As Inflation Soars, FMCG Manufacturers Are Opting To Reduce Product Weight Over Price Of Items

FMCG manufacturers are opting to reduce product weight rather than the price of items targeted at lower-end consumers while resorting to a single-digit price increase on some large packs and launching ‘bridge packs’, as they seek to overcome the impact of commodity price rise and unprecedented inflation.

Reportedly, HUL, for instance, whose approximately 30 percent of business is in the price-point packs, will take calibrated pricing actions. 

Again, FMCG companies are also using economical packaging, and recycled products, and cutting spending on advertising and marketing to counter sudden spur in costs due to geopolitical crises such as the Russia-Ukraine War and the export ban of Palm oil from Indonesia.

The growing commodity prices and unprecedented inflation touching a new high have forced the consumers to tighten their purse strings and opt for the low-unit price (LUP) packs to maintain their household budgets.

Homegrown FMCG maker Dabur India has responded to this challenge with a mix of pricing actions and costs control measures, said Mohit Malhotra, CEO, Dabur India.

“In the urban markets, where the per capita income is higher and consumers have the spending power, we have taken up prices in larger packs. On the other hand, in the rural markets, where LUP packs are sold, we have seen grammage reduction to protect sacred price points like Re 1, Rs 5, and Rs 10,” Malhotra further said.

With no sign of inflation coming down in the coming quarters, FMCG companies are fighting back through grammage cuts, launching bridge packs, and a single-digit price increase on some large packs.
In fact, several companies have already reduced the grammage of their products available at popular price points, ranging from soaps to noodles, chips to Aloo Bhujia, and biscuits to chocolates.

“We have observed that some consumers have shifted to affordable packs or LUPs to manage their monthly grocery budget. We have also increased supplies of LUPs of our key brands across categories to meet this consumer need,” Malhotra added.

Mayank Shah, Senior Category Head, Parle Products said that there were “some early signs” of downtrading, consumers turning to value packs, as the sale of low unit price packs was slightly going up.

“In terms of smaller packs, there is a bit of traction happening given the situation,” Shah stated.

Downtrading refers to switching from expensive products to cheaper alternatives by customers in a bid to conserve cash.

A recent report by retail intelligence platform Bizom also pointed out that there is a “definite increase” in the consumption of products across lower price points in both urban and rural centers in the January-March quarter in comparison to the July-September quarter.

 “There are signs of significant downtrading among FMCG products across both urban and rural India. Price inflation remains the key driver of this shift across categories especially among those where oil, wheat, and other inflationary commodities remain a key input ingredient,” said Bizom Chief of Growth & Insights Akshay D’Souza. 
 

READ MORE: FMCG Makers Mull 10 pc Price Hike to Mitigate Inflationary Pressure

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