Georgia Gold range of teas and coffees and Vitingo (a beverage fortified with micro-nutrients). In India, the Coca-Cola system comprises of a wholly owned subsidiary of The Coca-Cola Company namely Coca-Cola India Pvt Ltd which manufactures and sells concentrate and beverage bases and powdered beverage mixes, a Company-owned bottling entity, namely, Hindustan Coca-Cola Beverages Pvt Ltd; thirteen licensed bottling partners of The Coca-Cola Company, who are authorized to prepare, package, sell and distribute beverages under certain specified trademarks of The Coca-Cola Company; and an extensive distribution system comprising of customers, distributors and retailers. Coca-Cola India Private Limited sells concentrate and beverage bases to authorized bottlers who are authorized to use these to produce portfolio of beverages. These authorized bottlers independently develop local markets and distribute beverages to grocers, small retailers, supermarkets, restaurants and numerous other businesses. In turn, these customers make beverages available to consumers across India. The Coca-Cola system in India has already invested USD 2 Billion till 2011, since its re-entry into India. The company will be investing another USD 5 Billion till the year 2020. The Coca-Cola system in India directly employs over 25,000 people including those on contract. The system has created indirect employment for more than 1,50,000 people in related industries through its vast procurement, supply and distribution system. They strive to ensure that the work environment is safe and inclusive and that there are plentiful opportunities for people in India and across the world. The beverage industry is a major driver of economic growth. A National Council of Applied Economic Research (NCAER) study on the carbonated soft-drink industry indicates that this industry has an output multiplier effect of 2.1. This means that if one unit of output of beverage is increased, the direct and indirect effect on the economy will be twice of that. In of employment, the NCAER study notes that "an extra production of 1000 cases generates an extra employment of 410 man days."

Coca Cola System Worldwide and India At the core of Coca Cola’s business in India, as in the rest of the world is the production and distribution network, which the company calls the “Coca-Cola system”. Globally, the Coca-Cola system includes Coca Cola itself and more than 300 bottling partners. The Coca-Cola Company manufactures and sells concentrate and beverage bases. The authorized bottlers combine concentrate or beverage bases as the 3

case may be with sweetener (depending on the product), water or carbonated water to produce finished beverages. These finished beverages are packaged in authorized containers bearing Coca Cola’s trademarks -- such as cans, refillable glass bottles, non-refillable PET bottles and tetra packs -- and are then sold to wholesalers or retailers. In India, additionally, the Company also sells certain powdered beverage mixes such as Vitingo. The beverages reach the ultimate consumers through the company’s customers: the grocers, small retailers, hypermarkets, restaurants, convenience stores and millions of other businesses that are the final points of distribution in the Coca-Cola system.

Role of each intermediary - Distribution & Retail The Coca-Cola Company in India is governed from its corporate office located in Gurgaon. This office manages the working of five zones covering whole of India. The different and segregated zones are: 1. 2. 3. 4. 5.

Northern zone Eastern zone Western zone Southern zone Andhra Pradesh zone

These zones are divided into various plants and offices which govern the area assigned to them. The areas are the various distribution centres consisting of Distributors and Carry & Forward agents. Further down the distribution chain comes, the retailers/customer for the company's product. They receive goods from distributors and C&F agents. Finally consumer is the buyer accessing the product from the retail shops or having them delivered to their homes. The Coca-Cola Company typically has its reach taking its products to billions of people all around the world using wide distribution networks. In India, the pace and speed at which Coca-Cola has widened its business is truly amazing. Distribution network remains the biggest strength of the company

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Coca Cola System

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Sales Structure of Coca Cola

AGM

Sales Manager

Area Sales Manager

Sales Executives

Market Development Executive / Pre-sellers

Territory Design in NCR  

Full Coverage in Delhi NCR with 59 Routes for distribution Coca Cola uses both owned and contracted vehicles to cover these routes

Margins     

Margin per crate (comprising 24 bottles of 300 ml each) is Rs 20. On the 200 ml pack size, margin is Rs 16 per crate. Sales of the more affordable 200 ml pack size for about 60 per cent of its total carbonated soft drink (CSD) sales. Non-CSD business s for 15 per cent. Outsourced distribution so that trucks and other equipment needed for the purpose are no longer owned by the company

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FINANCIAL 1) Profit Margin a) To distributors

1-1.5%

b) To retailers

2-3%

2) Advance payment a) to company

1,00,000

b) for refrigerators

5,000

3) Credit and policies i) Credit amount a)Company to distributor

N/A

b)Distributor to retailer

Can provide.

ii) Credit period

One month(for retailers)

iii) Rate of interest

N/A

4) Discounts provided i) Cash discount

N/A

ii)Quantity discount

Variable

5)Frequency of visit by co. personnel to distributor: a)Customer Executive/

Once in a week

Supervisor b)TDM

Once in two months

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Infrastructure Required by Distributors HCCBPL is the largest bottling partner of The Coca-Cola Company in India. It is a part of The Coca-Cola Company’s Bottling Investments Group (BIG) and responsible for the manufacture, package, sale and distribution of beverages under the trademarks of The Coca-Cola Company. As part of the Bottling Investments Group of The Coca-Cola Company, HCCBPL has 24 bottling plants at strategic locations in various states spread across India. They cover approximately 65% of bottling operations for the CocaCola System in India. HCCBPL has an extensive distribution system spanning more than a million outlets operating with world class execution standards and infrastructure. In addition to HCCBPL, there are thirteen more licensed bottling partners who are also responsible for manufacture, package, distribution and independently developing local markets to distribute beverages to grocers, small retailers, supermarkets, restaurants and numerous other businesses. Coca Cola India is currently making huge investments to increase bottling lines, adding new bottling plants, enhancing back-end chain infrastructure across the country.

Coverage Plan Followed by Distributors The routes formulated by HCCBPL (Hindustan Coca Cola Beverages Pvt. Ltd. (India) for distribution of products are as follows: Key s: These key institutional customers contribute a large piece of the total sales of the Company. It mainly consists of organizations that buy large quantities of a product in one single transaction. Because of their volumes and bargaining power the Company offers one month or 15 days credit. They include Defence canteens, Clubs, fine dine restaurants, hotels, Corporate houses etc. Future Consumption: The segment consists of outlets of Coca-Cola products holding decent amount of stock meant for future consumption. This is done to ensure the product is available all time. They include Food courts, Departmental stores, Super markets etc. Immediate Consumption: Stocks need to be replenished on daily basis for immediate consumption form retail stores. The stocks of products in these outlets are sold on the same day and very few bottles may be left for next day such outlets include retailers, canteens of educational institutions, small sized bars and restaurants, and unorganized retailers. General: In this route a few but specific areas are grouped and served in one go. These include remote areas, rural places, and hill stations with less density of populations. Coca-Cola India (CCI) built a distribution network in combination with its bottling partners and contract manufacturers. In urban areas, it distributes products directly from bottling plants to retailers. However, owing to lack of proper infrastructure and difficult access to the remote villages, it modified its distribution chains and adopted the three-tier ‘hub and spoke’ distribution model, to penetrate into the rural areas and increase its sales. Besides its distribution network, CCI adopted ‘Right Execution Daily’ (RED) strategy for effective execution of its distribution mainly in urban areas, which boosted the sales

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of the company. RED ensures the proper display, availability and activation of company’s products in the retail stores.

Provided to Distributors by the Company Coca-Cola India Private provides syrup concentrate & beverage bases to authorized bottlers in strategic geographical location who mix this syrup with other ingredients like water, sugar etc. which they further distribute to the retailers Coca cola is using Push strategy in which they use its sales force and trade promotion money to induce intermediaries to carry, promote and sell the product to end s i.e. consumers. For example, Coca cola is giving free pet bottles, trade discounts, publicity material, point of sale display etc. to distributors, agency owners and retailers

Performance Evaluation of Distributors        

Sales quota attainment Inventory management Average order size placed Market coverage(calls made by distributor everyday) Infrastructure Volume generated Third party audit Complaints handling

Major Problems Faced by Distributors      

Intense competition with PepsiCo Depleting Margins Multiple Channels. Environmental Issues faced by the Coca Cola Company such as the pesticide issue, ban on sale of Coke products in Kerala in 2006 etc resulted in depleted sales From company : discounts/incentives given at the end of the month From retailer : bad debts/run away

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Logistics Attributes of Coca Cola Logistics Average order size a) Distributor to company

Based on Demand, Season

b) Retailer to Distributer

Based on Demand, Season

Order placement a) Distributor to company

Phone

b) Retailer to distributer

Distributor Representative

Transit Time

2 Days

Order frequency

Daily

Inventory Maintained

1 day

Unsold/Damaged Merchandise

Replaced

Mode of Transportation

Company vehicle

(company to distributor) Warehousing a) Storage Capacity

Minimum 30 m2

b) Ownership

Owned / Rented

Reverse Logistics Reverse Logistics is the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal. As far as managing the returns are concerned companies re-use them, re-sell them, leave them to a third party or destroy them. But companies are more likely to benefit if they can also make use of the information that comes back with returned merchandise.

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Reverse logistics plays an important role in the Coca Cola distribution. Greening is not the only motivation; this reduces the packaging cost considerably for them. The % of recycled component in bottles and cans is already a KPI for the beverage manufacturers. There is a big scope for greening the supply-chains from a packaging perspective - the hierarchy is Prevent > Minimize > Reuse > Recycle > Dispose. Two main enablers for achieving this are: 1. Just in time delivery (Minimize packaging ) 2. Reverse logistics for packaging materials (Reuse and Recycle) Coke’s global supply chain is a vastly complex network of plants, bottlers, warehouses and customers, along with multiple product lines following multiple supply chains with differing objectives. The challenge: achieving consistent reporting and having real-time information on which to base tactical and strategic decision making Because the same set of rules was not used throughout the company, the existing metrics system wasn’t sufficient for Coke. Even when using different KPI’s (Key Performance Indicators), simple things like stock out and fill rate were different. With the implementation of Advanced Planning & Optimization (APO) and SAP software, Coke combined the right intelligence that was relevant for its routes and markets and hence optimized its cost and delivery schedules.

Coca Cola’s Focus on Rural India Demands Coca-Cola India is betting big on the rural markets and has recast its distribution strategy to get more people to sample its beverages, especially in the rural region. The centralized distribution system of transporting the product directly from the bottling plants to retailers, as used in urban market was futile for rural market which resulted in innovative “Hub and spoke” distribution system. The stock was transported from the bottling plants to hubs and then from hubs to spokes (situated in small towns) and from spokes to retailers who catered to the demands in rural areas. A well designed marketing strategy with strong and efficient supply chain and logistics ensured Coca-Cola’s presence with increase in coverage.

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Hindustan Coca-Cola has introduced fountain machines on trucks and they take it to haats, melas and other such gatherings, and serve Coca Cola or our other beverages in a cup at ₹5 and it works very well, as there are rarely any permanent shop in these gatherings. In the process of exploring Indian rural market the Coca-Cola has come out with eco-friendly cooler eKOCool' operating through solar energy. Limited hours power supply in rural areas is one of the most important factor for not offering chilled soft drink products to consumers in rural areas. To address the issue Coca-Cola India came out with this innovation using a renewable energy resource. ‘eKOCool' can store two crates having 48 glass bottles of 300 ml each. Apart from this it can light up the store and charge mobile. This has given Coca-cola India a competitive advantage to penetrate into remote rural areas. The results are promising, a test market done by placing 20 ‘eKOCool' coolers in a rural area near Agra has given sales jump of nearly 5 times.

Coca Cola Launches Online Store in India Coca-Cola has launched Coke2Home.com, an online store for home delivery of the group’s various beverage products. This is one of the rare such instances of a large consumer products maker getting into direct selling through an online channel in India. The website is run by Hindustan Coca-Cola Beverages Pvt Ltd, the largest bottling partner of The CocaCola Company in India. The service is currently available in Ahmadabad, Bangalore, Chennai, Gandhinagar, Hyderabad and Mumbai only. Customers need to book their orders before 12 noon to get products home-delivered the same day. You can also place bulk order or monthly supplies of products. Minimum order for delivery is Rs 300, as of now. The company accepts multiple modes of payment, including cash on delivery cash card, credit card, debit card and net banking.

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What is interesting is how the firm has structured the venture to sell its products which in effect amounts to multi-brand e-tailing in which foreign investment is not allowed. We are getting in touch with the Coca-Cola spokesperson in India for more details and will update when we have more information. Early in 2013, the country’s top FMCG firm Hindustan Unilever said it is looking at building capabilities for e-commerce as a stronger distribution channel. The firm had not given details whether it is looking at launching its own e-com property as a direct sales venture or wants to strengthen its existing network catering to other e-tailers who sell its products.

Recommendations 

Try and not cannibalize brands taken over by coke such as Gold Spot and Canada Dry to promote their own brands/create space for Coca Cola products. If possible reintroduce them like Thumpsup and Limca.

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Introduce other worldwide successful products available in the Coca Cola brand that are yet to be introduced in India.

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Create a Cola Drink market e.g. the market Canada Dry created for itself.

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Create a bottled water market.

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Market soda products more effectively by tying up with liquor brands that do not have surrogate soda products.

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Enter the powder cola soda market and effectively market the product as antacid.

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Coca Cola can diversify into health drinks and food products (like PepsiCo), as consumers today are very health conscious.

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Ensure local brands of Parle which were taken over and are continued under the Coca Cola brand and are equally marketed. Case in point distribution of Thumps-up and Limca are quite weak more so in the high volume small SKU’s across retails of various segments. Also, in most post mix vending machines Thumps-up and Limca are not available.

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Coca Cola must ensure they have full stock of all their products in the outlets they handle.

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Coca Cola must have a speedy delivery system of its goods to the retailers at any given point of time.

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Promotional campaigns must be held in order to improve the sales of products that are not moving in the market (certain brands of Coca-Cola like Nimbu Fresh etc.).

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Coca Cola can implement more modified and better QPDS(Quantity Purchase and Display Schemes) in order to increase their sales figures. 13

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Efficient ways to handle complaints from the retailers must be designed by the Coca Cola.

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Fortnightly visit of the marketing heads to major retail outlets must be done in order to know the market, how the current sales& distribution is working and what more strategies can be implemented to enhance the process and sales.

Conclusion The sales and distribution network of Coca-Cola has also been found to be very strong and almost flawless. Hindustan Coca-Cola Beverages (P) Ltd. has had the first mover advantage when it entered the market and it has capitalized on that advantage to grab the market share. Franchisee who takes care of the company’s operations has been found to be competent and so the company does not interfere in their work. The franchisees are also required to report to the company at specific time intervals. Franchisee based operations combined with the company’s operations add strength to the overall presence of the company in the market.

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References http://www.coca-colaindia.com/ourcompany/coca_cola_system.html http://www.coca-colaindia.com/ourcompany/bottling_partners.html http://techcircle.vccircle.com/2013/05/31/beverage-maker-coca-cola-launches-online-store-in-india-isit-looking-at-multi-brand-e-tailing/ http://www.thehindubusinessline.com/companies/cokes-new-mantra-made-in-india-forindia/article5664891.ece http://marketinomics.com/consumer-behavior-2/how-coca-cola-did-it-in-india/

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