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New Delhi: FMCG distributors have pledged to stop selling select products of packaged goods major Hindustan Unilever Ltd. in Maharashtra, citing concerns over the company's inability to engage in a dialogue with them over price disparity between traditional distributors and organized business-to-business distributors.

Maharashtra is a key market for the maker of Dove shampoo and Bru coffee. Queries sent by Mint to HUL over distributors' non-co-operation did not elicit a response.

The move comes as All India Consumer Products Distributors Federation or AICPDF—an industry body that represents dealers and distributors of fast-moving consumer goods companies -- has been urging FMCG companies to address issues faced by offline distributors on account of business-to-business companies such as JioMart, Walmart, Metro Cash and Carry, Booker, Elasticrun and Udaan.

In all, AICPDF wrote to 24 FMCG companies. The federation has met three companies, conversations are on with 8-9 more companies and these have acknowledged the problems faced by distributors, said Dhairyashil Patil, national president, AICDF. Some companies such as HUL and Colgate Palmolive (India) Ltd., said AICPDF, have not yet acknowledged the federation’s demand.

The association could take similar action against Colgate Palmolive, Patil said.

The federation that represents over 4,00,000 distributors and stockists has sought pricing parity and similar margins that are offered to organized business-to-business distributors. The federation claims that new-age players are distorting the traditional distribution system by dumping similar products at lower prices to end retailers.

Mint had earlier reported that AICPDF’s protests could spill over to the next year as meetings with companies are still ongoing. Some FMCG companies have reiterated their faith in traditional trade channels but added that they would continue to engage with new channels to drive business.

HUL’s lack of response is a major concern for distributors, AICPDF representatives said.

In the first leg, they will stop supplying HUL’s Kissan fruit jams and ketchups to retail stores in Maharashtra starting 1 January, and then move to HUL’s beauty and cosmetics portfolio including brands such as Glow & Lovely, over the next 8-10 days in the absence of any communication from the company. It will subsequently stop supplying Rin detergent bars in the state.

“Dialogue is very important—irrespective of the resolution it just shows that they don't care what the distributor is worried about. This could mean they have reservations or have high-stakes involved in the system," said Patil.

The federation has written and communicated with HUL multiple times, Patil said.

“We are not against the company or disrupt the supply chain—we just want to tell them that we are in distress and they need to speak to us and figure out a solution. We are not in a state of war, we want to be heard--whatever the solution," he said.

In a note on the matter, brokerage Edewlweiss said that it does not expect the distributor boycott to have a significant impact on HUL as shops and consumers can easily buy from online and organised players.

“Important to note that HUL now services 15% of its demand digitally, which is a significant advantage (but wasn’t so a few years ago). HUL dominates most categories and has a strong consumer-pull," it said.

In a response to Mint, an HUL spokesperson said its arrangements with distributor partners are ‘not exclusive’. 

"We sell and distribute our products across all channels such as General Trade, Modern Trade, eCom, Cash & Carry B2B etc to make it convenient for our shoppers & consumers to buy our trusted brands. However, based on shopper buying habits, channel structures and cost of operations the assortment offered could be different. As channels evolve, we will continue to take up new initiatives with an objective to help scale up business for our Distributors and to strengthen our distribution," it said.

The company said that general trade continues to be its largest channel and its distributors (redistribution stockists) are and will remain its valued partners. 

"We remain fully committed to ensuring that our distributors earn a fair return on their investments and in enhancing capabilities in our GT network. We have taken several actions such as deploying technology for order placements through India’s largest eB2B app, Shikhar and in supporting our Distributors to increase their direct reach. We have also introduced specially tailored programmes with reputed academic Institutions to help them hone their business skills and become future-ready," it added. 

HUL has a long-standing relationship with its distributors that is based on trust and mutuality of interest, the spokesperson said. "Our distributors have overwhelmingly conveyed to us that they will rebuff any attempts to create a wedge between the Company and our trusted distributors," the spokesperson added. 

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