The development of a sustainable and cost effective sales and distribution model for FMCG products, specifically non alcoholic beverages, in the emerging markets of the greater Durban area.
Brand, Trevor Stanley.
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ABI has a sophisticated and effective distribution fleet which delivers canned and bottled non alcoholic beverages to 12000 wholesale and retail outlets in the Durban Metropole and to 46000 outlets nationally. Delivery is normally executed once per week, 48 hours after a separate order is taken by an account manager. In the more rural or "emerging market" areas traditional retail outlets such as supermarkets and superettes are scarce and reliance is made on spaza and house shops. Cash flow and storage space is limited. The sales and distribution calls are expensive, relative to the size order that the spaza would place. Spaza shop owners rely on distributors or collect from wholesalers. These outlets often run out of stock. Sales revenue is thus not maximized. Outlet development is marginal. The writer embarked on a research project to develop a sustainable and cost effective Sales and Distribution model in order to address these constraints in the Emerging Market territories of ABI Durban. Traditional theory turns to channel distribution as a means to effectively reaching an entire retail market. Levels are thus added to the distribution channel. The research however showed that service levels are sometimes compromised. The model that was developed returns ABI to DSD (direct service delivery) via specially designed vehicles and combines the function of "preseller" and "delivery merchandiser" on a dedicated route. Although a marginal increase in cost per case has been experienced, deliveries are direct to store, at least twice per week. Sales growth in these routes have been in excess of 85% while the total Umlazi area grows at 13%. Customer service levels, as surveyed, are exceptional. Although the model was specifically designed by ABI Durban for use in Durban, the concept has been adopted as a best practice and is being "rolled out" across the business. By the end of 2005, 10% of ABl's fleet nationally will function as MOTD (Merchandiser Order Taker Driver) routes. Additional vehicles have been ordered for delivery during the period July 2005 to September 2005 in order for this to be achieved. This model has assisted ABI in achieving its goal of maximizing DSD and lifting service levels to its customers (retailers). Revenue has increased significantly along with volume in these areas. Invariably MOTD acts as a significant barrier to competitor entry in those geographic areas where it is utilized. The Merchandiser Order Taker Driver (MOTD) model is successful and has potential for wider use, even in more developed markets.