ITC~ TOUCHING YOUR LIFE. EVERYDAY A study on the Channel Distribution
By: Radhika Gupta- 91041 Shivi Aggarwal – 91051 Madhusudan partani- 91029
What is ITC ITC is one of India's foremost private sector
companies with a market capitalisation of nearly US $ 19 billion and a turnover of over US $ 5 billion ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel, Personal Care, Stationery, Safety Matches and other FMCG products ITC's diversified status originates from its corporate strategy aimed at creating multiple drivers of growth anchored on its time-tested core competencies: unmatched distribution reach, superior brand-building capabilities, effective supply chain management and
The Product-Mix FMCG Cigarettes Foods Lifestyle retailing Personal Care Stationery Safety Matches Agarbatti
Hotels Agri-business Paperboard and Packaging Information Technology
Overview
The Composition Manufacturing Unit Separate for each product line Contract Manufacturing Backward Integration E-Chaupal
Storage Hubs Stores all the products
Cont… Distributors Exclusive based on population Needs to stock all FMCG products( Except
Stationery) Wholesalers Retailers Paanwalas Deepest penetration possible
Suitability Perishable Short Span Customers prefer fresh products
Lot Size Smaller Lot sizes
Convenience Waiting Time Product Assortment
Channel Objectives Consumer Behavior
Quality Conscious Convenience goods, Needs Intensive distribution Demands variety Very less waiting time
Company Objectives
Reach masses Rural penetration Diversification Competitive advantage
Alternatives
Sell ready to eat products through sweet shops like
bikanerwala Showrooms for High-End products E-Chaupal
Features Selection Distributor is selected based on Infrastructures, Delivery Van, Computer, Warehouse, Sales Force Population based ( 1 Distributor per 20-25 thousand)
Control Uses Coercive power To deal in Cigarettes, it is must to deal in
Other goods Terms and Conditions Price, Selling Condition, Godown Condition
etc…
Functions Manpower Promotion Credit Infrastructure Stocking
Benefits No Benefits Higher margins No Credit- Only Cash Payments No Freebies, Paid Vacations Gifts etc.. Very rarely Cash gifts (linked with
performance)
Others Order Distributors- Weekly Retailers- Twice a week Paanwalas- daily Online order is placed by distributor The periodical order from wholeseller ,
retailer, paanwalas is collected by staff of distributor.
Payment Mostly on Cash-Basis; sometimes post dated
cheques Very rarely Credit is allowed on cigarettes
Cont… Transportation Uses delivery van, Rickshaw, Cycles, Autos
Conflicts No Conflicts Some tiffs raise between distributor and
retailer due to under supply from distributor
Problems
Analysis ITC has the most popular brands of cigarettes in
India.
The sale takes place from the largest of retailers
like Big Bazaar, Spencers to the smallest of paanwalas at every nook and corner in India. Thus ITC has deeply penetrated the Indian cigarette market.
With an already established distribution channel
for cigarettes, ITC is also selling safety matches, which is complementary to both the cigarettes and agarbattis. The retailers and paanwalas are also ready to stock ITC’s candies, potato chips and finger snacks because of the higher margin as compared to Frito lays, which is its biggest rival in potato chips and finger snacks
Analysis By entering into the branded Indian biscuit
industry there was a business synergy.
ITC was already value-adding to wheat with
its branded atta presence. By entering the biscuits segment, it improved its bottomline further. The company used its existing network of convenience stores -- the company’s name for the hole-in-the-wall pan-beedi shops-for Sunfeast. The company says the brand is now available in nearly 1.8 million outlets. Sunfeast captured around 7% in mere 3 years since its launch in 2003
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