DEVELOPMENT OF A PRODUCT DISTRIBUTION PROGRAM FOR AN ORGANISATION
The study examined the “DEVELOPMENT OF A PRODUCT DISTRIBUTION PROGRAM FOR AN ORGANISATION” The study adopted survey research design. The population of the study was 592 staff in the sales and marketing department of the selected consumer goods firms in Lagos State, Nigeria. The selected firms control more than 70% of the market share for consumer goods in Lagos State and are actively involved in distribution channel practices. The respondents are known as key informants in literature who are considered competent to provide information on the subject of the study. Total enumeration method was adopted for the study. A structured questionnaire with close-ended questions was used as research instrument. Content and construct validity were adopted. The reliability co-efficients of the constructs in the instrument ranged from 0.70 to 0.92. Five hundred and ninety-two copies of the questionnaire were administered to respondents and the rate of return was 85%. Data were analysed using descriptive and inferential (simple and multiple linear regression analyses) statistics.
Findings revealed that distribution channel practices had a significant effect on organisational performance of selected consumer goods firms (Adj. R2 = 0.475; F(5, 497) = 91.906; p<0.05); channel coordination had insignificant negative effect on financial performance of selected consumer goods firms (β = -0.033, t(503) = -0.893; R2 = 0.002, p>0.05); channel relationship had significant influence on channel satisfaction of selected consumer goods firms (β = 0.603, t(503) = 11.750; R2 = 0.465, p<0.05); channel strategy had significant influence on marketing performance of selected consumer goods firms (β = 0.335, t(503)= 7.594; R2 = 0.103, p<0.05); channel intermediaries had significant effect on utility creation of selected consumer goods firms (β = 0.327, t(503)= 8.496; R2 = 0.126, p<0.05); and distribution intensity had significant influence on channel performance of selected consumer goods firms (β = 0.471, t(503) = 11.347; R2 = 0.204, p<0.05).
The study concluded that distribution channel practices affected organisational performance of selected consumer goods firms in Lagos State, Nigeria. It was recommended that management of consumer goods firms in Lagos State, Nigeria should adopt distribution channel practices in relation to the prevailing retail market environment in order to improve organisational performance. The management should review the channel coordination of the system.
1.1 Background to the Study
Adoption of distribution channel practices to facilitate movement of product or service from manufacturers to consumers constitute a large fraction of overall economic activity, practices and businesses across the world (Bronnenberg&Ellickson, 2015). This accounts for a large portion of economic activity in modern societies, thereby contributing to development and performance of global and national economies (Nyberg, 1998). With the involvement of distributors, wholesalers and retailers, distribution channels help to deliver product or service offerings from manufacturers to end users, and sales through these channels account for about one-third of global GDP (Dasgupta&Mondria, 2012; Hyman, 2015; Palmatier, Stern, El-Ansary, & Anderson, 2014).
However, this level of global economic contribution through distribution channel systems and practices has been due to the need to adapt channel practices to major changes in the business environment worldwide (Watson IV, Worm, Palmatier, &Ganesan, 2015). Some of these changes in the business environment which have been reshaping and redefining marketing channel practices are the shift to service-based economies, application of multichannel practices, development of new channel formats, increased online shopping and globalisation (Palmatieret al., 2014). Deloitte (2017) industry report captured this as a period of transformation globally for the retail, wholesale and distribution practices, which necessitated adaptation and changes in firms’ distribution channel practices to suit prevailing changes in the business environment.
A report on the African consumer market by the African Development Bank Group showed that, domestic demand was expected to give boost to African economies as a result of the average increases in real GDP exceeding 5% (African Development Bank Group [AFDB] , 2012). This prospect was predicated on catalyst such as population growth and urbanization, poverty reduction and the emergence of the middle class, business environment and lower trade restrictions, use of technology. However, the bank also noted that in spite of these substantial growth prospects for consumer spending and the anticipated impact on performance of consumer goods firms, some of the key challenging areas include market structure, distribution channels and levelof skills. The report further showed that, the heterogeneous and segmented nature of the Africa’s consumer market have shown significant influence on distribution channels practices across the continent due to cultural, geographical and language differences. Challenges of poor distribution channels and underdeveloped transportation and other infrastructure were reported as affecting fast moving consumer goods (FMCGs) firms servicing consumer market. These, the bank stated have been raising the need for strong sales networks such as direct distribution and wholesale within the continent by firms in order to gain market share.
Burch (2015), stated that, the constraints associated with distribution of consumer goods in the African continent were driving many companies to figure out how to reach consumers in the hundreds of thousands of smaller, traditional and informal outlets, which account for the majority of FMCGs sales. Over 550,000 of these outlets were reported to account for about 50% of FMCGs sales in 14 Sub-Saharan African countries. Most common among these shopping channels were the simple table top, set up on the road side and in local markets to capture quick trade. Eighty percent of consumers patronised these table tops (Agyenim-Boatenget al., 2015) of which Nigeria accounts for no less than 200,000 (Burch, 2015; Ejiro&Ehigiator, 2015). This was the reason companies struggle with the scope and scale of distribution. The Nielsen’s report also showed that, identifying the best channels and retailers for a given product category has always been a challenge in the Sub-Saharan African countries.
In view of the above background, this study aimed to investigate the development of a product distribution program for an organisation.
1.2 Statement of the Problem
Over the years, distribution channels research has focused on two main areas. The first is on how channels are organised or structured with focus on channel integration, multiple channels, distribution intensity and organisational policies relating to standardising and monitoring of activities within the channel (Fein & Anderson, 1997; Shervani, Frazier, &Challagalla, 2007). The second is on practices relating to coordination and management of members behavioural tendencies as they relate to inter-firm power play, communication approaches, trust and commitment (Anderson & Weitz, 1992; Boyle, Dweyer, Robicheau, & Simpson, 1992; Kumar, Scheer, & Steenkamp, 1995; Lusch & Brown, 1996; Morgan & Hunt, 1994).
Moreover, concentration of these studies has been more in the developed countries than in the less developed countries. To address this gap, the researcher intends to examine the development of a product distribution program for an organisation.
1.3 Objective of the Study
The main objective of this study is to analyse the development of a product distribution program for an organisation. The specific objectives are to:
- evaluatethe way channel strategy influence marketing performance of selected consumer goods firms in Nigeria;
- ascertain the effect of channel intermediaries on utility creation by selected consumer goods firms in Nigeria;
- examine the influence of distribution intensity on channel performance of selected consumer goods firms in Nigeria and
- evaluate the combined effect of distribution channel practices on organisational performance of selected consumer goods firms in Nigeria.
1.4 Research Questions
In order to achieve the objectives of the study, the following questions were addressed;
- In what way does channel strategy influence marketing performance of selected consumer goods firms inNigeria?
- What effect do channel intermediaries have on utility creation of selected consumer goods firms in Nigeria?
- How does distribution intensity influence channel performance of selected consumer goods firm inNigeria?
- What are the combined effects of distribution channel practices on organisational performance of selected consumer goods firms in Nigeria?
The following hypotheses were tested for the study at 0.05 level of significance;
HO1: Channel strategy has no significant influence on marketing performance of selected consumer goods firms in Nigeria.
HO2: Channel intermediaries have no significant effect on utility creation of selected consumer goods firms in Nigeria.
HO3: Distribution intensity has no significant influence on channel performance of selected consumer goods firms in Nigeria.
HO4: Distribution channel practices have no significant combined effect on organisational performance of selected consumer goods firms in Nigeria.
1.6 Scope of the Study
The study focused on the development of a product distribution program for an organisation. Lagos State Nigeria was the domain for the study and it plays host to about thirty-four (34) major firms that both manufacture and distribute different categories of FMCGs products comprising food and beverages, personal care and home care products (MAN; Vconnect, 2010-2017). Out of these 34 consumer goods firms, the researcher focused on eleven (11) (Chi Limited, Honeywell Flour Nigeria Limited, CWAY Nigeria Drinking Water Science and Technology Ltd, Seven-up Bottling Company Plc, May & Baker Nigeria Plc, Nigeria Bottling Plc, PZ Cussons Nigeria Plc, Unilever Nigeria Plc, Friesland WAMCO Campina Nigeria Plc, Dangote Sugar Refinery Plc, UAC Foods Plc) that are actively involved in distribution channel practices for their range of products. PZ Cussons Nigeria Plc and Unilever Nigeria Plc control more than 70% of the market share for personal care and home care products in Nigeria while the other selected nine firms control more than 70% of the market share for food and beverage products in the country according to the Sub-Saharan African FMCGs sector report given by Vengasai and Matsika (2012). Some other firms classified as FMCGs sector players declined participation as a matter of their organisational policy. These eleven firms constituted the primary population of the study while the secondary/target population were the 592 employeesin the sales and marketing department of the selected firms in Lagos state, Nigeria.
1.7 Significance of the Study
In view of the conceptual, theoretical and empirical scope of this study, the research report is expected to be of immense usefulness to the stakeholders and players in the manufacturing industry in Nigeria and around the world. Existing consumer goods firms in Nigeria are expected to find the report of this study useful in view of the fact that, all the combined independent and dependent variables which were not well researched within the Nigerian context have been studied.
In addition, findings and report of this study are expected to benefit students, lecturers and researchers in the academic world and Nigeria in particular, as the content would serve as source of secondary data. It is also expected to influence future researchers to extend the study to other areas not covered by the researcher. Finally, business and marketing consultants would also find the report of this study useful as a source of information for providing services to their clients who may be interested either as manufacturers or intermediaries or other stakeholders.
- Historical Background of Selected Organizations
- PZ Cussons Nigeria Plc`
The association of PZ Cussons with Nigeria began in 1899 when two friends, George Paterson, a Scott, and George Zochonis, a Greek, who earlier started trading in Sierra Leone, decided to expand the business along the West African coast. The company was into the business of exporting palm products, ground-nuts, hide-skin and timber to Europe and importing European textiles and food stuffs. A new era started in 1948 when the company invested in the equity of a soap manufacturing company – P.B Nicholas & Company Limited in Aba. This became one of the company’s principal activities. In 1953, Mr. Nicholas sold his interest in the business with majority shareholding retained by the Zochonis family. During the period, Paterson Zochonis was incorporated in Nigeria as Alagbon Industries Limited which was changed in 1960 to Associated Industries Limited.
With growing confidence and an excellent distribution network, the company diversified again into new product categories. In 1973, the company commenced the manufacturing of detergent and domestic white goods by establishing more factories at Ilupeju for these new ventures. In 1982, it opened one of the largest detergent factories in Africa to meet the demand of the growing populace. In November, 2007, the name PZ Industries PLC was changed to PZ Cussons Nigeria PLC to align with the nomenclature of its international operations.
As a forward looking company, PZ Cussons completed its Project Unity in 2010 involving the construction of a massive world-class Detergents Spray Tower and State-of-the-Art distribution centre at Ikorodu; relocation and modernization of the Personal Care manufacturing facilities from Ilupeju to Ikorodu including the new addition of a talc sterilization plant and the upgrading of the soap manufacturing facilities at Aba factory.
The principal activities of the group are the manufacture, distribution and sale of wide range of consumer products under various brand names such as detergent, soap, cosmetics, medicaments, confectionery, refrigerators, freezers, air conditioners and home appliances throughout the country. The company has 25 depots, strategically located, and hundreds of distributors in all crannies of Nigeria.
1.8.2 Unilever Nigeria Plc
Unilever Nigeria is a member of the Unilever Group, one of the world’s leading consumer goods companies with food, home and personal care brands. Unilever Nigeria Plc was established in 1923 as a soap manufacturing company -West Africa Soap Companyby Lord Leverhulme. It later became known as Lever Brothers Nigeria. Today, it is the longest serving manufacturing organization in Nigeria.After a series of mergers and acquisitions, the Company diversified into manufacturing and marketing of foods and personal care products. These mergers and acquisitions brought in Lipton Nigeria Limited in 1985, Cheesebrough Industries Limited in 1988 and Unilever Nigeria Limited in 1996. The Company changed its name to Unilever Nigeria Pie. in 2001 in line with the global strategic direction ofthe business.
The Company was quoted on the Nigerian Stock Exchange in 1973 and is a truly Multi-local Multinational organisation with very outstanding international and local brands in her portfolio. The international brands include Close-Up toothpaste, Pepsodent toothpaste, LUX beauty soap, Lifebuoy soap, Rexona, Vaseline lotion and Vaseline Petroleum Jelly in the Personal Care Unit of the business; Blue Band Margarine, Lipton Yellow Label Tea and Knorr bouillon cubes in the Foods Unit; and OMO Multi-Active Detergent, Sunlight washing powder and Sunlight Dish washing liquid in the Home Care Unit. Other Regional and local jewels include the Pears Baby Products range and Royco bouillon cubes. The Company provides sources of income to tens of thousands of Nigerians who are shareholders, distributors, suppliers, service providers and employees.
- FrieslandCampina WAMCO Nigeria Plc
FrieslandCampina WAMCO Nigeria PLC has been in Nigeri since 1954 through its flagship brand, Peak Milk. The company was incorporated in April 1973 as West Africa Milk Company Nigeria (WAMCO) and commenced operations in 1975. It is an affiliate of Royal FrieslandCampina of The Netherlands, one of the largest dairy cooperatives in the world. Its headquarters is in the Ikeja industrial area of Lagos State and operates an extensive distribution network across Nigeria’s 36 states and the Federal Capital Territory.
The company has continued to play a leading role in the production, processing, packaging, marketing and distribution of various milk products in Nigeria, having its market share driven by her key brands, Peak, Three Crowns and Friso. It pioneered the manufacture of evaporated milk and the introduction of fortified milk based products in Nigeria.
- UAC of Nigeria Plc
UAC of Nigeria PLC (UAC) is a leading diversified Company, operating in the Food and Beverage, Real Estate, Paint and Logistics sectors of the economy. UAC has been a foremost and active participant in the Nigerian economic landscape since 1879.
UAC’s business portfolio includes the following Companies: UACN Property Development Company PLC (UPDC), the first Company in the real estate sector to be listed on the Nigerian Stock Exchange; UAC Foods Limited, the manufacturers of Gala Sausage Roll, Supreme Ice Cream and SWAN Natural Spring Water; MDS Logistics Limited, a foremost integrated logistics Company, with investments in pharmaceutical distribution hubs in key locations across the country; UAC Restaurants Limited with its chain of Mr. Bigg’s and Debonairs Pizza outlets; Grand Cereals Limited the manufacturers of Vital Poultry and Fish Feeds, Binggo Dog Food, Grand Maize Flour, Grand Cornflakes and Grand Soya Oil; Chemical and Allied Products PLC, leading its industry segment with Dulux Paint, Warm Spring Waters Nigeria Limited, manufacturers of “Gossy” Spring Water and UNICO CPFA Limited, a Closed Pension Funds Administrator.
- May & Baker Nigeria Plc
What is known today as May & Baker Nigeria Plc started in Nigeria as May & Baker (West Africa) Limited in Lagos Island in 1944 as a trading outpost for a United Kingdom firm founded to manufacture chemicals for pharmaceutical products in 1834.In 1976, it built its factory at Ikeja where it began local manufacturing of pharmaceuticals. That same year it changed from May & Baker (West Africa) Limited to May & Baker Nigeria Limited.
In 1979, following the indigenisation decree which required that foreign interests in companies operating in Nigeria be of a minority nature, May & Baker, United Kingdom relinquished 60 per cent of its equity holding in May & Baker Nigeria to Nigerians while retaining 40 per cent. May & Baker Nigeria Limited became a publicly quoted company following its listing by introduction on the Nigerian Stock Exchange on November 10, 1994 and became May & Baker Nigeria Plc.
The company began an aggressive expansion and diversification programme since 2005 which has culminated in the creation of new businesses and subsidiaries. In 2006, the company diversified into and constructed a multi-billion naira food processing factory, producing noodles, bottled water, etc along aside the range of pharmaceutical products it has been known for which are marketed and distributed across Nigeria.
- Honeywell Flour Mills Plc
The Company started as Gateway Honeywell Flour Mills Limited on June 21, 1983 and was incorporated for the production of flour and livestock feeds from wheat, sorghum, maize and millet. A change in the Company’s ownership structure led to a change in name to Honeywell Flour Mills Limited in June 1995. Following a successful IPO and subsequent listing on the Nigerian Stock Exchange in 2009, the Company became a publicly quoted Company as Honeywell Flour Mills Plc.
From a 200 metric tonne per day wheat mill capacity in 1995, the company grew into 2,610 metric tonne per day capacity as at July 2012. The company’s Flour brands since 1998 include Honeywell Superfine Flour; Honeywell Brown Flour; and Honeywell Composite Flour. The company has also launched several other brands into the Nigeria market such as: Honeywell Semolina in 2006; Honeywell Noodles in 2006; Honeywell Pasta (Spaghetti and Macaroni) and Honeywell Wheat Meal in 2009.The company has continued to invest in heavy marketing and sales support to develop and grow all its product categories and to make them acceptable to all consumer segments.
- Chi Limited
CHI Limited, incorporated in 1980, is a fast-moving consumer goods company that provides consumer products in the dairy, beverages and snacks sectors. The company is a part of the Tropical General Investment (TGI) conglomerate which has diverse business interests in food, healthcare, agriculture, engineering and other industries. Chi Limited has become a dominant player in the Juices, Nectars & Still drinks, Milk & Yoghurt Drink and Packaged snack foods sector of the Nigerian Economy.
CHI Limited has established footprints in urban and rural Nigeria with large number of depot operations across the nation.
The company is the first company to sell Evaporated milk in Tetra Pak as well as the first to own a Nectar brand in Nigeria. It was also the first to launch 750ml SKU Tetra Pak in Africa and has also pioneered the Tetra Pak’s Tetra Fino Packaging in West Africa for two of its brands- Chi Choco and Chi Sweetened milk. Its brand Capri-Sonne is said to be the largest selling children fruit juice drink in Nigeria, while Happy Hour is rated as the largest growing brand in West Africa.
In 2016, Tropical General Investment, which is the largest shareholders of Chi Limited, sold 40% of its stakes in the company to The Coca Cola World Wide Company.
- CWAY Nigeria Drinking Water Science and Technology Ltd
CWAY as a company was founded by Mr. OnestChe in Nigeria in the year 1999. ‘CWAY’ is an acronym of the first alphabet of the word ‘CHINA’ and the word ‘WAY’, namely ‘China Way’. Similarly, Mr. Onest who has been motivated, decided to bring the successful experience from Chinese reforms and liberal enterprise into developing countries in the form of Foreign Direct Investment to impact positively on local social welfare.
After 18 years of fast paced development, CWAY Group grew into a multinational enterprise operating 16 plants across Nigeria, Egypt, Kenya, India and China. Thirteen (13) of these plants are located in Nigeria between 1999 and 2004: Lagos, Ota, Ibadan, Kano, Kaduna, Abuja, Benin, and Port-Harcourt, with thousands of employees.
CWAY is undoubtedly the No.1 Brand in Nigeria market for 18.9 liter refilling water and dispenser machines. The company is currently the Nigeria’s largest and the most advanced Refilling Water Plant. Its daily sales stand at thousands of tons, contributing immensely to the healthy lifestyle of numerous Nigerians.
Others brands within CWAY group include fruit drinks (Peach/Apple) and Milk Drink (Nutri-Milk, Super-Kids).
- Seven-Up Bottling Company Plc
The Seven-Up bottling company Plc was founded in October 1960 as an off-shut of a transport business [El-Khalil Transport] founded in 1926 by a Lebanese Mohammed El-Khalil when he first visited Nigeria for the first time. The company was formed in a bid to diversify the then largest transport company in the entire West of Africa.
On October 1st 1960, the exact day our great country Nigeria won her independents, Nigerians also experienced the birth of a soft drink giant as the first bottle of 7Up rolled out from the company’s factory located in Ijora. Since then, the company continued to grow in leaps and bounds. In the late 80s, the established two more plants in Ibadan and Ikeja. In the early 1990s when Pepsi International took over 7Up international, it was great opportunities for the company to introduce the Pepsi brand to the Nigeria market.
Seven-Up bottling company is one of the largest independent manufacturer and distributor of the well-known and widely consumed brands of soft drinks in Nigeria. Presently, the company produce and market the following brands in Nine (9) manufacturing plants in Nigeria: Pepsi, 7UP, Mirinda, Teem and Mountain Dew.The company also markets its range of products through its over 200 distribution centres that are called depots spread over the nooks and crannies of Nigeria.
- Nigerian Bottling Company Plc
Nigerian Bottling Company Ltd (NBC) is incorporated in November 1951, as a subsidiary of the A.G. Leventis Group with the franchise to bottle and sell products of The Coca‑Cola Company in Nigeria. Two years later in 1953, the production of Coca‑Cola begins at a bottling facility in Ebute-Metta, Lagos State. In the same year the company opens its first bottling plant in Apapa.
NBC becomes a member of the newly formed Coca‑Cola Hellenic Bottling Company S.A. (an anchor bottling group with operations in 28 countries worldwide).
The first ultramodern fully automated NBC plant was commissioned in Benin in 2001. The company launches the Five Alive juice brand in 2003; PET packaging for its Sparkling Soft Drinks category in 2004; and 33Cl Can in 2007. NBC has also introduced the more environmentally friendly ‘Ultra’ glass packaging for its Returnable Glass Bottle product segments since 2008.Other brands in the company’s portfolio are Fanta, Sprite, Eva Water. The company celebrates 65 years of refreshing Nigerians in 2016.
- Dangote Sugar Refinery Plc
Dangote Sugar Refinery PLC commenced business in March 2000 as the sugar division of Dangote Industries Limited. The sugar-refining factory at Apapa port was commissioned in 2001 with an initial installed capacity to process 600,000 MT of raw sugar per annum.
The refinery has since undergone two expansions increasing the production capacity to about 1.44 million MT per annum, making it the largest sugar refinery in sub Saharan Africa and second largest in the world.
Dangote Sugar Refinery employs the talo-phosphatation and ion exchange resin technologies to purify sugar to internationally accepted quality standards. DSR sugar refinery is located in Lagos, at Nigeria’s largest port, the Apapa Wharf. Currently has over 70% of domestic market share.
DEVELOPMENT OF A PRODUCT DISTRIBUTION PROGRAM FOR AN ORGANISATION