Small packs make big gains as budgets shrink and costs rise

Kolkata: Consumers in India are increasingly turning to smaller packs of daily essentials as rising prices strain household budgets. This has prompted fast-moving consumer goods companies to adjust their product offerings while navigating higher raw material costs due to the Iran war.

Sales of small packs have been growing 4-10 percentage points faster than larger packs since April, compared with the January-March quarter, driven by demand for lower-priced options amid inflationary pressures, including higher product prices, fuel costs, and LPG rates. Companies, on their part, are starting to reduce grammage in smaller packs to offset the increased raw material costs.

AWL Agri Business, the country's largest edible oil company, said demand for its smaller 200 ml and 500 ml packs has accelerated this quarter, prompting it to add production lines dedicated to these pack sizes. At biscuit maker Parle Products, packs priced at up to ₹20 have been growing 3-4 percentage points faster than the larger ones over the past two months.

Industry executives said the trend is visible across most consumer categories.

"Sales of smaller packs have gone up in the last couple of months, growing 8-10% higher this quarter as compared to the previous one," Angshu Mallick, executive deputy chairman at AWL Agri Business, told ET. "We have expanded the availability of such packs. The economic stress seems to have triggered this."

Britannia Industries managing director Rakshit Hargave told analysts recently that consumers are shifting towards products priced at ₹5 and ₹10, with the West Asia conflict injecting inflationary pressures.

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Smaller packs currently contribute 30-60% of total sales for most categories such as biscuits, soaps, detergent, shampoo, and staples. At Britannia Industries, for instance, packs priced at ₹5 and ₹10 comprise 60-65% of total sales.

Parle Products vice president Mayank Shah said the surge in sales of smaller packs over the past two months has been more pronounced in urban and semi-urban markets, as rural consumers have traditionally had a higher dependence on low-unit packs.

"It could be linked to the impact of the geopolitical situation, but it is too early to establish a definitive trend," he said.

FMCG companies have flagged rising input costs and taken 4-10% price increases across categories since April. While the initial price hikes were concentrated in larger packs, companies have now begun reducing grammage, particularly in smaller packs where altering the popular ₹5, ₹10, and ₹20 price points is difficult.

Dabur's global chief executive Mohit Malhotra said the company is reducing the grammage in ₹10 and ₹20 packs as it's not possible to breach these price points. Companies had increased the grammage to pass on the benefits of GST cut last September while retaining the same price points.

"There's a headroom available from a pre-GST time to the post-GST time. So that comes in handy," he told analysts recently. Small packs contribute around 30% to Dabur's overall business.

FMCG companies are grappling with higher input costs, particularly for packaging materials, as crude oil prices have risen.