Brands Strengthen Quick Commerce Policies Amid Food Safety Concerns
Following recent food safety violations at dark stores run by quick commerce platforms, several brands are taking proactive measures to renegotiate their contracts with these companies. This move aims to enhance compliance with food safety regulations and ensure better handling of products. Notable brands like Marico, ITC, Godrej Consumer Products, and Dabur are among those adjusting their terms to mitigate risks associated with food safety lapses.
Contractual Changes in Response to Violations
In light of the food safety issues, brands are focusing on revising clauses related to storage, handling, and hygiene within their contracts with quick commerce platforms. Chandan Goswami, a partner at AT & Partners, highlighted that many brands are also considering legal options to protect themselves from potential consumer claims or regulatory scrutiny. The Maharashtra Food & Drug Administration recently suspended the food business licenses of Zepto’s dark store in Dharavi and another managed by Blinkit in Pune due to non-compliance with food safety regulations. Although these licenses have since been reinstated following compliance checks, the incidents have prompted brands to take a more cautious approach.
Brands are now insisting on stronger representations and warranties in their contracts, which affirm adherence to the Food Safety and Standards Authority of India (FSSAI) norms. Dheeraj Nair, a partner at JSA Advocates & Solicitors, noted that these changes include robust indemnity clauses to protect brands from losses or reputational damage caused by lapses on the part of the platforms. Furthermore, brands are seeking audit rights to access dark stores and fulfillment centers for verification purposes.
Accountability in Quick Commerce
The evolving landscape of quick commerce has led to a shift in how brands view their partnerships with delivery platforms. Nair emphasized that these operators can no longer be seen merely as facilitators; they are increasingly regarded as co-custodians of regulated goods. This change in perception has prompted brands to enforce accountability through precise compliance standards and legal safeguards in their agreements. Legal experts stress that formal written agreements between brand owners and platforms are essential to ensure compliance with FSSAI regulations.
The quick commerce market, particularly in urban areas, is experiencing rapid growth. Consumers are willing to pay a premium for the convenience of receiving groceries and other products within minutes. A recent report by Kearney predicts that the quick commerce market in India could triple between 2024 and 2027, potentially reaching a value of Rs 1.5-1.7 lakh crore. As this market expands, both brands and quick commerce platforms are likely to scrutinize their contractual representations and warranties more closely.
Focus on Compliance and Safety Standards
As brands and quick commerce platforms navigate this evolving landscape, the emphasis on compliance with food safety regulations is paramount. Sahil Narang, a partner at Khaitan & Co., pointed out that the focus will be on ensuring that all necessary licenses, including those under the Food Safety and Standards Act of 2006, are obtained and maintained. This includes strict adherence to hygiene and storage standards, particularly for perishable goods.
The recent incidents have underscored the importance of maintaining high safety standards in the quick commerce sector. As brands renegotiate their contracts, they are likely to include more stringent compliance protocols to safeguard against future violations. This proactive approach aims to protect both consumer health and brand reputation in a rapidly growing market where the demand for quick delivery services continues to rise.
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