Full Project – THE EFFECTIVENESS OF CHANNEL OF DISTRIBUTION IN THE SOFT DRINK INDUSTRIES

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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 significantcompetitive 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:

·        Conflicts among the channels of distribution (Distributors, wholesalers, Retailers).

·        Conflicts such as between the wholesalers and retailers.

·        Conflicts as a result of non-compliance with zonalregulations by distributors.

·        Diversion of products by the salesmen during peakperiods/ seasons.

·        Overpricing of products by the salesmen during peakperiods/ seasons.

·        Brand assortments are not done properly.

·        The preferential treatment as well as undue advantagesgiven to some channel members over others by thestaff/ 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 obviousproblems 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 desiredsatisfaction from the company’s products in terms of qualityvis-a-vis the taste.

The study will also concern itself with the relationshipbetween 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 berestricted 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 studyto the company and the industry. Having analyzed problemsmilitating against effective distribution of products in NigeriaBottling company Plc, the findings and subsequentrecommendations will be of immense value to the company interms of improving on its performance. Also, the study willhave a broader relevance to the entire industry since most of the firms operating in the industry may have similardistribution patterns and recurring problems like that ofNigerian 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.

REFERENCES

Buckling, Louis P. (1996):        Institute   of     Business  and Economies Research, BerckleyUniversity of Califonia.

Davies, K.R. (1961): Marketing Management,New York, the Ronald Press Company.

Kotler, P. (1980):Marketing, the Management, Analysis, Planning and Control, 4th Edition, Prentice hall Inc.

McVey P. (1960) :Pre-Channels of Distribution what the textbook says, JMR.

Shelby D. Hunt and John R. Nevin (1989): Powerin        aChannel        ofDistribution, Sources and Consequences.

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Full Project – THE EFFECTIVENESS OF CHANNEL OF DISTRIBUTION IN THE SOFT DRINK INDUSTRIES