Background
Hindustan Unilever Limited (HUL) is one of the leading FMCG companies in India, with popular brands such as Lux, Lifebuoy, Surf Excel, Rin, Pond’s, Dove, and Kissan. The company has recently changed its margin model for its distributors, reducing the fixed margins by 60 basis points and increasing the variable margins by up to 100 to 130 basis points. The variable margins depend on factors such as performance and service efficiency.
Distributors’ Demands
The distributors are unhappy with the new margin structure and are demanding a minimum basic margin of 5%. They argue that the variable margins negatively affect their earnings and profitability. They are also supportive of incentive parameters, as long as they do not interfere with their basic margins. The distributors claim that they have a longstanding relationship with HUL and deserve fair treatment.
Boycott Plans
The Maharashtra Consumer Products Distributors Federation (MSCPDF), an umbrella body for distributors in the state, has initiated a non-cooperation movement against HUL from January 11. The federation plans to boycott HUL products, starting with Taj Mahal Tea, and escalate the boycott to include other brands such as Kissan and Rin if their demands are not met. The federation has asked its members to keep the boycotted products as “inactive” or “frozen” in their inventory and not to book or bill them.
Nationwide Movement
If HUL fails to address the distributors’ concerns, the All India Consumer Products Distributors Federation (AICPDF), which represents over 4 lakh distributors and stockists pan-India, plans to organize a nationwide movement. The federation intends to hold a dharna with 1,000 distributors in front of HUL’s Mumbai-based head office and expand the protest to different parts of the country. The federation expects more than 1,500 to 2,000 distributors from other states to join the movement by February.
HUL’s Response
HUL has not yet responded to the distributors’ boycott. The company has previously described its margin model as progressive and distributor-inclusive. HUL believes that the new model improves overall service efficiency and offers distributors higher earning potential. The company has also stated that it has a longstanding relationship with its distributor partners and values their contribution.