RS Sodhi, the managing director of the country’s largest dairy maker Amul, confirmed the development to ET.
“Amul has 10,000 exclusive distributors, or small entrepreneurs. If platforms like Udaan do the distribution themselves, they compete with our existing exclusive distribution partners and directly hurt them,” Sodhi said.
Executives at two large FMCG companies, who did not wish to be named, said they have curbed direct supplies of select stocks to Udaan. The startup operates across FMCG, lifestyle and general merchandise products, with over 3 million users, 1.7 million retailers and 30,000 sellers on its platform.
“FMCG companies take decades to build their exclusive distribution partnerships. If B2B platforms like Udaan start supplying to retailers on cheaper terms, which amounts to undercutting, it directly hurts our partnerships with existing distributors,” the sales head of a large FMCG company, which has curbed direct supplies of some packs to the platform, said.
Last week, Udaan filed a complaint with the Competition Commission of India (CCI) against Parle Products, alleging that the company was “abusing its dominant position” by refusing to supply its products directly to the startup.
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Udaan alleged it was buying Parle’s products from the open market, placing it at a competitive disadvantage to other distributors who directly procure from the company. This, Udaan alleged, leads to higher costs not only for itself but also for small retailers who buy from it.
According to the complaint filed with CCI, Udaan alleged that Parle was refusing to supply stocks of its biscuits brand – Parle-G – which amounts to ‘abuse of dominance’ under Section 4(2) of the Competition Act.
Executives at Parle and Udaan declined to comment.
A nationwide lockdown amid the Covid-19 pandemic last year and a second wave of the virus outbreak in April-May this year severely impacted distributor channels, hitting store-level inventory, with distributors under pressure from retailers to deliver.
Since then, almost all large FMCG companies, including Nestle, Dabur and Marico, have been adding direct distributors to expand reach in unpenetrated markets. This also helps kirana (corner) stores, which can reduce buying from wholesalers and instead buy directly from company-appointed distributors.
Indian online retail is set to become the third-largest market by scale over the next decade, with an annual gross merchandise value (GMV) of $55 billion in calendar year 2021 and $350 billion after another 10 years, according to a report by RedSeer.