Jugaad to the rescue: FMCG firms find a

way to keep business ticking during a

downturn
Top producers of consumption goods are introducing cheaper packs to woo new
customers.
ET Online|
Updated: Aug 02, 2019, 03.31 PM IST

It seems India's growth-starved FMCG companies have found a way to keep their cash registers ticking in the times of a slowdown.

The country's top producers of household consumption goods are introducing cheaper packs to woo new customers, according to a
story in the Mint newspaper.

Lower price points are likely to help the hard-pressed consumer goods companies find new consumers for products ranging from
chocolates to toothpastes to biscuits, at a time when demand is getting more and more depressed amid an entrenched slowdown in
Asia's third-largest economy, the report said.

FMCG major Dabur NSE -0.73 % is one of the companies doubling down on the new plan. "The Rs 10 price point is required
because we have to increase consumption. For doing that, we have to increase penetration," Mint quoted the company's CEO Mohit
Malhotra as saying.

Retailers are also seeing a lot of action in the Rs 10 price band. Take the example of wholesale retailer Metro Cash and Carry — as
of May 2019, sale of Rs 10 products saw a whopping 150% year-on-year jump despite an overall sales slowdown.

A sputtering consumption story

Over the last three quarters, India's rural consumption — which accounts for a third of the the country's FMCG sales — has been
under significant pressure.

Data shows the overall macro scenario is weakening due to factors that include liquidity crisis hurting wholesalers, lower
procurement despite MSP hikes, limited reach of PM KISAN and lower government spending.

That would mean the current economic environment is slowing down the entire FMCG industry — growth has come down to 10%
now from a high 16% in the span of just three quarters.

Sales of branded daily-use goods have now come to rely more and more on the 80 crore people who live in the country's hinterland,
and whose shopping patterns are inextricably linked to agricultural growth.

Despite all this slowing down in business, companies are doing well on the miniature products front, FMCG industry sales figures
showed.
The march of the miniature
Dabur has just released a 30 ml version of its celebrated and widely popular Dabur Amla hair oil at Rs 10. The company has also
brought Rs 10 packs of Babool toothpaste and Red toothpaste. Another of their products is the Real Koolerz drink, also for Rs 10.

In this race, Dabur is not alone. Others consumer goods biggies such as PepsiCo have also released cheaper versions of products
such as Doritos and Lay's Maxx.
Mondelez India, the maker of Cadbury Dairy Milk which is India's largest chocolate brand, has seen brisk business for its Rs 10
pack.

Why is this trend catching on in India? Top executives at consumers giants attribute it to the rising penetration of the internet, thanks
to which India's rural consumers are now familiar with all kinds of famous brands.

They want to consume those products, but most of them can't afford standard-sized offerings — which is why many FMCG products
are getting smaller by the day.
Going big on small packs
Hindustan Unilever NSE -0.65 % (HUL), India's FMCG bellwether, was a pioneer in this area. It launched a miniature, Rs 10 sachet
of its hugely popular Surf Excel detergent a few years ago.
"Such packs allow us to reach first-time users more effectively, introducing our offerings to them. They are particularly useful to drive
market development of nascent categories," a HUL spokesperson told the newspaper.

Also, small packs/sachets allow companies to make quality and aspirational products available to consumers at affordable prices,
he added.

Although the Rs 10 band has caught on in a big way for FMCG companies, this is by no means the only innovative price point.

Companies have launched mini versions of their products at Re 1, Rs 2 and Rs 5 at various points.

As per the Mint report, that is because India is famous for being a large value market, where smartly priced items help companies
draw in big moolah. This is especially true in cases of products such as biscuits, salty snacks and chocolates, it said.

Why Rs 10? The origins

For some reason, sales of the Rs 10 products are rising at a faster pace than those in the other affordable price points mentioned
above, figures show.

Why? Mayank Shah, category head at Parle Products, explained it to the newspaper thus: "Ideally, it makes sense to gradually
move the consumer to a price point which would be convenient for you to cater to as well as affordable for consumers. And Rs 10
fits in very well there."

According to the Mint story, contribution of Rs 10 packs to Parle's sales has jumped from less than 15% a few years ago to as much
as 25% now. The company has now launched trial packs of some of its premium cookies across the country.

Rs 10 is a much more sustainable price point from a manufacturing standpoint compared to others, says a senior marketing director
at PepsiCo India. It also helps that more and more innovations are coming at this price point, he adds.