FMCG companies go the economy way to push sales

Written by Lalitha Srinivasan | Mumbai | Updated: Nov 25 2013, 05:34am hrs
Indian FMCG
In a slowing economy, Indian FMCG majors are now betting big on economy packs to drive volumes in competitive markets. Recognising the growing demand for small packs, FMCG companies are now increasing the production capacity and distribution reach of these packs to woo cost-conscious consumers. For instance, after witnessing a 10% jump in the sales of its brands in economy packs, Dabur India, makers of Vatika hair oil, is increasing the production capacity for its low-unit packs by 15 to 20%.

Similarly, Gujarat Co-operative Milk Marketing Federation (GCMMF), owners of the Amul brand, is increasing its production facility for economy packs (priced at R5 and R10) in categories such as milk, ghee and milk powder after seeing a 15% rise in the sales of these economy packs.

Realising the significance of small packs, Nivea India, an affiliate of Beiersdorf, has recently introduced its select personal care brands in economy packs priced around R20.

Meanwhile, ITC Foods and PepsiCo India are sharpening their marketing focus on economy packs to drive sales. With the economic slowdown and rising prices, consumers are now shifting to smaller economy packs. Seeing this shift, companies are now relying on small packs to drive volumes, said an industry analyst with a domestic brokerage firm in Mumbai.

In essence, the R1,85,000-crore Indian FMCG industry will soon witness the launch of many low-unit packs across various product categories.

Sunil Duggal, managing director of Dabur India, said: We have seen a 5-10% jump in the sales in our economy packs specially in personal care brands. In urban India, consumers are now down trading to economy packs while rural consumers are increasingly opting for small packs.

As a result, Dabur India is extending the production capacity for its low-unit packs by 15 to 20%.

With sales turnover of R13,760 crore, GCMMF is planning to expand the production capacity and distribution reach of its small packs in the next few months. In smaller cities, towns and up-country markets, we have seen a 15% increase in the sales of Amuls small packs. We are now planning to move into many more small towns and cities with our economy packs, said Amul Sodhi, managing director of GCMMF.

ITC Foods is also planning to increase the production capacity for its economy packs. In fact, we have witnessed a considerable jump in the sale of our brands across all pack sizes. Hence, we are increasing our production facilities for all our brands, said Chitaranjan Dar, chief executive of ITC Foods.

While home-grown FMCG majors are sharpening their focus on small packs, MNC PepsiCo India is also betting big on small packs to drive volumes in domestic markets. Smaller packs are a growing part of the snacking category, within which R5 is the most salient and recognised price point. In fact, R5 pack continues to be the highest selling pack for Kurkure. Our flavoured oats range priced at R10 is also doing well, said a spokesperson from PepsiCo India.

Like PepsiCo, GlaxoSmithKline Consumer Healthcare, makers of Horlicks, has also witnessed a jump in the sale of its small pack in the last few months. Sale of our small packs for Horlicks (R5) has gone up by 6%. in Q2 FY 14, said Ramakrishnan Subramanian, director (finance) GSK consumer during an analyst meet this month.

As the economy slows down, Indian FMCG companies are devising fresh strategic plans with a sharp focus on small packs to retain consumers.