Fast-Moving Consumer Goods (FMCG) distributors in Maharashtra are gearing up to boycott Hindustan Unilever (HUL) products, starting with Taj Mahal Tea, in response to ongoing disputes over the company’s margin structure. The distributors, demanding a restoration of previous margin structures, are dissatisfied with HUL’s recent adjustments, which increased variable margins while reducing fixed margins.
The Margin Structure Dispute: HUL, the owner of popular brands such as Lux, Lifebuoy, Rin, Pond’s, and Dove, modified its margin structure by elevating variable margins by 100 to 130 basis points while lowering fixed margins by 60 basis points. Distributors, organized under the All India Consumer Products Distributors Federation (AICPDF), insist on a minimum five percent basic margin, unaffected by incentive parameters.
Boycott Timeline and Products: The Maharashtra Consumer Products Distributors Federation (MSCPDF) declared the initiation of non-cooperation against HUL on January 11, initiating a boycott of Taj Mahal Tea. If the company does not address their demands, the boycott is expected to extend to the Kissan brand and Taj Mahal tea from January 25 to February 10. Subsequently, products under the Rin brand, along with Taj Mahal and Kissan, will face inactivity from February 10 to February 25.
National Movement and Dharna: If a resolution remains elusive, the federation plans to launch a national movement on March 1, accompanied by a dharna involving 1,000 distributors in front of HUL’s headquarters in Mumbai. This movement is anticipated to spread across the nation, involving 1,500 to 2,000 distributors from various regions of India by February.
Background of Disputes: The discord between AICPDF and HUL has been ongoing for the past two years, primarily concerning margin parity between cash-and-carry players and business-to-business platforms. The call for a boycott on January 4, 2022, was initially made but subsequently called off.
The Impact on FMCG Industry: FMCG companies typically employ fixed and variable margin incentive programs. The ongoing dispute reflects the larger concern of margin disparities within the industry, impacting over 4 lakh distributors and stockists nationwide.
In conclusion, the threat of a boycott by FMCG distributors in Maharashtra adds a layer of complexity to the ongoing margin structure dispute with HUL. The potential boycott is expected to impact the availability of popular brands like Taj Mahal Tea, Rin, and Kissan in the region.
