HUL assures distributors of product supply after they warn of protests
Hindustan Unilever (HUL) said in Friday it will supply its products uninterrupted, clarifying that it had no exclusive deals with organised online businesses that traditional distributors allege are being favoured unfairly.
“HUL has a long-standing relationship with its distributors that is based on trust and mutuality of interest. Our distributors have overwhelmingly conveyed to us that they will rebuff any attempts to create a wedge between the company and our trusted distributors,” said the fast-moving consumer goods company in an exchange filing.
The statement after ‘Business Standard’ reported that distributors in Maharashtra will stop supplying the company’s products from January 1 in phases. Distributors in the state decided that it will stop the supply of Kissan range of products from January 1, followed by Glow & Lovely range of products eight days later and will then stop the sale of Rin from mid-January if the company does not come forward to resolve the issue.
Distributors in Maharashtra have threatened to stop the sale of all HUL products from February 1, seeking to press the company to given them price parity with new-age organised players. Organised distributors include firms like Jiomart and Metro Cash & Carry and B2B companies like Udaan and Elastic Run.
The traditional trade typically offers retailers margins in the range of 8-12 per cent compared with 15-20 per cent offered by big-box B2B stores and online distributors. Due to higher margins being offered by the organised trade, retailers increasingly started to procure stocks from the organised channel of distribution hurting the traditional trade.
In its exchange filing, HUL also said, “the company remains committed to ensuring that distributors earn a fair return on their investments and enhancing capabilities in their general trade.”
HUL further stated in its filing, “General trade (GT) continues to be our largest channel and our distributors (Redistribution Stockists) are our valued partners.”
The company said it remains committed to enhancing capabilities in its GT network and has taken several actions such as deploying technology for order placements through its eB2B app, Shikhar, supporting its distributors to increase their direct reach and has introduced specially tailored programmes with reputed academic institutions to help them hone their business skills and become future-ready.
“Our arrangement with our distributor partners are ‘not exclusive’. We sell and distribute our products across all channels such as GT, modern trade, ecommerce, cash & carry B2B etc to make it convenient for our shoppers & consumers to buy our trusted brands. However, based on shopper buying habits, channel structures and cost of operations the assortment offered could be different,” HUL said. Adding: “As channels evolve, we will continue to take up new initiatives with an objective to help scale up business for our distributors and to strengthen our distribution.”
Edelweiss Securities said in its report that these issues (the company and distributors) have happened earlier and expects HUL and distributors to come to an agreement soon since both need each other.
It also stated that these kind of differences and tussles would further drive consolidation in favour of organised players and online players.
“Important to note that now HUL services 15 per cent of its demand digitally, which is a significant advantage (but wasn’t so a few years ago),” the brokerage house said in its report and also said that it is a recurring issue and it does not expect any permanent truce.
It also stated that it is more important to monitor issues such as price hikes, rural slowdown, winter and covid-related restrictions than this issue in Maharashtra.
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
