In lieu of the recent controversy between fast-moving consumer goods companies and traditional retailers over pricing parity, India’s largest dairy company, Amul, has written to leading offline and online retailers, including Reliance Retail, Amazon, BigBasket, and DMart, asking them to “avoid” deep discounting on its products for their B2C (business to consumer) businesses; in other words, what the retailers sell to consumers.
GCMMF managing director RS Sodhi said, “We don’t encourage differential pricing favouring any channel.” Similarly, we expect our channel partners to also ensure that they do not involve themselves in under-cutting and follow Amul’s approved price-to-retailer pricing for B2B businesses and avoid deep discounting on Amul products for B2C businesses.
Traditional distributors have accused large 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.
In his letter, Sodhi writes, “In the recent past, we have come across many complaints from our traditional channel partners on pricing issues, and we find there is a need to clarify our norms once again so that we can avoid such conflict.
The past two months have seen the clash mounting between traditional channels and FMCG companies over trade margins, when distributor body All India Consumer Products Distributors Federation (AICPDF) wrote open letters to two dozen FMCG companies, including Hindustan Unilever, Nestle, and Colgate Palmolive, in December last year, alleging “predatory pricing”.
The distributors sought equal margins from the FMCG companies similar to what they offered to new business-to-business (B2B) and emerging wholesaler and retailer platforms. Threats by the distributors to stop selling select packs of products in states like Maharashtra and Gujarat led to HUL, Colgate-Palmolive and some others issuing statements that they would “protect distribution channel interests.”