EASTERN
CONDIMENTS
Group 9
• Ankur Jain
• Khushboo Hanjura
• Darpan Shah
• Darshan
• Vanashree
A B O U T - E A S T E R N C O N D I M E N T S P R I VAT E L I M I T E D
● Established by M.E. Meeran in 1968 as Eastern Trading Company
● In 1983, Eastern set up its first full-fledged spice factory with 35 employees in Adimali, Idukki
● In the same year, Eastern set up a Coffee Powder manufacturing facility as well
● By 1987 with its blended spice products, Eastern covered 1/3rd of Kerala’s market
● Eastern Condiments Private Limited was incorporated in 1989
● 1992-3, Eastern set up its first lab testing facility with International standards, the only such
lab in Asia
● In 1995, opened a new factory in Theni, Tamil Nadu
● In 2008, Eastern had a workforce 1100 - employed in 4 factories at 12 locations (India &
Abroad)
● Turnover in 2008 was INR 1.95 billion with Operating Profit of INR 167 million
EASTERN’S PERFORMANCE IN KERALA
● Market share was increasing YoY ( 28% To 47 % )(Exhibit 7)
● Profit margin was increasing from 5.9 % to 10.65 % ( exhibit 7 )
● Sales growth by over 365 percent in 5 years.
● Better “Behaviour Control” based on effort & actions was implemented on Sales staff
(Manager is King approach)
● Great Routing and Scheduling
THE KEY ASPECTS OF STRATEGY THAT DROVE THE
KERALA PERFORMANCE AND ITS OUTCOMES
● Owned the entire distribution system.
● Increasing product portfolio to patented blended spices, Non-vegetarian spice mix &
Rice based instant mix.
● Top management involvement in constant Sales planning, training & recruitment of
known personnel.
● Portfolio customized to local malayali taste palette.
● Permanent Journey driven distribution system.
● Seasonally procured spices to ensure marginally higher price vs commodity spices
● Consistent quality, hygienic packaging.
3. IS KARNATAKA A GOOD CHOICE FOR EXPANSION ?
● Yes, it had 30% of Malayali population, which was highest nationally after kerala.
● Distribution to Karnataka was relatively easy due to proximity to Kerala.
● MTR foods was only major competitor, restricted to vegetarian spices only.
● Bangalore, the capital city was the fastest growing Metropolis with population 6.5 million.
4. HOW IS THE PERFORMANCE IN KARNATAKA ?
● Sales has increased from INR 13 million to INR 116 million(EXHIBIT 11)
● Cash & Stock pilferage caused losses.
● Failure of Permanent journey system.
● Lack of upfront cash payment increased working capital.
● Less “ownership minded” Sales personnel.
● High sales staff attrition rate & burnout.
● Shift from “Behaviour Control” to “Outcome based control” due to minimal management
involvement and training.
● Distribution planning suffered causing stockouts.
● Ever-Present Manager Inconsistency
5. WHAT WERE THE EXPERIENCE IN CITIES LIKE
MUMBAI
● Distribution outsourced to third party partner (at 20% margin)
● Operation was profitable but scaling issues emerged.
● High fixed operating cost despite low consumer pull.
● Core competency was outsourced hence scaling challenges.
● Supply & Inventory management issues due to far off factory location.
● Low Management involvement caused weak Management Controls.
● Minimal training and frequent outcome based Evaluation caused high attrition rates.
6. OPTIONS FOR EASTERN’S FUTURE IN KARNATAKA
● Kerala Model- Owned Distribution System
Pros
● Better Monitoring and subjective multifactor evaluation (opaque criteria) of
Salesperson
● Better control of final decision making and salesperson’s compensation to managers
● Better training of salesperson
● Higher involvement/communication between salesperson and managers
● Better coaching of salesperson
● Better control of value chain
● Kerala Model- Owned Distribution System
Cons
● Less freedom of decision making and thought process to salesperson
● Opaque evaluation criterias
● No particular attention to bottom-line results
● As the salary is more fixed, less monetary motivation for a salesperson
● Higher Monitoring Costs
● Mumbai Model - Complete outsourcing of distribution system
Pros
● Cost reduction
● Better awareness of Locality
● Better time economy
● Service Quality improvement can be achieved
● Reduction in direct salesperson
● Mumbai Model - Complete outsourcing of distribution system
Cons
● Less control over distribution
● Supply and inventory management issues
● Training/Coaching, Monitoring, Involvement/Communication issues
● Low Management involvement caused weak Management Controls
● Product only based on Malayali taste
● Scale-up Issues
● India Model- Partial outsourcing of distribution system
Pros
● Larger Market Coverage
● Some Control over the Distribution System routes, etc
● Risk Diversity
● Usage of drivers with better awareness of locality
● India Model- Partial outsourcing of distribution system
Cons
● Training/Coaching, Monitoring, Involvement/Communication issues
● Low Management involvement caused weak Management Controls.
● Minimal training and frequent outcome based Evaluation caused high attrition rates
● Product only based on Malayali taste - Improper Research
● Low Brand awareness leading to credit difficulty
● Difficult Sales Forecasting; Stocks and Cash pilferage
SUGGESTED
MODEL
● Kerala Model
with the
suggested
consistency (As
they already
have their own
Vans)
ECONOMIC COMPARISONS
KERALA KARNATAKA
● Malayali Population (31.84 ● Malayali population- 30% of total
millions) population(15.87 million)
● GSDP: volume of all goods and ● GSDP: 2.5 trillion
services produced within the ● 54.4% of GSDP tertiary Sector
boundaries of the State during a ● Hub of IT, defence, aerospace and
given period of time, accounted telecommunications industries
without duplication- 1.75 trillion ● Large pool of skilled manpower
INR
● 64.4% of GSDP tertiary Sector
● Unemployment Rate 25%
● Least Corrupt State in India
FINANCIAL DETAILS FOR A OWNED VS
ENTREPRENEUR DISTRIBUTION MODELS
● Distribution cost ( % of sales ) was less in entrepreneur distribution model than owned
distribution.
● Entrepreneur model have better income to salesperson when compared to owned
distribution sales personnel.
