Inflation hits pack size and adspend in India

Rising raw material prices and high inflation are pushing India’s fast-moving consumer goods (FMCG) brands to shrink pack sizes in order to maintain crucial price points at the same time as they are cutting back on advertising.

Why it matters

Keeping a product’s price constant but reducing pack sizes – so-called shrinkflation – is a frequent response by manufacturers at such times. Dabur India’s CEO recently spoke of the need to “protect sacred price points like Re 1, Rs 5 and Rs 10", especially in rural markets. 

Takeaways 

• Urban markets, with higher incomes and spending power, are more likely to see price increases on large pack sizes.
• Businesses are also adopting “bridge-pack” strategies, which offer the consumer slightly more volume but at a higher price.
• As profit margins are squeezed, FMCG companies are also becoming more cautious about advertising expenditure, with observers suggesting many are cutting spend by up to 15%.

Key quote

"Most FMCG categories have lower unit packs of Re 1 to Rs 10 accounting for 25 to 35 percent of their sales. Even when downtrading happens, the consumer remains with the brands” – Abneesh Roy, ECP Edelweiss Financial Services, speaking to Economic Times. 

Sourced from Economic Times, e4m, Financial Express [Image: Getty]