Reading: Channel Flows

Channel Flows

One traditional framework that has been used to express the channel mechanism is the concept of flow. These flows reflect the many linkages that tie channel members and other agencies together in the distribution of goods and services. From the perspective of the channel manager, there are five important flows.

  1. Product flow: the movement of the physical product from the manufacturer through all the parties who take physical possession of the product until it reaches the ultimate consumer
  2. Negotiation flow: the institutions that are associated with the actual exchange processes
  3. Ownership flow: the movement of title through the channel
  4. Information flow: the individuals who participate in the flow of information either up or down the channel
  5. Promotion flow: the flow of persuasive communication in the form of advertising, personal selling, sales promotion, and public relations

Monster Channel Flow

The figure below maps the channel flows for the Monster Energy drink (and many other energy drink brands). Why is Monster’s relationship with Coca-Cola so valuable? Every single flow passes through bottlers and distributors in order to arrive in supermarkets where the product will be available to consumers.

Five Flows in the Marketing Channel for Monster Beverages. Product Flow: Manufacturer flows to transportation company flows to public warehouse flows to transportation company flows to bottlers and distributors flows to supermarkets flows to consumers. Negotiation flow. Manufacturer flows to bottlers and distributers flows to supermarkets flows to consumers, and consumers flow to supermarkets. Ownership flow: Manufacturer flows to bottlers and distributers flows to supermarkets flows to consumers, and consumers flow to supermarkets. Information flow. Manufacturers flow to transportation company, to bottlers and distributors, to supermarkets, and to consumers. Transportation company flows back to manufacturer and to public warehouse. Public warehouses flows to first transportation company and second transportation company. Second transportation company flows to public warehouse and to bottlers and distributors. Bottlers and distributers flow to transportation company and to supermarkets. Supermarkets flow to bottlers and distributors and to consumers. Consumers flow to supermarkets. Promotion flow: Manufacturer flows to advertising agency, to bottlers and distributors, to supermarkets, and to consumers. Advertising agency flows to bottlers and distributors, to supermarkets, and to consumers. Bottlers and distributors flow to supermarkets and to consumers. Supermarkets flow to consumers. Consumers flow to supermarkets.

Coca-Cola explains the importance of the bottlers in the distribution network:

While many view our Company as simply “Coca-Cola,” our system operates through multiple local channels. Our Company manufactures and sells concentrates, beverage bases and syrups to bottling operations, owns the brands and is responsible for consumer brand marketing initiatives. Our bottling partners manufacture, package, merchandise and distribute the final branded beverages to our customers and vending partners, who then sell our products to consumers.

All bottling partners work closely with customers — grocery stores, restaurants, street vendors, convenience stores, movie theaters and amusement parks, among many others — to execute localized strategies developed in partnership with our Company. Customers then sell our products to consumers at a rate of more than 1.9 billion servings a day.[1]

Revisiting the channel flows we find that the bottlers and distributors play a role in each flow. Examples of the flows are listed below. Remember, while the consumer is the individual who eventually consumes the drink, the supermarkets, restaurants, and other outlets are Coca-Cola’s customers.

  • Product flow: the bottlers receive and process the bases and syrups
  • Negotiation flow: the bottlers buy concentrate, sell product and collect revenue from customers
  • Ownership flow: distributors acquire the title of the syrups and own the product until it’s sold to supermarkets
  • Information flow: bottlers communicate product options to customers and communicate demand and needs to Coca-Cola
  • Promotion flow: bottlers communicate benefits and provide promotional materials to customers
Cans of Monster Energy Drink in different colors.

 

  1. http://www.coca-colacompany.com/our-company/the-coca-cola-system/ ↵