Snacko India Limited

SNACKO INDIA LIMITED LEVERAGING TRADE PROMOTIONS FOR COMPETITIVE ADVANTAGE

ISSUE In Nov 2010, Snacko India was evaluating the reasons for the decline in Market share & marginal growth in sales for the previous year. The company heaving relied on trade promotion schemes to achieve its sales targets. The company was aware that there was no adequate effort to design & evaluate the performance of these schemes. The company was looking at the possibility of improving these schemes & also find some ways to evaluate the performance of the promotional schemes. SNACKO FOOD INDUSTRY –  The processed snack market in India was us $3 billion & growing at 15 % per annum. The organized market was about 46 % & growing at 25-30 % annually. Potato chips at about US $1.2 billion were contribution close top 80 % of branded snacks category. Close to 90 % of the products were priced at or below US $ 0.22 price point. The market was dominated by small sized packs & highly innovative. Mortality rates of new brands were as high as 70 %.almost 50 brands were launched in the first half o 2009 out of which only 10 % survived. SNACKO –  Snacko was a local subsidiary of a European food giant. It entered India 15 years ago but did not meet with success. Subsequently it acquired a local subsidiary of another European food giant in other western snack sub categories in India to gain 20 % market share. It adopted aggressive growth strategies aimed to becoming a market leader. It based its strategies on innovation,  packaging, advertisement, promotion & inorganic growth the M&A’s. It was an innovator in using trade premium for capturing market share. It had set up an innovation centre in India to monitor local formats & tastes. It intended to grow by increasing the frequency of consumption in the metro markets & penetrating rural markets. DSITRIBUTION NETWORK –  The goods were distributed through a multi-level distribution system. CFA ‘s were the first level who transported merchandise from the factory to the stockiest or distributors The stockiest/distributors were assigned definite geographies & maintained sales force to call on wholesalers & large retailers in urban areas. The wholesalers provided the final link to the rural & smaller retailers who did not purchase directly from the distributors. The overall distribution cost worked out to 13-25 % with the breakup at various levels as below

CFA’s

3- 3.5 %

Stockist/Distributors 5-12 % Wholesalers

2-3 %

Retailers

5-15 %

The company appointed super stockiest in bigger town to serve a number of small traders in satellite towns. The sub-stockist or the traders in these small towns were appointed by the company. They were given relatively higher margins due to smaller value of sales in these regions. The company adopted various means of promotions like shop contact programs, market activation programs in weekly bazaars & trade excitement programs in wholesale markets. This helped the company develop contact with the super stockiest & sub stockiest & teest the sales potential as well as get feedback. The retail structure was dominated by unorganized 3 million stores. Nearlyu two third of these were located in rural areas. Unorganised retailing accounted for almost all of the sales of snack  industry. Snacks contributed less than 5 % of the food sales in organized outlets. However this was a very fast growing segment growing at the rate of 25-30 % and revenues expected to touch US $ 15 billion in the near future SNACKO’s DISTRIBUTION CHANNEL –  Snacko distribution channel consisted of a CFA acting as a link between the company’s

warehouse & distributors. The distributors sold the products to wholesalers. They had their own sales force. In addition they were supported by Sales Office (SO) of the company as well as Merchandising Officer (MO) for installation of merchandising equipments at the point of  purchase & product stand. The retailers were the last leg in the network & were the interface with the consumers. Snacko’s sales network was dependent on the distributor -sales person network.

SNACKO’s SALES MANAGEMENT – 

The Marketing Manager managed a team of Brand Manager & a Channel Manager. Brand Manager  –  Brand Management, approval of Promotional campaigns, expense for each brand. Channel Manager – Merchandise design, execution of various trade promotions. National Sales Manager - Managing National sales. Supervise regional managers & a channel development Manager. Regional Managers - Manager Sales for the region and merchandising through merchandising managers. Area Manager  –  manager merchandising activities with the help of Merchandising Managers & Merchandising Officers. Sales Officers - Frontline sales persons & responsible for sales in their territory. Merchandising Managers –  Responsible for merchandising related activities at the point of sales including managing stands, banners & danglers at each retail outlets. Supported by Merchandising Officers. Merchandising Officers  –  Execution of merchandising tasks in a smaller area. Covers A class retail outlets & relationship building with retailers. Manage Distributor’s Merchandiser. Targets

were for fixed installations per month.. Distributor’s Merchandisers –  Clean merchandising equipments, replace stickers/posters, regular

dusting cleaning. Targets were for semi-permanent fixtures of merchandisers equipment per month. TRADE PROMOTIONS –  Snacko emphasized on below the line trade promotion activities to promote its products. While introducing new products the objective was to improve visibility & availability. For slow moving brands promotions were through discounts & bundling .

The main focus was on either increasing the stock at trade level or increase shelf space. Distributors & retailers were given incentives to place large orders. Retailers were given incentive to provide shelf space. The trade scheme was implemented through the distributor’s sales force & company’s sales officers. The sales force was offered additional incentive based on

sales levels