Godrej Sara Lee Ltd (GSLL), manufacturer of mosquito repellent mats, has tied up with ICICI Bank to finance its distributors across the country through the channel financing model. GSLL is the first FMCG company to adopt this model, wherein the key distributors are sanctioned credit by a bank against delivery of goods.
GSLL is a Sara Lee-Godrej joint venture which markets three leading brands -- GoodKnight, Jet and Hit -- that command over 40 per cent share of the home insecticides market in India.
“Channel financing was introduced with the aim of easing the distribution process. The facility is mutually beneficial to the company and the distributors, ensuring transparency, efficiency and ease of transaction for all the stakeholders involved. This model allows distributors to get funds at lower rates and improves their return on investment,” said Narayan Barasia, DGM-Finance, GSLL.
A distribution method without the channel financing model involves time lag and cost, both for distributors and the company in delivering the goods. However, in the new model, the distributor is sanctioned a credit limit by ICICI Bank at interest rates that are lower than the prevailing cash credit rates. The money is transferred using the online payment mechanism, which reaches the company on the same day.
In addition to ease of accounting, GSLL benefits through cost savings on demand draft charges and immediate receipt of funds as compared to the two days float in the earlier system. The distributor in turn benefits from getting credit easily at affordable rates.
“This model is for our complete trade business and has been implemented for about a year now. We have 100 top distributors and are looking to get 200 more. Seeing the convenience of electronic payment, I feel more companies should shift to this model,” said Barasia.