Are FMCG Companies sucking the blood of Middle-class population in India?
I was talking to Prof. Avinash Mulky at IIMB and came to know of this "blood-sucking" by FMCG companies. I then started investigating it myself for almost half a day and found it to be 100% true.
Here is what it actually is!
For ages and ages, all products have been coming in different quantities. "Bigger the quantity per pack lesser is the price." This is done 100% of the time to promote the product and ensure consumption increases.
For example:if 100g of Product X's price is Rs.10 then the price of 200g of the same Product X's price is expected to be <=Rs.20.
This does not hold good in a very few cases-And the classic example all these years has been Shampoo bottles and Shampoo Sachets. The primary reason for this has been to promote the product in the rural areas and ensure even rural masses get to use shampoos.
I just went on to investigate if it was just a perception or true in all context and found it shocking.
Brooke Bond Red Label:
100 gms pack : Rs. 25
250 gms pack : Rs. 87
These pictures were clicked at Hypercity, Bangalore. Another noteworthy fact here is that 250gms pack is at the reachable space on the shelves and one needs to invest time in searching for a 100gms pack of the same.
The same was the case with most of the "Premium Tea" brands which includes Tata Tea premium, Tata Tetley and Brooke Bond Red Label Natural care. This wasnt the case in coffee powder brands-not to mention coffee itself is considered to be a premium product when it comes to Tea.
This did not stop with Tea.
MTR Snacks:
50 gms pack : Rs.10
80 gms pack : Rs. 20
Colgate Max Fresh:
40gms : Rs. 15
80 gms : Rs. 40
The same was the case with Colgate Active salt, Colgate sensitive and all these products are considered to be the "Premium" products in Colgate's tooth paste category.
Arguing the same way as in case of Shampoos and assuming that this price differentiation was done inorder to make the product available to the rural masses. The argument does not hold good logically. This was not the case in Colgate dental cream and close up, products which are actually available in most of the rural mom and pop stores.
When Prof inquired this with the shop-keeper, his obvious answer was that "Consumers generally ask for a bigger pack assuming that it costs them low". Even if there is a price comparison being made, it is usually not being made between different pack sizes of the same size, it is made only between different brands.
A few questions which remain unanswered here are:
1. Why are companies like HUL, Tata and Colgate-Palmolive into this?
2. Do they have an ethical rationale behind this?
3. Are consumer's perceptions being taken for a task?
4. Are these FMCG giants milking rather "blood sucking" Indian Middle-class?
Right now investigating on the lines of Excise duty. Will write to you once its done.
Right now investigating on the lines of Excise duty. Will write to you once its done.
Hope to get an answer sooon!
I think FMCGs are not unethical, you should also understand where they are selling these large packs with irrational pricing. Its mostly urban areas, where reality(land) costs are very high, where shopkeeper would be paying very high rents, this makes huge impact on margin of shop, so to be in business, FMCG companies have to give more margins.
ReplyDeleteso its ends on the consumer at the end !!!!
Might be true! But this is just to inform you that you are better off buying 2x100g when compared to 1x200g :)
DeleteHey! But if what you said was the case, then Coffee powder which occupies the shelf next to Tea and Health drinks (Complan, Horlicks,etc) which is located in the aisle opposite to Tea do not do this! They price the same way we perceive them to be!
DeletePricing is not so easy & pricing doesn't depend on cost of raw materials alone !
ReplyDeleteCase 1 : Advertising cost : Same amount of money (GRP) spent on a customer who is to buy a 100gm & another set to buy a 200gm packet. That itself justifies pricing the higher grrammage pack lower !
Case 2 : Cost of packaging ! Knob/ bottle strength material for a higher grammage pack might cost higher and hence the justification for the other way round pricing and so on and so forth !