ABOUT NESTLE INDIA LTD:

Nestle India Ltd is one of leading Fast Moving Consumer Goods (FMCG) Company. It is has
been operating in India since past seventy-five years. The products offered by Nestle are usually
premium in price, and the quality of the products are at par with the competitive market. The
product profile of Nestle India consists of categories like noodles, Coffees, Sauces, Infant
Formula, Infant Cereals, Chocolates, Dairy Whitener, Condensed milk, etc.
It is the market leader in almost all the segments. For example, Nestle Maggi has 93% market
share in noodle segment and Nestle Cerelac has 94% market share in Infant cereals category.
This was made possible because of the companys point of differentiation in operational
effectiveness on the competitors. They are distinct in the area of production, demand planning,
supply chain management and distribution and operational cost.
To understand the success of Nestle, understanding its distribution channel and its effective sales
force will play an important role.
CHANNEL DESIGN (NESTLE INDIA LTD):
Distribution Process:
Nestle has its own factories across India. The majority of the Nestle products are produced and
manufactured in their own factories. Some of the products are manufactured outsourced to
confectionaries. This product manufacturing is carried under the supervision of Nestle India Ltd
is order to have check on the quality and process used to manufacture the same. These
manufactured goods are then transported to the Distribution Center (DC) from the factories.
Main role of DCs is handle warehousing and forwarding of products. The products stored with
DCs are owned by Nestle India. In the absence of DC, the products are transferred to some
distant locations which required inter-model transportation. This inter-model transportation is
called Redistribution Centers (RDC). From the DCs, the stocks are invoiced to Cash
Distributors (CD). The role of a CD is to buy and hoard stocks for selling the products at the
market. CDs also provides infrastructure for retail stores and manages business relationship for
himself and the company. Along with CDs, DCs also invoice stocks for direct customers like
national and international modern trade organizations, institutions and large retail customers.
This the point where revenue is realized for the first time in the entire process. In India, Nestle

has approximately 1300 CDs. (Refer Exhibit no. 2 for Role & Key deliverables of each Channel
Member)
Nestle India Ltd.s sales process consist of two-stage process. First stage is termed as Primary
Sale which means sale of products from Nestle to CDs. Second stage is termed as Secondary
Sale which means sales from CDs to retailers or wholesalers (Retail Outlets). Primary sales take
place only if the stocks at the retail level are well below the predetermined stock norms set by
Nestle. It is estimated that it takes two weeks to sale considering an average weekly sales. Hence
the selection of CDs is done based on capital and stocking requirement of the said relevant
market. These CDs sale the products to the retailers and retailers sale it to the customers. The CD
do the task of distribution of products through their salesmen force called Distribution Salesman
DS. CD play a key role in business and market development on behalf of Nestle. When to do to
some location constraints, CDs could serve certain markets, in such scenarios RDs work under
CDs to sell the products to the outlets in such locations. Such locations are mainly in rural and
semi-urban. There are approximately 2000 RDs working for Nestle. (Refer: Exhibit no. 3
Distribution System of Nestle India Ltd).
Distribution Salesman is the entity who is responsible for secondary sales of the products i.e.
from CD to Market. Primary sales i.e. from company to CD is result of only secondary sales. If
for any reason secondary sales dont occur, CD would not purchase any more stocks as they do
not have enough warehousing facilities to store more stocks.
Many CDs currently handle many products of other multinational FMCGs. But in many cases,
Nestle is the most important company for them since; Nestle contributes 50% to 70% of their
total business. DS are employed by CD and the salary, incentives, promotion etc. are dependent
on the CD but on the companys payroll. Due to the Telecomm boom in the country in the recent
times, many CDs have left Nestle and started operations for telecom companies like Airtel,
Aircel, and Vodafone etc.
Due to less cost in operation for Telecomm companies and better relation with other FMCGs,
many CDs are shifting from Nestle to others. Hence, Nestle is coming up with new incentive
plan for CD retention.

CHANNEL MEMBER MANAGEMENT:

Company Incentive Structure:
Nestle India offers various incentive to different DS, depending on the performance of the DS, a
DS can earn a minimum of 750 per month to maximum of 1200 per month. If we benchmark
the incentive offer by the industry it is lower than other FMCGs like HUL, P&G, etc. This causes
a sense of dissatisfaction amongst the Nestle DS as other companys DS get much better
incentives. The competitor FMCG companies offer turnover incentive on a pre-determined sales
of different SKUs, coverage of retail market and selling of different priority products. The
payment system to DS is not uniform throughout the CD; some pay monthly, quarterly or some
even pay semiannually to the DS by target achieved.
The other problem with calculation of the incentive earnings of the DS. Many DS themselves
find it difficult to calculate their own earnings due to which they do not know how much
incentives have they earned over the period. This acts as demotivating factor for the DS. It is
only at the end of the cycle that they are made aware of how much incentive have they earned.
Target Setting:
Depending on the product-line-wise turnover, the targets are assigned to the SOs. In turn, the
SOs allot the targets to the DSs of them. These targets are assigned based on the past
performance of the DS and the current market condition and market trends. The process of target
setting is well defined in the organization, and the system is uniform across the globe, and there
is negligible margin of negotiation when it comes to target setting for Nestle.
Training Inputs:
The training process is standard process carried in the industry. The training of DS is through
training workshops which are conducted annually. The workshop is conducted for both fresh DS
and experience DS. Hence we can say that the training process is carried irrespective of the DSs
experience. This training workshop is usually treated as a retreat or an outing for most of the DS
which is not healthy. Since it should be skilled development exercise rather than a picnic.
Credit Pressure:

In the FMCG industry, the common practice which is followed is to give credit to its distributors.
Nestle India, gives a market credit of seven days to the CDs. But the payment system is not time
bound in many cases; many CDs do not pay till a fortnight or even till three weeks, and some
even go into bad debt account. In such cases, the CDs held the DS responsible since they are the
one who collect the payments. Sometimes the CDs suspend the salary payment to the DS, or a
loan voucher is issued under the name of the DS.
Monotony:
Since most of the DS have been working in the same FMCG market for more than three years, if
they wish for a transfer it is not practically possible since they are the employees of the CDs who
operate only in the local geographical market. Working in the same market, handling same
customers over and over the years makes it quite tiring and monotonous.
Other than this, Nestle India Ltd does not offer any other non-monetary incentive programs to
motivate their channel partners or DS. Incentive programs are standard across the FMCG market;
the only difference is the salary payment, incentive structure, and target settings.
Exhibit No. 1: The Product Portfolio of Nestle India Ltd

Exhibit No. 2: Role & Key deliverables of each Channel Member

Exhibit No. 3: Distribution Channel of Nestle India Ltd

References
Basu, J. M. (2010). DISTRIBUTOR SALES FORCE PERFORMANCE MANAGEMENT.
VISIONThe Journal of Business Perspective.
Transport. (n.d.). Retrieved from Nestle : http://www.nestle.com/csv/environmentalsustainability/product-life-cycle/transport