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In order for CIMERWA to be in a position to better manage sales volumes, customer loyalty programs, market pricing and service and support levels, CIMERWA needed to migrate from the distributor model to that of a delivered service. The structured transition plan was over a 3 month period ending and was concluded by the end of April 2017.

Business Situation

CIMERWA is Rwanda’s only integrated cement producer. Established 30 years ago, the firm’s production plant is located in Bugarama, by the South Western border of Rwanda. It is the only company in Rwanda that mines raw materials, produces clinker concentrate and packs and sells cement for general and civil construction. Some of its products are exported to the DRC and Burundi. CIMERWA invested USD 170 million in a new modern dry process production plant at its head office in Bugarama with a capacity to turn out 600,000 tons of cement per year. The plant was commissioned in August 2015. CIMERWA is 51 per cent owned by PPC Ltd, Southern Africa’s largest cement producer. PPC Ltd has been in the cement business for more than 100 years and is a public company listed on the Johannesburg Stock Exchange. More than 70 percent of CIMERWA’s sales were done through 31 distributors, and 6 of those distributors make up 68% of the distributor volumes. The distributor model arose as historically CIMERWA’s value proposition was insufficient to meet the market requirements. The distributor agreements were governed by a contract which binds distributors to volumes targets and exclusivity of distribution of CIMERWA product only. Of the 31 distributors, only two were achieving their volume targets. It had, therefore, become evident that the distributor model had many pitfalls such as disintermediation from the customer, limited control over market pricing, high risk exposure of losing significant volumes if a distributor leaves to join a competitor, increasing shift of power base to distributors and limited levers for CIMERWA to use to increase sales. The Kigali rebate table and ex-factory discounts that distributors enjoy were also prohibitive for small to medium size retailers to buy directly from CIMERWA, and thereby pushing volumes to distributors. In order for CIMERWA to be in a position to better manage sales volumes, customer loyalty programs, market pricing and service and support levels, CIMERWA needed to migrate from the distributor model to that of a delivered service. The structured transition plan was over a 3 month period ending and was concluded by the end of April 2017.

Transnova's Role

The transition from a “distributor model” to a “delivered service” model is a sensitive matter and needs to be well managed so as to ensure that the risk of loss of sales is minimized over the transition period. Transnova assisted CIMERWA in compiling a comprehensive transition plan that included:

  • Using Transnova’s expertise in sourcing transporters, negotiating rates and maintaining business relationships that maximize synergy and healthy yet competitive terms between carriers and shippers
  • Transitioning large distributors to transporters
  • Revising the rebate table to be more inclusive and accessible to small retailers
  • Increasing CIMERWA’s value proposition by bolstering the back office (people, processes and systems)
  • Increasing transport capacity and adopting a nodal pricing strategy

Why This Case Study Is Relevant

The design and implementation of the new route-to-market strategy showcased the benefit of Transnova’s supply chain expertise. The successful implementation of the transition plan contributed significantly to impressive improvements in CIMERWA’s strategic positioning in the Great Lakes cement industry, resulting in:

  • Increased sales volumes from 10 000 tons per month to 35 000
  • Ensured product availability in Kigali at a lower cost
  • Reduced the dependency on the distributor model thereby breaking their stranglehold on the market
  • Provided customers with a direct delivery service with product available in a matter of hours not days
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