Recasting Dealer Margins – Case of Hawkins

Till the 1970s, Prestige cooker, manufactured by the TTK group, was the leader in the Indian pressure cookers market, outselling Hawkins. Prestige had a strong distribution network.

Hawkins had in its favor a good product design. In spite of its superior product design Hawkins sales were much lower than that of Prestige, largely as a result of its distribution weakness.

The actual problem was that the retailers were getting only a small share of the total trade margin, while the sole distributor and the regional distributors were allowed to keep a large portion of the margin for themselves.

In the 1970s, Hawkins overtook Prestige and became the market leader. It attained a market share of 30% as against Prestige’s 21% and United’s 10.5%. It was by streamlining the distribution and recasting the margin that Hawkins achieved the feat.

Till the 1970s, Hawkins was using Killick-Nixon as the sole distributor for the product. It was paying Killick-Nixon, 50% of the list price as distribution margin. But, the latter was passing on just 17% to the distributors, retaining 33% for itself. The distributors in turn were passing on a mere 7% to the retailers.

The actual cost to the sole distributor Killick-Nixon, and other distributors amounted to just 2 to 3%. Yet, they were keeping a very high share of the margin for themselves, 33% and 10%, respectively. Against this, the retailers, who had to incur all major expenses on the distribution of the product – storage cost, cost of inventories, and cost of shop/personnel received only 7%.

In the revamping exercise, as a first step, Hawkins dispensed with the sole-selling arrangement with Killick-Nixon and took the distribution responsibility into its own hands. Then, it recast the margin structure thoroughly.

It set up four regional distributors (subsequently, the number went up to 15) and increased their margins to 20%. They were made to pass on 14% to the retailers.

The doubling of the margin to the retailers played a substantial role in the increased sales and market share of Hawkins.

The company also introduced several trade promotion schemes to enlist the enthusiastic participation of the retailers in promoting the brand.