Seizing value through large packs

It is a pressing time for Indian consumers as household budgets are soaring uncontrollably, leaving them with little options

for saving money. The situation has prompted FMCG brands to promote large pack offerings that eventually help consumers
to save money. The shoppers, too, are liking the trend, preferring big packs over smaller packs.
 
A recent study by Neilsen, titled “2011 Global Online Shopping and Saving Strategies Survey” covering more than 25,000
Internet respondents in 51 countries, has revealed that 46 per cent of India’s online consumers prefer to purchase
larger ‘value’ packs to save on household expenses.
 
Roosevelt D’Souza, Executive Director, Nielsen India, says, “Indian consumers have always been value conscious, and the
inflationary environment has increased this tendency. At Nielsen, we see more people actively seeking out deals, or even
switching stores to avail deals or better values. The emerging modern format encourages this practice, and the primary
factor for choosing the modern trade format as a shopping destination is to look for options that offer better value.”
 
THE CHANGING TREND
 
Large and bundled packs is a phenomenon, which is visible majorly in modern trade as consumers visit these hypermarkets once in 15 days or so, and buy large packs of products. They are also driven by bundled products, but only when the product provides them better value for money.
 
The industry players, keeping in mind the consumer behaviour, are emerging with larger packs of FMCG products or are
doing bundling of similar products. For instance, Hindustan Unilever recently launched an 8 kg pack of its popular RIN
detergent, moving up from its 6 kg offering in order to compete with rivals. L’oreal’s Garnier Fructis shampoo has also
come up with 700 ml packs. These products have regular buyers who don’t mind buying a larger pack, as they are already
loyal to those products and getting an opportunity to save per gram/ml offering just adds to their loyalty.
 
“Large packs drive consumption and economies of scale and allow both manufacturers and retailers to pass on the benefits to consumers,” says Devendra Chawla, President – Food Business, Future Group. He adds that the 8 Kg Rin pack proved to be a good bargain for consumers during Big Bazaar’s “Sabse Saste 5 Din” campaign in January. The Neilsen report suggests that less than a quarter (23%) of respondents, compared to those who preferred larger pack sizes for better value, think that purchasing smaller packs with lower unit price would help them save money. Indians also see an advantage in shopping at value retailers (41%), and at locations close to their homes and offices (40%).
 
As the Indian demographic now holds more of working families, the consumers prefer stocking up on consumer packaged
goods as a way to save money and time. Large pack manufacturing has also become a boon for manufacturers, as a sudden rise inconsumption of packs has called for larger volumes. “Selling larger packs, along with bringing ease and convenience to consumers, also helps us as a manufacturer to raise the volume of consumption,” says Devendra Shah, Chairman, Parag Milk Foods. For Future Group, combo or bundled products contribute to 18-20 per cent of the category sales. However, for Big Apple, a Delhi-based food and grocery retail chain, 2-4 per cent of total SKUs are large packs sold, of which 80 per cent sales happen only when the products are well promoted. “Larger packs help consumers to save up to 3-5 per cent in terms of money, on a monthly basis,” opines Shah.

 

 

 
Ideally, customers buy large or bundled packs in two scenario, first being their perception of increased value and savings
and secondly, short lead or consumption time.This, Anand Murthy P, President & CEO, Express Retail Service Pvt Ltd, the parent company of Big Apple, views as acomplete promotional interface to which consumers are reacting. It is more of supply push rather than a demand push. “The difference between product USPs is narrowing now, and consumers are becoming experimental. This calls for lowered customer loyalty. Large packs or bundles come to rescue in this scenario, as the consumption time grows and hence, keeps customer loyalty intact till that time. Moreover, modern trade is taking up these promotions because the sale of FMCG products is lower at their chain as compared to local kirana shops. So, in order to push sales, they are selling large or bundled packs,” informs Murthy.
 
Tarun Arora, Executive Vice President, Head – Marketing, Godrej Consumer Products Ltd, says, “Consumers nowadays
know and understand the value for money, so they cannot be fooled with large or bundled packs just because they might
save some money. Large packs surely boost revenues of FMCG manufacturers as it promotes greater penetration and
consumption. A few years ago, we introduced a 700ml pack of our house insecticide, Hit, up from 500ml pack, and these
were sold like hot cakes.”
 
THE RIGHT PLACE
 
Larger packs and bundling is finding its place majorly in the modern trade. Now, as the young population of India grows,
this population, rather than making purchases daily, prefers going to modern shops and purchase a month’s quantity of
even items that they need on a daily basis. This is happening because companies these days are coming up with daily need products that have a better shelf life.
 
For example, Parag Milk Foods recently launched GO UTH Milk, which is tetra-packed milk with a shelf life of 180 days.
According to the company, the consumers are buying this in bulk, ie, 6-12 packs on an average due to its longer shelf
life. “With our recently launched offering, we are majorly targeting consumers at the modern trade. I think this product can
get good feedback only from modern retail where people come to purchase their daily need products once in a month. We
need to offer them products that can save their time as well as their money,” says Shah.
 
Today, consumption of nuclear families may not be very high as compared to a joint family or larger families, but many of
these families possibly do not face the same pressures on day-to-day finances and monthly budgets as many others. These would be particularly applicable to those products that have a longer shelf life and do not come with a limited “Best Before” date. According to K S Narayanan, Chief Executive Officer, Pan India Food Solutions Pvt Ltd, who has earlier been a part McCain and HUL, there are some items that can be bought and stored, and it actually helps to save time and effort required in going to the market, buying, transporting, etc. For instance, a large pack of detergent powders, cleaning liquids, etc could be used over a longer duration. However, in case of certain food products, the consumption of which is not very high, it is not advisable to go for larger packs.

 

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