Barilla

Barilla SpA (A) Case Analysis


Barilla:
Barilla SPA, is a family owned pasta and confectionary maker. They are the market leaders in the pasta making business. They are known to produce premium quality Pastas that they project as jewels.

Sales & Marketing

1. Advertising- Heavy, Positioning as premium quality and wide variety.
2. Trade promotions- frequently to buyer, which is passedon to consumers or end-users.
3. Canvass period 10 to 12 in a year, typical duration of 4 to 5 weeks.
4. Volume discount also given. No limit on Distributor purchase.
5. Rationale for all above discounts is to propagate a push strategy.
6. Main roles of sales representatives- merchandise Barilla Products, set up in store promotion, take note of competitor’s process, stock-outs and new productlaunches and work out ordering strategies for retailers.
7. Sales representatives used more at DO’s than GD’s.

Problems with the current Sales & Marketing

1. Trade promotions:- Barilla used trade promotions to push the sales of its products. The general market perceptions of their products are as the best quality & most sophisticated products. Moreover, sponsoring athletes promoted thebrand as healthy, energetic and household category products. Hence, high use of trade promotions will lead to lower selling prices of Barilla’s product, resulting in doubts about their product quality.
2. Volume discounts:- Giving volume discount may lead to high inventory build-up at distributor’s end or delayed order from distributors.
3. Sales representatives’ compensation:- The main focus ofsales representatives is to collect data on competitors. As pasta and confectionary industry is highly competitive, such monitoring will lead to huge compensations and may not be advisable. Moreover, ignoring GDs may be harmful in long run because they are the largest accounts for Barilla products.

Channels of distribution:

1) Products divided into “dry” and “fresh” categories; 75% and 25% ofBarilla’s sales respectively
2) “Dry” products had a long shelf life of 18-24 months or medium shelf-life of 10-12 weeks while “fresh” products had a shelf life of 21 days[ fresh bread had a shelf life of 1 day]
3) Most of the products shipped to one of the two central distribution centres[CDCs]
4) Each CDC held only 3 day inventory of “fresh” products and about 30 days inventory of “dry”products; Certain fresh products such as fresh bread did not flow through CDCs
5) Fresh products were purchased from two CDCs by independent agents who channelled the product through 70 regional warehouses throughout Italy[each warehouse held a 3 day inventory of fresh products]
6) Around 2/3 of dry products were shipped to supermarkets via CDCs and distributors
7) Remaining Dry products weredistributed through Barilla-owned depots
8) Barilla distributed its products through three types of retail outlets: small independent grocers, supermarket chains and independent supermarkets which were around 100,000 in Italy alone
9) The small independent shops held over 2 weeks’ inventory and 35% of dry products were distributed from company owned regional warehouses to these shops.
10) Remainingdry products through outside distributors to supermarkets- 70% to supermarket chains and 30 % to independent supermarkets
11) Supermarkets carried 10-12 days inventory
12) Supermarket chains used their own distribution organization [“Grande Distribuzine[GD]” or large distributor]; Independent supermarkets used “Distribuzione Organizzata” [DO] or organized distributor which served as a centraldistributor for several independent supermarkets.
13) Both GDs and DOs purchased from Barilla CDCs, maintained a 2 week inventory in their warehouses and supplied to supermarkets.
Many supermarkets placed orders with distributor daily, which would be received between 24-48 hrs.

Problems with the current distribution system:

1) The main rationale for introducing JITD was the fluctuating...