快消行业发展分析报告-Bain贝恩咨询课件.ppt

This information is confidential and was prepared by Bain&Company solely for the use of our client;it is not to be relied on by any 3rd party without Bains prior written consent1SHA1311-KO wholesale works.ion v8China FMCG industry RTM and WS development practiceBain presentation(draft)November 2013This information is confidential and was prepared by Bain&Company solely for the use of our client;it is not to be relied on by any 3rd party without Bains prior written consent2SHA1311-KO wholesale works.ion v8Summary 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 reachMost 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 controlThe 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 models123This information is confidential and was prepared by Bain&Company solely for the use of our client;it is not to be relied on by any 3rd party without Bains prior written consent3SHA1311-KO wholesale works.ion v8Summary 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 controlMany 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 systemsFor many FMCG companies,there is a large size of the prize from successfully managing the complementary indirect selling model564This information is confidential and was prepared by Bain&Company solely for the use of our client;it is not to be relied on by any 3rd party without Bains prior written consent4SHA1311-KO wholesale works.ion v8AgendaManaging multiple RTM models in ChinaKey success factors for managing indirect selling models in ChinaSome implications for KOThis information is confidential and was prepared by Bain&Company solely for the use of our client;it is not to be relied on by any 3rd party without Bains prior written consent5SHA1311-KO wholesale works.ion v8 FMCG companies in China face a series of challenges in selecting and managing RTM modelsSheer size of opportunity,universe of outletsComplexity of managing different markets and channels-Different drop size and economics-Managing pricing is particularly difficult in China-Constantly evolving market and competitive dynamicsLarge and fragmented network of distributors/wholesalers to manage;size&capabilities vary significantlyEvolving internal capabilities and costs pressures1No“one-size-fits-all”model.Need to balance between execution effectiveness,and cost to serve in extending reachThis information is confidential and was prepared by Bain&Company solely for the use of our client;it is not to be relied on by any 3rd party without Bains prior written consent6SHA1311-KO wholesale works.ion v8FMCG companies in China need to be good at managing multiple RTM models at the same timeDirect selling&distribution(KO:DSD)Direct selling,indirect distribution(KO:DSS)Indirect selling(KO:Semi-controlled,WS)SellDistributionOwnExternalExternalOwnPreliminary2Full control over POS display and activationLarge initial investment in infrastructure and teamHigher cost to serveControl over POS display and activationDistributors with right logistic capabilities for drop size economicsRelatively high cost to serveCan have varying levels of control over distributors/WS,and POS executionQuality of distributors/WS can varyTypically lower cost to serve This information is confidential and was prepared by Bain&Company solely for the use of our client;it is not to be relied on by any 3rd party without Bains prior written consent7SHA1311-KO wholesale works.ion v8 Example:Want Want developed combination of indirect and direct sales models to sustain growthNote:Most revenue is from China MainlandSource:Company annual report;Analyst reports;Literature searchWant Want RTM development 290sQuickly 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 distributors001205Growth constrained by varying quality of wholesalers and relatively weak internal sales capabilities0610Built 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 revenuesBuilt up indirect sales model for E&D with focus on increasing penetrationPreliminaryThis information is confidential and was prepared by Bain&Company solely for the use of our client;it is not to be relied on by any 3rd party without Bains prior written consent8SHA1311-KO wholesale works.ion v8Example:Want Want relied on indirect sales and distribution model to drive quick expansion in 90sSource:Company Annual Reports;Expert Interviews;Literature Searches2Mainly sell through W/S markets25 sales office in ChinaVery limited Want Want own sales people-Only responsible to collect money from T1 DTs-No visibility on T2 DTs or belowWant WantT1 DistributorsT2 DT/WSIndirect selling&indirect distribution(95%of sales)Mostly GT outletsSellingDeliveryPreliminaryThis information is confidential and was prepared by Bain&Company solely for the use of our client;it is not to be relied on by any 3rd party without Bains prior written consent9SHA1311-KO wholesale works.ion v8Example:Want Want built up direct sales model for MT and key cities from 2006-2010Source:Company Annual Reports;Expert Interviews;Literature Searches2Global and national KA retailersWant WantKA salesT1 Distributors“He Want”salesT2 DT/WSDirect 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 GTFragmented tradeDirectly sells and delivers to 20 global&national KAsManaged by 200 Want Want KA salesDelivery by own delivery fleet or through 3rd party logistics providers“He Want”model covers 1M retail outlets in 2008Established 300 sales offices4-5K Want Want own sales people and 10-15K DSRs for both“He Want”&DT mgmt.in 200815K DT/WS nationwide with monthly sales ranging from a few thousands to 100M RMBSellingDeliveryPreliminaryThis information is confidential and was prepared by Bain&Company solely for the use of our client;it is not to be relied on by any 3rd party without Bains prior written consent10SHA1311-KO wholesale works.ion v8Example:Want Want then built up E&D indirect sales model to accelerate beverages starting in 12Source:Company Annual Reports;Expert Interviews;Literature Searches2Global/national&selective regional KA retailersWant WantKA salesRetail T1 Distributors“He Want”salesT2 DT/WSDirect selling&distribution(20%of sales)Direct selling&indirect distribution(35%of sales)Indirect selling&indirect distribution(35%of sales)Regional and local MTGeneral tradeExtend KA coverage to largest regional MT chains200 Want Want KA salesDelivery by own delivery fleet or through 3rd party logistics providersExpanded to over 350 sales offices in ChinaStabilized#of own sales people and increase#of DSR and in-store push-girls-Introduced“Liang Want”project to strengthen in-store executionStream down to 8K high quality DT/WS nationwide(only a small%through T2 DT)SellingDeliveryFocus on E&D outletsE&D T1 DistributorsIndirect selling&Indirect distribution(10%of sales)Started to recruit E&D dedicated DTs with territory exclusivitySupported DTs with segmented entry toolkit for different E&D types(layout,promo plan,etc.)T2 DT/WSPreliminaryThis information is confidential and was prepared by Bain&Company solely for the use of our client;it is not to be relied on by any 3rd party without Bains prior written consent11SHA1311-KO wholesale works.ion v8Example:Wrigley as an MNC company adept at managing indirect and direct selling models2Indirect selling&distribution,with set of scaled distributorsReplicated indirect selling&distribution,enlisting new distributorsBuilt up direct selling model for MTIndirect model:improved distributor scale,capabilities and systemsDirect model:reorganized to better serve different KAs50-100 cities100 new cities per year1000 cities all over ChinaMostly traditional trade70%TT,30%MT50%TT,50%MT1 brand:Doublemint2 brands:Doublemint,ExtraMulti-category,multi-brandsRTM model#ofcitiesProduct/brand portfolioChannel mixPhase I:DEVELOPING REPEATABLE MODEL(93-02)Phase II:Horizontal growth(02-11)Phase III:Vertical growth(since 11)PreliminaryThis information is confidential and was prepared by Bain&Company solely for the use of our client;it is not to be relied on by any 3rd party without Bains prior written consent12SHA1311-KO wholesale works.ion v8 FMCGs tend to use different RTM models tailored to different market and channel priorities/dynamics3/4GeographicGeographic and channel prioritiesChannelsMetroU1U2CountyT&VMT/KAGTHigh/mid-end E&DLow-end E&DOther channels(e.g.sports venues,etc.)Different mix of RTM models,driven by-Nature of category-Market scale/share(thereby cost/economics)-Internal capabilitiesContinuously evolve RTM models along with different stages of development-Adapt to market dynamics-Optimize costs with increase in scale and internal capabilities,without sacrificing controlIllustrativeand other considerationsThis information is confidential and was prepared by Bain&Company solely for the use of our client;it is not to be relied on by any 3rd party without Bains prior written consent13SHA1311-KO wholesale works.ion v8Example: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 providerSource:Expert Interviews;Literature SearchesKey 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)TT(50%sales)Direct selling&distribution*Mix of direct and indirect selling;Indirect distributionIndirect selling&distributionWrigley covers 3M outlets in China and have visibility on 800K outlets where their 2,000 sales reps and 3,400 DSRs sell intoCentralized sales database of these 800K outlets,and T1 distributorsFocus on top 50 cities,with strong sales presence in marketOutlet reach and flexibility3/4This information is confidential and was prepared by Bain&Company solely for the use of our client;it is not to be relied on by any 3rd party without Bains prior written consent14SHA1311-KO wholesale works.ion v8White space(no control)Developed market(greater level of control)Stage 2Stage 1Contract/conditionalityCompensation modelNo contract;purely transactionalBasic 2 party contract,subject to renewal each yearMark up+rebates on vol.targetMark up+rebates on vol.target&conditionsLevel of POS control/visitsInfrequent visit by DSRsNot knownILLUSTRATIVECategory exclusiveContract with sales target&high level execution KPIFloor price mark upVisibility/trackingOnly sales to wholesalerPOS visibility through route coverageAudits on wholesalerVisited by DSRs and some by salesMarkup+Rebates based on vol.target&product availabilityAnnual contract,subject to basic conditions.Tracking of 2nd tier WS utilized by wholesalerTracking of 2nd tier WS and POS coveredMore frequent visit by DSRsFragmented trade:Indirect selling model evolution with increasing local scaleExample:Wrigley continuously evolves its RTM model with local scale to assert greater control3/4This information is confidential and was prepared by Bain&Company solely for the use of our client;it is not to be relied on by any 3rd party without Bains prior written consent15SHA1311-KO wholesale works.ion v8Example:Beverage Co.evolves from indirect selling model to direct model as its local market share increasesMarket entry:Indirect selling with little controlDeveloping stage:Evolves towards direct sellingStronghold:Direct selling,strong control,moderate costOntrade&TTFMCG co.Master WST2 WSFMCG co.Master WSNew ChannelOntrade 1Ontrade 2TTTerritory 1Ontrade 1Ontrade 2TTTerritory 2FMCG co.Territory 1T1 WST2 WSSales planningSales target planningSales tactic planningSales rep managementDistribution&warehousingOrdering&InvoicingPost-sales servicesChannel developmentChannel maintenance*Sales target planningSales tactic planningSales rep managementDistribution&warehousingOrdering&InvoicingPost-sales servicesChannel developmentChannel maintenance*Sales target planningSales tactic planningSales rep managementDistribution&warehousingOrdering&InvoicingPost-sales servicesChannel developmentChannel maintenance*Channel mgmt.LogisticsSource:Bain experienceWS in chargeFMCG co.in charge#of sales rep5 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 WS1-210-2010-30 per city(#of outlets vs.#of sales rep=40-50:1,key role is to visit outlets,manage activation and W/S management)OntradeTTTerritory 3T1 WST2 WSOntradeTTT1 WST2 WST1 WS2-5T2 WSOntrade&TTOntrade&TTT1 WST2 WSOntradeTTTerritory 2T2 WS3/4W/S focused only on new channelThis information is confidential and was prepared by Bain&Company solely for the use of our client;it is not to be relied on by any 3rd party without Bains prior written consent16SHA1311-KO wholesale works.ion v8AgendaManaging multiple RTM models in ChinaKey success factors for managing indirect selling models in ChinaSome implications for KOThis informati