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
56,1
Type 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 criteria
Premium %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, Lipetsk
Warehouse
• 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 region
NWFD rank 56% : NWFD rank 63% :
• more orders through Arktika (esp. to St.Petersburg )
• replacing Sever-Kholod by dist 4 due to better coverage
Arktika 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 Central
Central 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 and
Santa Company 52% will encourage it to expand to Santa
Anapa, Novorossiysk, Gelendzhik due to brisk demand in
FDG 53% summer Company 56,5%
• termination of cooperation with Zero due to lack of
Antares 74% incentives to promote our products in Volgograd FDG 54,3%
• we encourage Antares to expand to Volgograd by further
Zero 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 Costs
NWFD : 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
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)
