After Hindustan Unilever, it is now Colgate Palmolive India.
Distributors have decided to stop supplying products of Colgate Palmolive India (Colgate India) in Maharashtra in phases from January 1 owing to the issue of price disparities between the traditional trade and organised channel, which includes players like Jiomart, Metro Cash & Carry, and commerce B2B companies like Udaan, and Elastic Run.
This move is similar to the action the traditional distribution channel will take on Hindustan Unilever’s (HUL’s) products in the state.
Distributors will first stop procuring Colgate MaxFresh from the company and stop supplying it to retailers from January 1, and eight days later they will stop supplying Colgate Vedshakti also.
Mid-January onwards, they will stop supplying Colgate toothbrushes, said at least two distributors.
Traditional distributors in the state will stop the supply of all Colgate products from February 1.
Colgate India, in a response to Business Standard’s query, said: “Our strong relationship with distributors, developed over the past eight decades, has been based on mutual trust and transparency. We continue to keep the best interests and growth of our partners as a key priority, irrespective of their size or scale.”
“We have engaged with our distributor network and are looking to address their challenges …”
According to a distributor, the toothpaste major had told its traditional distributors in the state at a product launch event in Pune that the company sold its products across all channels at the same price. The distributors, however, do not agree.
Distributors resorted to this move after their apex body sent two letters to FMCG companies, complaining about the price disparities between traditional distributors and other organised business-to-business (B2B) distribution firms, both online and offline, which have entered the sector in the last few years.
This issue began as traditional distributors offer retailers margins of 8-12 per cent against 15-20 per cent offered by big-box B2B stores and online distributors.
The organised trade channel of distributors commits higher volumes to FMCG companies than a traditional channel distributor does, thus making it easier for big box B2B players to offer higher margins to retailers.
As a result, retailers have increasingly started lifting stocks from the organised channel.
The All India Consumer Products Distributors Federation (AICPDF), which has over 450,000 members, had sought a meeting with FMCG firms to resolve the issue.
In its first letter sent earlier this month, the AICPDF stated if its demands were not met, it would start a “non-cooperation movement” against FMCG companies from January 1. In its list of demands, distributors asked for uniform pricing and schemes across distribution channels (traditional, organised B2B). So far, Nestle India, ITC, Dabur, and Marico have discussed the issue with traditional distributors, according to distributors, but the issue still remains unresolved.
On Friday, HUL said in an exchange filing that it would ensure supplies of its products remain uninterrupted and that it had had no engagements with the AICPDF so far.
“HUL has a long-standing relationship with its distributors that is based on trust … Our distributors have overwhelmingly conveyed to us that they will rebuff any attempts to create a wedge between the company and our trusted distributors,” HUL said in the exchange filing.
The company also said it remained committed to enhancing capabilities in its GT (general trade) network and had taken action such as deploying technology for order placements through its eB2B app, Shikhar, and supporting its distributors to increase their direct reach, and introduced specially tailored programmes with reputed academic institutions to help them hone their business skills and become future-ready.
Meanwhile, Edelweiss Securities said in its report that these issues (the company and distributors) had happened earlier and expected HUL and distributors to come to an agreement soon.