Over 5,000 Distributors of All Kerala Distributors Association (AKDA) will go on strike on 24 Jul. ‘21 to protest against the new business regulations brought in by Tata Consumer Products Ltd. after two of Tata entities merged recently. Tata Chemicals and Tata Global Beverages had different lines of business models but a lot has been modified with regards to “Trade Conditions”.
Over 10,000 vehicles are expected to go off roads an “dharnas” would be observed at 9,000 points across the state following Covid-19 appropriate protocols, said AKDA President Ayappa Nair. According to him, the new entity Tata consumer withdrew the 15-day credit facility and also removed the 0.5% Cash Discount which is provided for cash payments made in advance (at the time of recieving goods). The removal of credit lines seem to be a sour point, as it could hurt the entire supply chain – starting from the Super stockist, Distributor and Retailers.
In the FMCG retail trade , retailers usually rotate stocks twice before making the payment, that is they buy in credit from the Brands or their Distributors and pay only after selling the goods twice during a block of 15-45 which is when the credit is offered and varies across companies, brands, domestic or international.
Mr. Nair also said that the company has terminated 25 Distributors in the state and has demoted 20 of them to sub-stockists, relieving them of several privileges including removal of 0.8% margin on purchases. A further 52 Distributors have been terminated due to the agitations, he said. In a statement to the Media, a spokesman from Tata Consumer said “The change proposed is in line with the way most FMCG companies operate and will have the benefit of a stronger reach and distribution as well as the creation of more job opportunities overall in Kerala.” The company said that it is reworking it’s distribution network after the integration of the two companies and the process which began in Q2 FY20-21, has been completed across India except Kerala.
Companies have been under severe margin stress ever since the pandemic began. Operating cosys have spiralled due to safety and hygiene protocols that are to be adhered right from production to distribution. At the same time, companies are wary to increase prices as it may work detrimental to their expected business, especially in the fiercely competitive and price sensitive FMCG industry. On the other hand, FMCG and Grocery Retailers have seen a better off take , thanks to increased consumption due to WFH, schools and colleges closed since Mar. ‘20. However, the stress on non-discretionary items has been increasing, especially after the second wave since Mar. ‘21 and India lost many lives during these 3 months.