CHAPTER 1

INTRODUCTION
The Indian FMCG sector with a market size of US$13.1 billion is the fourth largest sector in
the economy. A well-established distribution network, intense competition between the
organized and unorganized segments characterizes the sector. FMCG Sector is expected to
grow by over 60% by 2010. That will translate into an annual growth of 10% over a 5-year
period. It has been estimated that FMCG sector will rise from around Rs 56,500 crores in
2005 to Rs 92,100 crores in 2010. Hair care, household care, male grooming, female hygiene,
and the chocolates and confectionery categories are estimated to be the fastest growing
segments,
With the presence of 12.2% of the world population in the villages of India, the Indian rural
FMCG market is something no one can overlook. Increased focus on farm sector will boost
rural incomes, hence providing better growth prospects to the FMCG companies. Better
infrastructure facilities will improve their supply chain. FMCG sector is also likely to benefit
from growing demand in the market. Because of the low per capita consumption for almost
all the products in the country, FMCG companies have immense possibilities for growth. And
if the companies are able to change the mindset of the consumers, i.e. if they are able to take
the consumers to branded products and offer new generation products, they would be able to
generate higher growth in the near future. It is expected that the rural income will rise in
2007, boosting purchasing power in the countryside. However, the demand in urban areas
would be the key growth driver over the long term. Also, increase in the urban population,
along with increase in income levels and the availability of new categories, would help the
urban areas maintain their position in terms of consumption. At present, urban India accounts
for 66% of total FMCG consumption, with rural India accounting for the remaining 34%.
However, rural India accounts for more than 40% consumption in major FMCG categories
such as personal care, fabric care, and hot beverages. In urban areas, home and personal care
category, including skin care, household care and feminine hygiene, will keep growing at
relatively attractive rates. Within the foods segment, it is estimated that processed foods,
bakery, and dairy are long-term growth categories in both rural and urban areas.



Distribution process consists of all the activities undertaken by manufacturer, either alone or
in sync with other channel members in order to make the product available to consumers.
Distribution can mainly be divided into two major components:
Distribution network comprising of distribution channels
Logistics or physical distribution
Efficient distribution and logistics are prerequisites for smooth transit of goods. Selling is the
end process of distribution as this leads to change in ownership of product. Distribution is the
most vital element for the success of FMCG companies. Efficient distribution network
ensures brand is delivered in right quantity, right place and right time in good condition and
at competitive rates.
Objective of distribution network of FMCG companies:
Availability of Brand: Distribution network ensures that the product is on the shelf or in
outlet when consumers want to buy.
Quality of product: Companies ensure that not only the product is available at right time but
also in right condition and quality like freshness, package etc.
Optimum price: Effective distribution also ensures that the cost of product is competitive
when it reaches final consumer.
Types of distribution channels:
Direct Distribution: In this case: Companies have direct control over the goods distribution
either to retailers or exclusive distributors.
Fig 1: Direct Distribution
Advantages of direct distribution:
A simplistic and direct distribution line
Efficient communication between the distributors and suppliers.
Indirect Distribution: This type of distribution occurs when intermediaries are involved in the
distribution process.
Types of Channel Members
A typical distribution channel consists of the following members:
Agents/Brokers: These are channel partners that match demands of manufacturer with
wholesalers or in organized market with customers. They are very important for exports and
international marketing.
Wholesalers: These are someone who primarily sells to other retailers. They typically buy in
bulk and are very important in rural India.
Retailer: Retailers are most visible face of the distribution system. India has the largest
number of retailers in the world.
Factors affecting Distribution network
Type of product:
Type of customers
Market considerations
Internal considerations
Legal considerations
Challenges and solutions in FMCG Distribution Networks
Value Chain De-verticalization to handle the huge distribution network requirements
India has approximately 6 million retail outlets with around 2 million in over 5000 towns and
4 million in 600,000+ villages. Although super markets have made in-roads into India, their
presence is limited to modernized urban areas. This poses a huge challenge for logistics and
distribution, especially for new players.
A solution to this problem is Value Chain De-verticalization which involves achieving
organizational separation through outsourcing the supply chain activity to a 3rd party. This
will often involve selling existing Operation assets and activities to a financial buyer, 3rd
party manufacturer/distributor or a joint venture with other FMCG companies. This
essentially makes the company in question asset light while the supply company becomes
asset heavy.
How De-verticalization unfolds to reduce barriers of entry
This allows the management of the FMCG Company to focus solely on customer and
consumer management which is its main growth driver. On the other hand, the 3rd party
providers can build their assets and networks in a robust way which they will lend out to the
FMCG companies which outsource the supply chain activities to them. Managing supply
chain activities being their core activity, they are able to put 100% focus on this and hence
achieve efficiency and responsiveness which will help all its clients.

To cite examples, a few FMCG companies like Sara Lee and Nike have already treaded this
path and have been quite successful. However, there is a lot of scope for a huge chunk of
FMCG companies to follow this.
Intermediary reduction for reducing supply chain costs
With time, organized retail chains are setting up systems for inventory management and
quick servicing. This is in turn providing opportunity for the companies or suppliers to reduce
distribution cost by reducing intermediaries like wholesalers and distributors. The FMCG
companies can use this to their advantage and supply directly to the warehouse of the retailers
thereby reducing costs immensely. A part of this benefit can be passed over to the customer
making the companies more competitive while the other part can be shared between the
company and the retailer. Thus this helps in increasing the efficiency of an FMCG company.
Driving channel width for increasing sales
The share of FMCG sales done through grocers had decreased from 50% in the early 90s to
around 35% in the late 90s. This is due to the increase in contribution from other outlets like
chemist outlets and paan shops. FMCG companies need to promote this increase in channel
width by redesigning their SKUs (e,g, sachets) and hardware (e.g. mini dispensers). This in
turn will give them benefit through increased sales by higher accessibility of their products
thus increasing the responsiveness of the distribution network.
Increasing visibility of secondary sales through web connectivity with redistributors
A typical distribution network will consist of goods passing to Clearing & Forwarding Agent
(CFA), then to Redistributors (RD) and finally to Retailers. While it is convenient to connect
with and track sales of the CFAs which are less in number (typically one or two in every
state), it is immensely difficult to track the sales that is happening from the RDs. This is due
to the huge number of RDs present in a distribution network.
To enable this, FMCG companies can use the web to connect with the RDs and major
retailers to obtain their sales data. This will help them in achieving better visibility and hence
better forecasting of sales at different points of the distribution network. This leads to a
substantial increase in efficiency for the company.
Differentiating by using the internet as a distribution channel
The future of most products probably lies in using the internet as a point of sale and reaching
out to the customers directly. FMCG companies will be no exception to this and will soon
have to join the bandwagon which will give them a massive boost of responsiveness to
consumer demand.
We will now examine the distribution networks of three largest FMCG players in India:
HUL, Marico and ITC. We will further see the issues they face in their distribution network
and how they have/can solve them to gain better customer service levels.




Present Day Distribution Network:
The present distribution network has the RWs replaced by redistribution stockists (RS) who
provided the distribution units to the salesperson. There were also Company depots which
acted as stocking point s and bulk breaking venues. The company depots have now been
replaced by Carrying & Forwarding Agents (C&Fas). They transport the products to the Rs
and also act as buffer stock points to ensure minimum stock outs.
The role of RS is important in this network as it services retailers, provides warehousing
facilities, implements all promotional activities, reports the market data to the company etc.



IMPORTANCE OF THE STUDY:
Distribution is one of the most important features that one must consider in undertaking even
a simple marketing. Distribution (Place) is the fourth traditional element of the marketing
mix. The other three are Product, Price and Promotion. It is one of the fundamental factors
specifically the 4Ps that marketers should master in marketing. Distribution channels are
very important because these distribution channels are the ones who help and simplify how
every consumer gets their needed and wanted products. Most businesses use third parties or
intermediaries to bring their products to market. Many producers of products and services do
not sell directly to their end users. They use a marketing channel. In its most basic form, a
marketing channel performs the work of moving goods from producers to consumers.
A marketing channel includes one or more marketing intermediaries who perform a variety of
functions. Each channel member: Provides value, performs a function and expects an
economic return. Marketing channel often speak about the sale of products. However, it is not
limited to the distribution of physical goods. Providers of services and ideas also benefit from
marketing channel. Marketing channels offer better services at costs lower than offerings
without the assistance of channel members. Organizations can achieve differentiation through
their distribution channels. Each of these channels may offer different coverage, skill, and
performance. They may also realize economies of scale that channels of distribution often
offer. Marketing channel decisions are among the most critical decisions facing an
organization. The chosen channels closely affect all other marketing decisions. The
organizations pricing depends on whether it uses mass merchandisers or high-quality
boutiques. The firms sales force and advertising decisions depend on how much training and
motivation the dealers need.


OBJECTIVES OF THE STUDY:
1. To study the nature of work related to distribution of products from companies to the
Retailers and wholesalers.
2. To understand the entire distribution activities carried out by Sairam distributors.
3. To identify any loop holes in between the distribution system

PERIOD OF THE STUDY: 30 days



















CHAPTER 2
COMPANY PROFILE:
Sai ram distributors basically a distributor of ITC business particularly FMGC sector related
to food products.
ITC's Branded Packaged Foods business is one of the fastest growing foods businesses in
India, driven by the market standing and consumer franchise of its seven popular brands -
Aashirvaad, Sunfeast, Bingo!, Kitchens of India, mint-o, Candyman and Yippee! The Foods
business is today represented in 4 categories in the market - Staples, Snack Foods, Ready To
Eat Foods and Confectionery.
It is ITC's policy that its food products should provide nutritious, tasty, hygienic and
convenient options to the consuming public.
ITC will offer food products across multiple categories, price points, delivery formats and
segments as dictated by the needs of the consumer.
ITC's portfolio of food products will be continuously improved and modified to -
1. offer new products that meet the aspiration of the changing consumer,
2. offer food products with affordable and appropriate nutrition,
3. offer food products with micronutrient fortification,
4. drive reduction of sodium, sugar and fat in Products,
5. offer trans-fat free products,
6. offer functional food products with focus on India specific metabolic disorders,
7. follow a strict code for making product functional claims,
8. follow the highest standards in nutrition labelling and reporting,
9. follow responsible marketing and consumer communications practices,
10. create and sustain R&D focus in development of new products and processes,
11. follow the highest standards of hygiene and manufacturing practices in all delivery
formats,
12. collaborate with experts and institutions and
13. ensure widespread accessibility to healthy products through appropriate pricing and
wide distribution.
VISION:
Sustain ITC's position as one of India's most valuable corporations through world class
performance, creating growing value for the Indian economy and the Company's stakeholders
MISSION:
To enhance the wealth generating capability of the enterprise in a globalising environment,
delivering superior and sustainable stakeholder value

Board of Directors

Chairman
Y C Deveshwar
Executive Directors
Nakul Anand P V Dhobale K N Grant
Non-Executive Directors
A Baijal A V Girija Kumar S H Khan

R E Lerwill S B Mainak S B Mathur

P B Ramanujam S S H Rehman Anthony Ruys

Meera Shankar K Vaidyanath






CHAPTER 3
FUNCTIONS AND ACTIVITIES OF THE SRI RAM DISTRIBUTORS
Sairam distributor generally has exclusive rights of distributing all products or a set of
products as ITC distributor is also appointed to serve a particular clientele base like hotels,
canteens, restaurants etc. Traditionally a distributor is treated like a trader in the distribution
channel. But now many organizations have started seeing distributors playing much bigger
role. Following are some of the functions a distributor plays in modern FMCG channel.
Basic role of Sri ram distributor is to purchase/stock products in bulk from the manufacture
and sell/distribute them to retailers in smaller quantity.
Distributor takes orders from the retailers and institutions and ensures timely and quality
delivery of products.
Distributor maintains stock of the products to absorb the supply fluctuation from
manufacturer.
Distributor provides required financing for allowing credit to the retail market.
Distributor is the person who will provide ground level data on demand estimation for the
products.
Distributor expands the retail universe (by opening new outlets) as well as the retail
penetration of various products.
Distributor takes up field level marketing activities like H2H promotions, in shop
promotions etc.
Distributor helps in minimizing consumer complaints and resolving them.
This basically clarifies the broad role of the Sairam distributor in modern FMCG channel.
We will see the functions and daily routine of a typical distributor in the next part to finally
derive the criteria for selection of a good FMCG distributor.

Roles and Responsibilities:

To invest in the company of which Stockistship he acquires. He should also invest in
ensuring adequate manpower and infrastructure(Godown, sales staff, vehicle for timely and
adequate supply of companys products to his customers in his area) which goes a long way
in development of the business. His lack of investment in any of the factors mentioned will
affect the sales negatively.

To maintain 15days stocks (of months sales target) during entire month. Maintaining
sufficient stocks will ensure that stock outs of companys different SKUs are minimum and it
will also enable him to supply full orders of his customers.

To keep and maintain stocks of companys products in safe and hygienic conditions. It is
necessary that the Stockist must have fire safety measures in his godown. He must also
ensure to keep his godown pest free by using pest control devices and services. Many
Stockists consider this a wastage of money. But having safety and hygiene in his godown not
only helps in safety of products of company but it also builds up his reputation and thus many
good companies may be willing to do business with him.

To place orders to super stockist or CFA (if the company is operating thru super stockist/CFA
network) or directly to company as per demands of market. He must maintain sufficient
stocks in his go down always to avoid sales loss due to stock shortage.

To make timely payments to SS or CFA or directly to Company against his old pending bills.
Company's lose 5 to 10% of their sales due to poor or late payments by Stockists. So a
Stockist with growth mind-set must always have sufficient funds at his disposal always to
ensure timely payments to SS/CFA or direct to company.

For continuous business growth in today's competitive market place he should maintain
cordial relations in the market. His regular market visits will help him make progress on this
front.In an age with more competition and more or less similar products, cordial and
productive relationships will go a long way in sales growth.

To visit his market on regular basis. These market visits will help him know about the
competitors practices in market. These visits will also make him aware of problems of
retailers and wholesalers in market relating to pending schemes of company or damage or un-
saleable stocks of company's products lying with them and this knowledge will help Stockists
solve problems of his customers. These visits will also help him develop good relations with
retailers and wholesalers in market.

For continuous business growth He must minimize and resolve complaints of his
customer(retailer and wholesaler) in his area. His regular market visits will take care of this.

To ensure timely and full order supplies to the customers i.e. retailers and wholesalers in his
area of operation to avoid sales losses due to late or insufficient supplies.
To extend credit to his customers as per market norms. In today's competitive market with
more and more companies entering market every day, extension of credit has become a must
for survival in market and to fuel growth. Retailers and wholesalers prefer buying on credit,
so they will prefer buying from a Stockist who gives credit to them.

It is his duty to provide product wise stock status to the company staff as and when they ask
for it.
He must maintain month wise purchase record of all of his customers, ready with him all the
time and provide the same to company as and when asked and required by company officials
from time to time. Availability of this purchase data with him will help him plan growth of
sales of companys products.

To have full contact details of all of his customers and provide the same to company.

To help in execution of Below The Line (BTL) activities in the market with or without help
or support from company staff. Below the line activities include:
(1) On shop promotion
(2) Canopy activity in his area.
(3) Door to door or home to home activity.
(4) Insertion of leaflets into newspapers etc.
Execution of these BTL activities will go a long way in increasing awareness and sales of
companys products.

To increase his turnover and sales he should make all efforts to promote and sell all of
companys products to all his customers.

To take all steps to increase the width and depth of distribution of companys products in his
area. Increasing Width of distribution means to sell companys products to more no of
retailers and wholesalers in his area and increasing depth of distribution means to sell more of
companys products to his existing customers.

To pass on schemes, as being run and operated by company from time to time, to his
customers. He should not try to increase his profit by not passing on scheme of company to
his customer. Companies plan schemes and inputs to grow the sales of their products so
passing on schemes to his customers by the Stockists will help Stockist increase his sales and
thus his turnover and thus his profit in the long run.

To provide timely information to company on competitor practices and activities to help
company plan its sales strategy to safeguard and/or increase the sale of its products.

To abstain from selling companys products to his customers on prices which are more than
the company price list.

It is the moral responsibility to Not to sell or trade companys products in the area of other
Stockist of company.

Again on ethical grounds he should not be a Stockist of competitors products.

ITC one of the leading FMCG in the country which operates in Foods, Personal Care,
Cigarettes and Cigars, Branded Apparel, Education and Stationery Products, Incense Sticks
and Safety Matches, Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business and
Information Technology, Category, has come a long way from the when it started. The
biggest harbinger in the ITC growth story has been Cigarettes, The category in which ITC
still is the major player in the country.
ITCs highly popular portfolio of brands includes Silk Cut, Insignia, Lucky Strike, Classic,
Bristol, Gold Flake, Players, India Kings, Scissors, Capstan, Berkeley, Flake, Duke & Royal,
Navy Cut. The Company has been able to maintain its Market leadership through complete
focus on ceaseless value creation for consumers through substantial investments in creating &
bringing innovative product designs to market, ensuring consistent & superior quality, state-
of-the-art manufacturing technology, & superior marketing and distribution.
However the effect of cigarettes as a category has not been limited to making ITC a Cash
Surplus company. What Cigarette as a category did was it laid the foundation for the
Marketing channel of ITC, which arguably is considered the Best in the country? In the early
days cigarette consumption was confined to the urban centers in the country however ITC
saw an immense potential for growth in semi urban and rural India. Thus began the expansion
of the channel, ITC gained inroads into the remotest of the places of the country eventually
leading up to the E-chaupal model. Cigarettes owing to the Inelastic nature of demand
provided ITC with a lot of bargaining power to further push their other products and hence
turned out to be very instrumental in establishing The ITC Marketing Channel.

Channel Design
MANUFACTURING UNIT
CUSTOMER
HAWKERS
RETAILERS
HAWKERS
WHOLESALERS
DISTRIBUTORS
WAREHOUSE


Data/Information Flow in the ITC Distribution Channel
Information flow plays an important role in communicating strategies from the top
management to the ground staff who are responsible for the ultimate implementation of these
strategies. In case of FMCG business these information flow can be in the form of gaining
more market share strategy (taken by the top management) to lowering product prices to
achieve the said strategy at the lower level.
The Information flow in ITC generally follows a hierarchical structure where it percolates
down from the top management to the area executives through several layers. Most of this
information flow is in the form of changes in strategy that ultimately changes to volume of
sales and other review metrics.
The following figure shows the information flow as it happens in the ITC organization:
If we look at the information flow particularly in the cigarette business we find the way
information flows from the top to bottom of the organizational pyramid. It starts with the
General Manager for the particular business vertical which in this case is the Cigarette
business. This information is typically in the form of strategy measures that the top
management takes. An example can be a strategy communication from the
general manager to improve the market share in the cigarette business. In such a case the next
line managers who would typically be the product managers would translate this strategy into
implementable product strategies (e.g. new product development or cutting prices based on
the particulars of the strategy). In case of simpler strategy like improving sales, zonal
managers would be communicated this strategy. From the zonal managers this information
will flow to the branch managers who typically manage specific branches within a zone. This
information next flows along to the assistant manager and from there to area managers who
deal with the wholesalers in implementing these changes. In the organizational hierarchy the
information flows to the area executives who interact directly with the retailers.
After this initial information flow there is data flow in the reverse direction as well to help the
managers to evaluate the attainment of strategy objectives. These are mainly in the form of
sales report that are produced in a weekly, monthly and yearly basis.
Example of sales position report:
These reports are generated on a weekly basis
These reports are generated by the managers at the distributor level
Reports are submitted to the Areas sales manager or Asst. Manager
Typical contents of the report include Opening stock, closing stock, ordered stocks, received
stock and damaged stock.
Document regarding the flow of information
A sales position report is generated weekly by the manager (cigarettes) at the distributor
level. This report is submitted either to the area sales manager or the assistant manager.
The report contains the following:
Opening stock : It is the stock of an item (cigarettes) present at the beginning of the week .
The stock which is left at the end of the week becomes the opening stock for the following
week. The distributor takes the order every week whereas the retailers take the order after
every two week. At the point of delivery distributors need to pay cash and collect stock, no
credit is given on cigarettes.

Received stock : It is the stock which each distributor obtains at the beginning of the week
from the godown( Area manager) and further distributes it to the wholesalers (maximum 1
month credit) and hawkers( 1 day credit).
Sale of the stock : This includes the total sale done by the distributors and the retailers from
the stock in a week.
Damaged stock : Cigarettes have a shelf life of 3-6 month as they are highly hygroscopic. All
damaged or unsold stock is bought by the company and sent to the factories where the
tobacco is extracted, processed and new cigarettes are produced.
Closing stock: The stock which is left at the end of the week .
Channel member management
Monetary and non-monetary methods of rewarding: According to the HR policy of ITC there
are no monetary or non-monetary rewards given to the channel members i.e. the distributors
and the retailers. No benefits, no freebies or paid vacations etc are provided to the channel
members. Very rarely cash gifts are given which is related to the performance. No credit is
given to the distributors for the purchase of stock (cigarettes). Even the retailers do not get
any credit from the wholesalers and have to pay cash. The wholesalers however get a
maximum of one month credit from the distributor.
Target setting mechanism: There is a certain target which is set for the distributors. For the
retailers there are no targets set. The target for the distributors is in terms of M-S, where 1 M-
S is equivalent to 12000 sticks and 1 case is equivalent to 12 M-S. The distributors are given
a target of 200 M-S per week.
Monitoring Mechanisms : The distributors are monitored by the Area Sales Manager and the
retailers are monitored on by the Area Executives. The parameters on the basis of which the
distributors are monitored are the following:
(a) Visibility of the products
(b) Availability of the products
(c) Maintenance of the existing.
Training and HR Inputs : The distributors are not given any training or HR inputs by ITC.
Management of Field Force
Monetary Method of Rewarding: As per the HR policy of ITC Ltd the field force is
monetarily rewarded on the basis of the number of bills drawn on the distributors.
Non-Monetary Method of Rewarding: The field force of ITC Ltd is given unlimited medical
benefits in terms of non-monetary methods of rewarding.
Target setting Mechanism: The field force is given targets in terms of the number of bills
generated by an individual.
Monitoring Mechanism: The members of the field force reports to their immediate supervisor
and this follows throughout the hierarchy.
Training and HR Inputs: The sales men of the distributors are under the payroll of ITC ltd. In
case of mass recruitment the new sales force is given training by the HR department of ITC
Ltd. As per the HR norms, ITC Ltd provides training to its own employees of the distribution
network at regular intervals.
Transportation and Logistics:
Company sourced 3rd party truck
Company sourced 3rd party truck

Distributor Sourced third party Vehicles
Distributor Sourced third party Vehicles
Third party owned trucks are used to transport the cigarettes from the production plant to the
company depot/warehouse. Similarly, third party owned trucks are also used to transport the
goods from the warehouse to the distributors. All these transportation costs are borne by the
company. From the distributors place, the cigarettes are distributed to the wholesalers & the
retailers (panwalas) through the user delivery vans, rickshaw, cycles, motorcycles, autos. All
these transportation costs are borne by the distributor. ITC Cigarettes have consolidated their
inventory by deploying SAP module of Information technology in their warehouses. The
stock positions are automatically updated in the database as & when goods are sold from the
warehouse. Accordingly, replenishment orders are generated to the company when the stock
level goes below the benchmark level which takes into account the order lead time as well.
This way ITC cigarette reduces its inventory holding costs by deploying proper inventory
management.








CONCLUSION
As FMCG companies get more directly involved at the front end of the value chain, the role of
distributors is shifting from selling goods in a particular territory to being mere financial
investors. In India, companies have long relied on distributors because they understand the local
market. But with improved data availability, companies are getting closer to customers. They
have started to reduce the number of small distributors in favour of big ones to cut costs. FMCG
companies typically give distributors a margin of four to six per cent of secondary sales, and
reducing the number of distributors helps cut costs. Large distributors are well equipped to handle
some key functions of small ones - lending to retailers, environment management and demand
management. In some areas, companies have taken on a greater role. Earlier, distributors
appointed salesmen directly, and the companies had little or no say. Increasingly, companies are
outsourcing this entire process to temp staffing outfits.
The distribution network that played an important role in driving, or hampering, the growth of
these companies.
Selling capability is the function of distributors, said an official from a logistics company.
Distributors perform one of the most important supply chain functions: the distributor has to
ensure the utilisation of space at the retailers shelf; it has to make sure the retailer does not run
out of inventory at any time, said the official.
In a standard supply chain, the official said, a manufacturer produces and markets its products
while the logistics firms transport, store and deliver the product to the retail outlets while
distributors take orders and manage sales on behalf of the manufacturer.
By contrast, most companies try to integrate this function into their existing operations, expecting
the third party to only provide storage, the official said. This sometimes leads to problems.








ANALYSIS OF ITCS DISTRIBUTION NETWORK

ITC is one of India's foremost private sectors companies with a market capitalization of
nearly 100000 crores and a turnover of over 18000 crores. ITC is rated among Asia's 'Fab 50'
and the World's Most Reputable Companies by Forbes magazine, among India's Most
Respected Companies by Business World and among India's Most Valuable Companies by
Business Today. ITC also ranks among India's top 10 `Most Valuable (Company) Brands', in
a study conducted by Brand Finance and published by the Economic Times. ITC has a
diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri-
Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel,
Greeting Cards, Safety Matches and other FMCG products.ITC has More than 1000 SKUs
with warehousing space of more than 4 million Sqft spread out across 55+ locations .Also
Production is carried out across 45+ plants.

ITCs Logistic network overview
Cigarettes:
ITC has a unprecedented market leadership in this segment with a market share of around 70
% .The Dominance of ITC is evenly distributed across all segments and in all geographic
locations as wel as price.ITC has an extensive distribution network supprted with state of the
art technology as well as products which give it a exciting long term potential in this sector.
Foods
The Foods business is today represented in 4 categories in the market. These are:
Ready To Eat Foods
Staples
Confectionery
Snack Foods
In the ready to eat segment ITC has a market share of 48 % and with a majority of the pie
being held by MTR as well.
CONFECTIONERY Confectionary market in India is about Rs.2500 crore. It is loosely
divided into seven categories: 1. Hard boiled candies 2. Toffies 3. Eclairs 4. Chewing gum 5.
Bubble gum 6. Mints 7. lozenges ITC has currently in market with its two brands Mint-o
and Candyman.
STAPLES ITC entered the staples market in 2002 with wheat flour under the Aashirvaad
brand. In 2003, ITC extended the Aashirvaad brand to edible salt. By early 2006, ITC had a
40% market share in the Rs. 6 billion packaged flour business
BISCUITS: Indian biscuit market is estimated to be around 5000 crore. Biscuit industry in
India in the organized sector produces around 60% of the total production, the balance 40%
being contributed by the unorganized bakeries
In the NON-FOOD segment ITC follows the same model, just that the production centres for
the same are: Kolkata, Bangalore, Haridwar and Nainital.
e-CHOUPAL
The e-choupal initiative was designed by ITC to the challenges faced by the Indian
agricultural scene characterized by fragmented farms, weak infrastructure and a lot of
intermediation by 3rd parties leading to deprivation of the farmers of their dues. The e-
choupal benefits the farmers in terms customized knowledge(for land management as well as
risk mitigation) Real time information(for commodity prices, weather information and farm
inputs).The company benefits in terms of finding a channel into the untapped rural markets,
leasing this channel to 3rd parties(Farm producers) and for direct marketing activities.
e-choupal brought down the chain costs by half and the majority of this benefit was passed on
to the farmers in terms of savings in the labour and handling losses. All in all while the
farmers benefits through enhanced productivity and gate prices ,ITC benefits by having paid
lower procurement costs reducing the non value adding activities in the chain, adding features
such as insurance and credit facilities for rural masses and using it as a medium for strategic
sourcing support for its various divisions.
The Distribution system comprising of village traders,Ghanis,wholesalers,Mandis
,cooperatives, traders has been replaced by the e-choupal as the centre of all information.
E choupal serves 4 million people spread over 10 states thorugh 6500 kiosks.It has around 35
hubs at the present and souces its supplies- soyabean, coffee, wheat, rice, pulses, shrimp from
around 40000 villages .It intends to take this facility to 15 states in the future covering 10
million farmers and 100000 villages in the coming years.

Issues in the Distribution system
With the inflow of retailers like walmart,ITC would be in a new arena altogether.With its
competitiors like HUL having prior experience of working in company specific channels with
shared ERP tools,ITC would have to device new distribution channel to account for such
retail players.


The Distribution process mainly consists of three departments:
Distribution Department: It appoints distributors and establishes a distribution
network, processes approved sale orders and prepares invoices, arranges logistics
and ship products, co-ordinates with distributors for collections and monitors
distribution stocks and their set-up.
Finance Department: It checks credit limits and approves sales orders in
compliance with the credit policy followed by the firm, records collections from
distributors, periodically reconciles outstanding balances from distributors, obtains
balance confirmation from distributors and follows up outstanding balances.
Shipping or Warehousing Department: It dispatches goods as per approved by
order, ensures that stocks are dispatched on a FIFO basis, ensures physical control
over load out area and updates warehouse stock records in a timely manner.

















DISTRIBUTION ACTIVITIES OF SAIRAM DISTRIBUTORS PVT LTD
Warehousing
Sairam range of warehouse solutions is amongst the most diverse in India. It encompasses
dedicated, shared-user, automated and multi-temperature operations. We deal with all types
of FMCG products of ITC. A unique combination of engineering, IT, human resources and
supply chain skills enables us to provide functionally excellent solutions that are Fit To
Purpose. By working in close partnership with our customers, we identify the optimum
operational model based on variables such as product type, customer geography and
technology requirements. Our trained, certified, experienced, motivated and empowered unit
managers and teams deliver operationally excellent service standards.
Transportation
Sairam has responded adeptly to modern supply chain challenges with a comprehensive
range of transport services, which cater to local, regional and national requirements. We add
value and build in flexibility through advanced solution design and supply chain modelling
where required. We effectively leverage technology to optimize routes, track consignments
and maximize driver and vehicle efficiency. Systems integration ensures total visibility whilst
transport is managed across multiple depots and state lines.

The team of experienced drivers ensures that the integrity of the products is maintained. They
are trained and motivated to ensure they make accurate and timely deliveries.
Sairam offers organizations various standardized options in their logistics solutions through
collaborative services across the entire spectrum in the supply chain. Whether it is flexibility,
pay-as-you-go warehousing space, shared transport to optimize capacity or a co-packing
facility, our width of experience makes us the ideal shared-user partner for all businesses-
small, medium or large.

The in-depth understanding of each project's unique characteristics coupled with ability to
challenge and re-engineer existing solutions, enables us to differentiate our service offerings
and bring additional value to our clients.



Basic role of Sri ram distributor is to purchase/stock products in bulk from the manufacture
and sell/distribute them to retailers in smaller quantity.
Distributor takes orders from the retailers and institutions and ensures timely and quality
delivery of products.
Distributor maintains stock of the products to absorb the supply fluctuation from
manufacturer.
Distributor provides required financing for allowing credit to the retail market.
Distributor is the person who will provide ground level data on demand estimation for the
products.
Distributor expands the retail universe (by opening new outlets) as well as the retail
penetration of various products.
Distributor takes up field level marketing activities like H2H promotions, in shop
promotions etc.
Distributor helps in minimizing consumer complaints and resolving them.
This basically clarifies the broad role of the Sairam distributor in modern FMCG channel.
We will see the functions and daily routine of a typical distributor in the next part to finally
derive the criteria for selection of a good FMCG distributor.