Multi benefits with Multi-pack

Indian FMCG market is very different from the global market. The reason for the success of multi-pack format internationally is - the market relies heavily on organised trade. Organised trade helps brands to communicate directly with the consumers in the form of product display, in-store promotion, and display of danglers, posters, flyers, etc. But in India, organised trade is still insignificant in terms of sales volume, and the majority of market share is captured by unorganised mom and pop retail outlets.

 

Buying behaviour

Multi-pack purchase option in India is still available in a limited category. For a manufacturer, multi-pack products are an innovative way to enhance consumers’ purchase weight as well as raise assortment purchase. A multi-pack product also reduces the cost involved in the packaging of the product. “The saved costs can be therefore used for the further marketing of the product,” says Anand Ramanathan, Manager, KPMG Advisory Services. Multi-packaging also helps in clearing the old stocks quickly. Discounts offered on multi-packs leads to bulk buying due to which stocks get cleared.

 

In case of new products, multi-packs help generate trial and familiarise consumer with a larger part of brand’s range in one go. A multi-pack product also helps in retaining brand loyalty so that consumer doesn’t switch to some other brand too soon. Moreover, products such as yogurts, soaps, etc, which are of daily use products, sell more when sold as a multi-pack. Consumers in upper middle class and above are definitely the largest buyers of such packs for whom convenience is a big factor while buying. Another factor influencing the buying behaviour of consumers, says, Jayant Kapre, President, United Biscuits India is “multi-pack provides value in the form of an offer or price off and it provides packs which remain fresh for longer since they are individually sealed.”

 

Modern trade: The Growth Booster

The evolution of modern trade has also played a vital role in increasing multi-pack retail in India. Target buyers of these kinds of products are consumers who frequently visit modern retail stores. “Indian consumers are still habituated for buying small packs more frequently rather than buying in bulk. Modern trade provides a good platform for multi-pack products which need visual display, backed by promotional offers to influence consumer and attract their attention,” says Asitava Sen, Director, Corporate Advisory and Public Affairs, India, APCO Worldwide. The demand and response to these benefits have been observed nationwide in urban stores.

 

Cash & carry stores, supermarkets and hypermarkets are the most suitable for selling multi-pack products as compared to mom & pop stores. At modern outlets, multi-pack products as well as single SKU products share equal shelf space. There, consumers can visibly observe the volume discount or other promotional offers on multi-pack products which will ultimately influence buyers to opt for buying a multi-pack instead of multiple individual packs. On the other hand, kirana or mom & pop stores might not be that suited for selling multi-packs as their customers usually directly ask for 1-2 pieces of the product, not being able to locate the products on the shelves in most cases and are mostly unaware of the multi-packs.

 

Introducing multi-pack in the market

Test marketing or beta testing of any product or product format before launching in the market helps manufacture to prevent from the loss in case of product failure. “As multi-pack format works well in modern retail format and target buyers are Sec A and Sec B consumers, the pack format should be first test marketed in a posh urban area in hypermarkets such as Big Bazaar, Star Bazaar, More, Spencer’s, Food Bazaar, etc,” says Ramanathan. After successful test marketing, the format can be launched nationally.

 

Generally, companies introduce multi-pack format of only those products that are very successful in the market as a single SKU. But it doesn’t hold true for each and every category. In case of failure of a multi-pack format in the market, there is an option to convert the product as single-pack products but it will overburden the player with increase in re-packaging cost. “In case of our brands, we have not experienced this so far, but heavier discounts are usually the norm followed by manufacturers and retailers to clear out such an inventory and it is proved successful too,” says Kapre.

 

Consumption behaviour changes amongst categories

The consumption behaviour of consumers in case of FMCG products changes from category to category. For example, in personal care product categories, such as soaps, shampoos, detergent or toothpastes, which have high consumption volume, are likely to have higher sales volume as a multi-pack format as compared to single SKU. Also, as per the current market trends, it is seen that multi-pack soaps are available as an on-going regular SKU but multi-packs in detergents are introduced occasionally to support a special promotional activity period. There’s occasional introduction of detergent as a multi-pack format because of availability of these products in large SKUs.  

 

In case of food categories, products such as cookies, biscuits, yoghurt, pro-biotic drinks, etc are popular as multi-pack products. United Biscuits India, under its brand McVitie’s has introduced the multipack product as a super saver pack currently available in major metros. Kapre informs, “We will start expanding the distribution of our multi-pack products from major metros and top mini metros in modern retail format as these are better established there and the consumers are also more evolved for this concept. Depending on the response, this concept can be applied to other areas of the country.”

 

Also, in products such as yoghurt, beverages and juices, availability of different variants and flavours in single pack influences consumers to buy multi-packs. One of the leading juice powder and mixes brands, Rasna, recently launched “Rasna Fruitplus Singles”, a juice powder and instant mix, in a multi-pack format. The multi-pack contains juice powder in five flavours – orange, mango, lemon, pineapple and mixed fruit. This kind of packaging in food items helps the unopened or unused portions to be kept fresh for longer as compared to large single SKU packs where there is a chance of the unconsumed part getting spoilt. In addition, it offers variants which a large SKU cannot offer. Therefore, multi-pack offering is more of a new and effective format to drive trials for a range of products and offer considerable value to the consumers.

 

Packaging: a challenge

Packaging of multi-pack products and managing work in process inventory on the floor shop or the area where packaging is done is a big challenge for manufacturers as some of these products have complex packaging designs. Transporting and storing such large packs is a problem as well.  Also, in case of mishandling, a larger volume of the product will be spoilt as compared to the single packs. Further, the distribution of multi-pack product is restricted to the right stores, and so targeting carefully is an additional challenge. Moreover, multi-packs lock up more working capital for the retailers.

 

Speaking over the challenges faced by manufacturers in case of perishable items, Ramanathan says, “Manufacturers should take the utmost care while transporting and storing multi-packs of perishable items. He should ensure that the packs are not puffed or opened. Even if a single portion of a multi-pack is bad, the consumer wouldn’t buy the pack.” Speaking over the sales figure difference in multi-pack and single SKU pack retailing, Kapre says, “In case of multi-pack retail, sales figure almost always increases, although the actual profits are usually low and hence margin dilutive.”

 

Multi-pack in rural market

Though multi-packaging is more prevalent in urban areas, it also has good potential in rural areas. This is due to the fact that rural areas have a large number of big sized families or joint families and the main market area is typically far away from residents, therefore the multi-pack products of higher volumes are well suited for these families. Over the past few years, rural India has witnessed an increase in the buying power of consumers, accompanied by their desire to upgrade their standard of living. Companies have been able to have an impact in the rural segment through effective marketing strategies. The main driver of success of multi-pack among price sensitive consumers of rural India is the price discount offered by brands.

 

But again the success of multi-pack in rural areas depends on the individual category. The format will be more successful in non-food items as compared to food items as the latter need more storage space. “Due to electricity and refrigeration problems, multi-pack format may not be very successful in perishable items category, such as yoghurt that needs proper refrigerating facility. Whereas in detergent and household product category, multi-packs can score better, and there is an option for players to grow in these categories,” says Sen.

 

The trend to rule

As the multi-pack products are largely retailed through modern retail outlets, the format will gain a share in the market as the modern retail format will grow. Multi-packs have potential to spread over almost all of the FMCG categories. Some categories, such as confectionary and snacks, are still in single SKU format in India, whereas, internationally, these kinds of products are available in multi-pack format. Along with existing categories in multi-pack, such as soap, detergent, fruit drink/powders, toothpastes, biscuits, etc, some other categories, such as cosmetics, dish bars and confectionaries, could also be successful in attracting a large number of customers and drive volume sales for the manufacturers and the retailers. But buying multi-pack against single SKU product is a change of habit which will happen over a period of time with the growth of packaged food consumption and more evolved modern trade. 

 

Factors effecting consumers buying behaviour

  • Importance of convenience for the consumers
  • Propensity to buy in bulk in order to avail volume discounts
  • Brand loyalty towards the product
  • Different variants and flavours in one pack
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