Industry: Large FMCG packs not making it to carts

Even though inflation has moderated, high-priced large consumer product packs are still off-limits for most Indians.
The sales growth in high-value packs across FMCG categories shrank in July over the previous year, data from retail intelligence platform Bizom, shared exclusively with TOI, showed. Consumers settled for low-and-mid-priced packs ahead of the festive season as prices of large packs remain higher than expected.

“When the price of a pack rises above a certain psychological threshold – say a Rs 100 pack becomes Rs 110 – then it’s difficult to get consumers to purchase these packs. Moreover, e-commerce and quick commerce, where consumers make impulse purchases of small-and-mid-priced packs, continues to grow faster than modern trade where high-value packs are usually bought,” said Mayank Shah, senior category head at Parle Products. He added that consumers are okay with grammage reductions because extra money does not go out of their pockets.
In packaged foods, sales of high-value packs saw a 1% decline even as mid-and-low-priced packs recorded 0.5% growth (see graphic). In confectionery, consumers shifted to mid-priced packs (4.6% growth) while high-value packs saw a 4.7% decline. In branded commodities, both high-value and mid-priced packs saw growth declining, as consumers moved to small packs (4.7% growth).
Over the last two years, when inflation was on the rise, high-value packs took the maximum burden of cost escalation, while on low-unit packs, where there is less scope to tweak pricing, companies had resorted to grammage reduction. “Shifting to small-or-mid-price packs pinches consumers less on their pocket,” said Shah, who added that getting volume growth back is a challenge.
Despite companies passing on raw material cost benefits to consumers – by increasing grammage on low-and-mid-price packs and reducing the prices on high-value packs – the pricing threshold on the latter continues to remain psychologically high for consumers. Even though edible oil prices have come down to ease cost pressures, prices of wheat, a key raw material in making biscuits, remains high, Shah said.
Bikano director Manish Aggarwal said, “We are focusing more on low-price packs as they are the best-selling product range.”
The festive season is expected to boost sales. “We continue to see stronger traction of discretionary across urban whereas we see strong traction of home care products across rural. With beverages, we see the end of season and hence a drop in sales across both urban and rural markets as consumption shifts towards a higher share of smaller packs. With input prices continuing to go down, we expect the upcoming festival season to trigger higher consumption,” said Bizom’s chief of growth & insights Akshay D’Souza. The FMCG industry posted flat year-on-year sales growth in July.