SALES & DISTRIBUTION MANAGEMENT ASSIGNMENT

POSTGRADUATE PROGRAMME IN MANAGEMENT

INDIAN INSTITUTE OF MANAGEMENT INDORE

THE COCA COLA S&DM SYSTEM

An Macro-Analysis of the Indian Beverage Industry Sales & Micro-Analysis of the
Company’s Distribution Management System with a comparison against major
competitors

Submitted to:
Prof. Manoj Motiani
Marketing Area, IIM Indore

Group-16 | Section-AFGH

Agam Jain 2021PGP021

Anjali Gupta 2021PGP047
Sakshi Sharma 2021PGP309
Vasu Golyan 2021PGP534
Vipin Rathore 2021PGP432
 PART I – THE BEVERAGE INDUSTRY

THE BEVERAGE INDUSTRY - PRODUCT CLASSIFICATION:

The beverage industry is mainly categorised into Alcoholic and Non-Alcoholic Beverages. The Non-
alcoholic industry consists of carbonated soft drinks, bottled water, juice and juice drinks, sports drinks,
tea and coffee, energy drinks and shots, etc., while the Alcoholic industry comprises of beer, wine,
distilled spirits, cider, etc.

INDUSTRY CHARACTERISTICS:

It is a highly regulated industry and has to deal with high standards of hygiene and safe handling to ensure
good quality. The industry is characterised by increasing price sensitivity for products and lower margins.
It is a highly competitive industry, and the flavor/taste of the product is one of the critical parameters of
competition.

DRIVERS OF DEMAND & GROWTH:

Important drivers for growth and change in the beverage industry are:

I. Healthier alternatives: With the changing consumer perception and increasing preference for sugar-
free and lower calories products, the beverage industry is taking a turn to produce products with higher
perceived health benefits. Innovation in this segment is one of the key drivers of growth and change.

II. Hybrid products: Combining more than one kind of drink and blending their best qualities has helped
businesses introduce newer products and fulfill various aspects of consumer demand. This has led to the
expansion of companies’ product portfolios and increased the overall market size.

III. Sustainability in packaging: Awareness of the environment and the need for sustainability is growing
among consumers. This has led major players in the industry to adopt more sustainable practices to stay
contextually relevant.

IV. Flexitarian lifestyle: The industry is now changing to focus more on people concerned about animals,
the environment, and their health. Consumers following a flexitarian lifestyle are shifting more towards
plant-based products and consume occasional animal-based products. This shift in taste and preferences
has opened a new avenue in the industry.

Growth Drivers:

● The beverage industry in India generates 6.5 billion USD per year.
● The beverage market is expected to grow by a CAGR of approximately 3% during the period
2021- 2025.
● The Non-alcoholic beverage market is currently valued at INR 340 Bn and is expected to reach
INR 1130 Bn by FY 2027, at the estimated CAGR of 18.69%.
● The Alcoholic beverage market in India is expected to grow at a CAGR of 7.2% during 2021-
2027. The current market size of alcoholic beverages is estimated to be USD 52.5 Bn.

1 | Page
 ● The revenue of beverage manufacturers in India is expected to be 13.1 billion USD by 2024

MAJOR PLAYERS - THE ‘BEVERAGERS’:

The Indian Beverage industry comprises the following top companies:

● Dabur India Ltd: Dabur is one of the largest companies in the beverage industry with a wide
range of fruit beverages under the brand Real. The company generates around 8700 crores as
annual revenue in the beverage market.
● Varun Beverages: Founded in the year 1995, Varun beverages is the second-largest bottling
company on behalf of Pepsico. Some of its famous brands include Mirinda, Mountain Dew, 7Up,
Pepsi, etc. The company is also responsible for the distribution of Aquafina, Tropicana, Gatorade,
etc
● Orient Beverage Ltd: Established in 1971, the company entered commercial beverage
manufacturing in 1973. Its famous brands include Club Soda, Thumbs Up, Limca, Gold Spot, etc.
It also packs and distributes drinking water for Bisleri.
● Bengal Beverages Ltd: Established in 1995, BBPL manufactures soft drinks and packaged water.
The company is the authorized bottler of Coca-Cola. It manufactures and distributes brands like
Coke, Thumbs Up, Sprite, Fanta, etc., and has an annual turnover of around 450 crores.
● Red Bull India Pvt Ltd: The company entered the Indian market in the year 2009 and has had
impressive sales ever since. With a market share of 75%, the company is currently leading in the
Indian energy drinks market.
● Coca-Cola India: Present in India since 1993, Coca-cola is one of the leading companies in the
Indian beverage segment. It holds 60% market share in carbonated drinks, 36% in fruit drinks,
and 33% in packaged water segment.
● Pepsico India Holdings: Prominently present in the packaged bottles, beverages, and mineral
water segment, the company operates as a holding entity all across India. The company holds
around 34% of the market share in the beverage segment.

ANALYSIS OF THE INDUSTRY:

THE PESTEL FRAMEWORK:

Political:

1. In the past the water usage and extraction practices of companies like Coca-Cola and Pepsi have
come under strict scrutiny. This has led to increased pressure on politicians and the government to
regulate the industry.
2. There have been reports since several years that the FSSAI will introduce a new system of
healthy marking on food and beverage products. Several best selling products would potentially
be marked as unhealthy if the new rules are issued.
3. Government has been investing in Mega food parks which have increased from 2 to 22 in less
than 7 years. The beverage industry is also covered in the production linked incentive scheme of
the government. Overall along with food processing the government classifies the industry as a
sunrise sector.

2 | Page
Economic:

1. Rise in per capita income will lead to increased consumption of commercially made beverages as
per the Engel curve for food expenditure.
2. INR 10,000 CR of incentives have been provided under the Production Linked Scheme of the
Government of India.
3. Demand has increased in the tier 2 and tier 3 cities along with villages and towns. This is led by
improvement of supply chain systems, cold storage and transportation facilities due to
government investments.

Socio-Cultural:

1. Growing preference for healthier and organic food as there is increased awareness about the sugar
levels and other unhealthy ingredients in conventional beverages.
2. Increased access to mass media and popular culture via cheap internet and smartphones has led to
growing brand awareness and influence.
3. There is also a movement towards basics and ethnic drinks as a (fashion) trend involving re-
discovery of Indian culture.

Technological:

1. Sustainability has been a key driver of the beverage industry with key technological
advancements in the process coming as a result of the demand for sustainability.
2. Companies like Coca-cola and Varun beverages have innovated in India to release the ~0.1 USD
priced refillable glass bottles as an SKU.
3. Smart warehousing and e-commerce is the latest technological advancements that will reform the
industry. Smart warehousing helps reduce storage costs, wastage, order costs while ensuring just-
in-time delivery.

Legal:

1. Since the Nestle Maggi ban and tussle with the food regulators there is increased risk of scrutiny
on the branded food and beverage industry. Until now regulators were more focussed on the
unbranded industry.
2. The Competition Commission of India has become an active regulator in recent years turning its
wrath into companies across industries. The dominant players in the beverage industry hold 30-
40% market share each which could lead to friction.

Environmental:

1. Over the past few years there has been a lot of scrutiny over the water usage and extraction
practices of major beverage companies.
2. A lot of the beverage industry SKUs still consist of disposable plastic based packaging which is
coming under criticism from an increasingly environmentally conscious customer base.

THE BEVERAGE INDUSTRY SWOT ANALYSIS:

3 | Page
Strengths:

1. The beverage industry has already cemented itself in the spending basket of the average Indian
family and invested enough to change tastes and trends.
2. Investments in sustainability will allow the industry to grow and keep up with the demands of an
environmentally conscious generation.
3. The beverage industry has shown a consistent practice of innovation to penetrate the unique tastes
and spending nature of the Indian market.

Weakness:

1. The industry is still heavily dependant on water extracted from the ground or from catchment
areas. There has been no concrete steps or results to decrease dependance.
2. The industry is extremely concentrated with 2 players commanding and setting prices for the
entire industry.
3. In the past we’ve seen the bottlers fail leading to the concentrate manufacturers to forward
integrate or act as investment banks for bottlers.

Opportunities:

1. There is an increasing demand for high quality, hygienic and branded ethnic drinks. The Indian
beverage industry can modify these recipes available in the public domain and create intellectual
property.
2. There is a demand for organic and healthy beverages such as cold pressed juices. The early
adopters are ready to pay huge premiums for such products. Coupled with the economic growth
of the company, India is set to become a huge market.
3. Sustainability is a driver for key changes in the SKU practices of the company. It allows the
company to push customer behaviour change and even some temporary inconvenience along with
an opportunity to cut costs.

Threats:

1. Increased regulatory requirements, supervision and fines could become the norm as the
government seems to be turning its eye towards the branded food sector.
2. Due to lack of supply chain infrastructure especially cold storage facilities a lot of small
companies are establishing local monopolies. Without the marketing expense and rip off recipes
they are able to deep discount their prices.
3. There is an increasing health concern about the sugar levels in various beverages. This has caused
decrease in consumption as well as push for additional regulations.

THE PORTER’S 5 FORCES FRAMEWORK:

● Power of Suppliers - Low

The beverage industry sources raw materials from various vendors. Most of the raw material is easily
available and standardised. Labour and capital is easily available. Moreover, there is little price
differentiation between the major players. Hence suppliers cannot play on that aspect either.

4 | Page
 ● Power of Customers - Medium

Customers have shown highly strong preferences in terms of taste as well as cost. In the past we’ve seen
companies like Coca-Cola fail after introducing new flavours. However, the concentration of the industry
reduces the power of customers.

● Threat of New Entrants - Low

The industry is extremely concentrated with huge investments in R&D as well as marketing which creates
a path dependant competitive advantage for the major players in the beverage industry. Several private
labels have tried and failed.

● Threat of Substitutes - Medium

The beverage industry faces the threat of substitutes from unbranded and fresh products from the
unregulated producers within the country. However, every product within the beverage industry faces
very high substitutabilty with other products in the industry.

● Competiton in the industry - High

There is a lot of competition despite 2 major players holding most of the market share in the industry.
There is a still a demand for price discounting as well as new flavours and variants. The supply chain
distribution also leads to competition for space at various levels. There is also very low switching costs
for customers creating high competition.

FOREIGN DIRECT INVESTMENT & FOREIGN PLAYERS:

The Government of India classifies the beverage industry within the umbrella of food processing industry.
Here 100% FDI is allowed in the automatic route.

In the past we’ve seen Coca-Cola having to leave in 1977 along with several other foreign companies
because of a socialist and dictatorial regime’s push for Indian ownership of companies.

Post the liberalization of 1991 both Coca Cola and PepsiCo entered India and begun to invest heavily to
dominate the entire industry. When Coca Cola re-entered in 1993, they acquired the 4 largest products
and started off with 50% market share in the country.

In today’s times India has positioned itself as a member of the World Trade Organization and believer in
free trade except for strategic sectors. Several foreign players have entered the Food and Beverage
industry in the country.

Last online release by the Press Information Bureau points out that from FY 14-15 to FY 16-17 the FDI in
food processing grew from 515 M USD to 710 M USD. In FY 19-20 the FDI grew even more to cross
900 M USD.

Hence, foreign players and investments continue to play an active part of the Indian beverage industry.
Depending on how you define the markets and assume beverages Coca Cola and PepsiCo along with their

5 | Page
subsidiary control between 50-90% of the Indian market space by revenue. Indian players either act as
independent bottlers, distributors or fight within the niche market share segment for their sales.

PART II – THE COCA COLA COMPANY

COMPANY BACKGROUND - COCA COLA:

After the Indian government allowed foreign investment in the country in 1991, Coca-Cola re-entered the
Indian market with a new modus operandi in 1993. The bottling operations of the company are done by
both locally and company-owned plants. The cold drink giant has a nexus of more than 7,000 distributors
and over 2.2 Million small retailers throughout the country. Coca-Cola has tried to cover almost every
segment of the beverage industry and is leading in almost all of them. The multifold portfolio of Coca Cola
includes brands like Thums Up, Sprite, Maaza, Fanta, Burn, Minute Maid Pulpy Orange and tea, coffee of
Georgia Gold as well as a micro-nutrients drink Vitingo.

In order to maintain such a large portfolio of cold drinks, Coca Cola operates in India via a wholly owned
subsidiary Coca Cola India Pvt Ltd. This subsidiary is responsible for making concentrates, beverage bases
and powdered beverage mixes. The bottling operations are done majorly by Hindustan Coca Cola
Beverages Pvt Ltd. and thirteen licensed bottling partners. The company gives the right of preparing,
packaging, selling and distributing to the bottlers. The authorised bottlers use their own connections and
self made markets ranging from retail stores, restaurants to grocery shops, paan shops etc.

The beverage industry plays a key role in the economic development of the country. It has a multiplier of
2.1, which means if a bottle is produced, it will have more than double the impact on the economy. The
industry is a good source of employment as well; it produces more than 410 men days on production of
1000 more cases.

The Coke Business Model:

Figure 1: The Coke Business model from Manufacturer to Consumer

DISTRIBUTION MANAGEMENT - THE COCA-COLA SYSTEM:

The Coca-Cola system helps to manufacture a multitude of products, with the help of more than 300 bottling
partners. The system is responsible for manufacturing and selling of concentrates & beverage bases. The

6 | Page
bottlers packs them in various kinds of packing including tetra packs, plastic bottles and cans. These are
then sent to various retailers for selling to end consumers via restaurants, grocery stores, hypermarkets and
million of small businesses throughout the country.

THE INTERMEDIARY - DISTRIBUTION & RETAIL MANAGEMENT:

The headquarters of Coca Cola India is in Gurgaon. This HQ is responsible for managing 5 zones, which
are as follows:

● Northern zone
● Western zone
● Eastern zone
● Andhra Pradesh zone
● Southern zone

Each zone is divided into areas which are responsible for the sales and distribution in a particular region.
The distributors and Carry Forward Agents are the ones who take the products to the customers and retailers,
from there it reaches to the end consumer.

Coca Cola follows the same model throughout the world. Especially in India the growth and reach of Coca
Cola is truly astonishing and a role model for other country’s distribution strategies.

The company relies on two type of distribution network namely, direct and indirect routes. Pictorial
representation of the same is given below:

Figure 2: The Coke Distribution Network - Direct v. Indirect Network

BOTTLERS - THE FIRST LEVEL OF DISTRIBUTION:

Coca-cola India uses a double mix system of the company-owned bottling operations (COBO’s) and
franchisee owned bottling operations (FOBO’s)

COMPANY-OWNED BOTTLING OPERATIONS (COBOS): These are the operations which are directly
managed by the Coca Cola company and follows an standard procedure laid by the company.

FRANCHISEE OWNED BOTTLING OPERATIONS (FOBO’S): These operations are done by bottling
companies to whom franchisee is given by Coca Cola company for bottling and other mixing operations.
Company has a relatively lesser control over such franchisee.

7 | Page
 Fig 3: Coke Bottling: 27 COBO units in 3 COBO regions & 12 FOBO units in 1 FOBO region.

HCCBPL - THE INDIAN BOTTLING GIANT

HCCBPL which is part of Bottling Investment Group of Coca Cola, is the most important and scale wise
crucial bottling partner of the Coca Cola company. They are responsible for various operations ranging
from manufacturing to distributing. The largest bottling partner of Coca Cola company is responsible for
almost 65% of bottling operations and has 24 bottling plants throughout the country at strategic locations.
In addition to this they have contracts with 13 other bottling partners which are again responsible for same
operations. The company is focussed on increasing its bottling capacity by doing huge investments and
currently focuses to enhance the support infrastructure across the country.

DISTRIBUTOR COVERAGE PLAN:

The elements of its distribution coverage plan by HCCBPL (Hindustan Coca Cola Beverages Pvt. Ltd.
(India) are as follows:

Key Accounts: Big organizational establishments which buy the Coca Cola products in bulk are the key
accounts. These organizations are places where there is an establishment of large employees, residents etc.
Because of such a key influence in the sale of products these customers enjoy a good bargaining power.
They are given a 15 days or one month relaxation in credit terms. Examples of such key accounts are
Defence Canteens, Big restaurants, Townships and Corporate Houses.

Future Consumption: These are stores which hoard or stock cold drinks in ample amounts so that it is
available all the time throughout the year. Examples of these type of customers are Department stores,
Speciality stores, Super Markets, Food Courts etc.

Immediate Consumption: These are kind of stores which sells daily and replenish the inventory daily.
Examples of these are small bars, restaurants, educational campuses canteens and unorganized retailers.

8 | Page
 General: These are small markets where Coca Cola tries to capture the rural markets, hilly regions. These
are markets which can be covered in one go for the entire session.

In the urban areas CCI follows a distribution strategy that involves taking bottles directly from the bottle
manufactures to the retailers. For easy execution of this strategy they have developed a strategy called RED
(“Right Execution Daily”). These ensured that there is a proper display of products, and people know the
presence of various drinks available at any particular store.

In the rural areas due to lack of infrastructure and less aware channle they follow Hub and Spoke model.
These ensures that the product reaches to last person in the remote villages of India.

Fig 4.1: Direct Distribution - On Order & Fig 4.2: Indirect Distribution - Across 600
Ready Stock System at COBO outlets serviced by FOBO

REQUIREMENTS FOR DISTRIBUTORSHIP:

● The distributor should have 5 days stock holding capacity

● The distributor should be licensed by Food & Drug administration
● A Shop establishment Certificate from local authorities
● A list of documents including Electricity bill, Address Proof and Bank statement

AUTHORISED BOTTLING AS DISTRIBUTION SUPPORT:

The company provides syrup concentrate & beverage bases to their authorized bottlers; they mix syrup
concentrate for making the beverage. All the proportions are fixed, and bottlers have to strictly follow that
in order to ensure standard taste and quality.

9 | Page
Coca-Cola uses a push strategy by employing its sales force. They also provide various trade promotions
to end consumers. These ensure that CFA and distributors take the products readily and do not move to
competitors. Promotions include giving free PET bottles, hoardings, and banners for promotions, trade
discounts, refrigerators at a lesser price, or sometimes even for free.

DISTRIBUTORS PERFORMANCE EVALUATION & MANAGEMENT:

● Assessed on the level of Inventory management

● Abel to meet the sales goal target or not
● Infrastructure in terms of space, deposit investment & liquidity
● The average order size per customer is evaluated based on the potential of the region
● Market coverage is assessed based on calls made by the distributor per day
● Market Development, the ability to add new customers to the chain
● A third-party audit is done by the manufacturer to avoid favouritism
● Responsiveness to the complaints raised by various customers in the market

The RED Strategy – Right Execution Daily:

Performance is measured by comparing with a set value of parameters:

● Checking of Visi-Cooler – Coolers which have a glass as covering so that the products are visible
to the consumers
● Checking of all the available products
● Checking the outlet’s activation

Market developer checks 25 outlets in a day and report the scores out of 100 to HCCBL

MARGINS TO DISTRIBUTORS:

● The margin per crate, (where each crate comprises of 24 bottles/300 ml each) is Rs 20.
● Whereas on the small 200 ml pack size, margin is about Rs 16 per crate.
● As the 200 ml packs are most affordable it comprises of around 60% sales of the total carbonated
soft drinks.
● The non-CSD business accounts for about 15 per cent.
● The transportation has been outsourced by the company so that they can focus on their important
task of bottling and selling in areas.

FINANCIAL TERMS TO DISTRIBUTORS:

Profit Margin

To Distributors 1% - 1.5%

To Retailers 2% - 3%

Advance Payment

To Company (by Distributors) 100000

10 | Page
For Retail Outlet Referigerators 5000

Credit Policy

Credit Amount to Distributors None

Credit Amount to Retailers Depending on Volume of Orders

Credit Period 1 month at 0 interest (wherever applicable)

Trade Discounts

Cash Discounts None

Quantity Discounts Extendable based on Volume Slabs/Region

Mandated Corporate Visit Frequency:

Supervisor & Customer Exec. Weekly

Territory Development Manager Bimonthly

LOGISTICS OF THE COCA COLA SYSTEM:

Average Order Size

For Distributor/Retailer Fixed by Company based on demand projections

& season

Order Placement

Orders by Distributor Over Phone to Sales Exec.

Orders by Retailers Company authorised Distributor Representative

Frequency of Ordering On a Daily Basis

Average Inventory Days 1 day(s)

Average Replenishment Time 2 day(s)

Damaged or Unsold Inventory Policy Replacement.

Strict NO Buyback Policy

Distribution Transport Company Owned Vehicles

Warehousing Requirements

11 | Page
 Minimum Storage 30 m^2

Ownership Pattern Owned/Leased

REVERSE LOGISTICS:

This is a process of identifying various process involved in inventory, finished goods and other relevant
information right from point of consumption to the point of origin.

The returns which the companies receive involve a lot of hurdles and drawbacks but that can also be used
to learn and make use if information which comes back with the returned product.

Reverse Logistics is the main component of CCI distribution. It is not only about becoming green but also
about reducing the packaging costs. As in beverage industries recycling is KPI .

There is a good scope of greening the entire supply chain industry. The process is Prevent > Minimize >
Reuse > Recycle > Dispose

Two main elements for achieving this are:

● Just in time delivery (Minimise packaging)

● Reverse logistics for packaging materials (Reuse and Recycle)

Coke’s global supply chain is a vast and huge network of various stakeholders such as manufacturing plants,
bottlers, retailers and warehouses. This present a challenge in terms of reporting consistently and real time
information to base strategic and tactical decisions on them.

Because of non-uniformity of reporting standards coke faced issue in reporting KPIs. With use of SAP and
Advanced Planning Optimization it has optimized its cost and delivery structures.

THE RURAL INDIA FOCUS:

Coca-Cola India is targeting rural markets so that more and more people can taste its beverages and for that
it is focussing on strengthening its supply chain.

The centrallised system of delivering coke from bottlers to distributors was not possible in rural area due
to lack of infrastructure. Hence a model of ‘Hub and Spoke’ was introduced. Hub means all the products
were collected at one place and then the stock was transported to various spokes (who were based out of
rural markets). These spokes then ensured that the product reached to retailers for selling to end consumers.
A well managed supply chain with strong logistic support ensured that coke reached to maximum
customers.

Hindustan Coca-Cola ame up with an idea of fountain machines which serve the people in haats and melas
of villages. They are available at a very cheap prize of Rs. 5 per servings and they capture a good amount
of crowd because there are no permanent shops in the region.

12 | Page
Coca Cola has always tried to be a company which is focussed much on greener energy sources. In the
process of becoming more and more eco-friendly, Hindustan Coca-Cola has come up with an ‘eKo Cool’,
which operates on solar energy. This has served dual purpose for the company because cold drinks were
niot available in rural areas because of chilling problems due to shortage of electricity. Now with the use
of solar refrigerators the villagers can chill upto 48 glass bottles of 300 ml each. Also, it provides the facility
of mobile charging and lighting. This has given CCI a competitive advantage as it is now able to capture a
good pie of cake in the rural areas, at the same time it is able to create value for the consumers.

THE ONLINE COKE FOCUS:

Coca-Cola has tried its hands in the direct selling of its products to the consumer by directly delivering its
products via online channel. This is the first time a company as massive as Coca-Cola (which is into
consumer products) is offering deliveries to its consumers through a direct home delivery model.

The company runs the online module on a pilot mode and is available in Bangalore, Coimbatore, Chennai,
Ahmedabad Hyderabad, and Mumbai. If a customer wants his cold drink delivered at home, he has to order
a minimum of Rs. 300 and before noon. They accept online, credit, debit, net banking, and cash as payment
options.

ANALYSIS OF PROBLEMS & RECOMMENDATIONS:

There is a significant reliance on phone calls and in-person ordering systems, which have often translated
into lost sales for the company due to lower coverage by the sales executives or the simple inability to reach
them at times. Furthermore, there have been numerous issues reported by distributors where-in orders have
been canceled due to payment-recognition failures. In this context, the use of internet-enabled order devices,
particularly at such strategic diamond outlets, can help facilitate quicker order placement and alleviate the
issue of multiple checks across the order placement & verification chain.

Currently, the company doesn’t enforce a system to collect feedback from channel partners, even though it
emphasizes retailer satisfaction when evaluating distributor performance. In the case of increased
complaints by distributors due to frequent stock-out of high pull-based products, imposition of standardized
quantity discounts, and lack of in-person visits by supervisory sales executives, the company should work
towards implementing a formalized feedback & channel-partner-satisfaction management system. This will
be beneficial, particularly in the context of the lack of exclusive distributor agreements and a highly-
competitive, low-differentiated beverage market in which Coca-Cola is operating.

CONCLUDING NOTE ON DISTRIBUTION:

The sales and distribution network of Coca-Cola is one of the most robust networks in the country. Coca-
Cola has leveraged its first-mover advantage and has grabbed a significant market share. The company vest
enormous trust in its franchisee and does not interfere in their daily operations. However, franchisees have
to submit reports to show their progress at specific intervals. Seamless integration of company and
franchisee operations enables the company to maintain a flawless distribution network.

PART III: SALES MANAGEMENT AT COCA COLA:

ORGANIZATIONAL CHART:

13 | Page
 Fig 5: The Coca Cola Company Organisational Chart

Organizational Sales Structure:

Fig 6: The Coca Cola Company Sales Structure

RECRUITMENT & SELECTION:

The recruitment of Coca-Cola involves ads in newspapers, the company’s website, etc. For management
posts, they recruit students only from premier management schools in the country. The general process of
recruitment involves:

● A Group Exercise
● Personal Interview
● Mock Presentations for Clients & Channel Partners
● Psychometric Tests to assess Attitude
● On-the-Jb performance assessment through Situational Exercises

ON-GROUND SALESFORCE TRAINING:

Coca-Cola has collaborated with the Indian School of Business to develop a program called ‘Parivartan
Academy.’ These involve training of retailers (6000+). However, Coke has also introduced its program to
train retailers under the Coca-Cola university.

14 | Page
SALESPERSON PERFORMANCE EVALUATION:

● Exceptional performance – EP: Given to candidates who contribute more than what was expected
in terms of quality, time, and quantity.
● Successful performance – SP: These are given to candidates who meet their objectives and
sometimes exceed their expectations.
● Developing performance – DP: Those who cannot meet all goals but are able to achieve most of
the objectives it is given to them; however, it’s a signal that improvement is necessary.
● No Performance – NP: Employees who are not able to meet their objectives often

SALESFORCE MOTIVATION:

● Quarterly performance-based incentives

● The base for incentives is the number of units sold or the total revenue generated.
● Unit incentives are given to employees if they are able to add new outlets.

Coca Cola sales-employees are extended performance-based rewards on three fronts:

● Annualized Rewards:
○ Increments in salary
○ Change in Designation or Jump in Grade-of-Job
○ Fixed Annual Incentive Plans, the rewards of which are fixed in magnitude, buried to
business performance.
○ Personal Progress Reports, prepared & evaluated under the annual appraisal process
● Rewards disbursed every Quarter:
○ Employee of the Quarter Award, provided for performance on non-sales metrics to boost
relationship-building, internally & externally.
○ Sales Dangle & Gold context rewards
● Rewards awarded to employees every Month:
○ MTM - Make the Move awards for achievement of sales targets & yield-performance
○ Monthly Turnhall Awards for extraordinary salesperson performance

PART IV – THE COMPARATIVE PICTURE

In this section of the report, we will be comparing the company with the other key players in the
industry, including Pepsi, Dabur, ITC, Nestle, Parle Agro, etc. The section would comprise of the
sales and distribution strategies followed by each of the mentioned companies and the differences
(if any) with Coca Cola.

1. Pepsi

The biggest competitor of Coca Cola follows the traditional hierarchical distribution system,
including the manufacturer, wholesaler, retailer, and consumer. The company uses the following
channels of distribution

15 | Page
 ● Direct Store Delivery: Pepsi delivers to retail stores without any intermediate levels. Often,
the bottlers operate direct store deliveries.
● Broker Warehouse: Pepsi delivers products stored in their warehouses to other
intermediaries’ warehouses, retail stores.
● Food servicing & Vending: The vendors associated with the company sell the product to
third-party operators, who in turn distribute to schools, stadiums, etc.

The company uses a 3 tier hub and spoke model for distribution in rural areas. The product goes
from the bottler to the rural hub (centre) from where the product is then distributed to the spokes
(village stores). Coca Cola also has a similar system in place.

Fig 7: PepsiCo’s Rural Distribution Structure that differs from Coca Cola’s

There are other significant differences between the two key players w.r.t the product line, market
size and pricing. The table below illustrates the same. The key point to notice, however, is how
similar the distribution strategies of the two companies are despite the different offerings.

Pepsi Coca Cola

Product Line Diversified product line offering Concentrated product line; focus
snacks, alternative drinks on drinks mainly

Market Presence 7 global divisions, including Market segmentation is

Frito Lay North America, Latin narrower. 4 divisions only
America, Asia Pacific, etc.) (North America, Asia Pacific,
Latin America, Europe)

Pricing Strategy Price maker Competitive pricing (price taker)

2. Parle Agro

The company has 4 levels of distribution, namely, Parle plants, Wholesalers and distributers carry
forward agents and retailers. The brand equity and wide product portfolio have complemented the
extensive distribution network of the company, making it available in every nook and corner of
the country. Parle experimented with tele - calling to widen the distribution facilities to the
retailers, especially in rural areas. The company recently launched SMOODH and B-Fizz to
increase sales pan-India

16 | Page
 3. ITC

The company mainly operates through wholesale dealers (WD), wholesale dealer branches (WD
branches) and WD stockists

WD: These are the firms or companies that purchase stocks in bulk from IT, which are then sold
to the retailers, wholesalers, consumers. This channel ensures vast reach of ITC products.

WD branches: This involves a full-fledged distribution of WD. The products are sold to retailers,
wholesalers in villages, town markets, etc. Maximization of WD profitability is the main objective
of this channel.

WD stockists: This includes all firms and individuals located away from WD. This is mainly used
for increasing rural penetration of ITC’s products.

4. Dabur

It uses the traditional channels of distribution like the other players in the industry. However,
recently, it has been increasing the use of E-commerce to distribute its products. Both popular
(Flipkart, Snapdeal, etc.) as well as semi-popular sites (FMCG titan) are used to sell the products.
In fact, to complement its efforts, Dabur has a separate page for product display on Amazon.
Furthermore, the brand has increased its presence on new platforms like Blinkit, Bigbasket,
Instamart, etc.

5. Ab InBev

The company uses WOD (Wholly owned distribution) channel in India pre-dominantly. This is in
contrast to the other industrial players, who have a franchise distribution system in place. The
company is, however, looking to increase its social media presence to improve the digital
distribution network. It is thinking of replicating the success of its Brazilian YouTube channel
called Coisa Nossa, which has almost 1.5 million followers.

CONCLUSION:

The beverage industry is monopolistic in nature, mainly dominated by Pepsi and Coca Cola. The
diffusion of information and systems happens rapidly due to the semi-oglipolidtic nature of the
industry. Any successful strategy, be it in terms of distribution or sales is easily replicated by the
other competitor. A case in point being the 3 tier hub and poke model used for rural penetration.
Once Coca Cola was successful in efforts to improve the distribution network in villages, Pepsi
immediately followed suit.

REFERENCES:

17 | Page
Aithal, R. K., & Maurya, H. (2018). Distribution Challenges in Emerging Markets: Evaluating
Alternate Distribution Strategies for FMCG Firms in Rural India. In Strategic Marketing
Issues in Emerging Markets (pp. 51-60). Springer, Singapore.

Alexander, J., Misra, S., & Shenoy, V. Coca Cola India and its distribution channel: A selection
by Analytic Hierarchy Process (AHP).

Anoop Narayanan. (2021, November 9). The Food, Beverage and Cosmetics Law Review: India.
The Law Reviews. https://thelawreviews.co.uk/title/the-food-beverage-and-cosmetics-
law-review/india

Business Wire. (2022, February 11). India non-alcoholic beverages market: A INR 1,131.52
billion market by FY 2027 - ResearchAndMarkets.com.
https://www.businesswire.com/news/home/20220211005234/en/India-Non-Alcoholic-
Beverages-Market-A-INR-1131.52-Billion-Market-by-FY-2027---
ResearchAndMarkets.com

Coca Cola India. (n.d.). Coca-Cola India: The Coca-Cola Company. The Coca-Cola Company.
https://www.coca-colaindia.com/

Coca-Cola India - IBEF. Indian Brand Equity Foundation. (n.d.). Retrieved March 30, 2022, from
https://www.ibef.org/download/CocaCola.pdf

Dyck, J. (2019, October 25). How Coca Cola lost India (And how they won her back). Medium.
https://medium.com/bc-digest/coca-cola-history-
a6c55eb5dfe6#:~:text=Faced%20with%20little%20choice%2C%20Coca,than%2050%20
other%20American%20companies

The Economic Times. (2020, June 11). FDI in food processing rises 44 PC to $904.7 mn in
2019-20. https://economictimes.indiatimes.com/news/economy/finance/fdi-in-food-
processing-rises-44-pc-to-904-7-mn-in-2019-20/articleshow/76326264.cms?from=mdr

FDI India. (n.d.). FDI in India | FDI consultant | FDI companies | FDI opportunities 2022.
https://www.fdi.finance/sectors/food-processing

India Non-Alcoholic Beverages Market. (2022, February 11). Retrieved March 30, 2022, from
https://www.businesswire.com/news/home/20220211005234/en/India-Non-Alcoholic-
Beverages-Market-A-INR-1131.52-Billion-Market-by-FY-2027---
ResearchAndMarkets.com

Ingavale, D. (2011). Tapping Indian rural market-rural distribution strategy. Global J. of Arts &
Mgmt, 1(4), 39-43.

18 | Page
Kumari, G., Bhat, J., & Pandey, K. M. (2010). Recruitment and Selection Process: A Case Study
of Hindustan Coca-Cola Beverage Pvt. Ltd, Gangyal, Jammu, India. International Journal
of Innovation, Management and Technology, 1(4), 441.

Marketinomics. (n.d.). Marketinomics.com. HugeDomains. Retrieved March 25, 2022, from

https://marketinomics.com/consumer-behavior-2/how-coca-cola-did-it-in-india

Maurya, H., & Makda, B. (2016). A study on development of coca cola's place strategy.
International Journal in Management & Social Science, 4(2), 4-7

Mordor Intelligence. (2022). India energy drink market | 2022 - 27 | Industry share, size, growth
- Mordor intelligence. https://www.mordorintelligence.com/industry-reports/india-
energy-drink-market

National Investment Promotion and Facilitation Agency. (2022). Food processing industry in
India - Companies, statistics, FDI. Investment Promotion and Facilitation Agency | Invest
India. Retrieved March 30, 2022, from https://www.investindia.gov.in/sector/food-
processing

Press Information Bureau. (2017, July 24). FDI in food processing industries.
https://pib.gov.in/newsite/PrintRelease.aspx?relid=168879

Price Waterhouse Coopers. (2018, April). Retail and Consumer Quarterly Newsletter Q1 FY
2018. Advisory, Tax & Regulatory Services in India | PwC India.
https://www.pwc.in/assets/pdfs/industries/retail-and-consumer/newsletters/retail-and-
consumer-quarterly-newsletter-q1-fy-2018.pdf

Startus Insights. (2021, December 3). Top 10 beverage technology trends for 2022. StartUs
Insights. https://www.startus-insights.com/innovators-guide/top-10-beverage-technology-
trends-2022/

Suman, S. (2020, April 23). Technology trends that will shape India’s food processing industry in
the post-Covid world. Indiaretailing.com.
https://www.indiaretailing.com/2020/04/23/food/food-service/technology-trends-that-
will-shape-indias-food-processing-industry-in-the-post-covid-world/

19 | Page