Gujarat-Based Distributors Stop Stocking Goods Of Six FMCG Companies
FMCG companies are said to give higher discounts to hypermarkets, supermarkets and e-commerce players compared to bulk dealers.
Bulk dealers of consumer goods in Gujarat have stopped stocking products of six companies for the last 20 days as the FMCG companies offered higher discounts to hypermarkets and supermarkets.
A total of 650 distributors in the state have stopped stocking goods of Godrej Consumer Products Ltd., Marico Ltd., Dabur India Ltd., Emami Ltd., Britannia Industries Ltd. and Reckitt Benckiser (India) Ltd., Arun Parikh, chairman at Federation of Gujarat FMCG Distributors Association, told BloombergQuint. The total number of distributors in Gujarat are 7,000 for 21 consumer goods companies.
Besides offering higher discounts, Parikh said these six companies directly started supplying to hypermarkets and supermarkets.
BloombergQuint emailed queries to all the companies. While Godrej, Marico, Dabur, Emami and Britannia are yet to respond to the queries, Reckitt Benckiser said its spokesperson is currently unavailable for any comment at the moment.
The distributors said the FMCG makers have been unfair in the profit margins they offered to modern trade outlets and online retailers, who in turn are using these to lure small retailers, or kirana stores, away from wholesalers, Parikh said. The discounts offered to hypermarkets, supermarkets and e-commerce companies across categories are 15-20 percent more than that offered to traditional distributors, he said.
Members of the Federation of All India Distributors Association are set to meet over this weekend and will take a call on the way ahead.
Business Standard reported that this stir is threatening to go national.
Bulk suppliers, dubbed general trade, are the mainstay of the about Rs 4-lakh-crore FMCG industry as, according to Nielsen India estimates, they contribute 90 percent to the factory-gate sales. Hypermarkets, supermarkets and online retailers contribute the rest.
But with customers switching to modern retail outlets and e-commerce platforms, which provide lucrative offers, distributors are hurting. That has aggravated as Indians cut back spending on biscuits and shampoos to cars amid stagnated wage growth and fall in rural incomes, leading to bloated inventory of distributors and forcing 5,000 suppliers across the country out of business in the last six months.
Value growth—a combination of volumes and price-led expansion—of FMCG companies rose at its slowest pace in seven years during the quarter ended September, according a report by Nielsen India.
That’s also reflected in a BloombergQuint survey of nine large FMCG distributors across India that showed demand for consumer goods failed to pick up during the quarter and credit days rose. Against this backdrop, the consumer goods makers have begun to accept delayed payments from distributors.