Gsom case group, 2 место, 1 Тур, Английская секция,
1. GSOM CASE GROUP
Deliver ce to Every House
Konstantin Andreev
Tatyana Aleksandrova
Igor Buryak
Igor Sumbaev
Saint-Petersburg, 2011
2. What do we want What do we have
Sales volume of Inmarko in Russia in Two well-equipped
2011-2015, billion rubles
?
25 factories in Tula and Omsk
20
Own system of distribution
15
10
and extensive distribution
5
network
0 Own and rented storage
2011 2012 2013 2014 2015
and transportation facilities
What should we do Where
1
Distributors Cooperation
1. Replace distributors with low 1. By Acquiring Talosto1;
CCFOT ratio; 2. With biggest companies and
2. Decrease costs on distr. & retail chains2 (Aeroflot, Russian
Railways, Starbucks, etc.);
logistics – build our 3) Partnership in Sochi 2014
own branches.
Increase in
Sales
POS (points Supply Chain
of sales) Methods
1. Concentrate on less developed 1. VMI with our Key Accounts;
POS, which are in demand; 2. Aggregated demand forecasting; 1
2. Individual strategy for each of 3. Available-on-shelf approach See Appendix 1 and 2
2 See Appendix 3
three regions! 4. Usage of railway transportation3
3 See Appendix 4
3. Northern-West Federal District
Main distribution problems: New Distributors Coverage area
Warehouses, % of sales
CCFOT
vol. volume
• Big distance to northern cities
Tcherepovets, South-East of
• Small volume of warehouses Distributor 2
NWFD
2000 27% 90%
• Low CCFOT of distributors
Distributor 5 Murmansk, Severodvinsk 2000 25% 90%
• Remoteness of production facilities
Distributor 6 Arkhangelsk 1000 18% 88%
• Absence of track fleet
Warehouses: 11 000 pallets
Main Cities:
Saint-Petersburg
Saint-Petersburg Volkhov
Novgorod/Pskov 2 000 pallets Murmansk
Acquisition of «Talosto» Arkhangelsk
3 000 pallets
Petrozavodsk
3 200 pallets
Tcherepovets Novgorod the Great
Pskov
Arkhangelsk
Production Facilities in Volkhov (35 000 ton of ice-cream) Severodvinsk
Vologda
Syktyvkar
Narnyan-Mar
Demand 4(See Appendix 5) Consumption
Exclusive contracts with
Population, Demand (ton) Supermarkets supermarkets (Talosto) and
Cities thousands 3% wholesalers (big bricks)
14% Retailer
people 2012 2013 2014 2015 32% Increasing number of branded
Saint-Petersburg 4848,7 10114 10277 10439 10601 12% Minimarkets kiosks and street retailers
(impulse purchasing)
Volkhov 47,2 98 100 102 103 Kiosks
16% Development of HoReCa
Murmansk 307,6 642 652 662 673 23%
HoReCa segment (Contracts with
Petrozavodsk 266,2 555 564 573 582 café, restaurants, like
Street Traders McDonalds, Baskin Robins
Novgorod the Great 213,8 446 453 460 467
Sales etc.)
Pskov 201 419 426 433 439
Arkhangelsk 353,3 737 749 761 772
Inmarko+Talosto
Severodvinsk 193,5 404 410 417 423
36% 28% 34% 31% 35% 34%
Vologda 290,5 606 616 625 635 Nestle
Syktyvkar 228,5 477 484 492 500
15% Iceberry
Naryan-Mar 18,8 39 40 40 41
Cumulative demand of 14% 14% 12% Russkiy Kholod
14 536 14 771 15 005 15 237 7% 8% 13% 7% 12%
main cities
NWFD(Cumulative Others
28 850 29 316 29 780 30 242
NWFD demand) 13831,7
2012 2014 2015
4. Central Federal District
Changes in distribution network Kiosks
Company name Cities Capacity CCFOT Margin Kiosk’s sales in Moscow ≈ 27% of total sales of ice-cream.
(storage) (pallets) Leader - Iceberry.
CLC Moscow 10’000 97% 30% Construction and modernization of new kiosks
Ivanovo 4’000 Another solution:
Vladimir 3’000 New way of distribution – Ice-cream vans (trucks)
Advantages: high mobility, opportunity to trade by the
Logistic + Ryazan 3’000 92% 20%
Tambov 1’500 underground stations
Disadvantages: high price (twice the price of a kiosk)
Central ID Orel 2’000 95% 30% Conclusion: the increase in sales will overcome the
Belgorod 3’000
Voroneg 6’000 additional costs the project is profitable
Kursk
Lipeck
3’000
3’000
Exclusive contracts
Sturbucks:
Snezhok Smolensk 6’000 90% 20% Additional 52 outlets on the present moment
Bryansk 2’000 sales High level of popularity
Kaluga 2’000 Well-known brend
Ice Moscow 8’000 85% 20% Plans to implement private-label ice-cream
Tver 1’500
Yaroslavl 4’000 Acquisition of Talosto
Kostroma - Acquisition of Talosto will not have great weight on solving
Inmarko’s problem, as in other regions, however:
• Due to permanent growth of demand on ice-cream and
Distributor 8 Yaroslavl 89% 20%
Kostroma 3’500 rejection of Ice distribution company, the new additional +
Moscow warehouse in Moscow with the capacity of 12’500 pallets
will have great value for the company
Distributor 9 Tver 93% 28%
Vladimir 2’500 • The transportation network of Talosto will allow Inmarko to
Moscow cut their costs
Distributor 17 Moscow 6’000 94% 28% Sales structure forecast for 2015
(temporary) Supermarkets
9% Retailer
The results of the distributor’s change: 10% 26%
Minimarkets
•Increased CCFOT (from 85% up to 92% in average) 5%
Kiosks
•Better communication with Kostroma 13% HoReCa
•More warehouses and storage place in Moscow (by 28% Street Traders
1000 pallets) 9%
Ice-cream vans
5. South Federal District
Main problems in the region Company Cities (storage) Capacity CCFOT Margin
• Weak position in the region in general name (pallets)
Santa Krasnodar 4’000 80% 15-24%
• Absence of own branches (producer) Stavropol 3’500 winter
• Low CCFOT of distributors Tcherkessk 1’200 90%
summer
Olympic Games Sochi 2014
FCG Nalchik 1’000 89% 25%
Participation in partnership program of Stavropol 8’000
Valdikavkaz 2’500
Sochi 2014 in the category “dairy Nazran 1’000
products” to sell ice cream during Olympic
Antares Rostov 5’000 99% 25%
Games in Sochi. More than 0.5ml people Astrakhan 3’000
usually visit Olympic Games! Elista 1’200
The main way of distribution – Ice-cream Zero Krasnodar 3’500 80% 15%
vans. (producer) Rostov
Volgograd
Cooperation with Magnit
Magnit – is the major retailer in Southern
Region. For more profitable cooperation, Open our own distribution channel 5:
we offer to implement Vendor - In 2012 building of a warehouse in Rostov-na-
Management Inventory (VMI) to increase Donu (the largest city in the region) to substitute
accuracy of planning and thus to reduce facilities of local producers (Santa, Zero), because of
costs. their low CCFOT ratio. To avoid idle capacity, in
Target distribution of Sales by 2015 winter season we let on lease our extra spaces.
Supermarkets
- in the 2013 we will build another warehouse in
2% Krasnodar. Thus we will have only one major
12% Grosery stores
31% distributor left - Antares
Minimarkets
25%
Kiosks + Acquisition of Talosto
19% HoReCa
New production facilities in Shakhty (25’000
11%
tonnes a year) and warehouse in Krasnodar
Street Traders
5 See Appendix 6
6. Conclusions and recommendations
Main goal: Distribution:
Construct the 1) Factories
distribution network in Add new chains
Central, South and 2) Distribution centers
North-Western Federal 3) Warehouses
Districts to double the
sales of Inmarko in 4) Wholesalers
Acquire existing
monetary terms up to 5) Retailers distribution chain +
2015 year 6) Consumers reconstruction
Main problems: Exclusive contracts, new channels of sale Increase the share of home
buyers up to 45% (summer)
• Tough competition and 65% (winter)
• Low CCFOT of some distributors New distributors, construction of own distribution channels
Key Accounts 15%
• Low capacity of warehouses
Modern Trade 30%
• Low coverage of NWFD and SFD Strategic acquisition of new production facilities (“Talosto”)
• Lack of necessary production Traditional 45%
facilities to increase sales Trade
Recommended time table of implementation6
2012 2013 2014 2015 Market Shares, 2015
Inmarko +
Acquisition of “Talosto” Talosto
Iceberry
New Distributors Resign of some 34% 35%
distributors in SFD Nestle
Increase of Track fleet 7% 12% Russkiy Kholod
12%
Creation of new contracts Others
6 See Appendix 7
7. Appendix 1
Description of Unilever-Inmarko and its most strong competitors 1
Nestle Iceberry Russkiy Kholod Talosto Unilever-Inmarko
St.Petersburg
Barnaul Volkhov Tula
Factories Zhukovsky 2 Vologda
Moscow Shakhty Omsk
Moscow
Branches in the Branches in such
biggest cities in 14 branches big cities as
10 branches
Russia Powerful branches throughout Russia Moscow,
throughout Russia
Branches (St.Petersburg, in Moscow and (Kursk, Vologda, St.Petersburg,
(Moscow, Qazan,
Moscow, Samara, Saint-Petersburg Astrakhan, Krasnodar,
Tula etc.)3
Nizniy Novgorod, Moscow etc.) Yekaterinburg,
Perm etc.) Rostov-on-Donu
Low-temperature
Large national or Big distribution warehouses in Own warehouses
regional Common center in Moscow St.Petersburg, in Tula, Omsk and
Storage facilities
warehouses distribution center and rented storage Moscow, several rented
located near clients facilities Yekaterinburg and storage facilities
Krasnodar
Own specialized Own 20 units of Own specialized Own specialized
Own big
Fleet trucks and rented refrigeration trucks and rented trucks and rented
specialized fleet
ones machines ones ones
1 In this description we consider companies, which are main competitors of Inmarko in all three dsctricts: CFD, NSFD, SFD
2 Company closed factory in Timashevsk in 2011 and transferred equipment to factory in Zhukovsky
3 According to web-site of the company http://inmarko.ru/, Inmarko has 10 branches throughout Russia on the November 2011
8. Appendix 2
Analysis of the most strong competitors in all three districts: CFD, NSFD, SFD
Iceberry
Russkiy
Talosto
Kholod
Factories Nestle
Talosto has factories and
storage facilities in all
Branches three districts, in which
Unilever-Inmarko holds
an interest.
Storage Facilities
Fleet Acquisition of Talosto
till the end of 2013
enables Unilever-
Unilever-Inmarko has better position Inmarko to achieve
undoubtedly its goal.
Unilever-Inmarko has worse position
Equivalent position with competitor
9. Appendix 3
The common components of strategy for all three districts
• Partnership with the biggest Russian airlines
(Aeroflot, Transaero, S7 Airlines, Rossiya) and its
suppliers, which implies that we will provide the
boards with special ice-cream
• Analogous partnership with the Russian Railways
• The prevalent usage of railways to transport ice-
cream in refrigerated rolling stock from factory in
Tula to some remote cities
(Murmansk, Arkhangelsk, Vladikavkaz etc.)
10. Appendix 4
Reasonableness of prevalent usage of refrigerated rolling stock in some routes
Route: Tula-Murmansk
(Tula-Moscow-St.Petersburg-Murmansk)
Usage of specialized trucks costs:
a) 30000 rubles for 20 tons of weight for route Tula-
St.Petersburg
b) 41520 rubles (1384 km * 30 rubles) for 20 tons of
weight for route St.-Petersburg-Murmansk
Total: a)+b) = 71520 rubles
One refrigerated rolling stock can carry 35 tons of ice-
cream. According to JSC Refservice (the subsidiary of the
Russian Railways) the transportation of 35 tons of ice-
cream costs in average 50 rubles per km. The distance
between Tula and Murmansk is 2336 km of railway. Thus
this transportation costs 2336 * 50 = 116800 rubles or
(116800 * 20) / 35 = 66742 rubles for 20 tons of weight.
So it is more reasonable to use refrigerated rolling
stock in this route than trucks.
11. Appendix 5
Forecasts and predictions
Calculations of annual demand are based on following assumptions:
1) The share of consumers of ice-cream is 55% in 2012 and increases by 1% every year;
2) The population of Russian Federation decreases by 0,2% every year;
3) The annual consumption of ice-cream is 3,8 kg per year for individual;
4) The Data concerning population of districts and cities was taken from RosStat web-site
Forecast of market share bases on:
1) Increase of sales through supermarkets/retailer with “Talosto” distributional channels
and exclusive contracts;
2) The annual growth of share is expected to be 3% with the growth of demand and
strengthening of company position in street trade and kiosk segment;
3) As we cannot predict the weather, we consider it will not change dramatically over 5
years;
4) As we cannot predict the crisis or other critical situations, or actions of competitors, we
consider that nothing will change (there will not be crisis, our competitor will not be
answering irrationally on our actions).
12. Appendix 6
Creation of own distributional channel in SFD
2011 2012 2013 2014 2015
Own warehouse
0 12000 24000 24000 24000
(pallets)
Distributors (pallets) 33900 21900 9200 9200 9200
Trucks 6 7 (+1) 10(+3) 10 10
Investments (ml) 17.28 2.88 8.64 0 0
In 2012 – construction of an warehouse in Rostov-na-Donu (12’000).
By the end of 2013 – construction of a warehouse in Krasnodar (12’000).
To calculate number of trucks we need: 1) Distance between Tula (our production facility) and Rostov-na-
Donu – 900km, each month a truck can do 5 tours back and forth 2) We decided to buy FRACOLD C 415
8SP (loading capacity – 16 tonnes), as Hyundai's’ trucks are more expensive. So in a year each truck can
transport 960 tonnes of ice cream during the year. Sales (in ths. tonnes)
Our sales (in thousand tonnes) will change in next 4 years according 20
following assumption: 15
1. Value of demand in 2011 was calculated, using the population 10
of the region (14 mil.) and ice cream consumers share (given in appendix), 5
2. Approximate sales share of Inmarko was determined from Appendix 0
2011 2012 2013 2014 2015
«Regional sales Distribution» using cities of Rostov and Sochi).
As the premium of distributors is around 25% and average price of ice cream 180.3 RUR, building our own
distributional network has economic sense (even if we add other supplementary costs such as
fuel, wages, taxes, local transportation).