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$3.$ Alternative Distribution for Prestin Protein, Incorporated $($PPI$)$

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To respond to the changing business environment, Prestin Protein, Incorporated $($PPI$)$ has determined that a new approach to marketing its products is necessary. To determine whether an alternative distribution concept should be initiated, PPI must analyze the information gathered and project the potential sales and profits.

Read the Alternative Distribution for Prestin Protein, Incorporated $($PPI$)$ case and answer the following questions.

Alternative Distribution for Prestin Protein, Incorporated $($PPI$)$

Judith M$.$ Whipple

Prestin Protein, Incorporated $($PPI$)$ was considering alternatives to increase market coverage and sales volume on its snack products. Historically, the majority of PPI products were sold to consumers through various grocery and convenience stores. Vending machines and institutional sales, such as airports, represent the remaining consumer market segments. The selling environment for snack foods was becoming increasingly competitive and traditional channels of distribution were being distorted, especially in the grocery and convenience trade.

Grocery and convenience stores were traditionally serviced through distributors known as snack and tobacco jobbers. These distributors purchased PPI products in large quantities and then sold them to retail stores for sale to consumers. The number of snack and tobacco jobbers was decreasing, which was distorting the traditional distribution channel. Two factors were causing this distortion. First, the wholesaler and distributor industry in general was going through consolidation as large distributors continued to get larger and more profitable, while smaller and less profitable distributors were either bought up or closed. Second, the popularity of warehouse club stores threatened snack and tobacco jobbers. Small mom$-$and$-$pop grocery or convenience stores were able to purchase many products they needed at these warehouse clubs at the same price or less than what the distributors offered. Furthermore, the warehouse clubs provided a one$-$stop shopping experience so that the grocery stores could purchase a wider range of products at the club store than was sold by any one snack and tobacco distributor. For example, a club store may offer a narrow selection of the most popular PPI products as well as its competitor$$s products, while an individual distributor may handle PPI products exclusively. While PPI encouraged grocery and convenience stores to carry its products, regardless of whether these stores purchase products from distributors or club stores, there was a concern about how the products were serviced. Distributors provide a significant benefit in that they carry a broader line of PPI products than most club stores. Also, some snack and tobacco jobbers visit their retail customers regularly to ensure the stores remain stocked with a large variety of fresh product. In this sense, snack and tobacco jobbers provided a marketing service for PPI that is not achieved with club stores.

As such, PPI began looking for an alternative channel system that would not only increase market coverage in light of the new competitive environment but also provide the important marketing service to ensure a large variety of fresh product available for consumers.

Table $1$: Alternative distribution concept

What is it$?$

A unique new concept for distributing and selling PPI snack foods through new retail outlets to broaden market coverage.

How does it work?

Display units of popular snack foods are provided to retail outlets for direct purchase by consumers. Fast$-$selling items are easily restocked by telephone order with an $800$ number and rapid small package delivery service.

What are the special features?

Minimal effort is required on the retailer$$s part since the popularity of well$-$known PPI brands makes selling easy. Freshness is guaranteed by direct shipment from PPI$$s warehouses through rapid delivery service. Incremental money is made by selling high$-$profit $$impulse$$ snack foods to customers at no risk since PPI will remove slow$-$moving products at no cost to the retail outlet.

To accomplish this, PPI questioned the reliance on its traditional marketing channel, as well as the typical outlets through which its products were sold. Andy Joslin, the vice president of integrated logistics$,$ had an idea. Andy began to focus on new retail outlets where PPI products could be sold and how these sales could be uniquely managed via a new channel arrangement. It was determined that direct store delivery of PPI products could be handled by using telemarketing for order processing and small package delivery. The notion was that any retail outlet that had sufficient counter space and high customer traffic was likely to sell high$-$impulse snack items such as PPI products. Examples of potential retail outlets that traditionally did not carry snack items included dry cleaners, barb