big fmcg sales come in small packages

8/7/2019 Big FMCG sales come in small packages

http://slidepdf.com/reader/full/big-fmcg-sales-come-in-small-packages 1/6

Big FMCG sales come in small packages LUX soap at Rs 10, Good Day biscuit packet at Rs 5, Nestea premix ice tea pack at Rs 2. These are some of the most popular offers in the consumer

products market where companies expect low-priced units to account for more than 40% of their total sales this year.

With rising prices of food and commodity products forcing India¶s huge middle class market to lap up low-unit packs of soaps and detergents,

shampoos, biscuits and snack foods more than ever before, companies such as Hindustan Unilever (HUL), ITC, Britannia, Frito-Lay, Godrej,

CavinKare, Dabur and Nestle are banking on these µmagic price points¶ to push volumes. Last year, such packs accounted for 25-30% of their sales.

³The Rs 5 and Rs 10 price points in India continue to be magical in providing affordability and accessibility across a wide variety of foods,´ says

Vinita Bali, CEO of Britannia Industries, which recently introduced Good Day biscuits in Rs 5 packs.

This is because most Indian households spend a large chunk of their disposable income on food, and they have to adjust their expenses on

discretionary items when the prices of sugar or dal rise, she says.

The price of sugar, which is also a raw material for biscuit and confectionery makers, has doubled from Rs 17/kg to Rs 35 over the past one year.

Nestle has introduced Nestea, its premixed ice-tea, in refill packs of Rs 2 and Rs 10. Till now, the brand was only available in packs of Rs 75.FMCG¶s rural focus drives small size sales

PEPSICO¶S snack foods arm, Fri to-Lay, has started advertising its Kurkure brand in packs of Rs 3 and Rs 5. ³We are trying to recruit new

consumers and drive category penetration on Kurkure with price-pack play,´ says Deepika Warrier, marketing director of Frito-Lay. Small packs will

account for about one-third of the firm¶s business, she says.

While the slowdown in economy and inflationary pressure have impacted the disposable income in the hands of people, another factor driving the

low-price unit growth is the increasing penetration into rural areas and the bottom-of-the-pyramid market.

³There is so much unexplored potential in rural areas. Keeping low-price points is crucial to get into these markets,´ says Dalip Sehgal, managing

director of Godrej, which is sel ling its No. 1 soap, Expert hair colour and Nupur henna at the Rs 5 and Rs 10 price points.

Godrej is strengthening its distribution by tapping new channels like barbers and salons to push its shaving creams and talc and advertising its

low-price units both regionally and nationally, he adds.

CavinKare, which began the sachet revolution by selling Re 1 shampoo packs in rural India in early 1980s, says sachet shampoo sales have

accelerated over the past few months from 70% to over 80% of the Rs 2,400-crore shampoo market.

³Small packs are growing faster because they drive penetration specially in rural markets and offer convenience of use. We have not seen much

upgradation from sachets to bottles,´ says V Ramesh, executive director of CavinKare, which sells Nyle and Chik shampoos in 50 paise and Re 1

packs.

Small packs help attract new users into a category, says V S Sitaram, COO of Dabur India, which recently rolled out Hajmola in 50 paise packets and

Amla hair oil in Re 1 sachets. Low-priced packs contribute close to 35% of total sales of Dabur that also owns Vatika and Chyawanprash.

Both Hindustan Unilever and ITC are now focusing their advertising for Lux and Vivel soap brands, respectively, on the Rs 10 price point instead of

brand attributes.

According to Cadbury India¶s director for marketing Sanjay Purohit, the growth of lowprice units is led by a market need to encourage consumption

and push growth in the smaller markets. The chocolates and confectionery maker has launched a Rs 2 version of its flagship brand Cadbury Dairy

Milk, called CDM Shots, and will soon introduce smaller packs of its premium brand of chocolates, Bournville.



Analysts feel the trend will force companies increase volume discounts and consumer promotion schemes to push sales of larger units. But even

then, the small will keep getting bigger, as the market penetrates and competition tightens.

³We expect low-pack units to become the highlight of the industry, with competition across categories intensifying. Downtrading and downpricing

(weight reduction rather than price hike) is likely to become a reality, with a focus on sustaining volume growth and protecting market share,´ says

Anand Shah, FMCG analyst at broking and advisory firm Angel Broking.

Growth rates in the FMCG sector accelerated since April 2009 to cross 20% compared to 17-18% last year.

Interestingly, the expansion of low-price units ² a popular phenomenon in emerging and developing countries ² does not favour the country¶s

nascent organised retail sector. More than 70% of low-unit packs are sold through kirana, or mom-and-pop stores, that constitutes almost 95% of the

total retail market.



7RROVIRU6DOHV3URPRWLRQ

Sales promotion is one component of advertising or marketing campaign. Companies use different marketing tools such as

reduction in prices, product giveaways, special trial periods, offer sale, coupons, money back offers, point of purchase displays etc.

Here is information about most commonly used sales promotion tools:

Reduced Costs

Offer special discounts to your regular customers. You can offer discount with different conditions like buy more than $ 200 and get

12% discount on total bill etc.

Sale Sale

You can offer reduction in prices for all customers for a specified period of time without imposing any condition like 75% off, 50% off

etc. This sales promotion tool is usually used by manufacturers to attract new customers. This tool can be used to increase sale in

off-seasons that normally doesn¶t occur.

Promotional Periods

This tool is also known as special trial periods. You can offer your customers to use a product free for a defined period of time. If a

customer doesn¶t try to return the product or cancel the purchase then you will bill that customer automatically for the product.

Point of Purchase Displays

This sales promotion tool is used in retail stores to catch attention of a shopper. Offered items may be sale items or seasonal

products. These displays are built in a prominent location in the shop.

Coupons and Rebates

Coupons offer reduction in price of a product during sales transaction. You can give coupons in newspapers or on product

packages. Rebates provide customers with a return of their purchase price.

Free Samples

Using this tool manufacturers invite customers for getting free samples before making buying decisions. Usually manufacturers

send small packages to target customers or general public. They can also offer coupons with these samples to increase sale in

future.

Money Back Offers

This tool is best to overcome customer¶s doubts when they are suspicious for quality and reliability of product or service by offering

money back guarantee.



Sales promotion is an important component of a small business's overall marketing strategy, along

with advertising, public relations, and personal selling. The American Marketing Association (AMA)

defines sales promotion as "media and nonmedia marketing pressure applied for a predetermined,

limited period of time in order to stimulate trial, increase consumer demand, or improve product

quality." But this definition does not capture all the elements of modern sales promotion. One should

add that effective sales promotion increases the basic value of a product for a limited time and directly

stimulates consumer purchasing, selling effectiveness, or the effort of the sales force. It can be used

to inform, persuade, and remind target customers about the business and its marketing mix. Some

common types of sales promotion include samples, coupons, sweepstakes, contests, in-store displays,

trade shows, price-off deals, premiums, and rebates.

Businesses can target sales promotions at three different audiences: consumers, resellers, and the

company's own sales force. Sales promotion acts as a competitive weapon by providing an extra

incentive for the target audience to purchase or support one brand over another. It is particularly

effective in spurring product trial and unplanned purchases. Most marketers believe that a given

product or service has an established perceived price or value, and they use sales promotion to

change this price-value relationship by increasing the value and/or lowering the price. Compared to

the other components of the marketing mix (advertising, publicity, and personal selling), sales

promotion usually operates on a shorter time line, uses a more rational appeal, returns a tangible or

real value, fosters an immediate sale, and contributes highly to profitability.

In determining the relative importance to place on sales promotion in the overall marketing mix, asmall business should consider its marketing budget, the stage of the product in its life cycle, the

nature of competition in the market, the target of the promotion, and the nature of the product. For

example, sales promotion and direct mail are particularly attractive alternatives when the marketing

budget is limited, as it is for many small businesses. In addition, sales promotion can be an effective

tool in a highly competitive market, when the objective is to convince retailers to carry a product or

influence consumers to select it over those of competitors. Similarly, sales promotion is often used in

the growth and maturity stages of the product life cycle to stimulate consumers and resellers to

choose that product over the competition²rather than in the introduction stage, when mass

advertising to build awareness might be more important. Finally, sales promotion tends to work best

when it is applied to impulse items whose features can be judged at the point of purchase, rather than

more complex, expensive items that might require hands-on demonstration.



GROWTH OF SALES PROMOTION

Sales promotion has grown substantially in recent years. There are several reasons for this dramatic

growth in sales promotion. First, consumers have accepted sales promotion as part of their buying

decision criteria. It provides reluctant decision makers with an incentive to make choices by increasingthe value offered by a particular brand. Second, the increasing tendency of businesses to focus on

short-term results has helped spur growth in sales promotion, which can provide an immediate boost

in sales. Product managers also tend to view sales promotion as a way to differentiate their brand

from that of competitors in the short term. Third, the emergence of computer technology has enabled

manufacturers to get rapid feedback on the results of promotions. Redemption rates for coupons or

figures on sales volume can be obtained within days. Finally, an increase in the size and power of

retailers has also boosted the use of sales promotion. Historically, the manufacturer held the power in

the channel of distribution. Mass marketers utilized national advertising to get directly to consumers,

creating a demand for the heavily advertised brands that stores could not afford to ignore. With

consolidation and the growth of major retail chains, however, retailers have gained the power to

demand incentives from manufacturers to carry their products. Many sales promotions are designed to

provide benefits to the retailers.

LIMITATIONS OF SALES PROMOTION

Although sales promotion is an important strategy for producing quick, short-term, positive results, it

is not a cure for a bad product, poor advertising, or an inferior sales team. After a consumer uses a

coupon for the initial purchase of a product, the product must then take over and convince them to

become repeat buyers. In addition, sales promotion activities may bring several negative

consequences, including "clutter" due to the number of competitive promotions. New approaches are

promptly cloned by competitors, as each marketer tries to be more creative, more attention getting,

or more effective in attracting the attention of consumers and the trade. Finally, consumers and

resellers have learned how to milk the sales promotion game. Consumers may wait to buy certain

items knowing that prices will eventually be reduced, for example, while resellers have become

experts at negotiating deals and manipulating competitors against one another.

big fmcg sales come in small packages

Documents