Group Interim Report Sales and Distribution Management

INTERIM PROJECT REPORT

MARICO INDIA LIMITED

Under the Guidance of: Prof. Vibhava Srivastava

Authors: Thacker Kaushik Khushabhai 17P176
Aakriti Sikka 17P181
Madhur Vashisht 17P203
Raviteja Kandala 17P201
Sarvagya Kala 17P223

Submitted in partial fulfilment for the PGPM in the subject of

Sales and Distribution Management

July 2018

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Table of Contents

1. Objective ............................................................................................................................................... 3
2. Industry - Company Overview .............................................................................................................. 4
2.1 FMCG Goods .................................................................................................................................... 4
2.2 Rural – Set to Rise ............................................................................................................................ 4
2.3 Urban Trends .................................................................................................................................... 4
2.4 Top Companies ................................................................................................................................. 5
2.5 Expectations of Millennials .............................................................................................................. 5
2.6 Marico ............................................................................................................................................... 6
3. Distribution ........................................................................................................................................... 8
3.1 Network - Channels .......................................................................................................................... 8
3.2 Key Characteristics ........................................................................................................................... 8
4. Customer Analysis .............................................................................................................................. 10
4.1 Product Mix – Primary Target ........................................................................................................ 10
4.2 Category wise Market Share ........................................................................................................... 10
4.3 Market Share Growth – FY17 ......................................................................................................... 10
4.4 Buying Products - Propositions....................................................................................................... 11
4.5 Urban – Rural Market Share ........................................................................................................... 11
5. Competitors ......................................................................................................................................... 12
5.1 Marico ............................................................................................................................................. 12
5.2 ITC .................................................................................................................................................. 12
5.3 Dabur............................................................................................................................................... 13
5.4 Godrej ............................................................................................................................................. 14
5.5 HUL ................................................................................................................................................ 15
5.6 Colgate Palmolive ........................................................................................................................... 15
5.7 Proctor & Gamble ........................................................................................................................... 16
6. Problem Statement and Symptoms ..................................................................................................... 18
6.1 Problem Introduction ...................................................................................................................... 18
6.2 Problem Statement .......................................................................................................................... 18
6.3 Problem Identified .......................................................................................................................... 18
7. References ........................................................................................................................................... 20

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1. Objective

As a part of practical learning in the subject of Sales and Distribution Management, we have
chosen Marico India Limited as our company. We would be analyzing FMCG industry as in
general and then Marico’s distribution network. We have identified a problem statement pertaining
to the Sales and Distribution network.

Throughout the project, we would try to understand the problem, analyze the situation and try to
put forward our recommendation for the resolution of the problem.

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2. Industry - Company Overview

The fast-moving consumer goods (FMCG) segment is the fourth largest sector in the Indian
economy. The market size of FMCG in India is estimated to grow from US$ 30 billion in 2011 to
US$ 74 billion in 2018.

Food products is the leading segment, accounting for 43 per cent of the overall market. Personal
care (22 per cent) and fabric care (12 per cent) come next in terms of market share.

Growing awareness, easier access, and changing lifestyles have been the key growth drivers for
the sector.

2.1 FMCG Goods

FMCG goods are popularly known as consumer-packaged goods. Items in this category include
all consumables (other than groceries/pulses) people buy at regular intervals. The most common
in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish,
packaged foodstuff, and household accessories and extends to certain electronic goods. These
items are meant for daily of frequent consumption and have a high return.

2.2 Rural – Set to Rise

Rural areas expected to be the major driver for FMCG, as growth continues to be high in these
regions. Rural areas saw a 16 per cent, as against 12 per cent rise in urban areas. Most companies
rushed to capitalize on this, as they quickly went about increasing direct distribution and providing
better infrastructure. Companies are also working towards creating specific products specially
targeted for the rural market.

The Government of India has also been supporting the rural population with higher minimum
support prices (MSPs), loan waivers, and disbursements through the National Rural Employment
Guarantee Act (NREGA) programme. These measures have helped in reducing poverty in rural
India and given a boost to rural purchasing power.

Hence rural demand is set to rise with rising incomes and greater awareness of brands.

2.3 Urban Trends

With rise in disposable incomes, mid- and high-income consumers in urban areas have shifted
their purchasing trend from essential to premium products. In response, firms have started
enhancing their premium products portfolio. Indian and multinational FMCG players are

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leveraging India as a strategic sourcing hub for cost-competitive product development and
manufacturing to cater to international markets.

2.4 Top Companies

According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs,
and the balance by Indian companies. Fifteen companies own these 62 brands, and 27 of these are
owned by Hindustan UniLever.

The top ten India FMCG brands are:

1.Hindustan Unilever Ltd.
2. ITC (Indian Tobacco Company)
3. Nestlé India
4. GCMMF (AMUL)
5. Dabur India
6. Asian Paints (India)
7. Cadbury India
8. Britannia Industries
9. Procter & Gamble Hygiene and Health Care
10. Marico Industries

2.5 Expectations of Millennials

According to a study by TMW and Marketing Sciences that surveyed 2,000 people across different
age groups ranging, young consumers are the most ‘rational’ and likely to spend more time
weighing up potential purchases. The survey also suggests that younger people are using
recommendations from their peers about products and services in order to make rational purchase
decisions. According to the study, shoppers aged 18 to 24 are 174 per cent more likely to use
recommendations on social media than shoppers aged 25 and over.

Another key factor today is – speed. Today's consumer wants packaged goods that work better,
faster, and smarter. The “need for speed" trend highlights the importance of speed as a potentially
decisive purchase factor for packaged goods products in a world where distinctions between
products are shrinking.

Younger consumers express the greatest need for speed, not a huge surprise for the smartphone
generation. Data monitor’s 2013 Consumer Survey found that younger consumers those in the 15-
24-year-old age group were twice as likely to say that "results are achieved quickly" has a "very
high amount of influence" on their health and beauty product choices than consumers in the oldest
age group, those aged 65 or older. Speed matters, and 2014 will almost certainly see the
introduction of new game-changing timesavers.

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2.6 Marico

Marico Limited is one of India's leading consumer products companies operating in the beauty and
wellness space. Empowered with freedom and opportunity, we work to make a difference to the
lives of all our stakeholders - members, associates, consumers, investors and the society at large.

Currently present in 25 countries across emerging markets of Asia and Africa, Marico has nurtured
multiple brands in the categories of hair care, skin care, edible oils, health foods, male grooming,
and fabric care. Marico's India business markets household brands such as Parachute, Parachute
Advansed, Saffola, Hair & Care, Nihar, Nihar Naturals, Livon, Set Wet, Mediker and Revive
among others that add value to the life of 1 in every 3 Indians. The International business offers
unique brands such as Parachute, HairCode, Fiancée, Caivil, Hercules, Black Chic, Isoplus, Code
10, Ingwe, X-Men and Thuan Phat that are localized to fulfil the lifestyle needs of our international
consumers.

Charting an annual turnover of INR 63 billion (Financial Year 2017 - 2018) across our portfolio,
Marico's sustainable growth story rests on an empowering work culture that encourages our
members to take complete ownership and make a difference to the entire business ecosystem.

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3. Distribution

Marico's distribution width and penetration is considered to be one of the best in the country as
well as the industry. 56 million consumer packs are sold to approximately 1.8 million households
every month, through 1.6 million retail outlets spread across the country.

Marico owns a total of 32 Depots, which are segmented into Urban and Rural territories. The 135
sales territories in the urban segment cater to a total of 3200 towns and cities. Further, there are
850 Distributors and 750,000 retailers in this segment. The 35 sales territories in the rural segment
cater to 11,000 towns and cities. Further, there are 115 super Distributors and 950,000 retailers in
this segment. Additionally, there are 2600 Stuckists between distributors and retailers in this
segment. Almost, every Indian town is covered by Marico’s distribution network, and 1 out of
every 10 Indians is a Marico consumer.

3.1 Network - Channels

Figure 3.1 – Distribution Network

3.2 Key Characteristics

• Distribution Alliance:
Indo Nissin Foods Ltd. is associated with Marico for the distribution of Top Ramen
products on a national basis.

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• Rural Sales & Distribution:

Marico's rural sales and distribution network contributes 24% to the company's top line
and ranks among the top three in the industry.

• Sales Capacity:
Significant progress has been made by Marico in the areas that enhance sales capacity.
For instance, the quality and the number of distributors have been improved to improve
the sales capacity.

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4. Customer Analysis

4.1 Product Mix – Primary Target

BRAND PRIMARY TARGET CUSTOMERS

Parachute Women of all ages
Parachute Advanced Young girls (college and school going)
Hair and Care Men and Women of all ages
Shanti Amla Customer looking for Value for money
Silk and Shine Females aged 18-34
After Shower Males aged 18-34
Mediker Children aged 3-13
Sweekar Housewives
Saffola Heart Health conscious consumers
Revive Housewives in urban area (middle and
upper class)

4.2 Category wise Market Share

4.3 Market Share Growth – FY17

• The India business volumes grew by a modest 1 percent, while the International business
witnesses a constant currency growth of 16 percent (volume growth of 5 percent)

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• Marico is the market leader in hair oils in India with 34% volume share and 26% value
share. Marico is the dominant market leader in Coconut Oil in India with 59% volume
share
• There has been an 8% volume CAGR in Saffola Edible oils in the last five years. It has
evolved from an edible oil brand to a leading healthy lifestyle brand.

4.4 Buying Products - Propositions

1. Hair Oil – Hair care has shifted from being an occasion-based activity to being an integral
part of the Indian consumer’s daily beauty regime. With an increase in disposable incomes
and western influence, consumers are experimenting with newer and pricier products.
There is a growing preference towards products containing natural/organic ingredients.
Marico aims to drive penetration of its hair oils in rural areas and gain share from
unorganized sector.
2. Edible Oils – Consumers are shifting towards edible oils with health benefits due to rising
incomes and increasing relevance of a healthy lifestyle. Marico plans to extend its brand
equity into healthy foods category and has recently launched Meal replacement nutri-
shakes and High-fiber soups.
3. Male Grooming – Millennials are increasingly buying grooming products. Factors such
as Marico is leveraging the widespread distribution network to gain access to
cosmetics/chemist outlets. It plans to grow this market segment through continuous product
and marketing innovations.
4. Premium Hair Nourishment (Hair Serums/tonics)- Marico’s product proposition in this
category is based on sensorial/functional benefits. The company wants to tap the
tremendous potential for innovation in this category by promoting dual usage, expanding
reach and packaging innovations.

4.5 Urban – Rural Market Share

• Urban Markets account for 69% of the business whereas Rural markets account for 31%
• Rural sales went up from 26% in FY10 to 31% in FY17
• Marico’s next level of growth will come from deeper rural markets where affordability is
a challenge. Single use sachet is the most efficient tool to attract new customers in rural
areas.
• Marico is targeting geography expansion in rural areas to grow market share.

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5. Competitors

5.1 Marico

Strengths Weaknesses
Liquidity and Profitability: Declining Revenue:
Marico recorded an increase in its current The company exhibited a decline in
ratio. Although with a decline in revenues, financial performance in FY2017. Decrease
the profitability improved. in the revenue is primarily due to price
reductions and reductions in the coconut oil
portfolio in India
Market Position: Consumer Preferences:
A leading market position that helps it The company is subject to changing
attract and serve a diverse customer base. consumer preferences. This leads to
One of India's leading companies in additional and frequent cost of new product
consumer products and services in the development and sensing the market trends
global beauty and wellness space quickly.

5.2 ITC

ITC Limited (ITC) is an India-based diversified conglomerate. The company operates through five
business segments: FMCG; Agri-Business; Paperboards, Paper and Packaging; Hotels; and Others.

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In the personal care category, the company offers fragrances, shampoos, after shave lotions,
bathing bars, shower gels and medicated powders, among others.

Strengths Weaknesses
Ability to Create Strong Brands across Dependency on Tobacco Business
diverse businesses The tobacco and cigarette business has been
ITC owns some of the strongest brands and the main revenue generator for the
is the leading player in most of the segments company, contributing 61.6% of the
in which it operates company’s total revenues in 2017.
Financial Performance Increasing Awareness on Health
ITC’s financial performance improved in Due to increasing health concerns, there has
last four years, including improvement in been a decline in the consumer demand for
operational performance tobacco products. This will also lead to
reduced goodwill and revenue for the
company

5.3 Dabur

Dabur India Limited is a FMCG company that manufactures and markets ayurvedic and natural
healthcare products. Dabur also operates specialized beauty retail businesses through the wholly-
owned H&B Stores mainly located in premium footfall malls.

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Strengths Weaknesses
Focus on New Product Launches Severe Competition from International
Dabur has always been focused on Players
innovation to meet its ever-changing Dabur faces stiff competition from both
consumer preferences. In 2017, NewU, domestic and international players,
Dabur’s beauty retail entity, launched Spice especially, in the oral care.
Island.
Presence in the Niche Natural/Herbal Low growth potential in haircare
Segment With high penetration in oral and hair care
Strong presence felt in the niche space of segments, the scope for growth is low.
natural and herbal products space. It is
world's largest ayurvedic and natural
healthcare company.

5.4 Godrej

Godrej Consumer Products Limited (GCPL) is a manufacturer, distributor, and marketer of FMCG
products. The company is one of the leading household insecticide and hair care manufacturer in
India.

Strengths Weaknesses/Threats
Strong Brand Portfolio Lack of Size and Scale
The company owns some of the strongest GCPL lacks scale in terms of operations and
brands in its portfolio. GCPL holds number revenues, compared to competitors such as
one position in hair colour, household ITC and HUL
insecticides, and air fresheners, and number
two position in the soaps category.

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Focus on Product Innovation Intense Competition

Focus on innovation and expand its GCPL faces intense competition in all of its
presence through new product launches and FMCG segments. HUL has a stronger
brand extensions. presence in rural segments due to which it
can counter Godrej in urban areas.

5.5 HUL

A subsidiary of Unilever, HUL is India's largest FMCG company. The company offers products
in about 20 distinct categories

Strengths Weaknesses/Threats
Wide Product Range Lower revenues than P&G and ITC
HUL offers a wide product range at various HUL has lower revenues than P&G and
price points to cater to the needs of various ITC, increasing the bargaining power of the
customers competitors.

Market Leadership in diverse portfolio Counterfeit Goods

HUL is India's largest FMCG company. Most fake cosmetic goods seized bear the
Nearly 90% of Indian households use HUL name of HUL’s famous brands like Lakme,
products Ponds, and Fair & Lovely

5.6 Colgate Palmolive

A subsidiary of Colgate-Palmolive Company, it produces and sells personal and oral care
products. Its portfolio comprises of oral care, skin care, and hair care products.

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Strengths Weaknesses/Threats
Support from the Parent Company Profitability
Strong parental support from Colgate- Even though revenues increased in FY17,
Palmolive Company which markets its the margins of the company decreased.
products over 200 countries and territories
worldwide.
Revenue Growth Intense Competition
The company reported strong revenue Firm faces tough competition from both
growth in FY2017 due to strong local and global operators, explaining the
performance by the company’s offerings. fall in margins.

5.7 Proctor & Gamble

P&G is amongst the FMCG companies in India. It now caters to over 650 million consumers
across India. The company classifies its business operations into two categories: Health Care
Business and Feminine Hygiene Business.

Strengths Weaknesses/Threats
Support from the Parent Company Geographical Concentration
Strong parental support from The Procter & P&G Global depends on India for
Gamble Company, a global leading FMCG generating a large portion of its revenue,
company, allowing it to improve its making it susceptible to local problems.
operational and distribution activities.

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Sustainability Counterfeit Products

With the main motive to touch and improve P&G faces the problem of counterfeit
the lives of its consumers and the products, especially in the premium product
environment, P&G has a special focus on segments as counterfeit products are
sustainability and keeping the environment available at cheap prices.
safe.

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6. Problem Statement and Symptoms

6.1 Problem Introduction

Modern trade is an organized form of wholesale or retail arrangement, which is classically a

multiple-outlet chain of distribution centers or stores. The feasibility of Modern Trade in India is
not a question anymore; a fifth of urban Indian shoppers now shop regularly at Modern Trade and
a third of shoppers choosing bulk packs‟ as a strategy to beat price rise (Nielsen, 2012).

Through this interim report, we would identify specific issues related to Marico in modern trade
and focus on a key issue that Marico faces which is Low Fill rates in Modern Trade. We have
identified the issue by talking to distributors of Marico, area sales and manager and key account
managers.

We have addressed problems faced by Marico in modern trade and did a root cause analysis to
identify key pain point of low fill rates in modern trade.

Below are the key issues faced by modern trade in India:

1. Short Product Life-Cycles

2. Demand variability caused by promotions
3. Frequent New Product Introductions
4. Rise of Private Labels & Impulse Buying
5. Price-Erosion
6. Shorter Time-to-market and Time-to-Volume
7. Delivery at Slot-Time

6.2 Problem Statement

To analyze reasons for low fill rates in modern rates channel for Marico and provide
recommendation to reach the benchmark fill rate of 90% in the modern trade channel

• Analyzing the current state of the problem

• Gaps identified leading to low fill rates
• Recommendations to reach fill rate of 90%

6.3 Problem Identified

In the present era of high demand uncertainties and shorter product life cycles, all the FMCG
companies are consistently trying to strengthen supply chain over demand uncertainties.
Challenges gets more complex with numerous sales channels with different order management
and supply dynamics. ‘Fill Rate’ is one of the performance indicator which indicates successful
supply planning. Fill rate of any particular channel is percentage of placed orders converted in
actual sales. Issues in data synchronization between sales and manufacturing departments, poor

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demand planning, logistics & network constraints, high volatility and uncertainty of the market
causes low fill rates in retail sector.

In the past few years, Marico has been facing lot of issues related to low fill rates in modern trade
primarily due to:

• Low off takes

• Decrease in consumption of flagship products like Parachute oil by modern trade customer
• Costly shelf spaces
• Rapidly changing preference of customers
• Rise of private labels and Impulse buying
The company manages its sales through various sales channels. ‘Modern Trade’ is one of their
major retail channels. Modern trade channel is basically point of sales of Marico available at
different Multi-Brand outlets. Currently Wildcraft has 41 active Modern trade partners which
includes Big Bazaar, spencer’s etc. Revenue wise Modern trade contributed to 18% of the sales
revenue for FY 2015-16, which makes it one of the important channels. Business fill rate for this
channel for FY 2015-15 was avg. 76%.
Fill rate is an important performance indicator of supply chain planning for any modern trade retail
channel. Low fill rate means direct loss of sales revenue. But it also implies high probability of
firm losing out customers to their competitors. Today’s extreme competitive environment pushes
companies to perform complex tasks ranging from managing supply chain, handling new product
introductions every season to managing electronic product catalogs. Such situations has made it
difficult to maintain desired 90% fill rate for companies.
Following work includes detailed look at the fill rate issues and how collaboration and
strengthening stock planning can help us improve the fill rates.

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7. References

http://marico.com/india/about-us/overview

https://www.ibef.org/industry/fmcg-presentation

Interviews with

ASM of Rajasthan: Former Marico ASM – Ashish Khanna

Summer Intern: Jaskaransingh Saluja

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