快消行业发展分析报告Bain贝恩咨询课件.pptx

,Click to edit Master text styles,Second level,Third level,Fourth level,This information is confidential and was prepared by Bain it is not to be relied on by any 3rd party without Bains prior written consent,#,SHA,1311-KO wholesale works.ion v8,China,FMCG industry,RTM,and,WS development practice,Bain presentation(draft),November 2023,Summary of key messages(1/2),FMCG companies face a series of,challenges,in selecting and managing,RTM models,when they pursue,growth,in,China,Sheer size,of opportunity(universe of outlets,),Managing,pricing is particularly difficult in China,because Chinese shoppers are“repertoire”and,because of complexity,of markets/channels,Need to balance execution effectiveness,and cost to serve with increasing reach,Most successful FMCG companies in China,need to be good at managing multiple RTM models,at the same time,as a,sustainable competitive advantage,.There is no,one size fits all,approach,Direct,selling,(controlled model),:,Core strength,of some MNCs(including KO),for organized,and even fragmented trade but,Chinese FMCG players,increasingly adept at this model,Indirect selling,:commonly utilized by Chinese FMCG players,given speed,reach and lower cost but,many models with varying,roles and levels of control,The most successful MNC and Chinese FMCGs,tailor direct and indirect selling models to different market and channel/customer priorities,with strong internal capabilities and systems to,manage conflicts between models,3_85,1,2,3,Summary of key messages(2/2),Managing hybrid models(combination of direct selling and indirect selling)is,a,dynamic,process.Successful FMCGs continuously evolve their models along with different stages of development,Adapt to market dynamics e.g.urbanization,industry consolidation,channel mix evolution,Optimize costs with increase in scale and internal capabilities,without sacrificing control,Many FMCGs invest in building,dedicated internal capabilities and systems for each model.,For,indirect selling,:,wholesaler management capabilities and systems critical but so are network of scaled,capable and loyal WS,Management tools and detailed playbooks to manage pricing transparency,margin pool,transshipment,optimize cost to serve etc.,WS reps dedicated to recruiting,setting targets,incentives,upgrading/training W/S,increasing loyalty and occasionally restructuring,Fully integrated with sales systems,For many FMCG companies,there is a,large size of the prize,from,successfully managing the complementary indirect selling model,3_85,5,6,4,Agenda,11_89,Managing,multiple RTM,models in China,Key success factors for managing indirect selling,models in China,Some implications,for KO,FMCG,companies in China face a series of challenges in selecting and managing RTM,models,Sheer size of opportunity,universe of outlets,Complexity,of managing different markets and channels,Different drop size and economics,Managing pricing is particularly difficult in,China,Constantly evolving market and competitive dynamics,Large,and fragmented network of distributors,/wholesalers,to,manage;size,&capabilities vary,significantly,Evolving,internal capabilities,and,costs pressures,3_85 6_84,1,No“one-size-fits-all”model.Need to balance,between,execution effectiveness,and cost to,serve in extending reach,FMCG,companies in China need to be good at managing multiple RTM models at the same,time,Direct selling&distribution,(KO:DSD),Direct selling,indirect distribution,(KO:DSS),Indirect selling,(KO:Semi-controlled,WS),Sell,Distribution,Own,E,xternal,External,Own,32_84 42_84,Preliminary,2,Full control over POS,display and activation,Large,initial investment,in infrastructure,and,team,Higher,cost to,serve,Control,over POS,display and activation,Distributors with right logistic capabilities for drop size economics,Relatively high cost to serve,Can have varying levels of control over distributors/WS,and POS execution,Quality of distributors/WS can vary,Typically lower cost to serve,Example:Want Want developed combination of indirect and direct sales models to sustain growth,Note:Most revenue is from China Mainland,Source:Company annual report;Analyst reports;Literature search,Want Want RTM development,2,67_85 76_85,90s,Quickly expanded,across,China through,indirect sales and distribution model for general trade,(same RTM for,snack food&beverage),Sell mainly through,W/S mkts;only,manage,tier1 DTs,25,sales offices in China,Very limited sales rep.#,only responsible for collecting money from tier 1 distributors,00,12,05,Growth constrained,by varying quality of wholesalers and relatively weak internal sales capabilities,06,10,Built up,direct sales model,and internal capabilities&teams for modern trade and key city GT,300 sales offices&4-5k own sales rep.,KA,and“He Want”(direct,selling/indirect,distribution),grew,to 60%+of,revenues,Built up,indirect sales model for E&D,with focus on increasing penetration,Preliminary,Example:Want Want relied on indirect sales and distribution model to drive quick expansion in 90s,Source:Company Annual Reports;Expert Interviews;Literature Searches,41_85 129_84 6_84,2,Mainly sell through W/S markets,25 sales office in China,Very limited Want,Want own sales,people,O,nly responsible to collect money from T1 DTs,No visibility on T2 DTs or below,Want Want,T1 Distributors,T2 DT/WS,Indirect selling&,indirect,distribution,(95%,of sales),Mostly GT outlets,Selling,Delivery,Preliminary,Example:Want Want built up direct sales model for MT and key cities from 2023-2023,Source:Company Annual Reports;Expert Interviews;Literature Searches,64_85 68_85 83_84 87_84 122_84,2,Global and national KA,retailers,Want Want,KA sales,T1 Distributors,“He Want”sales,T2 DT/WS,Direct selling&distribution,(20%of sales),Direct selling&,indirect,distribution,(40%,of sales),Indirect selling&,indirect,distribution,(40%,of sales),Regional and local MT,key city GT,Fragmented trade,Directly sells and delivers to,20 global&national KAs,Managed by,200 Want Want KA sales,Delivery by own delivery fleet or through 3rd party logistics providers,“,He Want”model covers 1M retail outlets,in 2023,Established 300 sales offices,4-5K,Want Want own sales people,and,10,-,15K DSRs,for,both“He Want”,&DT mgmt.in 2023,15K DT/WS,nationwide with monthly sales ranging from a few thousands to 100M,RMB,Selling,Delivery,Preliminary,Example:Want Want then built up E&D indirect sales model to accelerate beverages starting in 12,Source:Company Annual Reports;Expert Interviews;Literature Searches,40_85 41_85 17_84 18_84 58_85 79_84,2,Global/national&selective regional KA,retailers,Want Want,KA sales,Retail T1,Distributors,“He Want”sales,T2 DT/WS,Direct selling&distribution,(20%of sales),Direct selling&,indirect,distribution,(35%,of sales),Indirect selling&,indirect,distribution,(35%,of sales),Regional and local MT,General trade,Extend KA coverage to largest regional MT chains,200 Want Want KA sales,Delivery by own delivery fleet or through 3rd party logistics providers,Expanded to,o,ver,350 sales offices in China,Stabilized#of own sales people,and,increase#of DSR and in-store push-girls,Introduced“,Liang Want,”project to strengthen in-store execution,Stream down to 8K high quality DT/WS,nationwide,(only,a small%through T2 DT,),Selling,Delivery,Focus on E&D outlets,E&D T1 Distributors,Indirect selling&Indirect distribution,(10,%of sales),Started to recruit,E&D dedicated DTs,with,territory exclusivity,Supported DTs with,segmented entry toolkit,for different E&D types,(layout,promo plan,etc.),T2 DT/WS,Preliminary,Example:,Wrigley as an MNC company adept at managing indirect and direct selling models,3_85 10_84,2,Indirect selling&distribution,with set of scaled distributors,Replicated indirect selling&distribution,enlisting new distributors,Built up direct selling model for MT,Indirect model:improved distributor scale,capabilities and systems,Direct model:reorganized to better serve different KAs,50-100 cities,100 new cities per year,1000 cities all over China,Mostly traditional,trade,70%TT,30%MT,50%TT,50%MT,1 brand:Doublemint,2 brands:Doublemint,Extra,Multi-category,multi-brands,RTM model,#,ofcities,Product/brand portfolio,Channel mix,Phase I:,DEVELOPING REPEATABLE MODEL,(93-02),Phase II:Horizontal growth(02-11),Phase III:,Vertical growth(since 11),Preliminary,FMCGs tend to use different RTM models tailored to different market and channel priorities/dynamics,6_85 11_84,3/4,Geographic,Geographic and channel priorities,Channels,Metro,U1,U2,County,T&V,MT/KA,GT,High/mid-end E&D,Low-end E&D,Other channels,(e.g.sports,venues,etc.),Different mix,of RTM models,driven by,Nature of category,Market scale/share(thereby cost/economics),Internal capabilities,Continuously,evolve,RTM models,along with different stages of development,Adapt to market dynamics,Optimize,costs with increase in scale and internal capabilities,without sacrificing,control,Illustrative,and other considerations,Example:Wrigley tailors its RTM models with differential focus on key cities and TT,*Carrefour,Wal-Mart,Auchan,RT-Mart,Lotus,Metro C&C*Distribution can be done by a 3rd party logistics provider,Source:,Expert Interviews;Literature Searches,Key,cities,(50,key and provincial cities),B cities,(200 prefecture cities),C,D,cities&rural,(smaller prefecture cities,counties,towns),Global 6 KA*,(10%sales),Other MT,(40%sales),T,T,(50%sales),Direct selling&distribution*,Mix of direct and indirect selling;,Indirect,distribution,Indirect,selling&distribution,Wrigley covers,3M,outlets,in China and have,visibility on 800K outlets,where their,2,000 sales reps and 3,400 DSRs,sell into,Centralized sales database,of these 800K outlets,and,T1 distributors,Focus on,top 50 cities,with strong sales presence in market,Outlet reach and flexibility,3/4,White space,(no control),Developed market,(greater level of control),54_84 60_84,Stage 2,Stage 1,Contract/,conditionality,Compensation model,No contract;purely transactional,Basic 2 party contract,subject to renewal each year,Mark up+rebates on vol.target,Mark up+rebates,on vol.target&conditions,Level of POS control/visits,Infrequent visit by DSRs,Not known,ILLUSTRATIVE,Category exclusive,Contract with sales target&high level execution,KPI,Floor price mark up,Visibility/tracking,Only sales to wholesaler,POS visibility through route coverage,Audits on wholesaler,Visited,by DSRs and some by,sales,Markup,+Rebates based on vol.target&,product availability,Annual contract,subject to basic conditions,.,Tracking of 2,nd,tier WS utilized by wholesaler,Tracking of 2,nd,tier WS and POS covered,More frequent,v,isit by DSRs,Fragmented trade:Indirect selling model evolution with increasing local scale,Example:Wrigley,continuously evolves its,RTM model,with local scale to assert greater control,3/4,Example:Beverage Co.evolves from indirect selling model to direct model as its local market share increases,Market entry,:Indirect selling with little control,Developing stage,:Evolves towards direct selling,Stronghold,:Direct selling,strong control,moderate cost,Ontrade&,TT,FMCG co.,Master WS,T2 WS,FMCG co,.,Master WS,New Channel,Ontrade 1,Ontrade 2,TT,Territory 1,Ontrade 1,Ontrade,2,TT,Territory 2,FMCG co.,Territory 1,T1 WS,T2 WS,Sales planning,Sales target planning,Sales tactic planning,Sales rep management,Distribution&warehousing,Ordering&Invoicing,Post-sales services,Channel development,Channel maintenance*,Sales target planning,Sales tactic planning,Sales rep management,Distribution&warehousing,Ordering&Invoicing,Post-sales services,Channel development,Channel maintenance*,Sales target planning,Sales tactic planning,Sales rep management,Distribution&warehousing,Ordering&Invoicing,Post-sales services,Channel development,Channel maintenance*,Channel mgmt.,Logistics,Source:Bain experience,WS in charge,FMCG co.in,charge,#of,sales,rep,5 per city in early stage(key role is to,develop WS,),30-50 per city in mature stage(#of,outlets vs,.#of sales rep=200:1,key role is to manage and supervise T1 WS,),#of WS,1-2,10-20,10-30 per city(#of,outlets,vs.#of sales rep=40-50:1,key role is to,visit outlets,manage activation and W/S management,),Ontrade,TT,Territory 3,T1 WS,T2 WS,Ontrade,TT,T1 WS,T2 WS,T1 WS,2-5,T2 WS,Ontrade&,TT,Ontrade&,TT,T1 WS,T2 WS,Ontrade,TT,Territory 2,T2 WS,3/4,W/S focused only on new channel,Agenda,11_89,Managing,multiple RTM,models in China,Key success factors for managing indirect selling,models in China,Some implications,for KO,Some,key considerations for,roles and type of indirect selling and distribution model,5,Do we,have,resources,capabilities,and relationship network to attract exclusive&financially capable,distributors,?,Attractive returns:gross and net margins,sales turnover,trade terms,logistics cost as%of total cost,etc.,Brand strength,Knowledge transfer:business and infrastructure setup,systems,etc.,Are there,large,loyal and scalable,distributors,within,companys,existing,distributor,network?If yes,how many and where are they located?,Alternatively,are there,non-FMCG company,distributors,which are,large,enough and,non-bounded,by exclusive arrangements available to work with,company,?,Do we,have the,capabilities,to,manage the complexity,of having,large number of,distributors,?,Do we have the,resources,capabilities,and relationship/trust,to,grow,our,distributor network,and manage their daily operations?,Sales,force,training,daily/weekly planning meetings,performance tracking,etc.,What are the,roles of different RTM models,by geography/channel and stage of development?,How to,manage indirect and direct selling models at the same time,?,Ability to get the economics right to attract,distributors,Availability of scaled/scalable distributors,Capabilities,Capability to manage multiple models,4_85 5_85 6_85 8_85,5,Flywheel of W/S mgmt.capabilities&system that overtime result in network,of scaled,capable and loyal WS,34_84,Optimization,/,restructuring,Fully integrated,Cost-to-serve,&,optimization,Wholesale Management,capabilities&,system,Wholesaler development,Performance,targets,Recruitment,Performance,mgt.,Scale and loyalty,mgt,KPIs/,scorecard,Price,mgt,Margin,pool,mgt,Product,portfolio,Territory,definition,and roles,PRELIMINARY,Example 1:Wrigley has developed a leading W/S mgmt.system,5,Pricing transparency&control,Advanced distributor database,Sales Information mgmt system,PRELIMINARY,Systematic tracking mechanism,to ensure transparency,and control over trade,pricing,“,DNA program”,since 2023 to,minimize impact from,transshipment and,counterfeit,goods,(through bar code tracking),Severe punishments,if distributors break the rules,Tier,1,DTs automatically,linked into,national,distributor database,from order to cash,Sales,inventory,wholesaler capability,Customer hotline for all,wholesalers,Order placement and fulfillment,Inventory management and,replenishment history,Freight,&delivery,status,Sales system,that links distributor information with sales/route plans,Track sell-in on daily basis,by key SKU,Track distributor KPIs and performance,Track transshipment,counterfe