Shreyas Kulkarni
Distribution Diaries

"I will manufacture more products that require the least amount of labour": Mayank Shah, Parle Products

Ninety per cent of FMCG volumes are sold through traditional distribution channels, says the category head, Parle Products. Multiple channels must work for you to win in the current scenario.

We, in India, don't have a national biscuit. However, if people were asked to name one, then Parle-G would surely top the list. The power this glucose biscuit brand holds in people's minds.

Parle-G rules over Indian minds in two ways. First, it is the most common accompaniment to tea, one of India's obsessions. Second, because of its pricing, most can easily buy and eat it, even if they can't afford a square meal.

We are currently in the fourth lockdown phase. At the beginning, when people started panic buying, Parle-G quickly disappeared from shelves for a while. But now, it's back on shelves.

We got in touch with Mayank Shah, category head, Parle Products, to better understand the distribution challenges, supply chain issues, and marketing lessons during lockdown.

Edited Excerpts:

What is the biggest distribution-related learning that has emerged from these trying times?

You can't rely on one solution channel. Ninety per cent of FMCG volumes are sold through traditional distribution channels. Today, when they're affected, we see a surge in e-grocers.

Many companies, including ours, treat advertising cost as the cost of distribution.

Many delivery networks, especially direct to consumers (D2C), have pitched in. Networks, like Swiggy and Zomato, take the product from the retailer and then deliver it to the consumers. They are the carriers. However, the likes of Grofers and BigBasket are different because they buy from you (the brand), and then sell it through their app.

Then, we have another channel, i.e., e-commerce in organised wholesale, like Udaan, that was earlier ignored. But, they have become popular now due to their reach.

These companies come in handy today because FMCG distributors are hesitant to visit the market. All these online companies have an app, or are based on a platform. They get their orders on it, and then it is just about delivery. It is unlike traditional distribution networks, where a salesman goes and takes orders, and then a delivery person enters the picture.

You must make multiple channels work for you. Otherwise, you will suffer in the present scenario.

What are the top 3 changes that you have made to your supply chain over the last few weeks?

The supply chain, right now, is all about optimisation. Earlier, companies used to produce, stock and sell. Now, we're looking at a pull model because of scarce resources.

You will have to look at more efficient products, more efficient packs, and when I say efficient, it's not only restricted to production, but also moving faster to places where the demand is more.

Your supply chain has to change, from what it used to be earlier... If a minimum stock order was 'X' (earlier), it could go down today. There can be more things, like ordering only the quantity you require at a particular time, or ordering only certain types of things.

From a company's perspective, labour is scarce because the migrant workers have returned to their homes. In a scenario like this, you will try to increase your efficiency in terms of where you can utilise labour in the most efficient manner possible.

My labour force work is in manufacturing, loading and unloading. If I continue work, I will have to work at 50 per cent capacity to maintain social distancing norms. So, I have to rationalise and make the entire system efficient, rather than create an imbalance due to the uneven allocation of labour.

I will manufacture more products that require the least amount of labour (say it is easier to make Parle-G compared to Parle Burbon). Can I get more automation in the supply chain area that is labour intensive, like loading and unloading of raw materials and finished goods? Most manufacturing plants are automated. So, the question is how do you strike the right balance when it comes to the deployment of people.

What is it you manufacture that will give you the maximum output? If I have two varieties, where one gives me better output with low labour, I'll go with that. As a result, even your pack sizes will change. That's one part of the manufacturing process, or the beginning of the supply chain.

On the other side of the supply chain is the distributor, or retailer. He will also try to stock those products which are selling because he has to keep the money rolling.

In normal cases, you have your service person going to the retailers/outlets, thrice a week (best-case scenario), and once (worst-case scenario). Along with your core products, he will probably service that outlet with new products... He can nudge the retailer to take those things.

Now, those things are going to be difficult. First, there is resistance among the distributors to send the salesman to the retailers... The best thing would be to quickly jot down whatever is required and move to the next outlet. So, the entire supply chain changes.

You will have to look at more efficient products, more efficient packs, and when I say efficient, it's not only restricted to production, but also moving faster to places where the demand is more.

Post lockdown, will distribution prowess be more important than advertising? Do you see ad budgets being redirected to distribution in any way?

Earlier, there were push models, where you would push the stock to your distributor and he would, in turn, sell it and then you had to create a pull from the consumer.

It's a little different here (e-grocers) as this very channel becomes your advertising channel as well. When you're talking about BigBasket or Grofers or StoreKing or Udaan, these platforms allow you to advertise, too.

While you're still advertising in traditional channels, here you're doing it differently. You're not doing it on mass media, but directly to the consumers, or customers, who're your retailers on what you are offering. And of course, when you are spending here, you reduce the amount spent on regular traditional advertising.

Many companies, including ours, treat advertising cost as the cost of distribution.

Lets's say I talk to an e-commerce firm and ask it to list my product. The firm will do it... But while doing it, you set the terms of trade and say, we will give you 10 per cent margin, but the firm will expect you to, over and above the margin, invest in its model. Even if you don't want to, you will have to because that is the way the model is designed. The firm will tell you to buy this banner, open a store, open a store within a store.

If I look at other channels, the most efficient one is the traditional one. The cost of distribution is the least in it, whereas it is higher in the new channels. But you will pay a higher distribution cost because you want the goods to reach the consumers.

We treat the cost (advertising on e-platforms) as the cost of distribution, and not advertising. So, the cost of distribution will go up.

Last, 2020 has changed everything, from the way we consume, purchase and think. Has the very definition of marketing changed for you in any way?

You have to be consumer-centric, in terms of what is it he requires, rather than tell him what to buy. You have to understand the pulse of the consumer and then pitch things...

Second, the significance of health has gone up tremendously. While it was always important, (it is more so now) because of sedentary life where you're not allowed to go out, physical exertion is limited, and that's good learning.

Third, the relevance of content. You may have a great piece of communication, a great ad, but you can't run it unless it's not relevant to the current times. Today is the time when you have to communicate (talk) to the consumers about their concerns, likes and dislikes, or what they want to do and weave in your brand. All our recent communication has been on these lines.