HUL streamlines supply chain to kirana stores, lowers credit limit barriers

FMCG major HUL is enhancing its distribution model by directly supplying kirana stores, aiming to cut delivery times and ease credit constraints, thereby improving service and supply efficiency

Hindustan Unilever (HUL) is strengthening its control over the distribution process by directly supplying products to kirana stores in Mumbai. The company plans to expand this model to Delhi and other major metro cities, according to a report by The Economic Times.

 

This new initiative is part of HUL’s broader strategy to cut down delivery times from three days to under 24 hours. The goal is to ease credit limitations for kirana stores, which account for around 75 per cent of HUL’s sales, the report said.

New distribution model

In this updated distribution model, distributors will be responsible only for handling orders and payments from local stores. HUL will oversee all back-end logistics, including warehousing and delivery.

 

 

The Economic Times quoted Arun Neelakantan, executive director of customer development at HUL, as saying that the company aims to provide optimal service to kirana stores, ensuring timely delivery and addressing the challenges they face with inventory and capital.

 

HUL boasts the largest distribution network in India, with over 3,500 distributors across 2,000 towns. This network reaches nine million stores, including direct access to three million outlets.

 

HUL’s new distribution model, called ‘Samadhan’, was first tested near Chennai almost two years ago. This model is designed to compete with B2B e-commerce startups that offer next-day delivery and serve multiple companies at once.

Dominance of kirana stores

Kirana stores dominate the FMCG market in India, controlling nearly 80 per cent of sales. Organised retail and wholesalers, such as Flipkart Wholesale and Udaan, make up around 5 per cent, but they have more leverage in supply and pricing due to their scale, the report said.

 

The traditional distribution model, while effective, is labour-intensive and prone to errors. Distributors help maintain strong relationships with kirana stores and ensure they remain integral to the supply chain. Under HUL’s new model, distributors’ returns will remain the same, while the company will cover warehousing costs.

Enhancing e-commerce teams

HUL has also established specialised sales teams for each of its e-commerce sectors, including marketplace, quick commerce, and beauty retailers. With around 200 employees, half of this team has digital or technology experience, offering a fresh perspective on the company's approach to e-commerce.

 

HUL continues to enhance its internal ordering app, Shikhar, which allows kirana stores to place orders directly with the company. Currently, Shikhar generates more than a third of HUL’s total sales, the report said.