Marketing Decoded

Interesting article this week in Businessweek about how Nestle SA has developed an innovative distribution strategy to reach remote villages on the Amazon river banks by using a supermarket barge.  Nestle SA, in a move to head off competition with rival Unilever, and respond to emerging market consumers, will sail the barge down two Amazon river tributaries distributing to 18 small cities.  800,000 potential consumers are Nestle’s new market.  These consumers lives revolve around fishing and they don’t have time to go to the capital to buy goods.  Supermarket purchases in these areas outpaced growth in richer areas as disposable incomes increased.

The barge will carry 300 different products, including chocolate, yogurt, ice cream and juices.  This is an example of Nestle using direct distribution, bypassing any middleman e.g., wholesalers or distributors and selling its own branded product directly from its factory through its own ‘store’.  Direct distribution gives Nestle a competitive advantage over regional competitors who don’t have similar resources e.g., transportation, inventory, refrigeration, financial to do the same thing.

Nestle has adapted its product mix to respond to the income level of people in this area, offering smaller cheaper versions of its ice cream and milk powder.  As many as 1 billion people in emerging markets are expected to exit poverty in the coming decade and Nestle, and competitor Unilever, want to be prepared with offerings, distribution and partnerships with local suppliers.

It’s an interesting and innovative idea – bringing the product to the consumer when the consumer can’t easily get to you and one that we see every day in our high tech world of the Internet.  It’s interesting to consider a more low tech version:  using a boat and river to get chocolate and ice cream to consumers.