Akarsh 13 PGDM073

Benchmarking Retail Operations
A Report
By
Akarsh Prasad
13PGDM073
Perfetti van Melle
A Report Submitted in Partial fulfillment of the requirements of PGDM program
International Management Institute

New Delhi 110016
25th June, 2014

SUMMER INTERNSHIP REPORT1
EXECUTIVE SUMMARY
My project’s main objectives included:

1. Increasing Perfetti’s retail presence
2. Identifying if any new systems or processes have been mastered in the operations of FMCG
companies
3. Determining how FMCG companies have evolved in terms of their operations
4. Suggesting new plans on incentivizing new channels
To achieve the above objectives, I met retailers and distributors of 18 major FMCG companies
across Bangalore, Hyderabad and Mangalore. I conducted personal interviews to understand the
service provided to retailers and to understand their distribution model. I benchmarked major
FMCG companies in terms of their technology, retail operations, salesman salary and incentive
structure, distribution model, incentives to various channels, MIS reports and other parameters
related to retail.
11 out of 18 companies I visited had a smartphone/tablet based order booking in place. The most
comprehensive order booking system was that of Pepsi (SAMNA), Godrej (DISHA) and HUL
(Quantum). Their mobile phones/handheld devices have in-built GPS systems that helped the
distributor monitor the exact location of the unit, the salesman and the in and out time of each
outlet. They have outlet wise targets set and their handheld device helped them know their target
vs achievement in different beats and per outlet.
Companies like HUL, Mars and Cadbury use scratch card systems to promote their products and
in turn increase the drop size per outlet. Apart from that, ITC runs a loyalty program for retailers,
wherein the retailer gets points per purchases he makes. These points will encourage the retailers
to buy more and buy across different lines
A lot of companies offer display units to its retailers and set targets for the display units per store.
Companies like Britannia and Dabur offer discounts only if the targets of that particular outlet
are achieved. Other companies like Cadbury, 3M and Heinz offer monthly/quarterly discounts to
retailers who maintain their display units.
Companies like Dabur, HUL and Godrej offer varying retailer margins to retailers. For example,
Dabur Hajmola candy (250 jar) gives 15% return to retailers while Dabur Hajmola candy (250
pouch) gives a return of 20%. HUL’s Pond’s Dreamflower Talc offers a 12% margin while
Pond’s White Beauty Powder offers a 14% margin to retailers.

The salesmen’s salaries across companies had an average base pay of Rs 8000 to Rs 8500 with a
well-structured incentive system mainly having parameters like Value Target, No of bills cut, No
of lines sold and Focus Product.
Keeping all of the above in mind, I have made some recommendations for Perfetti van Melle
which as are follows:
1. In order to increase our retail presence in existing stores, introduce a loyalty program for
retailers
2. Introduce an SMS based ordering system for outlets who’s orders could not be taken on that
day or those who have a steady demand for Perfetti’s products and the salesman need not go
there every time to get orders
3. Introduce a scratch card system for retailers instead of regular discounts
4. Introduce smartphone/tablet based order booking
5. Provide display units to A class and B class outlets and offer discounts only if targets are
achieved by that outlet
6. Improve the MIS reports generated from Forum
7. Restructuring the salesman’s salary and incentive structure
8. Like Dabur, introduce refill packs for Perfetti’s products at a higher margin or at a lower rate
and also reduce margins on flagship products and increase margins on slow moving products
9. Introduce a 7 day credit policy for retailers. Offer only 50% credit if purchases within Rs 500.
Instances of bills pending for 4 months. Also, introduce an automatic stock replenishment system
where the computer sends a trigger to the C&FA when the stock reaches a minimum level at the
distributor point

Acknowledgement
I express my sincere gratitude to Perfetti Van Melle for providing me a great

learning opportunity and valuable practical exposure to the FMCG industry.
I am immensely grateful to the Sales Manager, Bangalore, Mr. Sangeeth EK for
lending me support, providing me with the required resources, imparting
knowledge and giving me valuable insights all throughout the tenure of the project.
I would also take this opportunity to specially thank Mr. Srushti Govinda, Area
Sales Manager, Karnataka for sharing his experiences and providing the guiding
light.
I would also like to acknowledge the Sales team of Bangalore, Hyderabad and
Mangalore for providing guidance throughout the project.
I would also like to thank Mrs. Barnali Mukhopadhyay, Head HR for timely
arrangements and hassle free learning opportunities.
Contents

1. INTRODUCTION...........................................................................................................................- 10 -
1.1 Company Background..............................................................................................................- 10 -
1.2 Perfetti’s Distribution Model....................................................................................................- 11 -
1.2.1 Division of Products................................................................................................................- 11 -
1.2.2 Distribution Flowchart...........................................................................................................- 12 -
1.2.3 Go To Market Model (GOTM)..............................................................................................- 13 -
1.3 SWOT Analysis..........................................................................................................................- 14 -
1.4 Porter’s Five Forces...................................................................................................................- 15 -
1.5 Tushman and Nadler’s Congruence Analysis..........................................................................- 17 -
2. PROJECT DETAILS......................................................................................................................- 23 -
2.1 Project Title................................................................................................................................- 23 -
2.2 Project Description....................................................................................................................- 23 -
2.3 Rationale of the Project.............................................................................................................- 25 -
2.4 Benefits of the Project...............................................................................................................- 25 -
2.5 Problem Formulation................................................................................................................- 25 -
2.6 Key Deliverables........................................................................................................................- 26 -
2.7 Objectives...................................................................................................................................- 27 -
2.8 Limitations.................................................................................................................................- 27 -
2.9 Research Problem......................................................................................................................- 27 -
2.10 Research Design.......................................................................................................................- 28 -
3. FINDINGS OF THE STUDY.........................................................................................................- 29 -
3.1 Distributors Visited in Bangalore.............................................................................................- 29 -
3.2 Distributors Visited in Hyderabad...........................................................................................- 29 -
3.3 Hindustan Unilver Limited.......................................................................................................- 30 -
3.4 ITC Limited...............................................................................................................................- 35 -
3.5 Pepsi............................................................................................................................................- 39 -
3.6 Britannia....................................................................................................................................- 41 -
3.7 GlaxoSmithKline.......................................................................................................................- 43 -
3.8 Godrej.........................................................................................................................................- 46 -
3.9 Marico........................................................................................................................................- 49 -
3.10 Dabur........................................................................................................................................- 50 -

3.11 Nestle........................................................................................................................................- 52 -
3.12 Cadbury...................................................................................................................................- 54 -
3.13 Reckitt Benckiser.....................................................................................................................- 56 -
3.14 Heinz.........................................................................................................................................- 57 -
3.15 3M.............................................................................................................................................- 58 -
3.16 Mars..........................................................................................................................................- 59 -
3.17 Wrigley.....................................................................................................................................- 60 -
3.18 Nivea.........................................................................................................................................- 61 -
3.19 Johnson & Johnson.................................................................................................................- 61 -
3.20 L’Oreal.....................................................................................................................................- 62 -
4. GRAPHS..........................................................................................................................................- 64 -
5. RECOMMENDATIONS FOR PERFETTI VAN MELLE...........................................................- 66 -
6. OTHER SUGGESTIONS FOR PERFETTI VAN MELLE.........................................................- 85 -
7. ANNEXURES..................................................................................................................................- 87 -
7.1 Questionnaire to Retailers........................................................................................................- 87 -
7.2 Questionnaire to Distributors...................................................................................................- 87 -
List of Tables
Page No

Table 1: HUL's Salesmen Salary and Incentive Structure ……………………………………… -32-
Table 2: ITC Division of Products ………………………………………………………………... -35-
Table 3: ITC's Salesmen Salary and Incentive Structure ………………………………………. -38-
Table 4: Godrej’s Salesmen Salary and Incentive Structure …………………………………… -49-
Table 5: Cadbury’s Salesmen Salary and Incentive Structure ………………………………..... -56-
Table 6: Heinz’s Salesmen Salary and Incentive Structure ………………………………..….... -58-
Table 7: Mars’ Salesmen Salary and Incentive Structure ……………………………………… -60-
Table 8: Distributor Turnover per Month ………………………………………………………. -64-
Table 9: Average Throughput per Salesman ……………………………………………………. -64-
Table 10: Basic Salary + Incentives of Salesmen ………………………………………………... -65-
Table 11: Specimen of the SMS Template ………………………………………………………. -68-
Table 12: Absolute Return Offered to Retailers per Jar ……………………………………….. -80-
Table 13: Existing Salary and Incentive Structure ……………………………………………... -83-
Table 14: Recommended Salary and Incentive Structure ……...………………………....….... -84-
Table 15: Promotion Scheme Chart for Salesmen ………………………………………....…… -86-
List of Figures
Page No
Figure 1: Screen Capture of HUL's Quantum Technology ……………………………………... -31-
Figure 2: HUL Scratch Card Coupon …………………………...…………………………….….. -33-
Figure 3: HUL Discounts Offered to Different Outlets ………………………………………….. -34-
Figure 4: HUL Retail Inputs to Retailers ………………………………………………………… -34-
Figure 5: GSK's monthly promotional schemes …………………………………………………. -45-
Figure 6: GSK's monthly promotional schemes………………………………………………….. -45-
Figure 7: GSK's monthly promotional schemes………………………………………………….. -45-
Figure 8: GSK's monthly promotional schemes …………………………………………………. -45-
Figure 9: GSK’s Focus Brand pops up on the tab ……………………………………………….. -46-
Figure 10: Dabur Retailer Margins and Promotional Schemes to Retailers………………….... -52-
Figure 11: Screen Capture of Dabur’s Drishti Technology……………………………………... -52-
Figure 12: Cadbury’s “Jar lo Car lo” Scratch Card Offer ……………………………………... -56-
Figure 13: 3M Display for Mops for General and Modern Trade Outlets …………………...... -59-
Figure 14: Perfetti’s existing display units ……………………………………………………….. -69-
Figure 15: Proposed Display Unit for A Class and B Class Outlets ……………………………. -71-
Figure 16: Prototype of the smartphone screen used for order booking ………………………. -75-
Figure 17: Appearance of the View Report tab …………………………………………………. -77-
Figure 18: Appearance of the desired report generated tab on a particular day …………...… -77-
Figure 19: Appearance of the desired report generated tab for a particular period ……….… -77-
List of Appendices
Page No
Questionnaire to Retailers …………………………………………………………………………... -87-
Questionnaire to Distributors ……………………………………………………………………… - 87-

1. INTRODUCTION
1.1 Company Background
Perfetti Van Melle India Pvt. Ltd. (PVMI) is a renowned manufacturer, distributor
and marketer of several high quality sugar confectionery products. With close to a
25% market share, it is the leading player in the organized confectionery business
in India today. The company has a diverse portfolio of brands across segments (i.e.
candies, gums & chewies) which it sells through various retail channels across the
country. As a marketer, PVMI has always been known for its iconic, eyeball
grabbing and entertaining advertising. PVMI is a fully owned subsidiary of the
global confectionary conglomerate Perfetti Van Melle, headquartered in Lainate,
Italy and Breda (the Netherlands).
Perfetti entered the Indian market in 1994 by offering its first brand Center Fresh,
followed by Big Babol and Alpenliebe in 1995. Alpenliebe Creamfills, Alpenliebe
Lollipop, Centre Fruit, Centre Shock, Mangofillz, Chlormint, Chocoliebe,
Fruittella, Happydent White, Protex Happydent, Marbels, Mentos are among the
range of the PVM global and regional brands that are produced and marketed in
India. PVMI enjoys a huge brand recall among its consumers contributing to a total
estimated market size of Rs.5500 cr.
Perfetti Van Melle India has more than 15 brands under its umbrella, all of which
have been launched after considerable market research and insight, so as to adapt
to the likes and preferences of the consumers. The climatic conditions of the Indian

geographical region have been kept under consideration, for product composition
and long shelf life.
PVMI crossed 1,200 crores in 2010 and 1,600 crores in 2012. The PVMI
manufacturing units in India are located in Gurgaon and Chennai with another
plant commissioned at Rudrapur, Uttaranchal in 2007. The Indian subsidiary also
takes care of the development of South Asian markets and exports to other Asian
countries. Perfetti has adopted an aggressive sales strategy to retain the numero
uno position in the confectionery industry in India backed by a wide network of
Carry & Forwarding agent (C&FA), distributors and sales force. Perfetti Van Melle
India has a network of around 4,000 (app.) distributors spread across 1,500 urban
towns and covers 7,000 towns through its extended network of 10,000 (app.) sub-
stockists.
1.2 Perfetti’s Distribution Model
1.2.1 Division of Products

The entire brand portfolio has been divided into three divisions P1, P2 and P3. It is
a unique distribution model in which the same outlet is serviced by all three
salesmen in the same week.
This is done to stay in constant touch with retailers and ensuring at least one person
from each division visits the retailers but with different products and does not
overburden the sales person with different variants of same product.

P1 P2 P3
Alpenliebe Caramel Chlormint JuztJelly Strawberry
Choco Moonz Center Fresh Sweet Mint Center Fresh Spearmint (285 pieces)
Mentos Cola Center Fruit Strawberry Center Fruit Maharaja Mongo
Center Fresh Spearmint (176 Chocoliebe Éclair 2choco éclair
pieces)
Happydent Spearmint Happydent Wave Strawberry Mentos Strawberry
Mentos Watermelon Center Fresh Paan Happydent White
Center Fruit Watermelon
1.2.2 Distribution Flowchart
Urban Areas
Retailer/
Plant C & FA Distributor
Wholesaler
Rural Areas
Sub-
Super
Plant C & FA stockist/
stockist
Retailer

1.2.3 Go To Market Model (GOTM)
Perfetti van Melle has moved to the Go To Market Model (GOTM) from the
erstwhile Ready Stock Unit Model (RSU) in Hyderabad and Bangalore. In this
model, the company has started using the Order Booking System, where the
salesmen go to the outlets to book orders on a particular day and the delivery is
made the next day. Earlier, the stock was delivered the same day the order was
booked. However, the company has made little investment in technology. There are
no handheld devices or mobile phones in use by salesmen to book orders yet.

1.3 SWOT Analysis
Weakness
Strength Lack of investment in technology
Distribution challenges in rural areas
Strong Brand Value
Relatively lesser retailer margins
Strong distribution network
Deep market penetration
Popular brands and high brand recall
Innovative and appealing advertising campaigns
Wide variety of gums, chewies and candies
Attractive packaging and high quality of products
Perfetti van
Melle
Opportunity Threat
Launch pan India GOTM Competition from brands with muscle power
Introduce attractive display units such as ITC
Introduce smartphone based order booking Competition from local players in the rural
system markets with higher retailer margins
Addressing super stockist and sub stockist
challenges

1.4 Porter’s Five Forces
1. Threat of Substitutes – Low

Perfetti van Melle has its product portfolio spread across chewing gums, candies
and chewies which covers almost all the product offerings in the confectionary
industry. The only substitute to chewing gums could be mouth fresheners.
However, chewing gums come in a variety of flavors and does not have any social
stigma in the society. The substitute for candies could be chocolates. However, the
price point of chocolates is generally higher than that of candies. The consumer’s
demand for candies which is available at a lower price than chocolates, reduces the
looming threat of chocolates as a substitute.
2. Bargaining Power of Buyers – Moderate to High
Since there are a lot of competitors in the industry, the buyer’s switching cost is
low. A buyer can buy the same/similar product which is being offered by other
players in the industry such as ITC, Wrigley’s, Nestle, etc. Hence, the company
must have certain brands in the market that appeal to the consumers and have a
brand recall. If these products are able to position themselves as a primary choice
among buyers, then the consumers might not switch among brands. The company
already has certain established brands such as Center Fresh, Center Fruit,
Alpenliebe, Mentos, Happydent and Juzt Jelly.
Also, the company has invested heavily on an extensive distribution network with
deep market penetration. However, if the distribution does not result into sales due
to inability to satisfy consumers’ varied tastes and preferences, likeability of
competitors’ products or any other reason would signify that the consumers have a
high bargaining power
3. Threat of Competitors - High
Perfetti faces competition from various players both in the urban and the rural
markets. While the urban competitors include the likes of ITC, Wrigley’s, Cadbury
and Parle, the rural competitors would also include local players that offer much
higher retailer margins and have a reasonable demand in the rural markets.
Moreover, there are low switching costs among the products and low product
differentiation in the confectionary industry. This increases rivalry in the industry
thereby making it important to have a brand recall among the consumers in order
to stand out among competitors.
4. Bargaining Power of Suppliers – Moderate
Both the upstream and downstream suppliers of products play a significant role in
the cost-sensitive FMCG industry. The upstream suppliers are the raw material
suppliers for production. It is important to maintain a sustainable relationship with
them in order to create a win-win situation for both the partners. In case of a
strained relationship with the supplier would lead to stoppages in production,
difficulty in maintaining low costs, inability to fulfill market’s demand, thereby
harming the company’s brand image.
Similarly, in case of downstream suppliers such as distributors and super stockists,
a high attrition rate would not allow the company to flourish as it would do without
it. Any instability in the supply chain would certainly dent the company’s
performance. Therefore, maintaining a good relation with both upstream and
downstream suppliers becomes imperative for a company to do well in the market.
5. Threat of New Entrants – Low to Moderate
Most of the established players in the confectionary industry have an extensive
distribution network. They have been in the industry for many years before they
have reached the position they have today. Therefore, it would be quite difficult for
a new player to enter into the market, set up a distribution network and achieve
economies of scale. However, since there are low switching costs in this industry, a
new player may enter into the market and may still be able to attract customers for
its products. This is an existing phenomena in the rural areas where local brands
enter into the market and are able to create demand for their products in the local
markets.

1.5 Tushman and Nadler’s Congruence Analysis
1. Work: The work during my internship included tasks related to sales and
distribution across Bangalore, Hyderabad and Mangalore
a. Knowledge/Skill: Most of the lower level employees such as salesmen
and delivery boys were generally class 10 and class 12 dropouts. Hence, the
only skill they needed was the ability to read and write. However, prior
experience in the field of sales was appreciated.
Next in the hierarchy were Distributor Sales Executives (DSEs) who were
responsible for managing the salesmen. They were typically graduates and
had prior sales experience across industries. Their ages varied from 25 to 50.
The DSEs were managed by Sales Managers (SM) or Area Sales Managers
(ASM) some of whom had MBA degrees and some grew up the ranks from
scratch. The ones without MBA degrees had an average 6 to 10 years of
experience in the field of sales. The ones with MBA degrees were people
who had very little prior work experience or were freshers out of b-schools.
Their role was typically to look after the sales of the areas allotted to them,
manage the distributors in that area, suggest offers to boost sales, motivate
employees to generate sales, etc.
Their bosses were Branch Sales Managers and Branch Managers who had a
vast experience in sales. They had over 10 years and 25 years of experience
respectively.
b. Intrinsic Rewards: The salesmen, DSEs, ASMs and SMs were offered
handsome incentives on achieving their monthly sales targets. Moreover, for
salesmen and DSEs, an annual or bi-annual appraisal system was in place in
which the top performing employees were promoted to senior positions
based on their performances over a period of time
c. Work Flow: Monthly sales targets are given to the ASM/SM from his
superiors. This target is broken down into DSE wise targets based on the
potential and performance of the distributors that are managed by DSEs. The
DSEs then brief their respective salesmen about their targets and also advise
them the means to achieve them. However, before the targets are set, a
feedback from the salesmen and DSEs is taken about the market scenario to
get a clarity of the situation at hand
d. Sales Approach: It is very important for a FMCG company to maintain
good relations with distributors, stockists, wholesalers and retailers in the
market. Hence, a major reason for the Perfetti’s success across markets is
because of the salesmen’s rapport with different channel partners. At the
same time, the salesman is expected to have thorough product knowledge,
competitors’ product knowledge and prices in order to sell effectively. He is
also expected to be enthusiastic and push the products into the market as and
when necessary
2. People: The people required to perform the tasks of the organization generally
have the following attributes
a. Interaction with channel partners: The salesmen form the primary point
of contact with the retailers, wholesalers and distributors. They have first-
hand information of the market scenario, performance of our products vis-à-
vis the competitors’ products, competitors’ new launch strategies,
competitors’ prices, etc. The DSEs also visit the market on a daily basis to
ensure that the salesman do their work effectively. The higher ups in the
organization such as ASM, BSM and BM also visit the market and interact
with the channel partners but that is not as frequent as the DSEs and
salesmen

b. Demographic Profile: The salesmen and DSEs are generally people
belonging to the same city as the markets in which they are required to work.
This is because they have a fair idea about the layout of the city and its
markets. They are also expected to know the local language so as to interact
with the channel partners effectively and build long lasting relationships in
the market. The salesmen and DSEs generally hired are men ranging
between the ages of 25 to 50. However, the managers need not hail from the
same region. They could be allotted markets as per the requirements of the
company
c. Expectations from the company: The employees expect to be rewarded
on par with the industry standard, if not more, in terms of compensation. A
typical salesman in the company would earn around Rs 7000 to Rs 10,000
per month + incentives. Similarly, a DSE would earn a minimum of Rs
25,000 to Rs 30,000 per month. In terms of career growth, the employees
expect a healthy appraisal and promotion in the hierarchy regularly.
3. Organizational Structure: The organization structure of Perfetti van Melle
India is as follows:

India Head
Branch Manager - Branch Manager - Branch Manager - Branch Manager -

North East West South
Branch Sales
Manager
Sales
Manager/Area
Sales Manager
Distributor Sales
Executive/ Perfetti
Sales
Representative
Salesmen &
Delivery Boys
a. Mechanistic Structure: The company has various levels of hierarchy and

it is generally a top-down approach
b. Business Units: Perfetti van Melle India has divided its business into four
zones viz. North, South, East and West. These businesses are further divided
into Rural and Urban markets.
c. Lines of Authority: The Area Sales Managers are allotted an area or areas
that they need to manage. All the decisions pertaining to their area can be
taken by them. However, if there are bigger decisions to be taken, the
consent of the BSM and BM would be required. The lower level of
employees’ authority and responsibilities are well laid out
d. Work Standardization: Since the work mainly included sales and
distribution, the work of all levels of employees is pretty dynamic and there
is no unique solution to all problems.
In terms of HR policies, there are well laid out policies for all levels of
employees in the organization.
4. Culture: Culture refers to the unwritten rules that define how work is really
done – which depends on attitudes, beliefs, commitment and motivation of
employees.
a. Values: Perfetti van Melle India has a strong set of six values which they
abide by
i) Integrity without compromise
ii) Achieving excellence
iii) Dedication to the consumer
iv) Care for our people
v) Social and Environmental responsibility
vi) Independence
b. Leadership Style: A combination of Transactional and Authoritarian
leadership styles are adopted by all levels of managers in the organization.
Since quick critical decisions need to be made in the field of sales, taking
everyone’s opinion may not be feasible at all times, hence an authoritarian
style is more feasible in such roles. Also, the employees are duly rewarded
and punished for their performances.
Congruence Analysis
a. Work and People: Perfetti is the market leader in terms of confectionary which
clearly confirms the fact that the right people are doing the right job. Being market
leaders and sustaining it for years is a clear indication of the effort put in by the
people of the company to scale such heights
b. Work and Structure: The structure of the organization is apt for FMCG sales.
There is a hierarchy in place but that does not restrict the flow of work. Also, the
employees are given a lot of freedom to execute their tasks since sales is a dynamic
field and there is no unique solution to each problem
c. Structure and People: The employees have a lot of freedom in terms of using
their own skill and knowledge to complete their sales tasks. In spite of the various
levels of hierarchy, the employees work in unison in order to achieve their targets
d. Culture and Work: A lot of flexibility is offered to employees in order to get
their jobs done. The employees believe in the six values mentioned above which is
responsible for the success of the company over the years
e. People and Culture: All the employees are treated at par in the company. The
job requires a lot of selling skills and patience. The company’s culture is highly
conducive for the above requirements.
f. Structure and Culture: The formal culture exhibits the seriousness among
various levels of management to get the work done. The informal culture builds a
rapport with the sub-ordinates. This rapport helps in building better relations which
eventually translates into larger sales values and volumes
All the four components of this analysis are in sync with each other i.e the there is
congruence among the four components which results in higher productivity for
the company

2. PROJECT DETAILS
2.1 Project Title
Benchmarking Retail Operations
2.2 Project Description
My project required me to understand the following operations of Perfetti in terms
of retail and distribution, and then benchmark the same with all the major players
in the FMCG industry.
 Distribution model in urban markets
 Technology in use
 Retailer inputs
 MIS reports
 Distributor and retailer margins
 Salesman’s compensation structure
 Distributor turnover
 Number of salesmen & salesmen throughput
 Discounts offered
 Stock Norms
 Any other retail and distribution related operations
I visited the markets everyday with Perfetti’s salesmen and DSEs and understood
exactly how Perfetti’s distribution works across Bangalore, Hyderabad and
Mangalore. I also visited four distributors of Perfetti to understand the working at
the distributor point as well.
After getting a clear picture, I visited retailers to understand the services being
provided by different FMCG players and interviewed them to understand the best
services being offered by different companies and compared them with the services
being provided by Perfetti. (Questionnaire in Annexures)
Along with visiting retailers, I visited 24 distributors of 18 different FMCG
companies and interviewed them to understand their distribution models,
technology in use, development of new systems and processes over the last 5 years
and their success, retailer inputs in terms of schemes, offers, promotions and other

incentives, credit policy, discounts offered, salesmen salary and incentive structure,
MIS reports, distributor and retailer margins, stock norms, etc. (Questionnaire in
Annexures)
All the information collected was analyzed and scrutinized to check whether some
of the processes in use by other companies was feasible for Perfetti. It also led to a
lot of new idea generation which has been mentioned later in the
Recommendations section.
No of Channel Partners Visited

350
300 330
No of DBs visited
250 No of Retailers Visited
200 No of Wholesalers visited
150 No of C&FAs Visited
100
50 80
50
0 13Bangalore 11Hyderabad
2 1 Mangalore
No of Working Days
Mangalore;
5.41%
Hyderabad; Total Working Days: 37

24.32%
Total No of Channel
Bangalore; Partners Visited: 487
70.27%
Bangalore Hyderabad Mangalore

2.3 Rationale of the Project
The rationale of the project is to help the company benchmark its operations with
other major FMCG companies in India in order to understand the best practices in
use in other companies and to check if the same can be implemented at Perfetti
2.4 Benefits of the Project

This project has given me immense exposure into the working of sales and
distribution of Perfetti van Melle and 18 other major FMCG players. It has helped
me understand exactly how distribution works across all 19 companies. I have also
understood the technology that is in use across all these companies. It has also
given me an insight into the salesmen’s salaries and incentives across all these
companies. In addition to that, I also have a fair idea of the return on investments,
distributor margins and retailer margins across all major FMCG players in India.
All the recommendations mentioned in the subsequent chapters of the report are
feasible for the company and can be implemented. This would help the company in
increasing its number of lines in the market, thereby increasing its market share,
improve efficiency by adopting technology and generating improved MIS reports,
improve sales of slow moving products due to varying retailer margins and the
loyalty program recommended
2.5 Problem Formulation

 Increasing Perfetti’s retail presence by scaling up operations in terms of
distribution, technology, salesmen’s compensation and other parameters
related to retailing.
Perfetti van Melle had made limited investments in technology required for sales
and distribution. There was an urgent need to understand the various technologies
adopted by other major FMCG players and how it had benefitted them. The main
purpose of this project was to increase Perfetti’s retail presence and it was
imperative for the company to invest in technology to be able to effectively
increase its retail presence. In order to understand how Perfetti can increase its
retail presence, it was important to understand the various systems and processes
adopted by different companies to succeed in the market
2.6 Key Deliverables

The project requires me to do the following:
A.
 Identify various FMCG players in the industry and understand the key
drivers of their retail operations
 Check for the best practices being used by industry in terms of operations,
technology, pay structure, incentives to stakeholders, distribution system and
other parameters related to retail
 Identify the parameters that the other market players are better are at than
Perfetti van Melle
 Suggest which parameters Perfetti van Melle can implement to improve its
operations
 Suggest how Perfetti van Melle can implement the best practices used in the
industry
B.
 Suggest an efficient compensation structure for Distributor Salesmen

(DBSM) compared to other FMCG players in the market

 Creating user friendly reports for DBSM, DSE and DB which is already in
the industry.
2.7 Objectives
 Increase the retail presence of Perfetti van Melle
 Determine how different FMCG companies have evolved in terms of their
operations
 Identify if any new systems and processes been mastered in the operations of
other FMCG companies
 Suggest new plans on incentivizing various channels
2.8 Limitations
 The information collected is based on the information provided by the
distributors and the salesmen of various companies. The authenticity of
some of the numbers cannot be guaranteed
2.9 Research Problem

Benchmarking retail operations in order to increase Perfetti’s retail presence
Variables Studied Under the Exploratory Study
 460 Retailers in Bangalore, Hyderabad and Mangalore

 24 Distributors in Bangalore and Hyderabad
 2 Wholesalers in Bangalore
 1 C&FA in Bangalore
 Perfetti’s salesmen and DSEs in Bangalore, Hyderabad and Mangalore
Possible Outputs from the Study
 Methods to increase Perfetti’s retail presence after employing the best
practices in the industry
 Suggesting technological improvements and areas of investment
 Improving the salesmen’s compensation structure
2.10 Research Design
Methodology
 Conducted personal interviews with retailers to understand the service and

delivery of other FMCG players
 Conducted personal interviews with salesmen and distributors of different
companies to get insights into the working of their distribution system,
technology in use, incentives given to different channels, MIS reports and
other information related to their operations

3. FINDINGS OF THE STUDY
3.1 Distributors Visited in Bangalore
3.2 Distributors Visited in Hyderabad
3.3 Hindustan Unilver Limited

Distributor Turnover Per Month
6.2
6
5.8
5.6
5.4
5.2
5
4.8
4.6
4.4
HUL 1 HUL 2
Col umn2
Processes in Place Brief Description Advantages

1. Order Booking  HUL follows an order booking system for • In a better position to handle
System taking orders from retailers, where the demand
salesmen visit six beats in a week covering • Reduces manipulation in
about 50 outlets per beat. There are two billing by automating it
salesmen allotted to each beat, each covering • Adds to the efficiency of
about 25 outlets in a day fulfilling orders and covering
 Computerized bills are generated in the more outlets
evening and the orders at dispatched after
two days of booking
2. Quantum  All the order booking is done on LG and  Helps in maintaining a track of
Samsung smartphones only using a software orders of all retailers, analyze
called Quantum which was introduced 8 their requirements and set
years back targets accordingly
 This application on the phone has all the  Improves the efficiency of
outlets on each beat listed along with their DBSMs
previous history of orders made, discounts to  Ensures no hoax orders are
be given and amounts due. recorded by DBSMs
 The salesman records the orders on this app  Shows a trigger if an outlet has
and transfers all the information to the not been visited or orders not
computer at the distributor point using Wi-Fi placed for some time
 Any stock damage returned is also entered  Makes claims from the
into the app company easier
 New product launches and promotional  Even if the salesman doesn’t
schemes are also mentioned in it inform the retailers about the
scheme, their bill gets adjusted
with appropriate discounts

Figure 1: Screen Capture of HUL's Quantum Technology

3. Credit Policy They have a credit policy of one week in place Since the distributor’s investment
and the salesman is expected to collect all is huge, his money is not stuck in
payments the next time he goes there for order the market for long
booking
4. Salary Structure  The team leader of the salesmen is given a  Good salary and incentives.
salary of Rs 18,000 plus an incentive of Rs Better than industry standard
3000 per month if targets are achieved. A  A lot of parameters considered
delivery boy is paid Rs 6000 per month before giving incentives which
 The salesmen’s salary structure is mentioned drives the salesmen
below in Table 1
Table 3: HUL's Salesmen Salary and Incentive Structure
Grade of Salesman Salary Offered Incentives (Upto Rs 3750)

Grade C (10+ years exp) Rs 11,700  Value Target
 If 100% achieved - Rs 750

Grade B (Performance Rs 9,500  First 10, 20 and 30 days target
Based)  If 30% target is achieved in first 10 days – Rs 500
 If 60% target is achieved in first 20 days – Rs 750
 If 60% target is achieved in first 20 days and 103%
Grade A ( New Joinee) Rs 8,200 achieved overall – Rs 1500
 Outlet Wise Lines Sold
 Number of lines to be sold per outlet – Rs 500
 Perfect Day
 If the targeted number of lines sold per day is achieved
for 70% days of the month – Rs 500
 Perfect Stores
 If 65% of the perfect stores’ targets are met – Rs 750
 Poster
 If posters are displayed in 80% of the stores – Rs 500

5. Margins  Distributor margin – 5%  Good ROI to the retailers
 Retailer Margins –
 Close Up – 13%
 Close Up – Gel – 10%
 Fair & Lovely – 10%
 Ponds – 12%
 Ponds White Beauty – 14%
 Pepsodent – 10%
 Vaseline – 10%
6. Discounts  HUL provides discounts only to retailers that  It compels retailers to store
have display units for their products such as products of all divisions
supermarkets and provision stores.  It pushes retailers to buy a
 The following are the divisions of HUL with higher value of a particular
the variable discounts category of products
 HUL1A – Soaps & Detergents –
1.5% on total purchases
 HUL1B – Tea & Food – 2.5% on
total purchases.
 It also provides an additional Rs 600
per month discount if the outlet has a
display for its food products
 HUL2 – Personal Products – 3.5% on
total purchases
 They also have scratch cards coupons as
discount coupons
7. MIS Reports  Based on the history of orders, HUL prepares  Understand the requirements
reports for each outlet mentioning the of a particular outlet and set
assortments maintained by the outlet, width targets accordingly
of the outlet and the actual amount of  Gives a clear idea about the
products the outlet can store. Accordingly, kind of products and quantity
salesmen’s targets are set per beat per day that each outlet can sell
8. Distribution  They have four divisions for their products  HUL’s salesmen will visit the
Network  Soaps & Detergents same outlet four times in a
 Food and Beverages week
 Personal Products  This will constantly remind the
 Lakme retailers of their presence and
 Since 2011, HUL gets stock on JIT basis will also help them place
 Stocks come from the depot every day to the orders in case of stock outs in
distributor point other divisions
 No inventory holding cost for
the distributor
9. Attendance  The salesman is expected to switch on the  Will ensure that the salesmen
GPS on his device everyday at 9am for the are in the market at the
distributor to know his location required time and they do not
lie about it
Figure 2: HUL Scratch Card Coupon

RETAILER MARGINS
Cl os e Up Cl os e Up Gel Peps odent Ponds Powder
Ponds Whi te Beauty Vas el i ne Moi sturi zer Vas el i ne Al oe Vera
0.14
13%
0.12
0.1 0.1 0.1
0.09
HUL
Figure 3: HUL Discounts Offered to Different Outlets Figure 4: HUL Retail Inputs to Retailers

3.4 ITC Limited
Table 4: ITC Division of Products
GR1 GR2 GR3 GR4

Aashirvaad Aata Fiama Di Wills Bingo! Tangles
Sunfeast Biscuits Vivel Di Wills Bingo! Mad Angles
Mint-o Fresh Engage Deo Spray Bingo! Tedhe Medhe
Candyman Superia Bingo! Yumitos Cigarettes
Salt Essenza Di Wills
Yippee Noodles
Sunfeast Pasta
Distributor Turnover: Rs 80 lakhs per month (without cigarettes)

1. Order Booking  ITC follows an order booking system where  In a better position to handle
System six beats are covered by nine salesmen per demand
week  Reduces manipulation in
 30-40 outlets are covered per salesman per billing by automating it
day and he is expected to have at least 80%  Adds to the efficiency of
productive calls fulfilling orders and covering
more outlets
2. Sify Forum  Salesmen across all divisions use the Sify  Helps in maintaining a track
Forum software which is installed on their of orders of all retailers,
smartphones analyze their requirements
 It was installed four years back and set targets accordingly
 It contains a list of all the outlets on each beat  Creates a database of previous
 Using this software, the salesman can book orders placed by retailers and
the quantities required per SKU in each outlet outlet wise targets are set
and the order is transferred to the computer at  Improves the efficiency of
the distributor point using USB cable or Wi-Fi salesmen
where the bills are generated  Ensures no hoax orders are
 The delivery is made the next day recorded by salesmen
3. Margins  The distributor margins for each division are  Lower margins are given for
as follows fast moving products such as
 Gr1 – 3.45% cigarettes and food items
 Gr2 – 4.2%  Higher margins are given for
 Gr3 – 3.45% slow moving products like
 Gr4 – 1.45% Personal Products
 Distributor  Retailer – 12%
 Distributor  Retailer (Cigarettes) – 8%
4. Discount  1% cash discount is provided to retailers on  Encourages the retailers to
purchases pay in cash
 Discount of upto Rs 1000 per quarter is  Display units increase the
provided for display units in some cases visibility of products and
hence drive sales
5. Credit Policy  15 days credit is provided to all retailers  Quick recovery of cash from
except those who sell cigarettes the market
 Cigarette sales are only on cash basis  Since the existence of pan
shops is uncertain, cash sales
reduces the risk of bad debts
6. Stock Norms  At least 5 days of safety stock needs to be  Minimum chances of stock
maintained in the distributor point out and supply issues
7. Return on  The company promises an ROI of 2% per  A healthy ROI helps in
Investment month maintaining good long term
relations with the distributor
8. MIS Reports  TM&D report is prepared every month for  It shows the entire history of
each distributor using the inputs of the Sify each retailer’s purchases. Any
Software which shows the performance of the drop in sales can be
distributor investigated
 Daily Reports are also made which show the  It shows the no of lines sold,
efficiency of the salesmen SKUs sold, Bills Cut, etc
 All the reports generated are fully automated  Also indicates the efficiency
of salesmen
9. Salary Structure  The salesmen are paid Rs 8000 a month with  The parameters on which the
and Incentives incentives upto Rs 3000 per month for food incentives are based on drive
products the salesmen to push sales
 The distributor pays the salesmen’s salaries
and claims it from the company
 The hawker that sells cigarettes is given
commission for each pack sold
10. Loyalty Program  In order to increase its retail presence in each  Encourages retailers to buy
store, ITC has introduced a Loyalty Program more of ITC’s products to get
in which retailers will be rewarded as they higher points
keep billing more  Increases the number of lines
being sold in each store
 Increases the value billed per
store

Loyalty Program
Eligibility: If a retailer purchases stock worth Rs 10,000 or more across Gr1
(except Aata), Gr2 and Gr3, then he is eligible to be a part of this program
Classification of Outlets: All the eligible retail outlets are called “First Club
Outlets.” They are further classified as:
 Gold – Purchases above Rs 20,000
 Silver – Purchases above Rs 15,000
 Bronze – Purchases above Rs 10,000
Points Structure: Points are allotted to each retailer upon purchase. Differential
points are allotted for products under different product categories. For example,
If Rs 1000 worth Aata is purchased, A Gold retailer would get 1 point
A Silver retailer would get 0.75 points, and
A Bronze retailer would get 0.50 points
Similarly, if Rs 250 worth Bingo is purchased, A Gold retailer would get 1 point
A Silver retailer would get 0.75 points, and
A Bronze retailer would get 0.50 points
All the retailers are given a brochure with a list of gifts or stocks they can claim for
the amount of points they have collected.
They also receive a monthly statement with the details of the amount of points
collected
Salary and Incentive Structure of Salesmen

Table 3: ITC's Salesmen Salary and Incentive Structure
Basic Salary: Rs 3000 to Rs 5000

Travel and Daily Allowance: Rs 135 per day => Rs 3375 (For 25 days)
Incentives
Value Target: If 90 – 100% of target achieved – Rs 750
If 100 – 110% of target achieved – Rs 2000
If 110% + target achieved – Rs 3000
Bills Cut: If 8-11 bills cut per day – Rs 3/bill
If 12 + bills cut per day – Rs 6/bill
If a new product needs to be pushed in the market,
If 10-12 bills cut per day – Rs 4/bill
If 13-14 bills cut per day – Rs 6/bill
If 15+ bills cut per day – Rs 8/bill
Lines Cut: If 85-104 lines cut per day – Rs 40/day
If 105-139 lines cut per day – Rs 70/day
If 140+ lines cut per day – Rs 100/day
Go Green Reduce Rate (GGRR): If Yellow turns to Green – Rs 20/outlet
If Red turns to White – Rs 10/outlet
NOTE: One or more of the above mentioned parameters are considered for
providing incentives every month
3.5 Pepsi

Plant
Distributors Distributors
Sub Retailers & Sub Retailers &

Distributors Wholesalers Distributors Wholesalers
Retailers & Retailers &

Wholesalers Wholesalers
Pepsi has a unique distribution system where there is no C&FA. The distributors
are directly supplied from the plant
1. Order Booking  Pepsi also has an order booking system in  In a better position to handle
System place where nine beats are covered everyday demand
by their salesmen known as PSRs  Reduces manipulation in
 Five to six units per day are out in the market billing by automating it
for delivery covering 40 to 50 outlets per unit  Adds to the efficiency of
fulfilling orders and covering
more outlets
2. SAMNA  Orders are booked on a handheld software  The time taken to cover each
called SAMNA which was introduced four beat can be tracked and
years back accordingly efficiency of
 The software on the handheld devices is very fulfilling orders can be
comprehensive. It has a GPS system with all increased
the outlets listed. It has a live tracking  The idle time and the
software which identifies the exact location of efficiency of the PSR can be
the unit, the time at which the PSR goes in tracked as well
and comes out of an outlet, etc  Scanning the barcode ensures
 Each cooling unit at an outlet has a unique that the PSR does not record
barcode. The barcode of each cooling unit any hoax orders
needs to be scanned before any order for that
outlet can be taken. This ensures that the PSR
does not record any hoax orders
 The device with the software costs Rs 30,000
per device and is provided by the company to
all the PSRs
3. Return on  The distributors get an ROI of 24% per  A healthy ROI will help in
Investment annum maintaining long term
relations with the distributor
4. Division of PSRs  The PSRs are divided into two.  This ensures that a good
 One takes care of high volume outlets, i.e. rapport is maintained with
which purchase over 800 cases per year and high volume outlets and the
the other one takes care of outlets that retailers purchases remain
purchase less than 800 cases per year consistent or increase
 Each of them cover 25 and 30-35 outlets per
day respectively
5. Credit Policy  No credit is provided to the retailers. All the  Distributor’s money is not
trade is on cash basis stuck with retailers
 No delivery is made if no cash is paid  Heavy investment is needed
 Credit given in rare cases depending on the to procure stocks so regular
competition flow of money is needed
6. Discount  The discount given to retailers depends on a  Only given as and when
number of factors such as volume purchased, required. Not given in all
area of the outlet, amount of competition in cases
the area, etc
7. Salary and  The PSRs are paid Rs 13,000 to Rs 14,000  The incentives are very
Incentives per month as base salary. They are offered motivating and keep the PSR
handsome monthly incentives over their base going to achieve more than
salary his targets
8. MIS Reports  Based on the data recorded by SAMNA, daily  It gives a clear idea about
MIS reports are provided by analysts at the how many products, SKUs,
corporate office. lines sold and how many to be
 These reports include Primary Target vs sold
Achievement, Secondary Target vs  Also tells us how many
Achievement, SKU wise report, Brand vs outlets were covered by a
Pack penetration, etc particular brand and which
packs were sold there
3.6 Britannia
Distributor Turnover: Rs 60 lakhs per month

Distribution Flow Chart
Urban Areas
Retailer/
Plant CFA Distributor
Wholesaler

1. Order Booking  Britannia follows an order booking system  In a better position to handle
System where six salesmen cover six beats per week demand
covering about 30 outlets per day per  Reduces manipulation in
salesman billing by automating it
 It was introduced 12 years back  Adds to the efficiency of
more outlets
2. Udaan  All the orders are taken on Android  Helps in maintaining a track
smartphones using a software called Udaan , of orders of all retailers,
designed by IBM which was introduced three analyze their requirements
years back and set targets accordingly
 It contains a list of all the outlets on each beat  Improves the efficiency of
 Using this software, the salesman can book salesmen
the quantities required per SKU in each outlet  Ensures no hoax orders are
and the order is transferred to the computer at recorded by salesmen
the distributor point using USB cable where
the bills are generated
 The delivery is made the next day
3. Varying Margins The following are the margins provided to  8 – 8.5% margin given on
different channels Dairy products
 Distributor margin – 5.5%  10% margin given on biscuits
 Distributor to retailer – 8 – 10% and cakes
 Distributor to wholesaler – 8 - 10% +
2% + Other promotional discounts
4. Credit Policy A one week credit policy is in place Distributor’s money is not stuck
in the market

5. Discount  No cash discount is given to retailers Display units drive sales, so
 In case of display units provided, discount discount given only to stores with
worth Rs 1200 to Rs 1800 is given per month such units
6. Division of  It is divided into S1 and S2 consisting of Since it has around 200 SKUs,
Products dairy products and biscuits division of products makes
 They have 6 salesmen – 2 each for S1, S2 and selling more efficient and quicker
S1 & S2 combined
7. Division of  The PSRs are divided into two, i.e. General  This ensures that a good
Salesmen Trade and Key Accounts rapport is maintained with
 Key accounts salesman takes care of high high volume outlets and the
volume outlets, i.e. which purchase over Rs retailers purchases remain
15,000 per month and the General trade consistent or increase
salesman takes care of outlets that purchase
less than Rs 15,000 cases per month
 Each of them cover 25 and 30-35 outlets per
day respectively
8. Backup Salesman The salesman of say S1 compensates for the Having a backup salesman
absence of his colleague in the same division ensures that order booking for a
day for a particular division is not
lost
9. MIS Reports  Based on the data recorded by Udaan, daily  It gives a clear idea about
MIS reports are automatically generated how many products, SKUs,
 These reports include Performance based lines sold and how many to be
reports Value Target vs Value Achieved, sold
SKUs billed, Monthly comparison reports, etc  Also indicates the efficiency
of salesmen. Failure to
achieve a day’s target is added
to the next day’s target
10. Return on The distributors get an ROI of 25 - 26% per A healthy ROI will help in
Investment annum maintaining long term relations
with the distributor
11. Stock Norms At least 25% of the investment must consist of Minimum chances of stock out
safety stock and supply issues
12. Salary and  The salesmen are paid Rs 7000 per month as The incentives are very
Incentives base salary. They are offered handsome motivating and keep the salesmen
monthly incentives of upto Rs 2000 over their going to achieve more than his
base salary targets
 The incentives are based on the following
parameters
 Value Target
 Bill Cut
 Lines Sold
 Focus Brand
3.7 GlaxoSmithKline
Distributor Turnover: Rs 50 lakh per month
Return on Investment: 2 – 2.5% per month
Salesmen Targets: Vary between Rs 8 lakh to Rs 13 lakhs
1. Order Booking  GSK follows an order booking system where  In a better position to handle
System seven salesmen cover six beats per week demand
covering about 35 outlets per day per  Reduces manipulation in
salesman billing by automating it
 Orders are taken on Samsung Galaxy Tabs  Adds to the efficiency of
more outlets
2. Sify Forum  All the orders are taken using a software  Helps in maintaining a track
called Forum which was introduced two years of orders of all retailers,
back analyze their requirements
 It contains a list of all the outlets on each beat and set targets accordingly
 Using this software, the salesman can book  Improves the efficiency of
the quantities required per SKU in each outlet salesmen
and the order is transferred to the computer at  Live tracking of the salesmen
the distributor point using USB cable where can be done and ensure if he
the bills are generated is in the market or not
 The delivery is made the next day
 The tabs have a GPS system that can keep a
track of the salesmen
 Each tab costs Rs 15,000 to the company
 The distributors are expected to pay a
monthly maintenance charge of Rs 450
3. Credit Policy  A one week credit policy is in place Distributor’s money is not stuck
 In some cases, the C&FA extends a 15 day in the market
credit to distributors
4. Varying Margins  Distributor Margin – 4.2%  Margins set as per product
 Retailer Margin category and not common for
 Horlicks and Boost – 8% all
 Crocin, Sensodyne and Eno – 17-20%  Higher margins will ensure
that the retailers will stock the
products
5. Retailer Inputs  The company launches promotional schemes  Such schemes encourage the
for retailers every month that are extended by retailer to buy more products
the distributors from the distributor

Figure 5: GSK's monthly promotional schemes Figure 6: GSK's monthly promotional schemes
Figure 7: GSK's monthly promotional schemes Figure 8: GSK's monthly promotional schemes

6. Stock Norms 7 to 10 days stock maintained as safety stock Minimum chances of stock out
and supply issues
7. MIS Reports  Based on the data recorded by Forum, daily  It gives a clear idea about
MIS reports are automatically generated how many products, SKUs,
 These reports include Performance based lines sold and how many to be
reports Value Target vs Value Achieved, sold
SKUs billed, Monthly comparison reports, etc  Also indicates the efficiency
of salesmen
8. Salary and  The salesmen are paid Rs 9000 to Rs 10000 The incentives are very
Incentives per month as base salary. They are offered motivating and keep the salesmen
handsome monthly incentives of upto Rs going to achieve more than his
3000 over their base salary targets
 The incentives are based on the following
parameters
 Value Target
 Bill Cut
 Lines Sold
 Focus Brand
 If a salesman achieves 110% of his target
continuously for three months then he gets an
additional incentive between Rs 6000 to Rs
10000
Figure 9: Focus Brand pops up on his tab every time a salesman books orders. This constantly reminds him about
the offers on the product and he pushes them accordingly
3.8 Godrej
Division of Salesmen Distributor Margins
Direct DB -
Salesman 5%
Wholesale
DB - 4%
PRO (Key GRO ( General Godrej
accounts) Retail Outlets) Super
Bill>Rs 15000 Bill<Rs 15000 Stockist - 3%
Sub Stockist
- 4%
Distributor Eligibility
Godrej
Mega Metro Metro Rural Super Stockist

(Min Rs 40 (Min Rs 25
lakhs) (Min Rs 4 lakhs) (<Rs 4 lakhs)
lakhs)
Salesmen Targets
PRO (2): Rs 6 lakh each
GRO (5): Rs 10 lakh each
Retail Margins

Retailer Margins
16% 0.15 0.15
14%
12%
0.1 0.1 0.1 0.1
10%
0.08
0.08
8%
6%
4%
2%
0%
Godrej
Aer Ci nthol Hai r Col or Good Kni ght
Al l Out Hi t Fa ir Gl ow No 1
Technology in Use: DISHA

Samsung S Duos used for order booking
Orders can be synced to the system from the market itself using GPRS
Discounts
If purchases > Rs 1500 – 1% cash discount
Display units only for Pro outlets. Rs 750 off per unit
If target of Rs 15000 is achieved by Pro outlets then an additional 1% discount
One Week Credit Policy No credit given by C&FA
Automatic Stock Replenishment

When the closing stock with the distributor reaches a minimum level of 8 days of
stock norm, the computer sends a trigger to the C&FA directly to replenish stocks.
The C&FA releases stocks and is delivered the next day.
Points System for Wholesalers
 “Parivaar” is the points system in place for wholesalers
 The wholesalers get points based on the value of their purchases and can claim
these points once a year
 Godrej rewards them with stocks or discounts their bills worth the amount of
the points accumulated. No gifts such as TV, Fridge, Mobile Phones, etc are
given
 They receive double the points if they purchase unseasonal products
Salary and Incentive Structure for Salesmen
Table 4: Godrej’s Salesmen Salary and Incentive Structure
Basic Salary: Rs 7500

Fuel Allowance: Rs 1500
Incentives
Value Target: If 100% achieved – Rs 400
Number of Lines Sold: If 100% achieved – Rs 400
Focus Brands (3): If Rs 14,000 target achieved for each product – Rs 300 each
Additional Incentive: If a new product launched has visibility in 100% of the
outlets on the salesman’s beats – Rs 1500
3.9 Marico
Distributor Turnover: Rs 1.75 crores per month
Return on Investment: 1.8% Credit Policy
Salesmen Targets (13salesmen) 15 days credit
Vary from Rs 10 lakh to Rs 40 lakh No credit from C&FA
Technology in use: MIDAS (Introduced 5 years back)
Handheld PDAs used for order booking
Margins
Distributor Margin – 4.5%
Retailer Margin – a. Saffola – 5%
b. Parachute – 14 – 18% (Varies for different lines)
Retailer Inputs
 Super Mera: Four display units given per store if targets achieved. Rs 2000
discount given for the display units. If the store achieves its target then 1.5%
extra discount given
 Mera: One display unit is given to the retail outlet. Rs 350 discount
provided. If the store achieves its target then additional 1% discount is given
Points System for Wholesalers
 “Bandhan” is the points system in place for wholesalers
 The wholesalers get points based on the value of their purchases and can claim
these points once a year
Salary Structure Retailer Wise Targets
Basic Salary – Rs 7000 to Rs 8500 Targets based on number of lines,
Incentives – Rs 1700 (Fixed) number of SKUs, Value and Brand
3.10 Dabur
Salesmen Target (5 salesmen) Distributor Margin – 5%
Rs 5 lakhs each
Discounts and Retailer Margin
Dabur has various schemes for different products and the retailer margins also vary
across products
For instance, retailer margin on Display Units
Dabur Honey – 12% If purchases over Rs 2000 are made,
Dabur Chyawanprash – 14% display units are provided. Discount
Dabur Hajmola (250 Pouch) – 15% of Rs 900 given per display unit
Dabur Hajmola (250 Jar) – 20%
Retailer Margins
Toothpaste Chyawanpra s h Lal Tai l
Honey Hajmol a Candy (250 Ja r) Ha jmol a Ca ndy (250 Pouch)
Aml a
20%
15%
14%
13%
12%
10% 10%
Dabur
Stock Norms Credit Policy

Rs 7 – 8 lakhs No fixed credit policy
No credit given by C&FA
Salary and Incentives
Basic Salary – Rs 8000
Incentives – Upto Rs 8000
Incentive Parameters: 1. Value Target
2. Number of lines sold
3. Bills Cut
4. Focus Brand
Figure 11: Screen Capture of Dabur’s Drishti
Technology
Figure 10: Dabur Retailer Margins and Promotional

Schemes to Retailers
3.11 Nestle

Return on Investment: 2% minimum. Sometimes 3% as well
Margins
Distributor Margin – 5%
Varying Retailer Margin – a. Polo & Eclairs – 19%
b. Maggi – 9% Overall 9% on an avg
Credit Policy

 One week credit to retailers
 Sometimes the C&FA extends credit in the following cases:
 Transit Party – 1 day time given
 Channel Financing, where one needs to take bank’s assistance – 2 days
time given
Technology in use: SDS – SAARC Distribution Solution (Introduced over 5
years back)
Salesmen Targets (5 salesmen)
Rs 5 – 6 lakhs each
How are targets set?
Generally, last three months average performance of the salesmen is taken and
10% is added to it
NOTE: In Nestle, targets are set only on Food & Beverages. The value does
not include any sales out of Nutrition
Discounts
 If an outlet purchases over Rs 20,000 then display units are provided. The
discount on display units varies from Rs 500 to Rs 1000 depending on the
product category and size of the unit
 If an impact outlet purchases stock > Rs 5000 of a particular category of
products, say chocolates, then an additonal 8% discount is given
 There is a points system in place for wholesalers. They can claim their points
either quarterly or annually
MIS Reports
An Effective Coverage Analysis Report is generated everyday that covers all
aspects such as:

 Value Target vs Achievement
 Total calls vs Productive Calls
 No of lines sold and how many are left to be sold
 No of outlets billed, etc
Salary Structure
Fuel Allowance – Rs 1500
Incentives – Upto Rs 2000
 Value Target
 Quarterly Contests where the salesmen can earn upto Rs 6000 (In
addition to other incentives) Other incentives such as t-shirts are also
given if targets achieved
 Focus Brand
All incentives are given only on Food & Beverage target achievement and not
on Nutrition products
3.12 Cadbury
Distributor Turnover: Rs 1.4 crores Margins
Return on Investment: 2% Distributor margin – 5%
Retailer Margin

Retailer Margins
0.12
0.1
0.09
12%
10%
8%
6%
4%
2%
0%
Cadbury
Bournvi ta Upto Rs 20 Col umn1
Division of Salesmen Technology in use: Winomkar
Salesman
P7 (Key Others ( Other

accounts) Outlets)
20 outlets/day 35 outlets/day
Salesmen Targets (8 salesmen) MIS Reports

P7 (2) – Rs 20 lakhs each Value Target vs Achievement
Others (6) – Rs 10 lakhs each Number of outlets billed
How are targets set? Number of outlets covered
Generally, last three months avg Number of SKUs sold
performance of the salesman is Credit Policy
taken and Rs 50,000 is added to it No fixed credit policy
No credit given by C&FA
Discounts
 Display units are provided to Perfect Outlets, i.e those that purchase over Rs
10,000 per month

 Discount of 4% is given to such outlets. If targets are achieved then 5%
discount is given to them
 1% cash discount is given to retailers
 2% cash discount is given to wholesalers
 There is a points system for wholesalers. They can claim their points annually
 1% discount is given to distributors if targets are achieved
 They also have scratch card coupons for retailers
Figure 12: Cadbury’s “Jar lo Car lo” Scratch Card Offer

Table 5: Cadbury’s Salesmen Salary and Incentive Structure
Basic Salary: Rs 9500

Incentives (Up to Rs 4000)
 Value Target: If 100% achieved – Rs 1000 to Rs 1500
 Must Sell SKUs (MSS) – If 60-65% outlets covered – Rs 1000
 Big Hit 1 – Value + Coverage – Rs 750
 Big Hit 2 – Value + Coverage – Rs 750
3.13 Reckitt Benckiser

Distributor Turnover: Rs 1.5 crore per month
Return on Investment: 2% assured
Technology in use: Manual order booking in place. No smartphones or PDAs

No division of products – 280 SKUs Stock Norms
10 days or 40% of turnover
Salesmen Target (9 salesmen)
Rs 12 lakhs to Rs 20 lakhs depending on their route
Salary and Incentive Structure Credit Policy
Basic Salary – Rs 8000 to Rs 9000 No fixed credit policy
Incentives – Rs 2000 to Rs 3000
 Value Target
 Focus Brand
Stock Damage
When billing is done every day, the stock damage for those outlets is automatically
generated by the system and the damaged stocks are brought back by the delivery
boy
3.14 Heinz
Return on Investment: 2-3%
Credit Policy Distributor Margin – 6%
Upto Rs 1000 – No credit
If purchases over Rs 1000 – 50% credit given Retailer Margins

Retailer Margins
Compl a n Gl ucon - D Column1
0.12 0.12
0.09
Heinz
Discounts
2% discount if display unit provided
Additional 1% discount if outlet wise targets are achieved
Salary and Incentive Structure
Table 6: Heinz’s Salesmen Salary and Incentive Structure
Basic Salary – Rs 7000 – Rs 9000

 Value Target – If 90% target achieved – Rs 800
If 100% target achieved – Rs 1200
If 110% target achieved – Rs 1400
 Bills Cut – Rs 2/bill cut & (-)Rs 4/bill cancelled
 Average lines sold – Average of 7 lines/outlet – Rs 200 – Rs 500
 Focus Brand – Value Target + 350 outlets covered – Rs 500
3.15 3M
Salesmen Target (3 salesmen) Technology in use: Oracle
Rs 2 lakhs per head
2 salesmen are hired by the company itself. 1 salesman is hired by the distributor

The salesman hired by the company works for 3 days with one distributor and the
other 3 days of the week with another distributor
MIS Reports Credit Policy
Route wise Report 15 days credit policy
Salesman wise Report Salary and Incentive Structure
Closing Stock Report Basic Salary – Rs 10,000
Product wise Report Incentives – Up to Rs 2000
 Value Target
 Focus Brand
 Attendance Bonus – If 100% attendance – Rs 400
Display Discount
2% discount on total purchases if display shown
Figure 13: 3M Display for Mops for General and Modern Trade Outlets
3.16 Mars
Return on Investment: 2% Stock Norms
Margins 10 days
Distributor Margin – 6.4% (markdown) & 7% (markup)
Retailer Margin – 15%
Technology in use: Manual order booking in place
Salesmen Target (3 salesmen)
Rs 2 lakhs – Rs 4 lakhs
Monthly target of Rs 2 lakhs is broken down into daily targets of Rs 8000 per day
Discounts
 Scratch cards given to retailers with purchases over Rs 1000. The gifts could
include a motorcycle, fridge or even 12 pieces of chocolates
 No discount on display units given. It is only given to increase visibility
Distributor Incentives
If a distributor achieves his targets for 2 months consecutively then he gets 1% off
on his turnover. Other gifts such as mobile phones and tablets are also given
Table 7: Mars’ Salesmen Salary and Incentive Structure

 Value Target – Rs 750; If 90% achieved – 90% of Rs 750
 Bills Cut – Average 10 bills/day – Rs 750
 Focus Brand – Value + Coverage of 100 outlets – Rs 750
3.17 Wrigley
Margins Credit Policy
Distributor Margin – 5.5% One week credit policy in place
Retailer Margin – 14%
Wholesaler Margin – 14% + 2%
Technology in use: WERA
Discounts
Discounts on display units provided to retailers
3.18 Nivea
Distributor Turnover: Rs 15 lakhs
Return on Investment: 2%
Rs 7.5 lakhs each
Credit Policy
No fixed credit policy in place
10 days credit extended by C&FA
Incentives: Upto Rs 6000
3.19 Johnson & Johnson

Return on Investment: 2% Distributor Margin – 5%
Salesmen Target (6 salesmen) Retailer Margin – 12%
Rs 10 lakhs to Rs 15 lakhs each

Direct Distribution to Modern Trade from C&FA
C&FA
Modern
Distributor
Trade
Retailers Wholesalers
Technology in use: WAVE Retailer Inputs

Scratch Cards given to retailers
Incentives – Up to Rs 4000
 Value Target
 Bills Cut
 Lines Sold
 Focus Brand
3.20 L’Oreal
Return on Investment: 2 – 3%
Distributor Margin: 5% Stock Norms
Retailer Margin: 13 – 15% Rs 3 lakhs to Rs 4 lakhs
Credit Policy

No fixed credit policy in place
C&FA offers one week credit
Rs 8 lakhs each
Technology in use: Manual order booking in place
Basic Salary – Rs 7000 Same salary structure for salesmen and delivery
Incentives – Upto Rs 1500 boys
Backup Salesman
The delivery boy performs the duty of the salesman in his absence

4. GRAPHS
Distributor Turnover Per Month
Turnover (In Lakh Rs ) Col umn1
600
500
175
150
140
80
65
65
62
60
50
25
25
20
16
13
10
10
L ) y ia e j r s al r z
U M es ic
o
ur tl SK re u so
n
ar se M n
PV n
es G ab re i 3 ei
H
re
tt ar b n o
d n M 'O ck
M ad ta N G D h L
H
ga C ri Jo n
ci B & Be
/o n i tt
(w so ck
n
TC h Re
I Jo
Average Throughput Per Salesman

Col umn1
13
13
10
9
5
3
2
j al s r
ic
o
re ar SK n M ry tl
e u
re G so 3 u
es ab
ar o
d
'O M n b
M G L h ad N D
Jo C
&
n
so
n
h
Jo
Average Throughput = Distributor Turnover/ No of Salesmen

Basic Salary + Incenti ves of Salesmen
Sal es ma n Avg Ba s i c Sa l ary (In 000 Rs ) Col umn1
3.5 4
2
3 3 3 2.25 5
3.5 1.8 2 6
1.5
1.7 4
2
0
13
9.5 9.5 10 9.5

8.5 9 9 9 9 9
8.38 8
7.5 7 7 7
6.5
L C M co re
j si ia ry tl
e
SK n n
z M er al ea ar
s
u
r
U IT PV i p n u so ei 3 s re iv
H ar o
d Pe an b es G n H ki O N M ab
M G
ri
t ad N h c L' D
B C Jo en
& B
n tt
so c ki
n
h Re
Jo

5. RECOMMENDATIONS FOR PERFETTI VAN MELLE
 OBJECTIVE 1: Increase Perfetti’s retail presence
Perfetti can increase its retail presence in two ways:

a) By increasing the drop size of existing outlets
b) By expanding its reach to more outlets
 Recommendation 1: Introduce a Loyalty Program for Retailers

In order to increase the drop size per outlet, Perfetti must incentivize the
retailers to store more of its products than that of its competitors. To do so, a
loyalty program for the retailers and the wholesalers can be introduced.
In this system, all the outlets will be categorized into A class, B class and C
class outlets depending on their drop size. Accordingly, they will be allotted
points based on the purchases they make. These points are equivalent to rupees.
For example,
A Class – Purchases worth Rs 3000 plus
B Class – Purchases between Rs 1500 and Rs 3000
C Class – Purchases worth less than Rs 1500
For every Rs 100 worth purchases made by each of these above mentioned
outlets, points will be allotted to them in the following manner:

A Class – For every Rs 100 purchase – 2 point = Rs 2 off
B Class – For every Rs 100 purchase – 1.5 points = Rs 1.50 off
C Class – For every Rs 100 purchase – 1 point = Rs 1 off
These points can be redeemed monthly, quarterly, half yearly or annually

Therefore, Perfetti can also offer stocks worth the total amount discounted or
offer other gifts as well such as mobile phones, tablets, 1 gram gold, 10 grams
silver, TV, etc
Moreover, for slow moving products or unseasonal products, the points offered can
be 1.5 to 2 times the existing points. This will offer further discounts to retailers
and they will stock various lines of our products. In this manner, Perfetti can
spread its presence in existing outlets and cannibalize into the market share of
other competitors.
 Recommendation 2: Introduce a Scratch Card System
In order to increase the drop size, Perfetti can also launch a Scratch Card
System in which the retailer needs to buy a particular product worth a certain
amount to get a scratch card coupon with an assured gift.
For example, a retailer would have to purchase two boxes of Choco Moonz to
get the scratch card. The scratch card can have gifts like Rs 5 off, or Rs 10 off,
or Get a box of Choco Moonz free or get a jar or Alpenliebe Spicy free.
This will encourage him to purchase more stocks in order to get something in
return. In this way, the drop size will increase and also the number of lines per
outlet
 Recommendation 3: Introduce an SMS based ordering system

A pre-specified format SMS based ordering system can be introduced to reach
out to retail outlets that are not being covered by distributors currently. Four
kinds of outlets can be covered under this system:
 The retail outlets are closed when the salesman goes to book orders
 The concerned person who places the order is not available when the
salesman reaches for order booking
 The retail and wholesale outlets that have a steady demand for Perfetti’s
products
 The outlets where the distributor is unable to reach and the wholesaler is
too far from the retail outlet’s location
In this system, the retailers and the wholesalers just need to send an SMS with the
following details to their distributor who will fulfil their orders. In this manner, the
distributor would be able to salvage some value at the end of the day and not lose
out on prospective sales. Also, the retailers such as paan shops and other stores that
have a heavy demand of Perfetti’s products do not run out of stock either
Table 11: Specimen of the SMS Template
Specimen of the SMS Template

Name of the Outlet
Location
Requirement (In no of jars)
 Center Fresh Spearmint – Rs 156 (176 pieces) – X
 Center Fresh Spearmint – Rs 253 (285 pieces) - X
 Center Fresh Ocean – Rs 133 (150 pieces) – X
 Alpenliebe Spicy – Rs 100 (115 pieces) – X
 Center Fruit – Rs 133 (150 pieces) - X
 Mentos – Rs 133 (150 pieces) - X
 Juzt Jelly – Rs 133 (150 pieces) - X
 Alpenliebe – Rs 133 (150 pieces) - X
 Happydent – Rs 133 (150 pieces) - X
 Chocoliebe – Rs142 (160 pieces) - X
 Choco Moonz – Rs 157.5 (60 pieces) - X
If the system is successful, the salesmen would not have to go to all outlets
weekly to book orders. Instead, they could cover new outlets or spend more
time in pushing more products in the existing outlets.

The only drawback of this system would be that the salesman would not be able
to push the products in the outlets personally
 Recommendation 4: Introduce attractive display units for mono pieces

Most of the major FMCG companies that deal with food and confectionary
products provide display units to the retailers. This helps them in displaying all
their products out of one single stand and increases the visibility of all their
products and also their visibility in the store as these display units are generally
kept on a table top or as stands in the shop.
Perfetti already has display units for High Value Packs but they have not been
able to achieve the desired results.
Figure 14: Perfetti’s existing display units

Recommended Display Unit
Average target per day per salesman in Bangalore: Rs 8750
Average number of stores visited by a salesman per day: 40
Average number of productive calls made by a salesman per day: 20 – 25
Therefore, average drop size = Rs 8750/20 = Rs 440 (approx.)
Which is equivalent to 3 to 4 jars per store on an average
4 jars of P1, 4 jars of P2 and 4 jars of P3

Figure 15: Proposed Display Unit for A Class and B Class Outlets
Material to be Used
Polyethylene Terephthalate – PET Plastic – 4 – 5mm thick
Food grade plastic
Acrylic Tops
Total Estimated Cost per Unit – Rs 300 to Rs 400 (For a bulk quantity of 1000 units)

The dimensions of the above designed display unit are as much as that of a 15”
laptop except for the height which is 4” more than that of the laptop screen.
This will ensure that at least 12 different lines of Perfetti’s products are
available in each A class and B class outlets that display this unit. This will
ensure greater visibility and increase the drop size per store.
If this display unit is introduced along with the Loyalty Program recommended
in Recommendation 1, it would be a phenomenal incentive for the retailers as
they would be able to sell more and earn more points which in turn offers them
exciting gifts and discounts. If the retailers are able to increase their drop size,
then it would be an amazing achievement for the company as well as they
would eat into their competitors’ share of confectionary thereby increasing their
market share.
Therefore, this proposition would be a win-win proposition for the retailers and
the company
 OBJECTIVE 2: Determine how different FMCG companies have

evolved in terms of their operations
Over the last few years, most of the FMCG companies have invested heavily on
IT. In 2005, P&G and HUL were the first ones to start order booking using
handheld devices. Since then 11 out of the 18 companies that I have
benchmarked have adopted the same system
Company Name Technology in use

HUL Quantum
ITC Forum
Cadbury Winomkar

Nestle SDS
Godrej DISHA
Dabur Drishti
Britannia Udaan
Marico MIDAS
GSK Forum
Pepsi SAMNA
Wrigley WERA
Johnson & Johnson WAVE
Recommendation: Introduce smartphone based order booking system

Perfetti must move away from the manual order booking system to smartphone
or tablet based order booking system. The cost of each tablet would be Rs
15000 including the software. The distributor will have to bear Rs 450 as
monthly maintenance charges. This is a one-time investment and the benefits of
adopting this are plenty. Some of them have been listed below:
1. Salesman’s Productivity:
 Booking orders will become easier and quicker.
 With the help of GPS, the salesman can be tracked and can be monitored
at all times in the market
 As orders are being booked, with time a database of all the orders
recorded by that salesman is created. With the help of this database, he
can pull up various MIS reports which give him details such as Target
Achieved vs Remaining, Number of bills cut, Number of lines sold, etc.
This will enable him to understand his position vis-à-vis his targets and
he can plan to achieve them accordingly
2. Outlet wise Targets:
 With the database of history of orders placed by different stores in place,

Perfetti can set up outlet wise targets based on their history of purchases.
The different lines, SKUs and a minimum value target to be achieved by the
store can be set. Upon achievement of targets, 1% discount on purchases
could be given
3. No billing problems:
 With this being introduced, all the promotional schemes, discount per
different outlet, VAT, focus brand, etc will be stored in the phone. So when a
salesman books orders, the bill generated will get automatically adjusted
with the schemes and discounts on offer and the final amount is generated.
This bill is then printed in the evening and delivery will be made the next
day

Figure 16: Prototype of the smartphone screen used for order
booking
The prototype drawn above is a sample design of what a salesman’s smartphone
screen would look like when he goes for order booking. There would be store wise
targets set and the store’s target achievement can be tracked in columns 3 and 4.
The background of “Center Fruit Mingle” means that is the Focus Product for that
month. This would constantly be in the salesman’s eye and he would communicate
the offer on the product to the retailer. There are chances of the salesman forgetting
about the focus product and not mentioning it at all, but this negates all such
probability.
The red light on the top right corner of the screen will turn into green as soon as
the targets for that store are achieved.
The “Next Outlet” tab at the bottom of the screen will give directions to the
salesman to the next nearest outlet along with geo-tagging.
The MIS reports can be pulled up by clicking on the “View Report” tab. All daily
sales reports can be generated using this tab.
For example,

Retail Reports
Report Type
Daily Report
Sales Date
View Reports Retail Reports
Report Type
Thu, 29 May 2014
StarZ Reports Daily Report
From Date
Create Report
Thu, 22 May 2014
Wholesale Reports
To Date
Thu, 29 May 2014
Retail Reports Email Report
Create Report Email Report
Figure 17: Appearance of the View Report tab Figure 18: Appearance of the desired report generated tab
on a particular day
Retail Reports
Report Type
Daily Report
Sales Date
Thu, 29 May 2014

Figure 8: Appearance of the desired
Create Report Email Report
report generated tab for a
particular period
Figure 19: Appearance of the desired report generated tab for a

particular period
Email Report

OBJECTIVE 3: Identify if any new systems and processes been
mastered in the operations of other FMCG companies
The heavy investment in IT systems has been the most advanced development in
the FMCG sector. Not only mobile phone and tablet based order booking has been
introduced, all the distributor and super stockist depots have been computerized
and synced with the company’s systems. These are used to generate daily MIS
reports based on the inputs given by the smartphone or tablet being used by the
salesman. Automated MIS reports are generated that include reports such as
 Individual Salesman Productivity Report

 Number of Outlets Covered
 Number of Bills Cut
 Number of Lines Sold
 Number of SKUs sold
 Beat/Route wise Productivity Report
 Closing Stock wise Report
 Product wise Report
 Primary Target vs Achievement
 Secondary Target vs Achievement
 Brand vs Pack Penetration
 Number of Outlets with Visibility Units
 Targets achieved by such Outlets
 Recommendation 1: Use Forum to generate the aforementioned reports
In order for Forum to generate helpful MIS reports, a reliable database needs to be
created. This can be done when smartphone or tablet based order booking is in
place and all the distributor and super stockist points have Forum installed. The
orders taken on the phone or tablet can be synced and with time a healthy database

can be created. This database can be used to analyze all facets of sales and
distribution. The database can also be exported to Microsoft Excel and further
analysis could be done on that
 Recommendation 2: Vary Retailer Margins

Perfetti offers the same retailer margins across all lines across all markets under the
same brand. However, this may not be the best strategy. For example, Juzt Jelly
Strawberry has a huge sales volume in Kerala and offers 12.50% retailer margin.
At the same time, Juzt Jelly Lychee does not generate heavy sales volume in the
Kerala market but it is still being offered at 12.50% retailer margin. In order to
ensure greater sales across various lines under the same brand, higher margins or at
least above average margins (Average Retailer Margin = 12.88%) could be
offered to retailers on the products that are not doing very well in that particular
market. Similarly, Juzt Jelly Lychee might be doing much better than Juzt Jelly
Strawberry in another market in India. In this case, higher margins could be offered
on Juzt Jelly Strawberry. Retailer margins need to be market specific and product
specific. A varying retailer margin across all the products and across all the markets
could be more effective than a uniform retailer margin.

PVM Retailer Margins
14.50%
14.00% 13.86%13.86%
13.50%
13.01%13.01%
13.00% 12.82%12.78% 12.78%
12.50%12.50%
12.50% 12.15%12.15%
12.00%
11.50%
11.00%
) ) ) ) ) ) ) ) ) ) )
176 150 135 135 120 120 150 165 165 115 115
( ( ( ( ( ( ( ( ( ( (
int a n rry h ee n go ple a irs int n go rry int
ar
m Pa e c a p l M a e m
e sh rawb y Ly t M n
A
o
Ec tos s M ra wb pe
r
p r e t l l i e c n t p
s h
S
rF l yS t Je Fr
u
Gr
e
C ho M
e
e nto ve
S
e
Pe
re te e l z r i t 2 a v
rF C en ztJ Ju ente Fru M
t W W
a
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C p pp
Ha Ha
Table 12: Absolute Return Offered to Retailers per Jar
 Recommendation 3: Introduce Automatic Stock Replenishment

There are instances when a distributor runs out of stock of a product because he
did not re-order to the C&FA at the right time. By the time, the C&FA delivered
the products to the distributor, the distributor had lost at least a day or two of
sales of that product due to lack of supply to the retailers.
In order to avoid such scenarios, an automatic stock replenishment system can
be put into place by integrating the systems of the distributors and super
stockists with the systems of the C&FA using Forum. By doing so, the
computer at the distributor point will automatically send a trigger to the C&FA
as soon as a product’s closing stock reaches its minimum safety stock level. The
C&FA would then release the products immediately which would reach the
distributors in a day or two. This would reduce the manual task of re-ordering to
the C&FA every time and would also ensure that the distributor does not run out
of stock during the week and lose out on sales.

Order Booked
Stock
delivered to
Delivery Made
the distributor
the next day
Computer
sends a trigger Closing Stock
to C&FA Checked
automatically
If it reaches
the minimum
safety stock
level
OBJECTIVE 4: Suggest new plans on incentivizing various channels
Recommendation: Incentivizing the Distributors
 Introduce incentives for distributors such as, if the distributors achieves his
target for a quarter then he would get 1% of his monthly turnover as
discount
 Other gifts like Holiday Packages, TV, Fridge, Mobile Phones, Gold,
Motorcycle, etc can be given once a year if the distributor over achieves his
targets for 11 months in a year
Incentivizing the Wholesalers and Retailers

 As mentioned in Recommendation 1 of Objective 1, introduce a loyalty
program with a points system for wholesalers and retailers in which they can
win exciting gifts or get good discounts if they purchase more of Perfetti’s
products.
 Scratch card systems also must be introduced to induce higher purchases.
 Incentivizing the Salesmen
Table 13: Existing Salary and Incentive Structure
Fuel Allowance: Rs 70 per day
Incentives
If Value Target of Rs 1.5 lakhs achieved – Rs 1000
If Value Target of Rs 2 lakhs achieved – Rs 1000 + Rs 1500
Focus Product – 15 cases – Rs 500
20 cases – Rs 750
25 cases – Rs 1000
Recommended Salary and Incentive Structure

Table 14: Recommended Salary and Incentive Structure
Grade of Salesman Salary Fuel Allowance Incentives (Upto Rs 4000)

Offered
Grade C (6+ years Rs 9500 Rs 70 per day  Value Target
exp)  If 100% achieved - Rs 750
 First 10, 20 and 30 days target
Grade B Rs 8,200 Rs 70 per day  If 30% target is achieved in first 10 days – Rs 250
(Performance  If 60% target is achieved in first 20 days – Rs 500
Based)  If 60% target is achieved in first 20 days and 110%
achieved overall – Rs 750
Grade A ( New Rs 7,000 Rs 70 per day  Focus Brand
Joinee)  If 100% value target + coverage – Rs 500
 Perfect Day
 If the targeted number of lines sold per day is
achieved for 70% days of the month – Rs 500
 Number of Bills Cut
 Rs 2/ bill cut
 New Product Launch (Additional Incentive)
 If 100% visibility in outlets – Rs 500
Buddy Salesman: In addition to the above, in case a salesman is absent, a backup

salesman called “Buddy Salesman” who is working in a nearby area can perform
his duty for the day
He will be given Rs 10 per outlet covered
NOTE: In addition to this, the distributors can provide a Full Attendance Bonus of
Rs 400 if the salesman achieves 100% attendance for that month
6. OTHER SUGGESTIONS FOR PERFETTI VAN MELLE

 Introduce a 15 day credit policy so that the distributors’ money is not stuck with
the retailers. There are instances of bills outstanding for four five months also
 Like ITC, promote big jars of flagship products like Center Fresh and Center
Fruit. This has better margins for the company and will also ensure that the
retail outlet does not run out of stock
 Set retail outlet wise targets and offer them 1% additional discount if targets are
achieved
 Introduce refill packs for all gums, toffees and chewies being sold in jars at a
cost marginally lower than that of jars or a higher retailer margin can be
provided on them.
 In case of slack sales of a particular product, introduce schemes like “If two jars
of Center Fresh are purchased then one box of Choco Moonz also must be
purchased”
 Introduce whacky jingles in all Center Fruit packs that will make a person’s
“jeebh lap lap” and add to sales. This is on the lines of what Nestle Alpino has
done with romantic messages in its packs
 Introduce Promotion Scheme Charts for salesmen. It is generally difficult for
salesmen to remember the retailer discounts or offers on each and every SKU.
In order to ensure that the offers are effectively conveyed to the retailers, the
following scheme chart could be shown to them at the time of order booking

Table 15: Promotion Scheme Chart for Salesmen
7. ANNEXURES

7.1 Questionnaire to Retailers
1. How often do you get stock from different companies?
2. Do they offer credit?
3. What are the margins offered?
4. What kind of schemes are offered?
5. What are the discounts offered if paid in cash?
6. Do different companies provide display units?
7. What are the discounts offered?
8. Would you mind if Perfetti offers refill pouches instead of jars at a slightly
lower cost?
9. Which company’s products are fastest moving?
A) ITC B) Perfetti C) Wrigley
10. Does ITC push its toffees and candies along with cigarettes?
11. If more schemes are given, are you willing to buy more products of Perfetti?
7.2 Questionnaire to Distributors

1. Do you have an order booking system?
2. What is the technology in use? Explain
3. How many salesmen do you have?
4. How many beats in a week does a salesman cover?
5. Do you have different salesmen for key accounts?
6. What are their targets?
7. Is there any division of products?
8. What is your turnover?
9. What is your ROI?
10.What is the distributor margin?
11.What is the retailer margin?
12.What is the credit policy you extend to retailers?
13. Does the company offer credit to you?
14.What are the various promotional schemes offered to retailers?
15. Do you offer cash discounts?
16. What is your salesman’s salary and incentive structure? Explain
17. What are the various MIS reports generated and their contents?
18. What are the stock norms that your company follows?
19. Which stores are eligible to have a display unit?
20. What are the discounts offered on display units?
21. Is there a concept of a backup salesman?

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Akarsh 13 PGDM073

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Benchmarking Retail Operations

Perfetti van Melle

A Report Submitted in Partial fulfillment of the requirements of PGDM program

International Management Institute

25th June, 2014

My project’s main objectives included:

SUMMER INTERNSHIP REPORT2

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I express my sincere gratitude to Perfetti Van Melle for providing me a great

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Questionnaire to Retailers …………………………………………………………………………... -87-

Questionnaire to Distributors ……………………………………………………………………… - 87-

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1.2 Perfetti’s Distribution Model

1.2.1 Division of Products

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1.2.2 Distribution Flowchart

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1. Threat of Substitutes – Low

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Branch Manager - Branch Manager - Branch Manager - Branch Manager -

a. Mechanistic Structure: The company has various levels of hierarchy and

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No of Channel Partners Visited

Hyderabad; Total Working Days: 37

Bangalore Hyderabad Mangalore

SUMMER INTERNSHIP REPORT24

2.4 Benefits of the Project

2.5 Problem Formulation

2.6 Key Deliverables

 Suggest an efficient compensation structure for Distributor Salesmen

SUMMER INTERNSHIP REPORT26

2.9 Research Problem

Variables Studied Under the Exploratory Study

 460 Retailers in Bangalore, Hyderabad and Mangalore

2.10 Research Design

 Conducted personal interviews with retailers to understand the service and

SUMMER INTERNSHIP REPORT28

3.2 Distributors Visited in Hyderabad

3.3 Hindustan Unilver Limited

Processes in Place Brief Description Advantages

SUMMER INTERNSHIP REPORT30

Processes in Place Brief Description Advantages

Table 3: HUL's Salesmen Salary and Incentive Structure

Grade of Salesman Salary Offered Incentives (Upto Rs 3750)

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Processes in Place Brief Description Advantages

Figure 2: HUL Scratch Card Coupon

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Table 4: ITC Division of Products

GR1 GR2 GR3 GR4

Distributor Turnover: Rs 80 lakhs per month (without cigarettes)

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Salary and Incentive Structure of Salesmen