B2B ecommerce unicorn Udaan has filed an antitrust complaint against biscuit manufacturer Parle for alleged abuse of the latter’s dominant position in the market.
In its complaint before the trade and competition regulator, Udaan claimed that it is facing a competitive setback due to Parle refusing to directly supply its highly demanded products “without any objective justification”, according to a report in Business Standard.
Parle is regarded as a dominant player in the Indian fast-moving goods market, especially for its glucose biscuits brand Parle G. For wholesalers and retailers, Parle G is a must stock item that contributes to significant sales turnover.
In its complaint, Udaan said that it is being forced to purchase Parle’s products from the open market which significantly impacts its acquisition costs as a wholesaler.
The startup also alleged that Parle’s refusal to deal with it directly has also decreased its competitiveness in the market.
Udaan said that it has tried to engage with Parle in the last 2 years to work out a direct supply deal in a “fair and justified” manner, but Parle has apparently continued to discriminate.
Udaan pointed out in its complaint that Parle is the dominant brand in the glucose biscuits market in India, which commands a market share of around 83% when compared with other brands.
“Parle’s continued refusal to supply Parle-G stock-keeping units to Udaan makes it a clear case of refusal to deal and is an abuse of dominance under Section 4(2) of the Competition Act,” Udaan said in its complaint.
Wholesalers prefer to directly buy stocks from the manufacturer which in turn delivers high margins and higher returns when compared to a traditional retailer. Udaan claimed that it is trying to disrupt the market using technology at its core.
Parle currently manufactures more than 150 products and out of which, 36 brands are considered as industry-leading brands. Outside India, Parle is also present in 21 export destinations around the world. Parle’s glucose biscuit brand Parle-G currently makes up more than 50% of the brand’s total turnover, which is also considered as the largest biscuit brand in the world.
Udaan also pointed out that existing retailers in the market could be forced to procure Parle biscuits from other wholesalers in the distribution network where “Udaan would not have any preference since it won’t be able to offer competitive prices”.
“They (retailers) may align with traditional distributors for the relevant market to avoid dealing with multiple upstream suppliers…Therefore, if Udaan is not given access to the said market on the same terms as its competitors, Udaan may have to exit this market altogether. This implies that Udaan will remain foreclosed from more than 83-85 per cent of the relevant market.” Udan said in the complaint.
Launched in 2016 by former Flipkart senior executives Sujeet Kumar, Vaibhav Gupta, and Malviya, Udaan connects small or medium-sized businesses (SMBs), manufacturers, wholesalers, traders and retailers to sell goods and services to each other.
It also offers a credit facility to select small sellers. It currently functions across electronics, home and kitchen products, clothing, and footwear. In September 2018, Udaan became the fastest unicorn in the Indian startup ecosystem, but then Ola Electric broke that record in 2019.
The B2B retailer claims to have a network of over 25,000 sellers across India, connecting with over 3 Mn users across 900 cities in India. The company also claims to have more than 500 popular brand partners, which includes boAt, Sandisk, HP, Giny & Jony, Raymond, Rajkamal, Sparx, Action, Siyaram and more.
The overall B2B ecommerce market size is expected to be around $700 Bn by 2020, according to a latest Confederation of Indian Industry (CII) and Deloitte report. Some of the major B2B players operating an online marketplace include Moglix, Bizongo, OfBusiness, Power2SME, Just Buy Live and more.