FMCG Distributors Warn Companies Against “Non-Cooperation”, Seek Price Parity
The umbrella organization of consumer goods distributors (FMCG) has written to companies against the price disparity between traditional distributors and other organized business-to-business (B2B), online and offline distribution companies, which have entered the sector in the last few years.
Higher margins (or lower product prices) offered by FMCG companies to players like JioMart, Metro Cash & Carry, and Booker, and B2B e-commerce companies like Udaan and ElasticRun, are hurting retail businesses. traditional distributors, said the Indian Federation of Consumer Products Distributors (AICPDF), which has more than 450,000 members. He requested a meeting with FMCG companies to resolve the issue.
âLarge discounts offered by other players create a monopoly and destroy traditional commerce, which still manages the crucial supply chain for all FMCG companies,â Federation president Dhairyashil Patil told Business Standard , adding that the situation was pushing up unemployment. âWe are not opposed to consumer benefits, but on a business level it is unethical to spend money offering predatory pricing to retailers,â Patil said.
Traditional distributors offer retailers margins in the range of 8-12%, compared to the 15-20% offered by big-box B2B stores and online distributors.
The AICPDF has said that if its demands are not met, it will launch a “non-cooperation movement” against the mass consumption companies from January 1. In its list of demands, the distributors asked for uniform prices and schedules for all distribution channels in the country.
Distributors requested that all programs be offered on a primary basis and that margins be reworked taking into account any incremental or wholesale price index costs. The letter states that all secondary plans (available to retailers) should be in the form of financial credit scores, and enterprise resource planning (ERP) should be defined as after-tax and not before-tax, as this would free up its capital blocked at entry. tax.
A financial credit is issued by companies on devices offered to merchants and is facilitated by distributors. If this is done in the manner recommended by distributors, then the distributor can opt for the input tax credit. Regarding the ERP, explained one distributor, the company should pass the plan amount on the main invoice given to the distributor, which is currently done on the secondary invoice (which is the invoice to the retailer).
He also asked companies to take back damaged, expired, and failed launch inventory at margins (new product launches that have not performed well in the market) equal to base margin. The Federation also called for new agreements and a draft committee, with representatives from all parties involved, in addition to a regulatory body in each state.
The AICPDF letter states that each FMCG company should appoint an independent ombudsperson to review complaints from the entire trade channel made up of clearing and transit agents, distributors and resellers.
Consumer companies Hindustan Unilever, Tata Consumer Products, ITC, Marico, Dabur, Britannia Industries, Mondelez India, Godrej Consumer Products, Reckitt Benckiser (India) and Colgate Palmolive India had not yet responded to Business Standard’s email requesting comments.
NestlÃ© India confirmed having received the letter. âOur goal has always been to maximize the coverage of our channels to ensure that our products are easily accessible to our consumers,â said a spokesperson for NestlÃ© India, adding that âall of our relationships throughout the value chain are based on fairness and respect “.
The distributors body has stated that if they do not enjoy the same margins as new-age distributors, regardless of the volumes, they will not sell products or storage units (SKUs) sold through B2B channels. organized.
âIf the company is not able to give us a level playing field, we will remove from our portfolio the products sold by the Jiomart / B2B companies,â the letter said. Traditional distributors will also not deliver new business launches to retailers.
They will also refuse to meet the primary (sales) target set by businesses (to distributors) but will continue to serve retailers, he said. The AICPDF also said that the traditional distribution channel will not pick up expired inventory from retailers.