HUL's Desperate Business Strategies Threaten Distributors' Livelihoods, Says AICPDF
AICPDF has raised concerns over HUL's performance-based incentive scheme introduced in January of this year.
The All India Consumer Products Distributors Federation has expressed concerns over Hindustan Unilever Ltd.'s recent decision to sell the Pureit business, a move that the company says will help focus on core categories. The federation believes that this move indicates a worrying trend of the company prioritising performance gains at the expense of its distributors.
"Several past decisions by HUL have left distributors in dire straits, and the latest decision to sell the Pureit business raises similar concerns," AICPDF President Dhairyashil Patil said in a statement. "This move appears to be another desperate attempt by HUL to improve its performance, regardless of the consequences for its long-standing distribution network."
AICPDF claims that even the commitments made by HUL during the takeover of GlaxoSmithKline Consumer Healthcare Ltd. did not materialise, resulting in several distributors being forced out of business.
"The management painted a rosy picture during the takeover, but the reality starkly contrasts with those promises. Thousands of people lost their jobs, and many distributors faced bankruptcy as a result," Patil said, hoping that HUL's top management will consider the potential fallout of the recent divestment of its water purification business and "take responsible actions" to mitigate the impact on distributors.
HUL is yet to respond to NDTV Profit's queries.
The year 2024 has been a period of gradual market recovery post a period of sustained high inflation. Consumption habits recovered with a lag, and this combined with uneven monsoons resulted in subdued demand for companies including HUL, especially in rural areas. As a result of this, while historically rural growth has been accretive to overall growth, this year it lagged that of urban. The maker of Surf Excel detergent powder and Dove soaps generated Rs 59,579 crore in sales in the financial year ended 2024.
Nine out of ten households use one or more of HUL brands. According to the company's annual report, its brands are accessible in over 9 million retail outlets and is managed through a network of over 3,500 distributors.
"We are repositioning our distributors in large cities and towns to succeed in the rapidly evolving and dynamic distribution landscape," the packaged consumer goods maker said in its annual report. "Our innovative approach to upgrade our customers is centred on boosting sales growth, improving overall service efficiency, and maximising distributor earning potential."
However, the AICPDF has raised concerns over HUL's performance-based incentive scheme introduced in January of this year, with distributors struggling to generate a profit.
"Many are struggling to achieve a return on investment, with some even facing losses due to the scheme," according to Patil. "Despite the company's efforts to implement this policy, sales have not rebounded to previous levels, contributing to the loss of business and fueling drastic decisions like the sale of Pureit."
The reports of impending job cuts at HUL in 2025 has only heightened concerns, he said, noting that distributors may face a challenging future if current policies are not reevaluated.
"We are alarmed by reports that job cuts are now in focus, signaling another potentially difficult year," the AICPDF said. "We urge HUL to consider the broader implications of their actions on their distribution network and to work collaboratively with stakeholders to find sustainable solutions that benefit all parties involved."
