FMCG companies are increasingly willing to allocate their distribution network to non-competing brands.
Last week, personal care products company JL Morison, which manufactures and distributes Nivea in India, announced a distribution agreement with Merisant India.
According to the agreement, Morison would distribute Merisant’s tabletop sweetener brand, Equal, through its distribution network. Last year, Godrej Foods (now Godrej Beverages & Foods) entered into a similar tie-up with Jyothi Laboratories to retail its tea brand through Jyothi’s distribution network.
Marico Industries has also been distributing the Japanese noodle brand, Top Ramen through its network for some years now.
Explaining the rationale behind the agreement to distribute artificial sweeteners, Bipin Vengsarkar, managing director, JL Morison said that the company has a significant distribution presence across 2,00,000 outlets and 1,200 distributors nationally which would double the current reach of the brand.
It would be distributing the Equal brand for five years, effective January 2007.
The brand was earlier distributed in India through Glaxo, before the company decided to handle the distribution on its own in 2002.
In these cases, the brand is distributed along with the distributor company’s own brands upto the final retail outlets.
“This sort of an arrangement is viable for a single brand company who cannot afford to invest too much into its distribution network,” say analysts. However, the rider is the brand must belong to a non-competing category.
Marico, whose core products comprise edible and hair oils, has been distributing Japanese company, Indo-Nissin Foods Top Ramen noodles in India for some years now. While Marico has its own processed foods brand, Sil, the products don’t compete with the Indo -Nissin brand it distributes.
A Mumbai-based consultant said, “This makes good business sense for both companies. The brand gets direct access to a well established, national network at a cost far lower than setting up a new network, while the distributor company’s bottomline gets a boost through little extra effort. While JL Morison has a similar distribution arrangement with skincare brand Nivea as well, it also manufactures the products for the company.