1. Distribution and Sales Management
– Gokaldas Trading Company
A report
submitted to
Prof. Prathap Oburai
In partial fulfilment of the requirements of the course
Marketing - II
On
28th January, 2009
By
Group 9
Section D
PGP 2008-2010
INDIAN INSTITUTE OF MANAGEMENT
AHMEDABAD

2. TABLE OF CONTENTS
TABLE OF CONTENTS.............................................................................ii
GOKALDAS TRADING COMPANY.......................................................iii
DISTRIBUTION CHANNEL OF CADBURY: ........................................iii
THE FUNCTIONING OF THE DISTRIBUTION CHANNEL (GTC).......v
MUTUAL EXPECTATIONS OF EACH STAKEHOLDER...................vii
From the point of view of the distributor, it is very important that the
company gets its pricing and promotion strategies right. He has very little
control over these factors, but is very strongly affected by these because all
his products are commoditised to the extent that brand loyalty is not strong.
All the brand promotions carried out by the company also help the
distributor. Though he expects timely delivery from the company, he has
up to one month’s inventory to take care of emergencies. ........................vii
ANALYSIS OF THE CURRENT SYSTEM.............................................vii
SUGGESTIONS........................................................................................viii

3. GOKALDAS TRADING COMPANY
Gokaldas Trading Company (GTC) is a local distributor in Ahmedabad. He
is a distributor for Cadbury and sells their confectionary as well as milk
beverages products. He is also a distributor for Reckitt-Benckiser’s nonmedical products like Dettol soap and for the dairy products of Britannia.
He services the Ashram Road and nearby areas.
For the purpose of this assignment, we have studied the operations related
to Cadbury in more detail. Operations related to Britannia and ReckittBenckiser are very similar in most aspects.
For Cadbury, the city of Ahmedabad has been divided into four
geographical regions which are catered to by four different distributors.
Larger stores like Big Bazaar have direct sourcing from the company
warehouse in Ahmedabad.
DISTRIBUTION CHANNEL OF CADBURY:

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Cadbury Factory: Cadbury India is the wholly owned
subsidiary of Cadbury PLC, world’s leading confectionary
company. Cadbury India has five factories in India at Bangalore,
Pune, Thane, Himachal Pradesh and Gwalior. It has regional Sales
offices in the four major metros.
Pricing is done at the national level. Most advertising campaigns
are also executed at the national level. But regions carry out
seasonal trade and consumer promotions.
Regional Warehouses: Cadbury has regional warehouse in
every state. Depending on market size, a warehouse caters to 3-10
neighbouring cities. This has helped the company to keep
intermediaries at the minimum. Warehouses act as storage and
supply point for the factory. Inventory system and marketing is all
done at the warehouse and region level.
Large retail chains like Big Bazaar are serviced through a
separate channel referred to as ‘modern trade’. These stores
order directly from the closest warehouse.
Wholesalers: In case the nearest warehouse is not close
enough, a wholesaler enters the chain in between the
warehouse and distributor. The wholesalers play an important
role in smaller towns and rural areas.
Local Distributors: Distributors supply to all the local
retailers. Distributors are responsible for data collection and
reporting the same to the company.
Retail Stores: This is the last link in the distribution chain and
the front end for the customer. The retailer is responsible for
displaying the merchandise properly. In all, Cadbury products are
available at more than 5 lakh retailers all over India.

5. THE FUNCTIONING OF THE DISTRIBUTION
CHANNEL (GTC)
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Scope and magnitude of operations: GTC has 20
salespersons for Cadbury. Each is dedicated to 25-30 stores. Thus,
GTC has close to 500 stores under him. There are separate teams
for Cadbury, Reckitt-Benckiser and Britannia. The monthly sales
are close to Rs. 70 lakh.
Method of operation: Every salesperson has 25-30 stores
under him. The salesperson visits stores once a week. He collects
last week’s dues and gets the order for current week. The order is
delivered within 2 working days. The company warehouse delivers
order every 2-3 days to the GTC godown. GTC has dedicated
godown operations and holds inventory of one month at any given
time.
Credit terms and financial transactions: The company
decides the pricing strategy and discounts. Distributors
get 5% margin. Final retailers get up to 10-15%
margin. The retailers’ margin is decided jointly by
the company, distributor and retailers.

6. •
In case of GTC, the retailer effectively gets a 7 day credit from the
distributor. The distributor however has cash dealings with the
company.
Physical distribution: The city of Ahmedabad has been
divided into 4 regions by Cadbury. One distributor services one
region. There are strict rules to ensure adherence to
the boundaries.
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Salespersons visit their allocated store once a week and collect
orders, submit current week’s billing and collect last week’s
payment. Thereafter, 2-3 tempos deliver the order to the stores
free of cost within 2 days of placing the order. In case of a stock-out
at the store level, the company can restock within a day.
The company delivers to the distributors in large trucks twice a
week. The distributor maintains a godown with up to one month’s
stock in inventory.
Sales incentive and marketing decisions: The company
sets monthly sales targets for the distributors. The incentive system
was not divulged for the purpose of the project. The distributor,
however, pays a fixed salary to his employees. The distributor
rarely sets targets for individual stores, except perhaps during
festive seasons. He may adjust the margin to retailers as incentive.
As mentioned earlier, the distributor plays a very minimal role in
pricing and promotion decisions. This is also true in the case of
Reckitt-Benckiser and Britannia.
Information flow: The retailer is expected to maintain weekly
record of item-wise sales. The information from the retailers
reaches the company through the salesperson in charge of the store.
This is then fed to an online system supplied by the company along
with information regarding every order processed. Thus the
company has real-time information of demand and supply. This
information is then collated and analysed at the regional and
national level by the company. Through this sophisticated system,
every individual box of confectionary can be traced from the
factory to the retail store through all the intermediate steps. Same
procedure is followed for Reckitt-Benckiser and Britannia. Each
company has provided its own software to all its distributors.

7. MUTUAL EXPECTATIONS OF EACH STAKEHOLDER
From the point of view of the distributor, it is very important that the
company gets its pricing and promotion strategies right. He has
very little control over these factors, but is very strongly affected
by these because all his products are commoditised to the extent
that brand loyalty is not strong. All the brand promotions carried
out by the company also help the distributor. Though he expects
timely delivery from the company, he has up to one month’s
inventory to take care of emergencies.
The company (in this case Cadbury) expects the distributor to maintain the
information flow meticulously so that the company can track trends
closely. It wants the distributor to promote its product to the retailers over
rival products. The monthly and quarterly sales targets are expected to be
met.
The retailers expect timely delivery from the distributor. Any problem
regarding quality that the retailers have goes to the company through the
distributor.
ANALYSIS OF THE CURRENT SYSTEM
The distinct advantages that the current system has for all the players:
° Distinct territories ensure that there is no cannibalisation of sales by
various distributors. At the same time, it also gives maximum
coverage to the company to cater to every part of the city.
° A lean distribution system with few intermediaries ensures that
there are fewer losses and profit distribution is also among lesser
stake holders. The tracking and monitoring becomes easier.
° Cadbury as well as its distributors follow a very efficient inventory
control system by virtue of detailed data available about sales at all
retail shops.
° The software used by the company and also by the distributors
(Omkar in the case of Cadbury, Zoom for Reckitt-Benckiser)
allows the companies to gauge market trends effectively. It also
gives them the capability of tracking a given merchandise through
all the intermediaries to the final retailer in case of problems.
The system has evolved over years and through efficient management
has overcome many anticipated problems. Nevertheless, it has its share
of inefficiencies:
° Distributors have no scope to expand into new areas
° Distributors cannot take pricing decisions – no scope for promoting
Cadbury’s products
° Sales force works on a fixed salary system

8. SUGGESTIONS
One area of concern we found was that the territories are so rigidly allotted
by the company that the distributor has no scope for growth except when
new retailer come up in his area. This problem is especially true for
distributors in the interiors of large cities.
Another point is that the distributors have no control over margins paid to
retailers. As a result they have no way of incentivising the retailers to help
them meet the sales targets set by the company.
The distributor can be effectively utilised to device seasonal promotional
campaigns during festivals especially at the local level.