Packaged grocery and consumer goods companies are escalating introducing online-only packs with differential pricing and new terms of trade with better margins for traditional distributors as a new set of deep-pocketed wholesalers disrupt traditional distribution models.

The development comes amid an escalating conflict with traditional distributors who have accused grocery and fast-moving consumer goods (FMCG) companies of selling their products at lower prices to wholesalers such as Reliance JioMart, Metro Cash & Carry and business-to-business (B2B) platform Udaan.

“The traditional way of distributing consumer goods will be disrupted as kiranas are going digital and ordering from apps of wholesalers such as us and our competitors (like JioMart and Udaan), since they are getting everything under one roof,” said Arvind Mediratta, managing director of wholesale chain Metro Cash & Carry. “Besides, 90% of our products are lower priced than the distributors’ selling price,” he said.

“Having said that, the traditional distributors’ cost of doing business has gone up in terms of salaries, fuel and so on, and they should be compensated for that,” Mediratta said.

Digital Transition Aided by Covid

Executives across the FMCG industry said preferential pricing for select channels as a practice, if not curbed now, could escalate to increased conflict between companies and traditional distributors who still form the bedrock of the Rs 4.2 lakh-crore FMCG market. “Differentiation in terms of packs or stock-keeping units (SKUs) and separate pricing for separate platforms is one way to avoid conflict between trade channels,” said Mayank Shah, senior category head at biscuits maker Parle Products.


The Covid-19 outbreak and resultant lockdowns last year hastened the transition to digitisation and technology in the retail space, leading to emerging trade channels and a significant chunk of consumers permanently switching to online shopping for groceries even for small-ticket items.

However, contribution from ecommerce, though growing rapidly, remains at less than 10% of overall FMCG sales. Hence, marketers are keen to avoid any conflict with traditional channels.

“While ecommerce contribution is growing in high double digits, traditional trade remains the core of the FMCG business. We can’t afford to upset them,” said a top executive at a major packaged foods company who requested not to be identified. “And though price differentiation in different trade channels has been happening, so far it wasn’t on a large scale or consistent. This is changing now,” the person said.

Executives from four consumer goods companies told ET they are escalating launching online-only packs, which could mitigate some of the conflict arising out of same products being sold to channels at different prices. They requested not to be named. “Conflicts such as these are inevitable and have been brewing for some time, with all the new emerging trade channels,” said Rajat Wahi, partner at leading professional services firm Deloitte.

All India Consumer Products Distributors Federation (AICPDF), an industry body of dealers and distributors of FMCG companies with around 400,000 members, last weekend wrote an open letter to 22 companies including Hindustan Unilever, Nestle, Britannia Industries, Procter & Gamble, Dabur, and Tata Consumer, demanding price parity and equal treatment from companies for both traditional distributors and other organised B2B distribution firms. “We are open for resolution with the FMCG players; we are not against any retail platforms and are only asking for pricing parity,” Dhairyashil Patil, president of AICPDF, said. The federation has threatened to halt supplies of these companies’ products starting January 1 if its demands are not met. HUL, Marico, ITC, Godrej Consumer, Marico and Dabur declined to comment on ET’s queries on the matter.

The chief executive at a leading FMCG firm said the solution could be giving trade discounts on a quarterly basis, and could also amount to incentives such as offering free or extra products along with orders. Ruchi Soya, a leading edible oil and foods company, said it has been giving identical margins to all the trade channels.


By admin

Leave a Reply

Your email address will not be published. Required fields are marked *