3. 3PD distributors
are not manageable
In 2003 the targets were like this
We have to convert
operations to DS3
Hired 500 sales
representatives
50 000 outlets
covered
1 2 3
4. Out of three possible RTM models âŠ
DSD
Direct Sales
and Delivery
DS3
Direct SalesThird
party delivery
3PD
Third Party sales
and Delivery
Warehousing
and delivery
Manufacturer
Distributor
Distributor
Sales
management
Manufacturer
6. We chose DS3, as the most adequate
to margin and offtake of the product
Control over shelves
Cost to serve
DSD
3PD
DS3
7. We recruited 500 sales representatives
Who sold directly to 50.000 retail
outlets
Half of the additional margin we
invested into further development
We kept on 40% sales growth with the
same margin level during 3 years of
the project
In 2003 it was still the time
to invest into new instruments
9. Only complex of sales initiatives
drove to results
Unified pricing
Territory integrity
Channel management
Effective internal communications
Career ladder, training strategy
10. We introduced channel pricing
equal for all the territories
Price for distributor
Retail Shelf Price
TraditionalTrade Local chains National Chains
Danone
Price for retail
11. Conversion 3PD to DS3
â is adherence to the route
The model was âeasy to sellâ to
distributors
The model allowed us to get ROI in a year
âGeneral
priceâ
âmixedâ
teams
âballastâ
product
Exclusive
teams
12. 900 Euro
manufacturer
contribution
Sales per agent
30.000 Euro
Distributorâs
markup
3% = 900 Euro
Distributorâs
contribution
Sales increased twice up to
60.000 Euro
In a year
3% = 1.800 Euro
distributor contribution
Agent wages
1.800 Euro
and stop investments in a year
DS3 model was
âeasy to sellâ to distributors âŠ
Agent wages
1800 Euro
16. 2000 2010
Retail chains
Distrbutors
Manufacturers
The market has changed irreversibly
Retail chains are growing and competing for the best prices
The margin is going from production to retail
From distribution the margin has already gone
Those who do not feel it today â will confront it to-morrow
Manufacturers, overstepped $1mlrd, escaped from this problem
How the other producers must behave on the new market ?
Margin split
17. The model was
successful and
profitable
Manufacturers solve similar tasks
But in the new
conditions the model
is not working.
And the issue is
not the crisis
We need to grow
both topline and
bottomline
1 2 3
18. But perhaps not all of us accept
the real problems
The market has changed,
but our mindset is the same
Distribution Model
Segmentation
TradeTerms
Something has happened
with our sales â
âcrisis, it seemsâ
20. Nowdays DS3 inTraditionalTrade
became less effective
Sales per outlets dropped â delivery
cost increased
Quantity of shops decreased, traffic
jams intensified â effectiveness of
routes decreased
So agentâs salary eats the margin
Only those who overstepped $1 mlrd
do not feel it yet
21. And it needs permanent revision âŠ
Chicago
To develop
NewYork
Philadelphia
# active clients
per sales agent
Salary / Sales per agent
Florida
Oklahoma
Washington
San-Hose To convert to 3PD
100
50
10%
22. How to make DS3 cheaper ?
Our average order was less than minimum delivery lot
We could not pay the whole salary to the agent
Mixed teams â was our solution
23. How to organize and manage mixed teams ?
The products should :
Not compete among themselves
To be within one category
To have similar sales per outlet
Belong to markets with equal volatile
Have similar consumer loyalty to brands
24. Your contribution to agents wages:
For the Euro of your sales agent gets
commission more than for the other
products
Ideally they pay fix part, and you play
bonus :-)
How to organize and manage mixed teams ?
The products should :
Not compete among themselves
To be within one category
To have similar sales per outlet
Belong to markets with equal volatile
Have similar consumer loyalty to brands
25. And merchandisers also became national
Shared services (1 person merchandises
several producers) was the reaction to
reduction in the functional
There are national agencies with salary fund
$10+ mln a year
Why are their services cheaper ?
Due to scale effect they organize
processes better than manufacturers
Merchandiser spend more time in the
outlets and less on the way
26. Retail investments need
to be optimized too
There are 22 500 modern
trade retail outlets in Russia
They form 50% of the market
# of outlets
Transfer of investments
improves bottom line and
topline
-
10 000
South North
Non active
Active clients with investments
Active clients with investments AND profitable
Active clients with investments AND NOT profitable
27. Today: 10 meters, 100 km/hour
Business process change rapidly
Before: 50 meters, 60 km/hour
28. It is important to review
3PD distributorâs Profile
Territory coverage
ModernTrade
TraditionalTrade
Wholesale
Opportunity to promote product
Sales reps motivation is effective
Promo for retail is effective
All your SKUs are in matrix
General
Growth vs LY
Price architecture
Finance discipline
29. Profile: Distributors power and
managersâ efficiency
0%
50%
100%
Distributorâs power
Managersâ efficiency
30. Profile: Distributors power and
managersâ efficiency
0%
50%
100%
Distributorâs power
Managersâ efficiency
31. Profile: Distributors power and
managersâ efficiency
0%
50%
100%
Distributorâs power
Managersâ efficiency
32. Every company differs from competitors
and you have to find your advantages !
There are no competitors in 3PD distributor price list
No pressure on distributors strategy
Individual approach to promos and cooperation as
respect to unique cultures of distributors
Gallina
Blanca
Nestle Uni Lever
Russki
product
Tsikoria
Delivery
Sales
management
Business
management
Trade
Marketing
Marketing
Responsibility of manufacturer
Responsibility of distributors
33. Only complex of sales initiatives
will drive to result
To find partners for alliance
To focus on the role of distributors
To reform distributorâs pool
To focus on modern and organized trade
To save costs (shared merchandisers, mixed DS3 ..)
