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Danone gallina blanca
- 1. Case —
- 2. Case Bolshevik – Danone industry
- 3. 3PD distributors are not manageable In 2003 the targets were like this We have to convert operations to DS3 Hired 500 sales representatives 50 000 outlets covered 1 2 3
- 4. Out of three possible RTM models … DSD Direct Sales and Delivery DS3 Direct SalesThird party delivery 3PD Third Party sales and Delivery Warehousing and delivery Manufacturer Distributor Distributor Sales management Manufacturer
- 5. DS3 Direct SalesThird party delivery Warehousing and delivery Distributor Sales management Manufacturer We chose DS3, as the most adequate to margin and offtake of the product
- 6. We chose DS3, as the most adequate to margin and offtake of the product Control over shelves Cost to serve DSD 3PD DS3
- 7. We recruited 500 sales representatives Who sold directly to 50.000 retail outlets Half of the additional margin we invested into further development We kept on 40% sales growth with the same margin level during 3 years of the project In 2003 it was still the time to invest into new instruments
- 8. What did we do better?
- 9. Only complex of sales initiatives drove to results Unified pricing Territory integrity Channel management Effective internal communications Career ladder, training strategy
- 10. We introduced channel pricing equal for all the territories Price for distributor Retail Shelf Price TraditionalTrade Local chains National Chains Danone Price for retail
- 11. Conversion 3PD to DS3 — is adherence to the route The model was “easy to sell” to distributors The model allowed us to get ROI in a year “General price” “mixed” teams “ballast” product Exclusive teams
- 12. 900 Euro manufacturer contribution Sales per agent 30.000 Euro Distributor’s markup 3% = 900 Euro Distributor’s contribution Sales increased twice up to 60.000 Euro In a year 3% = 1.800 Euro distributor contribution Agent wages 1.800 Euro and stop investments in a year DS3 model was “easy to sell” to distributors … Agent wages 1800 Euro
- 13. What has changed since that time ?
- 14. Retail chains are growing: Revenue ’10: $11 bln Q1 ‘11: + 50 % revenue + 64 % EBITDA X5
- 15. Trade terms change the market
- 16. 2000 2010 Retail chains Distrbutors Manufacturers The market has changed irreversibly Retail chains are growing and competing for the best prices The margin is going from production to retail From distribution the margin has already gone Those who do not feel it today – will confront it to-morrow Manufacturers, overstepped $1mlrd, escaped from this problem How the other producers must behave on the new market ? Margin split
- 17. The model was successful and profitable Manufacturers solve similar tasks But in the new conditions the model is not working. And the issue is not the crisis We need to grow both topline and bottomline 1 2 3
- 18. But perhaps not all of us accept the real problems The market has changed, but our mindset is the same Distribution Model Segmentation TradeTerms Something has happened with our sales – “crisis, it seems”
- 20. Nowdays DS3 inTraditionalTrade became less effective Sales per outlets dropped – delivery cost increased Quantity of shops decreased, traffic jams intensified – effectiveness of routes decreased So agent’s salary eats the margin Only those who overstepped $1 mlrd do not feel it yet
- 21. And it needs permanent revision … Chicago To develop NewYork Philadelphia # active clients per sales agent Salary / Sales per agent Florida Oklahoma Washington San-Hose To convert to 3PD 100 50 10%
- 22. How to make DS3 cheaper ? Our average order was less than minimum delivery lot We could not pay the whole salary to the agent Mixed teams — was our solution
- 23. How to organize and manage mixed teams ? The products should : Not compete among themselves To be within one category To have similar sales per outlet Belong to markets with equal volatile Have similar consumer loyalty to brands
- 24. Your contribution to agents wages: For the Euro of your sales agent gets commission more than for the other products Ideally they pay fix part, and you play bonus :-) How to organize and manage mixed teams ? The products should : Not compete among themselves To be within one category To have similar sales per outlet Belong to markets with equal volatile Have similar consumer loyalty to brands
- 25. And merchandisers also became national Shared services (1 person merchandises several producers) was the reaction to reduction in the functional There are national agencies with salary fund $10+ mln a year Why are their services cheaper ? Due to scale effect they organize processes better than manufacturers Merchandiser spend more time in the outlets and less on the way
- 26. Retail investments need to be optimized too There are 22 500 modern trade retail outlets in Russia They form 50% of the market # of outlets Transfer of investments improves bottom line and topline - 10 000 South North Non active Active clients with investments Active clients with investments AND profitable Active clients with investments AND NOT profitable
- 27. Today: 10 meters, 100 km/hour Business process change rapidly Before: 50 meters, 60 km/hour
- 28. It is important to review 3PD distributor’s Profile Territory coverage ModernTrade TraditionalTrade Wholesale Opportunity to promote product Sales reps motivation is effective Promo for retail is effective All your SKUs are in matrix General Growth vs LY Price architecture Finance discipline
- 29. Profile: Distributors power and managers’ efficiency 0% 50% 100% Distributor’s power Managers’ efficiency
- 30. Profile: Distributors power and managers’ efficiency 0% 50% 100% Distributor’s power Managers’ efficiency
- 31. Profile: Distributors power and managers’ efficiency 0% 50% 100% Distributor’s power Managers’ efficiency
- 32. Every company differs from competitors and you have to find your advantages ! There are no competitors in 3PD distributor price list No pressure on distributors strategy Individual approach to promos and cooperation as respect to unique cultures of distributors Gallina Blanca Nestle Uni Lever Russki product Tsikoria Delivery Sales management Business management Trade Marketing Marketing Responsibility of manufacturer Responsibility of distributors
- 33. Only complex of sales initiatives will drive to result To find partners for alliance To focus on the role of distributors To reform distributor’s pool To focus on modern and organized trade To save costs (shared merchandisers, mixed DS3 ..)
- 34. Develop model Persuade boss Compete !Learn more My conclusions from the case