Metro Cash and Carry India stops stocking Mondelez products over margins

The maker of Dairy Milk chocolates decided to cut margins by 25-30% for the German-headquartered company

It’s been over three months since Metro Cash & Carry India stocked up on Mondelez India’s products. The fast-moving consumer goods (FMCG) company had asked the membership-based wholesaler to procure goods at lower margins. 

The maker of Dairy Milk chocolates decided to cut margins by 25-30 per cent for the Düsseldorf-headquartered self-service wholesaler.

“We have stopped doing business with Mondelez in India. We don’t sell their products because they asked us to cut our margins by 25-30 per cent. This is unacceptable,” said Arvind Mediratta, managing director and chief executive officer, Metro Cash & Carry India.

“We are unable to have a sustainable business relationship with Mondelez India. The margins were squeezed, and it was a win-loss proposition. It doesn’t even cover the cost of running the business and is not good from a long-term sustainable standpoint,” he added.

On several occasions, Metro Cash & Carry India tried to renegotiate, but Mondelez India was being unreasonable, he said. “We have a great working relationship with other big suppliers who have a much stronger partnership mindset,” added Mediratta. 

Mondelez India sold approximately Rs 100 crore worth of confectionery through the wholesaler in a year. In 2020-21, its revenue was Rs 8,038 crore. 

Mondelez India did not respond to Business Standard’s email seeking its views on the story till the time of going to press. 

In another margin war, distributors of FMCG products across the country have written to companies against price disparity between them and other organised business-to-business (B2B) distribution companies, both online and offline, that have entered the system in the past few years.

The All India Consumer Products Distributors Federation in its letter to consumer companies has asked for a meeting with FMCG companies to resolve the issue of pricing parity between its existing traditional network of distributors and other B2B distributors, which include JioMart, Metro Cash & Carry, Booker, and e-commerce B2B companies like Udaan and ElasticRun, among others.

This comes on the back of retailers increasingly buying from new-age distributors since margins offered to them are higher compared to what traditional distributors offer. 

Traditional distributors offer retailers margins which range between 8 per cent and 12 per cent, compared with 15-20 per cent offered by big-box B2B stores and online distributors.

The All India Consumer Products Distributors Federation (AICPDF), the apex body of FMCG distributors which has over 450,000 members, has said that if its demands are not met, then it will start a non-co-operation movement against all FMCG companies from Jan 1, 2022. In its list of demands, distributors have asked for uniform pricing and schemes across all distribution channels across the country.

Similar issues have in the past come up in other consumer segments.

In late 2019, for instance, a similar fight was seen in the mobile phone segment where offline mobile retailers had written to companies asking them to stop deep discounting on online platforms and also accused manufacturers of diverting most of its stocks to e-commerce platforms in order to avoid giving margins to offline retailers and maintain profitability. Offline retailers had also said that they will not sell handsets of those companies if discounts given online were not controlled.