For a company seen as a threat to the decades-old distribution system in India’s consumer goods sector, Udaan did something unexpected earlier this month.
The B2B e-commerce unicorn filed a complaint complaint Business Standard Startup Udaan files complaint before CCI against biscuit maker Parle Read more against Parle Products with India’s antitrust regulator, the Competition Commission of India (CCI). Udaan said Parle, India’s second-largest biscuit manufacturer and maker of the wildly popular Parle-G biscuits, is abusing its dominant position by not supplying its products directly to Udaan.
All of a sudden, the aggressor was now the aggrieved.
Parle’s reluctance has forced Udaan, which supplies FMCG products to kiranas (mom-and-pop stores), to procure Parle products from the company’s distributors instead, increasing its costs, according to the complaint.
FMCG companies give distributors margins of 5-7%, says a distributor for ITC Ltd, among India’s largest FMCG companies. Margins slip to 3-5% if Udaan has to buy from distributors instead of directly from companies, according to the Udaan executive. Which means Udaan cannot afford to be shut out by FMCG companies in the long run. Food and FMCG account for 60-65% of Udaan’s GMV, The Ken has learnt.
Parle is hardly the only FMCG major responsible for Udaan’s woes. Amul, the country’s largest dairy brand, has also refused refused The Economic Times Amul, Parle, others stop direct supply to Udaan Read more to work with it. “These people have a lot of money to burn,” RS Sodhi told The Ken. Sodhi is the managing director of Gujarat Cooperative Milk Marketing Federation, which owns Amul. “But Amul is owned by small farmers, so we are with small traders.” Mayank Shah, senior category head of Parle Products, did not respond to The Ken’s request for comment.
Udaan’s plans to shake up India’s retail supply chain were bound to run into some stiff resistance. Disagreements between Udaan and FMCG companies are nothing new, says an Udaan executive. “They would get sorted at the state level. Udaan has got the majority of its talent from FMCG,” the executive adds. “But there’s nothing you can do about Parle or Amul. They don’t need to change their mind.”
The executive and several others The Ken spoke to for the story requested anonymity since they are not authorised to speak to the media or did not want to be seen commenting on Udaan.
Even as the $3 billion $3 billion The Ken How Pacman helped Udaan survive a tumultuous 2020 Read more -worth startup tries to convince FMCG companies of its utility, its arch-rival JioMart JioMart The Ken A year after its launch, JioMart’s e-commerce book is still in its first chapter Read more , owned by billionaire Mukesh Ambani’s Reliance Industries, recently scored a big win.