Nestlé is a multinational food and beverage
company headquartered in Vevey,
Switzerland. It is one of the largest food
companies in the world, with a wide range
of products that include baby food, bottled
water, breakfast cereals, confectionery,
dairy products, frozen food, pet foods, and
more. The company was founded in 1866 by
Henri Nestlé, who developed the first infant
formula to combat child mortality.
3. Nestlé's product portfolio is vast
and includes well-known brands
such as Nescafé, KitKat, Maggi,
Nespresso, Purina, and many
others. The company operates in
various segments, including
powdered and liquid beverages,
milk products and ice cream,
nutrition and health science,
prepared dishes and cooking aids,
confectionery, and pet care. Nestlé
operates globally, with a presence
in almost every country around the
4. Types of Distribution Channels
Distribution channels can either be
direct or indirect. The indirect
channels can be divided up into
1. Direct distribution channels
The direct distribution channel does not make
use of any intermediaries. The manufacturer
or producer sells directly to the end
consumer. The direct form of distribution is
typically used by producers or manufacturers
of niche and expensive goods and items that
2. Indirect distribution channels
The indirect distribution channel makes use of
intermediaries in order to bring a product to
5. One-level channel
The one-level channel entails a product coming from a producer to a
retailer and then to the end buyer. The retailers buy the product from
the manufacturer and sell it to the end buyers. The one-level channel is
ideal for manufacturers of furniture, clothing items, toys, etc.
Wholesalers generally make bulk purchases, buy from the producer,
and divide the goods into smaller packages to sell to retailers. The
retailers then sell the goods to the end buyers. The two-level channel is
suitable for more affordable and long-lasting goods with a larger target
The three-level channel is similar to the two-level channel, except the
goods flow from the producer to an agent and then to a wholesaler.
Agents assist with selling the goods and getting the goods delivered to
the market promptly.
6. Nestlé uses a multi-channel distribution strategy to reach its
customers and ensure its products are widely available. Nestlé's
distribution channel is designed to cater to diverse customer
segments and geographic regions, allowing the company to
effectively reach consumers across various channels.
Here are the key elements of Nestlé's distribution channel:
• Direct Store Delivery (DSD)
• Retailers and Wholesalers
• Foodservice and Out-of-Home
• Distributors and Agents
TYPES OF CHANNEL AVAILABLE IN
7. 1. Direct Store Delivery (DSD): Nestlé employs a direct store delivery
system for many of its products. This involves delivering products directly
to retail stores, bypassing intermediaries. Nestlé's sales representatives or
distribution teams directly manage the delivery and merchandising of
products to ensure efficient distribution.
2. Retailers: Nestlé products are widely distributed through various types
of retailers, including supermarkets, hypermarkets, convenience stores,
and specialty stores. Nestlé has established relationships with national
and regional retail chains to ensure the availability of its products to
consumers. These retailers purchase Nestlé products from wholesalers or
directly from the company.
3. Wholesalers and Distributors: Nestlé partners with wholesalers and
distributors who act as intermediaries between the company and
retailers. Wholesalers purchase Nestlé products in bulk and distribute
them to smaller retailers, such as independent grocery stores or
convenience stores. Distributors play a similar role in reaching specific
8. 4. E-commerce: Nestlé has recognized the growing importance of e-
commerce and has expanded its presence in online sales channels.
Nestlé operates its own e-commerce platforms and websites, allowing
customers to directly purchase Nestlé products online. Additionally,
Nestlé partners with popular online retailers, grocery delivery
services, and food aggregators to reach consumers who prefer to
5. Foodservice and Out-of-Home: Nestlé supplies its products to the
foodservice industry, which includes restaurants, cafes, hotels,
catering companies, and institutions such as schools and hospitals.
Nestlé offers specialized product lines and solutions tailored for the
needs of the foodservice sector. This distribution channel allows
Nestlé to provide its products for consumption outside the home.
6. Export and International Distribution: Nestlé has a global presence
and distributes its products internationally. The company utilizes a
combination of its own subsidiaries, joint ventures, and partnerships
with local distributors to reach consumers in different countries. This
approach enables Nestlé to adapt to local market dynamics and meet
specific regional preferences.
9. WHAT ACTUALLY IS CHANNEL
CONFLICT IN DISTRIBUTION ??
CHANNEL CONFLICTS can be described as
any disputes, differences, disagreements or
clashes that arise among two or more channel
partners, where one partner's activities affect
the business, sales, profitability of other channel
The channel partners are
the intermediaries such as Distributors,
Wholesalers and Retailers
which helps company to sell and
distribute its products to its customers.
10. REASONS FOR CHANNEL CONFLICTS
• Limited Resources: When leads, marketing support, or exclusive product availability are limited,
conflicts can arise between channels. Each channel may strive to secure the available resources for
themselves, leading to tensions and disputes.
• Overlapping Territories and role ambiguity: If multiple channels have overlapping territories or areas
of operation, conflicts can arise as they compete for customers and market share. This can happen
when manufacturers or suppliers expand their distribution network without proper coordination or
delineation of territories.
• Competing Interests: Channel conflicts often occur when different channels within the distribution
network have conflicting goals and interests. For example, if a manufacturer decides to sell its products
both through direct sales and through intermediaries, conflicts can arise as the direct sales channel
competes with the intermediary channel for customers and revenue.
• Pricing and Margin Issues: Pricing discrepancies and margin conflicts can lead to channel conflicts. If different channels are given
different pricing structures or margins it can create tension among them. For example, if one channel receives preferential pricing or
higher margins, other channels may feel disadvantaged and demand equal treatment.
• Lack of Communication and Coordination: Poor communication and coordination among channel partners can give rise to conflicts.
When channels are not adequately informed about product updates, promotional activities, or changes in policies, misunderstandings
can occur, leading to conflicts.
• Lack of Channel Management: Inadequate channel management practices, such as poor channel partner selection, insufficient training
and support, or lack of performance evaluation, can contribute to conflicts within the distribution network. When channels feel
unsupported or perceive unfair treatment, conflicts are more likely to arise.
12. VERTICAL CHANNEL CONFLICT: This type of conflict occurs between different levels of
the distribution channel, such as conflicts between manufacturers and wholesalers, or
between wholesalers and retailers. Vertical conflicts often arise from disagreements
over pricing, product positioning, territorial rights, or channel member roles and
Horizontal Conflict: Horizontal conflicts occur among channel members at the
same level of the distribution channel, typically between competing retailers
or competing wholesalers. These conflicts often arise from intense
competition for market share, customers, or resources. Price undercutting,
promotional battles, or exclusive distribution agreements with suppliers.
Multichannel Conflict: With the proliferation of multiple channels,
conflicts can arise when different channels (e.g., brick-and-mortar
stores, online retailers, direct sales) compete for the same customers or
overlap in terms of territories or product offerings. Multichannel
conflicts can occur between different companies or within the same
company with multiple distribution channels.
13. Channel Power Conflict: Power struggles between channel
members can lead to conflicts. For example, conflicts may arise
when one channel member tries to dominate or control others by
leveraging its market share, resources, or brand strength.
Goal Conflict: Conflicts can occur when channel members have
conflicting objectives or goals. For instance, a manufacturer may focus
on maximizing production efficiency and reducing costs, while a
retailer may prioritize customer satisfaction and personalized services.
These differences in goals can lead to conflicts over pricing, product
assortment, inventory levels, or promotional activities.
Channel Communication Conflict: Ineffective communication or lack
of information sharing among channel members can result in
conflicts. Misunderstandings, delays in responding to inquiries or
orders, or inadequate coordination can lead to dissatisfaction and
conflicts. Clear and open communication channels are crucial for
avoiding or resolving such conflicts.
14. HYPOTHETICAL EXAMPLE OF HORIZONTAL CHANNEL CONFLICT
Horizontal channel conflict refers to conflicts or disputes that arise between different entities operating at the same level
within a distribution channel. Example: Nestle and Distributor Competition
Situation: Nestle has multiple distributors who are responsible for distributing its products to various retailers or
customers within a specific region
Conflicts: Territory Overlap: Nestle's distributors may experience conflicts when their assigned territories overlap or when
they try to expand their distribution networks into each other's territories. This can lead to disputes over who has the
right to distribute Nestle's products in a particular area, potentially resulting in increased competition and
Price Competition: In a competitive market, Nestle's distributors may engage in price competition to gain a larger market
share. This can lead to conflicts when distributors lower their prices to attract customers, resulting in reduced profit
margins for both Nestle and the distributors. Such price wars can also damage the brand image of Nestle's products.
Resolution: to address these conflicts, Nestle could consider the following actions:
• Clear Territory Assignments: Nestle can establish clear and well-defined territories for each distributor, This can be
achieved through careful market analysis and strategic planning.
• Price and Margin Guidelines: Nestle can establish guidelines or policies regarding pricing to prevent excessive price
competition among distributors. By setting minimum resale prices or implementing pricing agreements
• Fair Promotional Support: Nestle can implement transparent criteria for providing promotional support to its
distributors. This can include factors such as sales performance, market coverage, and customer reach. By ensuring fair
and equitable distribution of promotional support, Nestle can foster a more cooperative environment among its
15. REAL CONFLICT INCIDENTS
IN 2015, Nestlé India faced a major channel conflict surrounding its popular Maggi noodles.
The Food Safety and Standards Authority of India (FSSAI) said that certain variants of
Maggi noodles contained excessive levels of lead and MSG (monosodium glutamate),
leading to a ban on the product.
As a result, Nestlé India had to recall and remove millions of packets of Maggi noodles from
the market. This had a significant impact on the distribution channel, including distributors,
wholesalers, and retailers, who faced financial losses due to the sudden removal of the
product from their inventory. The affected channel members demanded compensation
from Nestlé India for the financial losses incurred during the ban period.
Nestlé India had to navigate through this channel conflict by implementing several strategies:
• Open Communication: Nestlé India initiated direct communication to address their concerns and understand the impact.
Regular meetings and dialogue were held to provide updates and gather feedback.
• Financial Assistance: Nestlé India provided financial assistance and compensation to some channel partners who faced
significant losses. This was done to maintain their loyalty and mitigate the financial impact.
• Rebuilding Trust: Nestlé India focused on rebuilding trust with its channel partners by offering assurances regarding
product safety, quality control measures, and transparent communication.
• Collaborative Marketing Efforts: Nestlé India collaborated with its channel partners to develop joint marketing campaigns
to revive the sales of Maggi noodles once the ban was lifted. This involved promotional activities, discounts, and incentives
to encourage retailers and distributors to restock the product, and finally it got relaunched
16. IMPACTS OF CHANNEL CONFLICTS
Brand image and reputation: Channel conflicts that become
public or are visible to customers can harm Nestle's brand
image and reputation. For example, if conflicts lead to
inconsistent pricing or availability of Nestle products across
different channels, it can create confusion and erode
consumer trust. Negative experiences or perceptions
associated with channel conflicts can impact customer
loyalty and willingness to purchase Nestle products.
Missed market opportunities: Multichannel conflicts can
result in missed market opportunities for Nestle. If different
channels compete for the same customers or overlap in
terms of territories or product offerings, it can lead to
fragmented market coverage or inefficient targeting. This
can prevent Nestle from reaching its full market potential
and hinder growth.
17. Poor Public Relations: An example of Bad PR includes being unaware of what's happening in the
market and sending press releases without any consideration of when they will be published. Poorly
written press releases: Press releases are one of the fundamental steps in the PR process.
Inefficient resource allocation: Horizontal conflicts between competing retailers or wholesalers can
result in wasteful resource allocation. Price undercutting and promotional battles can lead to reduced
profit margins for all parties involved, as well as excessive spending on marketing and advertising.
This can negatively impact the profitability of Nestle and its channel partners.
Distributor Exit: strategy should set your service requirements when the parties are transitioning out
of the relationship. These requirements may include: An obligation on the supplier to continue
service performance during the transition period.
Sale Deterioration: Poor sales performance in organizations are a lack of skills, communication,
motivation, and accountability. If you want to improve sales performance in your organization, you
should focus on providing training, encouraging open communication and offering incentives.
Disruption in the supply chain: Channel conflicts, especially vertical conflicts between Nestle and its
wholesalers or retailers, can disrupt the smooth flow of products through the distribution channel.
Disagreements over pricing, product positioning, or territorial rights can lead to delays or disruptions
in product delivery, potentially affecting customer satisfaction and sales.
18. Strategies For Resolving
Channel conflicts can arise when there are
disagreements, tensions, or disputes between
different entities within a distribution channel,
such as manufacturers, wholesalers, retailers, or
intermediaries. Resolving channel conflicts is
crucial for maintaining smooth operations and
fostering positive relationships among channel
Here are some strategies for resolving channel
19. Communication and Collaboration: Establish open lines of communication
among channel partners. Encourage regular meetings and discussions to address
concerns, share information, and align goals. Collaborate on joint planning,
decision-making, and problem-solving to foster a sense of teamwork and mutual
Clearly Defined Roles and Responsibilities: Clearly define the roles and
responsibilities of each channel partner to minimize conflicts arising from
overlapping functions. Establishing clear guidelines and expectations can help
reduce misunderstandings and promote a more harmonious channel
Consistent Policies and Procedures: Establish consistent and transparent policies
and procedures for all channel partners. This includes pricing policies, terms of
trade, product return guidelines, and dispute resolution mechanisms. When
everyone operates under the same rules, it reduces the chances of conflicts
arising due to inconsistent practices.
Incentives and Rewards: Design incentive programs that encourage cooperation
and mutual benefit among channel partners. Offer rewards, bonuses, or
performance-based incentives that promote collaboration, sales growth, and
overall channel success. Incentives can help align the interests of different
entities and reduce conflicts.
20. Win-Win Negotiations: Focus on finding win-win solutions that address
the concerns and interests of all parties involved. Instead of a zero-sum
mentality, strive for compromise and mutually beneficial outcomes.
Encourage a cooperative mindset that emphasizes long-term relationship
building and shared success.
Data Sharing and Technology Integration: Encourage the sharing of data
and information among channel partners. Collaborate on data analytics,
inventory management systems, and supply chain technologies to
improve overall efficiency and reduce conflicts arising from information
gaps or operational inefficiencies.
Continuous Performance Evaluation: Regularly evaluate the performance
of channel partners and provide feedback. Identify areas for
improvement and work together to address any shortcomings. By setting
performance standards and monitoring progress, conflicts can be
mitigated and the channel can evolve towards better alignment.