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Fast moving goods in Rs 20 packs challenge the reigning SKUs

Packaged consumer goods companies clock a significant portion of their sales from Rs 5 and Rs 10 packs. However, companies had to reduce the grammage of these packs in the wake of inflation to protect their margins.

August 17, 2022 / 02:19 PM IST
Representative image

Representative image

Indian consumers are taking a shine to Rs 20 packs, with their sales doubling over four years. As the size of Rs 5 and Rs 10 packs have been shrinking due to high inflation in the fast-moving consumer goods (FMCG) space, the Rs 20 pack has emerged as the preferred pack for Indian consumers, as these packs are seen to be offering better value.

According to a recent report by data analytics and consulting firm Kantar Worldpanel, the sales of the Rs 20 pack in FMCG categories such as biscuits, noodles, toothpastes, bar soaps, skin creams, hair oils, and washing powders, grew 121 percent on a moving annual total (MAT) basis in April 2022, compared to April 2018. Kantar Worldpanel used 2018 as the base period because of readily-available data for the year.

Kantar Worldpanel reported that the Rs 20 pack has added five crore new households in the biscuits segment, seven crore in the toothpaste category, nine crore households in the hair oil segment and five crore incremental households in the skin creams category since 2018.

Companies have been increasingly introducing Rs 20 packs for their products. Parle has introduced Rs 20 packs recently to address reducing Rs 5 and Rs 10 pack sizes.

“The Rs 10 pack, which was more of an at-home consumption pack, is now being used by consumers for on-the-go consumption due its reduced size, while the Rs 20 pack is being used for consuming our products at home,” said Mayank Shah, senior category head, Parle Products.

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“Hence, we have introduced the Rs 20-pack for several products, including Parle-G biscuit,” said Shah.

There have been 87 new launches in the Rs. 20 space since 2019 in eight major FMCG categories: biscuits, noodles, food, drinks, toothpaste, bar soaps, skin cream, hair oil, and washing powder, according to Kantar.

“Rs 5, Rs 10, and Rs 20 are the magical price points for the FMCG industry, and they have sustained their growth. Rs 10 has the lion’s share of FMCG volumes, and Rs 5 is the fastest growing. Rs 20 is still small in comparison. But we believe that with the inflation and shrinking pack sizes, the Rs 20 pack will become more important going ahead,” said K Ramakrishnan, managing director, Kantar Worldpanel.

“For every 100 added in 2018, Rs 20 is recruiting much more today,” says the Kantar Worldpanel report. For instance, if Rs. 20 was recruiting (adding) 100 households in the biscuits category, it is now recruiting 208 households. Similarly, in toothpastes it is now recruiting 187 households against 100 households earlier.

incremental household added by Rs 20

Shrinkflation

Much like the larger economy, the FMCG industry has been grappling with sky-high inflation in raw materials and other commodity prices for more than a year now. The price of crude oil, according to HUL, was up 60 percent year-on-year (y-o-y) in the June quarter, while caustic soda was 125 percent costlier. Prices of other key commodities like palm oil and polyethylene were up 50 percent and 25 percent, respectively, year-on-year. Companies have been passing on the increased cost to consumers, albeit cautiously, given the tepid demand.

Last quarter, HUL raised the prices of some SKUs by 8-10 percent. Other top FMCG firms like Britannia, Nestle, Godrej Consumer Products, Tata Consumer Products, Dabur, Marico, etc., have also raised prices for several consecutive quarters now.

Companies, however, are treading cautiously when it comes to their highest-selling low unit packs, or LUPs. These packs, which have helped FMCG companies penetrate rural India, are meant for consumers at the bottom of the pyramid who are highly sensitive to price changes.

Sample this: The Rs 5, Rs 10, and Rs 20 packs collectively comprised 28 percent of FMCG sales volumes in April 2022 on MAT basis, as per Kantar Worldpanel. This has not changed much since 2018, when these packs comprised 27 percent of FMCG sales on MAT basis, said Kantar Worldpanel.

Hence, instead of tinkering with these price points, FMCG firms reduce the grammage, or volume, of the product. For instance, Haldiram has reduced the weight of its 55 gram-Aloo Bhujia packet to 42 grams, while Nestle has reduced the weight of its 80-gram Maggi pack to 55 grams. Parle Products has reduced the weight of its Rs 5 Parle-G biscuit pack to 55 grams from 64 grams.

According to Kantar, despite shrinking sizes, LUPs are still much sought-after. Sales volumes of Rs 5 packs in the food category jumped 21 percent in April 2022 on a MAT basis, compared to the same period last year. This was higher than the growth of the overall category, which stood at 11 percent, as per the consulting firm.

Similarly, in non-food categories, Rs 10 packs saw a volume growth of nine percent (MAT basis) in April 2022 compared to the corresponding month last year, whereas the overall category grew by 5 percent.

Bridge packs

Increasingly, FMCG companies are also introducing bridge packs, or packs that are priced between LUPs and large packs. For instance, HUL has introduced a Rs 16 bridge pack for Lifebuoy soap.

“Approximately 30 percent of our business is in low price-point packs. The high levels of input cost inflation have had an impact on the offerings in some parts of this portfolio. Therefore, we are creating bridge packs to provide the right price-value equation to our consumers, while ensuring our that products remain affordable and accessible,” said an HUL spokesperson.

Besides Lifebuoy, HUL has launched bridge packs in skin, and is evaluating other categories as well.

While the Rs 10 and Rs 5 packs contribute a hefty share of sales for FMCG companies, they say the Rs 20 pack is rapidly growing.

Parle Products, for instance, draws about 25-30 percent of its sales from Rs 5 and Rs 10 packs. Though only three percent of its sales volumes, the Rs 20 pack has seen a jump in recent times.

Amit Kumat, CEO and MD, Prataap Snacks, which sells potato chips, Indian namkeens and other snacks under the brand Yellow Diamond, reports a similar trend. According to him, while it comprises four percent of their volumes, sales of Rs 20 packs have seen a jump of late.

The Rs 20 pack has long way to go in the FMCG market, but if package sizes keep shrinking at their current pace, then it might rule the market sooner than later.
Devika Singh
first published: Aug 15, 2022 11:49 am
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