Distributors Vs Disruptors: Why All Is Not Well In The FMCG Space

Distributors of Fast Moving Consumer Goods (FMCG) companies are caught in a tussle with players such as Reliance, Udaan, Metro, Walmart and others. The B2B companies buy directly from manufacturers, and sell goods off to retail stores such as kiranas. As a result, traditional distributors have been struggling to keep up with the scale and the low prices offered by these platforms. As a result, All India Consumer Products Distributors Federation (AICPDF) has threated FMCG companies with supply disruptions unless their voices are heard. Distribution Is Being Disrupted Larger players are well-funded, and, therefore, have larger operations across several regions. As a result of the high volumes of transactions, these companies can bargain for lower margins with FMCG companies. According to distributors, these companies are burning cash and undercutting traditional supply chains to reach customers. As a result, traditional distributors are being pushed out of the business by the larger players. With a lower scale of operations, and lower margins, it is difficult for traditional players to undercut the prices offered by these B2B platforms. Distributors’ Demands FMCG distributors have put forward several demands to equalise the playfield. These include equal margins for all channels irrespective of volumes of business generated, product price parity, and several other demands. However, companies are yet to agree to these demands. The distributors have said that if these demands are not met, these companies will not sell the stock-keeping units sold by the new B2B players. Further, launches by companies would not be distributed by traditional distributors. Despite the rapid growth of new-age distributors, the traditional distributors still remain an important part of the ecosystem, accounting for a major share of revenues. Though some FMCG companies have invested in owned supply chains, they are still reliant on traditional distributors. Hence, companies would have to balance the interests of both the parties. Subscribe to Swarajya on YouTube. Get a Swarajya subscription: https://subscriptions.swarajyamag.com... Website: https://swarajyamag.com/ Twitter:   / swarajyamag   Facebook:   / swarajyamag