An apex body of distributors, which called off its stir against Colgate-Palmolive in Maharshtra last week, is drawing up a new list of companies which it says have not heeded to its requests of putting in place a level-playing distribution set-up. “We have repeatedly cautioned against trade practices that undermine the traditional distribution network, it is time to take this movement to the next level,” Dhairyashil Patil, national president of the All India Consumer Products Distributors Federation (AICPDF), said.
“While the discussions with officials of Colgate-Palmolive were positive and they have asked for time to review their processes and implement changes to their distribution practices, we cannot say that about all companies,” Patil said.
At the heart of the matter are deep discounts offered on quick commerce platforms, an increasingly popular channel. The AICPDF claims q-commerce is disrupting traditional trade, the backbone of the domestic FMCG industry which contributes 80% of sales.
The share of e-commerce share, which was earlier about 4-5% of FMCG sales, has now touched about 7-8%, driven by q-commerce. Experts and industry executives say q-commerce accounts for half of the online share for most companies adding the share could go up with the increasing shift from value to convenience.
Dabur India’s CEO Mohit Malhotra has said his firm would double down on emerging channels such as e-commerce and quick commerce, consolidating stockists in general trade for better return on investment.
Sunil D’Souza, MD & CEO, Tata Consumer, told FE, general trade typically gets a mass set of consumers and that the base has been under pressure in recent quarters in urban areas. “At the same time, there are channel shifts happening within urban markets. FMCG companies have to pay heed to it,” he observed.
In the past, the AICPDF has had issues with Hindustan Unilever (HUL) over distributor margins and Honasa Consumer, the maker of the Mamaearth brand of products, over inventory management. HUL had said that distributor inclusion was its top priority, while Honasa Consumer had denied inventory management issues with general trade, terming it as misinformation.
Market researcher NeilsenIQ says that while e-commerce share in urban markets in India is about 5%, it has risen to 10% for all metro markets and 13% for the top eight metro markets. Increasing online shopper penetration, more purchase occasions and increasing basket sizes, led by aggressive pricing and discounts as well as availability of an assortment of products on q-commerce is contributing to growth, NielsenIQ says.
Conversations with industry executives reveal that the stress in general trade is linked in part to an urban slowdown that has hurt sales at the lower end of the FMCG market as well as the shift happening from value to convenience at a broader level. The latter is hurting both general and modern trade channels in metros and larger cities.
“We are at about 7-8% e-commerce contribution, growing at faster than the average of our total business and that would go to 15% in the next few years,” Rohit Jawa, CEO & MD, HUL said about where channel growth for the company has been coming. HUL has carved out a separate sales and distribution team for quick commerce responding to the need for a faster turnaround in stocking as well as a distinct portfolio for the segment, industry experts said.
A report by Kantar notes that the number of online shopping trips was up over three times in a year in 2024, driven by the need for instant gratification. A report by consultancy firm Bain and Flipkart notes q-commerce platforms accounted for over two-third of all e-grocery orders and a tenth of overall e-dollars in 2024.