Wellness India gets candid with Elkana N. Ezekiel, Managing Director, Zydus Wellness Ltd, a subsidiary of Cadila Healthcare Ltd, to unfold the company’s strategy to increase penetration, distribution channels and more.
Making headlines for its high valued shares, Zydus Wellness Ltd is the company which operates in the consumer products segment offering renowned products like Nutralite, Sugar Free, and skin care products brand Everyuth.
What is your strategy to increase penetration through traditional, modern and eCommerce retail formats?
If you are talking about retail penetration, we have recently moved to a model, where distributors appoint members who are supported and trained by us. There are large numbers of people on the ground today in comparison with ten years back, that’s one key change which we’ve made. Secondly, we are focusing on some key SKUs that seems to be driven of both consumers off take market shares as well as distribution. When it comes to modern trade, there are several chains, which we have under-represented for a variety of regions, some of them are historical, while some are business related to close the gaps and ensure that we bring them upto the national average.
We’ve taken baby steps on the eCommerce side, which is not something in focus at the moment as we have unfinished business in general trade and in the modern trade format. There is a fair amount of growth to be added for us, which may continue to expand distribution, working general trade as well as modern trade, so will come into eCommerce later.
How do you retail your products in these three formats including traditional, modern and eCommerce?
As far as Everyuth is concerned, it’s a traditional FMCG product like any other available in India. Though, we sell it through retail channels, with a network of distributors who buy products from the company against Pre Return Margins (PRM) and pricing. When it comes to modern format stores, there are few chains who buy products directly from us and rest are through direct distributors, who have expertise and relationships in the channel. Hence, there is no difference in any other FMCG products and we also don’t have a unique model to ensure. We are pretty much following the industry practice.
What percentage of your products get retailed in a store directly and through distributors?
We have three brands; Sugarfree, Everyuth and Nutralite. Broadly speaking, our modern format stores contribute to approximately 10-12 per cent of the total national business, the rest gets channeled through general trade, broachers, chemist stores, kirana merchants and so on.
How many distributor channels you have city wise?
I can’t give you details city wise, but broadly speaking, our Sugarfree brand tends to travel more through the chemist, grocer and general merchant channel, whereas Everyuth gets channeled through grocery and general merchant.
Modern format stores have been growing pretty fast. As the network expands, our portfolio also expands, which is definitely a growth opportunity because we have an opportunity to interact with the consumer and stalls through the modern format channel. We have promoters and merchandisers hired by the company, who are stationed there to create the experience, explain the benefits of the products to the consumer, give them a chance to sample it and benefit from special promotion offers it may run periodically.
What are the challenges you faced in doing business with organised retail and how can they be effectively overcome?
When it comes to organised retail, there are several challenges. The cost of doing business is higher than the traditional trade. Week times, in terms of collection, tends to be longer. However, there are some significant advantages - you get to interact with consumers far more closely in the modern format store then in the traditional store. So you can station up retailer and merchandiser there and have a conversation with customer, which is not that easy with the traditional format grocery or the chemist. And there are special promotional programmes which can be run and campaign promotion programmes which can be organised.
How does your retail strategy differ for supermarkets and traditional retailers in terms of?
•Products to be sold at each format
With the modern format store, we have different terms of trade and they vary by channel, depending on amount of business we generate with them. In the case of distributors, our entire business is cash in advance. And they in turn will exit credit depending on the nature of the retailer and their relationship with him. In some cases, we may not give credit at all, while in other cases, we may collect the money after or between 17 to 15 days. This again may not differ from other strategies of the companies operates in the segment.
•Comment on Promotional tools being used by FMCG companies.
Variety of practices are available. Companies usually make every effort to get as much visibility on shelf as possible. That’s a combination of both paid and unpaid. The unpaid comes in the relationship, which you could enjoy with the retailer and the paid visibility is higher and safe - put up on display on a window, put up the screens and so on. In addition there are standard incentives on buying the volume, volume discounts and some companies also offer special banded packs in modern format stores.
•Special discount and deals
There are different types of deals; there are deals for the retail channel and there are deals for the consumer. If a retailer buys Rs 1,000 worth of products, he might be entitled for a bigger discount than the retailer who buys Rs 200 worth of products. This varies by product category and varies across the country. In the case of the consumer, for example we recently had a buy to get one free offer on Everyuth, some of the selected deals, which we ran both in the modern format as well as in the traditional channel and that received a good consumer response.
What is the percentage of sale of your particular brand/brands retailed in supermarkets and traditional brick and mortar shops?
Broadly, 10-12 per cent of the business growth.
What kind of initiatives can be taken by both the parties (product brands and retailers) to create a win-win situation for all the stakeholders?
On modern store formats, joint promotions are on and visibility programmes are created. The promotions draw traffic for the duty advisor and the merchandise. Sometimes we run special promotions with the channels for the consumers buy goods to a certain predetermined value or the gift items. That works beneficially because this allows us to interact with the consumers and help increase the business of the channel.