SDM Eastern Condiments

 

EASTERN CONDIMENTS Group 9 Anku An kurr Ja Jain in • • • • •

Khushboo Khushb oo Han Hanjur jura a Darpan Dar pan Sh Shah ah Darshan Vanashree

 

A B OUT -

E A S T E R N C O N D I M E N T S P R I VA T E L I M I T E D

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Established by M.E. Meeran in 1968 as Eastern Easter n Trading Trading Company

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In 1983, Eastern set up its first full-fledged spice factory with 35 employees in Adimali, Idukki

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In the same year, Eastern set up a Coffee Powder Powder manufacturing facility as well

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By 1987 with its blended spice products, Eastern covered 1/3rd of Kerala’s market

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Eastern Condiments Private Limited was incorporated in 1989

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1992-3, Eastern set up its first lab testing facility with International standards, the only such

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lab in Asia In 1995, opened a new factory in Theni, T Tamil amil Nadu

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In 2008, Eastern had a workforce 1100 - employed in 4 factories factories at 12 locations (India &

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Abroad) Turnover in 2008 was INR 1.95 billion with Operating Profit of INR 167 million

 

EASTERN’S PERFORMANCE IN KERALA

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Market share was increasing YoY ( 28% To 47 % )(Exhibit 7)

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Profit margin was was increasing from 5.9 % to 10.65 % ( exhibit 7 ) Sales growth by over 365 percent in 5 years.

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Better “Behaviour Control” based on effort effort & actions was implemented on Sales staff staff (Manager is King approach)

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Great Routing and Scheduling

 

THE KEY ASPECTS OF STRATEGY THAT DROVE THE KERALA PERFORMANCE AND ITS OUTCOMES ●

Owned the entire distribution system.

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Increasing product portfolio to patented blended spices, Non-vegetarian Non-vegetarian spice mix & Rice based instant mix. Top management involvement in constant Sales planning, training & recruitment of known personnel.

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Portfolio customized to local malayali taste palette. Permanent Journey driven distribution system. Seasonally procured spices to ensure marginally higher price vs commodity spices Consistent quality, hygienic packaging.

 

3. IS KARNATAKA A GOOD CHOICE FOR EXPANSION ?

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Yes, it had 30 of Malayali population, which was highest nationally after kerala. Distribution to Karnataka was relatively easy due to proximity to Kerala. MTR foods was only onl y major competitor, restricted to vegetarian spices only. Bangalore, the capital city was the fastest growing Metropolis with population 6.5 million.

 

4. HOW IS THE PERFORMANCE IN KARNATAKA ?

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Sales has increased from f rom INR 13 million to INR 116 million(EXHIBIT 11) Cash & Stock pilferage caused losses. Failure of Permanent journey system. Lack of upfront cash payment increased working capital. Less “ownership minded” Sales personnel High sales staff attrition rate & burnout. Shift from “Behaviour Control” to “Outcome based control” due to minimal management involvement and training. Distribution planning suffered causing stockouts. Ever-Present Manager Inconsistency

 

5. WHAT WHAT WERE THE EXPERIENCE IN CITIES LIKE

MUMBAI ● ● ● ● ● ● ●

Distribution outsourced to third party partner (at 20

margin)

Operation was profitable but scaling issues emerged. High fixed operating cost despite low consumer pull. Core competency was outsourced hence scaling challenges. Supply & Inventory management issues due to far off factory location. Low Management involvement caused weak Management Controls. Minimal training and frequent outcome based Evaluation caused high attrition rates.

 

6. OPTIONS FOR EASTERN’S FUTURE IN KARNATAKA

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Kerala Model- Owned Distri Distribution bution Sys System tem Pros ●

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Better Monitoring and subjective multifactor evaluation (opaque criteria) of Salesperson Better control of final decision making and salesperson’s compensation to managers Better training of salesperson Higher involvement/communication between salesperson and managers Better coaching of salesperson Better control of value chain

 

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Kerala Model- Owned Distri Distribution bution Sys System tem Cons

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Less freedom of decision making and thought process to salesperson Opaque evaluation criterias No particular attention to bottom-line results As the salary is more fixed, less monetary motivation for a salesperson Higher Monitoring Costs

 

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Mumbai Model - Comple Complete te outsour outsourcing cing of distribut distribution ion system system Pros

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Cost reduction Better awareness of Locality Better time economy Service Quality improvement can be achieved Reduction in direct salesperson

 

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Mumbai Model - Comple Complete te outsour outsourcing cing of distribut distribution ion system system Cons

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Less control over distribution Supply and inventory management issues Training/Coaching, Mon Monitoring, itoring, Involvement/Communication issues Low Management involvement caused weak Management Controls Product only based on Malayali taste Scale-up Issues

 

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India Model- Partial outsour outsourcing cing of distribu distribution tion syst system em Pros

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Larger Market Coverage Some Control over the Distribution System routes, etc Risk Diversity Usage of drivers with better awareness of locality

 

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India Model- Partial outsour outsourcing cing of distribu distribution tion syst system em Cons

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Training/Coaching, Mon Monitoring, itoring, Involvement/Communication issues Low Management involvement caused weak Management Controls. Minimal training and frequent outcome based Evaluation caused high attrition rates Product only based based on Malaya Malayali li taste - Impr Improper oper Rese Research arch Low Brand awareness leading to credit difficulty Difficult Sales Forecasting; Stocks and Cash pilferage

 

SUGGESTED MODEL ●

Kerala Model with the suggested consistency (As they already have their own Vans)

 

ECONOMIC COMPARISONS COMPARISONS KERALA ●

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Malayali Population (31.84 millions) GSDP: volume of all goods and services produced within the boundaries of the State during a given period of time, accounted without duplicati duplicationon- 1.75 trilli trillion on INR 64.4 of GSDP tertiary Sector Unemployment Rate 25 Least Corrupt State in India

KARNATAKA ●

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Malayali Malaya li populat populationion- 30

of total

population(15.87 million) GSDP: 2.5 trillion 54.4 of GSDP tertiar tertiaryy Sector Hub of IT, defence, aerospace and telecommunications industries Large pool of skilled manpower

 

FINANCIAL DETAILS FOR A OWNED VS

ENTREPRENEUR DISTRIBUTION MODELS ●

Distribution cost (

of sales ) w was as less in entrepreneur distributi distribution on model than owned

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distribution. Entrepreneur model have better income to salesperson sal esperson when compared to owned distribution sales personnel.