Candy and Chocolate India (CCI)

Candy and Chocolate India (CCI): Last Mile Distribution Challenge

Nikhil Joy PGP/16/034

Babita Pegu PGP/16/136

Febin Kovan PGP/16/259

Gurnoor PGP/16/318

Saumarjit Kamwar PGP/16/342

Situational AnalysisYear Relevance

1970 CCI was founded

1980 Diversified into Beverages

2000 Expanded to prepared foods

2007 Reconfigured RIM

Organized Revenue: 6.5 M

CAGR (Revenue) : 12%

Estimated Sales by 2014: 11 BCAGR (Volume) : 6%

Unorganized

35% of India’s Total Confectionery Consumption

CONFECTIONARY MARKET IN INDIA

MARKET PENETRATION

Urban – 75% Rural – 10%

PER CAPITA CONSUMPTION

OF CONFECTIONERY

India 20 gms West 32%

North 28%

South 23%

East 17%

75%

15%

10%

SALESConfec-tioneryPrepared Foods

Situational Analysis

76%

14%10%

DISTRIBUTION OF CONFECTIONERY

PRODUCTSKirana StoresConvenience StoresOthers

15%2

5%

55%

5%

DISTRIBUTION PATTERN2-8 yrs 8-25 yrs25-64 yrs > 64 yrs

PRODUCT GROWTH MARKET SHARE

Chocolate 20% 46%

Sugar Candies 5% 34%

Gums 9% 20%

CONFECTIONERY MARKETCCI’S RECONFIGURED RTM

Exclusive Rural

Penetrate Rural

Markets23% of Sales

Traditional Retail

Focuses on Urban Areas75% of Sales

Modern RetailRetail sector

through hypermarkets, supermarkets7% of Sales

Problem Identification

Identify a Route-to-Market (RTM) which is cost effective, easy to operationalize

and scalable. The RTM objective of increase in Sales, decrease in number of days

inventory and improved Customer Service should also be met.

Alternative 1: Superstockist Model

CCI Superstockist Substockist Wholesaler Retailer Customer

Channel:

Superstockist Model

Price per monopack 1

Retailer(12.5% margin) 0.875

Wholesaler(11% margin) 0.7787

Substockist(5.5% margin) 0.7359

Superstockist(11% margin) 0.6549

CCI's revenues 65%

Pros:• Offers advantages of scalability and

operational flexibility• Sustainable option as there are no

channel conflicts

Cons:• Expansion limited• Requires vast resources and

generates less revenues

Alternative 2: Haats

CCI Superstockist Substockist Wholesaler Haat Customer

Channel:

HaatsBuyer spend / day for FMCG 40Buyer spend / day for confectionary 4Total buyer spend / day on confectionaries 35200

CCI market share 12

Retailer revenues / day 4224

Retailer(12.5% margin) 3696Wholesaler(11% margin) 3289.44Substockist(5.5% margin) 3108.5208Superstockist(11% margin) CCI Revenues/Day 2766.583512

CCI's revenues 65%

Pros:• Weekly markets; 43000 Haats in India• Haats were preferred over rural retail

outlets• Accessible by roads• Single Haat would cater to 20-60

villages• Had 5000-12000 visitors per day

Cons:• Temporary Haats moved from village

to village• How would channel be established

Alternative 3: VansPros:

Mobility from village to village

Widely used in rural markets

Used for creating brand awareness

Cons:

Expensive option as Vans costed Rs.3,500 per day

Only 33% percent of villages had roads; limited scope

Alternative 4: SHGs

CCI Superstockist SHG Retailer Customer

Channel:

SHGs

Price per monopack 1

Retailer(12.5% margin) 0.875

SHG(0.5% margin) 0.8706

Superstockist(11% margin) 0.7748

CCI's revenues 77%

Pros:• Higher Margins for CCI• Personal selling possible• Opportunity for CSR

Cons:• Volume sales would be limited• Limited scope as SHG movement had

not spread evenly across India

Alternative 5: Mobile Traders

CCI Superstockist

Mobile Trader Customer

Channel:

Mobile Traders

Price per monopack 1

Mobile Trader(12.5% margin) 0.8750

Superstockist(11% margin) 0.7787

CCI's revenues 78%

Pros:• Local knowledge• Could sell at Haats and Rural retail

stores• Cost effective• Can penetrate areas without road

connectivity• Prices could be reduced to increase

penetration

Cons:• Lower sales volumes• Can only sell value packs and low

cost confectionary items

Alternative 6: Tie-Up with India PostPros: Cost effective way to reach rural markets Deliver consignments directly to retailers

Cons: Can only be used in conjunction with

Retailers, Mobile Traders etc India post has huge bargaining power Nature of product denied tie-ups

Recommendation Combine alternatives 2 and 5: Haats and

Mobile Traders Mobile Traders would be able to serve

villages with very low connectivity Higher volume sales at Haats would make

up for the low volume of Mobile Trader sales

Local knowledge of Mobile Traders coupled with lower prices would increase rural penetration

Thank You