Gujarat FMCG Distributors Raise Alarm Over Forced Billing Practices
Ahmedabad: The Federation of Gujarat FMCG Distributors (FGFD) has issued a stern warning against a troubling practice in the fast-moving consumer goods sector. Distributors and sales teams are allegedly being forced to record billing for outlets that have ceased operations to qualify for company incentives, creating a distorted business environment.
Systemic Issues in Distribution Management
FGFD officials have accused several leading FMCG companies of failing to deactivate closed shops in their Distribution Management Systems (DMS). This omission artificially inflates retail coverage figures, misleading performance metrics and disrupting the entire business ecosystem. The federation, representing approximately 8,200 members, has formally written to these companies to address the issue.
In its letter, the FGFD stated, "Numerous closed outlets are still considered while calculating targets and incentives, leaving distributors and salesmen with little option but to bill such outlets for survival. A large number of closed outlets reflected in the DMS must be removed with immediate effect." The letter further highlighted that many incentive structures are designed to compel billing to these outlets, indirectly placing blame on distributors and salesmen.
Financial and Operational Burdens
Arun Parikh, chairman of FGFD, elaborated on the challenges. "The FMCG business has become extremely competitive. We have received complaints from a large number of distributors that several companies are not removing closed shops from their systems merely to maintain higher outlet counts," he said. This practice forces salesmen to generate invoices for defunct shops and divert goods elsewhere, leading to potential losses if payments bounce.
Parikh added, "In Ahmedabad alone, by our estimates, at least 2,000 small shops have shut down over the past two years, yet they continue to appear as ‘active' in billing records due to incentive-linked systems. Even demolished shops remain in the system." Distributors, with annual turnovers ranging from Rs 20 crore to Rs 150 crore, face unnecessary financial burdens, such as hiring extra sales staff based on inflated outlet counts.
Demands for Pricing Parity and Fair Competition
Beyond the billing issue, the FGFD has demanded parity with quick commerce platforms and organized retail in pricing structures. The federation alleges that differential pricing offered to modern trade (MT) compared to general trade (GT) creates an uneven playing field. General trade distributors struggle to compete with lower prices extended to modern trade, resulting in significant business losses.
The letter noted, "Due to their inability to match lower rates and the simultaneous pressure to achieve primary targets, some distributors are compelled to encroach upon the territories of other distributors." This exacerbates competition in a market with an estimated 7 lakh retail outlets in Gujarat selling daily-use FMCG products.
Upcoming Meeting and Potential Action
The FGFD has convened a meeting scheduled for March 2026 to deliberate on these pressing issues. Members have issued a clear warning: if the problems remain unresolved, they will stop selling new products launched by the offending companies. This stance underscores the severity of the grievances and the potential impact on the FMCG supply chain in the region.
It is important to note that there is no GST implication in these practices, as many small shops fall under the composition scheme, meaning no revenue loss to the government. However, the ethical and operational concerns persist, calling for immediate corporate accountability and systemic reforms in the industry.
