INTRODUCTION
Rationale
Distribution Channels perform a crucial role in the successful distribution and marketing of all products They have various contacts, expertise and wider knowledge of the products The rapidly growing markets and increasing complexities of distribution have increased the demand and requirement of the distribution channels First and foremost, distribution channels offer salesmanship
The distribution channels offer pivotal role of a sales agent They help in creating new products in market They specialize in word of mouth selling and promotion of products They assure pre-sale and post-sale service to the consumers Since these channels are in direct and regular contact with the consumers, they do salesmanship very well and at the same time provide true and valuable feedback to the producers
Moreover, distribution channels increase distributional efficiency The intermediary channels ease the sales process as they are in direct contact with the customers
They narrow down the gap between producers and consumers both economically and efficiently These intermediaries reduce the number of transactions involved in making products available from producers to consumers For instance, there are four producers who are targeting to sell their products to four customers If there is no distribution channel involved, then there will be sixteen transactions involved But if the producers use distribution channels, then the number of transactions involved will be reduced to eight (four from producer to intermediary and four from intermediary to customer), and thereby the transportation costs and efforts will also be reduced
Furthermore, the channels offer products in required assortments Just like the producers have expertise in manufacturing products, similarly the intermediaries have their own expertise The wholesalers specialize in moving and transferring products from various producers to greater number of retailers Similarly, the greater number of final customers Due to the presence of distribution channels(wholesalers and retailers), it is possible for a consumer to buy the required products at right time from a store conveniently located(geographically closer) rather than ordering from a far located factory Thus, these intermediaries break the bulk and meet the less quantity demand of the customers In addition, distribution channels assist in product merchandising It is actually the merchandising by intermediaries which fastens the product movement from the retail shop desk to the customer’s basket When a customer goes to a retail shop, he may be fascinated by the attractive display of some new product, may get curious about that new product, and he may switch over to that new product leaving his regular product Thus merchandising activities of the intermediaries serve as a quiet seller at a retail store
The channels assist in executing the price mechanism between the firm and the final customers, the intermediaries help in reaching a price level which is acceptable both to the producers as well to the consumers Also, distribution channels assist in stock holding The intermediaries perform various other functions like financing the products, storing the products, bearing of risks and providing required warehouse space Thus, the distribution channels are a vital constituent of a firm’s comprehensive marketing strategy They assist in expanding product reach and availability, as well in increasing revenue
Nowadays, businesses are operating in a competitive environment where customers are becoming increasingly demanding and competitors are more savvy
The ways that a company markets its brand, products and services are becoming increasingly varied and differential from one company to another The beer industry is one of the Fast Moving Consumer Goods (FMCG) industries Currently, Vietnam is considered as a potential market due to its young population and rising incomes
Habeco Trading One Member Co., Ltd is one of the three largest beer companies in Vietnam However, before the attractiveness of the Vietnamese beer market, many domestic and foreign beer companies have been stepping up their investment and modernization, information technology becomes more and more important and indispensable in the process of managing and operating the production and business activities of enterprises Some major brands in the beer sector have applied very well technology in sales system management, business efficiency improvement and have boom such as Saigon Beer, Sapporo, Huda, etc For those reasons, the researcher himself chose the subject “MANAGING DISTRIBUTION CHANNEL FOR BEER PRODUCTS IN HABECO TRADING ONE MEMBER COMPANY LIMITED” to study and put into practical application at Habeco to improve distribution activities for beer products at Habeco and improve its competitiveness in the market.
Research objectives
This research aimed to achieve the following objectives:
- To summarize the theories on distribution channel management
-To analyze the current situation of managing distribution channel for beer products at Habeco and find out the achievements and shortcomings of its distribution channel
- To give some recommendations to improve distribution channel management for beer products at Habeco.
Research object
The research object is managing distribution channel for beer products at Habeco by surveying 104 employees working at the Marketing and Sales Division and 11 branches of Habeco.
Research scope
The geographical scope of the research is in the territory of Vietnam
Time period for the research: Secondary data were collected in the period of 2015-2017, primary data were collected from September to October, 2017.
Research methodology
Secondary data were collected from the company’s website and annual reports, textbooks, journals and searching Internet The researcher collected information from the formal publication of Vietnam General Statistics Office These data are basic to construct the literature review and explain the importance of
CURRENT DISTRIBUTION CHANNEL MANAGEMENT FOR BEER PRODUCTS AT HABECO
RECOMMENDATIONS ON IMPROVING DISTRIBUTION CHANNEL FOR BEER PRODUCTS AT HABECO distribution channel system to the business The researcher mostly used description analysis method to process these data
Besides that, public information was also gathered to make the analysis more convincing Based on public information both in Vietnam’sbeer industry on the whole, the researcher tried to study through Internet, via newspapers, magazines or other people’s research relating to beer industry in Vietnam market
First and foremost, in-depth interview method was applied in this research and played an important role in helping the researcher reach more factual and reliable required information The researcher conductedin-depth interviews with six
(6) interviews All questions that were brought out during the interviews were brief, clear and sharp; ensured that they were effective in reaching the reliable and valuable answers
* In-depth interview with Habeco’smanagers: Firstly, the in-depth interview was conducted with the Executive Manager of Habeco The content of the interview turned aroundHabeco and found out the strengths and weaknesses of distribution channel management of the company
The second interview was conducted with the Sales Manager of Habeco He told about the real situation of Habeco’sdistribution channel management
Additionally, he shared about the market potential for Habeco’sdistribution channel management forbeer products
* In-depth interview with distributors: The researcher interviewedtwo (02) distributors of Habeco; the in-depth interviews were designed to collect the information on the operation of distributors and to understand any difficulties they get when they distribute the beer products of Habeco The researcher also asked distributors to comment about Habeco’s policies to them and their sales force as well as the sales force of Habeco The result aimed to analyze the performance of distributors and find out the distributor’s gaps that Habeco needs to cover in order to design optimal distribution channel model in the future
* In-depth interview with retailers: Retailers playeda very important role in Habeco’s distribution channel system because they themselves sell beer products of the company directly to the end-users The researcher interviewed two (02) retailers to understand more about their perception on the current selling system of Habeco, their evaluation about goods delivery, sales team, and consumption potential for Habeco’sbeer products The researcher depended on such information to analyze distribution channel management of Habeco in the territory of Vietnam
The survey wasconducted with the following respondents:
- Marketing and Sales Division of Habeco: All 24 employees
- 11 branches of Habeco: Each branch has about 6 – 8 employees (including
1 director, 2 deputy directors, 1 market manager and about 2 – 4 market supervisors) Total employees of 11 branches are 80 employees
The information that the researcher collected from the questionnaire was useful to some extent Habeco’s decision of distribution channel managementin the future Among 104 questionnaires all sent by email, there were 100 valid answer sheets, reaching the ratio of 96.15%
The researcher used structure map, table of comparison, descriptive analysis via Excel program.All the interview and survey result, data and figures collected were performed by using Excel figures and tables to demonstrate the current situation of distribution channel management for beer products at Habeco, and then find out the solution to improve it.
Research structure
The research was divided into four chapters as follows in addition to Introduction
Chapter 2: Theoretical background on distribution channel management Chapter 3: Current situation of distribution channel management for beer products of Habeco Trading One Member Company Limited
Chapter 4: Recommendations to improve distribution channel management for beer products of Habeco Trading One Member Company Limited
THEORETICAL BACKGROUND ON DISTRIBUTION
Introduction of beer industry
2.1.1 Beer industry in the world
What we are seeing today in the brewing industry is the outcome of a long- running consolidation cycle that started in the 1970s with the purchase of Miller Brewing by Phillip Morris The continuation of consolidation in the industry leaves two sides to consider, Wall Street and Main Street Those on the Wall Street financial side clearly recognize the strength and opportunity in consolidated global brewers powered by scale and efficiency On the other side, Main Street consumers recognize the inherent risks and limitations to market access, choice and value as an outcome of too much consolidation Having a few consolidated brewers with a presence in all major markets brings economies of scale, but it also brings risks to related industries, businesses and consumers who may be impacted by consolidation (Alison, R et al., 1964)
A quick look at world markets and brewer share of each market offers a glimpse into what outcomes we will see post mergers Of course, whether or not more mergers pass the litmus test of regulators around the world is yet to be seen
In the table below, total beer volumes from the top 30 beer consuming countries are listed along with their share of total world volumes and estimated market shares of the top five brewers in each country Clearly there are a wide range of consolidated markets, with Germany at 40 percent to Venezuela and Philippines at 100 percent On a weighted average basis, more than 85 percent of world volumes are controlled by five brewers per market (Francioni, J L., 2012)
Figure 2.1: Total beer volumes from the top 30 beer consuming countries
A deeper look shows ABI and SABMiller market shares in their top share markets A few countries where these brewers operate were already highly consolidated by one brewer Depending on how approvals work out in each country, a new mega brewer has the potential to take a dominant position in 13 countries around the world (Nelson, J P., 2005)
Figure 2.2: Volumes and shares of global countries in beer market
The consolidation of the global beer industry has been in motion for decades
The consolidation activity crosses both vertical and horizontal lines of the industry
In addition to purchasing other brewers, brewers have pursued vertical integration up and down the supply chain from owning agriculture resources, to packing, distribution and retail These are not necessarily country borders only, but involve smaller geographies such as the recent horizontal and vertical merger activity in California – which happens to be the eighth largest economy and thirteenth largest beer market in the world (Francioni, J L., 2012)
At the foundation of brewing economics is economies of scale From raw ingredients, to bottles and cans, to distribution and retail, the more of the same beer that a brewer sells translates directly into greater profit with each additional unit
But beer is mostly water, and water is heavy and heavy things are expensive to transport So producing it locally is key to success – hence the drive to consolidate in breweries across every market Moreover, because alcohol is an affordable luxury, consumption of alcohol increases as income increases Companies that recognize and seize the opportunity are driving worldwide consolidation (Francioni,
In Vietnam, competition is getting tougher for domestic brewers as foreign rivals increased their shares within the country’s beer industry With a population of
93 million and a beer-drinking culture, Vietnam is attractive to foreign investors because of the perceived growth potential of its beer industry Indeed, foreign manufacturers, both newcomers and those who have been in country a long time, have rushed to scale up their production in Vietnam Recent entrants include ABI from the USA and Sapporo from Japan
Vietnam has a total of 129 breweries and an installed capacity of 4.8 billion liters whilst in 2015 production was 3.4 billion liters In 2015, Saigon Alcohol Beer
& Beverages Corp (Sabeco) remained the biggest player with a production of 1.38 million liters followed by Vietnam Brewery Limited (VBL) brewers of Tiger and Heineken with 729 million liters The other big local player is Hanoi Beer and Beverage Corporation with a production in 2015 of 667 million liters (Habeco,
Sabeco and Habeco have long been investment targets from foreign investors but to date have remained state owned but their growth is said to be slowing and profitability is said to be much lower than their closest rival VBL
Domestic beer companies are preparing themselves for fierce competition
Agreement Under the TPP, Vietnam will remove its tax on imported beer This is expected to attract a further wave of new investments from overseas and even fiercer competition and will increase the interest further from foreign investors in both Habeco and Sabeco (Habeco, 2017)
Now, Vietnam is the place to be for entrepreneurs and adventurous brewers
The market is booming and changing rapidly Platinum and Pasteur Street Brewing started in 2015 and are now the old ones Germans with their 500-year-old- breweries will off course disagree with the term old There are many new tap rooms and craft beers in Ho Chi Minh City while it’s moving a bit slower in Hanoi The next thing to happen is to see a craft brewery open up somewhere between these two cities Maybe Mui Ne with lots of beer places and already has one of Hoa Vien microbreweries or Da Nang/Hoi An which is a popular tourist destination for both domestic and international tourism There are also new beer importers and breweries such as Bach Brewing from New Zealand is selling their craft beer in Vietnam (Habeco, 2017).
Overview of distribution channel
A channel of distribution or trade channel is the path or route along which goods move from producers to ultimate consumers It is distribution network through which a producer puts his products in the hands of actual users A trade or marketing channel consists of the producer, consumers or users and the various middlemen who intervene between the tow The channel serves as a connecting link between producers and consumers By bridging the gap between the point of production and the point of consumption, a channel creates time, place and possession utilities (Hoang, H et al., 2003)
Channels of distribution is known as “Place” in the “4P's” model of marketing Distribution channels provide the utility of place, of having products where the customer wants, when the customer wants them
Firstly, many firms lack the financial resources to carry out direct channel, thus, they need distribution intermediaries, such as distributors, dealers, retailers to distribute their products to customers
Secondly, producers who do establish their own channels can often earn a greater return by increasing investment in their main business If a company earns a
20 percent rate of return on manufacturing and a 10 percent return on retailing, it does not make sense to do its own retailing
Thirdly, training human resource and establishing distribution channel will take much time and cost Therefore, firms take advantage of intermediaries' human resource, especially salesmen, as well as their experience, facilities in order to bring the goods to end-users promptly
Fourthly, in some cases direct channel simply is not feasible Producer must use intermediaries in their channel system (Mentzer, J T., 2004)
There are a number of functions of distribution channel The main use of distribution channel marketing is to move goods from producers to consumers It overcomes the time, place, and possession gaps that separate goods and services from those who need or want them Other functions include information gathering, promotion, and matching Negotiations, physical distribution, financing, and risk taking are also functions of distribution channel All these functions are necessary for success in any market (Rosenbloom, B., 2004)
Source: Philip Kotler et al (2012)
A brief explanation of different channels of distribution is given below:
Zero - level channel: This is also known as selling because the manufacturer sells directly to the final customer The major examples are door-to-door sales, home parties, mail order, telemarketing, TV selling, Internet selling, and manufacturer owned stores
One - level channel: This is the stage distribution channel having one middleman, i.e., retailer In this channel, the producer sells to big retailers like departmental stores and chain stores who in turn sell to customer
Two - level channels: This is the groceries channel of distribution There are two middlemen in this channel of distribution, namely, wholesaler and retailer This channel is most suitable for the products with widely scattered market
Manufacturer - Distributor - Wholesaler - Retailer - Consumer: In the meatpacking industry, wholesalers sell to jobbers, who sell to small retailers (Rosenbloom, B., 2004)
End-user End-user End-user
Distribution channel management
Distribution channel is a flexible corporation method of enterprises to implement the same business objective, or the moving line from the producer to the last consumer The thesis focuses on the distribution channel in the beer field In the beer providing, the definition of distribution channel is defined as the path through which beer products from a beer company to the client or payment for those beer products from the clients to the beer company A distribution channel can be as short as a direct transaction from the beer company to the client, or may include several interconnected intermediaries along way Distribution channel of beer, in particular, almost are interconnected intermediaries along way such as agents system channel (Philip Kotler et al., 2012)
Distribution channel has many functions The main function of a distribution channel is to provide a link between production and consumption It fills the gap of places, time from producer to consumers Organizations that form any particular distribution channel perform many key functions
The components in distribution channel management include:
- True alignment to corporate and sales strategy
- Adherence to a channel governance process
- Comprehensive channel enablement content According to Philip Kotler et al., 2012, the process of distribution channel management is divided into four main parts as follows
In order to facilitate distribution channel member selection, the company should entirely understand then determine what significant characteristics distinguish a better intermediary In more detail, it should examine the actual record performed in the market, such as: number of year operating, other lines carried, growth and profit result, financial strength, cooperativeness, and the service reputation of distribution channel member
For specific circumstance, the intermediaries may vary, so the company should consider and evaluate more about the number and the characteristic of other lines carried, as well as the size and the quality of the sale force, as well as should evaluate the location, potential future growth and client segments of those intermediaries (Philip Kotler et al., 2012)
2.3.2 Controlling conflict between channel members
Channel conflict is not a new phenomenon that was created by the Internet revolution To the contrary, the conflict construct received considerable attention in channels research in the 1970s and 1980s In the 1990s, conflict received little attention in the channels literature, in part due to the emphasis of the relationship marketing paradigm on the field Recently, though, the magnitude and speed with which electronic marketing channels have emerged, along with the trend toward multichannel distribution, have brought channel conflict to the forefront once again (Philip Kotler et al., 2012)
The foundation for the study of channel conflict lies in the organizational behavior literature The macro level or sociological approach has focused on conflict between groups, departments, divisions, and even entire organizations as units of analysis Conflict is viewed as being inevitable because of inherent differences in the perceptions and goals of the organizational members Conflict is also depicted as being functional, provided the very basis of the relationship is not threatened, because constructive conflict might move the organization to higher levels of creativity, innovation, and competitive energy The primary causes of conflict are identified as competition over scarce resources, drives for autonomy, and divergence of subunit goals Lastly, this sociological view of conflict contends that it is of concern to the organization only in so far as it has implications for performance (Philip Kotler et al., 2012)
To avoid channel conflict, companies have to develop strategies for integrating the new e-commerce channel with their traditional distribution system
The key element in introducing the Internet into the channel mix is understanding what customers in each channel value and whether the current channels are meeting these needs and expectations Marketers must begin with accurate market segmentation and provide channels of distribution that meet their target segments needs in the most convenient manner Providing multiple channels is the best way for producers to effectively serve a diversified customer base, and manufacturers need to use the power of a multichannel distribution system in order to be everywhere (Gundlach, et al., 2006)
Industrial suppliers should use e-commerce to support their distribution network, rather than to displace their existing intermediaries Channel partners can offer a range of services, many of which cannot be replaced by the electronic channel Once a company has clearly segmented its customers based on needs and willingness to pay, they can determine which channel(s) are best suited to serve each segment, traditional and/or the lower-cost Internet Coordinating a firm’s channel resources in this fashion, with customer needs as the centerpiece, is called the integrated distribution (Truong Dinh Chien, 2004)
After distribution channel members are selected, the company needs to consider and treat them in the same ways as do with the end-user.In addition to managing its channels, the company should often persuade distributors that they can succeed better by working together in the stable system By that way, distribution channel members can well complete their tasks and have a close cooperation with the company Moreover, they have to understand the practical situation and find out distribution channel member’s needs and concerns, based on that findings, there should be suitable motivation program to encourage distribution channel members to work more active and effective accordingly (Philip Kotler et al., 2012)
Once being able to stimulate distribution channel members to work and dedicate for the common benefit of company, it should invest in training programs
Otherwise, the market research should also be implemented frequently in order to get a proper comparison and evaluation then improve distribution channel’s performance (Andrii Galkin, 2015)
On the other hand, distribution channel members differ greatly in respect of channel power, the ability to alter distribution channel member’s behavior so that members take actions they would not have taken otherwise There is a popular fact that gaining intermediaries’ cooperation can be a huge challenge Therefore, a package of motivation program should be designed suitably to attract intermediaries to cooperate in long-term for the common development of the company (Philip Kotler et al., 2012)
The company must regularly check its distribution channel performance against such standards as sales volume, customer delivery time, cooperation in company promotion and training programs, and services to the customer The collected results must be recognized and rewarded correspondingly Distribution channel members that perform well and create good values to the company will be noted and rewarded Those who are performing poorly should noticed, and in the worst case, to be replaced (Andrii Galkin, 2015)
Factors affecting scope and frequency of evaluation include:
- Degree of manufacturer’s control over distribution channel
- Relative importance of distribution channel
- Number of distribution channel members
- Distribution channel member audit: That is a periodic and comprehensive review of distribution channel member performance Audits may do for one, several or all distribution channel members at the wholesale and or retail levels The frequency of the audit varies but is usually not one more frequently than once per year per distribution channel member (Philip Kotler et al., 2012)
Distribution channel member performance audit consists of three phases: i) Developing criteria for measuring distribution channel member performance such as sales performance of distribution channel members, selling capabilities of channel members, attitudes of distribution channel members and competition faced by distribution channel members ii) Periodically evaluating distribution channel members performance against criteria iii) Recommending corrective actions to reduce the number of inadequate performances (Philip Kotler et al., 2012)
Most producers do not sell their goods directly to the final users between them stands a set of intermediary’s performing variety of functions Thus, choosing the best channels is very important While selecting a distribution channel, the entrepreneur should compare the costs, sales volume and profits expected from alternative channels of distribution In order to select the right channel from distributing his product, manufacturers should keep in mind the following considerations (Minh Dao, 2006)
The nature of the markets is a key factor influencing the choice of channel of distribution The following features of the market should be considered to determine the channels:
Consumer or industrial market if the product is meant for industrial users, the channel of distribution will be a short one This is because industrial users buy in a large quantity and the producer can easily establish addict contract with them But in case for goods meant for consumers, retailers may have to be included in the channels of distribution
- Number and location of buyers:When the number of potential customers is small or the market is geographically located in a limited area, direct of wholesalers and retailers becomes necessary
LITERATURE REVIEW
Previous studies on distribution channel management
According to Ha Pham (2014), being considered as the bridge connecting producer/supplier with the final user or customer, distribution channel is one of the most important factors to make the success of any enterprise Actually, an effective management of the distribution system is the key management element which helps a company to achieve the competitive advantages fighting against other rivals This thesis gives actual overview of distribution channel management of bancassurance at Bao Viet Insurance Corporation (BVGI) BVGI has determined bancassurance to be one of the most strategic channels to maintain and improve the dominant leading position in the Vietnamese insurance market Despite the fact that BVGI is the company having the longest history of development with the best experienced and qualified human resources, the distribution channel management for bancassurance still faces many difficulties to operate effectively For the purpose of getting more understanding about the current distribution channel for Bancassurance at BVGI,
Ha Pham (2014) focuses on the following objectives: 1) Clarify the requirements of distribution channel management for Bancassurance; 2) Analyze the current situation of distribution channel management for Bancassurance at BVGI to find out the gaps; and 3) Propose solutions to improve the distribution channel management for Bancassurance at BVGI
According to Ha Pham (2014), the theory of “Marketing Management” of Professor Philip Kotler was used in this thesis to demonstrate the researcher’s points of view By applying the theoretical framework of “Marketing management” combined with the actual in-depth interviews with the Leaders of BVGI (1 Deputy Chief Executive Officer and 2 directors of bancassurance division), 80 bank’s staffs of cooperated banks, the researcher noted and performed the following findings such as actual requirements that BVGI has been applying to manage the distribution selecting channel member, training course, motivating program and evaluating on channel member.Some strategic bank partners have cooperated very well with BVGI, but some others still think about the benefit in the short term without considering about the long term and sustainable development with bancassurance.The business management division regulate strict guideline on all types of products, hence bancassurance products are not much different from traditional products and are not competitive enough to attract customers tightly controls designed products.The training course organized by BVGI for bank channels are not really supportive There is lack of trainee forces to onside support the bank channels in the daily business The motivation program for bancassurance is not strong enough to encourage bank channels to focus on selling, they have to complete the tight revenue target from banking mission.Evaluation for bancassurance channel management is not really specific and effective, it is mainly depended on the revenue reports while it should be seriously considered from daily operational activities Finally, looking at the discovered points, the researcher recommended some solutions to improve the distribution channel management for bancassurance at BVGI including focusing on reviewing and improving the cooperation with bank channels in term of relationship and commitment with the senior leaders, the operation model supporting business, investing more resources in improve the quality of training course for channel members, designing and selecting a better and more attractive motivation scheme for channel members to strengthen the bank leader’s belief as well as push the sales force in selling bancassurance products, balancing resource to implement the evaluation sessions frequently and focusing on more on the detailed and practical situation of the current operation process
Also analyzing distribution channel management at a bancassurance provider, Anh Pham (2014) focused on the case of Bao Viet Life He also pointed out that bancassurance has many challenge for both of banks and insurance distribution channel in a number of countries, but in Vietnam it still a secondary distribution channel The dissertation focused on the main research objectives as follows: 1) To summarize requirement about distribution channel management; 2)
To analyze current situation at banks that co-operation with BaoViet Life to identify the gaps of distribution channel management for bancassurance at BaoViet Life and analyze the reason for those gaps; 3) To make recommendation some solutions to improve the managing distribution channel for bacassurance at Bao Viet Life.Basing on the theories on managing distribution channels combines with primary data and secondary data, the author has analyzed current situation of managing distribution for bancassurance at Bao Viet Life including selecting channel members, motivating channel members and evaluating channel member to find out shortcoming of managing distribution for bancassurance at Bao Viet Life and causes of these shortcomings He found that the cooperation between Bao Viet Life and commercial banks is quite complex and uneasy for both parties.Bao Viet Life has not designed products yet to take full advantage of this distribution channel.Banking staff is unable to thoroughly understand products’ characteristics and they are not very active in attracting potential customers.Bao Viet Life and commercial banks has not paid much attention to advertising so customers do not know about it.Base on findings, the author has come up with some recommendation on solution such as improving the cooperation between Bao Viet Life and banks, developing suitable products for bancassurance distribution channel, improving training and motivation programs for staffs and improving products advertising and introduction
According to Tuan Bui (2012) in his research, although 2012 has affected economic recession and the risk of deflation, but the milk market in Vietnam is still a lot of promise Distribution channel system of Phuc Nhan Duong Pharmaceutical Company Limited is affected by characteristics of milk product, such as distribution channel is normally organized geographically and consists of many levels of channel must guarantee the quickness and accurateness to end-users because of timely matter Profit of the members in the distribution channel is not high because the absolute profit made on FMCGs products is relatively small Based on the requirements of the development company, empowering and brands on the domestic market and on the above current distribution system of Phuc Nhan Duong, some proposals are recommended such as firstly, developing an appropriate distribution channel structure Phuc Nhan Duong should restructure anew distribution channel model that will help it overcome the existing weak points and uphold the strong points in the old distribution channel structure but it still ensures in accordance with marketing strategy of the company that it will focus on two main channels of Groceries channel and Super-Market channel Secondly, improving the selection assignment of channel members then develop an advance sales-force management structure by establishing a standard performance evaluation process with useful criteria as selling performance of the channel members, their attitude the activity coordination with the company’s policy or their growth potential Finally, foster the relation with channel members, improvement the competence of sales force and issuance more techniques to motivate channel members are important issues that recommended.
Distribution channel management model applied for Habeco
As mentioned above, it is able to see that the main target of a distribution is to bring suitable products/services to the customers Hence, clearly understanding the actual needs of the customers is very significant as the essential role of marketing, this point makes distribution channel system succeed or fail obviously
Once the company has decided to choose distribution channel alternative, individual intermediaries must be selected, trained, motivated and evaluated And the channel arrangement will be modified over the time passing From the above literature review, based on the actual reality and characteristics of distribution channel for beer companies, in the researcher’s opinion, the distribution channel management
Figure 3.1: Distribution channel management model applied for Habeco
Source: Philip Kotler et al (2012)
From the above figure, it is able to see that the management of distribution channel for beer companies, in this case Habeco, is nearly the same with the management of distribution channel in general by Philip Kotler et al (2012) (also including three main steps: selecting channel members, motivating channel members and evaluating distribution channel) The contents of those three steps are as mentioned above
In terms of selecting members for distribution channel (DC), according to Philip Kotler et al (2012), this step can be broken into five factors as follows:
- Finding prestigious intermediates in the beer market as DC members;
- Selecting DC members based on their reputation financial strength;
- Selecting DC members by identifying their product lines as competitive products, compatible products or complementary products;
- Selecting DC members by fair dealing and friendly relationship it can establish with;
- Selecting DC members based on their advertising and promotion support given to beer products
For the additional but very important step of training channel members, after selection, training presents a prime opportunity to expand the knowledge base of all distribution channel members, but sometimes the company finds the development opportunities expensive Distribution channel members also miss out on work time while attending training sessions, which may delay the completion of projects
Despite the potential drawbacks, training and development provides both the company as a whole and the individual distribution channel members with benefits that make the cost and time a worthwhile investment (Rosenbloom, B., 2004)
Most distribution channel members have some weaknesses in their workplace skills A training program allows them to strengthen those skills that each of them needs to improve A development program brings all distribution channel members to a higher level so they all have similar skills and knowledge
This helps reduce any weak links between them and the company which relies heavily on others to complete basic work tasks Providing the necessary training creates knowledgeable distribution channel members who can take over for one another as needed, work on teams or work independently without constant help and supervision from others (Rui Borges Lopes et al., 2015)
A distribution channel member who receives the necessary training is better able to perform his job He becomes more aware of safety practices and proper procedures for basic tasks The training may also build his confidence because he has a stronger understanding of the industry and the responsibilities of his job This confidence may push him to perform even better and think of new ideas that help him excel Continuous training also keeps the company’s distribution channel members on the cutting edge of industry developments distribution channel members who are competent and on top of changing industry standards help the company hold a position as a leader and strong competitor within beer industry
Moreover, a structured training and development program ensures that distribution channel members have a consistent experience and background and procedures All distribution channel members need to be aware of the expectations and procedures within the company This includes safety, discrimination and administrative tasks related to beer industry Putting all distribution channel members through regular training in these areas ensures that all of them at least have exposure to the information (Truong Dinh Chien, 2004)
Last but not least, distribution channel members with access to training and development programs have the advantage over distribution channel members in other beer companies who are left to seek out training opportunities on their own
The investment in training that the company makes shows the distribution channel members they are valued The training creates a supportive link Distribution channel members may gain access to training they would not have otherwise known about or sought out themselves distribution channel members who feel appreciated and challenged through training opportunities may feel more satisfaction toward their jobs (Philip Kotler et al., 2012)
Therefore, this step can be broken into four factors as follows:
- Organizing training courses for DC members to improve their knowledge on beer;
- DC members can participate in some training courses to improve their sales and negotiation skills;
- Training courses help DC members improve their communication skills;
- DC members can freely be involved in the training courses without any charge
In terms of motivating members for distribution channel, according to Philip Kotler et al (2012), this step can be broken into five factors as follows:
- Using some approaches to learn about DC members’ needs and problems;
- Offering cooperative arrangements to support DC members to deal with their problems;
- Building a planned, professionally comprehensive distribution program for
- Giving some monetary rewards and recognition to DC members with outstanding and excellent results;
- Assigning some experts to be in charge of motivating DC members
In terms of evaluating the whole distribution channel, according to Philip Kotler et al (2012), this step can be broken into six factors as follows:
- Evaluating DC based on the amount of sales each DC member can give within a certain time frame;
- Evaluating whether DC can give better profitability to the company;
- Evaluating whether the company can have better control over its DC or not;
- Meeting between the company and its DCs are often and officially organized to discuss DC problems;
- The standards and approaches used for evaluating DC are suitable and effective.
CURRENT SITUATION OF DISTRIBUTION CHANNEL
Overview of Habeco Trading One Member Company Limited
4.1.1 History of development and establishment
Established in 2009, HABECO Trading One Member Co., Ltd is one of the strongest member companies of Hanoi Beer, Alcohol And Beverage Joint Stock Corporation With the growth rate of high and stable business indicators, the company has been playing the role of a leading “shocker” in the market, contributing to the success of the brand of Hanoi Beer
It can be said, the period of 2009 to 2016 is the time of the world economy with constantly complicated developments: crisis, recession, conflict, natural disasters occur in many places So far, the world economy is gradually recovering, many industrialized countries have strongly adjusted policies to protect domestic production Fierce competition among major countries in the region has adversely affected the socio-economic development of Vietnam
The domestic economy continues to face difficulties and challenges
Economic growth slowdown, business production and people's lives are difficult
Natural disasters, epidemics cause severe damage Especially, the uncertainties in the banking and finance sector, the high bad debt ratio has greatly affected the production and business activities of many enterprises throughout the country as well as affecting the consumption of the people In addition, severe weather in recent years, such as the North Central Coast, has been affected by hurricanes and floods that have caused significant losses, adverse impacts on agriculture, production, people's livelihoods in general and beverage industry in particular
In this context, HABECO Trading One Member Co., Ltd was established subsidiary of Hanoi Beer, Alcohol And Beverage Joint Stock Corporation By 01/9/2009, the company officially came into operation, with the task of consuming canned beer products and bottled beers under the brand of Hanoi Beer produced by the corporation, meet the requirements of serving customers at the best, high efficiency, preservation and capital development of the company in particular and the corporation in general
On the first days of establishment, besides being advantageous for 100% capital of the holding company, the direction and supervision of the Board of Directors, the close and timely leadership of the Board of Directors and the coordination and support from many functional departments of the corporation, etc the company has many difficulties and challenges It is a comprehensive transformation from a single office – the Department of Consumption - Market of the corporation into an independent business
In the spirit of difficulty overcoming, right from the first day of operation, based on the charter of organization and operation of the company approved by the corporation, the company has developed and issued the system of internal management regulations complying with the current charter and laws to manage the operation of business Since then, the company has deployed the sales to agents (on the basis of receiving the Branches/Warehouses transferred by the corporation), has immediately started to organize, strengthen the machine (from the board of directors to the professional sections, the branches/stores, the accounting department to carry out the accounting work of corporate finance) Many procedures, so many difficulties for sales staff, as well as for customers
However, with the direct direction of the corporation, together with the spirit of unity together to overcome difficulties, the Board of Directors and all employees strive to accomplish exceedingly assigned tasks In 2009, consumption of canned beers and bottled beer of the corporation increased by 268,419,013 liters, equal to 130% compared to the same period in 2008 In the following years, the main bottle beer of all kinds have achieved 440,508 million liters In 2016, the company will strive for total beer consumption of 465,5 million liters, equivalent to 106% over the same period last year
In order to achieve stable growth and increase annual consumption, the company has introduced many quick solutions, sticking to reality and applying many policies to promote consumption as follows: support customers recovering the bottles; bottle money guarantee; providing transportation support for mountainous customers and flexible seasonal sales policy (helping to significantly increase sales volume in mountainous markets, customers are excited and assured in using Hanoi beer); organizing the meeting of representative agents with high turnover in the years for the purpose of discussing solutions to strive for consumption, etc In addition, the company also improves the procedures to facilitate and quick purchase for agents; put into operation a number of new warehouses, contributing to reducing costs for businesses, agents and customer service on a better manner Thanks to the practical and timely solutions, the company has pushed up the consumption capacity, developed the system of agents throughout the country, bringing Hanoi beer products into the retail channel as the system supermarkets, etc
HABECO Trading One Member Co., Ltd has paid much attention to the Party and trade unions and social work It is an important activity, an essential organic correlation with business, creating motives, values, harmonious development, contributing to the building and affirming corporate brand and corporate prestige
The Party branch of HABECO Trading Limited Co., Ltd was established under Decision No 60-QD/DU on 08/10/2009, including 21 members of the Party Committee Up to now, the Party Cell has grown to 34 members, has been staffed in
6 Party Groups, participated in, set up and managed all activities Over the past five years, the Party Cell has consistently won the title of clean and strong Party Cell In particular, in 2013, is one of the two branches of the corporation’s Party Committee
The company’s trade union now has 06 trade unions and 03 trade union groups, with 147 trade unionists, including 39 female unionists, accounting for 26.5% The union has actively taken care of spiritual life for workers and employees, policies of workers and employees on monthly, holidays, New Year in the year, birthday, standard tours The union of the corporation held Mid-Autumn Festival for children who are children of workers and employees The average income of laborers is 10.8 million VND/person/month Representing its pioneering role, the company has become a core unit, participating in the movements organized by the corporation such as Performance Arts Festival, Annual Sports Festival and won the high rankings such as First Prize at Ho Chi Minh City Music Festival 2010 in Hai Duong, the second prize of the Youth Arts Festival 2012 in Thanh Hoa
The Youth Union of the company has more than 100 youth union members who are young, dynamic, creative, active in both professional and extra-curricular activities, often contributing to the fulfillment of business tasks of the company
With the development of medium and specialized enterprises, stable growth of business indicators and good performance of all social and corporate activities, the company has received many awards and emulation flags in consecutive years of the Ministry of Industry and Commerce in many areas such as business activities, fire safety work; Certificate of merit for implementation of tax policy by Hanoi People's Committee; Emulation Flag of the Industry and Trade Union, General Confederation of Labor of Vietnam, Certificate of Merit, Emulation of the Corporation
Particularly, the company has honorably received the Government's emulation flag for two consecutive years of 2012, 2013 and the Ministry of Industry and Trade approved the dossier requesting the State to award the third grade Labor Medal
Over five years of construction and development, although the time is not much, but achieve the initial results as today, it is a commitment, enthusiasm, strive
Dimensions and attributions to manage distribution channel for beer products in
As mentioned in chapter 2, the dimensions and attributes to manage distribution channel for beer products in Habeco Trading One Member Company Limited are represented in the following table
Table 4.2: Dimensions and attributions to manage distribution channel for beer products in Habeco Trading One Member Company Limited
1 Habeco finds prestigious intermediaries in the beer market as its DC members
2 Habeco selects its DC members based on their reputation and financial strength
3 Habeco selects its DC members by identifying their product lines as competitive products, compatible products or complementary products
4 Habeco selects its DC members by fair dealing and friendly relationship it can establish with
5 Habeco selects its DC members based on their advertising and promotion support given to its beer products
II TRAINING MEMBERS FOR DC
1 Habeco often organizes training courses for its DC members to improve their knowledge on its beer products
2 DC members can participate in some training courses held by Habeco to improve their sales and negotiation skills
3 Training courses held by Habeco can help its DC members improve their communication skills
4 DC members can freely be involved in the training courses held by Habeco without any charge
III MOTIVATING MEMBERS FOR DC
1 Habeco uses some approaches to learn about its DC members’ needs and problems
2 Habeco offers cooperative arrangements to support its DC members to deal with their problems
3 Habeco builds a planned, professionally comprehensive distribution program for its DC members
4 Habeco gives some monetary rewards and recognition to its DC members with outstanding and excellent results
5 Habeco assigns some experts to be in charge of motivating its DC members
1 Habeco evaluates DC based on the amount of sales each DC member can give within a certain time frame
3 Habeco evaluates whether DC can give better profitability to the company
4 Habeco evaluates whether it can have better control over its DC or not
5 Meeting between Habeco and DC members are often and officially organized to discuss DC problems
6 The standards and approaches used for evaluating DC are suitable and effective
Sample size description
From the figure as mentioned above, it is able to see that the rate of female and male is nearly equal (with 46% for female and 54% for male) It shows out the equality in gender in the work of food industry companies in particular and in beverage companies in particular The controversy characteristics of both genders will support each other in work
The age of respondents can be shown clearly in the following figure
From the figure as mentioned above, it is able to see that respondents are mostly from 30-50 years old (accounting for 75%) In this age range, employees at
> 5013% to superior; they become more patient and mature after having been enthusiastic but careless This age range is the flourish period for people in general to develop their career ladder So, inevitably, respondents of this research mostly fall into it For respondents less than 30 years old, they are mostly employees with not very much experience and skills in working For respondents more than 50 years old, they are mostly team leaders, who are too old and passive to be dynamic in the work
The qualification of respondents can be shown clearly in the following figure
From the figure as mentioned above, it is able to see that respondents having bachelor degree account for 35%, ones having postgraduate degree account for 30%, ones with college degree account for 20% and the remaining respondents with other degrees account for 15% It shows the fact that respondents, employees have quite high qualifications This help them be provided with expertise and professional knowledge during their work Respondents with other degrees (mainly honor certificates) need to be trained more in the future to improve their working quality
The seniority of respondents can be shown clearly in the following figure
According to the above figure, more than a half of respondents have been working at the workplace for more than 8 years (accounting for 58%) It shows the fact that respondents in general are mostly experienced and skillful in their field
Working for a long time in the industry of food and beverage industry, especially beer products provides them with necessary knowledge for their own work in particular and other works in general However, there are also some respondents working at their workplace for less than 4 years (accounting for 12%), they are mainly newly appointed Those people do not have much experience at all, which causes them many difficulties and challenges in their work.
Actual situation of distribution channel for beer products in Habeco Trading One
4.4.1 Selecting members for distribution channel
4.4.1.1 Requirements of selecting members for distribution channel
“The nature of setting up distribution channel is formulated from building up the selling system and culture at the company; it is not simply taking the advantages
58% additions to achieving considerable revenue by distribution channel and Habeco Trading One Member Co., Ltd based on the potential client base, it is extremely necessary to invest specifically and seriously in both money and time to create a development strategy from designing products, service training, and marketing for setting up distribution channel In reality, the channels work closely and directly with client, they are the representatives of Habeco Trading One Member Co., Ltd
Hence, despite the fact that Habeco Trading One Member Co., Ltd has very good reputation, long-tail developed history and excellent services, the channels that are not well qualified to meet the client’s needs can easily lose client as well as market share to other competitors.”
“Due to these above challenges, at the present, the company might consider various distribution channels that have good reputation and financial stability to be potential partners, but this is not the key factor the company focuses on
Furthermore, the distribution channels cooperating with the company should meet the following requirements to guarantee the feasibility of success:”
Having good operation model and modern organization where trading in beer products of the company is considered important equally as the core services of those channels Because the nature characteristic of setting up distribution channel today is much more modern, beer products can be sold effectively once the strong sales forces of those channels have professional consultancy ability, which is much different from selling their other products.”
“In more details, the modern operational model applied for distribution channel members of Habeco Trading One Member Co., Ltd here means they should have:”
“+ Professional business process which saves time and administration procedures for both distribution channel’s staffs and clients.”
“+ International standard IT software to support both distribution channel and the company.”
“+ Secured and synchronized client’s database that can be looked up easily and effectively to support the daily business.”
“Therefore, if those entities do not transform to an organization having professional counseling model for their own core products, they would never be able to implement good business of selling beer products of Habeco Trading One Member Co., Ltd accordingly.”
Willing to share their methodical investment perspective (development strategy) to come along with Habeco Trading One Member Co., Ltd In fact, the majority of those partners just want to achieve profit in the short-term, or just care about beer products at some contingency event, such as when the revenue of their products decreases then use beer products to balance the profit, otherwise just follow the trend when comparing with other agencies which also provide beer products of Habeco Trading One Member Co., Ltd In fact, those entities have to consider about the long tail and strategic development to cooperate with the company.”
“The whole system of those entities must strictly comply with the commitment of their senior leaders Based on the prestige, management ability of the senior leaders who have good relationship and important commitment to cooperation with Habeco Trading One Member Co., Ltd, those leaders need to make sure that their company systems will implement properly all the conditions and methods regulated in the cooperated contract Once there are any conflicts or differences, they need to seriously consider to acknowledge the negative circumstance and are willing to find out solutions to solve.”
In fact, the company has its own criteria for evaluating its distribution channels as stated in the following table.
Table 4.3: Criteria for evaluating distribution channels of Habeco Trading One
Evaluation criteria Plus/Minus Point
In Ho Chi Minh City (-)
- Number of subsidiaries and affiliates
Source: Habeco Trading One Member Co., Ltd’s Report (2016)
4.4.1.2 Actual situation of selecting members for distribution channel
The actual situation of selecting member for DC at the company is represented in the following table
Table 4.4: Actual situation of selecting member for DC at Habeco Trading One
1 Habeco finds prestigious intermediaries in the beer market as its
2 Habeco selects its DC members based on their reputation and financial strength 3.77
Habeco selects its DC members by identifying their product lines as competitive products, compatible products or complementary products
4 Habeco selects its DC members by fair dealing and friendly relationship it can establish with 3.27
5 Habeco selects its DC members based on their advertising and promotion support given to its beer products 3.45
The three criteria: “Habeco finds prestigious intermediaries in the beer market as its DC members.”, “Habeco selects its DC members based on their reputation and financial strength.”, and “Habeco selects its DC members by identifying their product lines as competitive products, compatible products or complementary products.” have quite high means of 3.76, 3.77 and 3.78 respectively Its show the fact that the company chooses its partners in DC as prestigious intermediaries in the food and beverage market Those intermediaries have a large number of loyal customers attracted by their reputation, and can sell beer products to those customers if they are also interested in beverage services
According to the in-depth interviews with the Executive Manager of Habeco, intermediaries’ credit and financial strength is also a very important factor to be strength of an intermediary will ensure the long commitment and partnership in providing beer products to customers after all Last but not least, products lines of those intermediaries also are taken into account by Habeco There should be a link between Habeco’sbeer products and the intermediaries’ services to be able to offer
“two-in-one” or “buy one get one free” packages to customers Therefore, analyzing and choosing intermediaries with suitable products lines to cooperate with them is another important task of the company in the process of selecting intermediaries for its DC members
However, the two remaining criteria have very low means Criterion:
“Habeco selects its DC members by fair dealing and friendly relationship it can establish with.” has the lowest mean of 3.27 29 respondents disagreed, 31 felt neutral, 24 agreed and 16 strongly agreed with the statement In fact, although the criterion has the lowest mean, but it does not bring negative meaning The Sales Manager of Habeco stated that when selecting a partner, the first important thing to be considered is that partner’s working performance, capacity and ability, but not fair dealing and friendly relationship which can be established later A good partner may not be a very friendly partner and vice versa Therefore, this should not be considered as one of the most important factors in selecting members for DC at Habeco Trading One Member Co., Ltd
Last but not least, criterion: “Habeco selects its DC members based on their advertising and promotion support given to its beer products.” has mean of 3.45 which is not very high 16 respondents disagreed, 30 felt neutral, 47 agreed and 7 strongly agreed with the statement The Sales Manager of Habeco during in-depth interview stated that the company did not take into account the intermediaries’ advertising and promotion support given to its beer products when selecting its DC partners This is really a disadvantage in the policy of DC selection of Habeco Trading One Member Co., Ltd, because if intermediaries can design specific and careful programs for advertising, marketing and promotion towards Habeco’sbeer products, the sales volume of beer products will be significantly increased and the beneficiary will be the company itself
In summary, the average score of the group of criteria is 3.61, which is at agreeable level Although the company selects its DC members based on their reputation, credit, financial strengths and product lines, it still does not take into account the promotion and advertising programs that they can give to its beer products
4.4.2 Training members for distribution channel
4.4.2.1 Requirements of training members for distribution channel
“Habeco Trading One Member Co., Ltd needs to cooperate closely with its distribution channels to organize many basic training programs to prepare knowledge of beer products and process of beer production, selling skills, consulting skills, managing and training for each management level, and direct sales staffs of intermediaries.”
“And such programs should meet Habeco’s requirements as follows:”
“Pursuant to the food hygieneand safety law, any channel member who wants to sell beer products legally must have the agent certificate granted by the authorized entity In more details, each agent has to attend a 48-hours course of training, in which 24 hours learning about food and beverage industry and the remaining 24 hours to comprehend on beer products.”
Assessment of distribution channel management at Habeco Trading One
Firstly, in terms of selecting DC members, the company chooses its partners in DC as prestigious agents in the food and beverage market because those intermediaries have a large number of loyal customers attracted by their reputation, and can sell beer products to those customers if they are also interested in
Moreover, those intermediaries’ credit and financial strength is also a very important factor to be considered by Habeco Last but not least, products lines of those intermediaries also are taken into account by the company
Secondly, in terms of training DC members, the company pays much attention to holding courses to train its DC members and equip them with expertise and specialized knowledge on its own beer products Moreover, the company’s training courses for DC give much focus on sales and negotiation skills to work with customers in the most effective way
Thirdly, in terms of motivating DC members, the company always tries its best to be able to capture and understand demands as well as difficulties of its DC members In addition, the company actually gives policy on monetary rewards and appreciation to DC members which achieve high results
Fourthly, in terms of evaluating DC, the company evaluates the effectiveness of its DC based on the sales volume of each DC members, which accurately indicates the working capacity of the whole distribution channel system Moreover, the evaluation of DC is organized periodically to be able to adjust and fix problems right at the time they happen In addition, the company also evaluates and assesses if DC can give higher profit to it
Firstly, in terms of selecting DC members, the company does not take into account their advertising and promotion support given to its beer products when of Habeco, because if the intermediaries can design specific and careful programs for advertising, marketing and promotion towards Habeco’sbeer products, the sales volume will be significantly increased and the beneficiary will be the company itself
Secondly, in terms of training DC members, training courses held by the company sometimes cannot help its DC members improve their communication skills There is often equipment failure such as projector, sound system, computers, etc during communication skills classes It takes too long to contact the Engineering Division to come to fix those errors Moreover, participants or DC members of the company have no idea why they are in the training, or they have been told to attend but not told why they have to attend the course, how communication skills is important in their work as DC members and what should be done to improve them It is also due to limited capacity from trainers Trainers for communication skills training courses are much more theoretical than practical, which makes the course boring and less interesting Last but not least, for specialized training courses which include much more important and precious expertise, knowledge and skills, DC members must pay some tuition fee to be involved in
Thirdly, in terms of motivating DC members, although the company can understand their difficulties and problems during their work as intermediaries for beer products, it does not actually take action to help them deal with the problems
The solutions it offers are too general without detailed direction Furthermore, the company does have a plan on distribution program for its DC members, but that plan is too spare and theoretical to be effectively used in reality The failure of the company in building a completed and effective distribution program plan will affect badly the operation of its DC members They will lack the direction about things which have and should be done to attract potential customers In addition, there are no experts specialized in motivating DCmembers This is also a disadvantage some strategies on DC members motivation, rather than all employees work on it at a too general and hazy way
Fourthly, the company often forgets to analyze its ability to control over its
DC It just focuses on what DC should do and has to do to improve the efficiency of this distribution channel.The company has been underestimating this issue
Moreover, standards and approaches used to evaluate the effectiveness of DC are not built and written officially There is no standard and approved benchmark for
DC evaluation, and the process mainly depends on the subjective ideas and thoughts of the leaders of the company in general and its Marketing and Sales Division in particular In fact, building such standard and approved benchmark is the tasks of the Marketing and Sales Division of the company but it cannot fulfill it due to limited number of employees and lacking standards and criteria from upper levels.
In the general market, the majority of food and beverave companies or their intermediaries just consider distribution channel as a simple way to sell beer products at those distributors without taking care of the suitability of product to the needs of clients, or how to set up the operation/support mechanism in order to well manage and motivate the effectiveness of their business This negative fact causes a lot of difficulties in developing distribution channel effectively and professionally in the general food and beverage market
Due to the simple cognition of setting up distribution channels, many intermediaries just find beer products as a way to increase the diversification of their product mix to follow the trend of the market development Hence, they consider being intermediaries as an extra job, it is not necessary for them to spend much money and resource in this field In fact, the leaders of intermediaries do not company, therefore, they do notspend suitable time and effort on selling the beer products That’s why there are not many intermediaries are willing to commit a long-term investment and collaboration with Habeco Trading One Member Co., Ltd in selling beer products
At the moment, the economy is still recovery very slow and weak, the purchasing power decreases considerably This fact causes the operation of all industries including food and beverage to face up with a lot of difficulties
Therefore, many food and beverage companies associating with intermediaries with their preferred products become more and more ineffective when underwriting from these distribution channels
- The stability of distribution channel sales force:
Normally, it takes much time and force to train intermediaries’ staff to have sufficient knowledge and skills in food and beverage field (training on certificate of agent, beer products and selling skills) Therefore, due to the frequent rotation of those staffs, it will cost Habeco Trading One Member Co., Ltd a lot when a trained staff move to not work in selling beer product any more This is a bad but quite common situation which should be studied and solved thoroughly by food and beverage companies in general and Habeco Trading One Member Co., Ltd in particular
Many big domestic intermediaries and distributions have big potential in dealing Habeco’s beer products; however, it is very hard for the company to approach these strong entities On the other hand, other beer companies sometimes copy Habeco’s products and compete by pricing (reduce premium and increase commission), this fact makes the company face many tough issues in developing its product lines fairly
- Experience in setting up distribution channel
SOLUTIONS TO STRENGTHEN DISTRIBUTION CHANNEL
Developing orientation of distribution channel management at Habeco Trading
5.1.1 General developing orientation of Habeco Trading One Member Co., Ltd
“Habeco is trying to become the biggest beer product provider in Vietnam, and effectively managing distribution channel is one of the most important parts of this plan.”
“Although there are have many difficulties in developing, the Marketing and Sales Division of the company has set overall objectives to:”
- “Develop cooperation with more intermediaries, improve the staff’s quality so they have more effective on sales.”
- “Provide beer products with the most competitive and the best quality service to client: designed products more match with intermediaries and customer from them.”
- “Increase total premium revenue of distribution channel to 20% of overall premium of the company.”
- “Get more experience about distribution channel from some famous beverage corporations.”
- “Management of distribution channel concentrated on developing quality of customer services to satisfy clients with more professional performance, so that can attract more and more new clients.”
Solutions to strengthen the distribution channel management at Habeco Trading
“Having been facing much competitiveness of many other food and beverage enterprises, the company clearly understands that in order to reach the1st position in the local market, it needs to create unique differences compared with other players, one of them is to develop distribution channel based on the competitive advantage of having effective intermediaries in the system.”
“There are some of the key targets that the company wants to maintain and develop in distribution channel management as follows:”
- “Being the company having the best distribution channel in the Vietnamese food and beverage market.”
- “Continuing maintaining and improving the good relationship with the existing distribution channels.”
- “Expanding the possible collaboration to other intermediaries that are operating strongly in the food and beverage market.”
- “Focusing more on developing the online sales, call-center services, improve the function of intermediaries’ system to support the client services.”
- “Investing both money, intelligence and labour force in building up a group of specialized staffs who take over the distribution channel part at the cooperated intermediaries.”
- “Actively co-working with intermediaries to implement various advertising and marketing campaign for beer products that are being launched in the future.”
5.2 Solutions to strengthen the distribution channel management at Habeco Trading One Member Co., Ltd
5.2.1 Improve criteria for selecting channel members
“At present in Vietnam, there are a great number of food and beverage distributors and this number will increase many more in the coming time However, each distributor has its own development strategy, strengths and weaknesses, hence, distribution channels should be based on its criteria and points as mentioned in the above chapter.”
“In fact, the evaluation standards and points are for reference only because it does not mean that the company will cooperate with the intermediaries having the highest point.”
“On the other hand, there are some other significant factors should be considered from business’s perspective as follows:”
“- Having good relationship with the senior leader of those intermediaries “
“- Achieving the mutual agreement on all the collaboration contents”
“- Having good operation model which is well equipped with: modern IT system, stable client’s database, long term cooperation with the commitment.”
“- Assigning missions to relevant divisions, staffs for implementing.”
Specifically, at Habeco, the company should:
- Build new criteria (based on compete ability, finance, service, vehicle, commitment, trustworthy and so on) to select distributor for different markets
- Require investment in resources and responsibility of distributor per market area
- Require distributors have to follow the strategy of Habeco
5.2.2 Improve training courses for channel members
“Habeco should coordinate with its distribution partner to implement effectively more training courses for their staff The customers of those intermediaries normally have good knowledge and experience in beer products, therefore, it is absolute important and significant for the company to well prepare qualified sales force, they should have sufficient knowledge and persuasive skills to be confident in consulting and giving advice The training course organized by the company should be professionally designed to meet the requirement of the sales force.”
“Furthermore, in order to implement good training lessons, the trainer should experience in selling beer products Looking at the gap mentioned in the previous part, the communications skills are very important and need to be improved considerably By that way, the number of successful contracts gained from distribution channel can be increased with the favourite choice of the customers.”
“Obviously, the company should invest much more resources including time and money in finding and formulating this special forces to serve for the training targets in the long-tail of development.”
In general, Habeco should implement more training for all the staff (on the job, off the job) The trainer should be selected based on knowledge and experience in selling FMCG The trainer can inspire passion to trainees The communications skills are very important and need to be improved.
5.2.3 Improve motivation policy for channel member
“The motivation program should be designed in a suitable way to encourage the intermediaries’ staff to sell beer products effectively for the purpose of achieving the set targets.”
“The first important point should be taken into account is the commission paid for the distribution channels Due to the fact that all the incurred expenses including: administration cost, renting office, etc are in charge by themselves, hence, the commission rate paid for distribution channel should be designed effectively.”
“The second point is to create the motivation for the senior leaders of distribution channels And the most important point is to persuade them to believe in the possibility of success when cooperating with Habeco Based on the competitive advantage of having good reputation in the food and beverage market, the leaders of the company need to express the willing of cooperation as well as the high professionalism in the beverage field By that way, any leader of intermediaries can see the actual benefit can come definitely in the future of collaborating with Habeco Obviously, this is the biggest motivation for the leaders
“Another useful way to push up the motivation in selling products is to build an attractive emulation program for the direct sales force In more details,the cooperated intermediaries should apply scoring models in emulation program If the intermediaries’ staffs introduce successfully their clients to buy beer products at a certain number as regulated, they can achieve points of bringing renewal or brand new account, they can receive the extra points In other ways, the targer is based on the certain number of beer bottles and periodically revenue The set target should not be too low otherwise it will not create the actual motivation to the sales force
The set target should not be too high neither, the sales staffs cannot complete and they can be frustrated in doing bussiness, it should be practical and achievable.”
“The selected time should not be too long and during the time, the emulation status of each candidates should be kept updated in order to let them know their current position, hence, they can try more to achieve higher result In addition, the annual emulation time can be divided in to smaller parts and be rewarded with suitable prize (for example: The best sales person of month/quarter), this way will encourage all the sales staffs frequently and they can be more excited and desirable with the motivation program.”
The motivation policy for distribution channels should be both financial and non-financial Habeco should improve commission rate and incentive for distributiors, create long-term benefits and profits for distributors., choose the best seller, distributor per month, quater, year, and give policy on reward, insurrance, travel, education, deligation, promote, health and family care, etc
5.2.4 Improve evaluation method for channel members
“For the purpose of evaluating the general operation of distribution channel, the leaders of the company should not only look at the revenue reports submitted by the Marketing and Sales Division but also consider the practical implementation of distribution channels In more details, in the lower-level meetings among people who work directly in the entire process of selling beer products, there should be a leaders of the company should appoint relevant resources to find out the root causes of the arising issues and propose solutions to handle them properly By that way, the company can evaluate the actual operation of distribution channels and understand whether they are working well or not.”
“On the other hand, in order to evaluate each member of the salesforce, the company should have a well-designed system of recording and measuring activity of intermediaries’ staff, evaluating and rewarding performance, based on the recorded activities It will complement the existing staff appraisal system with regard to performance in relation to the referral system This encourages employees to be objective about their performance from the referrals It also encourages employees to self recognize their improvement following the time.”
“On the other hand, applying a control system in evaluating the distribution channel is also necessary and significant for Habeco An effective system of controls will help mitigate various risks that may undermine the smooth operation of the referral system.”
“Examples of controls here include regular reporting of activity to the management of the intermediaries and the company, for example, regarding the following matters:”
- Number of new orders to be generated,
- Proportion of order converted into sales,
- Lapse experience on in-force contracts
“The report should include comparable figures in earlier periods, results should be filtered by certain fields, so that the gaps can be identified (e.g by product line) Furthermore, benchmarking of the the intermediaries’ performance compared with others, to identify differences and to point out where they should be improved.”
Recommendations
5.3.1 Recommendation to the State management agencies
5.3.1.1 Supplement regulation of distribution channel
“At present, there are many forms of distribution channels regulated by the law or other guiding documents but they are applying for many kinds of distribution channel as agent or broker In fact, following the deployment of food and beverage activity in Vietnam, some new types of distribution channel have been formulated
Obviously, there is no model which can be suitable for all companies, a distribution channel model hence will be selected based on the actual legal condition and environment With regard to the business cooperation agreement where Habeco Trading One Member Co., Ltd in particular and many other companies are in need of developing its own distribution channel, it is suitable with Vietnam as the amended regulations regulated that intermediaries could provide beer products to the customers On the other hand, pursuant to legal regulations, intermediaries are allowed to be corporate agent for Habeco Trading One Member Co., Ltd.”
“As distribution channel is becoming more and more potential and well developed in the future, building up a legal framework to manage and develop the development of distribution channel in Vietnam is absolute esstential To create many more conditions for distribution channels, the Ministry of Finance should issue specific instructions that regulate which type of products can be distributed via distribution channel, what are the criteria of agent, commission level, the security of customer’s information, etc All of these factors should be specifically instructed and regulated by legal documents, therefore, Habeco Trading One Member Co., Ltd can follow in an effective way In addition, this particular regulation would also help food and beverage companies avoid negative competitions in their field.”
5.3.1.2 Supplement regulation of selling and introducing beer products
“The regulation is made for the purpose of clearly classifying the method of career agent and direct response due to the huge difference among these channels
This research proposes the sales force for distribution channel should be mainly intermediaries’ staffs and sell via their system only Therefore, this regulation would guarantee avoiding the disperse situation of the sales force, and it is much more convenient in management activity; simple in commission payment, etc After about 3-5 years when distribution channel is more developed, it will be very necessary and significant to supplement regulation of sales force for distribution channel, such as: special professional advisor; food and beverage agents; intermediaries’ collaborator; etc.”
5.3.1.3 Supplement regulation of the number of companies cooperating with intermediaries
“In the business cooperation agreement with Habeco Trading One Member Co., Ltd, intermediaries are corporate agent Therefore, pursuant to the current regulation of the State, if it is noted and agreed in the cooperation contract, intermediaries can be able to sign in another contract with other companies.”
“However, in order to save the security of information, as well as make sure that intermediaries can be more considered about beer sales activity, this research suggests that at the initial time, one intermediary should be agent for one Habeco Trading One Member Co., Ltd only, instead of many other providers at the same time This would help Habeco Trading One Member Co., Ltd and that intermediary can be more focused in taking more necessary actions to improve the collaborating relationship, ensure the effectiveness and benefit from their cooperation.”
5.3.1.4 Supplement regulation of commission payment for corporate agent
It is very necessary to issue a separate regulation of commission payment mechanism for distribution channel activity In more detail, this regulation should be applied based on the type of products that is allowed to be distributed via distribution channel Moreover, the commission tarrif applied for distribution channel should be more attractive than the existing one to make sure that the payment for the direct sales force This will help the intermediaries’ staffs feel more attractive and encouraged in selling beer products.”
5.3.1.5 Supplement regulation of information sharing between the company and intermediaries
“The lawmakers need to consider about regulations of information sharing mechanism between intermediaries and companies, types of report, etc in order to protect the information of customer who is participating in a sales contract, in addition, take necessary and timely actions to control and supervise effectively this operation.”
“For the distribution channel operation at the present, companies are still taking precautioned steps to do business without breaking law due to the fact that the State has not had a basic legal framework for distribution channel’s development Therefore, if its wants this operation to contribute much benefit to the general economy, the State needs to quickly research and draft some specific legal documents guiding on distribution channel business in Vietnam.”
“The most important thing in developing intermediaries is the commitment of the senior leaders of both intermediaries and Habeco Trading One Member Co., Ltd Based on the commitment’s content, the involving parts will transfer and implement them to be the fact, ensure the proposed plan can be developed follow the right direction and achieve high qualified results.”
“Intermediaries need to clearly understand the benefits getting from distribution channel operation, that are the revenue of distribution channel commission From this point, intermediaries and companies can cooperate to make good decision on any actions, especially in selecting correct types of product to be deployed.”
“The intermediaries’ IT system should be customized to be suitable with distribution channel’s database The company should also appoint their staffs to ideas to customize and improve the intermediaries’ IT system to create the best facilities for both intermediaries and Habeco Trading One Member Co., Ltd in term of managing distribution channel operation.”
“Intermediaries need to actively request the company to organize training course for their staffs After the training course, they should also check the quality of the training course as well as how their staffs achieve and improve the course, make sure that they can improve distribution channel activities by increasing number of contracts and revenue.”
“The intermediaries may consider cooperating with many companies or Habeco Trading One Member Co., Ltd may cooperate with some intermediaries to improve efficiency and expand product distribution strategy However, depending on the specific condition that they can be deployed in certain form: intermediaries act as an agent of Habeco Trading One Member Co., Ltd or Habeco Trading One Member Co., Ltd’s staff can work onsite at intermediaries.”
“Intermediaries can develop relationship with customers through the introduction of their core products related to beer products based on the actual benefits, such as: satisfying the needs, attracting and initiating relationships with customers from sending advertised email, consul via telephone or even direct exchange with them about beer products.”
1 How doesHabeco Trading One Member Co., Ltdselect members for its distribution channel?
2 How often does the company organize training courses for its DC (distribution channel) members?
3 Which skills and benefits can be obtained by DC members when participating into the training courses held by Habeco?
4 How about Habeco’s tuition fee support policy for its DC members when participating in those training courses?
5 How about the measures used by the company to discover its DC members’ needs and problems?
6 How does the company support its DC members to deal with their problems?
7 How about the distribution program designed by the company for its DC members?
8 What are rewards given to DC members when they have excellent results?
9 Which criteria does the company depend on to evaluate its DC?
10 How suitable and effective are those criteria?
11 How often does the company evaluate the effectiveness of its DC?
Dear ladies and gentlemen Currently, I am completing the master thesis on distribution channel (DC) management at Habeco Trading One Member Co., Ltd (Habeco) Could you please spend a little time to share your opinion about the matter? Your information will be kept secret and will not be used for any other purposes rather than the purposes of this research
Please tick an “X” in the most appropriate box There should be only one answer for each question
Please indicate your opinion for the related factors through the following statements
Instruction for answer: Please complete the questionnaire by circling by an (O) to what extent each of the following statements is true according to your personal opinion Each statement is measured by the scale from 1 to 5, which meaning is as follows:
No Dimensions and attributes Min => Max
1 Habeco finds prestigious intermediaries in the beer market as its DC members
2 Habeco selects its DC members based on their reputation and financial strength
Habeco selects its DC members by identifying their product lines as competitive products, compatible products or complementary products
4 Habeco selects its DC members by fair dealing and friendly relationship it can establish with
5 Habeco selects its DC members based on their advertising and promotion support given to its beer products
II TRAINING MEMBERS FOR DC
1 Habeco often organizes training courses for its DC members to improve their knowledge on its beer products
No Dimensions and attributes Min => Max
Habeco to improve their sales and negotiation skills
3 Training courses held by Habeco can help its DC members improve their communication skills
4 DC members can freely be involved in the training courses held by Habeco without any charge
III MOTIVATING MEMBERS FOR DC
1 Habeco uses some approaches to learn about its DC members’ needs and problems
2 Habeco offers cooperative arrangements to support its DC members to deal with their problems
3 Habeco builds a planned, professionally comprehensive distribution program for its DC members
4 Habeco gives some monetary rewards and recognition to its
DC members with outstanding and excellent results
5 Habeco assigns some experts to be in charge of motivating its DC members
1 Habeco evaluates DC based on the amount of sales each DC member can give within a certain time frame
3 Habeco evaluates whether DC can give better profitability to the company
4 Habeco evaluates whether it can have better control over its
5 Meeting between Habeco and DC members are often and officially organized to discuss DC problems
No Dimensions and attributes Min => Max
6 The standards and approaches used for evaluating DC are suitable and effective
THANH YOU FOR YOUR COOPERATION!
Habeco finds prestigious intermediaries in the beer market as its DC members 0 0 45 34 21 3.76
Habeco selects its DC members based on their reputation and financial strength 0 0 45 33 22 3.77
Habeco selects its DC members by identifying their product lines as competitive products, compatible products or complementary products
Habeco selects its DC members by fair dealing and friendly relationship it can establish with 0 29 31 24 16 3.27 Habeco selects its DC members based on their advertising and promotion support given to its beer products
Habeco often organizes training courses for its
DC members to improve their knowledge on its beer products
DC members can participate in some training courses held by Habeco to improve their sales and negotiation skills
Training courses held by Habeco can help its
DC members improve their communication skills
DC members can freely be involved in the training courses held by Habeco without any charge
Habeco uses some approaches to learn about its
DC members’ needs and problems 0 0 45 34 21 3.76
Habeco offers cooperative arrangements to support its DC members to deal with their problems
Habeco builds a planned, professionally comprehensive distribution program for its DC members
Habeco gives some monetary rewards and recognition to its DC members with outstanding and excellent results
Habeco assigns some experts to be in charge of motivating its DC members 0 19 50 18 13 3.25
Habeco evaluates DC based on the amount of sales each DC member can give within a certain time frame
Habeco periodically evaluates DC 0 0 45 34 21 3.76 Habeco evaluates whether DC can give better profitability to the company 0 0 45 33 22 3.77
Habeco evaluates whether it can have better control over its DC or not 14 15 25 25 21 3.24
Meeting between Habeco and DC members are