Why Small Packs Make Sense for FMCG Co’s

Monday, December 14, 2009

While C.K. Prahalad’s seminal work, The Fortune at the Bottom of the Pyramid, advocated a strategy to look at the lower end of the market, companies till recently did not tap into the low-unit price market segment with aggression.

Asked why marketers did not look at a low unit price strategy earlier, Cadbury India’s Managing Director, Mr Anand Kripalu, says that playing a low unit price game requires a change in manufacturing and mindset. It requires different kinds of machines, packaging, and the supply chain has to ensure distribution and availability.

There’s is enormous opportunity in India in all segments of the market, he says, but it’s only now that marketers are looking at the lower end. When aspirational brands have offers at the lower end of the market, which allow them to be accessible, the market explodes, he adds.

Small packs make sense for every segment of the market, says brand consultant Mr Harish Bijoor. About ten years ago small packs were meant for rural markets as well as for the unaffording set of consumers in urban markets as well as daily-wage earners.

But not any more.

Varied reasons

As Mr Bijoor explains, small packs help maintain the freshness of what is on offer. Instead of opening a large pack where the freshness of contents can deplete, opening smaller packs keeps things factory fresh. Secondly, small packs mean small outlay on single buys. “It helps penetrate markets one would otherwise not have penetrated due to the high price tag of larger packs. Thirdly, small packs offer ‘variety’ options. Take biscuits. Instead of getting stuck with just one type of biscuit that costs Rs 25, small packs of Rs 5 will give me the ability to buy five different taste-profiles,” he elaborates.

Dabur’s COO, Consumer Care, Mr V.S. Sitaram, says the definition of low unit packs now stretches in the price band up to Rs 10. Dabur itself is offering everything in low units packs: from its honey and Amla hair oil to toothpaste and toilet fresheners and even its blockbuster brand, Chyawanprash.

Source: Hindu Business Line (link opens in a new window)