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From HUL to Dabur, consumer firms incentivise supply chain to drive growth
Consumer companies are incentivising the supply chain in order to push for growth.
Companies like Hindustan Unilever (HUL) have pushed for incentives such as offering credit to the supply chain, while Dabur India is now offering higher target-based incentives on meeting sales targets.
This comes at a time when the market is pushing for growth in urban areas, which has been impacted, while rural sales have been on an upward swing for the past few months.
According to distributors that Business Standard spoke to, in the March quarter, HUL offered seven credit days to distributors to pay for the stock they purchased. The company had started offering credit to the supply chain a year ago—something it never practised earlier—but at the end of the last quarter, the supply chain was offered credit for up to seven days.
It also incentivised distributors by offering a 0.1 per cent incentive on completing primary targets (which refers to buying stock from the company) for the month of March.
Distributors said on condition of anonymity, 'We've never been offered an incentive before for meeting primary sales targets.'
Another distributor said that this cushion by the company has never been extended to distributors before.
Dabur also typically incentivises its supply chain for meeting primary and secondary targets, which is typically dolled out once or at most twice a year for a month.
However, for the April–June quarter, distributors will be incentivised 0.85 per cent on meeting the highest slab of the target. The distributor has to meet the target for every month of the quarter to get a better payout.
'Typically, these incentives are given for a month or at most two months in a year, not for a full quarter. Also, the incentive is if the distributor meets 110 per cent of its primary sales target,' a distributor said on condition of anonymity.
Godrej Consumer Products is also offering retailers higher margins on its room freshener Aer. A distributor said that it is offering almost 10 per cent more margin on the product.
Dabur India and Godrej Consumer Products did not respond to Business Standard's email. HUL also did not respond to Business Standard's email and cited a closed period ahead of its earnings, which are slated to be released on Thursday.
In its pre-quarterly update ahead of its January–March quarter earnings, Dabur said that rural markets continue to remain resilient and continue to grow ahead of urban markets.
It also said that in terms of channels, organised trade—including modern trade, e-commerce and quick commerce—maintained its growth momentum, while general trade continued to be under pressure. It also said that overall fast-moving consumer goods (FMCG) volume trends continued to be subdued during the quarter ended March.
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