Pay more for FMCG goods from Nov 1 on new packaging rules
A Rs 20 pack of popular biscuit brand Parle-G has a weight of 338.4 grams, a Cinthol soap priced at Rs 27 weighs 92 grams. But soon this will all change as new standard packaging norms mooted by the government come into effect from November 1 and there will be no arbitrary packaging.
August 24, 2012 / 17:45 IST
Nachiket Kelkar
moneycontrol.com
A Rs 20 pack of popular biscuit brand has a weight of 338.4 grams, a toilet soap priced at Rs 27 weighs 92 grams. But soon this will all change as new standard packaging norms mooted by the government come into effect from November 1 and there will be no arbitrary packaging.Under new norms, biscuits can only be in pack sizes of 25g, 50g, 60g, 75g, 100g, 120g, 150g, 200g, 250g, 300g and there after in multiples of 100g up to 1 kg. Similarly, toilet soaps can have pack sizes of 15g, 25g, 50g, 60g, 75g, 100g, 125g, 150g and there after in multiples of 50g. "It has been observed that some manufacturers in the country are reducing quantity of packaged products by small fractions without making a change in the price of the product. The government after due examination of the issue amended the Legal Metrology Rules, 2011," Food and Consumer Affairs Minister KV Thomas said in a written reply to the Lok Sabha.The new government rules will certainly clear any ambiguity and confusion on pack sizes. But consumers should be prepared to pay more for their products too. Companies have commonly resorted to indirect price increases -- reduce pack sizes without changing price. Companies like those making biscuits, chips and chocolates have preferred maintaining price points like Rs 5, Rs 10, Rs 15 and Rs 20. But now there will be more direct price hikes as companies won't be able to tweak grammages any more."Pricing of packs priced above Rs 10 will be impacted...Prices will have to be raised to bring in standard packaging," Praveen Kulkarnii, general manager (marketing), Parle Products, told moneycontrol.com.There is no restriction on packs priced below Rs 10, so there will be more impact on premium products, he said. Some companies also warn that there will be some impact on profits as all the non-standard packs will have to be changed and more direct price hikes in the future could also hurt sales. There are 19 product categories, which will come under the purview of the new rules. Apart from toilet soaps and biscuits, baby food, weaning food, bread, butter, cereals and pulses, coffee, tea and other beverages, edible oils, salt, powdered rice, flour, detergent soaps, water, cement and paint products will have to fall in line with the new rules.Analysts say packaging costs for companies will go up as they will need to change existing pack sizes to the ones prescribed by the government. That apart, the new rules will also restrict promotional offers, as companies will have to adhere to standard pack sizes, says Sharekhan analyst Kaustubh Pawaskar. For instance, on a 100g pack, a company would not be able to offer 10% or 15% extra, since that would not be a standard pack size.Pawaskar points out that companies have already started re-defining strategies to meet the new packaging norms that come into effect in just over two months."We are geared up for the change. We are in a state of readiness," P Ganesh, CFO, Godrej Consumer Products, told moneycontrol.com. Packs manufactured on or after Nov 1 will have to adhere to the new norms and he says the company will be ready with new packaging by then.Ganesh says product price per gram is not likely to go up but the price of SKUs (stock keeping units), which have to be standardised will change in proportion to the change in size.But he too agrees that there will be more direct price hikes now given that pack sizes can't be changed.These rules related to the standard packaging norms were first notified last year and were to come into effect from April 2012. But they were postponed to July and then Nov post several meetings with industry lobbies.nachiket.kelkar@network18online.com Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
