Distribution Channel And Parle Essay
Distribution Channel And Parle
The bread and biscuits constitutes the largest segments of consumer foods in India. Both Biscuits and Bread are items of mass consumption in our Country. Almost 2 million tons of biscuits are produced in India each year and consumption is growing at 10-12 per cent annually. The per capita consumption of biscuits in the country is about 1.52 kg annually. Contrary to popular belief that biscuits are consumed by the middle and high income groups, it is actually the only nutritious and hygienic food product for children, lower income groups and the rural population. Nearly 50 per cent of biscuits produced are consumed in rural areas and 30 per cent by income groups earning below Rs 750 per month.
Every 100 gm of glucose biscuits roughly provides 20 per cent of energy, protein and calcium required by an average adult. So as to explore the opportunities in these sectors, a large no. of companies is trying to increase their consumer base in these areas. For this they are offering various promotional schemes in order to make their brand familiar to consumers and to have a Competitive edge. Parle G Industries has made a rapid progress in the variety, quality and quantity of biscuits and baked foods and has become India’s biggest brands and the preeminent food brand of the country. It is equally recognized for its innovative approach to products and marketing. The company’s offerings are spread across the spectrum with products ranging from the healthy and economical.
About the company
In 1929 a small company by the name of Parle products emerged in British dominated India.The intent was to spread joy and cheer to children and adults alike, all over the country with its sweets and candies. The company knew that it wouldn’t be an easy task, but they decided to take the brave step. A small factory was set up in the suburbs of Mumbai, to manufacture sweets and toffees. The Parle brand became well known in India following the success of products such as the Parle-G biscuits and Thums Up soft drink. The original Parle Company was split into three separate companies:
Today, the great strength of Parle Products is the extremely widespread distribution network. Even at the remotest places, you can buy Parle biscuits and sweets from the local grocer. It has taken years to create this extensive network. Parle’s sales force started with one salesman in Bombay and some agents in few other cities. Gradually, Parle Products expanded. Soon sweets and biscuits were being sent by rail to Calcutta, Delhi, Karachi, Madras and other major cities. As production increased, distribution was amplified. Full time salesmen were appointed in different areas. Currently, Parle Products has over 33, 00,000 distribution outlets.
Distribution Channel Network of Parle-G
Intensive Distribution- Parle uses, Intensive Distribution for Parle G. This is the ideal strategy for the market leader as intensive distribution has the following advantages; Increases coverage and sales.
Increases product availability.
Encourages retailers to compete aggressive.
Higher competition leads to narrower margins for the retails hence, increases the ultimate margin for the manufacturer.
Channel members of the distribution network: The Parle distribution network for biscuits has essentially four levels as enlisted below: Parle Depots
Wholesalers and Distributers
Carry Forward Agents (if required)
Channel members and logistics: Parle has nearly 1500 wholesalers, catering to 425000 retail outlets directly or indirectly. A two hundred strong dedicated field force services these wholesalers and retailers. Additionally, there are 31 depots and Carry and Forward agents supplying goods to the wide distribution network. Parle has level 1, level 2, level 3 distribution channels levels. Level1- Availability at all departmental stores across the length and breadth of the country. Level2- Channel exists for customers scattered throughout the country. Level3-Mass consumption and suitable for National and International coverage.
Channel Dynamics: Parle has a multi-channel marketing system since it uses more than two marketing channels to reach all its customer segments.
Parle Distribution Network Logistics
Selection of Channel Members: Parle takes into consideration a host of factors while selecting the channel members. This is because it believes that selection of channel members is a long run decision and the rest of the decision regarding the supply chain depends upon the efficiency and coverage by the channel members. The following are the host of factors considered by the company in selecting the channel members: Authentication is required by the regarding the identity of the channel members, which includes the name and address, photograph of the location. Proof of solvency which requires name and address of the channel member’s bankers Safety of the inventory, which means that the distributor/ dealer should get the stock of the company insured. Inventory or the perishable goods kept by the distributor/ dealer should be in good condition which means a detail of storage space and Refrigeration facility is to be provided. Details of the delivery vehicle, which includes the following.
1. Light Commercial Vehicles:
3. 3 Wheeler Van
4. Tricycle Van and Hand/Push cart.
5. The number and model of each of the vehicle needs to be furnished to the company. Company acknowledges the fact that it needs to be sensitive to the market demands. For this it requires that a number of salesmen needs to be present on the field. The salesmen too are divided into various categories like
1. The Field salesmen
2. Counter salesmen
The details of Clerical Staff and labour are to be provided. The technical competence of the salesmen needs to be mentioned. Details of the various products of other companies that the channel member keeps have to be provided. The following also need to be furnished with the above: 1. The annual sales of these products have to be mentioned. 2. Details of complementary products and product lines need to be mentioned. Dealers of the company must carry a good reputation. This is due to the fact that Parle believes that the reputation of the dealer affects the clientele in the long run. Market coverage by the distributors needs to be defined which includes details of Geographic coverage and Outlets per market area. The company also requires the dealers to furnish any Advertising and Sales initiative undertaken by them on behalf of the company.
Channel Members of the Parle Distribution Network
One of the main factors, which keep the distributors motivated, is the margin. Usually the margins offered by Parle are 8%. Now-a-days it has been raised to 8.5%. Volume wise this comes out to be a big figure since Parle’s product has a good demand in the market. However compared to the other companies the margins are still lower since the new players in the market offer a much higher margin. But the very fact that Parle’s products have good demand in the market motivates the distributors to stock it. Parle Products being a cooperative cannot afford to give heavy monetary incentives. Parle’s products are considered to be value for money since the company does not believe in charging high margins. In fact all monetary incentives are just the short run means to promote the company’s product.
b) The Retailers:
Trade schemes: these are undertaken by the company only for the hard selling items. Glow boards: the company puts up glow boards at the retailer and pays the major portion of the cost. Schedule of the salesmen: they provide the retails with this schedule so the retailers can pre -estimate the quantities of the various products needed. Infrastructure facilitation: the company facilitates the retailers to buy beautiful stalls by formulating an easy payment program and a commitment to buy back the equipment at a reasonable price when the value of the equipment has depreciated.
Distribution Channel and Parle
The company’s strength is in the procurement of raw materials and essentially not the distribution of its product. Even though Parle is the market leader in biscuits. But, distribution logistics is the industry’s main problem. While the other companies fail to replenish demand due to lack in procurement of rawmaterial, Parle’s inventory management is sound. Parle has loyal cooperatives that provide products only to them, over time the relationship of trust has built up with these people that Parle leverages now. The transport channel is another strong point for Parle. As these transporters have grown with the company overtime; the bonding with them enables the company to give least margins when it comes to the distributors in the industry, lowering the costs.
Parle believes that there is an ongoing demand in the market and therefore no promotions are needed to increase the sales, also the fact this would affect the cost of the product the company doesn’tundertake many promotion schemes. Parle is able to provide products at the least price in the industry, and is able to give least channel margins as the channel members earn through volumes and not through high margins. The company has been able to push its new products into the market by hooking them onto the fast moving products like Parle butter bite. Because of the strong relationship that Parle shares with the constituent channel members, it forces the channel members to carry all its new products.
Suggestions for Distribution Channel
The following are the suggestions that Parle can implement to better its distribution channels: Increase the margins: In order to motivate the channel members it is also very essential for the company to increase the margins for the hard selling items. Pushcarts: These should be increased in number in order to increase the market reach (especially the rural market). This can provide with a very effective channel. Parle should also go in for ‘Parle’ Zones: It is primarily for big city retail outlets. Here all the Parle products can be stalked. This can be an effective mode of umbrella marketing. This strategy can be implemented in regions where the footfalls are large in number. The advantages of this alternative channel would be as follows:
1. Full range display.
2. Easier to promote new products.
3. Easy to push impulse purchase products.
4. The Parle Brand building exercise will be enhanced.