Monday, 28 November, 2022
HomeFeaturesYou're not imagining it, Maggi to Vim bar—FMCGs are getting smaller. Shrinkflation...

You’re not imagining it, Maggi to Vim bar—FMCGs are getting smaller. Shrinkflation is here

The chips, cola, detergent and namkeen you’re buying are getting more expensive. You’re just not noticing it, thanks to shrinkflation.

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New Delhi: Mukesh Tiwari, 35, set up his paan shop in Delhi’s ITO about three years ago. Since then, he noticed that the size of Rs 5-10 snack packets had shrunk considerably. “I didn’t weigh the older packets and I can’t give you a comparative analysis. Bas ye samjhiye sab chota ho gaya hai, (the size of everything has reduced),” he says confidently.

Tiwari is not wrong. Across the FMCG sector, brands have slashed grammage (quantity per pack) or introduced lighter packaging in order to cut down costs even as inflation soars. Most of these business decisions were introduced earlier this year.

Store owners such as Tiwari are usually the first to observe this trend, popularly called, ‘shrinkflation’. “Lahori Zeera, which was launched in 2020 has reduced its grammage from 200 ml to 160 ml. A small bottle of Thums Up and Coca-Cola have also been reduced from 250 ml to 200 ml now,” Tiwari adds.

According to data shared by Dhairyashil Patil, national president of AICPDF (All India Consumer Products Distributors Federation), a Rs 10 packet of Parle-G biscuits now weighs 110 grams instead of 140 grams. Just when the weight reduction was introduced is not clear, but he recalls that it’s a recent development—around the last quarter of financial year 2021-22.

The same is true for soap brands. The weight of a Vim bar has been reduced from 65 to 60 grams. A 115-gram packet of Wheel detergent powder now weighs 110 grams, while a 150 gm bar of Rin is now 140 gms. These small reductions, which often go unnoticed by consumers, help companies transport more inventory at the same cost.

In price-sensitive markets such as India, where a consumer refuses to buy a product if the price increases even marginally, cost-cutting is the easiest way for companies to keep price points profitable.


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Size reduction in small packs

Size reduction typically happens in the lower unit packs, where price sensitivity is higher, says Ankur Pahwa, partner and national leader of Ernst and Young’s, e-commerce, consumer internet and startups. “Price increases in ranges about Rs 20 per package are easy to implement but ‘downswitching’ is the only choice in the price ranges lower than that. In all price-sensitive commodities, grammage reduction per pack is used to bring down input costs and maintain reasonable price points. But this reduction can’t be huge. You can decrease the weight of something from 50 gms to 40 gms but can’t slash it to 25 gms,” he explains.

The belief is that consumers are unlikely to notice small changes and will continue buying the product, ignorant of the fact that they’re effectively paying more for less. But Pahwa insists that it’s not an unethical exercise. “The buyer also has to make an informed choice when they purchase something. Having said that, companies have to maintain a certain price keeping in mind the inflation of the time and rising input costs,” he says.

Going forward, however, companies will no longer be able to covertly reduce grammage. A March notification issued by the Ministry of Consumer Affairs makes it mandatory for companies to display prices per gram, per kilogram, per millilitre and per litre starting in October.

Companies say it’s a fine balance between retaining their consumer base and managing escalating costs. A small price increase in this segment leads to a drop in sales volumes, which is why companies are wary of increasing prices.

These small packages are the biggest drivers of sales volumes. Hindustan Unilever told The Indian Express that it accounts for 30 per cent of their business, while for Britannia, smaller packages make up 50-55 per cent of its sales. Grammage reductions in Britannia products accounted for nearly 65 per cent of the price hikes it has undertaken in 2021-2022.

Even though they account for a considerable chunk of sales, a few companies are cutting down on the number of smaller packages in the market altogether. PepsiCo, for instance, is “accelerating a mix of higher revenue packs to mitigate the increase in commodity prices and inflationary pressures,” according to a company spokesperson.

There are exceptions to the rule such as Nestle’s Maggi noodles. Over the years, the price of a single packet rose from Rs 10 to 12, while the size was reduced from 100 gms to 70 gms.

It’s not like prices haven’t increased at all. Dabur CEO Mohit Malhotra says the company has also increased prices for various products. “Our total price increases during the fourth quarter have been around 5.7 per cent. In categories where we have pricing power and are market leaders and also where consumer pushback is not as severe, we have mitigated the entire impact through price increases. For instance, in categories like Healthcare and Food and Beverage categories, we have completely mitigated the impact through price increases. However, in the highly competitive categories of personal care, we have only taken partial price increases,” he tells ThePrint in an email response.

Dabur didn’t specify if it has reduced the weight of some of its products. PepsiCo India, too, didn’t directly confirm a reduction in package sizes but says it’s taking certain measures to bring input costs down. “Continuous increase in commodity prices over the last few months is impacting the FMCG industry. Rising input costs, particularly palm oil and paper and increased freight costs, have put significant pressure on the margins. PepsiCo India has been exploring a judicious approach and is working towards taking a series of actions including evaluating price, value equation, cost optimisation,” a company spokesperson says.


Also Read: Ignoring inflation may bite back, it will not purchase India extra growth


How ‘weight reduction’ helps

Weight reduction also helps bring down transport costs. A small drop in size helps Parle make huge savings on transportation costs. Earlier, sixty Rs 10 Parle biscuit packets would fit in one carton. Since the size was reduced by 30 gms, as many as 100 packets can fit in one carton, shows data from CAIT that was shared with ThePrint.

Companies have introduced lighter packaging as well. “While they don’t tinker with packaging a lot because it directly affects the quality of the product, companies have been using recycled packaging. The core packaging may be untouched, but external packaging is of lighter quality or made with recycled products,” Pahwa adds.

Other ways to reduce costs, Pahwa points out, are schemes for distributors or marketing and advertising spending.

While Patil says this reduction in grammage doesn’t affect the cut of distributors and retailers, Mukesh Tiwari is not convinced. He mostly sells Haldiram’s various wafers and namkeens at his shop and says his margins have reduced. “One ladi of 10 packets of Haldiram Namkeens used to cost Rs 80, now they cost Rs 83,” he says.

(Edited by Srinjoy Dey)

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