HUL's Direct-To-Kirana Model Leaves Distributors Fuming

Hindustan Unilever Ltd. and its distributors are at loggerheads once again. This time, the distributors' concerns revolve around the consumer goods giant's new initiative to supply products directly to kirana stores.Through its direct-to-kirana model, the maker of Surf Excel and Clinic Plus aims to save time and boost sales. This model, known as 'Samadhan', was first tested near Chennai in 2022 and is now being rolled out in other big cities such as Mumbai and New Delhi. It launched this pilot to compete with B2B e-commerce retailers such as JioMart, Metro Cash & Carry and Udaan that offer next-day delivery. The traditional supply chain can't match their speed, prompting HUL to serve directly.However, this model has not gone down well with its distributors, who argue it is a short-sighted approach focused on quick profits, while squarely overlooking the long-term health of the distribution ecosystem."The direct-to-kirana model is designed to mislead stakeholders while ignoring the ground realities," said Dhairyashil Patil, national president of All India Consumer Products Distributors' Federation. "If any distributor is harmed by this model, AICPDF will mobilise a nationwide call to action.".MRP Versus Discounts: Why Mumbai’s Kiranas Are Falling Behind Quick Commerce.In an emailed response to NDTV Profit, an HUL spokesperson, however, said the company has a "one-to-one and longstanding relationship" with its distributors. "We have a distributor-inclusive kirana-centric model, where our distributors ensure that our relationship with outlets is maintained, and they continue to remain an integral part of our supply chain."This isn't the first time, though, that distributors have criticised HUL's strategies. Earlier, the company faced resistance from distributors over the rollout of a 'performance-based' margin structure, which included reduction in fixed margins for distributors from 3.9% to 3.3%, and increasing the variable margin by 1-1.3 percentage points. Distributors had demanded reinstatement of original margins, even threatening to halt the distribution of some key brands."We had warned about the flaws in the performance-based incentive policy, and today’s situation proves we were right," said Patil. Over the past two years, AICPDF has claimed HUL was facing challenges in maintaining its sales and market position in the retail space. The introduction of a performance-based incentive policy—despite warnings—has led to a 30% reduction in market coverage and the exit of many distributors, according to the federation, which represents eight lakh distributors of major consumer goods companies. The new model, it said, could further erode traditional market share, exacerbating losses faced by distributors..HUL Ends Boost and Horlicks Production Agreement with Jagatjit Industries.HUL, however, downplayed these concerns, stating that its performance-based model had proved to be "impactful" and was a "win-win". HUL has over 3,500 distributors who cater to more than nine million retail stores. HUL has been pushing direct distribution aggressively over the last few years to reduce its dependence on traditional distributors. It reaches retail outlets directly through its Shikhar app and by putting more feet on the ground. Nearly a third of HUL’s total retail reach is now serviced directly.Voicing their concerns, AICPDF further claimed that HUL distributors have been forced to take on unsaleable inventory due to aggressive sales targets, leading to significant financial losses and market imbalances. "Distributors have operated on thin margins of just 3.2% for two years. Systematically undermining this network could dismantle decades of trust and operational efficiency," the federation said.The latest approach, Patil said, "appears to be prioritising short-term gains over long-term stability by sidelining distributors, which will only deepen the crisis." The federation has called on HUL to halt the initiative. "They must engage with distributors to explore mutually beneficial models, instead of taking such unilateral decisions that jeopardise businesses and the livelihoods of thousands of distributors — the backbone of India's retail trade.".Distributors Body Alleges CII Fronting For Quick Commerce

HUL's Direct-To-Kirana Model Leaves Distributors Fuming

But HUL downplayed distributors' concerns, saying the company has a "one-to-one and longstanding relationship" with its distributors.

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