Some FMCG co.s Move Out of Fixed Priced Packs, While Some Increase Volume to Stay
HUL has increased the grammage and has managed to remain at the fixed price points.
Chennai:While FMCG companies have reduced the prices of products to pass on the GST rate cut to the consumer, fixed price point products are a sticky category. While a few FMCG companies have moved the products out of the fixed price packs, some have increased the grammage to remain in those price points. A few companies hope to return to the price point soon by increasing grammage.
The fixed price point products – mostly low-value, low-grammage products packed in sachet packets - are meant to make the product affordable for the rural and urban poor. The price point of Re 1, Rs 2, Rs 5, Rs 10 or Rs 20 remains fixed while the company tweaks the grammage to adjust the increase or decrease in costs. This makes the transaction easier for both the retailer and the consumer.
The GST rate reduction in processed foods and personal care products has created a challenge for the FMCG companies as price reduction will move them out of the fixed price point.
HUL has increased the grammage and has managed to remain at the fixed price points.
“In line with the recent GST rate rationalisation, we are passing on the benefits directly to our consumers. For price-point packs, we’ve opted to increase weight or volume as applicable to avoid odd pricing and coinage-related challenges, which will ensure pricing simplicity. This means consumers will now receive more product at the same price, effectively lowering the price per gram or millilitre," said HUL spokesperson.
However, Parle and Dabur have moved out their products from fixed price packs.
“In order to bring in the GST rate cut, we have brought down the prices. So, a Rs 5 packet of biscuits are now priced Rs 4.45 and Rs 10 packet Rs 8.90. However, this will be for the interim and we plan to return to the fixed price points in a month or so,” said Mayank Shah, vice president, Parle Products.
According to him, the wrappers for these products take a lead time of at least two months to get changed. The wrappers should be slightly bigger to accommodate higher grammage. Hence for the interim, the company has reduced the prices, but once the new wrappers arrive, it plans to go back to the fixed price packs. For Parle, fixed price packets account for 70 per cent of the sales.
Dabur too has decreased the prices of hair oil, toothpaste and shampoos at fixed price points. Re 1 pack will now be charged 90 -94 paise, Rs 10 will be Rs 9 and Rs 20 pack will be priced Rs 18.
According to Dabur officials, retaining the fixed price points are becoming less relevant as most of the consumers pay using UPI and fixed price points mostly benefit cash purchases.
However, Parle finds that both in urban and rural markets, there are sections of people who are not UPI savvy and hence buy using cash. In order to support them, Parle wants to retain fixed price packs.
