The new packaging norm which was implemented from November 1st has started to show its colours. FMCG majors have started taking steps to follow the norms and the impact in general has been price hikes.
According to the new norms, biscuits can only be in pack sizes of 25gm, 50gm, 60gm, 75gm, 100gm, 120gm, 150gm, 200gm, 250gm, 300gm and thereafter in multiples of 100gm up to 1 kg; toilet soaps can have pack sizes of 15gm, 25gm, 50gm, 60gm, 75gm, 100gm, 125gm, 150gm and multiple of 50 gm. Similarly there is standardization for all the 19 categories. There are 19 products that would come under the new rule. Besides biscuits and toilet soaps, baby food, weaning food, bread, butter, cereals and pulses, tea, coffee, salt, powdered rice, edible oils, flour, detergent soaps, water, cement and paint products are also included.
According to Ministry of Consumer Affairs, Food and public distribution, the new norms have been formulated keeping the consumer’s interest in mind. It was expected that the change will help the consumers and will also help to curb inflation. But is it working in the interest of consumers?
The average contribution done by smaller packs is more than 50 per cent for most of the FMCG players. Parle’s revenue generated from the smaller packs is around 65 per cent and reports suggest it has gone down by 10-15 per cent. The amount of depreciation will soon reflect in the price. Earlier the companies used to shy away from raising the price tag by tweaking the grams contained in the packets. Since that is no more an option, the companies have to increase product prices to avoid eroding margins.
Parle-G makers Parle have developed a new strategy for the entire portfolio of biscuits. They have incorporated price revisions for its premium brands such as Hide & Seek, etc. ITC on the other hand has also made the necessary changes in the packaging of the biscuit packets. Britannia has made a slew of changes in its product pack configurations across the portfolio of biscuits, breads, rusks and dairy products.Similarly, PepsiCo India has also complied with the new standard pack size regulations. Though there most of the brands come in the standard weights as per the rules so there is not much of a change in their packaging habits. PepsiCo India, which offers products at various price points from Rs 2 to Rs 60 in snacks and Rs 7 to Rs 99 in beverages, is fine-tuning its pack sizes to comply with the government's new rules
Parle-G which till now was marked at Rs 5 for 66.7 gm pack will not see a revision as the packs will be sold for Rs 2 for 25 gm pack and Rs 4 for 50 gm pack.
The sachet wing of their business is going to see a setback. The norms bar the sale of FMCG products in sachets and smaller packs with irregular pack sizes. So the smallest unit of these companies will no more be available within Rs. 10 mark.
It is too early to comment on the impact of packaging norms in the longer run. If government intends to curb the pricing strategy adopted by various FMCG majors in order to check the inflation, this seems not to be working in the right direction. As of now, the companies are increasing the prices, decreasing the weight and since all of them are doing it at the same time, things are not going in the favour or the consumers, probably an example where policy backfires.