Danone - Report_Latest

Danone Foods & Beverages India Pvt. Ltd.

Vinod Gupta School of Management , IIT Kharagpur | 1

Submitted By-

Sushrut Choubey

Roll No: 11BM60026

Vinod Gupta School of Management

IIT Kharagpur

UNDERSTANDING AND IMPACTING

THE DYNAMICS OF THE DTC

CHANNEL - BOP



ACKNOWLEDGEMENT

The completion of this project would be incomplete without the mention of the people whose

constant support and guidance have helped me to complete this project successfully.

I would like to express my deepest appreciation to Mr. Sunil Khosla (Sales Head), Danone Foods

& Beverages India Pvt. Ltd., for his words of encouragement and extending all help from his

department, necessary for the project. I am thankful to him for giving his valuable time and for

providing a systematic way for completing the project in time.

I am really grateful to Mr. Dadhich Patel (Manager- Trade Marketing), Danone Foods &

Beverages India Pvt. Ltd., for giving an in-depth knowledge about the industry and providing me

continuous guidance and direction to the course of the project.

I would like to specially thank my Project Mentor, Prof. Anand Teltumbde ,Vinod Gupta School

of Management, IIT Kharagpur, for his great help. He provided me necessary guidance and

support until the completion of my project.

Last, but not the least, I would like to thank my esteemed Institute and my Faculty, for the

learning given to me so that I could complete my Project.

Sushrut Choubey



Table of Contents

Page No.

1. Executive Summary 4

2. Goals 5

3. Company Background 6

4. Survey Literature 9

5. Methodology 16

a. Understanding the FMCG business environment 17

b. Understanding the FMCG direct to consumer environment 17

of push carts

c. Learnings 19

6. Results 23

a. Recommended changes 23

b. Changes accepted and taken forward 28

c. The Results 37

7. References 38

8. Certificate 39



Executive Summary

The motive behind the project was primarily to understand the reasons behind the declining

sales figure for Danone – Bottom of the pyramid in the Gurgaon region for the push carts and to

try to improve on them with an aim to increase the sales figures.

The activities performed included firstly understanding the working environment of an FMCG

company, understanding how it is for Danone and then understanding it specifically for the

direct to consumer channel. The above mentioned activities were done for the first three weeks

of the internship duration. This helped in forming a sound base for all the future activities as I

did not have any prior experience either in the sales function or in the FMCG sector. After

gaining a sound knowledge of the environment and the existing system, recommendations

were given to make changes in the existing system which should put a stop to the dwindling

sales figure and if possible, increase them.

The recommendations which were given were then presented to the company project guide

with the help of a presentation and the rationale behind each of the recommendations was

explained. Taking the company policies, existing scenario and the recommendations given into

consideration, certain recommendations were approved by the company project guide and I

was asked to implement them in the most effective manner.

I also helped launch the Danone bottom of the pyramid products in Ghaziabad, Vaishali and

New Gurgaon region. Activities performed included identifying the prospective distributors,

negotiations, appointment of distributors and push cart vendors and vendor management.

The second half of the summer internship was dedicated towards implementing the approved

recommendations. This involved a lot of intensive interaction with customers, distributors,

push-cart vendors of Danone and also the potential competitors to figure out the best way to

implement each change in the most effective manner. The recommendation were implemented

as much as possible in the given time frame and were able to revive the sales for the Gurgaon

region.

The implemented activities helped in increasing the sales average by 80%.



Goals

A set of specific goals were given at the beginning of the summer internship so that the focus

was kept on achieving them in all the activities that were performed during the summer

internship. This exercise certainly resulted in a lot of clarity in all the activities and a focussed

thought process.

Project Title: Understanding and Impacting the dynamics of the DTC channel – BOP

The goals are listed below:

• Studying the FMCG DTC environment with the frontline team.

• Carts/Channel/Process documentation.

• Recommending few changes in the overall process in the same environment.

• Post approval from Guide, executing the recommendations & delivering the expected

higher output.



Company Background

Danone – An Introduction

Mission: Bringing health through food to as many people as possible.

Danone is one of the largest food and beverages company and the largest fresh dairy company

in the world. Danone exists primarily in four key verticals:

Its current standing in the world in the above mentioned verticals is given below:

1. Fresh Dairy Products: World No. 1

2. Waters: World No. 2

3. Medical Nutrition: World No. 2

4. Baby Nutrition: World No. 2

Fresh Dairy Products

Waters

Medical Nutrition

Baby Nutrition



The fact that all the verticals that Danone is involved in, it is either world no. one or two speaks

volumes about the performance of the company in all the businesses that the company is

involved in.

Some useful information related to the company is mentioned below.

Key facts and figures:

• 2011 Sales: € 19.318 billion. Up 7.8%

• Europe grew by 2.4%

• Asia grew by 20.1%

• Rest of world grew by 13.3%

Growth by division:

• FDP: 4.6%

• Waters: 15.7%

• Baby nutrition: 10.7%

• Medical nutrition: 9.4%

Group’s targets for 2012:

• +5% to 7% increase in net sales

• Stable full-year trading operating margin

• Continued rise in free cash flow , reaching €2 billion

Overview of sales performance — Q1 2012

Consolidated sales rose +7.6% to €5,117 million in the first quarter of 2012. Excluding the

impact of changes in the basis for comparison, which include changes in exchange rates and

scope of consolidation, total sales were up +6.9%. This organic growth reflects a +2.2% increase

in sales volume and a +4.7% increase in sales value.

The +1.1% exchange-rate effect reflects favourable trends in certain currencies including the

Chinese Yuan and the US Dollar.



2012 Outlook

Backed by sustained growth in 2011, Danone is moving into 2012 with confidence.

For 2012, the Group expects no significant improvement or decline in the macro-economic

environment from the second half of 2011:

Consumer spending to remain under pressure in Western Europe, Raw material prices to hold at levels similar to those observed at the end of 2011, implying

inflation in our raw material costs remaining strong in the first half and at mid-single digit for the full-year.

Against this backdrop, the Group’s priorities will remain the same: developing its product categories, pursuing investment in countries with high growth potential, particularly those that Danone calls “MICRUB”, and supporting operations and brands in Western Europe. Drawing on its experience of 2010 and 2011, Danone will continue to manage increases and volatility in raw material costs by focusing on sustained productivity and using selective pricing to maintain its competitive edge. GLOBAL PRESENCE

Africa and Middle East

Latin America

North America

Asia-Pacific

Central and Eastern Europe

Occidental Europe



Survey Literature

SWOT ANALYSIS OF DANONE BASE OF PYRAMID :

STRENGTH Low price per unit

Innovative sales mechanism- push carts

Worldwide leader in Fresh Dairy Products

Nutritious products

WEAKNESS Lack of distribution network

Indian consumers not aware of the company and the products

Cold supply chain not present

Lack of experience and understanding of the indian

market

Lack of manpower

OPPORTUNITY No similar products in the given

price range

No competitor in selling yogurt with the help of push carts

THREAT Nestle, Mother Dairy and other

regional players major competitors for GT, MT

Ice cream companies major competitors for DTC



PORTERS FIVE FORCE ANALYSIS OF FMCG INDUSTRY

Rivalry among competing firms: In the FMCG industry, rivalry among competitors is very fierce.

There are scarce customers because the industry is highly saturated and the competitors try to

snatch their share of market. Market players use all sorts of tactics and activities from intensive

advertising campaigns to promotional stuff and price wars etc. Hence the intensity of rivalry is

very high.

Potential entry of new competitors: FMCG industry does not have any measures which can

control the entry of new firms. The resistance is very low and the structure of the industry is so

complex that new firms can easily enter and also offer tough competition due to cost

effectiveness. Hence potential entry of new firms is highly viable.

Potential development of substitute product: There are complex and never ending consumer

needs and no firm can satisfy all sorts of needs alone. There are plenty of substitute goods

available in the market that can be replaced if consumers are not satisfied with one. The wide

ranges of choices and needs give a sufficient room for new product development that can

replace existing goods. This leads to higher consumer’s expectation.

Bargaining power of suppliers: the bargaining power of suppliers of raw materials and

intermediate goods is not very high. There is ample number of substitute suppliers available

and the raw materials are also readily available and most of the raw materials are homogenous.

There is no monopoly situation in the supplier side because the suppliers are also competing

among themselves.



Bargaining power of customers: Bargaining power of consumers is very high. This is because in

the FMCG industry the switching costs of most of the goods is very low and there is no threat of

buying one product over other. Customers are never reluctant to buy or try new things off the

shelf.

Danone Base Of Pyramid – India

Danone’s Base of Pyramid centre is one of a kind centre that has been developed by Danone. It

is currently headquartered in Gurgaon, Haryana.

The Bottom of the Pyramid centre is currently operational in Delhi, parts of Punjab, Haryana

and Rajasthan and is expanding into new territories with each passing day, growing by leaps

and bounds.

The aim of the Base Of Pyramid centre and the reason for its existence is to provide healthy,

nutritious products at a low price to the people (primarily kids) who otherwise won’t be able to

afford the products.

The factory of the centre is in Sonepat, Haryana and was made to cater to the population

centres in about 250 Km radius.

Channels Used

Danone is currently using the following four channels to take its products to the target

consumers:

• Modern Trade: Modern trade is usually used to refer all the new retail outlets that have

certain set of facilities such as self service with electronic billing and credit, Above an

indexed covered area (different users have different indices but safe to say 3000 sq. ft.

as the minimum), SKUs above an index number (again, different for different users, but

again safe to peg it at above 2500), Bulk Buying/ Inventory management, Discounting

(and frequently passing it out to customers as well). This includes trade with all the big

organized retail stores.

• General Trade: General trade is used to refer to all the mom and pop stores/ the local

kirana stores. The stores which do not fall under Modern trade fall under this category.

General trade is said to be the backbone and the key to the strong functioning of a good

FMCG company. This includes trade with the usual mom and pop stores.

• Door to door: This is generally used to refer to the form of selling when the Door to door

salesmen/saleswomen approach the consumers directly at their houses.



• Direct to consumer: Direct to consumer channel is used to refer all the trade done by

the push carts done with the help of push cart vendors, trade done with schools,

colleges and other institutions. Push carts form an important part of channel of a

company as the area covered by a single push cart is much more that the target area of

a local departmental store. The main advantage that the push carts have over other

channels is that they can be moved from one place to the other and are hence

considered as a moving shop. This includes push carts, schools, colleges and other

institutions.

•

By Business Line (€ min)

2010 2011 Like-for-like changes

Fresh Dairy Products 9,732 11,235 +4.6%

Waters 2,868 3,229 +15.7%

Baby Nutrition 3,355 3,673 +10.7%

Medical Nutrition 1,055 1,181 +9.4%

Group Total 17,010 19,318 +7.8%

By region (€ min)

2010 2011 Like-for-like changes

Europe 9,449 10,809 +2.4%

Asia 2,386 2,382 +20.1%

Rest of the World 5,175 5,647 +13.3%

Group Total 17,010 19,318 +7.8%

•

By Business Line (€ min)

2010 2011

Fresh Dairy Products 1,365 1,475

Waters 371 424

Baby Nutrition 635 708

Medical Nutrition 207 236

Group Total 2,578 2,843

NET SALES

Operating Income



By region (€ min)

2010 2011

Europe 1,483 1,509

Asia 445 580

Rest of the World 649 754

Group Total 2,578 2,843

The products

Long shelf life products: These products

have a shelf life of 60 days and are

available in innovative easy squeezy

packs.

• Yum Chuski Chocolate Flavor

• Yum Chuski Kulfi Flavor

• Yum Chuski Choco+

• Yum Chuski Kulfi+





Fresh dairy products: Have a shelf life of 15

days. Available in attractive neon box

packaging.

• Yum Creamy- Vanilla Flavor

• Yum Creamy- Strawberry Flavor

• Yum Creamy- Fruit Blast Flavor



Methodology

• Understanding the FMCG business

• Understanding the FMCG direct to consumer environment of push carts

• Learnings/ Activities peformed

• Analysis

• Recommendations

• Getting the recommendations approved

• Implementation

• Results



UNDERSTANDING THE FMCG BUSINESS ENVIRONMENT

• Spent the first three weeks in analyzing and understanding the workings of the very

dynamic FMCG environment in different parts of Delhi and Gurgaon.

• Special focus was given to understand the workings from the point of view of push cart

vendors and the salesmen to understand the efforts they have to put to sell the

products and how they go about it.

• Observed the distribution model and its components.

• Interacted with the sellers as well as the consumers to understand their needs and

expectations.

• Studied the current overall scenario of the market.

• Studied how a new entrant in the market works and the hardships it faces.

UNDERSTANDING THE FMCG DIRECT TO CONSUMER ENVIRONMENT

OF PUSH CARTS

• Observed how push cart vendors try to sell the product and how they interact with the

consumers.

• Understood how the consumers approach the push carts and their needs and

expectations specially in the summer season.

• Gained valuable insights into the supply chain management. E.g.: Vendor management,

negotiations, distributor selection, problem handling

• Understood the working of below the line promotional activities and their use.

• Studied the usage of point of sale marketing in impacting and driving the customer

sales.





LEARNINGS

• Done by push cart vendors with the help of vending stockists/distributor.

• Push cart vendors are provided a combination of fixed and variable pay to motivate

them to try for higher sales.

• Push cart vendors are given fixed areas to cover at fixed time periods so that the

frequent customers are aware of the push cart availability at that point of time.

• Push cart vendors are the face of the company for the consumers.

• Understood how the push cart vendors care mainly about how much they make at the

end of the month.

• Importance of push cart vendors being well educated about the company and its

products.

• Motivation level of the push cart vendors is an important parameter.

• Most of the customers are first time customers and have limited/no knowledge about

the company and its products.

• Customers prefer to have an ice cream, given a choice in the current harsh summer

conditions.

• Customers expect a push cart to be present at a particular point at a specific time of the

day, every day.

• Generally when a customer who does not know about the company and the products

approaches the push cart, he expects ice cream.

• Children prefer LSL.

• Offtake percentage more for FDP.

• Most of the new push cart vendors are new to the business and need to be educated

about the working of the business model.

• Sales distribution with respect to point of sale (for Fundooz):



• Sales figures for some of the points of sale in a day by classification:

Religious places: 230

Markets: 130

Offices: 220

Residential areas: 350

Schools: 300

Crossings: 170

Road stretches: 140

0 5

10 15 20 25 30 35 40 45

Cro

ssin

gs

Mar

kets

Off

ices

Ro

ad s

tret

ch

Rel

igio

us

pla

ces

Sch

oo

ls

Oth

er …

Res

ide

nti

al …

Park

s

Sales(In %age)

Sales(In %age)



• As far as push carts are concerned, the main competitors are ice cream vending

companies.

• Ice cream business in India is estimated to be worth 2500 Crores and is growing by 12-

15% per year. Of this about 1500 is in the organized sector which is growing by about

20-25%.

• Major players: Amul, Vadilal, Kwality Walls, Mother dairy, Cream Bell.

1200 1500

2000 2500

3500

0 500

1000 1500 2000 2500 3000 3500 4000

Average Push Cart Sale per Day (in Rupees)- For June

Average Push Cart Sale per Day (in Rupees)



Fruit Chill Amul Cream Bell Kwality

Walls

Mother

Dairy

SKU 9 80-90 90-100 80-90 80-90

Margin 35% 14% 15% 15% 15%

Average sales 1200 1500 2000 2500 3500

Salary 12000 10000 12000 12000 16000



Results

RECOMMENDED CHANGES

• Include an audio device in the cart which would produce a unique sound and would help

kids in colonies/ societies know about the Danone push cart presence.

It was noticed that while the push cart moved around the residential colonies, not many

children were aware of the push cart presence as they were inside their homes. To

make more children aware of the push cart presence near their homes, this

recommendation was made.

• Bi-monthly brand engagement sessions with the push cart vendors, distributors and rest

of the sales team.

As the company is relatively new in the Indian market and the general public including

the push cart vendors, distributors and rest of the sales team was not aware of the

company and its products, brand engagement sessions are important. The concerned

people were also much aware of the company processes and policies which directly

impact them hence increasing the importance of the brand engagement sessions

further.

• Light bulbs should be provided in the push carts.

Light bulbs are essential for a push cart operating in late evening or at night. Addition of

a light bulb makes the push cart visible from a distance and hence raises the potential

customer base.

• Possibility of changing push cart vending times from existing to 2-11 PM and to study

the impact on sales.

It was observed that most of the companies involved in push cart vending operate

during similar timings and generate higher revenue in these timings than in the morning

and afternoon. On a trial basis, certain push cart vendors were made to operate in these

timings for a day. The response was encouraging- they were able to achieve a sales

increase of 5-10% for each push cart. This result means much more as the consumers

were not aware that a Danone push cart would be present at that place, at that time of



the day. With time the regular clientele will increase for the said timings and the actual

results after a certain period of time would be much better than the said results.

• Increase interaction with the target audience directly, at schools, with the help of

promotions, sampling and other methods.

Most of the FMCG companies use promotions and sampling to increase their existing

customer base and to raise awareness about the company and the advantages of their

products. As the current customer base of Danone BOP is very small, such activities are

very important for the company.

• The cart vendors who keep their cart, clothes and themselves clean and presentable to

be given a monthly gift or bonus.

The carts which are kept clean are able to generate higher revenues than the carts

which are not kept clean. When a same push cart is sent one day in a dirty condition and

one day in clean condition, there is a difference in sales of 10% or more with clean carts

generating higher revenues.

This is one of the ways to implement this.

• The top 3 cart vendors who keep their cart, their clothes and themselves clean and most

presentable to be given a monthly gift or bonus.

The carts which are kept clean are able to generate higher revenues than the carts

which are not kept clean. When a same push cart is sent one day in a dirty condition and

one day in clean condition, there is a difference in sales of 10% or more with clean carts

generating higher revenues.

This is one of the ways to implement this.

• Fix the push cart route plan with focus on offices and frequented eateries around lunch

hours, societies and colonies in the early evening to target kids and markets, busy roads

in the night.

These changes were suggested after observing the footfalls in the respective areas at

different times of the day. The footfalls were observed to be higher in the said areas at

that point of the day. During the lunch hours in the heat of Gurgaon summer, not many

people venture out on streets but people are easy to find at or around frequented

eateries. Similarly, during early evening hours children tend to venture out of their

homes for recreational activities, hence the push carts should be positioned in and

around those areas at that time of the day. Similarly for the busy roads in the night.



• Use of ERP and online marketing should be started.

• The conditions of the push carts should be of highest standards and if the minimum

quality standards are not met they should not be allowed to go to the market. Any

publicity is not good publicity. Any sale is not good sale.

Impact on sales when the push carts are sent to market:

Sales with canopy = 330

Sales without canopy = 90

• The number of products available for sale in the push carts needs to be increased. Wider

range of products will in turn lead to more choices for the customers and higher sales.

As the range of products available increases, many products would also be there which

would be of a higher price range and can provide higher profits per unit and can

increase the sales considerably even with a lower unit sales.

• To study the possibility of including GPS in the push carts for tracking and better cart

management. Estimated cost of GPS – Rs. 15000.

0

50

100

150

200

250

300

350

Without canopy With canopy

Sales(In Rs.)

Sales(In Rs.)



As the cost of installing a Global Positioning System is too high at this point of time

considering the average sales per push cart, it is best not to implement it at this point of

time.

• POSM needs to be increased in such a way that it also educates the customer about the

products of our company and how to consume them in the best possible manner.

Most of the consumers that come to the push carts are not aware of the product that is

being sold by Danone as the advertising in not present right now. To counter this, the

point of sales marketing needs to be done in such a way that all the information about

the company and the products is conveyed in a simple yet effective manner.

• On the FDP packaging it should be mentioned from where to open the packaging.

As could be seen from the below mentioned figure about the existing packing, it is not

mentioned from where the packaging could be opened which is a standard followed by

all the companies which have an easy to open similar packaging. Many of the customer

spend some time trying to find the point from which it would be easiest to open the

packaging.



• Salary mechanism for push cart vendors to be made highly target based and if possible,

should be given daily. On target achievement a high value gift or considerable bonus

amount should be given.

A daily salary structure will make the push cart vendors push themselves for higher sales

every day. With a monthly target structure, most of the push cart vendors tend to lose

focus of the tagets given and assigned to them and hence this could impact the sales

figures considerably.

• Company and the products to be advertised specifically in the areas that it has been

launched to increase consumer awareness with the help of print media, online media,

roadshows, nukkad nataks and other relevant mechanisms.

As it is not in the best interests of the company to go for the mass marketing activities,

activities specifically targeting the areas in which the company products have been

launched make much more business sense.

• The push cart vendors should be given a company ID card which should have their

photograph, name, contact number, blood group and other details on the front. On the

back side of the ID card the hotspots that the push cart vendor is assigned to cover

should be mentioned.

This particular activity will make tracking the push cart vendor, identifying him and help

keep a tab on if he is sticking to the given route plan/ hotspot or not.

• Product and company information pamphlets must be carried in the carts and given to

every customer who asks about the company or its products.

This will help in educating the customer about the company, the products and the

benefits that the products have for them and also help in promoting the brand among

the consumers.



CHANGES ACCEPTED AND TAKEN FORWARD

• A list of hotspots where the product sales should be high was prepared and marked on

the Google maps.

• The hotspot planning was done after talking to a lot of competitors’ push cart vendors

and other roadside vendors, analyzing the potential customer base and other factors

such as distance from vending point and schools. The vendor- hotspot mapping must be

checked regularly by the concerned person.

• The salary mechanism of the employees has been made highly target based and is based

on the daily performance of the push cart vendors.

The push cart vendors should be paid the daily performance bonus on a day to day basis

to motivate them to perform well daily.



• Conceptualized and initiated a daily meeting to be held with the push cart vendors

where they are told about the company in brief and about the products in detail and

also how they should sell the products- from why they should stick to the fixed hotspots

to how to reply to the customers when they ask specific questions.



• Some push cart vendors were sent during the evening timings on an experimental basis

to study its impact as during the harsh summer conditions in Gurgaon, not many people

like to venture out during the day and brave the sun.

On average, the sales rose by 5-10%. The sales will rise further once the customer

psychology is aligned with the change in timings. The resultant change could be 15-20%.

• The cost of adding light bulbs or tubes was studied and the best alternative was found

to use an inverter with a tube light. The entire setup would cost Rs 450(approx) per push

cart.

An inverter that was found to be the best fit costs about Rs 400 per piece when taken in

bulk.

• The push cart vendors were made to realize the importance of wearing the company t-

shirt and cap and how it assists in getting higher sales in the short as well as long run.

• The push cart vendors were also made to realize the importance of cleanliness with

respect to their appearance, clothes and their push cart.

• The point that the push cart is a second home and is the agent that is helping them earn

their bread and butter was driven across to the cart vendors so that they get a strong

association with their carts and thus manage and care it in a much better way.





• Cost of installing a GPS system was found to be around Rs. 15000 per push cart and is

not feasible at this point of time.

• Many push carts had POSM missing or the entire set of POSM was not available. All the

cart vendors were educated about the importance of POSM and POSM was personally

added in many carts to drive the point home.





• A push cart routine checklist was prepared which is to be taken care of by the push cart

vendors in a day.

Must leave the vending point by 10:15 AM.

Must wear the T-shirt and cap given by the company.

Must follow the route plan and the hotspot guidelines.

Must park the cart at the assigned charging point only.

Must wash the T-shirt in the evening so that it can be worn the next day.



• The concept of VALL- the vending wall is introduced whereby the following should be

present on the VALL at the vending point:

Name and photograph of the highest seller of last month.

Company and product information.

A set of questions asked frequently by the customers and how to respond to them.

Push cart vendor- hotspot mapping.

Latest happenings in the company.

• Assisted some cart vendors in selling the products to customers to help them

understand how to communicate with the customers in the best possible manner.





THE RESULTS

The push cart vendors that I was working with have been achieving average daily sales

of about Rs 450 while the daily average sales of all the other push cart vendors in

Gurgaon area is about Rs 250(approx).

450

250

0

100

200

300

400

500

Push carts I worked with

Other Push Carts

Sales per Push cart

Sales per Push cart



References

1. http://danone.com

2. http://finance.danone.com

3. http://danone11.danone.com

http://danone.com/

http://finance.danone.com/

http://danone11.danone.com/



Certificate

Documents

Danone - Report_Latest