Distributors of fast moving consumer goods (FMCG) said they have been given assurances by large consumer goods firms that going forward products given to key distributors and those supplied to large business-to-business or organised wholesale stores and B-2-B e-commerce sellers will be priced at parity and bear similar offers.
Dhairyashil Patil, national president at The All India Consumer Products Distributions Federation (AICF) said that over the last month some distributors have had conversations with companies such as Marico, ITC, Dabur, that have assured them that they will safeguard the interest of traditional distributors that have been agitating over discriminatory pricing by FMCG companies.
“We have written to all CEOs of top FMCG companies wherein all the companies have responded and called us to their head office—HUL, ITC, Marico, Dabur—all of them have called us. They have given a detailed presentation to us as to what is the contribution of modern trade in their sales and what are the steps they are taking to safeguard the general trade,” Patil told Mint.
Distributors in parts of India have been agitating against FMCG companies over claims that disparity in offers and prices being offered by them to modern trade and e-commerce retailers are harming their business. They are also sceptical of physical wholesale or cash and carry stores as well as online B2B stores that Patil claims have become like distributors themselves. They are now even deploying their staff on ground to supply goods in bulk to retailers directly thereby shrinking the dominance of large distributors, he pointed out.
“Some of these B2B stores are selling at a price lower than the landing cost of the distributor and that is what we have asked all these companies to look in to it,” he said.
India relies largely on small traditional retail stores or kiranas that form the backbone of the country’s retail trade and help the sale of goods of daily use. These stores are in turn supplemented through large distributors who work with FMCG companies and distribute their stocks to retailers and wholesalers.
However, over the last few years, more FMCG companies have expanded their direct reach, while the sale of daily groceries has also moved online with FMCG companies dedicating a separate sales team to deal with online retailers. Moreover, the expansion of wholesale or cash and carry stores (such as Metro Cash & Carry, Walmart and LOTS) has given small retailers more avenues to stock up on products such as soaps, shampoos, pulses and much else than rely solely on distributors. This has squeezed their scope of business.
Earlier this year, over 4 lakh distributors threatened to stop stocking goods sold by FMCG firms over issues related to discriminatory pricing, according to a November report in The Times of India.
But Patil said the recent conversations have helped clear doubts. “The companies have assured us and told us that they will take necessary measures because it is spoiling their brand–because if a brand is being continuously discounted, it loses ground in the mind of the retailer and the trade fraternity,” he said. “We have been given assurance that they want to move towards lowering price parity,” he said.
