Friday, October 10, 2008


The term 'small' is not referring to the scale of operation. Neither it is about the turnover of the business. The focus here is to the pack size that is becoming smaller and smaller every day as the business finds it much more profitable to introduce single use packs instead of larger packs in the retail market. To day, go to any small vendor in your town and you will be greeted by a plethora of products hanging in front of the shop with the shop owner literally trying to peer through the maze of hanging packets to attend to your needs. This trend first introduced by tobacco products like pan parag, gutka etc has taken root in the country and other industries are following this trend mainly to expand their consumer base. One of the major reasons for down sizing the pack size is to offer the products at rates varying from Re 1 to Rs 10 and thereby enticing the low income consumers to buy them with their limited purchasing power. According to market pundits this strategy also serves to meet the aspirational goals of economically weaker populations by making such products affordable to them. It is amazing how 'one- time' use products are to day in the market in foods, candies, biscuits, cosmetics, spices, pickles, personal hygiene products, beverages etc at prices as low as 50 paise to a more decent Rs five per packet.

What are the logic and logistics in such a strategy? Why it has taken such a long time for the industry to embrace this concept? Is it unique to India or such 'innovative' marketing practices exist in other countries also? Is it a consumer friendly practice? All these questions must have been considered by the management Gurus who are constantly working for the business to maximize the profit through physical as well as psychological techniques.

There was a time in India when packaging cost accounted for almost 40% of the consumer price due to heavy imposts of taxes by the government and the consequent cascading effect. But over the years the packaging material costs to the industry dropped dramatically while improved technology helped to effectively reduce the quantity of packing materials used in a pack significantly, without adversely affecting their functional performance. Packing equipment capacity and cost also came down to affordable levels, due to small fabricators taking up their manufacture and FFS machines costing less than a lakh of rupees became a reality, making small size packing a viable operation. The classical concept of lowering of prices per unit as the pack size increases still holds true to day though the difference might not be high but still small sized packing configurations do generate more profits besides increasing the volume of business. Consumer may find it difficult to calculate the economic impact of such practices since declaration of unit prize on the label is not mandatory in India.

The current international trend seems to be to reduce the content size to cope up with the rising cost of manufacture due to all round inflation and increased fuel costs. Big players like Krafts invested in package re-design without decreasing the content and maintaining the price line, so that their profitability is maintained through savings in input costs. Many others are subtly reducing the contents without the consumer perceiving about it to protect their margins. Such examples include Tropicana's orange juice pack changing the volume from from 96 ounce(oz) to 89 oz, Kellogg reducing the contents of its breakfast packets from 19-24.3 oz to 18-24 oz, Unilever packing 1.7 oz less in Breyers ice-cream packs, Peanut butter packs bringing down the contents from 18 oz to 16.3 oz or 32 oz to 30 oz while prices are kept same levels. On an average 10% of the products in the market change their packing configurations primarily to reduce the contents without appearing to do so, giving the impression that prices are not increased to keep with rising input costs. Though it may sound unethical, industry considers it a painless process for the consumers as the marginal reduction in the contents may be less painful than paying a higher price.


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