The Hindu Business Line : Manufacturers upset over retail discounts

New Delhi May 15 Discounts may be music to the consumer's ears, but not so for retailers and manufacturers. In an effort to save their business interests, manufacturers across sectors (from FMCG to consumer durables), are protesting the substantial discounts being offered by organised retail chains.

"Discount offers provided by organised retail chains are increasingly eating into the small retailers' pie. Thus, creating a problem for manufacturers, since it is the smaller players that drive bulk of their sales, in spite of the hype around the retail boom," said a retail industry expert.

FritoLay, manufacturers and marketers of brands such as Lays, Kurkure and Leher Namkeens, for example, has stopped supplies to Future Group owned Big Bazaar and Food Bazaar since the past two to three weeks. "We have stopped supplies to both Big Bazaar and Food Bazaar of all our products on grounds of commercial terms, which also include margins and discounts offered by these stores," said Mr Manu Anand, Managing Director, PepsiCo India Holdings Pvt Ltd, FritoLay Division.

He, however said, "Any such incident is a setback and a lost opportunity for our company as it results in our products not being available to the consumer. Actually, we are in the process of on-going commercial dialogues with the retail chain."

Mr Sadashiv Nayak, CEO, Food Bazaar, Future Group, on the other hand said, "FritoLay has been unhappy with the arrangement that is in place between us and them. In fact, we do not have anything to do with their decision; it is they who have decided to withdraw supplies." He added that such an action by FritoLay has not dented sales in either Big Bazaar or Food Bazaar outlets.

Apart from the snacks segment, manufacturers of mobile devices and white goods too, have been pressuring big retailers to bring down their discount margins. But discount retail chains as yet are sticking to their guns. Mr R. Subramanian, Managing Director, Subhiksha, said, "We are constantly subjected to pressure from several manufacturers with regard to margins that we offer consumers on their products. But we never let them dictate terms and consider it our total liberty to decide on the discounts to be offered."