Transcript No Slide Title

Together we win
Analysis Presentation
Summary for Rand Sherif
Romania Srl
Together we win
 The goal of Project “Together we win is to
improve the way of doing business in Nestlé
Romania with the following key objectives





Identify and analyse current Commercial Processes and
recommend improvements
Analyse the current Distributor Management, identify the
challenges and recommend solutions to improve coverage
and necessary route to market by channel
Analyse Product Portfolio and identify potential needs to
improve and adapt to the consumer/shopper and channel
needs
Analyse Trade Terms and Conditions, establishing
transparency about the customer and channel contribution
and recommendation of a Commercial Policy adapted to the
customers and channel needs
Review and optimise the Sales Area within Nestlé Romania,
including reviewing the current way of doing business
Nestlé Romania Srl
Slide 2
Together we win
 Considering the tight timelines we did not
cover the following areas

Analysis of Foodservice

Analysis of Nestlé Purina Petcare (if not linked with
route to market of Nestlé Romania)

Analysis of the activity of Medical Delegates
Nestlé Romania Srl
Slide 3
Together we win
 The tight timelines were only feasible because of
the excellent support from Interbrands and within
Nestlé. We would like to especially thank the
following people for their valuable support
Interbrands
•
•
•
•
•
•
•
•
Rand Sherif - General Manager of Interbrands
Anca Hîrtopeanu - Country Manager of Interbrands
Florentina Dobre - Budget and Reporting Manager
Mihaela Iancu - Budget Analyst
Gerald Gallagher - Logistic Manager
Andreea Calin
Dana Barbu
Ioana Pielescu
Nestlé Romania
•
•
•
•
•
•
•
•
•
•
Cristian Busu - National Sales Field Force Manager
Antonio Matei - Key Account Manager
Celina Mercone - Budget and Controlling Manager
Calin Cristescu - IT specialist
Stefan Alexandrescu
Alina Moldovan
Gabriela Benicky
Mariana Ardelean
Petre Manda
Cristina Besciu
Nestlé Romania Srl
Slide 4
Together we win
 We are now at the end of Phase 1 after the
first 2 1/2 weeks of the project...
Analysis
Recommendations
Implementation
Planning
Implementation
Provisional
Timing
Stages
Who is involved?
Analysis of the current
situation from a ‘neutral
perspective’
“Together we win” team works
independently gathering facts
from the organisation
Development of
recommendations for the
business
“Together we win” team + part
time local members work
together in Change
Management Teams (CMTs)
Documentation of Action
Plans and Project
Summaries
“Together we win” team plus
local CMT leaders (part time)
17 May to 22 May
The recommendations
become reality
- training, coaching,
changing habits
Project Implementation
Manager with part time
support of local CMTs
23 May …
Nestlé Romania Srl
4 April to 23 April
ending with a
presentation to and
commitment from the
Steering Committee
24 April to 16
May
ending with a
presentation to and
commitment from the
Steering Committee
Slide 5
Together we win
 For the analysis phase we have allocated our
resources into 5 sub teams for the last 12 days
Sales
Management
Trade
Investment
Distribution
Management
Product Mix
Business
Planning
Nestlé Romania Srl
• Analysis of the current Sales Force, including Field
Sales and KA Management
• Analysis of Sales Rep. territory management
• Customer Management
• Interactions and coordination between Sales and
other departments
• Roles and Responsibilities
• Establishment of customer and channel contribution
statements
• Analysis of current Trade Terms and Conditions
(Commercial Policy)
• Analysis of the process of TTS allocation
• Promotion analysis
• Analysis of the current distribution set up including a
gap analysis versus the current distribution coverage
• Branch management analysis
• Variety analysis
• Portfolio analysis
• Complexity cost analysis
• Review of current business planning process (MBS
and OPL planning including Category, Brand, Channel
and Customer)
Jérôme Puget
Calin Pop
Jacek Slota
Jaroslav Kollar
Alex Costa
Valentin Dumitru
Anuj Mathur
Cosmina Oprea
Cristian Cucos
Afrodita Blasius
Mircea Boboc
Slide 6
Together we win
 The purpose of today is to share our findings
with you
Analysis
Objective:
Build a fact-based picture of the current situation.
Understand the key opportunities for improvement.
Outcome:
Common understanding on what we will focus on in
the next phase.
Is NOT yet
to provide solutions to the problems / opportunities
identified.
Is NOT yet
intended to push decisions related to the Nestlé
Romania operation
It will often be the case that you or the organisation already know
about these findings - Our aim is more to build credibility than to
reveal the unknown
Nestlé Romania Srl
Slide 7
Together we win
 We have used a variety of tools to enable a
our analysis...
Vice President
Issue Analysis
Assistant Vice President
Culinary business unit
Senior Manager
Assistant Manager
Retail Business
Senior Brand Manager
Brand Manager
Retail Marketing
Retail Sales
Assistant Brand Manager
0% 10% 20% 30% 40% 50% 60% 70% 80%90% 100%
Percentage of Group
Structures
Profiles
People
AVA
SFAA
(Added Value Analysis)
(Sales Force Activity Analysis)
Mapping
Process
Travelling (excl between home / work)
Various administrative tasks (filing, translations, etc.)
Information
Ownership (ARCI)
Coordinate, prepare and attend internal meetings
Visits to trade, store checks, branch, factory
Trade Spend
I
A
C
Systems
C
R
R
Customers
Portfolio
Review
Interviews
Meetings and communication with agency
Attend Nestlé training courses
Monitor sales performance of accounts and territories
Reading trade articles, magazines and press
PNS
Develop and train direct reports
Meetings with Nestle Sales Team
Prepare for and attend sales conferences
7-11
Monitor performance of products
Wellcome
Develop promotional material
Plan consumer promotion programs
Develop new product development briefs
CRC
CK
Attend tastings
Develop product specifications (packaging, recipes)
GD(KK)
Meetings with top management (division, market, centre)
Prepare new product business and project plan
Nestlé Romania Srl
Slide 8
 …which has been thorough and
Together we win
comprehensive
No. Completed
Individual
Interviews
Group
Discussions
Activity Analysis

Internal interviews
38

External Interviews
20

Internal group discussions
6

23

Added Value Activity Analysis (Nestlé
employees in head office)
Added Value Activity Analysis
(Sales people at Interbrands)
Sales Force Activity Analysis

Scorecards (ARCI)
24

Entity File Nestlé
585
79

Entity File Interbrands
225

Workshops (PPO, Trade Inv., IBP)
4

Branch observations
4

Customer contribution statements
83

Additional various
Source: Project Together we win
Nestlé Romania Srl
20
63
= 1304
calls!
Slide 9
Together we win
Distributor
Management
Romania Srl
Together we win
 Some key findings for the Distribution
Management Area







Inefficient DC set up
No essential KPIs in place like e.g. customer service, out
of stock etc.
100% of our sales go through Interbrands with a fix gross
margin of 20% and no financial risks for IBR
Lack of clear distribution strategy and responsibilities /
procedures
Branches are not analysed as independent distribution
set ups
Insufficient coverage of impulse products, especially for
foodstores and kiosks
No activity based cost allocation from Interbrands to
Nestlé
Source: Project Together we win interviews and analysis
Nestlé Romania Srl
Slide 11
Together we win
 We are paying a flat 20% on our sales to our national
distributor, however we have not come across any
KPI’s suggesting a break-up of the commission by
activity / expenses type
2.27%
Other Indirect Expenses
0.14%
Net Financial Cost
0.54%
Prof. Expenses
1.22%
Other Expenses
1.87%
Logistics
0.33%
Dep. Assets
2.55%
Cars & Vans
0.30%
Travels
4.70%
Salaries
Discount
5.80%
0.00% 2.00% 4.00% 6.00% 8.00%
Source: IBR P&L for Nestle Division (Jan-Feb’03 YTD)
Nestlé Romania Srl
Slide 12
Together we win
 Our first step was to analyse the coverage of
the Nestlé products
Gap Analysis Vs
Nielsen Universe
Branch Profitability
Analysis
DC Management
Branch logistics set-up
& operations
Nestlé Romania Srl
Slide 13
Together we win
 For our distribution drivers like Nescafé sticks, Seasoning and
Wafers, the food stores and kiosks are very important for our
coverage - based on AC Nielsen data however, we are only
directly covering 51 % of the overall Food & General stores.
Nestle coverage Vs ACN universe
69,505
COUNTRY
100%
100%
36 % Nestle direct
coverage Vs. ACN
universe
90%
80%
24,929
17,220
5,859
VALAHIA
13,646
6,498
TRANSILVANIA
51%
60%
37%
On Nestle and BAT estimation
20% only 1,000 from 6,300
Petrol Stations can carry
Food products
36%
5%
8,851
ACN
3,562 40%
NESTLE
BANAT
CRISANA
0%
C&C
HYP & SM & FOOD &
MM
GENERAL
KIOSK &
OPEN
MARKET
PETROL
STATIONS
OTHERS
48%
11,868
26%
3,052
BUCURESTI
3%
34%
17,920
33%
5,958
MOLDOVA
40%
36%
TOTAL
0
20,00040,00060,00080,000
Source ACN & IBR
Nestlé Romania Srl
Slide 14
Together we win
 Across 2/3rd of Romania, less than 50% of the outlets are
DIRECTLY covered by Nestle - especially low in the Eastern
and South Eastern region with the highest population
density
% Nestle direct coverage
Vs. AC Nielsen Universe
80-100%
50-70%
40-50%
30-40%
20-30%
Source ACN & IBR
Nestlé Romania Srl
Slide 15
Together we win
 Our second step was to analyse the branch
profitability
Gap Analysis Vs
Nielsen Universe
Branch Profitability
Analysis
DC Management
Branch logistics set-up
& operations
Nestlé Romania Srl
Slide 16
Together we win
 IBR provided us with Branch specific DIRECT
costs (without their Head Office and other indirect
expenses) to analyze infrastructure / break even.

IBR forwarded us information by Branch for the
Jan-Sep’02 period.

Analysis of this period’s data reveals most IBR
Branches did not reach the “break-even” as
sales : efficiency ratio was not achieved.

Manpower / Fleet accounted for nearly 80% of
the total direct branch operating expenses.
Source: IBR Branch info. for Jan-Sep’02
Nestlé Romania Srl
Slide 17
Together we win
 Nearly 365 non-sales staff at IBR Branches in
2002 existed and were allocated to our P&L for the
Mass and Petcare division without having a clear
understanding on how many were really required
to do the job.

Nestle operated through a dedicated set-up through
30 IBR Branches.
In Full Time Equivalents:
VSR
TOTAL
Other
PC
Logistics Branch
PreOperaStore
Delivery Delivery FuncSuperseller ASS tors
Cashiers Keepers Preseller Drivers tions
visor
Total
41
76
18 68.44
30.32
45.35
54
25.28
119.22
2 480.61
Source: IBR Branch info for Sep’02 for Mass and NPP
Nestlé Romania Srl
Slide 18
Together we win
 Payroll & vans accounted for nearly 80% of
the Total Expenses.
Breakdown of Total Expenses
7% 2%
Expenses as % of Net Sales
Jan-Sep’02:
12%
2%
47%
0%
1%
2%
0%
5%
0%
8%
29%
0%
1%
Payroll
Travel
Vans
Dep. Assets
Logistics
5%
Other Expenses
10%
Prof. Exp.
Source: IBR Branch info. for Jan-Sep’02
Nestlé Romania Srl
Slide 19
Together we win
 Steps were initiated in July 2002 to improve
the profitability of IBR without specific
emphasis on either ...

The long term coverage perspective

Impact on Nestle distribution coverage and
sales (coverage sank drastically after change)
SHARED coverage division formed to jointly distribute
products with P&G, Gillette, Kotanyi, Flit with a view to...

Improve profitability of the IBR Branches.

Primarily service the low end of the trade.
Nestlé Romania Srl
Slide 20
Together we win
 The set-up definitely improved profitability of IBR but it hasn’t
brought us closer to achieving the coverage objectives that
will provide us an edge in the market
Mainly personnel costs / van
expenses have resulted in
higher profitability.
26 IBR
Pre - July ‘02
NESTLE
Division
Branches
SHARED
Division
MASS Division
Branches
Nestle exclusive: Bigger retailers
including Key Accounts
VSR
'03-'02
30 IBR
-29
PreASS
Seller
-6
28 IBR
Branches
Shared along with other
companies: Smaller retailers.
PC
Cashi Store Delive Delive Other Branc Total
Opera ers
Keepe ry
ry
Logist h
tors
rs
PreDriver ics
Super
seller
Functi visor
ons
-3 -11.38
-2.16
-4.75
26 -21.43 17.49
-2 -36.23
Source: IBR Branch Head count info. for Jan-Sep’02/Jan-Feb’03
Nestlé Romania Srl
Slide 21
Together we win
 Creation of the SHARED division has helped
most branches reach the “break-even”
(considering impact of DIRECT expenses only)

4 Branches closed (Buzau, R. Valcea, Slobozia, Tulcea).
Jan-Feb ‘03 : Break-even analysis across Branches
2790
2411
2500
2000
1500
414
Source: IBR Branch P&L Jan-Feb’03
Net
Margin
0
Net Sales
500
291
Total
Expenses
1000
Gross
Sales
Avg. Sales/Month (Jan-Sep’02)
3000
Net Margin = Gross Sales X 20% - (Gross-Net) Sales
Nestlé Romania Srl
Slide 22
Together we win
 The third step was to analyse the current DC
approach
Gap Analysis Vs
Nielsen Universe
Branch Profitability
Analysis
DC Management
Branch logistics set-up
& operations
Nestlé Romania Srl
Slide 23
Together we win
 Route to market - the long and winding
road
Bucharest
InterCompany
Welz
IBR DC
- > 2000 pall spots
22,500
outlets
- 1850 pall spots
- 23 factories, in 13
countries
50 trucks /mth
26 branches
Timisoara
80 trucks /mth
- 5200 pall spots
Nestle
ownership
IBR
ownership
Source: Supply Chain
Nestlé Romania Srl
Slide 24
Together we win
 IBR DC costs are high and not transparent as we only
receive a total amount without tracking the DC costs
separately
[Based on OP 2003 volumes]
IBR DC
[eur/month]
# pall
STORAGE
Petfood
Nestlé
HANDLING
Petfood
Nestlé
750
1,000
1,255
1,414
eur/pal
TOTAL
Total IBR
7.1
7.1
1.3
1.3
TOTAL DC
12,500
5,357
7,143
37,731
19,470
18,261
3,500
1,646
1,854
16,544
7,876
8,668
16,000
54,274
Benchmark: < 5 eur/pall
(handling + storage)

IBR DC - relatively fixed costs, same infrastructure could cope with
a higher volume

IBR DC cost - not tracked separately
Source: Supply Chain and IBR
Nestlé Romania Srl
Slide 25
Together we win
 And finally we looked at the branch
management
Gap Analysis Vs
Nielsen Universe
Branch Profitability
Analysis
DC Management
Branch logistics set-up
& operations
Nestlé Romania Srl
Slide 26
Together we win
 Branch Operations Supervisor, shared

among principals, is the key logistic person
in a branch...
Key responsibilities

supervise daily activities (warehouse, office)

reporting to IBR head office

control banking transactions

safety & security

implement procedures coming from IBR head office

recruitment (warehouse staff), performance evaluation

main branch contact for Principals

maintenance, office administration
Limited decision making, mainly supervisory
& administrative tasks
Source: job description; branch visits
Nestlé Romania Srl
Slide 27
Together we win
 No overall responsibility for branches
management
Sales force (IBR + Nestlé)
Area Sales Mgr (*) / KAM
(Nestlé)
Operations staff
Branch Operations
Supervisor (IBR)
Area Operations Mgr (IBR)
Nestlé Sales Mgmt
Logistics Mgr (IBR)
Distributor Operations Team interface between Nestlé and IBR
(*) except for shared divisions
Source: job description; branch visits
Nestlé Romania Srl
Slide 28
Together we win
 High number of sku’s, and warehouses’
layout leads to relatively high space needs
MAIN
Bucuresti
Bacau
Baia Mare
Braila
Brasov
Cluj
Constanta
Craiova
Deva
Iasi
Oradea
Pitesti
Ploiesti
Sibiu
Suceava
Tg. Mures
Timisoara
pall
spots
needs
pall
spots
avail.
900
187
155
223
312
259
248
178
89
253
164
159
236
154
112
181
300
959
290
185
185
330
360
285
204
100
265
171
146
240
294
130
181
283
sqm
2300
576
374
371
594
780
608
332
155
463
306
231
489
548
217
307
624
Branches whs. cost/mth [eur]
Max capacity [pallets]
Storage cost [eur/pall]
needs
vs.
avail.
94%
64%
84%
121%
95%
72%
87%
87%
89%
95%
96%
109%
98%
52%
86%
100%
106%
42,644
5,195
8.2
capacity
utilization
42%
50%
49%
50%
56%
46%
47%
61%
65%
57%
56%
63%
49%
54%
60%
59%
45%
MINI
Alba Iulia
Arad
Bistrita
Focsani
M Ciuc
Resita
Satu Mare
Tg Jiu
Tr Severin
TOTAL
pall
spots
needs
pall
spots
avail.
50
68
52
74
54
35
62
31
34
4,570
7.7% of 2002
IBR expenses,
or 1.5% out of
With
few
20%margin
exceptions,
Despite
low rent per sqm,
available
storage cost per pallet
space
fits
is significant
our needs
50
63
70
100
97
48
70
44
45
5,195
needs
capacity
vs.
utilization
avail.
sqm
113
139
132
252
233
128
157
134
84
10,647
100%
108%
74%
74%
56%
73%
89%
70%
76%
44%
45%
53%
40%
42%
38%
45%
33%
54%
88%
49%
Needs = 1
avg. mth of
sales, to cope
with peaks,
except Buch
and Timi (3
weeks)
Source: IBR P&L 2002; branch data
Nestlé Romania Srl
Slide 29
Together we win
 Some of the inefficiencies are
generated by us

Almost 600,000 stickers to be put monthly (promotions not
included), in order to comply with legal regulations, workload
equivalent of 10 full time employees

All sku’s stocked in all branches (*), while on some (infant, imported
confectionery) sales can be below 10 units/month!
[2002 sales in units]
Bacau
PIURE-LEGUME CU PUI 125G
PIURE-LEGUME CU SUNCA 125G
PIURE-CARTOFI CU CARNE 125G
(*) exception infant
specialties, only in
branches with Pharma
division
Source: IBR
Jan
41
6
11
Feb
Mar
Apr
May
Jun
1
11
27
1
75
11
19
8
6
37
2
-
27
6
6
Deva
NESTLE - GRAU CU 3 FRUCTE SI LAPTE 250G
52
NESTLE - OREZ 200G
58
NESTLE - OREZ CU 3 FRUCTE 200G
59
NESTLE - GRAU CU MIERE 200G
40
AFTER EIGHT 200G
4
59
61
72
64
34
38
42
50
34
18
53
45
43
37
9
54
61
54
39
10
30
41
54
38
Tg. Mures
SUC BANANA,PORTOCALA 200G
SUC MAR SI STRUGURE 200G
SUC MAR 200G
AFTER EIGHT 200G
6
2
8
16
3
5
1
2
10
10
7
4
15
10
14
9
Nestlé Romania Srl
21
19
18
15
7
1
3
Slide 30
Together we win
 Lack of measurement and control
at branch level

No customer service measurement (to start in April)

No tracking of missed orders, just a statistical calculation
of out of stock

No performance measurement

FIFO not consistently applied

Branch performance depends on Branch Operations
Supervisor capability rather than on system efficiency

Lack of consistent work processes and central
coordination

Poor quality of co-packing activities

Limited training for Operations staff

Unclear cost allocation (ex. wrapping machines)
Source: IBR, Field visits
Nestlé Romania Srl
Slide 31
Together we win
Sales Force Analysis
Romania Srl
Together we win
 Key findings from Sales team

Territory Management is not adapted to customers type and
potential

High amount of administration time for Sales Representatives

No consistent incentive scheme

Substantial overlap of customers between Shared and Mass
division

No Nestlé orders for 1/3 of all customers visited by Shared division
Source: Project Together we win interviews and analysis
Nestlé Romania Srl
Slide 33
Together we win
 We conducted a Sales Force Activity
Analysis across our 3 Divisions
Sales Force
Activity Analysis
Territory
Management
Nestlé Romania Srl
Slide 34
Together we win
 Our study covered 1304 calls performed
over 2 weeks
Sales Force Activity Analysis (SFAA) is a systematic observation and analysis
of the daily activity of our sales people.
S C O P E OF THE STUDY
Sample Size
• 63 observations representing 31% of
the total Field Sales
Reps
• 1304 outlets visited
Divisions
• Mass Division
• Shared Division
• Pharma Division
Functions
•
•
•
•
•
Nestlé Romania Srl
17 Branches
in 7 Regions
Brasov, Ploiesti, Pitesti,
Alexandria, Slobozia,
Suceava, Targu Mures,
Bacau, Constanta,
Tg. Jiu, Bucuresti, Iasi,
Timisoara, Oradea,
Craiova, Cluj, Arad
7 KAE
23 Mass PSR
4 Mass VSR
24 Shared VSR
5 Pharma VSR
Slide 35
Together we win
 The number of visits per day varied across
the types of Sales Reps
Number of Visits / Day
KAE
PSR perform
only 8% more calls
than VSR
10
MPSR
26
MVSR
22
SVSR
PVSR
22
Equal for VSR
in Mass & Shared
Divisions
16
Source: SFAA
Nestlé Romania Srl
Slide 36
Together we win
 Overall, 83% of the Sales Reps did not visit
In 75% of observation,
at least 1 customer
was visited twice, to
collect money
the same amount of outlets as they
planned at the beginning of the day
% of Reps who did not follow
the # of visits planned for the day
Measuring only
successful calls, we
do not have a consistent
tracking of this
67%
KAE
MPSR
82%
MVSR
67%
SVSR
92%
PVSR
80%
0%
Nestlé Romania Srl
20%
40%
60%
80%
100%
Slide 37
Together we win
 The Hand Held Computer was used in 81%
of the calls
The hand Held computer
is used only to take orders,
which explains the lower
usage by KAE
100%
91%
90%
A decision
maker is met in
85% of the calls
84%
81%
80%
90%
89%
80%
81%
73%
73%
70%
60%
50%
40%
37%
30%
20%
19%
21%
24%
19%
22%
10%
0%
KAE
Source: SFAA
Nestlé Romania Srl
MPSR
Use customer file
Talk to decision maker
MVSR
SVSR
PVSR
Use a Hand Held Computer
Slide 38
Together we win
 Our 7 day credit policy generates a high
frequency of visits in all the types of outlets
and limits our potential coverage
6.2 on
average
# Days since
last visit
Every store
is on the route
plan each week
# Days since
last visit
9.0
4.3
KAE
5.7
6.7
5.8
6.7
4.1
MPSR MVSR
PVSR
4.8
5.1
5.6
10
6.8
6.9
7.1
5.7
SVSR
Source: SFAA
Nestlé Romania Srl
Slide 39
Together we win
 From our snapshot, Sales Reps on average
spend 5 hours in-store per day
Total Time Allocation
Breaks
24 m
Reps go
to branch every
morning and
evening
More than 2
hours in
Admin.
Private
Travel
40 m
Working
Travel
4h
Admin
Time
2h14 m
100%
26
34
90%
80%
198
70%
34
43
230
23
55
14
31
18
39
245
241
271
138
129
287
353
PVSR
SVSR
60%
50%
126
127
141
40%
30%
Reps spend
on average
41% of their
time in store
Source: SFAA
Nestlé Romania Srl
In store
Time
5h12 m
20%
304
267
371
10%
0%
KAE
MPSR
MVSR
Slide 40
Together we win
 Invoices Payment, briefings and truck
loading (for VSRs) are the main
components of the “administrative” time
% of total Administrative time
Function Observed
Data
KAE
MPSR
MVSR
PVSR
SVSR
Grand Total
Average of Payemt invoices
6%
22%
24%
26%
22%
21%
Average of Filling return goods forms
0%
0%
0%
7%
1%
1%
Average of Handling custom queries
11%
8%
8%
5%
3%
6%
Average of Day planning
6%
9%
6%
6%
7%
8%
Average of Establish Calls Objectives
8%
10%
3%
6%
6%
7%
Average of Review/ Record Call achievements
8%
8%
3%
7%
6%
7%
Average of Briefing from supervisor
10%
17%
7%
6%
11%
12%
Average of Discussions/meetings/phones
4%
6%
4%
3%
5%
5%
Average of e-mail& other correspondence
6%
1%
2%
1%
1%
2%
Average of Order transmission
5%
4%
18%
1%
3%
4%
Average of Truck unloading/loading in branch
0%
0%
8%
13%
22%
10%
Average of Stock Management in branch
0%
1%
4%
2%
2%
2%
Average of Truck maintenance
0%
0%
2%
8%
9%
4%
Average of Admin. work at home
35%
10%
0%
6%
2%
8%
Average of Others
2%
3%
10%
4%
0%
2%
Source: SFAA
Nestlé Romania Srl
Slide 41
Together we win
 The MPSR’s show the most balanced time
allocation between order taking and
merchandising / display activities
100%
% of Other Tasks
90%
% of Preparing delivery &
delivering Total
% of Checking stock storage /
Warehouse Total
80%
70%
% of Checking stock shelves
Total
60%
% of Managing shelf-displays
Total
50%
% of Managing shelf-NON
displays Total
25%
2%
10%
6%
6%
9%
40%
% of Money collection Total
30%
% of Order taking Total
Merchandising &
display activities 24%
9% on collecting money,
although this activity is in theory
handled by delivery drivers
33%
20%
% of Hard selling Total
10%
8%
0%
Source: SFAA
Nestlé Romania Srl
MPSR
Slide 42
Together we win
 SVSR spend more time on order taking &
money collection than MVSR, at the
expense of display
SVSR spend
no time on
products visibility
100%
12%
90%
5%
80%
Stronger focus
on money collection
in the Shared Division
12%
70%
60%
50%
3%
3%
6%
5%
21%
5%
5%
13%
6%
2%
1%
9%
3%
12%
19%
% of Other Tasks
% of Managing shelf-NON
displays Total
% of Managing shelf-displays
Total
% of Checking stock storage /
Warehouse Total
24%
24%
40%
Handling orders
for several principles
% of Checking stock shelves
Total
% of Hard selling Total
30%
% of Money collection Total
20%
40%
40%
29%
% of Order taking Total
10%
0%
Source: SFAA
Nestlé Romania Srl
% of Preparing delivery &
delivering Total
MVSR
SVSR
PVSR
Slide 43
Together we win
 In 32% of their calls, SVSR spend 0 time on
Nestlé products
% of calls with 0 time spent on ...
Even higher
for PVSR
51%
38%
Better result for
P&G
44%
32%
SVSR
25%
20%
0 Time Nestlé
0 Time P&G
PVSR
0 Time Gillette
Source: SFAA
Nestlé Romania Srl
Slide 44
Together we win
 Time spent on Nestlé products by Shared
Reps is not proportional to our share of
the fixed costs
Probably increased
by the presence of a
Nestlé observer
In Store Time
per Principles
8%
13%
The time spent
on Nestlé is
proportionally
higher than our
share of fixed
costs (24.2%)
13%
4%
14%
31%
22%
Shared VSR
dedicate an
average of 5
minutes per call
to Nestlé
4 min. for PVSR
Waiting & Pleasantries
Other
Kotany
Gillette
Nestlé
P&G
Source: SFAA / IBR data 2003
Nestlé Romania Srl
46%
47%
SVSR
PVSR
In pharma, we
pay 30.4% of the
fixed costs
Slide 45
Together we win
 The Nestlé success rate of calls is low
across Mass and Shared division
% Successful calls per principle
For Nestlé, success rate
is 23% lower with SVSR
vs. MVSR or MPSR
63%
SVSR: 71.5 %
70%
in total
SVSR: 70 %
in total
63%
56%
56%
53%
48%
Nestlé
P&G
Gillette
27%
Source: SFAA
Nestlé Romania Srl
MPSR
MVSR
SVSR
PVSR
Slide 46
Together we win
 Shared VSRs sell on average 2.3 Nestlé
SKUs per call
Average Number of SKUs Sold Per Call
7.8
MVSR sell on
average 2.8 more
Nestlé SKUs than
SVSR per call...
…but the same
average # of SKUs
for P&G
7
6.5
6.4
2.3
2
2
1
PVSR
MPSR MVSR
SVSR
Nesté
P&G
Gillette
Source: SFAA
Nestlé Romania Srl
Taking into account all visits, with or without order
Slide 47
Together we win
 Orders generated by Shared Sales reps
include a limited number of SKUs
The shared division SVSRs
have made their own ranking:
26.3
In top 5 SKUs:

68% indicated bulk wafers

11% indicated Nescafé
Sachet
Although the
outlets covered are
able to hold a wider
portfolio for
P&G
Nestlé
P&G
12.2
Gillette
11.3
10.4
10.1
Average Nestlé
9.3 SKUs
4.7
KAE
Nestlé Romania Srl
MPSR
MVSR
3.8
SVSR
3.6
3.7
PVSR
Slide 48
Together we win
 We have also analysed our territory
management approach
Sales Force
Activity Analysis
Territory
Management
Nestlé Romania Srl
Slide 49
Together we win
 Average turnover by salesman type is
unbalanced due to the customers size on
their portfolio
Monthly average sales value by
salesman type Q1 2003 (Rol mio)
174.
Very low average
for shared VSR.
94.
432.
2,560.
Pharma
589.
Mass VSR
Mass PSR
KAE
Shared
Sales areas are still
unbalanced even
within each sales
division.
Minimum and Maximum sales value by salesman type Q1 (monthly tarcking)
Branch
Min
Max
Value (Rol mio)
# cust
Value (Rol mio)
# cust
KAE
1,024
29
7095
15
PSR
242
107
1228
113
VSR
283
112
599
114
VSR Shared *
51
108
600
109
Pharma *
75
72
352
92
Source: IBR Database
Nestlé Romania Srl
Slide 50
Together we win
 We have a major coverage overlap
between the Mass and Shared divisions
30% of Mass customers
universe & 36% of Shared
customers universe
The exact number
is not yet available

Approximately 3,000 customers (*) are visited by both
Mass and Shared divisions

Pharma division is not overlapping with others due to
their specialized customers
(*) In coming weeks, a database alignment will be done, for automatisation purposes.
Manual analyses will be done in the meantime, at the branch level.
Source: IBR Database
Nestlé Romania Srl
Slide 51
Together we win
 VSRs & PSRs have the same theoretical
base for territory coverage split & visit
frequency

Territory coverage takes into consideration driving time
(all PSR, VSR have areas in and out of the cities)

Territory coverage is built on a weekly coverage base for
VSRs & PSRs, due to some constraints:
Visit frequency is
not linked to customer
potential and order
frequency

commercial policy: 7 day credit

low level of available cash/out of stocks

easy to measure/check

initiatives execution (i.e. new product launch, price
increases)
Source: Sales management
Nestlé Romania Srl
Slide 52
Together we win
 We have no formal tracking of the number
of actual visits made by our sales reps for
VSR and PSR

We only measure successful calls in our system

At branch level, ASS check which customers have been
visited on a daily basis

If a customer does not order, we have no way to know if
he has been visited or not, if he has no potential or a
specific reason

We do not have a consistent use of the customers’
history
Source: Sales management
Nestlé Romania Srl
Slide 53
Together we win
 Only 50% of the customers of Mass division
were invoiced in each of the 3 months of Q1
Common customers
represents 83% out of the
total turnover of Mass Division

+ 3000 customers were
customers invoiced only
once per Q1

+ 3000 customers were
invoiced in 2 different
months of Q1
Source: IBR Database
Nestlé Romania Srl
All are
visited on weekly
basis
Total customers per Q1
Cust size
KAE
PSR
VSR Grand Total
A
260
805
35
1100
B
190
7308
547
8045
C
43
1748
202
1993
D
33
1876
288
2197
Grand Total
526
11737
1072
13335
Common customers on monthly base Q1
Cust size
KAE
PSR
VSR Grand Total
A
88.8%
81.1%
82.9%
83.0%
B
39.5%
67.9%
54.5%
66.3%
C
11.6%
22.4%
17.3%
21.6%
D
0.0%
2.5%
2.4%
2.4%
Grand Total
59.1%
51.6%
34.4%
50.5%
Slide 54
Together we win
 In Shared division only 34% of the
customers are working on a monthly basis
with us
Lowest level of stability in
coverage is coming from
the smallest customers.
Most constant ones are
B customers.
Common customers
accounts for 66% of the sales of
the division’s
Nestle turnover
Common customers during Q1 2003 - Shared division
Total
customers
A
B
C
D
Total
15
2867
3348
5228
11549
Common
customer each
month
47%
56%
41%
18%
34%
Working 2
months
Working 1
month
13%
22%
28%
28%
26%
40%
22%
31%
54%
39%
Source: IBR Database
Nestlé Romania Srl
Slide 55
Together we win
Trade Investment
Romania Srl
Together we win
 Some key findings for the Trade Investment
Area

Very strict and transparent commercial policy not adapted to channel needs

Shift from performance to non-performance caused by International Key
Accounts

No activity based allocation of cost to serve (selling and distribution
expenses)
Source: Project Together we win interviews and analysis
Nestlé Romania Srl
Slide 57
 We did a comprehensive review of the drivers
Together we win
behind current performance and transparency
across Cost to Serve
Groundwork
 Establishment groundwork
 Cost to Serve
Cost to Serve Analysis
 General View of all channels
Commercial Policy
Analysis
Nestlé Romania Srl
 Nestlé and Competitors Commercial Policy Analysis
 Bad goods / Delayed Payments
Slide 58
 We are covering a significant part of the
Together we win
business split in the channels as below:
The information for the CCS
is collected from
direct and
indirect sources (through IBR)
Carrefour
1,1%
Mega
Billa
1,2%
2,5%
+ 12 Customers
2,6%
26 Customers
0,5%
5 Customers
0,02%
18 Customers
0,5%
6%
16%
Selgros
2.4%
Metro
14%
25%
7%
4%
RomGros
0,1%
4 Customers
2,3%
3 Customers
1%
Hyper and Super
8%
Food and G. Stores
32%
1%
Kioks and OM
Indirect
(IBR)
GPS/CCS
in % of GPS
Petrol Station
Nestlé
Customers - CCS
C&C
Wholesalers
Subdistributors
Pharma
9 Customers
Source: Market / Not included Pet Food,
FoodServices and others / Kiosks and Open
Markets included Retail Division - 2002
Nestlé Romania Srl
Sales Covered by CCS
0.3
29%
Slide 59
 The channels that we are covering are split
Together we win
as below...
2002 - in % GPS
Pharma
4%
Cash & Carry
16%
Others
1%
Hypermarket and
Super Market
8%
Food, General
Stores and Mini
Market
32%
Wholesalers
25%
Petrol Station
1%
Subdistributiors
7%
Kioks and Open
Markets
6%
Source: Market / Not included Pet Food and FoodService/ Kiosks and Open Markets include Retail Division - 2002
Nestlé Romania Srl
Slide 60
Together we win
 It is very hard to get the numbers because
they come from different sources
The information of IBR is not activity based costing but on reliable
estimations and checked by our project team that utilised some
tools like: SFAA, Time allocation, Interviews ...
Nestlé
IBR
Customer Consumer
Source: Market
Nestlé Romania Srl
Slide 61
Together we win
 The CCS data was collected from 8 sources
(not only Nestlé)
Source
CUSTOMER CONTRIBUTION STATEMENT
IBR
(WIZ)
Nezoom
Time
Allocation
Spreadsheet
SFAA
Customer
Agreements
Employees
Cost
Spreadsheet
PPO
Spreadsheet
COGS System
and
Spreadsheet
GROSS PROCEED OF SALES
./. General Price Reduction
NET PROCCED OF SALES
./. Performance Trade Expenses
Space
Trade Promotional Activities
Specific Target Incentives
Non Performance Trade Expences
Ad-Hoc Expenses
On-Going Expences
Cash Discount (Settlement Discount)
Total Deals, Allowances and Payment
REVENUE AFTER TRADE FUNDS
Bad Debts
Bad Goods (Sales accountability)
GROSS CUSTOMER CONTRIBUTION
./. Other direct Customer related Expenses and Allowances
Distribution Costs Allowances & Expenses
Distribution Costs
Distribution Allowances
Selling Expences
KAM Team / Trade Marketing
Field Sales Force
Cost of other Selling Activities
Commissions to Agents / Sales Persons
Merchandising Expenses and / or Allowances
Cost of Sales Support Fixed Assets
Cost of Credit
Product Customisation Costs
CUSTOMER CONTRIBUTION
./. Variable Cost of Good Sold
NET CUSTOMER CONTRIBUTION
Source: Analysis of Trade Investment Team
Nestlé Romania Srl
Slide 62
Together we win
 The TTS and Cost to Serve not goes only
from IBR to the customer but also from
Nestlé
6.7 % not
directly
attributable
Nestlé
IBR
(100% Sales)
20% Gross
Margin
of the
Nestlé Sales
5.2 % TTS
Customer
8.1 % CTS
Nestlé
X% TTS
Nestlé
X% CTS
Source: Interview/Finance/IBR/Trade Investment Team Analysis/All Nestlé Business Included
Nestlé Romania Srl
Slide 63
Together we win
 Interviews and workshop were conducted to
clarify TTS in the CCS
The workshop
brings
transparency,
shifting some
figures from
Performance to
Non-Performance
Through the
contract analysis
and Workshop we
defined the
Performance and
Non-Performance
Source: Workshop with National Sales Manager and 1 Key Account
Nestlé Romania Srl
Slide 64
Together we win
 Cost to serve was difficult to analyse as there is no
activity based costing in place
Groundwork
Cost to Serve Analysis
Commercial Policy
Analysis
Nestlé Romania Srl
 Establishment groundwork
 Cost to Serve
 General View of all channels
 Nestlé and Competitors Commercial Policy Analysis
 Bad goods / Delayed Payments
Slide 65
Together we win
 Distribution costs - Allocation the right cost per
customer and channel is of paramount importance to
get a clear cost transparency in all areas

Current situation:
No Activity Based Costing in place

Action taken for Trade Investment:
We assessed the distribution cost by customer through an excel database
based on the information by IBR.

Impact on Trade Investment:
Decisions should not be based on numbers below Net Contribution
Source: Market
Nestlé Romania Srl
Slide 66
Together we win
 We (Nestlé and IBR) used some criterias to split
the Distribution Cost as drops and SFAA
We access the IBR P&L and split the distribution cost
according to the some key parameters.
Number of drops and time spend in each channel.
Time spend with the
customer/channel
Managing
damage/good returns
Source: Trade Investment Team/SFAA
Nestlé Romania Srl
Number of drops - We
took the number of
invoices by customers by
day and considered just it
as one drop when there
were more than one
invoice (to eliminate the
coffee-double invoicing
impact).
Time Spend - We
collected from time spend
by channel through the
SFFA and applied it to the
Distribution Cost
Slide 67
Together we win
 Selling expenses - we tried to identify the real
selling expenses by customer using a template we
did for Nestlé Romania and the SFAA

Current situation:
- No Activity Based Costing

Action taken:
- Template for KAM & Sales
Administrative time allocation (69
people)
Channel
Customers
Cristian Busu Costel Burcea Cristian Cucos
NFSM
PCM
DOM
8%
0%
10.0%
2%
0%
3.0%
1%
0%
0.4%
Mega
0%
0.4%
Carrefour
0%
0.4%
0%
0.3%
0%
0.3%
Hypermarket and Super Market (All customers)
Hypermarket and Super Market
Billa Romania
Gimrom
0%
La Fourmi
0%
0.3%
Alfa Beta
0%
0%
0.3%
Univers
0%
0%
0.3%
Artima
Interex
0%
0%
0.3%
0%
0%
0.0%
Intermacedonia
0%
0%
0.0%
Diana Com
0%
0%
0.0%
TREI G
Promoterm
0%
0%
0.0%
0%
0%
0.0%
Naturvita
0%
0%
0.0%
Oncos
0%
0%
0.0%
Grand
0%
0%
0.0%
0%
0.0%
Nic Supermarket
Profi

Piramida
0%
0%
0.0%
Mignon Mini Trix
Alimrom
0%
0%
0.0%
0%
0%
0.0%
Impact on IC3:
- SFAA to measure
the time the Field
Sales Force
spend with the
channels
- The selling expenses in the CCS are
better allocated than before but still not
100% accurate!
Source: Time Allocation/SFAA/Market
Nestlé Romania Srl
Slide 68
Together we win
 There is great variance in Cost to Serve between
the Channels
Groundwork
Cost to Serve Analysis
Commercial Policy
Analysis
Nestlé Romania Srl
 Establishment groundwork
 Cost to Serve
 General View of all channels
 Nestlé and Competitors Commercial Policy Analysis
 Bad goods / Delayed Payments
Slide 69
 Based on IBR numbers we calculated the directly
Together we win
attributable costs per channel
Total Trade Spend IBR
Hyper and Supermaket
6%
Cash and Carry
4%
8%
Wholesalers
7%
Food and General Stores
10%
1%
9%
18%
2%
8%
10%
1%
Kiosks/Shared (Nov-Feb)
3%
13%
16%
2%
17%
14%
5.2%
Total
20%
6%
Subdistributors
Petrol Station
9%
2%
2%
Pharma
Total TTS +
CTS
Cost to Serve - IBR
16%
7.5%
0%
13%
20%
Source: Market CCS 2002 and IBR numbers - (Kiosks - Nov 2002 - Feb 2003)
Nestlé Romania Srl
Slide 70
Together we win
 The size and the payment has a strong impact in the
results
Total Trade Spend IBR
Cost to Serve - IBR
4%
Billa
2%
4%
Mega Image
5%
6%
Carrefour
2%
8%
Gimrom
La Fourmi
2%
8%
Nic SM
6%
5%
7%
Univers all
6%
Artima
2%
4%
Interex
4%
3%
2%
Intermacedoria
8%
4%
Trei G
6%
3%
Naturvita
2%
0%
9%
25%
50%
75%
100%
Source: Market CCS 2002 and IBR numbers
Nestlé Romania Srl
Slide 71
Together we win
 Due to the size RomGros has a bigger Cost to Serve
Total Trade Spend IBR
Metro
Cost to Serve - IBR
8.6%
RomGros
7.2%
1.4%
5.8%
7.7%
Selgros
0%
25%
1.8%
50%
75%
100%
Source: Market CCS 2002 and IBR numbers
Nestlé Romania Srl
Slide 72
Together we win
 There were a big shift in the Cost to Service due to the
shift in to the Shared Division
% of GPS
2002
Nov-Feb
Mass
Shared
100
100
Bad goods
0.06
0.02
Distribution costs
12.1
7.7
Selling Expenses
16.1
6.1
GPS
Source: Customer contracts and CCS by Trade Investment Team - 2002
Nestlé Romania Srl
Slide 73
 We also analysed the commercial policy of our
Together we win
major competitors
Groundwork
Cost to Serve Analysis
Commercial Policy
Analysis
Nestlé Romania Srl
 Establishment groundwork
 Cost to Serve
 General View of all channels
 Nestlé and Competitors Commercial Policy Analysis
 Bad goods / Delayed Payments
Slide 74
Together we win
 Some competitors have different behavior in the Trade
Terms area

Transparent Terms - Most of the suppliers do not show the trade terms
on the invoice (Kraft, Unilever, Elite…)

Cash Discount - is not uniform in the market (Elite - 2%, Kraft - 1%-2%,
European - 3%, Amigo - 2%…)

Payment Terms - Some competitors have a better trade terms than we
have (Elite - 7/14 days, Unilever - Up to 30 days for Key Accounts and
14 days for the Wholesalers, Alka - 14/21 days...)
Source: Trade Marketing Department Nestle Romania
Nestlé Romania Srl
Slide 75
 Part of the analysis were also the delayed
Together we win
payments and the bad goods
Groundwork
Cost to Serve Analysis
Commercial Policy
Analysis
Nestlé Romania Srl
 Establishment groundwork
 Cost to Serve
 General View of all channels
 Nestlé and Competitors Commercial Policy Analysis
 Bad goods / Delayed Payments
Slide 76
Together we win
 Creating transparency in the Bad Goods can
bring opportunities to deal with this important
topic
Bad Goods
informed by
the customers
Sales check
and
approve
the bad goods
E-mail is
sent to
supply
chain
Supply chain
approves the
bad goods
by e-mail
Sales
receives
email and
agrees with
customer

There is no formal tracking of bad goods (we do not know how
much we pay by channel/customer)

There is no clear rules in the Bad Good policy
Sales changes
the bad goods
The process finish
with the Bad
Goods being given
to the sales
people!!
Source: Finance and Supply Chain / IBR information
Nestlé Romania Srl
Slide 77
Together we win
 The main chunk of delayed payments in 2002 - lies
in Cash and Carry
Days over agreed
Delay Payments
time limit (due
from the
customers to IBR date)
in '000 Euros
31
13
Hyper & Super
75
8
Mini, Food & GS
9
Petrol Station
1,5
6
Kiosks and Open Mktg
11
8
8
Subdistributor
Wholesaler
15
59
16
Cash & Carry
74
6
Pharma
8
10
Average
3.5
IBR*
0
* - Delay form IBR to Nestlé
5
10
15
20
274.5
- Money transit - 2 days
Source: Finance/IBR system//Trade Investment Team/(Include PetFood)/Interviews
Nestlé Romania Srl
Slide 78
Together we win
 The settlement discounts are transparent although
they hide the non-performance discount

Big customers understand and get the 4% discount

Immediate - 4% discount

7 days - No discount
Romanian Inflation (2002)
18%
Romanian Interest (2002)
33%
Nestlé Discount (0 days)
4%
A change in the policy
will impact the net
contribution of IBR
This policy was made in April 2000 when the interest was 50% and the
inflation in 2000 was 40.7%
Source: Finance, Customer contracts, interviews
Nestlé Romania Srl
Slide 79
Together we win
Moving forward...
Romania Srl
Together we win
 We will be involving more members of staff
in Change Management Teams

Time commitment from team members

meetings twice per week for 2-3hours each

selected team member must attend - no substitutes

Team members should be open to change

Local team leaders take over as soon as possible
with Project “Together we win” International
members mentoring
Nestlé Romania Srl
Slide 81
Together we win
 In general CMTs will focus their work on
three things...
Processes
Detailing
processes,
including
determining who
does what, & when
People
Detailing
structures, skills,
roles &
responsibilities
Tools
Detailing key
templates,
meetings to
support the
processes (&
structures)
The three areas overlap - change management teams will look at 1, 2 or all 3
Nestlé Romania Srl
Slide 82
 …within our suggested 9 key areas of
Together we win
development in the recommendations phase
= potential
impact on IBR
Sales Roles
&
Responsibilities
Sales Force
Territory and
Route to Market
Management
Branch Grading
Customer
Management
Commercial
Policy and Trade
Investment
Product Portfolio
Optimisation
Promotion
Planning
&
Evaluation
Business
Planning
Nestlé Romania Srl
DC Efficiency
Slide 83
Together we win
 Overall timelines will include key involvement
steps and work that continues when the
internationals leave
23.04
04.04
Intro
16.05
Analysis
Analysis phase
Recommendations
Recommendations
phase
Implementation
Action
Plans
Change
Management
Teams
Project team works
independently
to keep the
"neutral" perspective
Change Management Teams
Part-time involvement of
key people via CMT
for the transition
of ownership
Steering Committee presentations
Nestlé Romania Srl
Slide 84
Together we win
Thank you for your
attention
Romania Srl