HUL To Marico Steer Shoppers To Buy Bigger Packs With Eye On Margin

Hindustan Unilever Ltd. is pushing its Rs 20 detergent packs as it flexes its pricing power in a bid to maximise revenue.

The company is ramping up availability of 160 gm pouches of Surf Excel priced at Rs 20, according to at least five general trade distributors in different parts of the country that BQ Prime spoke with.

These packs, which offer better margin, are being repeatedly preferred over Rs 10 offerings, one of the distributors with told BQ Prime, speaking on the condition of anonymity out of business concerns.

HUL is not alone. The approach is followed by peers like Marico Ltd.

For its Nihar Shanti Amla hair oil, the consumer goods company has been focusing on the Rs 20 stockkeeping unit over Rs 10. Parle Products Pvt. is also trying to upsell consumers to a more expensive Rs 20 Parle G pack, while PepsiCo India (Holdings) Pvt. is doing the same with Lays potato chips.

"(Rs) 10 is the new (Rs) 5 and similarly (Rs) 20 is the new (Rs) 10," said Mayank Shah, senior category head, Parle Products Pvt. "The price-value equation works well at Rs 10, 20, which helps in maintaining margins... it's a more viable option."

The 12-month rolling sales or moving annual total of Rs 20 packs rose 5% in August as compared with 3% growth in the same month last year, according to data shared by Kantar Worldpanel.

The strategy will work in the long run as consumers will be more focused on wringing better value out of their money. However, it can eat into the market share in the near term, analysts said.

HUL's strategy may prove costly in the near-term as Rohit Surfactants Pvt. and Procter & Gamble Hygiene and Health Care Ltd. have turned aggressive with their Rs 10 SKUs, according to Nitin Gupta, senior research analyst at Emkay Global Financial Services Ltd.

"P&G is pushing its Rs 10 SKU with a 60 gm offering, while Rohit Surfactants is pushing a Rs 10 SKU in a bulk pack, via a scheme where the consumer gets one pack free for every purchase of five packs," Gupta said.

While demand for larger SKUs after the Covid-19 pandemic has been resilient, the low-unit packs are still the dominant route to consumers.

For instance, the growth of Rs 5 pack has decelerated, but it remains a popular price point, generating about 32% of all food category volume, according to Kantar.

The Rs 10 pack grew 6% on a MAT basis in August. This price point is more popular among non-food categories, generating close to 22% of volume. 

"While the Rs 20 pack has seen a steady growth over the last couple of years, it has not been as popular as Rs 5 or Rs 10 yet," K Ramakrishnan, managing director-South Asia at Kantar Worldpanel, said.

HUL and Nestle India Ltd. are aggressively pushing bridge packs—that were launched to ensure affordability of everything from soaps to biscuits—with inflation sustaining longer than expected. These bridge packs, or packs that are priced between the low-unit packs and large packs, are gaining pace with higher sales push, according to companies. However, these packs are a way for companies to protect margin rather than increase volume.

"The Rs 20 pack might not be a big volume churner as the other two low-unit packs of Rs 5 and Rs 10," Ramakrishnan said. "It often plays the role of that bridge pack between the price points and the grammage packs."

Therefore, companies need to tread cautiously when it comes to their highest selling low-unit packs or the Rs 20 pack. The Rs 5, Rs 10 and the Rs 20 price point packs contribute 35% of the FMCG volume. Over the past few years, the mix has remained the same, according to Kantar Worldpanel.