The document discusses Inmarko's plans to restructure its distribution network in four federal districts in Russia to double its sales by 2015. Currently, Inmarko has a 16.6% volume share of the growing Russian ice cream market. To achieve its goal, Inmarko will focus on penetrating the markets in the "western" regions to gain market share from competitors. This will be done by establishing owned warehouses and optimizing the transportation network between cities and within cities using both purchased and rented vehicles. Risks are assessed and appendices provide details on warehouse capacity needs, transportation costs analysis, and expectations for key accounts.

1. Cup Moscow 2011 >> 1st round Case
Reorganizing Inmarko distribution network
in the Central, Northwest, Southern & North-
Caucasus federal districts
Team Faces

2. Goals & current situation analysis
Inmarko distribution network will be restructured in the Total increase in Inmarko sales, bln rub.
Central, Northwest, Southern & North-Caucasus federal districts to respond to 2011-2015
11,53 x 2 = 23,06
its goal – to double the sales in monetary terms in Russia up to and
including 2015
Sales increase in Sales increase in “eastern”
The ice cream market in Russia is developing and has a continuous 10,3% “western” regions regions (all other ones)
growth rate per year (CFD, NWFD, SFD, NCFD)
At the expense of
The ice cream sales in Russia (bln rub.) the market increase
Inmarko The ice cream market At the expense of At the expense of 7,48 x 1,482 = 11,08
the market increase the penetration level
76.3 4,06 x 1,482 = 6,01 increase
51.48 11,53 – 5,56 = 5,97
23.06
11.53
As a result, the share of “western” districts’ sales in total Inmarko
2011 2015 E sales will grow in next 4 years
The market is divided by 5 largest producers that together take 70% of Share of Inmarko region sales in total Inmarko sales
total market sales. To double its sales Inmarko should strongly Central FD
penetrate the market of “western” regions and take the market shares 2011 2015 E
of its rivals away. North-Western
Producers value Producers volume price per 1 kg, FD 24% 26%
Producers South FD 48%
share shares rubles
4%
Inmarko 22,4% 16,6% 172 65% 7%
North- 4%
Nestle 14,7% 6,3% 297 15%
Caucasus FD 3%
Iceberry 13,5% 8,0% 215
all other FD 4%
Russki Holod 6,8% 6,9% 126
Talosto 6,3% 5,7% 141
Others 36,3% 56,5% 82 Double sales growth will be provided by the reorganization of
distribution network to the appropriate level.

3. The results of reorganization
*The expected share of Inmarko in the district in 2015
69% TT
14% MT 27%* = 1,5 bln rub.
7 795 pallets 17% KA
Own warehouses in:
70% TT
Moscow 8 000 pallets
32 601 15% MT 23%* = 6,03 bln rub.
pallets 14% KA Voronezh 3 500 pallets
SPB 6 000 pallets
80% TT
13% MT 35%* = 3,56 bln rub. Rostov-na-Donu 4 000 pallets
12 204 7% KA
pallets Volgograd 3 500 pallets
Krasnodar 4 000 pallets
4 730 82% TT
Yaroslavl 3 000 pallets
pallets 13% MT 18%* = 0,89 bln rub.
5% KA Kaluga 2 000 pallets

4. Types of channels of sales
Traditional trade Modern trade Key accounts
+ The largest part of total + Ideal for spontaneously + Provide strategic partnership
demand-55-85 % purchases
+ Stalls, Street
traders, grocery + In some cases production is
store – represents Inmarko’s + Wide range of Inmarko brands delivered to their warehouses
logo
+ Most promising channel for
- Low penetration into country + Fast-growing segment
ice-cream area
- For take-home consumption, so
- Little amount of purchases per its share is low
outlet
1 2 3
High-Priority channel Medium-priority channel Low-priority channel
(It is necessary to settle branches (Most important in urban areas, such as Moscow (But we should pay attention to this
within traditional trade segment) and St.Petersburg) channel in some areas with high
share of take-home consumption)

5. Opening branches: own distribution network
The example of branch functioning for a representative city
Assumptions:
• there are 80 supermarkets (50 of which
Costs per month:
500 000 people are large network stores)
driver ‘s salary (50 000) • there are 40 restaurants and cafes
x ( including 15 network ones)
370 ml rub. (sales of ice cream) 10 trucks • there are 150 retail outlets and small
+ shops
consumed: sales specialist’s salary (35 000) *the Inmarko logistics service delivers
2000 tn x goods to the distribution warehouse of the
8000 pallets 10 specialists network store. Inmarko also delivers goods
+ and provides chests to small shops.
1150 pallets Overheads (200 000)
Inmarko 1 050 000 rub.
One-time costs :
Tula
Yaroslavl
1 for 25 sales otlets 20 stalls Ryazan
X Lipetsk
20 Inmarko stalls Price stall Voronezh
+ Rostov
3 Sales specialists (branches) + 7 sales 10 trucks Krasnodar
specialists (others) x
20 stall sellers Price of truck
+ Astrahan
Staff search
+
License

6. Own distribution network
The influence of factors on the choice of kind of distribution If there are several distributors in a region, we choose the one with the
network ("+" - the preference of own network, "-" - the highest level og CCFOT, as our main goal is to foothold on a region market.
preferences of distributors services)
North-Western FD
Distance (the Desired
Federal District closeness to large influence on Sales in total
markets) prices Inmarko sales
Disributor Area
in Federal
CFD + + Disctrict
NWFD - -
Beta Archangelsk, Severodvinsk 5%
SFD + +
Distributor № 4 Syktykar 4%
NCFD - -
LED Vologda Cherepove 6%
We choose to use distributor services, when sales in Distributor № 5 Murmansk Apatity 4%
some region are not very important in comparison with
total sales of the company. Till 2015 Inmarko expects
to increase its share of region sales in total region sales South FD
in each “western” region. Although, the share of Distributor № 20 Elista, Astrahan' 15%
Inmarko sales in North-Western FD and North-
Caucasus FD in total Inmarko sales will amount to 6,5%
and 3,9% correspondingly => We prefer to use North-Caucasus FD
distributor services instead of creating its own
distribution network with a sharp increase in costs. Grozny, Makhachkala, Nazran'
Distributor № 22 50%
Vladikavkaz, Nalchik,
We also prefer distributors when the ice-cream market in Distributor № 23 Cherkessk 33%
some far regions or cities is quite large. In this case it is
more beneficial for Inmarko to conclude a contract with Stavropol, Region of
Distributor № 21 Caucasus Mineral Waters 13%
an exclusive distributor, that has its own transport and
storages and allows to maintain the appropriate price Central FD (because of lack of own resources)
level on different brands of ice-cream.
Distributor № 17 Moscow 18%
Central Logistic Moscow, The Moscow region,
Company Vladimir 30%

7. Risks assessment
risk threats Avoiding risk
Threats
1) Overpricing - Recommended level of prices
by a distributor - Bonuses for the plan fulfillment
7 2) Loss of a Provide maximum discounts to the
2 major largest distributors
5 1 distributor
3 3) Weak marketing campaign in the region
development before entering
4 of the brand in
6 the region
4) Long Standardize the contracts
negotiations
with the dealer
5) Increasing Monitor competitors, make
Probability of risk appearance competition acquisitions if possible
6) Increase of Making long-term contracts
rental cost of
storage and
High risk trucks
7) Decline in Promotion of cheaper brands
Average risk demand
caused by
external shocks
Low risk

8. Appendix 1. The schedule of goods delivery to distribution warehouse
amount of goods amount of The warehouse should be of size suitable for keeping the
delivered to realized goods kept in the warehouse (%)
warehouse (%) l%) excess of production (the difference between produced
and realized goods).
sept 8,3 4 4,3 (1)
The factory in Tula produces
oct 8,3 4 0,3 (2) + 8,3(1)
nov 8,3 5 3,6 (2) + 8,3 (1)
8,3% = 100%/12m
dec 8,3 5 6,9 (2) + 8,3 (1)
of annual production per month.
jan 8,3 5 1,9 (3) + 8,3 (2) + 8,3 (1)
Assumptions:
feb 8,3 5 5,2 (3) + 8,3 (2) + 8,3 (1)
1. The warehouse becomes empty to the end of the
mar 8,3 6 7,5 (3) + 8,3 (2) + 8,3 (1) = 24,1 season – so September is the time origin
apr 8,3 9 6,8 (3) + 8,3 (2) + 8,3 (1) 2. Earlier produced goods are the first to be realized
may 8,3 13 2,1 (3) + 8,3 (2) + 8,3 (1)
jun 8,3 14 4,7 (2) + 8,3 (1)
We need that amount of warehouses in the
jul 8,3 19 2,3 (1)
Central, Northwest, Southern & North-Caucasus
aug 8,3 12 0
districts in total
which will be capable of keeping 24,1% of
(*) – amount of months the production was
annual production.
kept in the distribution warehouse
2011 46 080 pallets = 48 000 tn.* x 24,1% 2015 92 160 pallets
are held in the warehouses
* 48 000 tn. = 60 mln L.

9. Appendix 2. Costs: own VS rented transport
Own transport demand covered by our own
for transportation between for transportation within the Costs within city
trucks
between cities
cities same city
Hyundai HD500 with trailer
Between cities: Sept. 100% 100%
model Hyundai HD250 (18 pallets) Oct. 100% 100%
Shmitz Cargobull (28 pallets)
price
useful life
3 610 000 rub. + 73 000 euro
5 years
113 500 $
5 years
x2,7 Nov. 100% 100%
mileage Own Rented Dec. 100% 100%
800 000 km 250 000 km
(5 years) Jan. 100% 100%
truckers' Feb. 100% 100%
salary 50 000 x 2 persons = 100 000
50000 rub.
Within the city: Mar. 83% 100%
(per rub.
month) Apr. 56% 100%
fuel (per 27 rub./L. x 0,37 L/km x 14 000 27 rub./L. x 0,3 L/km x 4 000
month) km km x1,4 may
Jun.
38%
36%
69%
64%
service 1/2 of fuel costs 1/2 of fuel costs Jul. 26% 47%
TOTAL
Own Rented
418 891 rub. 151 378 rub. Aug. 42% 75%
costs
Rented transport
Tula-Rostov
50 000 rub.
(925 km) price per day (8h) = 7 000
Tula-Moscow rub
20 000 rub.
(184 km)
average price
8137,49 rub. price per month = 217 000
per 100 km
TOTAL costs 1 139 248 rub. 217 000 rub.
The optimal amount* of purchased & rented
transport
The issue
Using our own transport is more profitable in case of
continuous (uninterrupted) use.
Between cities 78% purchased 22% rented
But due to the increase in demand in summer & its
winter decrease most of purchased transport stands Within the city 57% purchased 43% rented
idle winter or it could be scarcity of transport in
summer. *calculations are presented in the attached excel file

10. Appendix 3. Key Accounts
2011 Expectations
~ 90 large shops (X5 Retail Group, Increase of concentration up to 60%
Auchan, Magnet & others)
Some Key Accounts will enter
10% of all Inmarko sales (40% of the cities with population of 200 000
Modern Trade) people
The main type of sales – the ice cream
for home consumption