Inside HCCB’s Distribution SystemOne which serves 400+ beverages per second
A deep dive into the distribution system at HCCB told by the people who keep the system running every day.
Uttam Seal is the Area Sales Manager (ASM) for HCCB in a part of the North East territory and true to the job, his phone is always buzzing. He must ensure that his primary clients – the distributors and the retailers – are happy. Ensuring the availability of a wide swathe of products, available in 200+ stock-keeping units (SKUs), can be a task when everything is not manufactured at every factory. He checks on the orders collected from the market (retailers), the availability of the product range at the distributor's premise, is in constant touch with HCCB's Supply Chain team based at the Raninagar (Siliguri) factory and has to coordinate with his Distribution Team Leader. The most he loves to do is spend time with his distributor partners and the retailers. That is where the proverbial rubber meets the road, and insights and information filter through.
Uttam is one of the many ASMs at Hindustan Coca-Cola Beverages (HCCB). They are supported by thousands of sales representatives (called Market Growth Representatives or MGRs in HCCB) and several Sales Managers, each supervising a group of MGRs. This team aided by distributors and the wholesalers' network, service the nearly three million retail outlets where HCCB's products are sold.
In the food and beverage industry, big or small, every customer and every consumer, matters.
"Fulfilling our retailers' orders promptly is our most important deliverable for the day. Many retailers have a good percentage of their monthly earnings from the beverages they sell that HCCB manufactures. So, every consumer that may ask for a particular beverage in specific pack size and would not find it is a major opportunity loss for the retailer. And therefore we work day-in and day-out to meet the retailers' requirements." says Uttam. "These beverages may bring nutrition or joy to some, relief from the heat for others or add to the celebration of yet others," he adds.
Thousands of kilometres away in South of India, in Hyderabad, Vinay Nagaram, Zonal Distribution Head, Andhra and Telangana zone of HCCB, is also busy planning and mapping the requirements of his clients or partners. In this zone, availability that too timely availability is the parameter of success. In this Thums Up and Sprite loving territory, the challenge to distribute the beverages is about constant replenishment across outlets, eateries and places of preference.
Recalling an instance from May 2020 when the pandemic prevailed, Vinay says, "Hundreds of retailers lined up at our distributors' godowns on the very first-day post Unlock 1.0, to re-stock Thums Up and other beverages. Sensing high demand, we had to act overnight, draw out circles at two feet distance, put communication posters to reiterate social distancing norms and keep a close check to ensure safety protocols. Queues were going in kilometres, and we had to constantly replenish the distributors' stock to ensure retailers went back happy. After all, we don't just serve beverages. We serve happiness."
HCCB is a top 5 FMCG company and given its scale, Uttam and Vinay working in different territories, have the same goal. Beverages being present at the moment of truth! The beverage in the consumers' hands is their delight.
In making sure that every retailer has the stock they needed, they are serviced at regular intervals, powered with the most advanced software at the backend. MGRs punch orders on the SFA tablets, which are then processed and collated to be serviced by the respective distributors. A centralised Tell-Sell based in North Bangalore, armed with all modern calling and analytical facilities and fluent in most Indian languages, complements this team of MGRs in order capturing. But despite this network, there may still be markets which could witness a short-term spike, or an unplanned event or where capturing pre-delivery order is challenging or limiting. In such situations, it is the ready stock units (RSUs) that come in handy.
Distributors send their vehicles armed with loaders and salespeople, with whatever available stocks and service the requirements. If their vehicle can do two rounds in a day, the distributor's capacity utilisation and earning improves.
Eventually, everything boils down to keeping this vast network of local retailers, combined with the MGR's for execution focus, backed by distributor partners' passion and market relationships, working like a well-oiled machine. This is supported by HCCB's Supply Chain network, the data-driven focus of HCCB's Distribution team and everyday market working and process-based execution focus by the Sales Team. A winning combination.
Identifying where to put a distributor, a wholesaler and where to distribute directly by the company can be a challenge. Given India's scale and diversity, there is no one-size-fits-all formula that works. Nor is only one model of distribution adequate to cover a geography. Depending on the market, the consumer, the production facility, the product preferences and the SKUs, IT and data-based insights become a great enabler for the Distribution team. The SKUs that have to be replenished at different outlets in an area can vary greatly.
While the nearby corner store or pan shop will likely prefer the returnable glass bottles in a cooler, malls and cinemas will have a fountain machine and cans or mobile on-the-go packs. Convenience stores prefer the portable, recyclable PET packs while the grocer may pick family packs that get delivered to the households. An entire team works on the metrics for the distribution team, which includes details like route, volume potential, frequency of delivery, right assortment and much more.
The distribution and logistics team also have to keep in mind the manufacturing locations for different products. For example, cans are only manufactured at HCCB's factory in Pune. To make sure that cans for various beverages of different sizes are available at thousands of outlets across the country can be a herculean task. Cans are manufactured for different distribution channels – modern retail, airports, cinemas and others. Imagine millions of cans moving around like little Lego blocks headed for the right channel. All of them must reach in time so that the consumers can enjoy their well-earned sip!
The area where HCCB distributes is more than half of India's geography, which includes 300+ districts. While expanding into new territory, several factors are evaluated, the population in the neighbouring areas, each market's potential in various districts and future projections.
Based on the analytics team's inputs, the distribution point can be set up even at a location where people from several villages assemble. It can make sense to have one wholesaler who can service the smaller retailers in the surrounding villages. Wholesalers are an essential part of the big picture. There are areas where the volume is not big enough to merit a distributor. The retailers could be too small to grow into one. The wholesaler comes in between so that he can service some retailers. It all boils down to working with an optimum distribution team, keeping cost to serve in mind. That is why a regular review of the nature and scale of distribution is critical. In fact, HCCB has added over a million outlets in a short span of a year in 2019.
Expanding into new geography starts with mapping the landscape to identify latent opportunities. The number of outlets in the geography needs to be understood since the HCCB distribution will ride on the available options. The number of general trade outlets must-have details of whether it is a 'Kirana' outlet, where a buyer can stand and order, or an open aisle grocery (OAG), where they can take a basket and walk around picking his choice of products.
The eating and dining (E&D) places add to the high consuming locations. The corner 'paan' shop also needs to be mapped since it is often a place where consumption is naturally high. Bus stops, metro stations and other points like that could also be the ones that exhibit similar consuming metrics.
The volume potential for each outlet is not necessarily based on its size or, in the case of E&D, how many people can sit inside.
If a cooler is placed near a place where people spend some time could be an ideal point of on-the-go consumption.
"Expanding our reach across the length and breadth of the country, with continuous availability and the right service model is a constant journey. Indian geography comes with its opportunities, and how we closely partner with our distributor partners to fulfil the known as well as latent demand is our continuous endeavour," says Pallavi Agarwal, Head of Distribution, HCCB.
The distribution team has to be agile to react to the market's moving situations. After consumption at home increased over the last few months, a new pack size has been introduced to cater to the household consumption requirement. With the need to find last-mile delivery options during the peak of lock-down, distribution tie-ups with D2C (directly from the distributor to consumer) became a reality. Similar new products and pack size and opportunities add to the challenges faced by the distribution team.
The operation of HCCB covering 60% of the country is gargantuan. The spread may appear to be daunting for a young professional looking to join the distribution team. But the freedom to suggest and execute new ideas lets everyone contribute to the distribution engine running at its optimum efficiency.
Imagine a young manager absorbing the contours of the distribution network to learn lessons that will always hold them in good stead. It could be any B-school graduate.
Three years ago, Aman had been identified as one of the interns to work at HCCB. He was one of over two dozen interns who spend their April and May every year, learning with the company. While working on a rural distribution project, he was particularly enamoured by the challenges faced by existing rural distribution for HCCB. Aman got the freedom and support from the management to develop solutions. So, Aman created an in-house tool that factored in all the inputs required to consider the kind of distribution set suitable for rural distribution. A core-team was designed to support him in his project. They pulled out village census data, considered the distributor's service viability radius and captured critical inputs like supply source, village weekly haats etc. to build the tool.
With inputs from his colleagues, within his stipulated internship period, Ashish was able to come up with a solution that was named Project ART.
Over the last three years, Project ART has been enhanced further and now is in V3.0. It helps estimate the volume potential for a rural market, identify distribution gaps, and is now a vital part of the input that goes into reviewing and executing the rural distribution strategy.
Aman is back in B-school. He has realised how much goes behind the scenes in making an FMCG product in the food and beverage category available when consumers stretch their arms to pick them up.