Mumbai/New Delhi: Starting 1 November, consumer product companies will have to sell 19 products, including bread, biscuits, tea, coffee, and soap, in specified standard weights and sizes only
This comes about because the ministry of consumer affairs has implemented the Legal Metrological (Packaged Commodities) Rules, 2011 following an approval by the Union Cabinet.
The government had earlier planned to amend the packaging norms for specified consumer goods from 1 July. But it postponed the move after getting industry representations, and in June 2012 it issued a notification postponing the implementation to 1 November. It also modified the amendments from what was proposed earlier, thereby lessening the impact on consumer companies.
Companies will now have to produce specified products such as biscuits, soaps, tea, coffee, detergents, in uniform pack sizes. The move is not expected to disrupt product availability for most companies, as they have had enough time to change their pack sizes. The new rules allow companies to sell products up to Rs.10-value, but in increments of one rupee, without any restriction. Therefore, this does not affect companies’ ability to cater to so-called “bottom of the pyramid” customers. Companies selling tea and coffee have been allowed to sell pack sizes below 25g without any restriction, in addition to a few others which already had this flexibility. Lastly, if companies can make out a case for selling a product in non-standard pack size, then the government can give them a one-year window to do so. So a wild swing in commodity prices can be accommodated, without hurting customers.
Companies can also sell bread in multiples of 50g up to 500g, and in multiples of 100 gm above 500g. Earlier, bread was only sold in multiples of 100g packs. Biscuits can be sold in packs of up to 5kg compared with a maximum of 1kg earlier.
The government’s move is promoted by a desire to help consumers compare prices and clamp down on companies managing an increase in their input costs by marginally reducing pack sizes (without consumers realizing that they are getting less for the same price).
The new rules will remove the flexibility companies previously had. Faced with rising input costs, they could lower weight sizes while keeping the price point intact. This was not wrong per se, but this soon became a part of their pricing strategy, and the government was not wrong in perceiving that this trend was making it difficult for consumers to evaluate the price-value equation. Even in large pack sizes, companies were producing non-standard pack sizes. Standard pack sizes will mean that prices of many products will go up, or down, even if the per gram price remains the same. Smaller players will now be at an advantage, as they would have earlier found it difficult to frequently change product sizes and packaging—to compete effectively—both of which can involve incurring a substantial capital cost.
Consumers may feel the pinch in some categories, where prices may go up. But in the long run, they will benefit as two similarly-sized soaps will now weigh the same, and figuring which one is cheaper will not require a calculator. The government has also ensured that lower income customers do not suffer, as the really small-sized packs will not be affected by this amendment. This is one decision that appears fair to the consumer and does not do much harm to the industry either.
“We have implemented the change across all our categories that come under the notification”, said Neeraj Chandra, chief operating officer, Britannia Industries. Almost 90% of the company’s product portfolio is covered by the change.
Chitranjan Dar, chief executive officer of ITC’s foods division said, “we have aligned our product portfolio in accordance to the latest grammages.”
“HUL is in full compliance with the Legal Metrology (Packaged Commodities) Amendment Rules, 2012,” said a spokesperson for Hindustan Unilever Ltd (HUL), India’s largest packaged goods company.
B.N. Dixit, director, legal metrology, at the consumer affairs ministry, said on Thursday that his ministry had received requests from companies, including HUL and Marico Ltd, seeking relaxation in certain pack sizes.
Nitin Mathur, consumer research analyst at Espírito Santo Securities, said that most companies got sufficient time to prepare for this change. “Companies have undertaken changes in packaging, moulds and cartons to ensure that they now comply with the amendment.” He also added that this will not see any immediate impact on earnings for these companies.
The government has also indicated that the manufacture, packing or import of these 19 commodities in non-standard packs will invite penal action. However non-standard packs which have already been manufactured and packed on or before 31 October and are ready for sale in different retail outlets, have been exempted from penal action.