Sales channels to reach your customers
Selling through retailers, wholesalers and other distributors
Selling through an intermediary may be a more cost-effective way of reaching your end-customers than selling to them directly.
If you are targeting business customers who prefer to deal with large suppliers, selling directly to them may not be a realistic option. Instead, you might aim to supply wholesalers who have existing relationships with those businesses.
If individual consumers buy low value quantities of your products, the best option might be to target retailers that sell similar products. Or you might choose to focus your efforts on a relatively small number of wholesalers who can in turn supply your products to many retailers.
Other distribution channels may also reach your end-customers. For example, technology suppliers often sell to resellers who can configure and install the technology to suit end-users’ particular needs.
Managing your distributors
You need distributors who will value your product. If they sell competing products, what will make them push yours?
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Think about how you set your prices. Distributors will be more enthusiastic if they can make a large profit – but setting too low a price will eat into your own margins.
Effective advertising and promotions can be vital. As well as marketing to the distributor, you can promote your products directly to end-customers. Distributors will be keener to stock and sell products that their customers are asking for.
The key terms of the supply relationship should be covered in a written contract. Key issues might include:
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how much stock the distributor will hold
what the distributor will do to promote your products
how quickly you can resupply and minimum order levels
whether the distributor has exclusive rights to your product (for example, in a particular territory)
what happens if either you or the distributor want to end the relationship
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Budgets Implications on FMCG Sector
The Budget gives more focus on the agricultural/farm sector that will boost the rural income thus providing better growth prospects to the FMCG companies. With 12.2% of the world population living in the villages of India, the Indian rural FMCG market is something no one can overlook. Better infrastructure facilities will improve their supply chain. Also, with rising income and growing consumerism, FMCG sectors are likely to benefit. Growth potential for all the FMCG companies is huge as the per capita consumption of almost all products in the country is amongst the lowest in the world. Further, if these companies can change consumer’s mindset and offer new generation products, they would be able to generate higher growth in the future.Points to rememberFarm sector has been given the top priority. Agriculture investments to go up to 2% of GDPDuty on edible oil has been reducedExcise duty exempted for all food mixes and biscuitsCustom duty on Sunflower oil (crude and refined) reduced by 15 per cent while exempted from additional CV duty of 4 per cent Customs duty on food processing machinery and their parts is being reduced from 7.5% to 5% Excise duty has been fully exempted on biscuits of per kilogramExcise duty on food mixes, including instant food mixes, has been reduced from 16% or 8% to NilFree samples and displays are exempt from the purview of FBTFootwear – Excise duty on parts of footwear reduced from 16% to 8%Venture capital investing in dairy industry will get a pass through statusBetter rural infrastructure development to be an area of focusIncrease in dividend distribution tax from 12.5% to 15%1% higher education cess to chargedThe dividend distribution tax on dividends paid by money market mutual funds and liquid mutual funds increased to 25 % for all investorsNo implementation of value-added tax (VAT) on cigarettesSpecific excise duty on cigarettes increased by about 5%CHANGES EXPECTED The focus in agriculture will benefit rural income that in turn will help FMCG companies Thrust on Increased investment in agricultural activities and rural infrastructure would be positive for the sectorIncrease in spending towards upliftment of rural populace to lead to increased demand for durables in the long termCST reduction expected to lower manufacturing costs of FMCG playersReduction of excise on food mixes is beneficial to ITC, as this segment is a new growth areaFMCG companies spend a lot of money on advertising and brand building. Exclusion of samples and displays from FBT will help them in promoting their productsBetter infrastructure will help better access and more distribution network to the FMCG companies. It will help them improve the supply chainCompanies have huge investments in the liquid funds, the higher tax on dividend distribution will reduce their other income. The impact of higher tax (cess) on the industry is likely to lower net margins, albeit marginally. Also all the FMCG companies will benefit from the infrastructure development funds that will boost to rural incomeHLL, Marico, Dabur and ITC will benefit out of it. Britannia and ITC are likely to benefit due to reduction in excise on biscuitsITC will also benefit from the reduction of excise duty on instant mixesDuty reduction on edible is a positive for companies like MaricoPositive for footwear companies like Bata, Liberty Shoes and Mirza InternationalSource: Indian Budget 2007-08 – Part I – Fast Moving Consumer Goods (FMCG) Thanks Mr. Finance Minister for this hygienic budget for FMCG Sector !!Labels: biscuits, budget, edible oils, FMCG, instant mixes, ITC
