HUL Bypasses Distributors, Targets Kiranas Directly

31 Dec 2024 , 01:11 PM

According to a senior corporate executive, Hindustan Unilever (HUL) is assuming command of its extensive distribution network by delivering goods directly to kirana shops in Mumbai. The company also aims to expand into Delhi and other major cities.

The plan is a part of a larger effort by the biggest fast-moving consumer goods company in India to remove credit restrictions for kirana stores, which account for three-fourths of its sales, and cut the supply time from three days to less than twenty-four hours.

Arun Neelakantan, executive director-customer development at HUL, told ET that the company will manage all back-end logistics from warehouse to delivery under the new model, with distributors handling only orders and payments from the neighborhood stores.

With more than 3,500 distributors spread across 2,000 towns, HUL has the biggest distribution network in India’s consumer products sector, catering to nine million retailers, including three million outlets directly.

Nearly two years ago, the company tested its newest distribution strategy, Samadhan, near Chennai, to compete with online business-to-business (B2B) startups that promise next-day delivery and the benefit of serving numerous companies simultaneously.

Nearly 80% of FMCG sales in India are controlled by kirana stores, which are supplied by distributors or wholesalers. Despite accounting for only 5% of FMCG sales, organized retail and wholesalers like Flipkart Wholesale, Udaan, and Reliance Cash & Carry have more negotiating power over pricing and supply because of their size.

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