FMCG distributors body All India Consumer Products Distributors Federation (AICPDF) has said that will organise a protest in New Delhi on 4 February against the alleged bias from packaged consumer goods companies favouring organised and internet-based B2B firms such as Udaan, Walmart Best Price, Metro Cash and Carry, etc. The distributors body has been demanding price parity between organised players and traditional distributors.
“Distributors from across the country will be attending dharna with covid protocols in place and representatives from 25 states will attend the protest. We seek the attention of Prime Minister Narendra Modi and the government and demand that they take action to save the livelihood of around 8 crore Indian retail traders fraternity. We demand that there be a reduction in the interest rate of collateral based trading loans to 5 per cent,” said AICPDF President Dhairyashil Patil.
The association is also asking the FMCG companies to introduce a minimum retail price for distributors on the same line as MRP offered to customers.
The impact: Will stores run out of goods?
The tiff between the distributors and FMCG companies over this issue has been on and off for over a month now. AICPDF had first written to major FMCG companies in December 2021 demanding price parity between traditional and online distribution channels. It says that traditional distributors are able to offer retailers margins of only 8-12 per cent against 15-20 per cent offered by B2B distribution firms, both online and offline, since the latter gets better and discounted prices from the FMCG companies because organised trade channels of distributors commit higher volumes to FMCG brands.
So, what does this entail for the FMCG firms, kirana stores, and consumers? If continued, the stand-off might mean that there will be a shortage of daily use items from across brands at kirana stores in the days to come. This might prove even more detrimental at a time when the companies are trying to stock up and ensure smooth supply during the ongoing third Covid wave, in case of any more movement restrictions or curfews.
“Traditional distribution is a critical channel and forms more than 90 per cent of the overall business,” an senior executive from a major food FMCG company said. “There will be no shortage initially and there usually is seven days’ inventory in general and around 15 days’ inventory during deep offerings on a particular brand.” But there may be a possible shortage if protest goes on for more days, he told Financial Express Online, requesting anonymity. Also, most FMCG firms expect that the protest will not extend, since they have reached an understanding with the distributors and are continuously working towards solving the issue at hand, for good.
Distributors’ show of power
Even as the FMCG firms are devising strategies to level with the distributors, and some have even ‘launched exclusive packs for different channels’ in order to remove the alleged bias, distributors are still looking for a permanent solution in the form of price parity.
Harish Bijoor, Business and brand-strategy expert, said, “If continued, the standoff between distributors and FMCG companies is bound to bite the consumer in terms of the widespread availability of some brands. Typically, distributors hold two weeks of stock and retailers likely hold just about a 1.1 weeks’ stock on shelves. The idea of the distributors’ organisation, here, is to twist precious fingers to showcase serious intent, rather than twist the full arm itself.”
Meanwhile, the Confederation of All India Traders (CAIT) has said that it is launching a month-long national campaign “Vyapari Samvad” from February 01 to 28. Through this, it will also conduct a survey on retail trade of India, in terms of its potentiality and capacities, challenges faced by the traders and suggestive remedial measures.
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