Heavier packs signal end of shrinkflation

Parle Products Pvt. Ltd is offering 20-25% extra grammage on its salty snacks portfolio, a top executive said. “For price cuts, we have no further plans, but yes, we are adding grammage wherever possible. We are also doing promotional offers and offering extra weight where we are getting respite from commodity prices going down— for instance, in cooking oil. In salty snacks, especially, we are offering extra weight and volume," said Krishnarao Buddha, senior category head at Parle Products.

The March quarter data from Hindustan Unilever Ltd (HUL), India’s largest packaged consumer goods company, showed easing prices of crude oil, soda ash, caustic soda, crude palm oil, and tea.

Dhairyashil Patil, the president of the All India Consumer Products Distributors’ Federation (AICPDF), said while prices have remained stable, companies are increasing grammage on certain packs. “Grammages that were earlier reduced are coming back as indirect price cuts," he said.

When commodity prices surge, companies raise prices—a move that could drive away consumers—or shrink the quantity sold, especially across set price points of ₹10, 20, and 30, where prices are hard to tinker with. When pricing pressure eases, they step up such indirect offers instead of making direct price cuts.

As inflation soared over the last two years, brands took to both price hikes and smaller packs to protect margins.

“Different brands react in different ways. For instance, some categories such as biscuits are very price-sensitive, wherein we are seeing brands going back to offering 10-15% extra grammage, giving offers, etc.," said Aditya Goel, the co-founder of Love in Store, which works with large, fast-moving consumer goods (FMCG) firms offering general trade merchandising management, retailer engagement, and e-commerce channel management.

Goel said while promotions are high in modern trade and e-commerce, such offers are visible on salty snacks, biscuits, soaps, and shampoos.

For instance, Procter & Gamble’s detergent brands Tide and Ariel are both offering 1 kg free with several large packs at both general trade and in e-commerce. However, in categories such as edible oils, companies such as Marico, Adani Wilmar, and Mother Dairy said they have been lowering MRP in response to lower global prices of palm and sunflower oil.

A 16 June report from HDFC Securities said HUL initiated price cuts in the home care category in the first quarter of FY24. “Beauty and personal care should see sequential improvement, aided by moderating inflation and price cuts (skin cleansing has seen two rounds of price cuts in Q3 and Q4). Within home care, HUL has taken price cuts in Q1, which shall help maintain its industry outperformance," they said. However, high milk inflation continues to hurt the company’s health food and drinks portfolio, they said.

Meanwhile, others said they are awaiting more moderation in prices before passing on benefits to consumers.

“In the last two years, hair oils industry took just about 50% of the overall increase. Only categories that had taken substantial price increases earlier are giving back to the consumer as the price cools off. For that to happen in hair oils will require some more cooling off of are material prices," said Jaideep Nandi, the managing director of Bajaj Consumer Care.