Soft drinks marketing in Bangladesh- A Study on Tea
Marketing involves a complex series of relationship and interactions among the different divisions of an organization. Distribution management demonstrates how this entire process can be managed so as to amplify the efficiency of an organization with its channel members. Distribution management is the operation, which creates time, place and form utility through the movement of goods and persons from one place to another (Mossman & Norton 1965). With growing competition in the market after the emergence of the concept trade liberalization, considerable thought is being given to formulate new market strategies to accelerate and to develop efficient distribution network especially for highly convenience products and tea is one of those.
Tea is the most popular refreshing drink irrespective of age, gender and race. Drinking tea is particularly popular in the northern and southern hemisphere where extreme cold prevails for most of the time. However, Bangladesh is also a good market for tea. Serving a guest with tea is an inalienable part of our long-standing tradition. Bangladesh being a small Tea-producing country shares 2% of the worlds total Tea production. Tea is an agro-based, labor-intensive and export- oriented sector and plays an important role in the national economy through export earnings, trade balancing and employment generation. Our Tea industry dates back to 1857 when the first Tea garden was established at Malinichera in Sylhet District. Today a total of 163 Tea gardens with an area of 1,15,757.41 hectors of which 52,317.21 hectors or 45% is under cultivation.
The domestic consumption of tea in Bangladesh has been enhancing proportionately with demographic growth, which leads to gradual shrinking of our exportable surplus as it eats up the current flow of our tea production. To meet this swelling internal demand and to export tea to earn foreign exchange we must maintain at least a 60:40 (Export: Internal consumption) rate to have effective increment in tea production. The low turnover of the existing rate of tea production in Bangladesh may be attributed to be the reason of technical, financial and management problems. Effective research needs to be conducted with a view to raising productivity of our tea and improving its quality. Moreover, efficient distribution management is one of the focal points of internal tea marketing in Bangladesh. To serve the local market efficient distribution network is the significant issue for the tea marketers. The study will highlight the distribution management of the marketing giants of tea brands in Bangladesh in the path of comparative study.
OBJECTIVES OF THE STUDY:
The objective of this study is to identify the problems in distribution management of branded tea and to suggest remedial measures to increase sale and market share of these competing tea brands.
- To determine the triggers and barriers for stocking up branded tea.
- To identify the strength and weakness of distribution channels of the competing brands.
The strategic sales management channel of distribution plays a key role in market penetration and concentration. As far as the Management Guru’s concerned, it is widely accepted as a sound strategy for a new product, external distribution channel is preferable, specifically when the product marketing is relatively difficult both in the scale of logistics, recruitment and networking. Companies normally do use their own channels rather than distributors when fully equipped, confident and capable both financially and humanly. However, distribution and transportation are also termed as ‘the economy’s dark continent’, and the last frontier of cost reduction in American business. It implies that at some stages Managers can’t adjust prices, labor or material. The only area left in this business is physical distribution, which is also termed as ‘fat’.
As a matter of fact, Distribution is the sale and movement of goods to customers. The term ‘physical distribution’ refers to that portion of the total distribution activity devoted to the addition of time and place utility to the form utility provided by manufacturing. It is to be noted that improvements in distribution technology have not kept pace with improvements in manufacturing efficiency and marketing effectiveness. Much has been spoken on marketing but the subject of distribution should be placed in proper perspective for marketing management.
In essence, physical distribution is the ‘Science’ of business logistics whereby the proper amount of the right kind of product is made available at the place where demand for it exists. So, distribution is the key link between manufacturing and demand creation. As such it has a profound effect on the success of both activities, and consequently on the basic profitability of the enterprise.
Bangladesh Tea Scenario:
Though our tea industry suffered a serious setback in 1971 but we succeeded in reversing with the help of the government, foreign assistance and hard work of our planters. It is hoped that to increase our production to an average of 1500 Kg per ha in a few years time some pragmatic measures to be taken to improve the quality of tea by extending the area with new varieties of hybrid clone, modernizing factories and improving infrastructure. Bangladesh now annually produces 60 million Kg of Tea and it was expected to increase the production to 90 million Kg in the next 15 years, i.e., by 1986. Marketing system of Bangladesh tea is defined as the process of manufacture-tea in bulk or packed from tea estates to the buyers at Chittagong Auction where teas are sold either directly to overseas buyers or internal traders.
DATA ANALYSIS & FINDINGS:
According to the research, primary and secondary data have been collected and have proper tabulation of the data found in the field research. The data are according to the view about the overall tea sector of the country that might vary. In the research questionnaire, the main concentration was paid on the information needed for the report. The response was great. All retailers tried to answer all the questions except the distributor’s price. So it is not included in the report.
Number of respondents 100
Gender of the respondents: 100% of the respondents are male.
Availability percentage of different brands
In order to make the data available 100 shops in Chittagong have been covered in this research process through a careful scrutiny and screening, and direct visit to the same.
At Chittagong, Available brands in different stores are as follows:
From above, it is clear that Distributors are trying hard to make their product available in every corner of the country. Ispahani Mirzapur (the Brand of Ispahani) is the most available tea in our country followed by Uni-Lever Bangladesh, the main competitor of Ispahani is also at the second position by covering 96% of the stores.
Individual brand sold:
Ispahani is the leading brand in our country. The distributor of Ispahani is trying hard to increase the sales quotas. They are providing a good feedback to the retailer about their problems as well as on right delivery-time. These entire pro-marketing activities resulted in higher sales. The credit system is the main trick to click their success. Their vision is that “Sell then pay”. So they don’t have to worry about the money at the buying point. Pressure of this huge stock leads to sales increase.
In terms of adherence to tea brand, the customer does have a shifting perception of mentality not stubbornly attached to any particular brand or other. If told to try any other brand, one would do so. In that case, the retailers have the maneuvering capacity in influencing the sale of Ispahani tea.
Top five brands
According to retail-sales report Ispahani ranks second to none in respect of brand standing. Second position goes to Uni-Lever Bangladesh Ltd. but they are expanding rapidly in Chittagong. Ispahani strategically outclassed its competitors with their price tactics, i.e., the lower price, as they have their own tea gardens.
The stock of tea is totally dependent on the retail outlets location, sell, size etc. In residential areas and the bazaars the sale trend looms higher.
Ispahani is the most popular brand name in Chittagong in terms of sale. The average stockpile per store is at least 2.287 kg.
Closest brand is Lipton Tazza of Uni-Lever Bangladesh. The average stockpile per store is at least 2.001 kg.
In the tea-bag market segmentation Ispahani Mirzapur leads the competition at a marginal level in striking comparison with Lipton Yellow Label tea-bag. Tea-bags are mostly sold in commercial areas, hotels and restaurants.
Problem in storing tea
The study brings to light some facts about the problem of tea storing which are as follows:
- No Problem in storing: 90%;
- Problem of Rats: 7%;
- Problem of Cockroaches: 3%
Most of the retailers are not worried about the problem in storing tea as the sales person of respective tea Brands always replace the non-usable / damaged packets.
With regard to the distributors’ coverage the following facts derived at:
The best sales team
- 16% Respondents voted for Ispahani.
- 10 % Respondents voted for Uni-Lever Bangladesh Ltd.
- 74 % Respondents voted for both.
In the opinion of the retailers Ispahani,s sales team is better. But most of the retailers declined to comment about the comparative standing between Ispahani and Uni-Lever Bangladesh sales team performance.
Most frequent callers to accounts:
According to the respondents that comprised of 11% of the total interviewed opined that Ispahani sales team have a more frequent calling than Uni-lever Bangladesh (09%). Again, 80% of the Respondents are under the impression that both the sales teams call more frequently.
Problems facing from distribution channel
The study shows that the distribution channel encounters with the following problems:
- Call time resentment: No problem 90% cases.
- When the store is closed 2%.
- Irregular or Never comes 4%.
- Others / Declined to comment- 4%
- Call time resentment: No problem 89% cases.
- When the store is closed 4%.
- Irregular or Never comes 4%.
- Others / Declined to comment- 3%
Comparative Distribution functions
Alteration and replacement of defective goods are parts and parcel of distribution jobs of any good selling companies. With a comparative study in this case it has been found that-
– Did not change goods that are defective: 3% (Uni-Lever Bangladesh)
– Did not change goods that are defective: 4% (Ispahani)
There are number of ways in which a properly designed physical distribution system can help to generate additional sales volume. Considering all the data found in the questionnaire survey and analyzing the market position and the distributor effectiveness, the following recommendations can be drawn:
◊ The competing brands may adopt more credit facility for the retailers in Chittagong;
◊ A few changes are required in the sales system for the distributors. The sales team should change their timing according to the convenience of the retailers. They should supply the product right in time and give emphasis on the retailers’ requirement, i.e., pro-retailer policy needed to be adjusted.
◊ The competing brands may incorporate innovative marketing policies so that they can drive the total consumers toward their tea products. Some promotional marketing activities can be adopted, such as, offering gifts to the retailers against targeted quota achievement within a stipulated time frame. Same tempting offers can be delivered to the customers against a certain volume of products or brands for a limited period of time, or targeting social rituals or marking any seasonal festivals.
◊ Proper inventory & control management required to be implemented at the retail store level. So, the stock shortage / sales wastes could be minimized. This has the double-edged leverages i.e., increasing of both actual sales volume and the level of customer satisfaction.
◊ Reduce customer inventory requirements – A responsive distribution system can mean shortened customer order cycles, and consequently reduced customer inventories. Focus to be given on the competitor’s activities in this field too. Meaning the customers will get the economic leverages by doing business with.
◊ Solidify supplier-customer relationships – A soundly designed distribution system can help to solidify and perpetuate a supplier’s relationships with its customers. This can be accomplished through integration of the suppliers’ delivery facilities with customer’s receiving facilities, consignment of stocks to customer, and other devices of a similar nature.
◊ Increase delivery discounts- Sufficient cost could be saved by developing more efficient physical distribution procedures to enable the sharing of part of these savings with customers in the form of increased delivery discounts.
◊ Enable expanded market coverage- More efficient distribution operations frequently permit a company to compete more profitably and more effectively in distant markets, or in markets that previously were marginal. In this way the company is enabled to expand its distribution, which leads in turn to increase sales volume.
◊ Allow greater concentration on demand creation – The development of a well organized physical distribution activity in which a separate administrative group is established to plan and operate the distribution system can free up marketing and sales personnel – to allow them to concentrate more attention on their basic responsibility, demand creation. In many companies this has led to an expansion in the number of sales offices and a decrease in the number of warehouses, with a consequent reduction in total distribution costs.
The betterment of the macro economic scenario distribution management strategy needed to be evaluated to fine-tune the total tea marketing process. The tea market was less focused for long time. But with the potential market growth of tea the competition within is quite notable indeed. The demand for tea is universal and so is the supply. In this connection, the quality matters much in popularizing tea product. The folks desire their refreshment to be perfect and hence the quality of tea should be of standard.
The goodwill of the competing brands in Bangladesh makes the tea marketing process easier. The only variable to highlight here is the quality marketing management. Meanwhile Uni-Lever Bangladesh does in a good position though not possess the top place like that of the Ispahani. The main reason for Ispahani to top the market is their retailer-friendly marketing policy. But the Uni-Lever Bangladesh is also fighting neck and neck. In terms of sales personnel both the companies have already proved efficient & friendly. But yet, the marketing policy followed by the companies makes some inconveniences for the retailers to store and sale the tea products. The retailers play a key role in tea marketing, as the customers do not mind trying a new brand pushed by the retailers. The happy retailer-pro schemes needed to be introduced to have a positive impact in sales volume hike. However, distribution policy and strategy are required to be adjusted time and again in line with the macro and micro environmental changes that occur in the tea market. Concluding, both the companies focused in this particular study do have a very good market potentials to thrive nationally and globally with special reference to distribution management.