“We’re a new company and a new entrant in the beverage industry. We recently launched our ready-to-drink fruit juices targeting school children up to 19 years old, and distributed them to various sales channels. Our products received very high consumer acceptance despite the relatively higher price because of its superior quality and distinct taste. Our mantra was ‘the more customers we have, the better the sales and profit.’ After just over a year, we realized that not all channels and customers were contributing to our sales revenue and profit growth. We discovered that we spent so much money in certain channels and customers where our products did not move very well.  We cannot afford above-the-line advertising which obviously limits awareness of our products. We would like to step back and take stock of our situation and sales strategy. In your previous columns, you suggested focusing on certain channels only. Which distribution channel should we consider as top priority to develop?” – Mr. Al Sy

 

As one book author says it, hope is not a strategy. Strategy is the choice of where and how you will compete to outdo or outsmart your competitors in the marketplace. You need to decide where to focus your energy and resources. Formulating a sales strategy involves choosing which distribution channels to prioritize. This statement acknowledges the fact that not all channels will help you achieve your long-term business ambitions. Product differentiation is no longer the main source of sustainable competitive advantage for most companies. Owning and dominating relevant distribution channels is becoming a better source of competitiveness.

 

Choosing a distribution channel requires a clear understanding of how your primary target consumers buy your products. It is not what they buy, but how they buy. You stated that your primary target consumers are school children up to 19 years old. In schools, canteens and stores in the immediate vicinity are very attractive channels for ready-to-drink beverages. However, I notice that this is a channel which is still largely ignored by most beverage companies judging from the appearance of the selling areas of most school canteens. For me, this channel is still practically under-served for beverage products.

 

If I were to choose for you, I will capture and solidify my position in the school canteen channel for the following reasons:

  1. Your primary target consumers are in school most of their waking time. How you take advantage of these captured consumers will spell great success for your brands. I know of some brands that are almost the exclusive beverage providers in certain schools.
  2. Consider the ‘pester power’ of children to their parents. Most of the brands preferred by school children are the ones they see in school. When they go home, they literally pester their parents to buy for them. Parents in turn buy from other channels like supermarket and sari-sari stores. This creates a retailer pull, like a ripple effect, coming from school canteens to other channels. The school canteens become your stage to showcase your brands while other channels consequently benefit from.
  3. Most schools strictly implement the ‘healthy snacks and beverages only’ policy in their canteens. Your product should benefit from this policy as more popular carbonated beverage brands are taken out of school canteens.
  4. School canteens offer you a better opportunity for branding or building brand connection and relationship with your target consumers. To maximize your presence, invest in visually-arresting point-of-purchase (POP) materials, product displays, and brand activation activities. Actively participate in school events by giving out free product samples of your products to induce more trial and brand awareness. Negotiate to dress up the school canteens and offer exclusivity deals if you can.
  5. School canteens are cheaper to develop and maintain versus some supermarkets and convenience stores where you need to pay huge amount of listing fees, display rentals, store-initiated promotions, and other fees that sometimes do not yield good returns.
  6. There are thousands of schools with canteens in the Philippines. You may want to start in the Greater Manila Area (GMA) which has at least 2,000 schools. Go to DEPED where you can ask for a listing of all the registered schools in the Philippines for a very minimal processing fee.

 

So, there you are! Choose your channels wisely!

 

Emilio “Bong” Macasaet III is Partner and Chief Distribution Strategist of Mansmith and Fielders, Inc. (www.mansmith.net), the leading marketing and sales training company in the Philippines. Please also send your marketing, sales and strategy questions to mentors@mansmith.net.