Battle Over Margins Brews Between Britannia And Its Distributors
Britannia locked in a faceoff with distributors over margins.
Britannia Industries Ltd. is locked in a faceoff with its distributors in Kerala over margins.
The food and dairy products maker stopped supplies to its dealers in Kerala earlier this month after they demanded higher margins. The confrontation is likely to spill over as distributors from other states have also raised similar demands.
“Britannia is not willing to understand the issues regarding rising operating costs,” said Dhairyashil Patil, national president, All India Consumer Products Distributors’ Federation. “We will stand by Kerala distributors.”
Bulk dealers from the state demanded higher margins from the maker of Good Day biscuits citing an increase in third-party insurance costs and costlier transportation. The Goods and Services Tax has increased costs further as traders now have to file returns monthly and spend on IT infrastructure, said Patil.
Britannia said “no comment” in reply to an emailed query by BloombergQuint. The company has filed a caveat in a Kochi court, according to a document obtained by BloombergQuint. While its lawyer confirmed the development over the phone, the company didn’t immediately reply to a second email.
Distributors sought higher margins from other fast-moving consumer goods makers as well, said Syama Prasad Menon, president of All Kerala Distributors Association. “While some companies have already increased margins, others are open to a discussion,” he said.
How Did It Start
Distributors first wrote to Britannia on November 28 asking it to increase their margin from 5.5 percent to 6.5 percent. The association said it did not receive a response to any of the five letters it wrote to the company and its Chief Executive Officer Varun Berry since November. BloombergQuint has obtained copies of the letters.
Even as bulk dealers were paring stock ahead of GST implementation from July 1, Kerala distributors did not buy Britannia’s products from June 20 till month-end as a sign of protest.
Britannia responded by refusing to supply stock in Kerala after June 30, the dealers’ association said. The company asked them to increase the distribution infrastructure, it said.
“They want us to have two salesmen on two motorcycles to cover the same number of retail outlets otherwise covered by one,” said Menon. This will increase costs even more, he said.
The deadlock continues with both the company and the distributors holding their ground so far.
