In Peru, with over 250,000 mom and pop stores to cover, Coca Cola partners their bottling partner, the Lindley Group. Recently, a local discount competitor was cutting price dramatically and this put Coca Colas costs under close scrutiny. The Lindley Group outsourced its entire distribution function to 70 wholesalers with their lower cost base and a detailed understanding of micro market conditions. This move required close supervision, significant investment in IT applications and continuous training and support. For example, Lindley defined the sales routes, coached sales management techniques and assisted in the use of technology.
The Lindley Group has grown sales in the Peruvian mom and pop channel by an average of 10% per year since 2005 and has reduced distribution costs by more than 60%. Sales and distribution are no longer fixed costs for the company as payment is linked to results. [i] It was the second time that Lindley had transformed the business model. The first time was when Coca Cola had arrived in the market and failed to beat Lindley at the distribution game into the informal market. Finally, in 1999, Coca Cola had to buy 50% of the Lindley Group for a reputed $300 million largely due to its understanding of the local market and especially how to access informal opportunities. The symbol of this success throughout has been their Inca Cola, a bright yellow concoction based on hierba luisa, lemon verbena. [ii]