New Refrigerator breeds.

Am sure you have come across one of these. Apparently , they call it the Pepsi refrigerator. Search on google and you get 144000 results pointing to the same. Excuse me if I sound stupid

but I was really not aware that one is not supposed to keep products other than those manufactured by PepsiCo in these Pepsi-branded coolers. The same logic holds for all other breeds such as Cadbury Coolers, Coca Cola refrigerators et al. Till date, I was of the view that these banners/logos are purely brand promotions of individual products. Evidently, I was wrong ; This is a part of such products' business model and the below account shall describe how it all falls in place.

How does the system work?
The local franchisee of a particular product approaches the shops in the locality asking them sell only their product. The targets of such requests/proposals are shop owners at critical nodes and stages. The created monopolistic chain is lengthened by approaching many more such nodal shopowners.

Whats in it for the shopkeeper?
Ah, I am no Galileo. This is possibly the first question that even the 'baniyas' pose to the franchisee representatives. Heres the key. The fridge/refrigerator belongs to the company whose product is going to be enfranchised by the shopkeeper. Maintenance, Servicing and periodic cleaning of the refrigerator is completely managed by the product company. The shopkeeper safeguards his peace of mind at a relatively small CTS - Cost to Serve. He only needs to ensure that he is stocked with the products of the aforesaid company at all times. But is this really a little CTS? Well I do not think so. Lets place it against the Opportunity Cost of the baniya.

The Opportunity Cost
Well, the primary purpose of stocking products of only a single brand is to kill the demand for those of the brand's competitors. But this approach focusses on a scenario where all the brands are equally placed in the market in terms of their demand,differentiated product offerings and also their timing of production, shipping and delivery. But that is usually never the case. Demands for such FMCG products change by the day. New products or product lines launched can also play a huge role in shaping the demand. Convenience of Use and Availability is also key in brand loyalty retention. For example: Pepsi might have soft drinks available in tetra packs whereas Coke might not. Similarly, Pepsi might have employed a poor service in shipping which might be delaying its replenishment dispatch orders. In such a case, if the demographics of a locality are bent upon having the product in a particular form and quantity, their local convenience store does not give them that provision, they would rather go to a super market and shop for the month rather than compromise on every daily purchase. Carpet Bombing does not always solve the issue of a 'need based' marketing campaign. This is a huge opportunity cost to pay as the local convenience stores end up losing customers while aligning themselves to a larger objective of that product company. However, the 'baniyas' are not people to be cowed down by such externalities. Workarounds are devised and margins are maintained at a Green level.

The Workaround.
No prizes for guessing. The shopowners bribe the person who delivers the product line and checks for aberrations in the shopkeeper's conduct as per the unspoken agreement. The shopowners also extract intelligence about the existence and timings of periodic checks from the higher authorities of the said company. Who is the sufferer? It is the company which tries to establish the monopoly by getting the grass-root players in their favor. These companies end up doing all the dirty work of maintaining those refrigerators which ultimately house their competitors' products!.

That is one manifestation of an utterly complex microeconomic scenario for you.

The next time you visit a shop which houses multiple products from multiple brands, be sure to check the cases where these are stored. If you see a Coke standing comfortably in a 'Pepsi refrigerator' or a Kitkat snoring in a 'Cadbury Cooler Case' you know what went on behind the scenes.