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Gsom case group, 2 место, 1 Тур, Английская секция,


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  • 1. GSOM CASE GROUPDeliver ce to Every House Konstantin Andreev Tatyana Aleksandrova Igor Buryak Igor Sumbaev Saint-Petersburg, 2011
  • 2. What do we want What do we have Sales volume of Inmarko in Russia in Two well-equipped 2011-2015, billion rubles ?25 factories in Tula and Omsk20 Own system of distribution1510 and extensive distribution 5 network 0 Own and rented storage 2011 2012 2013 2014 2015 and transportation facilities What should we do Where 1 Distributors Cooperation 1. Replace distributors with low 1. By Acquiring Talosto1; CCFOT ratio; 2. With biggest companies and 2. Decrease costs on distr. & retail chains2 (Aeroflot, Russian Railways, Starbucks, etc.); logistics – build our 3) Partnership in Sochi 2014 own branches. Increase in Sales POS (points Supply Chain of sales) Methods 1. Concentrate on less developed 1. VMI with our Key Accounts; POS, which are in demand; 2. Aggregated demand forecasting; 1 2. Individual strategy for each of 3. Available-on-shelf approach See Appendix 1 and 2 2 See Appendix 3 three regions! 4. Usage of railway transportation3 3 See Appendix 4
  • 3. Northern-West Federal District Main distribution problems: New Distributors Coverage area Warehouses, % of sales CCFOT vol. volume • Big distance to northern cities Tcherepovets, South-East of • Small volume of warehouses Distributor 2 NWFD 2000 27% 90% • Low CCFOT of distributors Distributor 5 Murmansk, Severodvinsk 2000 25% 90% • Remoteness of production facilities Distributor 6 Arkhangelsk 1000 18% 88% • Absence of track fleet Warehouses: 11 000 pallets Main Cities: Saint-Petersburg Saint-Petersburg Volkhov Novgorod/Pskov 2 000 pallets Murmansk Acquisition of «Talosto» Arkhangelsk 3 000 pallets Petrozavodsk 3 200 pallets Tcherepovets Novgorod the Great Pskov Arkhangelsk Production Facilities in Volkhov (35 000 ton of ice-cream) Severodvinsk Vologda Syktyvkar Narnyan-Mar Demand 4(See Appendix 5) Consumption Exclusive contracts with Population, Demand (ton) Supermarkets supermarkets (Talosto) and Cities thousands 3% wholesalers (big bricks) 14% Retailer people 2012 2013 2014 2015 32% Increasing number of brandedSaint-Petersburg 4848,7 10114 10277 10439 10601 12% Minimarkets kiosks and street retailers (impulse purchasing)Volkhov 47,2 98 100 102 103 Kiosks 16% Development of HoReCaMurmansk 307,6 642 652 662 673 23% HoReCa segment (Contracts withPetrozavodsk 266,2 555 564 573 582 café, restaurants, like Street Traders McDonalds, Baskin RobinsNovgorod the Great 213,8 446 453 460 467 Sales etc.)Pskov 201 419 426 433 439Arkhangelsk 353,3 737 749 761 772 Inmarko+TalostoSeverodvinsk 193,5 404 410 417 423 36% 28% 34% 31% 35% 34%Vologda 290,5 606 616 625 635 NestleSyktyvkar 228,5 477 484 492 500 15% IceberryNaryan-Mar 18,8 39 40 40 41Cumulative demand of 14% 14% 12% Russkiy Kholod 14 536 14 771 15 005 15 237 7% 8% 13% 7% 12%main citiesNWFD(Cumulative Others 28 850 29 316 29 780 30 242NWFD demand) 13831,7 2012 2014 2015
  • 4. Central Federal DistrictChanges in distribution network KiosksCompany name Cities Capacity CCFOT Margin Kiosk’s sales in Moscow ≈ 27% of total sales of ice-cream. (storage) (pallets) Leader - Iceberry.CLC Moscow 10’000 97% 30% Construction and modernization of new kiosks Ivanovo 4’000 Another solution: Vladimir 3’000 New way of distribution – Ice-cream vans (trucks) Advantages: high mobility, opportunity to trade by theLogistic + Ryazan 3’000 92% 20% Tambov 1’500 underground stations Disadvantages: high price (twice the price of a kiosk)Central ID Orel 2’000 95% 30% Conclusion: the increase in sales will overcome the Belgorod 3’000 Voroneg 6’000 additional costs  the project is profitable Kursk Lipeck 3’000 3’000 Exclusive contracts Sturbucks:Snezhok Smolensk 6’000 90% 20% Additional 52 outlets on the present moment Bryansk 2’000 sales High level of popularity Kaluga 2’000 Well-known brendIce Moscow 8’000 85% 20% Plans to implement private-label ice-cream Tver 1’500 Yaroslavl 4’000 Acquisition of Talosto Kostroma - Acquisition of Talosto will not have great weight on solving Inmarko’s problem, as in other regions, however: • Due to permanent growth of demand on ice-cream andDistributor 8 Yaroslavl 89% 20% Kostroma 3’500 rejection of Ice distribution company, the new additional + Moscow warehouse in Moscow with the capacity of 12’500 pallets will have great value for the companyDistributor 9 Tver 93% 28% Vladimir 2’500 • The transportation network of Talosto will allow Inmarko to Moscow cut their costsDistributor 17 Moscow 6’000 94% 28% Sales structure forecast for 2015(temporary) Supermarkets 9% RetailerThe results of the distributor’s change: 10% 26% Minimarkets•Increased CCFOT (from 85% up to 92% in average) 5% Kiosks•Better communication with Kostroma 13% HoReCa•More warehouses and storage place in Moscow (by 28% Street Traders1000 pallets) 9% Ice-cream vans
  • 5. South Federal District Main problems in the region Company Cities (storage) Capacity CCFOT Margin • Weak position in the region in general name (pallets) Santa Krasnodar 4’000 80% 15-24% • Absence of own branches (producer) Stavropol 3’500 winter • Low CCFOT of distributors Tcherkessk 1’200 90% summer Olympic Games Sochi 2014 FCG Nalchik 1’000 89% 25% Participation in partnership program of Stavropol 8’000 Valdikavkaz 2’500 Sochi 2014 in the category “dairy Nazran 1’000 products” to sell ice cream during Olympic Antares Rostov 5’000 99% 25% Games in Sochi. More than 0.5ml people Astrakhan 3’000 usually visit Olympic Games! Elista 1’200 The main way of distribution – Ice-cream Zero Krasnodar 3’500 80% 15% vans. (producer) Rostov Volgograd Cooperation with MagnitMagnit – is the major retailer in SouthernRegion. For more profitable cooperation, Open our own distribution channel 5:we offer to implement Vendor - In 2012 building of a warehouse in Rostov-na-Management Inventory (VMI) to increase Donu (the largest city in the region) to substituteaccuracy of planning and thus to reduce facilities of local producers (Santa, Zero), because ofcosts. their low CCFOT ratio. To avoid idle capacity, in Target distribution of Sales by 2015 winter season we let on lease our extra spaces. Supermarkets - in the 2013 we will build another warehouse in 2% Krasnodar. Thus we will have only one major 12% Grosery stores 31% distributor left - Antares Minimarkets 25% Kiosks + Acquisition of Talosto 19% HoReCa New production facilities in Shakhty (25’000 11% tonnes a year) and warehouse in Krasnodar Street Traders 5 See Appendix 6
  • 6. Conclusions and recommendations Main goal: Distribution: Construct the 1) Factories distribution network in Add new chains Central, South and 2) Distribution centers North-Western Federal 3) Warehouses Districts to double the sales of Inmarko in 4) Wholesalers Acquire existing monetary terms up to 5) Retailers distribution chain + 2015 year 6) Consumers reconstruction Main problems: Exclusive contracts, new channels of sale Increase the share of home buyers up to 45% (summer)• Tough competition and 65% (winter)• Low CCFOT of some distributors New distributors, construction of own distribution channels Key Accounts 15%• Low capacity of warehouses Modern Trade 30%• Low coverage of NWFD and SFD Strategic acquisition of new production facilities (“Talosto”)• Lack of necessary production Traditional 45% facilities to increase sales Trade Recommended time table of implementation6 2012 2013 2014 2015 Market Shares, 2015 Inmarko + Acquisition of “Talosto” Talosto Iceberry New Distributors Resign of some 34% 35% distributors in SFD Nestle Increase of Track fleet 7% 12% Russkiy Kholod 12% Creation of new contracts Others 6 See Appendix 7
  • 7. Appendix 1 Description of Unilever-Inmarko and its most strong competitors 1 Nestle Iceberry Russkiy Kholod Talosto Unilever-Inmarko St.Petersburg Barnaul Volkhov Tula Factories Zhukovsky 2 Vologda Moscow Shakhty Omsk Moscow Branches in the Branches in such biggest cities in 14 branches big cities as 10 branches Russia Powerful branches throughout Russia Moscow, throughout Russia Branches (St.Petersburg, in Moscow and (Kursk, Vologda, St.Petersburg, (Moscow, Qazan, Moscow, Samara, Saint-Petersburg Astrakhan, Krasnodar, Tula etc.)3 Nizniy Novgorod, Moscow etc.) Yekaterinburg, Perm etc.) Rostov-on-Donu Low-temperature Large national or Big distribution warehouses in Own warehouses regional Common center in Moscow St.Petersburg, in Tula, Omsk and Storage facilities warehouses distribution center and rented storage Moscow, several rented located near clients facilities Yekaterinburg and storage facilities Krasnodar Own specialized Own 20 units of Own specialized Own specialized Own big Fleet trucks and rented refrigeration trucks and rented trucks and rented specialized fleet ones machines ones ones1 In this description we consider companies, which are main competitors of Inmarko in all three dsctricts: CFD, NSFD, SFD2 Company closed factory in Timashevsk in 2011 and transferred equipment to factory in Zhukovsky3 According to web-site of the company, Inmarko has 10 branches throughout Russia on the November 2011
  • 8. Appendix 2 Analysis of the most strong competitors in all three districts: CFD, NSFD, SFD Iceberry Russkiy Talosto Kholod Factories Nestle Talosto has factories and storage facilities in all Branches three districts, in which Unilever-Inmarko holds an interest.Storage Facilities Fleet Acquisition of Talosto till the end of 2013 enables Unilever- Unilever-Inmarko has better position Inmarko to achieve undoubtedly its goal. Unilever-Inmarko has worse position Equivalent position with competitor
  • 9. Appendix 3 The common components of strategy for all three districts• Partnership with the biggest Russian airlines(Aeroflot, Transaero, S7 Airlines, Rossiya) and itssuppliers, which implies that we will provide theboards with special ice-cream• Analogous partnership with the Russian Railways• The prevalent usage of railways to transport ice-cream in refrigerated rolling stock from factory inTula to some remote cities(Murmansk, Arkhangelsk, Vladikavkaz etc.)
  • 10. Appendix 4 Reasonableness of prevalent usage of refrigerated rolling stock in some routesRoute: Tula-Murmansk (Tula-Moscow-St.Petersburg-Murmansk)Usage of specialized trucks costs:a) 30000 rubles for 20 tons of weight for route Tula- St.Petersburgb) 41520 rubles (1384 km * 30 rubles) for 20 tons of weight for route St.-Petersburg-MurmanskTotal: a)+b) = 71520 rubles One refrigerated rolling stock can carry 35 tons of ice-cream. According to JSC Refservice (the subsidiary of theRussian Railways) the transportation of 35 tons of ice-cream costs in average 50 rubles per km. The distancebetween Tula and Murmansk is 2336 km of railway. Thusthis transportation costs 2336 * 50 = 116800 rubles or(116800 * 20) / 35 = 66742 rubles for 20 tons of weight. So it is more reasonable to use refrigerated rollingstock in this route than trucks.
  • 11. Appendix 5 Forecasts and predictionsCalculations of annual demand are based on following assumptions:1) The share of consumers of ice-cream is 55% in 2012 and increases by 1% every year;2) The population of Russian Federation decreases by 0,2% every year;3) The annual consumption of ice-cream is 3,8 kg per year for individual;4) The Data concerning population of districts and cities was taken from RosStat web-siteForecast of market share bases on:1) Increase of sales through supermarkets/retailer with “Talosto” distributional channels and exclusive contracts;2) The annual growth of share is expected to be 3% with the growth of demand and strengthening of company position in street trade and kiosk segment;3) As we cannot predict the weather, we consider it will not change dramatically over 5 years;4) As we cannot predict the crisis or other critical situations, or actions of competitors, we consider that nothing will change (there will not be crisis, our competitor will not be answering irrationally on our actions).
  • 12. Appendix 6 Creation of own distributional channel in SFD 2011 2012 2013 2014 2015 Own warehouse 0 12000 24000 24000 24000 (pallets) Distributors (pallets) 33900 21900 9200 9200 9200 Trucks 6 7 (+1) 10(+3) 10 10 Investments (ml) 17.28 2.88 8.64 0 0 In 2012 – construction of an warehouse in Rostov-na-Donu (12’000). By the end of 2013 – construction of a warehouse in Krasnodar (12’000). To calculate number of trucks we need: 1) Distance between Tula (our production facility) and Rostov-na- Donu – 900km, each month a truck can do 5 tours back and forth 2) We decided to buy FRACOLD C 415 8SP (loading capacity – 16 tonnes), as Hyundais’ trucks are more expensive. So in a year each truck can transport 960 tonnes of ice cream during the year. Sales (in ths. tonnes) Our sales (in thousand tonnes) will change in next 4 years according 20 following assumption: 15 1. Value of demand in 2011 was calculated, using the population 10 of the region (14 mil.) and ice cream consumers share (given in appendix), 5 2. Approximate sales share of Inmarko was determined from Appendix 0 2011 2012 2013 2014 2015 «Regional sales Distribution» using cities of Rostov and Sochi).As the premium of distributors is around 25% and average price of ice cream 180.3 RUR, building our owndistributional network has economic sense (even if we add other supplementary costs such asfuel, wages, taxes, local transportation).
  • 13. Appendix 7The distribution network of Inmarko by 2015