FMCGs turning attention on premium, small packs as spending curbs grow

Companies in the fast-moving consumer goods (FMCG) sector are turning their attention on small packs as spending curbs grow. At the same time, premium consumers are not being ignored, with launches lined up for them too, executives Business Standard spoke to said on the sidelines of the Confederation of Indian Industry’s FMCG Summit, held in Mumbai, on Wednesday.

In the past two quarters alone, firms such as Hindustan Unilever (HUL), Nestlé, Proctor & Gamble (P&G) , and Mondelez have all launched premium products in detergents, personal care, and foods, even as the proportion of small packs have grown within their portfolios. 

According to industry, small packs within the portfolios of most companies in FMCG has increased by 10-15 per cent in the past six months, aimed at making products as accessible as possible to consumers. “This way the companies are ensuring that there is some sampling by people, and therefore, penetration,” said Suresh Narayanan, chairman and managing director of Nestlé India. A P&G spokesperson said the firm had been focusing on superior products, brand communication, retail execution, and value to drive growth in India. 

P&G said that launch of premium variants in personal care and laundry has been offset, with the roll-out of more satchets (in shampoos), price cuts in laundry (Tide), and availability of lower-priced variants in feminine care (Whisper). Experts said the growth of small packs within the portfolios of firms is likely to accelerate, as the slowdown prolongs over the next few quarters. 

Market research agency Nielsen has already forecast low single-digit FMCG market growth for the October-December period, saying this could worsen in the coming months. 

In the past six quarters, FMCG market growth has consistently fallen from levels of 16 per cent in July-September 2018. FMCG market growth for October-December (2019) is now estimated to be in the region of 3 per cent. Though experts say that green shoots are beginning to show especially in  channels such as modern trade. 

Experts said penetration and premiumisation would still be the most important sources of growth for companies in the FMCG sector, especially in a slowdown. 

“Our research shows that more people spend more at affordable price points, especially in a slowdown. It is almost 55 per cent. At the same time, 26 per cent people are spending on better products while 19 per cent on new products,” said Nikhil Ojha, partner, Bain and Company. 

HUL, for instance, launched Love and Care, a premium detergent, a few months ago. It has now introduced mayonnaise brand Hellman in India and is expected to ramp up its premium variants in skin care, beauty, and hair care. 
Simultaneously, it has maintained advertising and sales promotion expenditure, keeping its presence going on television and digital medium despite a slowdown. 

Ojha said companies such as HUL do not cut on advertising spends despite the pressure to rein in expenditure. 

Over a 15-year period, HUL has reinvested its surplus into advertising and sales promotions and the rest into growing retail reach.

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