Why have distributors stopped supply FMCG products to Hindustan Unilever and Colgate?

They started a phased disruption of supplies to Hindustan Unilever and now it has been extended to Colgate Palmolive too. They had warned that the supplies would gradually stop from 01-Jan due to apparently unfair price disparities between traditional trade and organised channel. The likes of JioMart and Metro Cash & Carry had secured bigger discounts from HUL and Colgate compared to the traditional dealers.

Traditional distributors stopped procuring Colgate Max Fresh from the company after a week, they also stop procuring and supplying Colgate Vedshakti. Subsequently, Colgate toothbrushes will be added to the list and by end of January will stop all supply of Colgate products. Meanwhile, both Colgate and Hindustan Unilever are proactively engaging with their distributor networks to address their challenges.

Traditional distributors offer retailers margins of 8-12% in contrast to 15-20% offered by the big B2B players like Reliance. This has led to many retailers preferring to lift stocks directly from the organized channel than the traditional distribution channel. Other FMCG companies like Nestle India, ITC, Dabur and Marico are also engaging with the distributors to find a long term solution. Markets expect an agreement to happen soon.