DEVANSH PANDEY

PGFB1917 ; DCM-2 ; TEAM 4

DCM CASE ANALYSIS
DISTRIBUTOR SALES FORCE PERFORMANCE MANAGEMENT – NESTLE
INDIA LIMITED
Summary :
This case of Nestle India Limited discusses about the strategy started by Nestle for
aggressive market growth which was tough to get implemented.
Nestle follows the intensive distribution and the final connectivity was managed by the
Distributor Salesman (DS)
DS are the employees of the channel partners known as Cash Distributors, who are
responsible the availability and visibility of goods at the retail market available for
consumption of end consumers.
It was difficult to implement because of the increasing turnover of the distributors’ salesmen.
It discusses about the difficulties faced by salesmen which intervenes when the diversity of
the management practices of channel partners were there.
To manage the problem, Nestle collected the data and done competitive analysis of the
benchmarked companies and through that data they decided to take the few steps to solve the
problem.
Nestle India in order to change in distribution system, they focus on Big Leap policy which
was a strategy initiative which help the company to achieve the quantum leap in revenue as
well as profitability. Their main focus was to develop the market aggressively.
So the whole case is leaned towards the problem of distribution, and also the problem of DS
incentives and also regarding the sales performance are their in the case which are needed to
be diagnosed.
Exhibit 5: Competitive Landscape of Nestle India
Turnover of the Benchmarked FMCG Companies (INR Millions)
YEAR NESTLE HUL P&G CADBURY
2008 43242.4 157417.6 8895.4 17730.8
2007 36471.8 137177.8 6547.1 15115.3
2006 29441.9 121034.4 5550.1 10582.5
2005 26438.9 110605.5 5985.8 8797.8

Table 1: The Summary Data on the Entire DS Workforce of Nestle

DS Profile: Experience, Education and Earnings

Average Experience with CD 5.3 Years
Average Experience Nestle 4.2 Years
Average No. of Years Spent in Same Market 2.3 Years
 Inference : In the above Table 1, the data shows that Nestle’s DS workforce has CD
with average experience of 5.3 years but average experience Nestle has 4.2 years. So
the experience, earnings and education are being considered in the data.

Exhibit 6: Sales Force of Nestle India distribution system

CATEGOR NUMBERS AVERAGE AVERAGE INDUSTRY AVERAGE
Y ANNUAL COST EARNINGS PER OF EARNINGS PER
TO COMPANY MONTH THROUGH MONTH IN SIMILAR
(IN RS.) NESTLE POST TAX LEVELS (IN RS.)
(IN RS.)
DS 3000 INR 47400 INR 3950 INR 5500
CD 1300 INR 1591016 INR 44000 INR 35 - 45000
INFERENCE : In exhibit 6, it can be seen as per the given data, Nestle’s DS are
earning less than that of industry average. There is a significant difference of INR
1550. But on the other hand CD are earning equivalent to industry’s average i.e INR
44000.

Table 3: Details of Secondary Salesman of HUL

% of Graduates 37%
Average Turnover Handled Per Month INR 0.79 mn.
Average Basic Salary Per Month Rs.3250
Average Company Incentive Per Month Rs.1000
Average Distributor Incentive Per Month INR 500
Average Monthly Earning INR 4750
% having Additional Business/ Occupation 26%

Criteria Data
Works under RDS

Minimum Academic Qualification 10 / 12 pass with 1 to 2 years of experience

Salary paid by Basic by Distributor +

Incentive by Company

Average Basic Pay Per Month Rs.3800-6200

Average Company Incentive Per Month Rs.2400-6000
Average Total Monthly Earnings Rs.7000-12500
Allowances Given by Distributors Daily Lunch Allowance (25*25 working
days) +Daily Traveling Allowance (25*25
working days)

Incentives parameters Lots of priorities and

focus areas on monthly basis
Outlet Covered Per Day 28 to 36 outlets
 Inference :Table 3 gives the summary information of the distributor sales force. It
shows that salesmen in HUL earns more than that of Salesmen in Nestle.

1. What were the real factors behind the DS turnover?

Firstly, the people with experience of 3 to 5 years were making the distribution less effective.
Also alternate businesses like telecommunication, credit card sales were in a position to offer
higher positions and better pay.
Their current employment with cash distributors was not providing them adequate non-
financial motivators like belongingness to the organisation, career prospects inside the
organisation and job security.
The problem was compounded in Nestle's case by the presence of an equally large number of
very experienced DS's who were resistant to adopt and possibly incapable of implementing
the new strategies of distribution management like sales force automation.
2. Was it possible to manage the sales performance required for the “Big Leap” with a
continuous churn at the DS level?
No, it was not possible to manage the sales performance required for the Big Leap with a
continuous churn because the objectives of the decision maker were not in the line with the
Big Leap strategy which included :
- Market leadership
- Market development
- Aggressive market development and
- Improving the systems by providing the training to its members
There were lot of discrepancy between actual and desired market working. The ineffective
use of the consumers perception of premium quality of the Nestle products for retail
dominance.
Also, the less payroll to salesmen of Nestle are making salesmen to leave their job.
The DS were not able to convince the outlets to get visibility and shelf space for the Nestle
products.
The sensitivity and need to gather competitive information were lacking across DS's of
Nestle.
Since the DS did not consider it as a part of their duties, they felt that it was too much of a
work for the remuneration they were getting, which lead to the problem to manage the sales
performance required for Big Leap with a continuous churn at the DS level in Nestle.
3. Was it possible to improve the sales performance without any major change in sales
management paradigm?
Yes, it was possible to improve the sales performance with the help of following ways :

- Nestle can increase the incentives given to salesmen as other competitors are
providing better incentives
- They can increase the incentives by 8-10% which will boost the morale of salesmen
and ultimately increase the sales performance
- They can also provide them trainings to the workforce which can enhance the
efficiency to perform the sales activity and betterment in sales performance
- Sales team should be more strengthen by investing in them, which can help the
company in long run