Developing The Bda Channel for Itc Limited

Getting the chance to work in an organization deemed as a ‘dream company’ by hundreds of thousands of professionals is always special – a dream comes true, an experience of a lifetime. But seldom does it match up to the expectations. This summer project, however, did not just meet the aforementioned expectations, it exceeded them in a dramatic yet understated manner.

Sales is considered the most important function in any business function, and rightly so. It is this function that brings in the revenues after all. The sales function is the growth engine of the organization. It is the function that rakes in the mullah that drives customer retention and loyalty, minimizes their turnover and incorporates a conducive, positive corporate culture in the organization. This is why the sales team has immense pressure on its head- it has to achieve the targets, while ensuring growth and satisfying the wants of other members of the supply chain. The general trade market in the Indian subcontinent accounts for the lion’s share of the total sales.

Acknowledgement

This project is a result of the efforts invested by a number of very inspiring, brilliant minds. Dr. Shalini Rahul Tiwari, Professor at IMT Ghaziabad, played a very important role in this project- that of my academic mentor. Not only was she instrumental in guiding me throughout the two months I spent doing this project, she made sure that she was always there whenever I needed her help.

Mr. Vibhor Aggarwal, Area Sales Manager at ITC Limited played perhaps the most exhaustive role in this project. Always there to help me out in the most challenging of situations, it was because of Mr. Aggarwal’s dedication and commitment that this project was a success.

I would also like to express my sincere gratitude to Mr. Rohit Dogra (ITC Limited), Mr. Rahul Sinha (Human Resources, ITC), Mr. Ravi Kandara, (RSM, ITC Limited) and Mr. Bhandari (Senior Sales Supervisor, ITC) for their guidance.

The Company

ITC Limited is a Calcutta based conglomerate with major business interests in the segments of Agri Business, Fast Moving Consumer Goods (Abbreviated as FMCG), Hotels, IT, the Paperboards and Packaging Industry and most importantly, Tobacco. Established as the Imperial Tobacco Company in British India in 1910, the company, during its initial years, produced mostly tobacco products. Today, however, with more than 31,000 employees across India, an annual turnover of $9.1 Billion and market capitalization of $50 Billion, it is known as an FMCG Giant, a prominent brand of hotels and a diversification success story and is, therefore, a part of the Forbes 2000 List.

After going public in 1954, the company, originally known as the Imperial Tobacco Company, changed its name to ‘Indian Tobacco Company’ in 1970 under the chairmanship of Ajit Narain Haskar, its first Indian Chairperson, before changing its name again in 1974 to just ITC, thereby signaling his intention to diversify the company into newer segments, some of which are discussed above.

The company first diversified into the Indian Hotels Business in 1975 by purchasing what is now known as WelcomHotel Chennai. ITC then entered the Paperboard business. At one point of time, in the 1970s, ITC Limited was the largest major marketer of Condoms in the country.

Perhaps one reason why ITC had to sometimes ‘rush’ into diversification was the fact that the Government of India was actively seeking to undertake significantly more efforts to protect public health, and this included discouraging smoking in general, and smoking in public in particular. That could not have been good news for a company that sells almost 80% of all cigarettes sold in India. That is why the company had been concentrating most of its efforts on introducing more and more products under various brands belonging to different segments of FMCG.

Role of Tobacco

Though the company would like to call itself an ‘FMCG Major’, the truth is that it still is India’s biggest Tobacco company which manufactures and sells the most cigarettes in the country. This can be illustrated by the fact that despite contributing 43.2% of the company’ revenues, the company’s Non-Tobacco Division (NTD) accounted for just 15.86% of its Gross Profit.

Introduction

As we have just discussed, ITC is a major player in the Indian FMCG Sector with presence in all major segments such as biscuits, cookies, instant noodles, wheat, ghee, incense sticks, rice, salt, snacks, potato chips, namkeen, packed foods, frozen foods, luxury chocolates and juices in Food Category, and Deodorants, perfumes, soaps, gel bars, shower gels, hand wash in the Personal Care Products category. With such a huge product line in its Non-Tobacco Division, ITC needs a cutting-edge distribution system and designated sales team to push these products in both the general trade and modern trade.

On the 9th of April, 2018, I joined ITC as a Trade Marketing and Distribution Intern at their Institutional Area Office in Gurugram, Haryana. I reported to the office of Human Resources to Mr. Tarun Massand and Mr. Rahul Sinha, Senior HRs at ITC Gurugram. He introduced me to Mr. Ravi Kandara, the Regional Sales Manager, who was to give further guidance throughout the next two months. He ordered me to familiarise myself with the various segments the company operates in. In order to do so, he told me to visit major retail outlets in Delhi NCR. The list of these retail outlets was pretty comprehensive and covered all formats of retail as we know them. Mr. Kandara then attached me to Mr. Yogendra Kumar, Senior Sales Supervisor for Food and Beverages, Delhi and NCR.

I started covering the market with SPAR Hypermarket, located in MGF Metropolitan Mall, Gurgaon. Though I was not accompanied by Mr. Kumar, I was in constant touch with him throughout the visit. The following week, I visited 18 retail outlets, which included the likes of supermarket chains like ABRL’s More Supermarket, Spencers’ Supermarket, La Marche Supermarket, etc., Cash and Carry Stores like Metro Cash and Carry Store, Reliance Market and Best-Price (By Walmart) and a plethora of Kiryana Stores.

The Project: In a nutshell

• This project primarily revolves around the development, channelizing and utilizing the Cash and Carry Stores’ BDA Channel in the Modern Trade Distribution Channel.
• BDAs refer to Business Development Associates employed by Cash and Carry Store Chains Reliance Market, Metro and Best Price across their various stores in the country.
• These BDAs cover a large number of retail outlets (Mainly Kiryana stores) to sell a large assortment of very carefully chosen SKUs across various brands.
• The BDAs carry Kiryana Price List (KPL) to these stores to sell this assortment.
• The KPL is simply a list of 650-700 high selling SKUs from across brands. These KPLs contain the MRP, the selling price per unit price, price per bundle and the retailer’s margin.
• Thus, it becomes imperative for us to maximize the number of SKUs offered by the BDAs through the KPLs to the retailers in order to effectively utilize this channel.

Objectives

• The primary objective of this project is to leverage ITC’s position as a leading FMCG Brand in the country to increase its presence in the Modern Trade market as well as the General Trade market with the help of Cash and Carry Stores and their BDA Channel.
• To ensure that the Kiryana Price lists of the various Cash and Carry Stores include as many ITC SKUs as possible. This is because at present, on an average, only 9 ITC SKUs are listed in the KPLs.
• Another objective is to identify and discover ideas so as to minimize the existing and potential conflicts between the different Cash and Carry Stores, between Cash and Carry Stores and Hypermarket and Supermarket chains, and between Cash and Carry Stores and the company’s Wholesale Dealers (WDs).
• This is perhaps a big challenge for the company as it will lead to friction, disharmony and unhealthy competition among the two channels of distribution, ultimately harming the company.

Timeline

The Stakeholders

The Cash and Carry Stores visited:

• Best Price (Wal-Mart), Zirakpur
• Metro, VIP Road, Zirakpur
• Reliance Market, VR Punjab, Kharar
• Reliance Market, Patiala
• Metro, Shahdara, Delhi NCR

ITC’s Wholesale Distributors:

• Ess Enn Marketing, Sector 29, Chandigarh
• Mahajan Enterprises, Industrial Area, Panchkula

The Problems Identified

• BDAs offer only the fastest selling, popular SKUs such as Aashirvaad Aata (10 KG), Yippee Noodles (35g, 60g), Sunfeast Dark Fantasy Chocofills (75g) and Mangaldeep Agarbatti.
• General Trade Outlets purchase these SKUs from this channel, but avoid purchasing other SKUs such as B Natural Juices, Bingo Potato Chips, Sunfeast Pasta Treat, etc.
• After having interacted with many BDAs, it can be concluded that BDAs make minimal efforts in pitching the products in the KPL.
• “They sell what sells,” is how Mr. Prem Kumar from Reliance Market, Patiala describes what his men do.
• This is a major problem for ITC, as it seeks to expand manifold the SKUs these stores offer in their KPLs.
• One way to counter this is by incentivizing the BDAs.

Proposed Solutions

• To counter this problem, I, under the guidance of my mentor, Mr. Vibhor Aggarwal came up with a simple solution: to create a unique bundle of 3 ITC SKUs for these BDAs to sell to the retail outlets.
• If these BDAs managed to sell a predetermined number of these bundles to a specified number of unique outlets, they stand to earn an incentive of Rs. 20 per unique outlet per month.
• The pilot involves three primary SKUs: B Natural 1 Litre Juice, Sunfeast Yippee Noodles 240 g and Sunfeast Mom’s Magic Cookies 58 g.

Pilot 1

• According to this pilot, every BDA will be instructed to sell at least 6 units of 1 Litre B Natural Juice (any flavour), 6 units of Yippee Noodles (Pack of 4, 240 g, with free Bowl) and 24 units of Sunfeast Mom’s Magic Cookies (58 g) to each unique outlet twice a month to at least 67% of all outlets in his/her monthly sales beat.
• These SKUs were finalised after careful discussions at several brainstorming sessions between the ITC Sales team at the Sector 5, Panchkula office.
• On an average, a BDA covers approximately 170-190 outlets in a month (Data from Reliance Market, Patiala).
• Thus, the target number of unique outlets a BDA covers in a month revolves around 120.
• The minimum number of billings per month has been set at 2.
• Since an average BDA earns a salary of Rs. 15000 per month, an incentive of 16% of his/her salary shall provide the BDA enough reason to pitch ITC Products to the retailers.

Proposed Budget

• A Cash and Carry Store employs, on an average, 15 full time BDAs.
• Thus, an incentive plan for these BDAs, provided all the BDAs are able to achieve their respective targets, should cost the company approximately Rs. 2400 per one Cash and Carry Store.
• This amount, however, is very miniscule when compared to what the company stands to earn by way of

Pilot 2

• Training sessions for BDAs: One of the key recommendations would be to organize training sessions for the BDAs, with the help of the local Sales teams. This would ensure that the BDAs have sufficient product knowledge to convey to the retailers.
• Organizing Seminars: ITC could organize seminars with the help of its Sales and Distribution team to guide the BDAs on how to pitch its products.

Pilot 3

• • Increased In-Store promotional activities: ITC could introduce more In-Store Promotional activities such as banner advertisements and End Caps to increase awareness for relatively new brands such as Engage and B Natural.
  • The reason for this is when retailers start stocking newer products, they do so by going to the Cash and Carry store themselves and buying it. This is an ideal time to target these retailers.

The Way Forward

• Going forward, I believe that one area which needs a lot more careful deliberation and attention is the resolution of existing and potential conflicts between General Trade and Modern Trade.
• The cut-throat competition between the company’s WDs and Modern Traders poses an immediate threat for the company’s growth in segments such as Atta, Noodles and Biscuits.

Recommendations

• Keeping in mind the aforementioned Pilot programs suggested, I would recommend running all the three programs.
• These pilot programs would cost the company negligible amounts of money, while the potential and scope of business these programs can generate appear to be well worth the risk.
• Another recommendation would be to provide a slightly lower landing price for these aforementioned SKUs to the Cash and Carry Stores to provide an initial push to Pilot Project 1.

Key Learnings

• An elaborate understanding of ITC’s Brand and Product Portfolio.
• An extensive understanding of the Distribution Network.
• A substantial understanding of the working of modern trade outlets with special emphasis on the working of Cash and Carry Stores.
• A considerable working knowledge on how to go about and solve apparently difficult problems in Modern Retail outlets.
• An immense understanding of the negotiation skills required in an employee that made this project successful.