Revised margins by HUL will put distributors out of business: AICPDF

The All India Consumer Products Distributors Federation (AICPDF) has flagged concerns about the distributor margins fixed by Hindustan Unilever Limited (HUL).

The body has stated that as the FMCG major overhauled its distribution network by reducing fixed margins and introducing variable margins, the distributors will face operational challenges within the proposed base margin.

“The new policy further intensifies concerns, potentially forcing existing distributors out of business, rendering survival in the distribution sector impossible. The company has a significant gap, with 30 per cent of areas lacking distributors, and efforts to find distributors proving futile. AICPDF’s opposition to this change stems from the demanding parameters that may push distributors toward unethical activities like undercutting and infiltration, risking the destabilization of the entire ecosystem. The silence is perplexing, and suspicions rise as basic margins are deducted. The unexpected reaction from distributors signals an inevitable clash,” added the statement,” mentions a statement from AICPDF.

Citing the second concern with the company’s overhauling of the distribution network, the distributors association stated that it relates to the effective coverage, with 25 per cent to 30 per cent of claimed outlets either closed or non-existent in the company coverage database, raising doubts about the accuracy of the coverage company database.

‘Contains errors’

HUL has refuted the statements made by the federation and stated that the statement contains errors and misinformation in the statement.

“HUL has a longstanding relationship with its distributor partners based on trust and mutual interest. We have a one-to-one relationship with our distributors that we value and cherish deeply. We are always looking at commercial models to enhance the quality of service to general trade stores while giving our distributors an opportunity to earn healthy returns – hence, a win-win. Our progressive and distributor-inclusive model is designed to better serve the needs of Kirana and other neighbourhood stores – the MSMEs, which are the bedrock of the Indian FMCG industry in a fast-changing environment. It improves overall service efficiency and offers our distributors a higher earning potential. In fact, we have tested this approach favourably with our distributors over the last one year before launching it across 100 plus cities,” stated a HUL spokesperson when approached by Businessline.