Oct 3, 2008

Mktg - Looks can sell

Meera Mohanty Bindu D. Menon
Sleek. Nifty. Stylish. Spiffy. Practical too. In a day and age when looks rule as much as substance, packaging is having its moment in the sun. It may be unfair to judge a book by its cover, but when it comes to biscuits, oil, cola and even common salt, it’s the packaging that can convince the consumer to pick one product over another, maybe even drop a trusted old brand.
Santosh Desai, CEO, Future Brands, puts it succinctly when he says, “If the content is prose, than packaging is the poetry.” Ever more sophisticated today, packaging decodes and glorifies what’s inside of it. Packaging, the silent and most important salesman, is critical to products weighing down long retail shelves.
It has the ability to provide great disruption and engagement with the consumer, says Punita Lal, Executive Director (Marketing), PepsiCo India. “We are seeing the emergence of a discerning consumer who is increasingly looking for premium offerings and value-added products. This means that we have to constantly tantalise the consumer with new offerings, whether it is through packaging or communication,” says Lal.
In today’s market there is no way packaging can do without absolutely top class work. It is as much about material as about graphics and design. With the wide number of choices that every brand has to break through, packaging is gaining importance. And brands across sectors are acknowledging that it’s a specialist’s job. “The pack is the first point where the consumer makes contact with the brand,” says George Mathew, Founder Director of Bangalore-based consultancy Icarus which specialises in two areas, Industrial Design and Branding. There is much sophistication that’s going into the packaging even of ready-to-eat goods, processed meats and commodities such as sooji that have so far rarely been branded, says Mathew.
Sometimes the packaging, in cosmetics, for example, becomes a functional part of the product, adding a lot more to the experience, says Future Brands’ Desai. Structural packaging, where shape meets usability, aesthetics and the technical aspects of design, is also an area that is seeing a lot of activity. Talcum powders, toilet cleaners (Harpic’s a great example of structural design, says Icarus’ Mathew) and shampoo bottles are being redesigned with great care and cleverness. Packaging can be a great branding exercise, says Coca-Cola, which would like to claim its contour bottle as one of the “best examples of the power of packaging”. Its message should be instantly recognisable. “We envisage packaging variants playing a major role as consumers become more discerning about usage options. We are open to looking at varied clutter-breaking packaging options in the near future,” said a Coke spokesperson.
Plastics are a lot more accepted. “There is a whole generation that has grown up seeing plastic around them, and are not worried about buying their food products in plastics. The rule that whisky or beer has to be served in glass bottles, for example, no longer exists. New companies such as CavinKare and Paras have skipped glass completely,” says Udit Seth, Vice-President (Sales and Marketing), Pearl Polymers.
Canned products are also likely to be more visible. Rexam Hindustan Tin Works (HTW), the joint venture between the world’s second largest consumer packaging company, the UK-based Rexam Plc, and HTW has seen a 30 per cent growth in the can market from last year. It recently organised a ‘Can School’ for leading breweries and carbonated soft drink (CSD) players that are its clients. “Cans as packages is growing. With greater disposable income, and changing lifestyles, cans are now perceived as a package to be seen with,” says Atit Bhatia, Vice-President (Business Development), Rexam HTW. The price point had been an issue, but with local manufacturing beer makers avoid a 32 per cent import duty and CSD makers save themselves 12 per cent.
When Pepsi’s Rs 15 cans picked up, competition also adjusted prices. Cans still account for less than 1 per cent of CSD sales, compared to 30 per cent globally. (For beers it’s 6 per cent in India, against 30 per cent globally.) Rexam HTW, which provides for more than 50 per cent of canned units sold in India, is betting on cans picking up as they also work out to be more affordable to stack on retail shelves where space is sold by the sq. cm.
“We are also seeing interest from fruit juice companies. If you are looking at non-returnable packaging, the convenience and trendy nature of cans is unmatched,” says Bhatia. There are great possibilities, such as the smart can with a temperature indicator that will change colour to indicate the temperature of the beverage, he adds. As innovations go, Pepsi points to its sleeker My Can launched last year. “The youth are very expressive of their individuality and style. They are not emulative in their approach. They are creators of their own unique style and they proudly wear it on their shoulders. My Can emerged out of a clear need — the youth needed a new, stylish ‘on-the-go’ format,” says Pepsi’s Punita Lal.
Packaging is also becoming more communicative, with context and seasonality (special launches, celebrity packs, collectors’ items) finding space on the package. “It’s becoming the map of the brand,” says Future Brands’ Desai. “Once considered an appendage to the manufacturing value chain and not a core activity, packaging increasingly is being acknowledged as a crucial segment of any economy in proportion to the growth,” says Sanjay Sachdeva, Director (Marketing and Product Management - India and South Asia Markets), Tetra Pak.
The packaging industry is itself reeling under margin pressures essentially caused by rise in raw material prices. “The rising cost of paper, which is the basic raw material for the industry, is eating up the margins,” says Amila Singhvi, President, Indian Carton Manufacturing Association (ICMA). Manufacturers have passed on 3-7 per cent of the cost to their clients. The reduced excise duty on paper mills in the last Budget, from 12 per cent to 8 per cent, however hasn’t been passed on to the packaging industry. A rationalisation of tax structure, says Rajiv Dhar, the Director of Indian Institute of Packaging, can bring in robust growth for the highly fragmented Rs 8,000-crore industry. Big players such as Reliance and the Jindals have entered the industry, which has been seeing an annual growth rate of 22-25 per cent.
Raw material costs have gone up 20-40 per cent from last April to August, say those in the plastic business. According to Pearl Polymers’ Seth, the company has passed on about 30 per cent of the cost increases to its clients, and some of them have passed it on to consumers. A recent drop in demand and lowered crude prices have helped, though. Any significant change in packaging could cost Rs 6-10 lakhs for just the research, design and packaging work. A cautious FMCG industry is holding back some of its launches, say industry sources. “Things are bit in a flux right now. There is a demand, despite the market being overstocked. How long this demand will last will depend on this Diwali season,” says an industry insider.
Packaging accounts for just 5 per cent of a product’s cost, and is hardly the most urgent cost concern to be tackled. Yet, in the face of rising costs, companies could consider refreshing tired and existing brands rather than revamping the brand completely. “Certainly the emphasis is not on introducing too many products as it was last year. There is more a certain tuning, a refreshing of a look,” says Icarus’ Mathew. Lightening the weight of the bottles is a constant R&D effort, adds Seth. “Bigger FMCG players are very stringent on quality and will not take such shortcuts for existing lines. However, we are considering lighter materials for some newer projects. It has also been done for secondary packaging, for example, bottles of confectionery,” says Seth.
Things are, however, looking up these days, certainly for those involved with plastics. Though fluctuating prices will need to stabilise, raw material prices have gone down in the recent past. The implementation of new food safety standards is also expected to bring along with superior standards and norms, new packs, says Satybrata Mishra, Assistant General Manager (Sales and Marketing), Indian Dairy Machinery Company Ltd, the NDDB-promoted company. It will also make the sector more competitive, ultimately passing on the valuable benefits to the end consumer, he adds.
And then there is modern trade. “Unlike in shops, most of which are just large cupboards, modern trade allows the consumer tactile stimuli, where they can pick up products that speak to them directly — that makes packaging the immediate link, most critical,” says Desai. Retail chains are also expected to revamp their own offerings, predicts Icarus’ Mathew. Currently most retails chains offer their own private labels in basic, undifferentiated packs. They will be soon a thing of the past once retail chains invest in a more exciting packaging. There is, however, only that much that anyone can do. At the end of the day the product will have to clinch the game.

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