The Effectiveness Of Channel Of Distribution In The Soft Drink Industries (A Study Of Nigeria Bottling Company Plc)

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The Effectiveness Of Channel Of Distribution In The Soft Drink Industries (A Study Of Nigeria Bottling Company Plc)


Abstract


The study investigated the Impact of Channel Distribution Strategy on Organizational Performance. Specifically, it examined whether intensive distribution strategy helps an organization to gain a sustainable competitive advantage, increased sales and profitability.

The study employed primary data collected from 30 employees of Nigeria Bottling Company Plc in Lagos state. The primary data used for the study were collected through questionnaire administered to the respondents. The study employed descriptive statistics and Pearson product moment coefficient of correlation. Pearson product moment coefficient of correlation method and t-test were also employed to analyze the relationship between intensive distribution, sustainable competitive advantage, increased sales and profitability.

The study recommends that the management of the Nigeria bottling company should be aware that distribution via stockless platform is more complex solution for physical distribution improvement than direct delivery.


Table of Contents


  • Title Page
  • Certification
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of Contents

Chapter One

Introduction

  • 1.1 Background of Study
  • 1.2 Statement of Problem
  • 1.3 Purpose of Study
  • 1.4 Research Questions
  • 1.5 Research Hypothesis
  • 1.6 Limitations of Study
  • 1.7 Scope of Study
  • 1.8 Significance of Study
  • 1.9 Definition of Terms
  • References

Chapter Two

Literature Review

  • 2.1 Introduction
  • 2.2 Distribution Channels
  • 2.3 Reasons and Functions of Distribution Channels
  • 2.4 Channel Levels
  • 2.5 Channel Design Decision
  • 2.6 Objectives and Constraints of Distribution Channels
  • 2.7 Types of Intermediaries
  • 2.8 Managing the Marketing Channel
  • 2.9 Channel Conflicts
  • 2.10 Impact of Channel Conflict
  • 2.11 Managing Conflicts in Distribution Channels
  • References

Chapter Three

Research Methodology

  • 3.0 Introduction
  • 3.1 Research Design
  • 3.2 Population Study
  • 3.3 Data Collection Method
  • 3.4 Sampling Technique
  • 3.5 Method of Data Analysis
  • 3.6 Scope and Limitation of the Study
  • References

Chapter Four

Presentation and Data Analysis

  • 4.0 Introduction
  • 4.1 Presentation of Data
  • 4.2 Test of Hypothesis
  • References

Chapter Five

Summary of Findings. Recommendations, Conclusions and Suggestions for Further Research

  • 5.0 Introduction
  • 5.1 Summary of Findings
  • 5.2 Recommendation
  • 5.3 Conclusion
  • 5.4 Suggestions for Further Research
  • Bibliography

Chapter One


Introduction

1.1 Background of Study

Distribution is a stream, a flow of products and services from the producer though intermediaries to end-users. It consists of members in the distribution channels that gets the products from assembly line (production) to the consumer (consumption). It includes selecting and managing the trade channels through which the product will reach the right market at the right time and to develop a distribution system for physically handling and transporting the product through these channels. It also involves the actual movement of products from one place to another.

The Nigerian Bottling company plc came into existence in 1953 to bottle coca-cola range of products. This includes coca-cola, fanta (orange, Lemon and pineapple), sprite, Schweppes and Eva Table water. It sells more than 15,000,000 bottles of these products daily.

Nigerian Bottling company is a public liability company with a fully-paid up share capital of over 783, 740, 441 of which 41percent is held by Molino soft drinks. A- in trust for Leventis Nig., Plc, while Nigerian investors about 51 percent, other foreign investors own about 8 percent of the paid-up capital. It has on its board nine (9) directors of which Bashorun A.A., Adesanya is the chairman.

The company has its registered office at the NBC House, behind Mainland Hotel, Oyingbo, Ebute-Metta, Lagos and Operates from twenty-one (21) bottling plants, thirty four (34) bottling lines, 250 depots throughout the federation, and the country is divided into regions namely Lagos, East, North andWest for easy management of operations.

In addition to the above, the company has in its employment more than ten thousand (10,000) regular employees, contract workers in excess of 1,000 as well as a fleet of 3,500 vehicles including sales tricks totaling over 2000 and 500 trailers. This company is a dominant player and infact the leader of the soft drinks industry accounting for more than 65% of the market share.

Furthermore, this company has subsidiaries and associates companies including Delta Glass company Plc, producing softdrinks bottles and glass wares, crown products limited which manufactures bottle crowns, Benin plastic company limited makes plastic cases for bottles.

Moreover, the company has about 400,000 customers (dealers) spread all over the federation. It is the largest manufacturer of carbon-dioxide (Co2) gas used for making soft drinks.


1.2 Statement of Problem

In any organization, the channel of distribution should be treated as a total unit in order to achieve a significant competitive advantage over other firms.

This is very important especially when the firm is planning for and designing distribution channels.

Nigerian Bottling Company Plc is a major player and infact the leader (has over 67 percent market share) in the soft drink industry and there have been inherent and apparent problems with the distribution system.

These problems include:

  1. Conflicts among the channels of distribution (Distributors, wholesalers, Retailers).
  2. Conflicts such as between the wholesalers and retailers.
  3. Conflicts as a result of non-compliance with zonal regulations by distributors.
  4. Diversion of products by the salesmen during peak periods / seasons.
  5. Overpricing of products by the salesmen during peak periods / seasons.
  6. Brand assortments are not done properly.
  7. The preferential treatment as well as undue advantages given to some channel members over others by the staff / salesmen of Nigerian Bottling Company Plc. Management of the Distribution fleet.

1.3 Purpose of Study

The purpose of this study is to proffer solutions to the obvious problems inherent in the distribution system of Nigerian Bottling Company Plc. Highlighted above and in doing this,the following objectives shall be looked into and justice done to them. the study shall examine the various channels of distribution in the soft drink industry with special reference to the Nigerian Bottling Company Plc, which is the research’s case study.

It will also discuss he various conflicts that arise among the channel members and the causes of these conflicts as well as their impacts on the distribution system of Nigerian Bottling Company Plc. It will ensure whether these conflicts have any influence on the channels members themselves and the various product lines manufactured by the company.

In addition to the above, this research work will find out if the customers and the consumers are getting the desired satisfaction from the company’s products in terms of qualityvis-a-vis the taste.

The study will also concern itself with the relationship between product demand, pricing and present distribution system. It will reveal if the present (current) distribution system has been able to meet with the demand of the consumers and overall expectation of the company.


1.4 Research Questions

The following question will be used in appraising the effectiveness of channels of Distribution in NBC Plc. Data analyzed will proffer solution to this question.

  1. Does effective channel distribution have any impact on the profitability of soft drink industries?

1.5 Research Hypothesis

Effective channel distribution has no impacts on the

  • Ho: Profitability of soft drink industries Effective channel distribution has negative impact on the profitability of soft drink industries
  • Hi: Profitability of soft drink industries Effective channel distribution has positive impact on the profitability of soft drink industries

1.6 Limitations of Study

Owing to finance and logistic constraints, this study will only be conducted for Lagos Region. Also, some dealers are not willing to respond thus limiting our sample size


1.7 Scope of Study

In carrying out this study, Nigerian Bottling Company Plc and their dealers (customers) were picked out of the soft drink industry to represent the industry.The reason for the choice is because the company is a big player and infact, markets leader in the industry (controlling more than 65% of the market).

Nigerian bottling Company Plc is a big firm with many bottling plants grouped under regions throughout the federation. Because of the large size and the near impossibility of the research work to cover the federation, this study will be restricted to only the Lagos region comprising three (3)bottling plants namely Apapa, Ikeja and Mushin.


1.8 Significance of Study

Under the above, we want to see the importance of this study to the company and the industry. Having analyzed problems militating against effective distribution of products in Nigeria Bottling company Plc, the findings and subsequent recommendations will be of immense value to the company in terms of improving on its performance. Also, the study will have a broader relevance to the entire industry since most of the firms operating in the industry may have similar distribution patterns and recurring problems like that of Nigerian Bottling company Plc, the result of the study may be used by other firms.

This study may serve as a basis for further studies on the same topic or topics of similar features.


1.9 Definition of Terms

According to supervising Route Distribution Effectiveness of Nigerian Bottling Company Plc., (1990), the following terms to be used in this project work are defined as follows:

Channels:

A channel is a term of merchants and agents business institutes that combine physical movement and title movement of products in order to a create useful assortments for specific markets.

Distribution:

It is the process of satisfying consumers and customers while generating profitable growth.

Wholesaling:

This consists of activities involved in selling the buyers other than ultimate consumers.

Retailing:

Business concerns or merchandises that is responsible for the selling goods and services to final consumers.

Agent:

Business units that deals in the negotiations for the buying and selling of goods and services.

Customer:

This refers to the wholesalers, retailers and agents.

Consumer:

This refers to the final end-users in the chain of distribution.


Chapter Five


Summary of Findings, Recommendations, Conclusions and Suggestions for Further Research

5.0 Introduction

This chapter consists of summary, conclusion and recommendations, important and revealing aspect of each chapter highlighted. Conclusion was drawn from the result of findings on the study. The recommendations are based on the conclusion.


5.1 Summary of Findings

This study revealed that distribution is an important aspect of marketing which ensure that products needed by consumers are delivered in the right quantities and quality to meet their satisfaction. Distribution encompasses physical distribution, which involve transportation, storage and materials handling activities.

Also, marketing involve the selection of the number of levels of middlemen and in these levels, the individual wholesale and retail form to assist in the flow of product i.e channel ofdistribution and Channel facilitating agents. The role of middlemen cannot be reemphasized as they engage in active and prominent role in negotiations involving buying and selling of goods.

The various functions performed by the intermediaries also highlighted in chapter two such as informational, promotional negotiation, ordering, financing, risk taking, physical possession model level i.e. middlemen that brings the product and its little closer to the final buyer. the various channel model such as consumer, marketing channel made and industrial marketing channel model are discussed.

This study also revealed that the objective of establishing distribution channel is to minimize total channel cost with respect to desired levels of service output. In doing this, the number of intermediaries and designing channels decisions needed to be made as it relates to analyzing customer needs, identifying and evaluating the major channel alternatives.

Distribution channel should also be managed very well to reduce various channel conflicts with the use of appropriate power to elicit co-operation. If these conflicts are not well managed the effect will be on both intra channel distribution and the user of inappropriate power.

However, findings reveals on chapter four that 20 respondents representing 66.7% of the total questionnaire administered stated that there exist conflicts in the distribution system of NBC Plc while 10 respondents disagreed with existence of conflicts.

Also, it was shows that 14 (16.7%) of the respondents strongly agree that effective channels of distribution has positive impacts on the profitability on soft drink industries, while 10 (33.3%) of the respondents Agree with that 4(13%) of the respondents Disagreed and finally, 2(6.7%) of the respondents strongly disagree with the statement.


5.2 Recommendation

As a result of the conducted investigation of the different physical distribution systems, recommendations are provided below:

Direct Deliveries

There is a big potential for cost savings if the number of direct deliveries was increased. There will be a large volume of soft drinks products, which could go directly to the consumers i.e some products, will be considered as possibilities for direct deliveries. The main reason for this is that there will be reduction in tied-up capital costs for soft drink products.

With the aim to increase direct delivery Index, review of sales in different markets should be carried out periodically.

Before making a decision about increase of direct deliveries, some awareness is recommended in transportation planning, such as coming federal road tolls and their effect on transport pricing.

Distribution

The channels of distribution are feasible for soft drinks industries in terms of total logistics costs and tied up capital costs. These might decrease by half, because time for storage is eliminated. This will results in reduction of total logistics costs and tied up capital costs. It is recommended that considering this alternative, but at the same time management should be aware that distribution via stockless platform is more complex solution for physical distribution improvement than direct delivery.


5.3 Conclusion

It is important not to overlook the frequency of invoicing the customers. The invoicing of the customers has to be increased at the same time as the company increased tied up capital turnover. In other words the inventory turnover and invoicing has to be proportional. Otherwise, management is very efficient, finance department might be a bottleneck for overall improvement. That is why the integration of logistics and finance departments is obligatory.

Furthermore, close collaboration with customer is needed. As it was stressed during the interviews with dealers, and sales communication, processes and win-win solutions finding with customers and business partners is a key to successfully implement this kind of set up.

In the analysis part we tried to show the parts where economic savings can be attained. Of course, these are simplified situations and not all variables were included in our research that is why further investigation and more detail calculations for the proposed solutions are required.

In order to implement new distribution set ups, further research on the cost trade-offs for the customer should be conducted.


5.4 Suggestions for Further Research

In order to implement new distribution set ups, further research on the cost trade – offs for the customer should be conducted.


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