FAIDA raises alarm over FMCG and telecom practices, warns of crisis in India’s distribution system
Distributors allege stagnant margins, data misuse, lack of formal agreements, and rising costs are eroding role in India’s retail chain.
ADVERTISEMENT
The Federation of All India Distributors Associations (FAIDA), representing over five lakh distributors serving three crore retailers nationwide, has reportedly sounded the alarm over what it calls “serious risks” to the survival of India’s century-old distribution system.
In a communication sent to FMCG, food and beverages, telecom, and mobile companies on September 27, FAIDA, according to a CNBCTV-18 report, highlighted structural issues and business practices that it says are steadily weakening distributors’ position in the consumer ecosystem.
A key flashpoint is the aggressive push toward direct-to-consumer (D2C) channels. While companies still rely on distributors for last-mile access, FAIDA argues that running parallel D2C models effectively sets principals against their own long-term partners. FAIDA further slammed the stagnation of distributor margins, unchanged for more than 20 years, even as operating costs have soared three- to five-fold. With rising expenses across infrastructure, logistics, and compliance, the association warned that the current ROI model is unsustainable.
Adding to the strain is what FAIDA terms a “growing lack of recognition.” Distributors, despite decades of market-building investment, are often treated as unpaid staff by junior company executives. Most partnerships also operate without formal contracts, leaving distributors exposed to abrupt discontinuity or exit without safeguards.
Further, much of the value created by distributors is being diverted to modern trade, corporate retail, e-commerce, and quick-commerce channels through preferential pricing and incentives. This imbalance, it said, not only erodes distributor profitability but inflicts “deep humiliation” on traditional networks that have powered India’s retail sector for decades.
The association also raised red flags on data misuse, alleging that retail billing software is being exploited to extract distributor data for direct marketing without consent. It further accused companies of forcing billing under dummy outlets, pushing distributors toward illegal practices.
According to the report, FAIDA also expressed concern over the misuse of banking instruments such as NACH mandates and pre-signed cheques.
