The FMCG industry is responding to low consumer sentiments with new price points across more categories to counter the trend of downtrading (settling for cheaper goods) during an economic slowdown.
Companies are now moving beyond the Re 1 and Rs 2 categories. For instance, in the July-September quarter, Hindustan Unilever (HUL) launched Clinic Plus multi-sachet — a pack of 4 targeted at a family of 4 for Rs 3. HUL also launched a Clinic All Clear triple pack shampoo sachet for Rs 5. Whereas, Marico recently launched the Rs 4 sachet of its Hair & Care product Silk-n-Shine. Marico also offers Parachute Advanced Starz shampoo sachets for kids at Rs 3.
Saugata Gupta, chief executive officer, Marico said: “The Rs 10 and below price point Stock Keep Units (SKUs) are very attractive to the consumers and account for 15 per cent of our overall revenues and we will continue the trend to introduce innovative price points within a product line.”
Even for CavinKare which has the Chik Satin and Fairever brands, “The Rs 10 and below price points account for 60 per cent of our revenues,” said C K Ranganathan, managing director, CavinKare.
Also as most of the fmcg goods like shampoos and soaps have become routine usage, FMCG companies like CavinKare are postponing their investments in research for products that require customers to make a change in their habits.
“We expect downtrading to take place during a slowdown. Hence we will not launch hi-end experimental products and will focus on building our brands at the lower-end of the pyramid,” said Ranganathan.
Sharing the trends that are coming to the fore as the economy enters into a slowdown Adi Godrej, chairman of Godrej Industries said, “I expect consumers will look for more value for money products than in the past.” As such, he continues, “FMCG companies are likely to experiment more with lower unit cost sizes in most categories.” The second trend, he adds, “Will be more emphasis on consumer promotions.”
“The bottom of the pyramid accounts for 60-70 per cent of our overall sales,” said Harsh Mariwala, chairman and managing director, Marico, which has products like Parachute and the anti-lice shampoo Medicare targeted at the mass markets. “The company is planning to focus on more activation and channelising of spends for rural markets as the rural markets show higher growth than the urban markets,” shared Gupta.
On the flip side, the consumers are also uptrading when they see value like in the oral care segment.
“There is a trend where consumers using toothpowder are moving to toothpaste. The sale of tooth powder has dropped by 3 per cent and the sale of toothpaste has increased by 10 per cent. The oral care categories’ volume growth has been 4.4 per cent and value growth 6.5 per cent,” said Abheek Singhi, managing partner, Boston Consulting Company.