Contribution of low-priced packs to overall sales within categories such as beverages, personal care and commodities moved up by 2%, 4% and 10.5% respectively in rural India between January and first week of March, according to data shared by retail technology platform Bizom. In urban India, contribution from lower price points in categories such as confectionery, commodities, home care and packaged foods moved up by 2.8%, 2.9%, 5.9% and 13.7% respectively. Commodities consist of packaged and branded edible oils, spices, rice, and flour.
To be sure, a switch to low priced packs in categories such as confectionery and beverages was also driven by a strong return in out-of-home consumption during the period.
Meanwhile, contribution of high value packs across all categories in urban India reported a decline, as per the retail intelligence platform that tracks sales across 7.5 million retail stores. Bizom compared the data to pre-covid period or 2020.
“Across both urban and rural India, we see a strong trend of increased consumption across lower price points. Price inflation is among the key drivers of this shift across categories especially among commodity products driven by hyper-inflation in these products,” said Akshay D’Souza, chief of growth and insights, Bizom.
Companies selling everything from soaps, detergents to biscuits and edible oils have taken price hikes—prompting shoppers to look at cheaper or value alternatives. On Thursday Bloomberg reported that cake and cookie maker Britannia Industries Ltd. plans to hike prices as much as 7%.
In large categories such as soaps, detergents, shampoo, biscuits and edible oils, price hikes have been to the tune of 15-20% year-on-year within key stock keeping units, analysts at BNP Paribas India said in a report dated 17 March. They noted that such price hikes were insufficient to offset cost inflation. They also flagged some downtrading within the fast-moving consumer goods market.
“With price increase ahead of income growth, sector volume growth moderated and we see likelihood of some downtrading. After large price increases in the preceding period, we have seen relatively lower price hikes in Jan-March 2022, as companies could have been looking for consumers to absorb the recent price hikes and expecting commodity costs to moderate,” they said.
Meanwhile, consumers switched to cheaper packets in commodities such as edible oils and pulses. In personal care, fewer social interactions were prompting consumers to purchase lower usage packs, especially in rural areas, the Bizom data revealed.
“With more price inflation on the horizon, we will see pressure on personal care and other discretionary products as consumers could look to rationalize their monthly spends by cutting on usage here,” said D’Souza.
In home care, data pointed to consumer preference toward high price point packs in rural. “In urban the wide availability of hygiene products is leading to this shift while rural consumers still seem to be buying longer duration packs as availability of their preferred brands seems to be erratic,” the firm said in its findings.
Meanwhile, companies said higher fuel prices could put pressure on household budgets, especially, for socio-economic classes B and C.
“While we have not witnessed that in our business because it’s an everyday consumption item—be it milk or curd but I’m sure there is an inflationary pressure on consumers and across categories. Especially SEC B and C consumers are feeling the pinch of petroleum prices,” said Sanjay Sharma, Business Head, dairy products, Mother Dairy Fruit & Vegetable Pvt. Ltd.
Companies are likely to push cheaper and smaller stock keeping units, said others. “Consumers will downgrade to smaller and cheaper brands as well as. You will find better distribution for cheaper stock keeping units, that is, at price points of Rs10 and Rs20,” said Aditya Goel, co-founder of Love in Store, a trade activation and execution company that works with FMCG companies and retailers.
Bizom said within beverages demand trends indicate that mid-sized packs are leading growth.
“Out of home packs for what is expected to be a warm summer and the upcoming IPL season, can help spike consumption at home too,” said D’Souza.
Parle Agro that sells juices and fizzy drinks said demand for its products remained firm as mobility improved. The company that sells Frooti and Appy Fizz beverages has not taken any price hikes in order to keep demand intact.
“Two of our largest segments are really value packs which are at the Rs10 and lower price points. And then the larger value packs, which are for home consumption, those are two of our largest segments. From a value for money perspective that’s been something we’re very conscious of, and we’ve been able to provide that to consumers consistently,” said Nadia Chauhan, JMD and CMO, Parle Agro.
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