‘Mini Case Study 1.3 iC Affordability _\ Companies often resort to small packs to enter rural markets. This encourages trial purchase and people can try out and use a consumer product that they otherwise would not. Small packs also make the product affordable but companies face problems related to transportation and distribution. Though they work in some categories, are ‘small packs the magic strategy to conquer rural markets? This is because micro-packs find it difficult to achieve profitable volumes. Coca-Cola introduced its “chhota Coke’ priced at £5 in 2004, making it affordable. Pepsi too followed suit, However, the company struggled to manage costs and make a profit at that price point, it found that the packaging cost for ‘small packs was higher. For the Chhota Coke, the packaging costs worked out to 33 per cent of total cost, compared to 16 per cent for a one-litre bottle. Both companies found that the &5 price point was just not feasible. They had to subsequently raise the price by 22, vacating the price point altogether. Since then, both firms have been cautious in their approach when targeting the BoP with low priced products. To get over the cost of glass bottles for small packs, Coke re-entered its powdered ready-to-drink orange-flavoured drink called Fanta Fun Taste at %5 in sachets. Pepsi launched Lehar Gluco+, a lemon” flavoured drink in 200 ml packs in a plastic cup, under its joint venture with Tata Global Beverages. The plastic cups, similar to ice cream cups, make the cost of packaging viable. The idea was to reduce the packaging material cost per serving. In 2004, Godre] introduced three brands of Cinthol, Fair Glow and Godrej in 5 gm packs, priced at 4-5, meant specifically for Madhya Pradesh, Bihar and Uttar Pradesh—the BIMARU states. HUL launched a variant of its largest selling soap brand, Lifebuoy, at %2 for 50 gm to target the rural market. Parle Agro has been marketing conical tetrapacks of Frooti for %5. First launched in 2004, Tetra Classic Aseptic packs were initially available for £2.50 for 65 ml. The company later increased the quantity of the beverage to 100 mi and 200 ml packs as well. Parle Agro says that these packs do not require much refrigeration and is using distribution through tea stalls, fruit shops and other smalll unconven- tional outlets. As a result, distribution reach has significantly improved for the company. Nestlé and GlaxoSmithKline Consumer Healthcare (GSK) too launched products for rural markets. Nestlé launched a low-priced variant of Maggi noodles developed for the rural and semi-urban markets. ‘Rasile Chow’ is gravy noodles at &4, ‘Maggi Masala Magic’ is a taste enhancer in single-use sachets priced at £2 each. GlaxoSmithKline launched ‘Ashe’, @ milk food-drink under the Horlicks brand for Tural consumers in Andhra Pradesh. Asha is 40 per cent cheaper than the regular variant of Horlicks. Coca-Cola launched a fortified beverage called ‘Vitigo’ in 18 gm sachets at €2.50 each across villages in Odisha. The Company tied up with a microfinance institution, BISWA, for distribution. HUL’s ‘Operation Bharat’ tapped rural markets through low priced sample packets of its toothpaste, fairness cream, shampoo, cream and other produets. CavinKare, which makes Nyle and Chik shampoos and Fairever Fairness Cream, marketed sachets with a price tag of €4. and are among the company's strongest volume drivers. Liquefied petroleum gas (LPG) companies have introduced small-sized cylin. ders, ensuring that price remains effordable. Bharti Atel lowered its recharge sizes by launching a £10 coupon valid for 10 days for the rural markets. Idea Cellular had also introduced rural calling card that charged only 50 paisa per minute for a local call. Philips and even Eveready have brought out cheap lanterns to replace the Kerosene ones, specifically targeted for the rural market. Is lowering strategy a long-term solution? How should companies respond?