Will boycott HUL brands: Maharashtra FMCG distributors over new margin structures

FMCG distributors on Thursday said they will boycott HUL products in Maharashtra, starting with Taj Mahal Tea, unless the company restores the previous margin structures.

The distributors further said if the company does not pay attention to their demand, they will also boycott food brand Kissan and leading detergent brand Rin going ahead.

HUL, which owns brands such as Lux, Lifebuoy, Surf Excel, Rin, Pond's, and Dove, has reduced the fixed margin by 60 basis points and increased the variable margins by up to 100-130 basis points for its distributors.

The distributors are demanding a minimum basic margin of 5%. They are supporting incentive parameters, but they should not interfere with the distributor's margin.

The company, however, said it has "longstanding relationship" with its distributor partners and termed its margin model as "progressive and distributor-inclusive", which improves overall service efficiency and offers its distributors a higher earning potential.

"We are always looking at commercial models to enhance the quality of service to general trade stores while allowing our distributors 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," said a HUL spokesperson.

The company has tested this approach favourably with its distributors over the last one year before launching it across 100-plus cities.

"Our distributors have overwhelmingly conveyed to us that they would continue to meet the needs of our shoppers and consumers in an uninterrupted manner," the spokesperson said.

The All India Consumer Products Distributors Federation (AICPDF), an umbrella body for distributors, has raised concerns over the new margin structure.

AICPDF on Thursday shared a statement from the Maharashtra Consumer Products Distributors Federation (MSCPDF), in which they have started non-cooperation against HUL from January 11, by boycotting its products starting with Taj Mahal Tea.

MSCPDF plans to keep the Taj Mahal Tea brand as "Inactive" till January 25, which "should be kept in Frozen so that it does not get booked and billed." However, if "the company does not pay attention to our legitimate demand, then Kissan brand along with Taj Mahal tea will be Inactive / Frozen from January 25 to February 10," MSCPDF said.

MSCPDF further said if no solution is found even after this, then products under HUL's leading detergent brand "Rin along with Taj Mahal and Kissan brands will be Inactive from February 10 to February 25." The federation further said from March 1, a nationwide movement will be organised in all the states, along with a dharna with 1,000 distributors in front of HUL's Mumbai-based head office.

"This movement will start from Maharashtra and spread to different parts of the country week after week," AICPDF statement said, adding that by February, more than 1,500-2,000 distributors from other parts of the country are expected to join.

Generally, FMCG companies provide two kinds of incentives -- fixed margins and variable margins. Most of the companies have fixed margins, which are around 450-600 bps, and also give variable margins, which depend on factors such as performance.

AICPDF claims to represent over 4 lakh distributors and the stockist pan-India.

Two years ago, AICPDF was in loggerheads with HUL over margin parity between business-to-business platforms and cash-and-carry players. It had called for a boycott of HUL products, which was called off.

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