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MUMBAI : Distributors are likely to delay the 1 January deadline they set to stop working with consumer goods companies to pressure them to offer similar product prices and margins the companies give new distribution platforms such as Reliance Industries Ltd’s JioMart and Udaan.

The decision comes as talks between the fast-moving consumer goods (FMCG) companies and distributors are set to spill over to the new year, a distributor said on condition of anonymity.

Industry body All-India Consumer Products Distributors Federation (AICPDF) held meetings last week in Delhi with companies such as Nestle India and ITC. In the meetings, FMCG companies reiterated their faith in traditional trade channels but added that they would continue to engage with new channels to drive growth.

Godrej Consumer Products Ltd, which sells Cinthol soaps, said it intends to work with traditional channels without neglecting the emerging ones. “We are very clear that we will have to partner and take care of our traditional channels without neglecting the emerging channels," said Sunil Kataria, chief executive, India and SAARC. “We have been very cautious and very particular about not disturbing our general trade economics. At the same time, we will participate in modern trade and e-commerce. As a company, we do ensure price parity."

Emails sent to spokespeople for Hindustan Unilever, ITC Ltd and Marico Ltd remained unanswered. Dabur India declined to comment.

Nestle said all its relationships across the value chain are based on fairness and respect. “Our focus has always been to maximize our channel coverage to ensure our products are easily accessible to our consumers," said a Nestlé India spokesperson.

In a November interview, Saugata Gupta, managing director of Marico, said that online business-to-business platforms should be seen as distribution multipliers in markets where distribution is weak or as a means to drive challenger brands. “You cannot have zero channel conflict but can minimize it," he said.

Biscuit maker Parle Products recently stopped supplying stocks to e-commerce platform Udaan, alleging that the platform was competing with its established network of distributors by offering products at a lower price to retailers.

Krishnarao Buddha, senior category head at Parle Products, said that while there are benefits when it comes to working with online business-to-business (B2B) platforms, it expects price parity and discipline in the market.

Udaan approached the anti-trust regulator against Parle Products in September, alleging that Parle abused its dominant position as a leader in the biscuit category by refusing to supply directly to Udaan.

A spokesperson for Udaan declined to comment.

As much as 60% of the general trade market for FMCG goods is serviced by authorized distributors, 35% by wholesalers, while the remaining 10% is serviced by large wholesalers and business-to-business distributors.

AICPDF alleged that FMCG firms offer better deals to both online as well as offline companies such as JioMart, Walmart, Metro Cash and Carry, Booker, Elasticrun and Udaan, which helps such platforms provide cheaper products to retailers. The body has sought a level-playing field, asking FMCG firms to maintain price parity between the two channels.

Earlier this month, AICPDF gave FMCG companies until 1 January to resolve the issue of parity in prices, failing which the body threatened a “non-cooperation movement" against FMCG companies. The federation also said they would delay the launch of new products if their demands remained unmet. FMCG companies typically appoint thousands of distributors to maximize their retail reach. For instance, Parle Products works with more than 8,000 distributors.

In some pockets, though, e-commerce business-to-business (eB2B) platforms are gaining ground. In Gurugram, for instance, JioMart garnered more than 25% share of distribution within six months of operations, according to a recent report by Kotak Institutional Securities. The note cited cheaper product prices as the reason for the company swiftly grabbing market share.

Several FMCG executives who spoke on condition of anonymity said many of the new-age platforms could be using pricing as a tactic to gain market share. For instance, a large carton of biscuits that a company-appointed distributor sells for 550 to the retailer could be sold at 500, hurting distributors’ businesses.

In its letter, AICPDF said that prices offered by such platforms to the retailer are much lower than the landing price of the distributor. Distributors work on a margin of between 5-6%, while B2B companies’ margins are well over 15% since fewer middlemen are involved. As a result, B2B distributors can offer better deals to shopkeepers.

AICPDF demanded that companies ensure that no preferential treatment is given to any enterprise irrespective of their volumes. “Our demand is only one—we need price parity in the market. We are not afraid of any competition," said Dhairyashil Patil, national president, AICDF. Meetings held so far were “positive", he said.

Others said that such conflicts would continue to surface as India moves from unorganized trade to organized. “New formats offer a clear advantage such as convenience and transparency to retailers. For FMCG companies, it means more refined data", said Ullas Kamath, joint managing director, Jyothy Labs.

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