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New Packaging Norms For Fmcg Companies - Threat To Packs Targeted For Bottom Of Pyramid Segment??

During 2011 Govt. has announced implementation of new packaging norms, based on the Legal Metrological (Packaged Commodities) Rules, 2011 that disallowed 20 commodities to be sold in non standard packs. This new rule was to be implemented w.e.f 1st July'12.

As per the new law, FMCG companies cannot sell 19 product categories in current unconventional arbitrary pack sizes like 65, 73, 85, 92, 175, 425 (grams/milliliter, whichever is applicable). Instead, all such products will have to be sold in standard pack sizes like 25, 50, 100 and multiple of 100 units (g/ml). Tea or coffee can only be retailed in 25g, 50g, 100g, 500g, 1 kg and thereafter in multiples of 1 kg pack sizes as opposed to 425g or 712g currently sold. In categories like detergents, milk powder and baby food among others, weight above 50g must be be in multiples of 100 gms and below it will need to be multiples of 10g. Categories like detergents, tea, coffee, soaps are expected to face the brunt of the new rules as they are sold in varied weights

FMCG giants like HUL, Dabur, PepsiCo and Godrej were lobbying against the move saying the same will increase the cost of products and will directly affect consumers of small packaged items.

The govt. is considering their opinion and has decided to defer implementation of the new packaging rules by another six months. While FMCG companies may utilize this time to clear their stocks and slowly switch to the standard packaging norms, govt is planning to "find out a way where a consumer of cheap packs is not hit hard", a senior official at the ministry of consumer affairs said.

When asked on need for new norms?? Govt. official mentioned that 'Sometimes shampoo sachets of the same brand cost the same but their weights are different. However, customers cannot spot the difference, because of careful package designing. This kind of tweaking is common practice among companies and with the new norms, consumers can't be fooled'.

Products that will be put under the standard packaging category are -  Beverages, Cereals, Edible Oil, Detergent, Flour, Salt, Aerated Drinks, and Mineral Water

Relaxation Rule - Norms are expected to be relaxed for products at the lower range, like packs costing `5 and `10 and for packs weighing less than 100gm

Other measures for standardized packaging include prohibiting use of a rubber stamp for indicating month and year of manufacture of the product. Besides, packages containing more than 10g or 10 ml will require all the statutory declarations. Under the new measures, the MRP inclusive of all taxes would not mention price in paisa but will be rounded off in rupees.

With soaring inflation and rising cost of raw materials, FMCG companies margins have been hit. Not wanting to raise their prices which may turn away customers, many companies have reduced the quantity of the goods instead. The changes proposed will adversely impact operations of small and large businesses. The reach and extension of many FMCG products in BOP (bottom of pyramid) markets will be greatly hampered. A very large set of purchases happen at `1, 2, 5 and 10 across product categories, because of affordability, accessibility and the convenience of coinage".

FMCG's are against this move as it would increase prices of some products. They are mentioning that govt.. must find out some other way to solve this problem as the perception is that companies are cheating consumers by reducing weights. If the law is implemented, FCMGs may even have to withdraw some packs completely.

What is the rescuing option post implementation of this rule????

 

Chhavi Aggarwal
Associate : Research & Business Consulting
www.PackagingConnections.com

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2 Comments

  • Sandeep Goyal June 12, 2012 Log in or register to post comments

    Comment: You can find some more details at <font color="#000000" face="Times New Roman" size="3"> </font> <a href="http://www.moneycontrol.com/news/business/new-packaging-rules-pay-more-for-fmcg-goodsnov-1_748748.html" rel="nofollow"><font color="#0000ff" face="Times New Roman" size="3">http://www.moneycontrol.com/news/business/new-packaging-rules-pay-more-for-fmcg-goodsnov-1_748748.html</font></a>

  • Amita Venkatesh June 12, 2012 Log in or register to post comments

    Comment: This will definitely bring more uniformity on shelf and less confusion for consumers. For FMCG companies yes it will be a blow. Possibly we will see less of promotional offers now on these goods. &#160;

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