FMCGs find a way to keep their business ticking during a downturn

It seems that Indian fast-moving companies have found a way to keep their cash registers ticking in times of slowdown.

Top manufacturers of consumer goods in the country are introducing cheaper packaging to attract new customers, according to a story in Mint.

Lower price points are likely to help consumer pressure companies find new users for products ranging from chocolate candy to toothpaste to biscuits, at a time when demand is increasingly depressed amid a slowdown in Asia's third largest economy, the report said.

The main FMCG Dabur is one of the companies doubling down on the new plan. "The price of Rs 10 is needed because we need to increase consumption. To do this, we need to increase penetration," Mint said, quoting Mohit Malhotra, CEO of the company.

Retailers are also watching a lot of action in the price group of Rs 10. Take for example Metro Cash and Carry wholesalers – since May 2019, sales of Rs 10 products have seen a huge 150% annual jump, despite the overall slowdown in sales.

History of consumption spread

In the last three quarters, rural consumption in India – which accounts for one-third of the country's sales of fast-moving goods – has been under considerable pressure.

Data show that the overall macro scenario is weakening due to factors including a liquidity crisis affecting wholesalers, lower orders despite an increase in SMEs, the limited scope of Prime Minister KISAN and lower government spending.

This would mean that the current economic environment is slowing the entire FMCG industry – growth has dropped to 10% now from the high 16% over a period of just three quarters.

Sales of branded consumer goods are relying more and more on 80 crores, which live inland and whose shopping patterns are inextricably linked to the growth of agriculture.

Although all this is slowing down in business, the companies are doing well in front of the miniature products, FMCG industry sales data showed.

The hike of the miniature

Dabur has just released a 30 ml version of its famous and popular Dabur Amla hair oil at Rs 10. The company also brought Rs 10 packs of Babool toothpaste and red toothpaste. Another product is the Real Koolerz drink, also for Rs 10.

In this race, Dabour is not alone. Other major consumer goods companies like PepsiCo have also released cheaper versions of products such as Doritos and Lay's Maxx.

Mondelez India, the Cadbury milk producer, which is India's largest chocolate brand, is a brisk business for its Rs 10 pack.

Why is this trend intensifying in India? Consumer giant's top executives attribute it to the growing advent of the Internet, making consumers in rural India already familiar with all kinds of well-known brands.

They want to consume these products, but most of them cannot afford standard-size offers – so many FMCG products are getting smaller.

It gets big in small packages

Hindustan Unilever (HUL), India's fast moving bell pioneer, was a pioneer in the field. A few years ago, he released a miniature bag of Rs 10 from his hugely popular Surf Excel cleaner.

"Such packages allow us to reach consumers more efficiently for the first time by presenting our offerings to them. They are particularly useful for stimulating the emergence of an emerging category market," a HUL spokesman told the publication.

In addition, small packages / sachets allow companies to provide quality and ambitious products to consumers at affordable prices, he added.

Although the reach of Rs 10 has come a long way for fast moving companies, this is by no means the only innovative price. The companies have released mini versions of their products at Re 1, Rs 2 and Rs 5 at various points.

According to the Mint report, this is because India is known for being in the high value market where smart pricing products help companies attract big malls. This is especially true in the case of products such as cookies, salty snacks and chocolates.

Why Rs 10? The origin

For some reason, product sales of Rs 10 are increasing at a faster rate than those at the other prices mentioned above, figures show.

Why? Mayank Shah, category manager at Parle Products, explained it to the newspaper in this way: “Ideally, it makes sense to gradually move the consumer to a price point that is convenient for you to take care of and accessible to consumers. And Rs 10 fits in very well there. "

According to the Mint's history, the contribution of Rs 10 packs to Parle's sales has jumped from less than 15% a few years ago to 25% now. The company is now launching trial packages of some of its first-class cookies nationwide.

Rs 10 is a much more sustainable price point of view compared to others, says a senior marketing director at PepsiCo India. It is also helping more and more innovation come at this price point, he adds.