Maharashtra distributors to stop supply of HUL products from Jan 1

Hindustan Unilever’s (HUL) distributors in Maharashtra will stop supplying its products in phases in the state from January 1. This is because the fast-moving consumer goods (FMCG) major has not come forward to discuss the issue of price parity between traditional and organised distributors. Organised distributors include firms like Jiomart and Metro Cash & Carry as well as B2B firms like Udaan and Elastic Run.

Distributors in the state have decided to stop supplying Kissan range of products, which includes ketchups and jams, from January 1. This will be followed by HUL’s face cream range under the brand Glow & Lovely eight days later if the company does not come forward to resolve the issue.

By mid January, distributors have decided to stop supplying Rin products, which include detergent soap and powder. They have also decided to stop supplying all of HUL’s products to retailers from February 1 if the matter is not discussed. HUL has over 150 distributors in the state. 

HUL responded to Business Standard’s query, in an email, saying, “General trade continues to be our largest channel and our distributors (redistribution stockists) are our valued partners.”

The company said it remains committed to enhancing capabilities in its general trade network and has taken several actions. These are deploying technology for order placements through its eB2B app, Shikhar, supporting distributors to increase their direct reach and launching specially-tailored programmes with academic institutions to help them be future-ready. 

It also said that during Covid, HUL extended support to ensure the safety and secure livelihoods of its distributor partners through initiatives such as vaccination drives and special insurance coverage.

“Our arrangement with our distributor partners is not exclusive. We sell and distribute our products across all channels such as general trade, modern trade, ecommerce and cash & carry B2B to make our brands available to shoppers and consumers. As the new channels evolve, we will continue to take up new initiatives with an objective to help scale up business for our distributors,” HUL said.

The move comes after the apex body of distributors sent two letters to FMCG companies against the price parity between traditional and other organised B2B distribution firms. These include both online and offline firms, which have entered the sector in the last few years.

This issue began as traditional distributors offer retailers margins in the range of 8-12 per cent compared with 15-20 per cent offered by big-box B2B stores and online distributors. Since the latter commits higher volumes, FMCG companies offer higher margins to big-box B2B players, giving them space to offer a higher margin to retailers. 

As a result, retailers have increasingly started to procure stocks from the organised channel of distribution, thus hurting traditional trade. 

The All India Consumer Products Distributors Federation (AICPDF), which has over 450,000 members, had sought a meeting with FMCG firms. 

In its list of demands, distributors have asked for uniform pricing and schemes across distribution channels in the country. So far, Nestle India, ITC, Dabur and Marico have discussed the issue with the traditional distributors but it still remains unresolved.

Among the list of demands given to FMCG companies is all schemes be offered on a primary basis (sales at the distributor level rather than retailer level) and margins be re-worked taking into account all incremental costs or linked with the wholesale price index.