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Retailers look to resolve margins issue with Reckitt

| | Updated on: Feb 11, 2011
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Large FMCG players acknowledge importance of organised retail trade

The Future Group-owned Big Bazaar hopes to resolve the conflict in margins with Reckitt Benckiser, the owner of brands such as Dettol and Harpic.

This is not the first time, the country's largest retailer has had an issue with FMCG companies and this time round it is going to be a matter of time before the Reckitt brands are back on the shelves. Mr Damodar Mall, Director-Food Strategy, Future Group, said, “This is a temporary development and we plan to resolve it soon. We always have stocks of any brand and it is unlikely that the customer is going to notice any change on the shelves for a couple of days.''

Other retailers like Hypercity are looking to replenish their stocks from the UK-based firm. “We are renegotiating with Reckitt and plan to resolve this issue within a week, At the moment we continue to have stocks from the company,” added Mr Ashutosh Chakradeo, Head of Buying, Merchandising and Supply Chain, Hypercity Retail.

Typically in the personal care and foods category, retailers get margins between 14 and 15 per cent from FMCG companies. Sources within Future Group said that Reckitt Benckiser has decided to slash margins between 3 and 4 per cent for the modern trade due to cost inflation. At the same time it is unlikely that private brands can replace the established brands. “Private brands cannot replace 100 per cent of what the established brands have to offer and while we do have brands like Care Mate and Clean Mate, none of these have the equity of brands like Dettol and Harpic. At the same time we cannot sell the established brands at a loss as we have to cover our costs,'' said an official from Future Group.

MoUs signed

In fact, a couple of years ago, the Future group signed a series of MoUs based on service level agreements with FMCG companies to give them better terms of trade, which included significant shelf space at their stores. “We did sign MoUs with FMCG players but Reckitt was not one of them, There has been a paradigm change in the way FMCG players perceive modern trade retailers and today we do matter to them,'' added Mr Mall.

Importance of modern trade

Meanwhile, big FMCG players such as HUL, P&G and Godrej continue to acknowledge the importance of modern trade. At the recently concluded Retail Leadership Summit, Mr Manish Tiwary, Vice-President- Customer Management, HUL, said, “It has been a journey with modern trade and today it has emerged as a critical channel for us. The Indian shopper is unique and we get our learning from the retail partners as they have the ability to drive consumption and get categories closer to the consumer. We have nearly 60 per cent of our sales coming from modern trade in places like Thane where there are a large number of malls.''

Published on February 11, 2011

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