- FMCG distributors across the country are revolting against manufacturers like HUL, Procter & Gamble, Dabur, etc. with regard to price disparity.
- They feel that FMCG companies and new-age distributors are destroying their business and harming their goodwill and reputation.
- The AICPDF’s demand is that traditional distributors also get goods at competetive prices and margins, just like their counterparts.
FMCG distributors across the country are revolting against manufacturers like HUL, Procter & Gamble, Dabur, etc. This chain of distributors is very extensive and is responsible for getting products on the shelves of neighbourhood stores and ultimately making them reach consumers.
On December 30, 2021, FMCG distributors in Maharashtra were planning to stop selling select products of leading firm HUL from January 1, as the company did not engage in talks with them over the issue of the price disparity between traditional distributors and organized B2B distributors.
A spokesperson from HUL said that based on shopper buying habits, channel structures and cost of operations the assortment offered could be different.
The All India Consumer Products Distributors Federation (AICPDF), a body that represents dealers and distributors, is in negotiation with several FMCG makers. It had earlier called for a “non-cooperation” movement against FMCG companies from 2022 if B2B retailers, such as Jiomart, Walmart, Metro Cash & Carry, Booker, ElasticRun and Udaan, continue to sell the products at lesser prices.
Earlier, the AICPDF had written to companies informing them that B2B retailers are offering FMCG products to the retailers and local shops at lower products, what they offer and it is now “adversely affecting” their reputation and goodwill.
“Hence, our demand is that we also receive those products at prices at which we can also offer the same prices as Jio Mart/ B2B companies,” the association had said in an open letter to FMCG companies.
During the height of the pandemic, there were lockdowns and disruptions in the supply chain. Distributors and retailers that owned these neighbourhood stores weren’t able to move around or sell goods. They faced losses.
FMCG companies realized that they needed a parallel channel of distribution, apart from the traditional one. New age distributors that were backed by venture capital and private capital, like JioMart, Metro Cash & Carry, Jumbotail and Udaan gained impetus. They could pay for goods immediately, unlike traditional distribution channels, where a credit period of 10 to 15 days was required.
FMCG companies returned the favour by selling goods to these new-age distribution channels at a lower price. As a result, they could offer large margins of 15% to 20% as compared to traditional channels that could offer only 7% to 12% over products sold.
Many shop owners switched to these new-age distribution channels that have apps and deliver products much faster. Traditional distributors felt that FMCG companies and these new-age distribution channels are destroying their distribution networks.
Traditional channels supply goods to 90% of the retail market, as there are many people who buy offline, therefore FMCG brands would not want to upset traditional distributors entirely. Traditional distributors have decided to stop supplying certain popular consumer products to local stores until FMCG companies give them similar margins and prices as are given to organized, new-age distributors.
Newer channels like JioMart are important to some FMCG brands but overreliance on them could prove to be detrimental to their business, especially if these B2B distributors start their pushing their private label brands to neighbourhood shops using their apps.
