Ahmedabad: The Federation of Gujarat FMCG Distributors (FGFD) has flagged that distributors and sales teams are being compelled to record billing for outlets that are no longer operating in order to qualify for company incentives. The FGFD officials have alleged that several leading FMCG companies fail to deactivate closed shops in their Distribution Management Systems (DMS) to project higher retail coverage. This practice, they claim, distorts performance metrics and disrupts the business ecosystem. The distributors have also demanded parity with quick commerce platforms and organized retail in pricing structures. The FGFD has convened a meeting in March 2026 to deliberate on the issue. Members have warned that, if the issue remains unresolved, they will stop selling new products launched by these companies.
FGFD, which has some 8,200 members, has written to leading FMCG companies outlining its concerns.In its letter, the federation 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. Many incentive structures are designed in a manner that compels billing to these outlets, indirectly placing distributors and salesmen at fault.“The federation further alleged that differential pricing offered to modern trade (MT) and general trade (GT) has created an uneven playing field. General trade distributors are unable to compete with the lower pricing extended to modern trade, resulting in business losses.“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,” the letter stated.According to market estimates, Gujarat is home to some 7 lakh retail outlets selling daily-use FMCG products.Arun Parikh, chairman, FGFD, said, “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.”“This has created difficulties for distributors, as incentives are linked to outlet coverage. Salesmen, too, are incentivised based on the number of stores billed. As a result, there are instances of salesmen generating invoices in the names of shops that have shut down and diverting goods elsewhere. If a cheque issued by such a buyer bounces, then the distributor ends up bearing the loss,” Parikh added.There was no GST implication, as many such small shops fall under the composition scheme, and therefore, there is no revenue loss to the govt.“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. Most distributors have annual turnovers ranging from Rs 20 crore to Rs 150 crore. They are required to deploy sales staff based on the number of outlets covered. If billing reflects 150 closed shops, a distributor may need to employ three additional salesmen according to company policies, creating an unnecessary financial burden,” he said.
