MT1: Distribution Channels Case- Consumer Products Goods (CPG)

Choose an organization: Describe Distribution Channels, Benefits/Costs of intermediaries

Choose a firm that produces tangible products (NOT a retailer) that are ultimately sold to final consumers and is part of a distribution channel involving at least one other independent organization as an intermediary and uses at least two different sales channels (e.g., direct sales, retail).

1. Describe the organization, its target market, its positioning and its current competitive situation. Also discuss the products that it produces (NOTE: If the company is very large and produces many diverse product lines, narrow focus to just one division or product line of that company).

2. Classify and describe the multi-channel distribution system for the product line and assess the appropriateness of its design in relation to its desired service output levels (e.g., lot size, waiting time, spatial convenience,...).

3. Discuss how the organization benefits by using one or more intermediaries.

4. Describe the costs and potential risks that the firm must encompass by using these intermediaries. Explain how the distribution system does or could operate as either a vertical (VMS) or horizontal (HMS) marketing system and the benefits associated with that system strategy, or why a VMS or HMS doesn't make sense for the channel.

Please give a great deal of consideration to your selection of the organization and the product that will be used in your case. Your selection must meet the following criteria:

* The organization should produce a physical product that is eventually sold to final consumers.
* The organization must be part of a distribution system that includes a minimum of one intermediary.

The organization must sell its products through two or more channels (e.g., retail, online sales, telephone sales, sales force).

Student's Post

Sargento Foods

Sargento Foods is a privately owned American company, that generates about $1.3 billion annually ("About Us | Sargento," n.d.). Sargento is one the largest cheese manufactures and a close second in its industry with Kraft being #1("About Us | Sargento," n.d.). Sargento falls into the food production and marketing industry with a target market of multi-generational and diverse demographic households as well as businesses; mostly restaurants and retail outlets.

The end product produced by Sargento is cheese. This product is sold and can be purchased in many different varieties (shredded, block, sliced and specialty), sizes (ounces, cups and snack) and packages (Ziploc, tubs, wrapped). Sargento Foods is divided into two business units; Consumer Products and Food Service & Ingredients ("About Us | Sargento," n.d.). The Consumer Products division consists of the packaging and marketing of the end product.

Channels are utilized to maximize customer value, to coordinate multiple activities that happen within each channel and reduce risks. The Food Service and Ingredients unit of Sargento has two channels of distribution. The Food Service channel produces cheese products that are specifically for the restaurant industry. These products are usually tailor-made ("About Us | Sargento," n.d.).

The second distribution channel that Sargento utilizes is the Food Ingredients channel, this channel allows for innovative products to be made. These products are not tailor-made but offer quality product choices to consumers. This channel also incorporates the invention and improvement of product packing solutions to effectively utilize store display area and shipping methods ("About Us | Sargento," n.d.).

The channels utilize merge with the retailer (grocery stores) via shipping/packaging methods and online sales options (peapod and amazon fresh) ("About Us | Sargento," n.d.). The benefits of utilizing the retailer and online sales agent enable Sargento Foods to reach areas that some of their products may not be sold. This also gives variety/choice to the consumer. The costs associated with utilizing the online sales option include and additional if small amount added to the sales price to cover overhead and marketing costs. Other costs associated with shipping and packing is the cost of transportation and warehousing of products.

Sargento Foods seems to currently operate on a vertical marketing system (VMS) and would not fully benefit from a switch to a horizontal marketing system (HMS). The reasons being the VMS allows them to continue integration of systems, control channels, eliminate conflicts and most importantly allows their products to reach consumers and expand their geographical reach (Wienclaw, R. A., 2015).

References

About Us | Sargento. (n.d.). Retrieved from https://www.sargento.com/our-company/about-us
Wienclaw, R. A. (2015). Channel Management. Research Starters: Business (Online Edition).