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Distribution Channel For Coconut Water

2151 words (9 pages) Essay in Marketing

5/12/16 Marketing Reference this

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Coconut water has been known for its natural health benefits that it offers to human kind. The benefit are well scripted in the traditional texts of Ayurveda and Unani. Coconut water has been said to provide minerals and energy, and prevent from dehydration in case of summers in the tropics. The tender coconut water has been said to improve digestion and help in the cure of UTI.

But, to come up with coconut water drink in packaged form and to cater regions all across India definitely requires answering some essential questions including the areas of high production of coconut, the demand of coconut water in the country, what is the current coconut production, etc.

The following factors can be taken into consideration while determining the production location:

Table 1: State wise production and productivity of coconut

States

Productivity(nuts/ hectare)

Production (mn nuts/annum)

Kerala

7046

6326

Tamil Nadu

13133

4867

Karnataka

3139

1210

Andhra Pradesh

8577

892

West Bengal

 

323.5

Orissa

 

274.6

Maharashtra

914548

273.4

Assam

 

204.9

Source: www.indiastat.com

CHANNEL DESIGN

Urban Distribution Network

Company

Carry and forwarding agents

Redistributing agents

Wholesalers

Rural retailers

Urban Retailers

Consumers

In this, the company directly supplies its product to the retailers which helps them to save the margin, which they give to the wholesalers and it also ensures quick availability of the product to the retailer. The flowchart above depicts the scenario. The company manufactures the product which is then sent to the carry and forwarding agents. After Manufacturing of the product, it needs to be sent to the market for sales & distribution. This is where C&F (Carry & forward) agents come into picture. They act as a link between company & distributor. They transfer stock from company to distributors. The distributors then make the product available in the market through retail & dealer channel

Rural Distribution Network

Since last five years beverage companies had started penetrating rural marketing also. For the rural sector these companies are working on Hub and Spoke model. To reach out to rural India, we need to start out by drawing up a hit list of high potential villages from various districts. So to ensure full loads, large distributors (Hubs) need to be appointed, and they would supply the product from the company’s depot in large towns and cities. . The hubs would appoint smaller distributors (Spokes) in adjoining area so that the goods can be distributed. Below is the diagram illustrating the same.

CONSUMER PROFILING

Since we are coming up with a product at the national level, therefore, it is important to identify the industry. Customers’ and consumers’ behaviors help to correctly define one’s industry. Therefore, we conducted survey to identify the industry where our product will have an existence. The sample size was around 80 people out of which 96% people drink coconut water. Convenience sampling was used because of the time constraint.

Others

Thirst quencher

Refreshing

Drink

Health drink

No response

What do you consider coconut water?

100

80

60

40

20

0

Percent

Thus, from the survey results, it can be clearly seen that the product should have an existence in Health and refreshing industry which we, here, are considering it to be fruit juice industry as fruit juices are also perceived in the same way. Here, one might argue why not (Carbonated) soft drink industry? The reason why we are not placing our product in the same is that people do not consider carbonated drinks as health drinks, but thirst quenchers. Since we are positioning our product as health and refreshing drink so fruit juice industry suits the best which is also backed up by the survey so conducted.

STP ANALYSIS:

Segmentation:

Demographic: The youth (Age: 15-30) will be the main target segment whereas the people of middle age will be the spillover segments.

Geographic: We will target both rural and urban areas.

Psychographic: Socioeconomic classification is done in rural and urban areas.

Behavioural: This will be done taking into account the benefits and usage rate, as required by target customers.

Positioning: We are positioning our product as a natural health drink that is extremely nutritive and also highly refreshing.

Its tagline will be ‘Naturally Refreshing’

MARKETING MIX:

Product: Product is different from what we get from roadside coconut vendors since the shelf life of such products is very low. Our product has a shelf life of 9 months and hence making it available to a wide range of markets becomes easier since customers would rest assured of the quality of this product. We would also apply for accreditation by authorized food agencies like FPO and other quality control certifying agencies like HACCP.

Packaging: Tetra packs will be made available both for small as well as large SKUs. The colour of the packs will be palm green and there will be images of green cocounuts, prominently displayed to reinforce the positioning of the brand.

In the urban centers, especially in modern trade, plastic bottle packs will also be made available for SKUs greater than 500ml.

Focus will be on Traditional trade, for intensive distribution. This will include paan shops, LEG, HEG and chemists as well.

Modern trade: In urban areas, there is huge potential of modern retail formats and our product will be made available in Hypermarts, Supermarts and Food Stores.

Alternative Channels:

We will also focus on convenience aspect of marketing channel. The packaged coconut water will be sold in various bus depots, airports, transit points and railway stations. The on-the-go proposition of the product makes it an ideal option for consumers to get instantly refreshed when they are travelling.

Promotion: We would take up heavy promotional campaign to build awareness about our product and to push it in the market. We would keep track of activities that our competitors would be doing so that we can strategize further.

product is intact when it is in the market and hence we would like to sell it through stores that take good care of inventory, have good and adequate storage facilities. Also, we would be able to track not only our sales and turnover but also that of our competitors. This data would be available through the store manager because unlike traditional retailers, he would be engaged in systematic data management and record keeping.

SWOT Analysis of our product – Packaged coconut water

Limitation and Future Scope of Research

Limitation: The research on channel design is qualitative rather than quantitative. It is very difficult to assign weightage to different parameter for choice of channel design. The research suffers from the perception of service output with respect to another. A different set of researcher may have given different weightage to different parameters and hence could have come out with different recommendations.

Current market is unorganized and there are very few and small organized players. The research is heavily borrowed from the experience of beverage industry as the product characteristics are perceived to be more or less similar.

We haven’t considered e-commerce as the channel for the product

Future Scope of research: As the market is naïve, so there is a lot of scope for new players. In future, if the intermediaries happen to be removed from the distribution channel with companies directly selling the product to the consumers like in US and the coconut water market gets more organized, the distribution channel strategy might have to be revamped.

As there is no current established market leader in this category, we are trying to replicate distribution strategy of current beverages industry in India. So again if the market grows substantially in future, the present distribution needs to be changed drastically and a completely different distribution model might have to be designed.

We can also think of selling directly to consumers through e-commerce.

CONCLUSION

Setting up a distribution channel for coconut water requires some strategies which are different from traditional distribution methods for other products like aerated drinks, mineral water etc.

There is huge potential for a product like packaged coconut water to work in a country like India. Coconut is already seen as a product which is very useful in daily requirements of households in southern parts of the country, and coconut water is seen as a product which would essentially quench thirst for the people as well as have some nutritional value.

Designing a packaged coconut water drink has some unique challenges in itself. To market the product, we not only have to look at the aspect of providing just coconut water to the end consumer, but provide a solution to him, so that he can quench his thirst, and also get the nutritional benefits provided by coconut water. For this purpose we have used a systematic approach to design the distribution channel for coconut water.

Despite coconut water’s potential as a competitor in the bottled beverage market, attempts to capture those qualities in a commercial product have been largely unsuccessful. Once exposed to air, coconut water begins to ferment, and rapidly loses most of its organoleptic and nutritional characteristics. To eliminate the risk of bacterial growth, commercial bottlers are forced to sterilize the product using high-temperature/short-time pasteurization, which destroys some of coconut water’s nutrients and almost the entire flavor.

We have studied some of the current channel designs currently being used for distribution of aerated drinks, and figured out how different strategies are being used to distribute the products in rural as well as urban areas. Also, while designing a new channel we have to keep in mind that the Indian retail setup is such that still only 2 % of all retail takes placed through organized retail. The rest of the retail still takes place through unorganized channel and this leads to a lot of intermediaries being involved in the traversal of the product from the manufacturer to the end consumer, which provides its own unique challenges.

According to our consumer survey, we have figured out that the ideal way to position our product is as a health drink which refreshes, so it is placed on a pedestal where it might be put by the consumer in the same category as a packaged fruit juice. This particular product category is growing at a very fast pace, with more and more people becoming health conscious and going for products which are healthy and refreshing. There has also been a general trend of people going for substitutes of aerated drinks as thirst quenchers as opposed to say 10 years ago.

We intend to use an intensive distribution strategy mostly in northern parts of the country, because in those parts there might also be some novelty factor attached to coconut water, as it would not be as readily available as in the southern parts of the country.

In the end we would like to add that in a market like India, no particular channel can be said to be an ideal distribution channel. Multinationals which have been operating in India for many years now have seen that even for marketing the same SKU to different sections of consumers, altogether new channels need to be setup in some cases, whereas some modifications need to be made in other cases. Hence we would initially target those segments of the consumers where we feel that maximum chances are there for innovators segment of the consumers, so that they would try out product, and maximum marketing can also be obtained through word of mouth marketing. Targeting channels like education and cafes would be a good start, and we could start of with strategies like free sampling, discounts, display incentives to the various retailers, in an effort to push the product from the shelf, and create awareness about it. Also along with push strategies, we can also go for some TVCs where the product is introduced to the people, and create inquisitiveness about the product, and introduce our product as a different offering in the healthy drinks product category.

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