DISTRIBUTION

CHANNEL ADOPTED BY
THE NESTLE - PAKISTAN:
CASE STUDY
Deepak Kumar (2039103)
Hasan ul Moin (2039105)

25 May 2021
Nestlé Pakistan is the leading Food & Beverages
Company in Pakistan with key focus on
Nutrition, Health and Wellness and reaching the
remotest of locations throughout Pakistan to
serve the consumers. Nestlé Pakistan operates in
many ways but people, products and brands are
the main flag bearers of the Company’s image.
The objective of the report is to study the
existing distribution strategy of Nestle Pakistan
ltd in depth by identifying all the channels
utilized from the very start of the process to the
actual sale.
Contents

Abstract ii

1 Introduction 1

2 Distribution Strategy 2
2.1 Distribution Process . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Distribution Zones . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Distributor’s Sales Target . . . . . . . . . . . . . . . . . . . . 5

3 Conclusion 6

Bibliography 7

ii
Introduction

Nestlé Pakistan Ltd. is a subsidiary of Nestlé S.A., a company based in

Vevey, Switzerland. Millions of consumers across Pakistan mirror company’s
emphasis on nutrition, realizing that food choices impact their health and
quality of life. Nestlé has been operating in Pakistan since 1988 under a joint
venture with Milk Pak Ltd, whose management was took over in 1992. For
the last several years, Nestlé Pakistan has been consistently placed among
the top companies of the Pakistan Stock Exchange.

At Nestlé Pakistan, the global ideology of Nutrition, Health and Wellness

is inspired by the scientific breakthrough of it’s founder, Henri Nestlé when
invented the first infant food in 1867. Nestlé Pakistan is headquartered
in Lahore, with four production facilities across the country. Factories in
Sheikhupura and Kabirwala are multi-product, whereas the ones in Islam-
abad and Karachi are water factories.

1
Distribution Strategy

2.1 Distribution Process

The products from the production lines are shipped to the warehouses where
they are stored during the incubation period. The products are then shipped
to the customers as per request.

Trucks are dispatched nation wide from these warehouses to the customers.
The customers are the distributors, which in turn supply the products to the
retailers/consumers nationwide. Warehousing is looked after by the Group
Distribution Operations Manager who reports to the Supply Chain Manager
for the transportation of the product.

Nestle has contracts with a number of service providers. The company strat-
egy for logistics is quite simple. It’s outsourced all logistics activities. Nestle
does not own any trucks for the transportation of the products. They have
outsourced logistics to four major transporters who provide trucks on a daily
basis.

2
CHAPTER 2. DISTRIBUTION STRATEGY 3

These four transporters have a total of 120 trucks that are owned by them
and are dedicated for the transportation of nestle products. These trucks
account for about half of the daily shipments. The rest of the half is still
hired from transporters market. The truck hiring is not the responsibility
of Nestle. Trucks are hired by the transporters from the truck market and
supplied on daily basis. The transporters are paid on ’per trip’ basis accord-
ing to mileage. Trucks currently being used for the transportation of Nestle
products are six wheelers with twenty feet containers and ten wheelers with
forty feet containers.

The Group Transport Manager who reports directly to the Supply Chain
Manager heads the transportation department. The standard truckloads
and loading patterns for all products are defined by Nestle and strictly fol-
lowed all transporters.

It is also made clear that all transit losses are charged to the transporters
unless provided a valid reason for them. The responsibility of the supply
chain is the delivery of the product to the distributor. The company is not
responsible for the delivery of the product from the distributor to the re-
tailer. This comes under the Distribution Department and is the job of the
Outsourced distribution centres.

The distribution strategy of nestle is standard Distribution strategy for vir-

tually all multinational FMCG in Pakistan. They outsource their distribu-
tion to a single distributor in an area. This business is responsible of keeping
enough stock to support the area for a weak. As deliveries from warehouse
come after one week, so the vender-withheld inventory is in play, which is
quite good for the FMCG Company, as they don’t give credit. They charge
it to the distributor on delivery.

It is the job of the distributor to supply all products to the retailers in the
area. The distributor and the Area manager together do the retail mapping.
They find new retail outlets and also assess the availability of products at
the existing retail outlets. The distributors are given a certain share of sales
of the stock they purchase from the Company. Traditionally this percentage
is some where between five and ten percent. All expenses of distribution
like transport, manpower required and stock maintenance in the warehouse
is the responsibility of the distributor.
CHAPTER 2. DISTRIBUTION STRATEGY 4

2.2 Distribution Zones

Nestle has a very well defined distribution strategy. The man in charge of
distribution is National Sales Manager (NSM). The country is divided into
three zones a zone manager is responsible for distribution in each zone. They
are reply to the NSM directly. The three distribution zones are:

• North

• Central

• South

These three regions are further divided into 15 sales regions and each of
these regions has a local distribution. These are the name of all major cities
of Pakistan.

1. Quetta

2. Quetta coastal belt

3. Karachi east

4. Karachi west

5. Hyderabad

6. Sukkur

7. Multan

8. Sahiwal

9. Lahore

10. Gujranwala

11. Jehlum
CHAPTER 2. DISTRIBUTION STRATEGY 5

12. Islamabad

13. Islamabad outstations

14. Peshawar

15. Peshawar outstations

There is a regional manager responsible for distribution in each of these

regions they are delegated the task of observing the distributor. These
managers are also responsible for setting the sales targets for their distribu-
tion centres. The manager set the target by keeping the past sales, market
trends and demand forecast in mind. The entire process of distribution from
the distributors warehouse to the market is outsourced. Total distribution
is being done through distributors. [1]

2.3 Distributor’s Sales Target

The distributors are given sales targets, which are then communicated by
the distributors to their sales team. The targets are usually like 15% annual
growth in sales. The distributors achieve this by selling more units to the
existing clientele (outlets in the region). In some cases the clients themselves
ask for more stock. In other cases they have to be persuaded to buy more.
The norm usually is that if a retail client asks for 12 pack the distributor’s
sales team sells him 15. The reason is to leave no space available for the
competitors. [2]
Conclusion

Nestle Pakistan is the leader in FMCG industry. Nestle keeps track of its
goods by maintaining its supply chain all over the country. From Netle’s
manufacturing system to its distribution channels, everything is properly
managed. They have a strong relationship not only with their customers
but also with their suppliers, distributors and retailers. Nestle can improve
its distribution strategy by using modern techniques in logistics to reduce
logistics cost considerably. Virtually all companies outsource logistics. If
nestle establishes a better system of logistics using modern management
techniques like Cross-docking, RFID and GIS system it could save a lot
of operations cost and that would reflect on their profits. This would also
improve their availability and lost orders.

6
Bibliography

[1] Saad Ahmad Khan. OPERATIONAL STRATEGY OF NESTLE BEV-

ERAGES IN PAKISTAN. PhD thesis, The University of Nottingham,
2007.

[2] Scribd. https://www.scribd.com/doc/119784198/

Introduction-of-Supply-chain-of-Nestle-MilkPak, De-
cember 2012.