Government move to restrict pack sizes and weight irks FMCG companies

Sarah Jacob &RatnaBhushan, ET Bureau Dec 8, 2011, 06.43am IST Tags: BANGALORE/NEW DELHI: A government move to restrain companies from changing pack sizes and weight of products such as soaps, detergent, biscuits and coffee to help consumers easily compare them is facing strong resistance from makers of these products. The ministry of consumer affairs wants about 20 packaged products to be retailed only in stipulated pack sizes. But marketers say this will take away their flexibility to buffer the impact of inflation on the consumer and urged the government to at least keep sensitive price points such as Re 1, Rs 2, Rs 5, Rs 10 and Rs 20 out of this rule in the interest of the lower-income group.

"The manufacturers should be given the flexibility to pack such quantities as they consider to be appropriate at such price points," a Hindustan Unilever spokesperson said. The ministry issued a notification, Packaged Commodities Rules 2011, on October 24, saying baby food, weaning food, biscuits, butter, cereals, bread, tea, coffee, edible oil, beverages, milk powder, rice, atta, salt, aerated drinks, mineral water, soap, detergents, cement and paint must be retailed only in stipulated pack sizes. "Consumers will now be able to compare brands easily as they will all be of the same weight," a senior official from the department of legal metrology, said. The new policy comes into effect from July next year. The official said that in some cases, manufacturers were incrementally increasing grammage into non-standard sizes but charging a much higher price. Consumer goods makers have been reducing pack sizes while keeping prices constant for the past two-three years when prices of raw materials such as palm oil, sugar and wheat, and other costs have been escalating-effectively charging the consumer the same for less, thus protecting their profitability.

So, coffee brands are retailed in 170 gram and 175 gm packs, while detergents are available at 713 gm and 400 gm, which will not be allowed once the new rules are implemented. The government has now stipulated different weight restrictions on different products. For example, coffee can only be retailed in 25 gm, 50 gm, 100 gm, 500 gm, 1 kg and thereafter in multiples of 1 kg. For certain categories such as detergents and milk powder, there is no restriction below 50 gm. And salt can be sold below 50 gm in multiples of 10 gm. Violations will invite fines from Rs 25,000 up to Rs 1 lakh. Most companies say the move will make shopping more difficult for price-sensitive consumers. "The entire value chain was based on consumer convenience, particularly with Rs 5 and Rs 10 packs," ITC Foods CEO Chitranjan Dar said. (AIMA) The new policy will impact the company's Sunfeast biscuits, but will not make any difference to Aashirvaadatta and salt because they are retailed in standard sizes. "Promotional strategies such as offering extra on a pack will not be possible now," Dar said. The head of another prominent biscuit maker said the move will impact both sales and profits. "We are lobbying against this move...especially at a time when we are reaching out to consumers in smaller markets," said the person, requesting anonymity.
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A Mahendran, MD of Godrej Consumer Products, which makes Cinthol soap and Ezee liquid washes, said the Indian Soap & Toiletries Makers' Association will make representations to the government on the notification. The association represents Hindustan Unilever, Procter & Gamble and Godrej Consumer Products among others. Dalip Jolly, executive member of the Detergent Manufacturers Association of India and MD of Fena, too wants the government to revisit the decision. "As long as accurate weights and prices are printed on packs, we believe status quo on packaging norms should remain," he said. "It's not as if we are misleading consumers in any way." Jolly added that there are no such restrictions in most developed countries. But there are those who see merit in the government action. Prathish Nair, director of brand consultancy Transcend, said the move will create a level-playing field for smaller brands that cannot afford to change pack sizes frequently. The country's largest dairy brand Amul too has welcomed the move. "We are in favour of this move as it will benefit the consumer. Many times the consumers don't realise that the sizes of packs they have bought have been reduced," said RS Sodhi, MD of Gujarat Cooperative Milk Marketing Federation.