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Traders's war with HLL in Kerala intensifies

It has started to look like a glitzy soap opera: the petty trader pitted against a corporate giant backed by a Communist regime that dispenses with ideology and distributes luxury soaps to the proletariat.

The two-month-old face-off between the consumer products multinational giant, Hindustan Lever Limited, and the Kerala Vyapari Vyavasaya Ekopana Samiti along with its affiliate, the All-Kerala Distributors Association, who are boycotting the former's products, has intensified with both sides digging in for a protracted showdown.

The conflict began when the traders in Kerala traders protested against the margins given to them by the major consumer products manufacturers. In a communication dated March 25, the traders said the distributors's margin of four per cent and the retailers's margin of five per cent each of the maximum retail price are inadequate to meet the running costs of trading units. They sought a 15 per cent increase on the retailers's margin or a 50 per cent hike of all the prevailing trade margins, whichever is higher. The traders also argued that the margins given to traders in other states should not be the criteria for Kerala as the state is a high-wage economy compared to the rest of the country.

Getting no response, the traders decided to put the squeeze on the manufacturers. Kerala, a state with a rampant consumer culture, absorbs the products of around 150 multinational companies, with the lion's share belonging to HLL. "We decided to target HLL because it is the biggest player in the market. If it agrees to increase its margins, other companies will follow suit," says AKDA President A Ravindranath.

The boycott was selective at first with their company's brand soaps Lux and Lifebuoy being targetted. But after KVVES President Naseerudin was arrested for intercepting a HLL truck in Kozhikode, the agitation turned violent. After HLL moved court when its officials were manhandled, the traders retaliated by extending the boycott to cover the company's entire range of products.

Hardening their posture, the traders's associations have now begun a mop-up operation to "lift" HLL products from shop shelves across the state. They have also introduced a fresh demand that the company scale down its existing price structure.

Pushed to the wall and with its losses mounting to Rs 1 billion, the consumer giant set up its own marketing chain in the state. HLL launched an ad campaign soliciting "business partners" to run exclusive shops for its products in all the district capitals and municipal towns in Kerala.

The situation was partly relieved for HLL by the Left Democratic Front government's distributing its products through the state-run Neeti stores and other co-operative outlets. This, however, did not scare the traders since the government outlets represent only a fraction of the market. The KVVES, boasting 1 million members, is confident of keeping HLL out of the wider consumer market.

The government also made abortive attempts to get the warring sides to the negotiating table. The traders say HLL officials declined face-to-face parleys saying the company did not recognise the traders's associations. Kerala Civil Supplies Minister E Chandrashekharan Nair held separate meetings with both sides and wrested short-term concessions from the multinational which were turned down by the traders.

What, however, has raised eyebrows is the LDP government's zeal to "rescue" HLL. "The Left parties have been shouting from rooftops about the threat posed by multinationals. Yet they go to great lengths to promote their products," says KVVES State Secretary P Ramachandran.

Nair disagrees. "There should be a case-by-case approach. We should not permit competition detrimental to our economic interest. When we stand to benefit, there is no harm in dealing with foreign companies." He parries the charge of government cushioning for HLL by pointing out that the state outlets have been selling its products for years and an agitation by traders did not provide grounds to reverse the practice.

But the government is hard put to explain the creation of the Neeti stores that only duplicates the public distribution system, which exists in the Maveli shops selling essential commodities at subsided rates. Neeti outlets have emerged as the showrooms for HLL products.

The confrontation between HLL and the traders appears to defy hopes of an early rapprochement. The company is only too aware that should it cave in to the traders's demands, it would set off a chain reaction in other states.

Meanwhile, the traders's association is seeking to stir up public sentiment by projecting the multinational company as the reincarnation of the British East India Company.