Mondelez India reduces inventory pipeline with distributors

In a bid to push sales and ensure faster reach to consumers, Mondelez India — makers of Cadbury Dairy Milk, Oreo, Bournvita, Cadbury 5 Star, among others — has been reducing its inventory pipeline with distributors.

The initiative, which has been on for nearly a year now, has borne fruit with inventories coming down at least 20 per cent at the retailer level, and nearly 40-50 per cent at the distributor level. Modern trade accounts for 15-18 per cent of the company’s total sales. According to Hemant Rupani, Sales Director, Mondelez India, the move to reduce go-to time in the market, has ensured that consumers get the product “faster and fresher”. This meant bringing down the time between production and offerings reaching shop shelves.

“Our conventional time to market used to be as high as 45-60 days. We thought it was a bit too long, and brought it down to a maximum of three weeks,” he told BusinessLine .

Mondelez is the market leader in the country’s chocolate space, with over 65 per cent market share. Cadbury Dairy Milk is its highest selling product with a 41 per cent market share (in the chocolate category).

The company has added close to 100,000 new urban distributors, while 10,000 new villages have been added under its rural outreach programme.

Anil Talreja, Partner at Deloitte Haskins & Sells, which tracks the retail sector, said that such time reduction in inventory is done primarily for working capital optimisation and cost management. “Typically, companies try to maintain a tight control over stocks. Reducing time to market of products helps in bringing down costs, and gives a competitive advantage,” he said.

Market sources point out that Mondelez has excelled at creating occasion-driven purchases (such as gift packs surrounding Rakhi or Valentine’s Day). Now, offerings are being introduced in the high shelf-life online space too (through Amazon). In both cases, products have to be on time with minimum returns.

The seasonal nature of consumption in India cannot be ignored, and stocks have to be accordingly shifted to suit the demand.

“Traditionally, we have always been good at creating such occasion-specific portfolios. This now is being extended to the e-commerce space, wherein we are creating specific, bundled offerings, even for very small occasions like Mother’s Day or Father’s Day. Therefore, the active life of that portfolio is very limited, only a few weeks,” Rupani said.

“If you are late by a few days and its yesterday’s story, no one will be interested in that. The small portfolio that you created for that specific occasion could either result in the product getting returned or you discounting it later to liquidate it; which is not good for the brand.”

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