Client Name

FrieslandCampina

Faculty Advisor

Mr. Atif Murtaza

SBS Thought Leadership Areas

Behavioural Studies

SBS Thought Leadership Area Justification

This project falls under the thought leadership area of Behavioural Studies. This study does not purport to conclude that the price arbitrage and inter-channel stock movement were failures of pricing policy, they were simply the predictable results of rational economic action in response to misaligned incentives. When it is profitable to have a surplus of products, wholesalers will have a stockpile. Retailers avoid assigned distributors because the tax structure makes it a less attractive option. Order books are made scarce to get premium prices. Distributors don't only avoid being punished for breaking compliance requirements, they can also be incentivized to dump stock close to the target deadlines. These behaviours were all observed in the field and supported. The essence of the study is that the problem of channel indiscipline in the FMCG market is a behavioural problem, which can be induced by various factors including tax status of the channels, target design, margin economics, and information asymmetry, and thus effective recommendations need to target the root of the problem, the incentive, and not the symptom.

Aligned SDGs

GOAL 8: Decent Work and Economic Growth

Aligned SDGs Justification

This project aligns with SDG Decent Work and Economic Growth by addressing inefficiencies caused by price arbitrage and interchannel stock movement within FrieslandCampina's distribution network. The study aims to identify the factors contributing to stock leakage and pricing discrepancies across channels and propose strategies to improve inventory control, channel management, and operational efficiency. By reducing revenue losses, optimizing resource utilization, and strengthening sustainable business growth, the project supports economic productivity and long-term organizational performance. Improved efficiency and profitability can contribute to a more stable business environment, supporting employment opportunities and sustainable economic growth within the FMCG sector.

NDA

No

Abstract

This ELP studied price variations and flow of movement of stock across the channels for Olper's UHT milk in three pack sizes (250 ml, 1 L and 1.5 L) and compared the price and stock movement of FrieslandCampina Engro Pakistan Limited (FCEPL) with Nestlé Milkpak, Nurpur, Haleeb and Dayfresh. The study adopted a mixed method in which 300 cleaned SKU level observations were made through price audits at retail, wholesale and modern trade outlets of Karachi, while in-depth interviews were conducted with the commercial leadership of FCEPL and wholesalers. All prices were adjusted to per-pack prices and compared to the company's recommended price.

The findings show a definite trend, as we move from Wholesale to Retail, the price spread widens from Rs 8.3 per pack (250 ml) to Rs 32.0 per pack (1 L) to Rs 59.7 per pack (1.5 L); in other words, the Structural Discounter is Wholesale. A live arbitrage route was found from wholesale to general trade with a margin of Rs 82 – 87 per carton, before any market behaviour, in case of the 1 L SKU. This is further exacerbated by the filer/non-filer tax differential. The report suggests that the distributor targets should be reset to weekly periodicity, the creation of a compliance-based reward program, the management of promotional depth both in modern trade and on e-commerce platforms, the scaling up of batch code tracing and strengthening of overall trade service guarantees by Olpers.

Document Type

Restricted Access

Document Name for Citation

Experiential Learning Project

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