HUL may lose potential distributors in India after expansion plan is rejected
INDIA – Hindustan Unilever Limited (HUL), India’s subsidiary of Unilever, has received a backlash from the All-India Consumer Products Distributors Federation (AICPDF) over a move to appoint new distributors in Madhya Pradesh.
AICPDF said the move has led to a loss of confidence in the entire distribution system in the state for fast-moving consumer goods (FMCG) at a time when the FMCG market in India is reported to have expanded by 7% in value and fallen 5% in volume in the quarter ended June.
The apex body of distributors in India has threatened a mass resignation to protest the move, while the leading manufacturer has maintained it is not removing any current distributors and values relationships with them.
HUL, which has a huge distributors’ network in Madhya Pradesh, sought new distributors for several of its popular brands across all major cities in the state.
In an advertisement issued locally, the company said the distributors should be willing to invest ₹1-3 crore (US$126,000-US$375299) in the business and should have wide distribution experience, which includes godowns with the necessary infrastructure.
Dhairyashil Patil, National President, of AICDF, commented: “Distributors working with the company for years across the state will submit mass resignations as the move has created a lot of uncertainties over their future.”
HUL Distribution Business warrants crores of investments particularly in Extending Credit facilities to Retail Traders for Sustaining and Growing HUL Businesses at risk. If New Distributors are proposed to be appointed, all Existing Distributors will lose a minimum of 50% of their investments with Retail Trade.”
However, issuing a statement, HUL said the advertisement relates to expanding our work with General Trade distributors and is not about removing our current distributor.
The company believes the prospects for general trade business are bright in the region and are looking to partner with distributors to leverage opportunities.
Over the past several months, the distributors have been in ire with FMCG companies, as the companies have added a stream of revenue by partnering with e-commerce players who directly buy the products from the companies instead of buying them from a distributor.
While this gives eCommerce players pricing and discounting power, distributors have alleged that the eCommerce players are latching on to deep discounting thus creating a dent in their revenues.
In fact, members of the federation wrote to FMCG companies seeking pricing parity and similar margin that are offered to organized business-to-business distributors.
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