Sales and Distribution Project Report

Hindustan Unilever v/s Reckitt Benckiser

Submitted To:

Prof. Subhashis Ray

Submitted By:

Subhranshu Sekhar Mandal (110)

Sujit Kumar Sahoo(111)
Swarup Kumar Kar(112)
Sweta Sah(113)
Thendral (115)
Udaya Bhanu Satapathy(116)
Vibhav Kumar(117)
Vikrant Krishan Mahajan (118)
Zubair Jiwani (120)
Contents
Contents..........................................................................................................2

Reckitt Benckiser (RB).....................................................................................4

Organizational Background.............................................................................4

Product Portfolio and Distribution overview for RB...............................................................5

Sales Force Structure......................................................................................6

Sales Force Recruitment..................................................................................8

Recruitment of Territory Sales In-charge..............................................................................8

Distributor Sales Representatives (DBSR)............................................................................8

Company Sales Person.........................................................................................................8

Area Sales Manager.............................................................................................................8

Sales Force Compensation..............................................................................8

Sales Force Training........................................................................................9

Measurement and Appraisal of Sales Force Productivity.................................9

Territory Allocation........................................................................................10

Measurement of sales force productivity and distribution efficiency at RB........................10

Budgeting and Target Setting.......................................................................12

Annual budgeting and Target setting at RB.......................................................................12

Channel Conflict............................................................................................13

Conflict 1: Conflict because of unequal members in distribution chains.............................13

Conflict 2: Modern trade selling to retail outlets.................................................................14

Automation in Sales Force.............................................................................14

Hindustan Unilever Limited...........................................................................15

Organization Background..............................................................................15
Product Portfolio for HUL...............................................................................15

Sales force structure.....................................................................................16

Channel Design ............................................................................................17

Territory Allocation........................................................................................20

Sales Force Recruitment................................................................................20

Sales Force Compensation............................................................................20

Sales Force Training......................................................................................21

Measurement and Appraisal of Sales Force Productivity...............................21

Budgeting and Target Setting.......................................................................22

Channel Conflict............................................................................................22

Automation in Sales Force.............................................................................23

Financial Analysis..........................................................................................23

Acknowledgment...........................................................................................26

References....................................................................................................26
Reckitt Benckiser (RB)

Organizational Background
Reckitt Benckiser India Ltd (RBIL) is a fully owned subsidiary of Reckitt
Benckiser Plc., world’s No.1 Company in Household, Health and Personal
Care. Reckitt Benckiser Plc came into being with the merger of Reckitt &
Colman Plc with Benckiser NV in 1999. The company has operations in 60
countries, sales in 180 countries and has had net revenues in excess of $6.6
billion (2008). Reckitt Benckiser India Ltd (RBIL) manufactures and markets a
wide range of products in Personal care, Pest control, Shoe care, Antiseptics,
Surface care, Fabric care and other categories. Amongst its many well-known
brands are Dettol, Mortein, Harpic, Cherry Blossom, Lizol, Disprin, Robin
powder, Colin, etc. Most of these brands are either number 1 or number 2 in
their respective categories in India

The company has sales of over £ 6.6 Billion consistently growing ahead of
the industry due to its leading brands, its operations in over 60 countries and
sales in 180, & its highly motivated multinational management.1
 Product Portfolio and Distribution overview for RB

Source: Strategm Case study Document,2009

Source: Strategm case study document, 2009

Sales Force Structure

The national sales department of RB has divided India into four zones
consisting of four zonal managers reporting to a National Sales Director. Area
sales managers report to Zonal Sales Managers. Each Area Sales Manager
(ASM) has 8 Territory Sales In charge (TSI) reporting to him. Each TSI has
about 7-8 Distributor Sales Representative reporting to him. Each of the Area
Sales Executive supervises about 9 Pilot Sales Representative.

On the other hand, for the channel involving modern trade, the sales force is
a centralized one. The ASMs for modern trade are separate from those for
the normal channel. The TSIs are also different for modern trade.

The Sales Force Structure for Reckitt Benckiser is as given below:

Sales Force Recruitment
The following points outline the sales force recruitment procedure for RB:

Recruitment of Territory Sales In-charge

Territory Sales In-Charge has the responsibility of one territory under him.
TSIs are MBAs recruited from Tier-3 B-Schools. They are mostly students
having no work experience. On promotion, TSIs are deputed as Area Sales
Executives.

Distributor Sales Representatives (DBSR)

Distributor Sales Representatives are employed by the distributor to escort
the company sales person during their sales pitching. DBSRs are provided
incentives based on the distributor reaching the sales target.

Company Sales Person

Company sales persons are experienced people recruited from the sales
force of competitors and other FMCG companies.

Area Sales Manager

ASMs are recruited from the campuses of reputed B-schools of India. Both
experienced and non-experienced people are given due consideration.

Sales Force Compensation

The pay structure for the company is a combination of fixed and variable
components. The pay for a distributor sales representative is approximately
Rs. 2050/- per month. The company gives incentive to Distributors’ Sales
Representatives on quarterly and yearly basis. If the target set for the
quarter is met by the sales representative, they get a quarterly incentive of
Rs. 1100. The incentive given by the company for meeting the annual target
is Rs. 4000.

The fixed component of the salary makes most part of the pay that a person
gets from Reckitt Benckiser. The incentive structure accordingly increases or
decreases as a person moves up or down the hierarchy. The Territory Sales
In-charge gets 85% fixed pay and 15% in the form of incentives. In the same
way, the Area Sales Manager receives salary with 75% of fixed component
and 25% forming the incentives.

Sales Force Training

Quarterly workshops and training sessions are conducted on a regional basis
to train the sales persons with regard to sales pitching, understanding the
brand identity and the schemes. During launch conferences of new products,
rehearsal sessions of sales pitching are done under the guidance of ASM,
RSM and ZSM.

Measurement and Appraisal of Sales Force Productivity

Measuring sales force productivity is valuable because these measures
provide a basis for improvement programs. Measuring the productivity of a
sales force is a subjective task, it can vary from company to company
depending upon the business it is in. The parameters on which productivity
can be measured are as follows:

1. How much time the sales force actually spends selling.

2. Database techniques

3. Sales force structure

4. Study sales process & Track each step

5. Competency and impact

The first task of a program to measure sales force productivity is to

determine how much time the sales force actually spends selling. Factors
such as poor call rates, travel time, sickness, and vacations all serve to
reduce potential sales time.

Database techniques can improve sales performance by enabling analysis of

comprehensive sales support information and facilitating stronger control. A
comprehensive customer database can build a complete picture of
customers and their response to various sales and marketing initiatives. This
data can be used to focus the sales force on the most important customers
and prospects. The database improves control by supplying reports on
performance, sales costs, and the effectiveness of sales support programs.

The leverage of various technologies—such as laptop computers, pervasive

Internet access, and teleconferencing (as well supporting functions like
telemarketing)—can also greatly enhance sales force performance and
productivity. Sales force structures like geographical structures can help in
evaluating the productivity of a sales team. For example, regional direct
marketing could be integrated with a local sales drive to improve business in
a high potential territory.

The productivity can be improved by Breaking down the selling process into
milestone events and then making sure the sales force knows them and
understands their objectives.

Territory Allocation
The eastern zone has been divided into 7 territories based on geographical
space and no of outlets to be covered. The beat plan of RB is thus: 30-40
outlets per day, 6 days a week from Monday to Saturday. However there are
about 20-22 calls ( average productivity per day)

Measurement of sales force productivity and distribution

efficiency at RB
At RB, the appraisal of the sales force is done on the following parameters:

• Sales Force Productivity: Sales Force productivity is defined as the

percentage of successful calls out of total calls made in a day by a
sales person. On an average, a sales person is expected to make
around 35-40 calls per day with a productivity of about 60-70%.

• Sticking to Budget: The sales manager is responsible for keeping the

costs and expenses of maintaining the sales force under control.
Unjustified budget overruns may have repercussions in the form of low
variable component of salary.

• Achievement of Sales Targets: Every member in the sales force is

responsible for the achievement of personal sales targets. While the
 ASM and subordinate sales force focus on increasing the top line, RSMs
and people above them focus on the bottom line.

• Market Coverage: Market coverage and penetration both in terms of

types and percentage of possible retail outlets covered is an important
parameter for measuring sales and distribution efficiency.

• Brand Salience: Brand salience for one or more brands of RB also

impacts the sales efficiency.

• Other Key Performance Indicators:

 Stock outgo

 Increase in coverage

 Case specific
Budgeting and Target Setting
In order to bring an objectivity to evaluate the performance of a salesperson,
targets are a must. Targets once set, provide a quantitative standard to
measure the productivity at the same time it helps in achieving better sales
and having a greater control over the expenses. These targets act as a cue
for the salesperson to perform by keeping targets in their mind and try to
outperform or at best achieve them. In this way setting up of targets help in
motivating the sales force and makes them believe that by achieving these
targets they would be performing at the expected level. Targets are set on
the basis of geography or the industry or the products. Some of the ways of
setting up targets are through the following:

• Sales volume quotas

• Rupee quotas

• Unit quotas

• Profit quota

• Activity quota

• Credit quota

• Area covered quota

However these quotas cannot be fixed randomly and they are based on the
estimates of market size and potential and also based on the past
experience of the manager. Again while defining these targets the manager
has to first divide the market to be covered in territories and then sales
person working in each territory would be assigned with a target. The
purpose of dividing the market in territories is to ensure that the coverage of
market is done in the best possible manner at the same time it becomes
easy for the manager to evaluate the salesperson based on its targets
related to a territory he/she is working on. For a salesperson it gives a sense
of belongingness that a particular region of market is his territory and it
increase his morale and helps in improving coordination among salesperson
of different territories.

Annual budgeting and Target setting at RB

The annual budgeting and target setting exercise takes place at RB during
Dec-Jan. The forecasting is done for one year territory-wise based on the
sales figures for the last 3 years. ASMs, RSMs, ZSMs and higher ranked
managers co-ordinate at the corporate head quarters to come up with the
budget and targets. These targets are then allocated to the sales force
according to the territory and the kind of products that are being sold.

Channel Conflict

Conflict 1: Conflict because of unequal members in distribution

chains
One kind of channel conflict occurs in RB because of price undercutting
between different channels. Distribution of products to retail outlets occurs
through two chains:

Channel 1:

Channel 2:

Sub-distributor (Channel 2) gets products at a higher price than Distributor

(Channel 1). This is because in Channel 2, there is one additional member
(which adds to the price) between the company and the sub-distributor.
Because of this price difference, the distributor (Channel 1) often takes
advantage of its lower prices to attack the retail outlets catered to by
Channel 2. Very often, the retailers themselves refuse to take stock from the
sub-distributor because of higher prices.

Solution

RB has not yet strategized any specific solution to the above problem owing
to the fact that it is very difficult to keep a check on such activities. One
solution can be to strictly restrict the catered areas to separate channels and
monitor them.
 Conflict 2: Modern trade selling to retail outlets
Modern trade includes organized retail chains like Big Bazaar, Metro etc.
Because of their higher bargaining power owing to high volume purchases,
modern trade outlets like Metro command a higher discount on the price as
compared to other channels. The final price offered by them is thus lower.
Thus, retailers often prefer to buy from modern outlets in bulk, thereby by-
passing the normal distribution channels.

Solution

The schemes are different in case of modern trade and other channels. Thus,
RB often plays upon these schemes to lure retail outlets to the conventional
distribution channels.

Automation in Sales Force

The degree of automation in the sales force for RB is very low. Order booking
is done manually in a Beat book by the sales person. One Beat book is
maintained per distributor. At the end of the day, the orders are entered into
the sales system from the Beat book, bills for the retailers are created and
the sales van is dispatched the next day with the ordered stock.

RB is currently planning to automate the sales force by providing the sales

persons with internet enabled palm tops/PDAs so that order logging directly
takes place at a central server.
Hindustan Unilever Limited

Organization Background
Formerly known as Hindustan Lever Limited (renamed in late June 2007) HUL
is India's largest Fast Moving Consumer Goods. HUL's brands, are spread
across 20 distinct consumer categories, touch the lives of two out of three
Indians.

 The Brands endow the company with a scale of combined volumes of

about 4 million tonnes and sales of Rs.13,718 crores.

 35 Power Brands

 The operations involve over 2,000 suppliers and associates. HUL's

distribution network, comprises about 2,500 redistribution stockists,
covers 6.3 million retail outlets reaching the entire urban population,
and about 250 million rural consumers.

Product Portfolio for HUL

Sales force structure
The Sales Force Structure for HUL is as given below:
Each Regional Sales Manager (RSM) is assigned around 3-4 Area Sales
Manager (ASM) under him. About 5 Sales Officer (SO) report to each ASM.
Each SO further supervises about 2 Territory Sales In-charge (TSI).

Channel Design
Hindustan Lever Limited (HUL) has two types of channel selling ‐
i. Regular (traditional) retail channel,
ii. Direct Selling Channel in the name of Hindustan Lever Network
(HLN).
HUL has a robust distribution model which comprises of C&FAs,
Redistribution Stockists, wholesalers and retailers (as shown earlier). One of
the biggest strengths of HUL is its distribution strength and

HUL’s Sales Break‐up through

different channels:

Source: Primary Data from Omkare, ratified and checked with data available on the net as well

Channel Structure

The goods produced in each of the HUL's 45 (approx)) factories are sent to a
depot with the help of a carrying and forwarding agent (C&FA). The company
has its depot in almost every state of the country. The C&FA is a third party
and gets servicing fee for stock and delivery of the products. In each town,
there redistribution stockist (RS) who takes the goods from the C&FA and
sells them to retail outlets. However gradually HUL realized that this model
of sales channel was not a viable one for smaller towns and villages and it is
also expensive to appoint one stockist exclusively for each town. Morever the
retail revolution is changing the pattern and the way the customers shop.
Hence HUL being the mammoth that it is, redesigned its sales and
distribution channel and the new system is as “diamond model”

At the top end of the diamond, there are the self service retail stores
which constitute 10% of the total FMCG market. The middle part of the
diamond represents the profit‐center based sales team. In the bottom of
the pyramid is the rural marketing and distribution which accounts for
20% of the business. As a result of the new distribution plan the
company has planned to reduce the number of RS (Redistribution Stockists)
in small towns.
The channel flow for HUL is

Distribution Network of HUL (flow diagram)

Source: HUL Company Website, Investor Centre, Presentations

Territory Allocation
The Orissa region is divided in to district wise territories. Within each territory
the beat plan for an average sales person is to cover 20 retail shops per day.
However the number of SKUs carried /order booked are as much as 3-4 times
the no of SKUs carried by any of the competitor.

Sales Force Recruitment

Most of the recruitment at HUL at almost all levels from TSI to ASM happens
for lateral candidates who have considerable experience in the sales field at
various other companies. HUL prefers to hire people with experience in the
related field for its workforce. Otherwise the ASMs are recruited from Tier 1 B
schools, and the TSIs are recruited from Tier 2 B schools.

Sales Force Compensation

The pay structure is quite similar in Hindustan Unilever to that of Reckitt
Benckiser. It is also a combination of fixed pay and incentive-based
component. At the level of Territory Sales Manager, 65% of the pay is the
fixed part while 35% is paid in the form of various incentives. A Sales officer
manager receives 25% in the form of incentives and 75% is received as fixed
pay. At higher levels of the hierarchy, i.e. an Area Sales Manager and
Regional Sales Manager, the distribution between fixed and variable pay is
80% and 20%.

HUL also has annual reward process under which it recognizes the top
performers. This recognition leads to reward in the form of both career
advancement options and non-financial compensation.

Sales Force Training

Most of the training at HUL happens online. They have an advanced training
software developed by Accenture which provides training facilities to all the
work force which requires it online. There is also a provision of a 3 day offline
training camp which offers around 2-3 courses to different levels of work
force at HUL

Measurement and Appraisal of Sales Force Productivity

In HUL there are three kinds of appraisals that take place: monthly, quarterly
and yearly. Monthly appraisal is a form of measuring productivity and the
salary of the salesperson is dependent on it. The productivity is measured by
using a matrix of percentage of call converted (productivity) versus the
depth or the coverage area.
This kind of matrix is used to ensure that productivity is not attained at the
cost of low coverage area. The quarterly and annual appraisal is based on a
work plan which has the following goals in it:

• Volume of sales achieved

• Value of sales achieved

• Infrastructure expansion

• Increase in distribution reach

• Number of new launches

• Number of new initiatives

Budgeting and Target Setting

In HUL, each year the new targets are forecasted based on the last three
years target that were set. Also the seasonality is a big factor in Target
setting. The Target setting is done on a territory to territory basis. The
regional office monitors the performance of each of the zones. A detailed
analysis is done at the month end and based on that the products for which
the demand has weakened are identified. Each field person is given a
palmtop wherein he can feed the entries on the spot where the transaction is
done. This is unique to HUL where in the field force is given palmtop’s to
ensure speedy flow of information. This helps in the following way:

• First the field person is freed from the tedious task of maintaining the
records and hence can concentrate more on the job which is selling.

• Secondly the information about the sold item is immediately updated

in the company information system which helps in real time updating
of the database.

Channel Conflict
The are some outlets which are not classified by HUL whether they would
come under modern trade or traditional trade. These are the stores where
the channel conflicts occur for HUL. The major drive at HUL these days is to
have clearly defined outlets under Modern trade category or Traditional trade
category.
Automation in Sales Force
The use of palmtops in various regions by the ground level sales force at HUL
is probably one of the few instances where such automation has taken place
in an FMCG company. The orders are fed into the palmtops and then fed into
the computer database at the distribution centres. A major advantage of
using palmtops is that the sales force has all the information about the
buying patterns of the retailer and the past sales pattern of the retailer. In
this way, even if the retailer is not aware of his fast selling items and his past
ordered SKUs the sales force can suggest him and give the complete sales
data to the retailer.

Financial Analysis

We have taken financial data from the capitalline database and CMIE
database to analyze the marketing and sales distribution functions of RB and
HUL. We have also looked into the advertising expenditure of these
companies to find the possible link between advertisement expenses and
distribution expenses.

2008 2008 2008 2008

Sl. Adverti Advert Marketi Marketi Distribu Dist.
No. sing . Exp. ng Exp ng tion Exp.
expense expense
Compa Sales As % Exp. As As % of
ny of %
Name
Annua Annual Sales Annual of Annual ( Sales
l (Rs ( Rs ( Rs Sales Rs
Crores Crores) Crores) Crores)
)
1 HUL 14937 1422.9 9.53 6.07 0.04 731.41 4.9
2 Reckitt .88
1334. 207.85 15.57 9.34 0.7 55.88 4.19
Bencki 76
ser
Let us now break up each of the critical components and have a direct
comparison between the two giants HUL and RB

The following graph shows the Advertising Expense as a percentage of sales.

The marketing expenses include

a) Rebates

b) Commissions

c) Sales Promotions

d) Discounts

e) Expenses on direct selling etc

The following graph shows the marketing expenditure of the two companies
in comparison
 The distribution expenses of HUL and RB as a percentage of sales stack
up as shown below.

From the graphs we observe that RB spends more percentage value of its
sales on advertising and marketing, where as HUL spends a significant chunk
of its sales in boosting its distribution channel. HUL strength is its distribution
and HUL spends money on it more to constantly update it and reach out to
newer and newer customers. RB on the other hand is using both branding,
advertising and marketing exercises and as well as boosting its distribution
channel to compete with the behemoth HUL.

Acknowledgment
We acknowledge the help of the following individuals. We had telephonic
interviews with Mr Omkare, Mr.Sumeshwar as they are located outside
Orissa.

1) Omkare Kore Operations Manager ( HUL) – West (Out of Home)

Contact No: 09320735998

2) Sumeshwar Dhuper ( ASM, Assam, RB )

Contact No : 09577375410

3) Dibya Prakash Das ( TSI, Eastern Region, RB)

Email Id: dibyaprakashd@yahoo.co.in

References

1) Stratagem Case Document, NITIE, 2009

2) Sales and Distribution

http//www.scribd.com/doc/12950828/Distribution-Management-of-
Hindustan-Unilever-Ltd, Last Accessed 17th Novemeber, 2009
3) Distribution HUL,http://www.scribd.com/doc/4715246/Hindustan-
Unilever-Limited-HUL, Last Accessed 17th Novemeber, 2009

4) HUL company website, http://www.hul.co.in/, Last Accessed 18th

Novemeber, 2009

5) RB company website, http://www.reckittbenckiser.com/home, Last

Accessed 18th Novemeber, 2009