95802512 55459265 a study on distribution channel of pepsico

A STUDY ON DISTRIBUTION CHANNEL
AT
PEPSICOAND LIMCA(COCA-COLA)
Submitted in partial fulfillment of the requirement for the award of degree
In

Post Graduate Diploma in Management
Submitted by
NITIN SABHARWAL
GAURAV PATHAK
Under the guidance of
BIANCA RAY CHOUDHARY

POST GRADUATE DIPLOMA IN MANAGEMENT
NEW DELHI INSTITUTE OF MANAGEMENT

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EXECUTIVE SUMMARY
PepsiCo is one of the oldest, largest and most successful beverage and snack food
companies in the world. PepsiCo was founded by Caleb Bradham in 1902 in USA.
Today PepsiCo and its affiliates operate in more than 140 countries in the world
and generate revenues in excess of $ 40 Billion. In its pursuit of never ending
growth and expansion, PepsiCo entered India in 1989 in a joint venture with
Punjab Government. However, PepsiCo India very soon started its beverage
operations in collaboration with the R K Jaipuria group. Soon after entering the
beverage segment PepsiCo Established its dominance in the market owing to its
expertise in sales, marketing, operations and local collaboration. PepsiCo
maintained its market dominance for many more years to come. However, this
advantage slipped and PepsiCo had to concede the market leadership to Coca Cola

India. Distribution channel is having an important role in positioning of the product
because we know that distribution channel is tool by which we can make reach our
product to the final consumers Discontinuation of slums in the distribution network
by PepsiCo. This move by PepsiCo adversely affected its position of a market
leader because while PepsiCo discontinued the use of Slums in its distribution
network, Coke continued it and within one year, it was able to snatch considerable
market share from PepsiCo. Acquisition of well-established and flavored brands
like Thumps Up and Limca by Coca Cola India. These two brands still constitute a
bulk of sales for Coca Cola India.
To explore the reasons behind these developments this study will analyze the
marketing initiatives and policies of PepsiCo India in detail with particular focus
on its partner relationship management.
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INTRODUCTION
Distribution Channel is the chain of businesses or intermediaries through which a
good or service passes until it reaches the end consumer. A distribution channel can
include wholesalers, retailers, distributors and even the internet. Channels are
broken into direct and indirect forms, with a "direct" channel allowing the
consumer to buy the good from the manufacturer and an "indirect" channel
allowing the consumer to buy the good from a wholesaler. Direct channels are
considered "shorter" than "indirect" ones.
The Distribution Channel
Distribution is also a very important component of Logistics & Supply chain
management. Distribution in supply chain management refers to the distribution of
a good from one business to another. It can be factory to supplier, supplier to
retailer, or retailer to end customer. It is defined as a chain of intermediaries; each
passing the product down the chain to the next organization, before it finally
reaches the consumer or end-user. This process is known as the 'distribution chain'

or the 'channel.' Each of the elements in these chains will have their own specific
needs, which the producer must take into account, along with those of the allimportant end-user.
Channels
A number of alternate 'channels' of distribution may be available:


Distributor, who sells to retailers,



Retailer (also called dealer or reseller), who sells to end customers



Advertisement typically used for consumption goods
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INDUSTRY PROFILE
Soft Drink Industry, the production, marketing, and distribution of nonalcoholic, and generally
carbonated, flavored, and sweetened, water-based beverages. The history of soft drinks in the
United States illustrates important business innovations, such as product development,
franchising, and mass marketing, as well as the evolution of consumer tastes and cultural trends.
Many Europeans long believed natural mineral waters held medicinal qualities and favored them
as alternatives to often-polluted common drinking water.

Pepsi

Type

Cola

Manufacturer

PepsiCo

Country of origin

United States

Introduced

1898 (as Brad's Drink)
June 16, 1903 (as Pepsi-Cola)
1961 (as Pepsi)

Related products

Coca-Cola
7 Up
Irn Bru
Cola Turka

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Big Cola

Website

pepsi.com

Limca

Type

Lemon-lime soda

Manufacturer

The Coca-Cola Company

India

Country of origin

Introduced

1977

Related products

Coca-Cola, 7 Up, Sprite

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PepsiCo in India
PepsiCo gained entry to India in 1988 by creating a joint venture with the Punjab governmentowned Punjab Agro Industrial Corporation (PAIC) and Voltas India Limited. This joint
venture marketed and sold Lehar Pepsi until 1991, when the use of foreign brands was allowed;

PepsiCo bought out its partners and ended the joint venture in 1994. Others claim that firstly
Pepsi was banned from import in India, in 1970, for having refused to release the list of its
ingredients and in 1993, the ban was lifted, with Pepsi arriving on the market shortly afterwards.
These controversies are a reminder of "India's sometimes acrimonious relationship with huge
multinational companies." Indeed, some argue that PepsiCo and The Coca-Cola Company have
"been major targets in part because they are well-known foreign companies that draw plenty of
attention."

Pepsi is a carbonated soft drink that is produced and manufactured by
PepsiCo. Created and developed in 1898 and introduced as "Brad's
Drink", it was later renamed as Pepsi-Cola on June 16, 1903, then to
Pepsi in 1961.Pepsi is marketed in 200 ml and 300 ml glass bottles with
national maximum-retail prices of 8 Indian Rupees (INR) and 11 INR,
respectively, 600 ml plastic bottles priced at 27 INR, 1.5 liter "Family
Pack" plastic bottles at 50 INR, and 2 liter "Party Pack" plastic bottles
priced at 60 INR. In certain establishments such as cinema-halls, snackbars, and bakeries, Limca is available from soda-fountains, in 350 ml
paper glasses.Its competitors are Thumbs-up, Coca-Cola, Rc-Cola.
COMPETITION
The Coca-Cola Company has historically been considered PepsiCo’s primary competitor in the
beverage market, and in December 2005, PepsiCo surpassed The Coca-Cola Company in market
value for the first time in 112 years since both companies began to compete. In 2009, the CocaCola Company held a higher market share in carbonated soft drink sales within the U.S. In the
same year, PepsiCo maintained a higher share of the U.S. refreshment beverage market,
however, reflecting the differences in product lines between the two companies.
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Coca Cola
The Coca-Cola Company re-entered India through its wholly owned subsidiary, Coca-Cola India
Private Limited and re-launched Coca-Cola in 1993 after the opening up of the Indian economy
to foreign investments in 1991. Since then its operations have grown rapidly through a model

that supports bottling operations, both company owned as well as locally owned and includes
over 7,000 Indian distributors and more than 1.3 million retailers. Today, our brands are the
leading brands in most beverage segments. The Coca-Cola Company’s brands in India include
Coca-Cola, Fanta Orange, Fanta Apple, Limca, Sprite, Thums Up, Burn, Kinley, Maaza, Maaza
Milky Delite, Minute Maid Pulpy Orange, Minute Maid Nimbu Fresh and Nestea Iced tea, the
Georgia Gold range of teas and coffees and Vitingo (a beverage fortified with micro-nutrients).
In India, the Coca-Cola system comprises of a wholly owned subsidiary of The Coca-Cola
Company namely Coca-Cola India Pvt Ltd which manufactures and sells concentrate and
beverage bases and powdered beverage mixes, a Company-owned bottling entity, namely,
Hindustan Coca-Cola Beverages Pvt Ltd; thirteen authorized bottling partners of The Coca-Cola
Company, who are authorized to prepare, package, sell and distribute beverages under certain
specified trademarks of The Coca-Cola Company; and an extensive distribution system
comprising of our customers, distributors and retailers. Coca-Cola India Private Limited sells
concentrate and beverage bases to authorized bottlers who are authorized to use these to produce
our portfolio of beverages.These authorized bottlers independently develop local markets and
distribute beverages to grocers, small retailers, supermarkets, restaurants and numerous other
businesses. In turn, these customers make our beverages available to consumers across India.
The Coca-Cola Company has invested nearly USD 1.1 billion in its operations in India since its
re-entry back into India in 1992. The Coca-Cola system in India directly employs over 25,000
people including those on contract. The system has created indirect employment for more than
1,50,000 people in related industries through its vast procurement, supply and distribution
system. We strive to ensure that our work environment is safe and inclusive and that there are
plentiful opportunities for our people in India and across the world.
The beverage industry is a major driver of economic growth. A National Council of Applied
Economic Research (NCAER) study on the carbonated soft-drink industry indicates that this
industry has an output multiplier effect of 2.1. This means that if one unit of output of beverage
is increased, the direct and indirect effect on the economy will be twice of that. In terms of
employment, the NCAER study notes that “an extra production of 1000 cases generates an extra
employment of 410 man days.”
As a Company, our products are an integral part of the micro economy particularly in small

towns and villages, contributing to creation of jobs and growth in GDP. Coca-Cola in India is
amongst the largest domestic buyers of certain agricultural products.
As an industry which has strong backward and forward linkages, our operations catalysis growth
in demand for products like glass, plastic, refrigeration, transportation, and Industrial and
agricultural products. Our operations also lead to incremental growth for enterprises engaged in
post production activities like merchandising, marketing and sales. In addition, we share best
practices and technological advancements with our suppliers, vendors and allied industries which
often lead to improvement in the overall standards of quality across industries.
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Limca is a lemon and lime flavoured carbonated soft drink made
primarily in India and certain parts of the U.S.Limca is marketed in 200
ml and 300 ml glass bottles with national maximum-retail prices of 8
Indian Rupees (INR) and 11 INR, respectively; 330 ml cans priced at 18
INR, 600 ml plastic bottles priced at 27 INR, 1.5 liter "Family Pack"
plastic bottles at 45 INR, and 2 liter "Party Pack" plastic bottles priced at
60 INR. In certain establishments such as cinema-halls, snack-bars, and
bakeries, Limca is available from soda-fountains, in 350 ml paper
glasses. Its competitors are Nimbouz, Mirrinda lemon flavour.

Variables we need to work with are Transportation, Timelydelivery, stock-updation Commission, compensation,
promotional-material and lead time.

SALES AND DISTRIBUTION NETWORK OF PEPSICO INDIA.

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COMPANY

FOBO
COBO

WAREHOUSE

C & F Agents
DISTRIBUTERS
SALESMAN
SALESMAN

WHOLESALER
RETAILER
SLUMS
RETAILER

CUSTOMER
CUSTOMER

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COBO: These are Company owned bottling operations operating directly under the Company.
Out of 32 bottling plants, PepsiCo owns 15.
FOBO: These are Franchise owned bottling operations. R K Jaipuria group does all the
franchisee-bottling operations for PepsiCo India; currently R K J Group has 17 bottling plants for
Pepsi.
Warehouses: These are Company or franchisee owned warehouses spread over various locations
that cover the respective territories and come under the purview of their respective Area or
Territory Offices. Stocks are sent from the bottling plants to these warehouses, from where they

are sent to the C & F centers and Distributor Points.
C & F Centers: These are the biggest centers in the distribution network and receive proper
assistance from the Company (either COBO or FOBO). The C & F center is owned by a private
player and not by the Company. The vehicles (Delivery Vans) are owned by the Company, and
the Salesmen at the C & F points are on the Company Payroll.
Distributors: These are small, compared to C & F centers. Everything at the Distributor point
owned and managed by the distributor, even the salespersons are on the Distributors payroll.
Wholesalers: These are smaller than C & F centers and Distributor points and get the stock
directly from the Company or Franchisee. They get their stock directly from the Company and
thus get special rates and extra discounts from the Company.
Slums: They are generally smaller than the Wholesalers are. However, they get special discounts
from the C & F centers and Distributor points. All the different players in the distribution channel
namely C & F centers, Distributor points, Wholesalers and Slums have different designated
markets and are not supposed to operate in the market designated to any other player.
Retailer: Retailers are the most important chain in the distribution channel of Pepsi as they are
the only point of contact with the customers. Retailers get their stock from all the other channel
members in the distribution channel.
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REARCH METHODOLOGY
MEANING OF RESEARCH:
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Research in a parlance refers to a search for knowledge. One can also define research as a
systematic search for pertinent information on specific topic. In fact research is an art of
scientific investigation.

STATEMENT OF THE PROBLEM:

 Limca Co. wants to know whether its downfall in the market is due to its distribution
channel, so it does a research by comparing its distribution channel with Pepsi Co.
 The Comparison is done In order to know the effect of distribution channel on its sales &
revenue.

PURPOSE AND OBJECTIVE OF THE STUDY:
 TO know distribution channel Strategy of Limca co.
 To know the importance of Distribution channel strategy in Positioning of the product.
 How strong relationship limca and pepsi has with the distributors and retailers.

RESEARCH METHODOLOGY:
Method of research- Description research was used.
Tools used for data collection: A questionnaire was structured together the primary
Information.

SOURCES OF DATA COLLECTION:
The data has been collected from both primary and secondary methods have been used.
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Primary data- It was collected by surveying the distributers of PepsiCo and limca (coca-cola).
Secondary data- it was collected from,
• General library research source like marketing book.
• Advertising journals like magazines and newspaper.
• Internet: PepsiCo website, coke website, wikipedia

Structured questionnaire: Structured questionnaire is a printed list of questions to be filled
by the respondents. The structured questions are being made as short as possible and simple to
understand. The questionnaire is designed such that it helps to elicit the accurate information.

TOOLS AND TECHNIQUES:
The first hand information was collected by interviewing the Distributor regarding the
Strategies followed by the company for distribution channel. Hence the survey method is the tool
used here for data collection.

SAMPLING DESIGN:
• Sample unit: Distributers of Pepsi and Limca, Retailers and customers
• Sample size: 8 distributors
• Sampling technique: Random sampling
• Sampling method: Stratified sampling
• Place of study: Delhi

LIMITATION OF THE STUDY:
• Biased- The study was purely based on the information provided by the respondents and they
may be biased.
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• Time constraint- The study was conducted in a short period of time and a detailed
study was not possible.
• Cost constraint- This being a academic study suffers from cost constraint.
• Area constraint- The area of study is limited to only Delhi.
• Sample constraint- The sample size was not large enough as planned, as the time factor was
the key limitation in the study.
• Confidential constraint- Due to confidential constraint certain information, not all
details could be obtained.

FINDINGS AND RECOMMENDATION

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FINDINGS
 Some retailers are unable to get the services which are provided by the company
 There are some retailers are not happy with services provided by the distributors and the
company.
 There is a gap between the retailers and the company
 Distributers are not satisfied with the services like margins, product availability, credit
facility
 Customers prefer the taste of Thumbs Up more than the PepsiCo’s product.
 Most of the time desired products are not available or not chilled due to unavailability of
visi coolers.
 In most of the mix outlet company has not provided its Visi Cooler, so it is becoming the
major cause for not getting fulfill of the demand. Because retailers are promoting that
brand to the consumer which company is satisfying them more in terms of Visi Cooler,


Schemes, Relationship etc
Retailers are not happy with the MDC (Marketing Development Coordinator) of

PepsiCo. Retailers are saying that what they promise, do not fulfill that.
 Marinating good relationship with the retailers as well distributors is very important for
having a strong distribution channel
 Visi cooler have an important role in enhancing the distribution channel and policy.
 Time concern is very important in good distribution channel, it means providing product
at retailers door within a time.
 Company should provide better facility of logistics because without logistics any
company cannot maintain good distribution strategies.

RECOMMENDATION

This is one of the most important and most difficult part of the study. I arrived at certain
recommendations for PepsiCo India after the analysis of the data. Some of the important
recommendations are as follows.

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 There should be and correct feedback from the retailers on the performance of salesmen.
This will help improve their efficiency and accountability. Moreover, this will also help in
reducing the confusing that the retailers have at times because the salesman does not
explain the schemes properly.
 As already mentioned V.C. coolers are a major reason of dissatisfaction among retailers.
The periodical maintenance check of V.C. coolers is done at three months. This should be


done at an interval of 45 days or 60 days instead of the current practice of 90 days.
Company should adopt aggressive marketing strategy that it could reach each and every



place.
Company should have better logistics facility for making reach the product at retailer’s



door at a right time.
Marketing Development Coordinators/ Marketing Executives/ Sales Executives of the

company must focus more for making better relationship with retailers.
 Company should provide visi cooler to every retailer. Because who is having visi cooler

of which company they are promoting the same brand to the consumer.
 Company should more focus on youth of the country because youths more prefer the soft
drinks.
 Company should focus on the consumers taste and preferences and launch new product
according to the consumer taste and need.

CONCLUSION

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1. CONCLUSION
After analyzing all the aspects of the data available and giving some important recommendations
a suitable conclusion which should be derived for this study. However, before starting the
conclusion part, the objective of the research must be kept in mind so that we can arrive at a
befitting conclusion for the research problem. The primary objective of this research was to
know distribution channel Strategy of PepsiCo and to know the importance of Distribution
channel strategy in Positioning of the product. The data collected provided a sound base for
understanding the overall organizational set up of PepsiCo in India. By analyzing the data and
the literature review, following conclusion was inferred:
The Sales and Distribution Network of Pepsi is very strong and almost flawless. PepsiCo India
had the first mover advantage when it entered the market and it capitalized on that advantage to
grab the market. Franchisee based operations combined with the Company’s operations add
strength to the overall presence of the Company in the market.
Franchisee takes care of its operations and PepsiCo does not interfere in its operations. The
Franchisees are required to report to the Company at specific time intervals.
The Advertising Campaigns are conceived, implemented by the PepsiCo and Franchisee has no
say in that. It is very important to develop good relationship with the retailers by providing them
better services and schemes. Maintaining the good relationship with the distributors are very
important for the company because they are the main part of the distribution channel.

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