While firms such as Godrej [ Get Quote ] Consumer (GCPL) and Dabur [ Get Quote
] said they saw no immediate impact on pricing, most companies are
bracing up for the situation when input prices begin to pinch. Marico
executives were not immediately available for their comments.
R S
Sodhi, managing director, Gujarat Co-operative Milk Marketing
Federation (GCMMF), which markets the Amul brand of milk and dairy
products, said standard packaging would bring in price rationalisation.
Only the cola companies don't see an impact on pricing, as they use
standard packs. "Packs of 200 ml, 300 ml, 500 ml, 600 ml, 1 litre, 1.5
and 2 litres, as prescribed by the consumer affairs ministry, are
already used by us. So, we do not see an impact on pricing," says a
Coca-Cola India [ Images ] executive.
On
an average, commodity prices have remained volatile in the last six to
eight months, as crude oil and agricultural inputs have fluctuated.
This
has put pressure on companies whose emphasis has largely been on volume
growth. In the last few quarters alone, most FMCG companies have seen
topline growth in excess of 15 per cent driven mostly by volumes.
Companies have admitted that their pricing strategy has been cautious
so far to avoid adding to inflationary woes. But analysts say they may
no longer be able to resist price hikes. "I foresee a situation where
product prices will shoot up," says Pravin Kulkarni, general manager
(marketing), Parle Products, which is one of the top biscuit makers in
the country. Executives at Britannia [ Get Quote ] were not immediately available for comment.
Biscuits
are one among 19 product categories that will be affected thanks to the
new packaging norms. Others include ghee, butter, milk powder, packaged
milk, baby foods, edible oil, salt etc.
These norms, which were
first notified last year by the Consumer Affairs Ministry and were to
kick in by July this year, but were eventually postponed because of
intense lobbying by FMCG companies, makes it mandatory for players to
pack items in standard sizes only.
In the case of biscuits,
soaps, coffee, tea and allied beverages, pack sizes start from as low as
25 grams going right upto one kilogram. In some other categories such
as branded rice and flour, for instance, pack sizes start from 100 grams
going beyond five kilograms, while in the case of detergents and
laundry soaps, the minimum pack size is 50 grams respectively.
The
new norms, however, have exempted small packs giving players some
legroom, say experts. "Certainly it does bring some relief to players,
with small packs not falling under the norms," says P Ganesh, chief
financial officer, GCPL.
Typically value packs, which fall in the
Re 1 to Rs 10 price range, constitute about 25-30 per cent of overall
sales for an FMCG company. In the case of biscuits, it could be higher
at about 55-60 per cent since the category as a whole is regarded as a
low-value item.
Nevertheless, the move not to standardise small packs will help
companies, say analysts, since they act as recruiter packs, that is,
entry-level products that help consumers get familiar with the brand.
This
is critical, they say, because introducing standard packs at the
entry-level could lead to odd pricing discouraging consumption.
http://www.rediff.com/business/report/prices-may-shoot-up-with-new-fmcg-packaging-norms/20121003.htm