KOLKATA: India’s FMCG companies use smaller pack sizes as a way of widening distribution and increasing penetration but these efforts may be hampered by government plans to tighten regulations surrounding tobacco sales at paan shops.
A few years ago, smaller packs at lower price points were seen as a way of achieving greater penetration in rural markets but a period of economic difficulties meant the tactic spread to urban areas.
“In India, small value packs are as popular in metros as in rural markets,” according to Sameer Satpathy, Chief Executive, Personal Care Products Business, ITC.
“Small value packs help consumers to experiment more often,” he told BusinessLine. “For a marketer, it is a definite opportunity to ensure that their brands continue to remain in the consumer’s monthly purchase baskets.”
ITC itself has recently been expanding its range of small packs beyond snacks, beverages and shampoo to include products such as handwash and a new line of “pocket perfumes”, a crossover of the deodorant and perfume sectors for the mass market.
BusinessLine noted that smaller packs are estimated to account for between 30% and 40% of all FMCG sales. While much of this is via kirana stores, paan shops are also an important part of distribution for FMCG products, accounting for around 10% of sales overall, and even more in specific categories.
That could change, however, as the health ministry not only wants to see shops needing permission from municipal authorities to sell tobacco products, it also suggests they could be prevented from selling non-tobacco products, including snacks, biscuits and soft drinks, in order to reduce children’s exposure to tobacco products.
“To avoid a harmful product, you can’t adopt a blanket ban on all the other products,” argued B Krishna Rao, category head at Parle Products. “In India, they [paan shops] are 2.5 million, or about a quarter of the country’s store universe, and the impact will be huge,” he told the Economic Times.
For Parle maybe, but not necessarily for all FMCG businesses. “We aren’t as over-leveraged in the channel as some of our competitors,” observed Varun Berry, managing director of biscuit maker Britannia.
“There will be a short-term blip where impulse buying could reduce,” he said, “but overall sales could move to other stores over a period of time.”
Sourced from The Hindu, Economic Times; additional content by WARC staff