A lesson in distribution from a paanwala

Waiting for Harneet at the Sarai Kale Khan bus stop in Delhi, I was feeling thirsty. Looking around, I noticed two paanwalas who had displayed a single layer of bottles of water, called Hi-Life, manufactured by a Delhi based company operating out of Paharhganj. It had an ISI mark, but I decided against it. For me, the ISI mark has no value.

I asked the paanwala why he kept only this brand of water. Good company, he offered. Excellent water. I probed further - why not other companies? Bisleri? Aquafina? Kinley? Don't their delivery vans come here? That got him talking and strangely enough, he took it upon himself to explain the situation to me, even ignoring a few customers.

Sarai Kale Khan is a major bus terminus and in winter, even this paan wala sells a couple of bottles each day. Others who are located closer to the terminus must be selling many more- at least ten bottles a day each. Expect that number to quadruple in the summer.

The difference is that while companies like Coca Cola Co., Pepsico and Bisleri send vans weekly and deposit bottles on credit, it is up to the paan wala to take care of the bottles for a week. If the bottle gets dirty or scratched while packing up, people don't buy. The two paan walas I saw displayed ten bottles each. Where Hi-Life beats the big co's is that they have a man stationed at the terminus, on a bike, who distributes these bottles on credit every morning and takes them back every night. All the shopkeepers know he is there, so they just deposit the cash and carry. At night, they return the bottles for cash. They don't need to worry about packing the bottles and taking care of them for the rest of the week. Consequently, all the shop keepers keep only Hi-Life.

I'm not sure if I've said this on the blog before or not, but the real battle between areated drink and water companies is not in their products and the advertising - product changes and advertising battles are used to create a hype. For most people, the drinks are substitutes - if a Pepsi isn't available, you might settle for a Coke. The real battle is of making their product available to you, and at times making sure that the competitors product is not available. Distribution is key.

And I had to wait a little longer to drink water (Aquafina).
2 Comments:
Anonymous Drumster said...

And so we study SUpply Chain Management :) Good post man.. Never knew this funda of mineral water distribution. No wonder local cos sometimes manage to beat the shit out of huge corporate giants...

March 09, 2006 12:44 AM  
Blogger Nikhil Pahwa said...

Well you'll be surprised about how big small players actually are...

How else do you think brands like Ghadi and Double Dog detergent do well? Gai Chhap boot polish is among the most successful shoe polishes in the country. These are all essentially regional players who provide a low cost, value-for-money, and play a high-volume game. These are the guys national players are battling against.

Yes, distribution is key when the big players are competing, but the smaller, local players also play a great margin game, which retailers rarely acknowledge to anyone except the companies themselves.

It's really difficult finding the right balance, since different retailers have different needs and demands. If there are some retailers who need your product because its a large proportion of their total sale, there are others who might be selling more, but your product is a relatively low proportion and hence the shelf space is not as important as for other products. I'd come across a shop while doing a project for Revlon a couple of years ago, where the shopkepper was actually turning down Gillette products because Gillette wasn't offering them a good enough margin.

March 09, 2006 9:43 AM  

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