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  • 1. Case SurfersUnilever: delivering ice to every house Fedor Chuvilkin Maksim Sofronov Victoria Susakova Yuriy Kotikov
  • 2. Current distribution network of Unilever requires optimization to achieve the aim of doubling the sales of ice-cream in Russia by 2015 *See appendices for additional analysis 100,0 According to our criteria the distributors are not efficient enough Premium 25,0 Global strategy: focus on Objective in Russia: BRIC doubling sales by 2015 68,0 CCFOT 20,0 59,4 10,8 56,1Type of company 10,0 11,8 15,0 16,0 Other contracts 10,0 9,0 8,3 10,4 7,0 7,5 Optimization of Warehouse 20,0 9,0 7,5 15,4 distribution 6,0 5,7 11,1 •Own network Analysis AS-IS Transport 15,0 14,0 •Multiple distributors 9,0 10,0 •Logistic services Perfect NWFD CFD SFD&NCFD Our analysis shows that Inmarko needs to ramp up its production The aim is to increase sales from € 280 mln to € 564 mln; to do that we volume from 69 th tons in 2011 to 106 th tons in 2015 need to capture at least 19% of the market value by 2015 110 Current value share (projected) 100 Required value share to double the sales 24 24 90 22 22 21 21 21 20 80 19 18 19 70 17 60 50 40 2007 2009 2011 2013 2015 Inmarko volume projected (th tons) Required volume (th tons) 2010 2011 2012 2013 2014 2015
  • 3. To optimize the distribution network we have assessed each distributor according to the following criteriaPremium %of type of other # Name Coverage CCFOT Stock Fleet Total sales company contracts• % of sales charged by a 25 20 10 10 20 15 100 distributor 1 Arktika SPB, Novgorod, Pskov 8% 14% 5% 10% 11% 15% 63%CCFOT SPB, Novgorod, Cherepovets, 2 LED company 12% 12% 10% 5% 6% 15% 60% Vologda• % of goods delivered in 3 Sever-Kholod Komi 24% 5% 10% 5% 2% 5% 51% time 4 Alfa Arkhangelsk 18% 10% 10% 5% 5% 5% 53%Type of company 5 Beta Severodvinsk 18% 11% 10% 5% 5% 5% 54%• Does a company produce ice-cream or only Central 1 Moscow, Ivanovo, Vladimir 0% 17% 10% 5% 20% 10% 62% distribute the goods? Logistics Moscow, Yaroslavl, Tver, 2 Ice Company 18% 5% 10% 5% 17% 15% 70%Other contracts (Kostroma) 3 Snezhok Smolensk, Bryansk, Kaluga 18% 10% 5% 10% 13% 15% 71%• Does it work for our rivals? 4 Logistic + Ryazan, Tambov 18% 12% 10% 5% 8% 15% 68% Orel, Kursk, Belgorod, 5 CentralD 0% 15% 10% 10% 20% 15% 70% Voronezh, LipetskWarehouse• Does it have enough stock Santa Krasnodar, Stavropol, 1 20% 5% 5% 5% 12% 5% 52% to meet our needs? Company Tcherkessk 2 FDG Nalchik, Vladikavkaz, Nazran 8% 9% 10% 5% 16% 5% 53%Transport Kalmykia, Rostov, Astrakhan, 3 Antares 8% 19% 10% 10% 12% 15% 74% Elista• Does it have its own fleet? 4 Zero Volgograd 24% 0% 5% 10% 5% 15% 59% See appendix for the assessment of potential distributors
  • 4. Our team has optimized the distributors to maximize the efficiency of the network in each regionNWFD rank 56% : NWFD rank 63% : • more orders through Arktika (esp. to St.Petersburg ) • replacing Sever-Kholod by dist 4 due to better coverageArktika 63% (Ukhta) Arktika 67,0%LED company 60% • termination of contracts with Beta in favor of Alfa to cover both Arkhangelsk and Severodvinsk LED • developing cooperation with Alfa by signing exclusive company 60,3%Sever-Kholod 51% agreements and granting a premium for higher CCFOT •signing contracts with dist 5 to expand in Karelia Distr4 66,0%Alfa 53% Alfa 59,5%Beta 54% distr5 50,5%CFD rank 68% : CFD rank 67% : • existing distributors in CFD in general meet our CentralCentral Logistics 62% requirements regarding quality • they provide full coverage of the region and have Logistics 62,0%Ice Company 70% opportunities for increasing their storage capacities to meet the future demand Snezhok 71,0%Snezhok 71% • to eliminate inefficient delivery in the Kostroma region Logistic + 67,5% we will cooperate with dist 8 and dist 9 instead of working distr8 67,5%Logistic + 68% with Ice Company, which in the short term will decrease the total ranking of the region distr9 63,5%CentralD 70% CentralD 70,0%SFD&NCFD rank 59%: SFD&NCFD rank 63%: • we will pay SantaCo. Extra premium for higher CCFOT andSanta Company 52% will encourage it to expand to Santa Anapa, Novorossiysk, Gelendzhik due to brisk demand inFDG 53% summer Company 56,5% • termination of cooperation with Zero due to lack ofAntares 74% incentives to promote our products in Volgograd FDG 54,3% • we encourage Antares to expand to Volgograd by furtherZero 59% developing our relations Antares 77,0%
  • 5. Analysis shows that multiple distribution strategy does not allow us to leverage our strengths and therefore needs to be complemented by a series of M&As Why do we need our own network? Benefits 1 1. To have better impact on market conditions and pricing 2. To hold dominant position on the market in the long run 3. To reduce costs in the long run 4. To eliminate dependency on distributors 5. To increase profitability due to elimination of premiums on sales M&As How to go about building our own network? Organic Growth On the graph, we have shown the cost/benefits analysis of the 2 possible ways of growing: M&As and Organic Growth. Besides, the SWOT analysis correlates with this conclusion. 0 Corollary: M&As 0 1 CostsNWFD : Arktika 67% Arktika 91% Distr4 69% Distr4 76% Alfa 70% •We consider these Alfa 75%CFD : M companies to be easy targets since either they have established business Snezhok 71% Snezhok 89% CentralD 70% & relations with us or we are their unique suppliers •Acquisition of these CentralD 91% SFD&NCFD: A companies will bring about fewer costs of distribution. Antares 77% See appendix 1 for the SWOT analysis Antares 86%
  • 6. As a result the distribution network combining multiple distributors and acquired companies will be capable of meeting the future demand and helping to double the sales by 2015 Final composition of network: %of type of other As a result of all the alterations the distribution# Name Coverage CCFOT compan contrac Stock Fleet Total sales y ts network of Inmarko in each region will account 25 20 10 10 20 15 100 for the following % according to our rating: 1 Arktika* SPB, Novgorod, Pskov 25% 16% 10% 10% 15% 15% 91% NWFD 76% Arkhangelsk+Severodvin CFD 73% 2 Alfa* 25% 16% 5% 10% 5% 15% 76% sk SFD&NCFD 73%: 3 distr4* Ukhta, Syktyvkar 25% 16% 5% 10% 7% 12% 75% While currently it is as follows: Murmansk, Apatity, NWFD rank 56% 4 distr5 8% 10% 13% 10% 5% 15% 61% Severodvinsk CFD rank 68% SFD&NCFD 59% Central Moscow, Ivanovo, So far these measures are the most effective to 1 0% 17% 5% 5% 20% 15% 62% Logistics Vladimir double the sales by 2015 Smolensk, Bryansk, 2 Snezhok* 25% 16% 10% 10% 13% 15% 89% Kaluga •Apart from that, we suggest paying more 3 Logistic + Ryazan, Tambov 18% 12% 5% 5% 8% 15% 63% attention to Traditional Trade (kiosks and retail Orel, Kursk, Belgorod, 4 CentralD* Voronezh, Lipetsk 25% 16% 5% 10% 20% 15% 91% chests) in SFD&NCFD region since it is the most effective way of selling ice-cream in touristic Vologda, Yaroslavl, 5 distr8 20% 13% 5% 10% 7% 15% 70% places Kostroma 6 distr9 Tver, Vladimir, Moscow 9% 13% 10% 5% 12% 15% 64% •In NWFD ice-cream should be sold primarily through Key accounts and Modern Trade as Santa Krasnodar, Stavropol, these means are more popular among people 1 17% 13% 5% 5% 12% 15% 67% living in severe climatic conditions Company Tcherkessk Nalchik, Vladikavkaz, •In CFD regions, especially in big cities, it is 2 FGD 8% 13% 10% 5% 16% 15% 67% Nazran preferable to use a combination of these Kalmykia, Rostov, 3 Antares* Astrakhan, Elista 25% 19% 5% 10% 12% 15% 86% methods* Acquired company
  • 7. Appendices
  • 8. Appendix 1 SWOT analysis of M&A Strengths: Weaknesses: • Time and money savings • High transactional costs • Reduction of fixed costs (salaries) • Difficulties in integration of acquired • Better control of distribution companies in Inmarko’s structure network Opportunities: Threats: • Lots of potential targets to acquire • Difficulties in negotiating (some (small companies which lack companies may be reluctant to be resources for development) acquired) • Decrease in competition among distributors (favorable situation for distributors working for Inmarko)
  • 9. Appendix 2 Market growth and production level (projections) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015value share projected 17,4 20,1 22,7 23,65 22,15 20,69861 19,34232 18,0749 16,89053value share required 17,4 20,1 22,7 23,65 22,15 21,31664 20,51463 19,74279 19projected growth rate -0,06553required growth rate 0,962376 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015volume projected, th tons 388 412 423 381 396 404 424 444,4871 465,9641 488,4788average volume share 17,21inmarko production projected th tons 66,7748 70,9052 72,7983 65,5701 68,1516 69,5284 72,9704 76,49623 80,19241 84,0672inmarko production required, th tons 66,7748 70,9052 72,7983 65,5701 68,1516 69,5284 74 85 93 106average price for inmarko icecream, rub for kilo 163 174,41 186,6187 199,682 213,6597inflation 0,07assumptions
  • 10. Appendix 3 Analysis of current and potential distributors # Name Coverage %of sales CCFOT type of company contracts with competitors Warehouses transport Total 25,00 20,00 10,00 10,00 20,00 15,00 100,00 1 distr1 SPB, Petrozavodsk 0,08 0,12 0,10 0,05 0,08 0,05 0,48 2 distr2 Velikiy Novgorod, Cherepovets, SPB 0,03 0,10 0,10 0,10 0,08 0,12 0,52 3 distr3 Velikiy Novgorod, Pskov 0,25 0,07 0,05 0,05 0,04 0,13 0,59 4 distr4 Ukhta, Syktyvkar 0,15 0,08 0,10 0,10 0,07 0,12 0,62 5 distr5 Murmansk, Apatity, Severodvinsk 0,08 0,10 0,10 0,10 0,05 0,05 0,48 6 distr6 Arkhangelsk 0,18 0,09 0,10 0,05 0,06 0,05 0,52 7 distr7 Arkhangelsk 0,08 0,08 0,10 0,10 0,04 0,05 0,45 8 distr8 Vologda, Yaroslavl, Kostroma 0,20 0,09 0,05 0,10 0,07 0,13 0,64 9 distr9 Tver, Vladimir, Moscow 0,08 0,13 0,10 0,05 0,12 0,15 0,62 10 distr10 Yaroslavl, Vladimir, Ivanovo 0,03 0,11 0,10 0,05 0,12 0,15 0,56 11 distr11 Moscow, Ryazan, Smolensk 0,05 0,13 0,10 0,05 0,09 0,13 0,55 12 distr12 Moscow, Kaluga, Bryansk 0,08 0,10 0,10 0,10 0,09 0,05 0,51 13 distr13 Bryansk, Kursk, Belgorod 0,20 0,04 0,05 0,05 0,08 0,05 0,47 14 distr14 Orel, Lipetsk 0,23 0,08 0,10 0,10 0,06 0,05 0,62 15 distr15 Voronezh 0,20 0,10 0,10 0,10 0,07 0,05 0,62 16 distr16 Voronezh, Belgorod, Lipetsk 0,03 0,11 0,10 0,05 0,08 0,13 0,50 17 distr17 Moscow 0,00 0,14 0,10 0,05 0,09 0,15 0,53 18 distr18 Volgograd, Astrakhan 0,08 0,08 0,10 0,05 0,07 0,05 0,43 19 distr19 Volgograd, Rostov 0,03 0,09 0,05 0,05 0,07 0,05 0,34 20 distr20 Elista, Rostov, Astrakhan 0,03 0,14 0,10 0,05 0,07 0,15 0,54 21 distr21 Krasnodar, Stavropol 0,08 0,10 0,10 0,05 0,06 0,15 0,54 22 distr22 Grozny, Machachkala, Narzan 0,10 0,09 0,05 0,05 0,05 0,05 0,39 23 distr23 Vladikavkaz, Nalchik, Tcherkessk 0,13 0,13 0,10 0,05 0,07 0,15 0,62 AS-IS average 0,53 NWFD 1 Arktika SPB, Novgorod, Pskov 0,08 0,14 0,05 0,10 0,11 0,15 0,63 2 LED company SPB, Novgorod, Cherepovets, Vologda 0,12 0,12 0,10 0,05 0,06 0,15 0,60 3 Sever-Kholod Komi 0,24 0,05 0,10 0,05 0,02 0,05 0,51 4 Alfa Arkhangelsk 0,18 0,10 0,10 0,05 0,05 0,05 0,53 5 Beta Severodvinsk 0,18 0,11 0,10 0,05 0,05 0,05 0,54 CFD average 0,56 1 Central Logistics Moscow, Ivanovo, Vladimir 0,00 0,17 0,10 0,05 0,20 0,10 0,62 2 Ice Company Moscow, Yaroslavl, Tver, (Kostroma) 0,18 0,05 0,10 0,05 0,17 0,15 0,70 3 Snezhok Smolensk, Bryansk, Kaluga 0,18 0,10 0,05 0,10 0,13 0,15 0,71 4 Logistic + Ryazan, Tambov 0,18 0,12 0,10 0,05 0,08 0,15 0,68 5 CentralD Orel, Kursk, Belgorod, Voronezh, Lipetsk 0,00 0,15 0,10 0,10 0,20 0,15 0,70 SFD&NCFD average 0,68 1 Santa Company Krasnodar, Stavropol, Tcherkessk 0,20 0,05 0,05 0,05 0,12 0,05 0,52 2 FDG Nalchik, Vladikavkaz, Nazran 0,08 0,09 0,10 0,05 0,16 0,05 0,53 3 Antares Kalmykia, Rostov, Astrakhan, Elista 0,08 0,19 0,10 0,10 0,12 0,15 0,74 4 Zero Volgograd 0,24 0,00 0,05 0,10 0,05 0,15 0,59 average 0,59
  • 11. Appendix 4 Optimization of current distributors wareho possible distr 0,1 Coverage %of sales CCFOT type of company contracts with competitors transport total uses NWFD 1 Arktika SPB, Novgorod, Pskov 0,08 0,14 0,05 0,10 0,15 0,15 0,67 2 LED company SPB, Novgorod, Cherepovets, Vologda 0,12 0,12 0,10 0,05 0,06 0,15 0,60 3 Distr4 Ukhta, Syktyvkar 0,15 0,10 0,12 0,10 0,07 0,13 0,67 4 Alfa Arkhangelsk 0,18 0,09 0,13 0,10 0,05 0,05 0,60 5 distr5 Murmansk, Apatity, Severodvinsk 0,08 0,10 0,13 0,10 0,05 0,05 0,51 CFD 0,61 1 Central Logistics Moscow, Ivanovo, Vladimir 0,00 0,17 0,10 0,05 0,20 0,10 0,62 2 Snezhok Smolensk, Bryansk, Kaluga 0,18 0,10 0,05 0,10 0,13 0,15 0,71 3 Logistic + Ryazan, Tambov 0,18 0,12 0,10 0,05 0,08 0,15 0,68 4 distr8 Vologda, Yaroslavl, Kostroma 0,20 0,13 0,05 0,10 0,07 0,13 0,68 5 distr9 Tver, Vladimir, Moscow 0,09 0,13 0,10 0,05 0,12 0,15 0,64 6 CentralD Orel, Kursk, Belgorod, Voronezh, Lipetsk 0,00 0,15 0,10 0,10 0,20 0,15 0,70 SFD&NCFD 0,67 1 Santa Company Krasnodar, Stavropol, Tcherkessk 0,20 0,10 0,05 0,05 0,12 0,05 0,57 2 FDG Nalchik, Vladikavkaz, Nazran 0,08 0,10 0,10 0,05 0,16 0,05 0,54 3 Antares Kalmykia, Rostov, Astrakhan, Elista, Volgograd 0,08 0,19 0,10 0,10 0,15 0,15 0,77 4 0,63
  • 12. Appendix 5 Optimization of current distributors taking into consideration M&As type of contracts with # Name Coverage %of sales CCFOT warehouses transport total company competitors NWFD 1 Arktika SPB, Novgorod, Pskov 0,25 0,16 0,10 0,10 0,15 0,15 0,91 2 Alfa Arkhangelsk+Severodvinsk 0,25 0,16 0,05 0,10 0,05 0,15 0,76 3 distr4 Ukhta, Syktyvkar 0,25 0,16 0,05 0,10 0,07 0,12 0,75 4 distr5 Murmansk, Apatity, Severodvinsk 0,08 0,10 0,13 0,10 0,05 0,15 0,61 CFD 0,76 Central 1 Moscow, Ivanovo, Vladimir 0,00 0,17 0,05 0,05 0,20 0,15 0,62 Logistics 2 Snezhok Smolensk, Bryansk, Kaluga 0,25 0,16 0,10 0,10 0,13 0,15 0,89 3 Logistic + Ryazan, Tambov 0,18 0,12 0,05 0,05 0,08 0,15 0,63 Orel, Kursk, Belgorod, Voronezh, 4 CentralD 0,25 0,16 0,05 0,10 0,20 0,15 0,91 Lipetsk 5 distr8 Vologda, Yaroslavl, Kostroma 0,20 0,13 0,05 0,10 0,07 0,15 0,70 6 distr9 Tver, Vladimir, Moscow 0,09 0,13 0,10 0,05 0,12 0,15 0,64 SFD&NCFD 0,73 1 Santa Company Krasnodar, Stavropol, Tcherkessk 0,17 0,13 0,05 0,05 0,12 0,15 0,67 2 FGD Nalchik, Vladikavkaz, Nazran 0,08 0,13 0,10 0,05 0,16 0,15 0,67 3 Antares Kalmykia, Rostov, Astrakhan, Elista 0,25 0,19 0,05 0,10 0,12 0,15 0,86 0,73

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