Tata Consumer Products (TCPL), the new entity formed by the merger of Tata Global Beverages and the consumer products division of Tata Chemicals, has terminated contracts with most of its distributors and dealers to make way for digital distribution of its products including Tata Salt, Tata Sampann, Tata Tea, Tetley, Eight O'clock Coffee and Himalayan water. According to sources, TCPL severed its long standing contract with 40 nationwide distributors and 5,000 dealers to try the direct dealership strategy, at which the FMCG giant Hindustan Unilever (HUL) excels.
"The company has cancelled the contracts with its entire network of distributors, which will come to 40 in number, and there are at least 2,000 small dealers working under them. Besides, they terminated the services of another 3,000 dealers. With this, the overall dealer network strength will come down to 4,000 from earlier 9,000," said a distributor from Assam.
TCPL confirmed about its new strategy, but didn't disclose the numbers. "As part of the integration, when we reviewed our sales and distribution structures, we realised that it was critical for us to leverage digital technology and work with our stockist and dealer network directly to increase our distribution footprint and in store-execution in the market. This resulted the termination of a very small number of CAs and distributors of the company, making TCPL more in line with the way most FMCG companies in India operate," the company said in its reply to Business Today.
It said, "We are in the process of integrating the food and beverage businesses of Tata Consumer Products in India, which will result in benefits such as stronger processes and scale efficiencies. This is essential for us to accelerate growth and fulfill the market opportunity in India for Tata Consumer Products."
Another distributor said that they are consulting the trade unions to escalate the issue. "We have been supporting the company since its Tata Tea (earlier name of the company) days. There are second and third generation distributors among us. It is completely unfair to severe the relationship in such an unceremonious way," he said.
However, TCPL said, "We remain committed to working with all our stakeholders to support and help them through the transition phase."
TCPL aims to emerge as a full-fledged FMCG firm and scouts for new opportunities in the international markets, Tata group chairman N Chandrasekaran recently told shareholders of TCPL in its virtual annual general meeting. The company will strengthen distribution and marketing channels so that its products are available nationwide, he said. It will also bolster presence in the US, UK and Canada.
"We took a conscious call to broaden the focus to make it an integrated food and beverages company," he said. The merger took effect from February this year.