InvestorQ : What was the dispute between the distributors and FMCG companies like Colgate and Hindustan Unilever?
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What was the dispute between the distributors and FMCG companies like Colgate and Hindustan Unilever?

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Mary Joseph answered.
4 months ago
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The dispute between the FMCG players like Colgate and Hindustan Unilever on one side and the distributors on the other side is a fight between the old order and the new order. The batter had been escalating between the FMCG companies like HUL and Colgate and the traditional distributors. However, the battle has fortunately fizzled out. However, this about how the FMCG goods will be distributed in the coming future. But first the dispute.

The dispute had been simmering for some time but came to light when the All-India Consumer Products Distributors wrote to a list of FMCG companies about restoring parity in commissions between traditional distributors and new age B2B players like Reliance JioMart and Metro Cash and Carry. Traditional distributors were paid much lower commissions as the new age B2B players gave assurances on volumes offtake, which helped FMCG players.

During the week, there was a truce worked out between the consumer products distributor association and the FMCG companies. Both have agreed to review the situation after some time and maintain status quo till then after engaging with each other. The traditional distributors have agreed to review the situation for 3 months before taking a final decision, based on how the FMCG companies engage with the distributors of over 75 years.

The situation is actually quite complex. As of now, B2B players like Reliance JioMart and Metro Cash and Carry earn much higher margins from the FMCG companies and the reason is that they assure higher volumes and bulk evacuation. While these players can do the same with their deep pockets, traditional distributors are struggling. However, this is also a signal of how technology is changing the distribution model in India.

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