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JAIPURIA INSTITUTE OF MANAGEMENT,LUCKNOW

DISTRIBUTION AND SUPPLY CHAIN MANAGEMENT

PROJECT REPORT ONDISTRIBUTION STRATEGIES OF PEPSICO INDIA

PREPARED FOR

ASHISH TRIVEDI

FACULTY MEMBERJAIPURIA INSTITUTE OF MANAGEMENT

PREPARED BY

RUCHITA SHARMA

4TH TRIMESTER

PGDM (RM) 2008-10


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ACKNOWLEDGEMENT

Completion of task is never a one-man effort. It is the result of direct or

indirect valuable contribution of a number of individuals who guides one to

the path of perfection.

I express my sincere gratitude to our respected MR. ASHISH TRIVEDI,

Faculty ofJAIPURIA INSTITUTE OF MANAGEMENT, he has helped

us clarify our concepts by sharing his valued experiences in the field of

retail, which have thereby become an unconscious part of our ideas and

thoughts while analyzing the various aspects for this project report. Without

his sincere help and guidance, the project report would have not been a

success.

Lastly, I take this opportunity to express my heartfelt gratitude to the

distributor and retailers of this product in Lucknow for providing all

possible help and practical knowledge regarding distribution of Pepsi

products in Lucknow which not only helped in completion of this project but

also provided a deep insight of the distribution process of PepsiCo.


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COMPANY PROFILE

PepsiCo India

Mission

"To be the world's premier consumer products, company focused onconvenience foods and beverages. We seek to produce healthy financialrewards to investors as we provide opportunities for growth and enrichmentto our employees, our business partners and the communities in which we

operate. And in everything we do, we strive for honesty, fairness andintegrity."

Corporate Profile

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

bought out its partners and ended the joint venture in 1994.

One of the largest multinational investors in the country, PepsiCo hasestablished a business, which aims to serve the long-term dynamic needs ofconsumers in India.

PepsiCo India and its partners have invested more than U.S. $1 billion sincethe company was established in the country. PepsiCo provides direct andindirect employment to 150,000 people including suppliers and distributors.

PepsiCo nourishes consumers with a range of products from treats to healthyeats that deliver joy as well as nutrition and always, good taste. PepsiCoIndias expansive portfolio includes iconic refreshment beverages Pepsi, 7UP, Mirinda and Mountain Dew, in addition to low calorie options such asDiet Pepsi, hydrating and nutritional beverages such as Aquafina drinkingwater, isotonic sports drinks - Gatorade, Tropicana100% fruit juices, and

juice based drinks Tropicana Nectars, Tropicana Twister and Slice.
http://en.wikipedia.org/wiki/Punjab_(India)http://en.wikipedia.org/w/index.php?title=Punjab_Agro_Industrial_Corporation&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Voltas_India_Limited&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Lehar_Pepsi&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Lehar_Pepsi&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Punjab_Agro_Industrial_Corporation&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Voltas_India_Limited&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Lehar_Pepsi&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Lehar_Pepsi&action=edit&redlink=1http://en.wikipedia.org/wiki/Punjab_(India)


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Local brands Lehar Evervess Soda, Dukes Lemonade and Mangola add tothe diverse range of brands.

The group has built an expansive beverage and foods business. To supportits operations, PepsiCo has 43 bottling plants in India, of which 15 arecompany owned and 28 are franchisee owned. In addition to this, PepsiCosFrito Lay foods division has 3 state-of-the-art plants. PepsiCos business is

based on its sustainability vision of making tomorrow better than today.PepsiCos commitment to living by this vision every day is visible in itscontribution to the country, consumers and farmers.

Performance with Purpose

Performance with Purpose articulates PepsiCo India's belief that itsbusinesses are intrinsically connected to the communities and world thatsurrounds it. Performance with Purpose means delivering superior financial

performance at the same time as we improve the world.To deliver on this commitment, PepsiCo India will build on the incrediblystrong foundation of achievement and scale up its initiatives while focusingon the following 4 critical areas that have a business link and where we

believe that we can have the most impact


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REPLENISHING

WATERPepsiCo India continuesto replenish water and aims toachieve positive water balance

by 2009, which means it iscommitted to saving andrecharging more water than ituses in its beverage plants.

PARTNERSHIP WITH FARMERS

PepsiCo Indias Agri-partnershipswith farmers help more than 22,000farmers across the country earn more.

WASTE TO WEALTH

PepsiCo India continuesto convert Waste to Wealth, tomake cities cleaner. This awardwinning initiative hasestablished Zero Solid Wastecentres that benefit more than2,00,000 community membersthroughout the country

HEALTHY KIDS

PepsiCo India will stay committed tothe health and well-being of children. It will continue to providechildren with a healthy and fun portfoliowhile simultaneously tackling thecalories out side of the equation byexpanding its Get Active programmefor kids, especially for school goingchildren. PepsiCo will also launch anddistribute products directly aimed ataddressing nutritional deficiencies andwill launch a pilot program that directlydelivers against the United NationsMillennium Development Goal to

eradicate extreme poverty and hungerby 2015.


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SOME SOCIAL ACHIEVEMENTS

PepsiCo partners with the Energy and Resources Institute (TERI) to

implement watershed management projects in Neelamangala and

Uttaranchal

TERI was established in 1974 with the purpose of tackling and dealing withthe immense and acute problems that mankind is likely to be faced with inthe years ahead on account of the gradual depletion of the earths finiteenergy resources which are largely non-renewable and on account of theexisting methods of their use which are polluting.

Over the years, the Institute has developed a wider interpretation of this corepurpose and its application and has created an environment that is enablingfor the development of solutions to global problems in the fields of energy,environment and current patterns of development, which are largelyunsustainable.

Partnership with Alternative Development Initiatives (ADI) on

Watershed Management Projects in Kerala, Punjab and Maharashtra

ADI is devoted to support, promote and nurture sustainable growth, socialdevelopment and good governance for the empowerment of communities

through collaborative action.

ADI facilitates an alternative paradigm of development that valuesappreciating people's basic potential to lead the process of socio-economicchange. ADI values livelihood promotion and resource management as aninstrument to build leadership and entrepreneurial skills of individuals,communities, systems and institutions.


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ADI aims to improve the lives and future prospects of society as a whole.The organisation envisages to bring about people centered development byfostering institutional linkages, technology transfer, technological innovationand experiments, demonstrate new ideas, promote new approaches, mobilizeresources, demystify concepts and technologies, mediate to bring aboutcollaboration, and impart skills and foster conditions for reflection andlearning. ADI promotes institutions, systems, processes and mechanismsthat would bring socio-economic growth.

PepsiCo Partnership with Exnora in its award winning Waste to Wealth

initiative

EXNORA International a voluntary non-governmental, non-political, non- profit 'GLOBAL HEAD ENVIRONMENTAL SERVICEORGANIZATION'. Exnora Green Pammal is a unique joint venture ofPrivate, Public and Government participation to improve the livingenvironment and to promote more enviro-friendly sustainable humansettlements. Pammal Exnora and its members, under the able guidance ofMrs. Mangalam Balasubramanian, Chair-person, Pammal Exnora,demonstrates that civil society organizations have an important role andenormous potential to improve local environment areas in areas that are intransition from rural to urban to support service delivery by the government.

Today Pammal is an example of how civic engagement and people'spartnership can be used to achieve source segregation of solid waste, vermincomposting of organic waste, sale of recyclables and the restoration of thePammal Lake that lead to the greening of Pammal.

PepsiCo partners with CSMCRI for sustainable livelihood seaweed

farming project in coastal Tamil Nadu


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The Central Salt & Marine Chemicals Research Institute was set up in 1954to work in partnership with visionary sponsors and collaborators to generatethe knowledge and innovations required for efficient utilization of Indiascoastal wasteland, seawater, marine algae, solar power and silicates. TheInstitute will also harness its capabilities in biosciences, chemicaltransformation and catalyst, process engineering, environmental monitoring,separation science and analysis to address focused needs of industries andorganizations in the region and beyond.

Partnership with CAP Foundation to train and provide alternate

livelihood options for Tsunami affected communities in AP and Tamil

Nadu.

CAP Foundation is an independent , registered organisation demonstratingPublic Private Partnership initiatives between civil societies, corporate andgovernment agencies in linking learning and livelihood for communities ofchildren, youth and women 'at risk'. The mission of the CAP Foundation isto reach out to the children, adolescents and youth at risk by providing aholistic education and livelihood promotion module, which combines formaleducation with vocational training, skill development training, life skillmodules, job placement and career exploration opportunities through anexperiential mode, aimed at developing confident individuals capable of

self-directed growth.

The Foundation specializes in working with the most deprived, vulnerableand difficult to reach sections of young persons, women and communities atrisk and has a strong gender perspective.

PepsiCo partners with Project Healing Touch to provide ex-servicemen

with sustainable livelihoods.

Project Healing Touch was launched by Mukesh Anand in the aftermath ofthe Kargil war in 1999. The project strives to help servicemen in the IndianArmy earn a sustainable livelihood after they have retired from the armedforces.


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Under the auspices of Project Healing Touch, Mission Vijay IIprovidesformer Indian soldiers an important opportunity to live independently and befinancially self-reliant. The partnership has provided employees of thearmed forces with a stable source of income in their new roles asdistributors, sub-distributors, salesmen or as trolley vending distributors forPepsiCo.

In addition to PepsiCo, Project Healing Touch also partners with ApolloTyres, ICICI, MICO, Castrol, IOC, Hero Honda and Tata Motors.

PepsiCo partners with Swashrit Society to promote active and healthy

lifestyles among kids through the Get Active programme.

Swashrit is an NGO that works in the area of uplifting underprivilegedchildren by providing them with basic education and empowering them with

better futures. Swashrit has also been actively involved in conductingtraining workshops for primary, middle and senior school children as well asteachers. These workshops have addressed important health related issuessuch as stress management, holistic child development and substance abuse

prevention. The organization has also undertaken prestigious annual projectswith schools in Delhi and the NCR, such as Save the Young Heart,Obesity management and Get Active.

PepsiCo partners with the International Labor Organisation on

creating and implementing its HIV/AIDS Workplace Policy.

PepsiCo India partnered with the International Labor Organization (ILO) todevelop and implement a sustainable HIV/AIDS workplace prevention careand support programme for its employees, their families and communitymembers.

The International Labour Organisation is the UN agency responsible for

work related issues. In 2000, it created the Programme on HIV/AIDS andthe World of Work (ILO/AIDS). The key objectives of this programmeconsist of raising awareness on the social, economic and developmentalimpact of AIDS on labour and employment while helping Governments,employers and workers support national efforts to control HIV/AIDS. Thiscrucial programme also serves to fight discrimination and stigma related toHIV.


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PepsiCo partners with Youth reach in its employee engagement

programme, PepsiCo People with Purpose

Youth reach engages in creating awareness on critical issues to sensitise

people and institutions and provide opportunities for significant participationin response to community and ecological needs.

The vision of Youth reach is to inspire individual and collectivetransformation to create positive social change. Youth reach, founded in1997, is a not for profit organisation based in New Delhi. Youth reachcreates spaces that engender a deeper inquiry into the nature of social andecological injustices and work towards building a culture that is rooted in thehumane and equitable.

Youth reach seeks to bridge two parallel worlds of the haves and have-nots,by sensitizing people who have access to resources and opportunities andopening up spaces for them to make a difference to the less advantaged

people, and communities. Youth reach partners with 80 grassroots NGOs,identifying needs, and creates opportunities for individuals, institutions,

businesses to volunteer, donate materials and support projects throughgrants.

Through its programmes, it offers exposure to social issues on the ground,

where social and ecological inequities exists, in order to inspire individualsto make a difference.


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PRODUCT MIX FOR INDIAN MARKET

PRODUCT LINE WIDTH

PRODUCT-LINELENGTH


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BREVERAES

Pepsi

Diet Pepsi

Pepsi- My Can

7 UP

Mountain dew

Aquafina

Diet Pepsi max

Mirinda

Slice

Lipton pure

leaf Tea

FRITO-

LAYS

Kurkure

Kurkure-

Desi Beats

Cheetos

shots

Lays

potato

chips

Uncle-

Chips

Uncle

Chipps-

Puffies

LeharNamkeen

TROPICANA

Tropicana pure

premium juice

Tropicana pure

tropics juice

QUAKER-OATS

Quaker oatmeal

Quaker instant

oatmeal

INTRODUCTION

PepsiCo entered India in 1989 and in the span of a little more than a decade,has grown to become the countrys largest selling food and beveragecompanies. One of the largest multinational investors in the country,PepsiCo has established a business which aims to serve the long termdynamic needs of consumers in India. The group has built an expansive


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beverage, snack food and exports business and to support the operations arethe groups 37 bottling plants in India, of which 16 are company owned and21 are franchisee owned. In addition to this, PepsiCos Frito Lay snackdivision has 3 state of the art plants. PepsiCos business is based on itssustainability vision of making tomorrow better than today.

PepsiCos foods company, Frito-Lay, is the leader in the branded salty snackmarket and all Frito Lay products are free of trans-fat and MSG. Thecompany started with potato chips between 1996 and 1999. This wasfollowed by the second phase where it focused on products that bridged thegap between western and traditional snacks vis--vis Kurkure. Itmanufactures Lays Potato Chips; Cheetos extruded snacks, Uncle Chippsand traditional snacks under the Kurkure and Lehar brands. The companyshigh fibre breakfast cereal, Quaker Oats, and low fat and roasted snack

options enhance the healthful choices available to consumers.PepsiCo IndiaHoldings Ltd's foods division Frito Lay that manufactures Lays, Cheetos andKurkure brand of snacks, has this month entered baked health snack Aliva.The company has been for over a year now focusing more on the healthconcept and communication towards reduction of saturated fat content. Itfocused more on the health benefits on labelling, to cash in on the increasingconsumer inclination for healthy and guilt-free snacking habits. Frito Layscore products, Lays, Kurkure, Uncle Chipps and Cheetos are cooked inRice Bran Oil to significantly reduce saturated fats and all of its productscontain voluntary nutritional labeling on their packets.

Line Stretching- In order to capture the more n more market share Pepsihas lengthen its product line beyond its current range. So it has moved todown market stretch

DOWN- MARKET STRETCH- Pepsi has always focused on middlemarket segment n its product is always in reach of middle class man. But in


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order to trap the lower market it came with is product like Pepsi 200mlbottle with low price

LINE FILLING- PEPSI has lengthened its product line by addingMirinda lime in addition to Mirinda orange, Pepsi blue and Pepsi gold inaddition to normal Pepsi.

LINE MODERNIZATION - Change is the need of hour with thisthought Pepsi my-can change its traditional.

packing and came with its newpacking

LINE FEATURING- Pepsi came up with Pepsi 1.5 lit bottle that couldfit in refrigerator.

D i s t r i b u t i o n - I n t r o d u c t i o n

Distribution (or "Place") is the fourth traditional element of the marketingmix. The other three are Product, Price and Promotion.

The Nature of Distribution Channels

Most businesses use third parties or intermediaries to bring their productsto market. They try to forge a "distribution channel" which can be defined as

"All the organizations through which a product must pass between its

point of production and consumption"
http://images.google.co.in/imgres?imgurl=http://bp0.blogger.com/_Lfq8xwuxtDs/R5Y-zHgUhKI/AAAAAAAAAEI/QDBhqPHHJLE/s320/pepsi.JPG&imgrefurl=http://ideasmarkit.blogspot.com/2008/01/mycan-and-pepsis-digital-marketing.html&usg=__z8YybgrALvy0A8_SmCrf5GWCPY8=&h=212&w=320&sz=13&hl=en&start=19&um=1&tbnid=RLkQMZiyn-dS3M:&tbnh=78&tbnw=118&prev=/images%3Fq%3Dpepsi%2Bmy-can%26start%3D18%26ndsp%3D18%26um%3D1%26hl%3Den%26sa%3DNhttp://images.google.co.in/imgres?imgurl=http://www.adamfoods.com/pepsi%2520can.jpg&imgrefurl=http://www.adamfoods.com/drinks.htm&usg=__tBtoNkE4_Uv1dZvqzGd2iaSWxMA=&h=300&w=300&sz=114&hl=en&start=6&um=1&tbnid=dGV3iuZnYaiFIM:&tbnh=116&tbnw=116&prev=/images%3Fq%3Dpepsi%2Bcan%26um%3D1%26hl%3Den%26sa%3DN


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Pepsi is using the same strategy in the form of intensive distribution

(Intensive Distribution- A form of market coverage in which a product

is distributed through all available wholesalers or retailers who stock

and sell the product in a given market area.)They are selling their goods

through intermediaries.

Functions of a Distribution Channel

The main function of a distribution channel is to provide a link betweenproduction and consumption. Pepsi distribution channel perform many keyfunctions:

Information Gathering and distributing market research and intelligence -important for marketing planning.

Promotion Developing and spreading communications about offers.

Contact Finding and communicating with prospective buyers

Matching Adjusting the offer to fit a buyer's needs, includingassembling and packaging.


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Negotiation Reaching agreement on price and other terms of the offer

Physical

distribution

Transporting and storing goods

Financing Acquiring and using funds to cover the costs of thedistribution channel

Risk taking Assuming some commercial risks by operating the channel(e.g. holding stock)

Numbers of Distribution Channel Levels

Each layer of marketing intermediaries that performs some work in bringingthe product to its final buyer is a "channel level". The figure below showssome examples of channel levels for consumer marketing channels:


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In the figure above,

Channel 1 is called a "direct-marketing" channel, since it has no

intermediary levels. In this case the manufacturer sells directly to customers.

The remaining channels are "indirect-marketing channels".

Channel 2 contains one intermediary. In consumer markets, this is typicallya retailer.

Channel 3 contains two intermediary levels - a wholesaler and a retailer. Awholesaler typically buys and stores large quantities of several producersgoods and then breaks into the bulk deliveries to supply retailers with

smaller quantities. For small retailers with limited order quantities, the useof wholesalers makes economic sense.


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Channel 4 contains three intermediary levels.

Pepsi do its soft drink business under the name of Pepsi bottling group.Pepsi mainly use a mix of this market channel according to situation and

place but they also use a different marketing channel as they use it inLucknow Pepsi supplies comes from Kanpur-Jaunpur Dehat manufacturingunit. Distribution channel of this company goes like below:

Manufacturing Unit

Carry/Forward Agents

Distributor (Super Stockist) of Lucknow

Sub- Stockists of Pepsi products in Lucknow

Retailers

Consumers


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But the question comes why a company like PepsiCo involves so manyintermediaries for its products? After all, using intermediarys means givingup some control over how products are sold and whom they are sold to.

The answer lies in efficiency of distribution costs. Intermediaries arespecialists in selling. They have the contacts, experience and scale ofoperation which means that greater sales can be achieved. If PepsiCo startsselling on their own then they will not be able to cater this much big market.Moreover, a local person has a better insight of a local market and is easilyable to capture the market.

D i s t r i b u t i o n - c h a n n e l s t r a t e g y

Exclusive Contracts with Franchisee Bottlers and Independent

Distributors and Retailers. Use of the most modern technology:

PepsiCo and its bottlers were able to improve their distributionand logistics management operations significantly due to use ofmost modern technology.

Further improve the market penetration of its products globally, PepsiCo launched a new distribution method in the initial years

of the new millennium. These were the chilled DSD system(Direct Store Delivery)

The following table describes the factors that influence the choice ofdistribution channel of Pepsi:


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Influence Comments

Market

factors

An important market factor is "buyer behaviour"; how dobuyers want to purchase the product? Do they prefer to buy fromretailers, locally, via mail order or perhaps over the Internet? Inthe case of Pepsi, buyer want to purchase it from there nearbyaccessible shop may be it is a grocery shop or a pan ki dukan.Thats why to motivate their retailers Pepsi give them fridges on avery low cost then market it also motivate retailers and providechilled Pepsi to consumers which increase its goodwill in

consumers.

The willingness of channel intermediaries to market product isalso a factor. Retailers in particular invest heavily in properties,shop fitting etc. They may decide not to support a particular

product if it requires too much investment. But as in the case ofpepsi there is no such specific cost thats why intermediates arewilling to be its distributors.

Another important factor is intermediary cost. Intermediariestypically charge a "mark-up" or"commission" for participatingin the channel.

Producer

factors

A key question is whether the producer have the resources toperform the functions of the channel? Like producer has that pull

factor that customer demand the product and they dont have topush the product.


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Distribution Intensity

There are three broad options - intensive, selective and exclusivedistribution. PepsiCo's distribution system aimed at making available all ormost of the products in its portfolio within a reachable distance to theirconsumers.

Intensive distribution aims to provide saturation coverage of the market byusing all available outlets. For many products, total sales are directly linkedto the number of outlets used as in the case of our product pepsi. Intensivedistribution is usually required where customers have a range of acceptable

brands to choose from like at present there are mainly two brands and somelocal brands. In other words, if one Pepsi is not available, a customer will

simply choose any another and vice a versa.

Selective distribution involves a producer using a limited number of outletsin a geographical area to sell products. An advantage of this approach is thatthe producer can choose the most appropriate or best-performing outlets andfocus effort on them. Selective distribution works best when consumers are

prepared to "shop around" - in other words - they have a preference for aparticular brand or price and will search out the outlets that supply for this purpose Pepsi is having wending machines placed in malls, collegecafeterias and near by big sports ground.


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Exclusive distribution is an extreme form of selective distribution in whichonly one wholesaler, retailer or distributor is used in a specific geographicalarea. Pepsi doesnt use this type of distribution because its products are notspecific these are very general.


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LIST OF SOME RETAILERS AND DISTRIBUTORS

NAME OF DISTRIBUTORS LOCATIONKumar Enterprises (Super StockistLucknow)

Aliganj (supplying to different distributors)

Ankit Agency Fatehganj (Gallamandi) coveringAminabad,Ganeshganj,Fatehganj,Charbagh

Sarveshvari Agency Gomtinagar

Ruby Enterprises Thakurganj,Chawk,aroundMedical College

Shree Agencies Sadar, Hazratganj, Alambagh, Ashiana

NAME OF THE ETAILERS LOCATIONGupta General Stores Aminabad

Jaiswal Stores AminabadDeepshikha Stores Aminabad

Unity Business Stores Chawk

Arshad Cool Corner Near Medical College

My Choice Chawk

Vinayak Provision Store Gomtinagar

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