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FMCG new packs clog supply chains, say distributors

Launch of multiple packs is also likely to drive up the cost for transportation.
Launch of multiple packs is also likely to drive up the cost for transportation.

Summary

Concerns raised over low-priced pack of consumer goods causing supply chain disruptions and impacting storage spaces.

New Delhi: The All India Consumer Products Distributors’ Federation, which represents fast-moving consumer goods distributors, has raised concerns over low-priced pack of biscuit, noodles, chips, soap and shampoo, causing supply chain disruptions and impacting storage spaces across small mom-and-pop stores.

Large companies are ramping up innovations and introducing more price options for product categories to take on competition by offering more affordable options to consumers amid declining household budgets due to high inflation.

Of late, several companies introduced new stock-keeping units (SKUs) with lower price points aimed at catering to the rural market. While this initiative holds potential for market expansion it raised concerns over the viability of distribution networks, AICPDF said on Wednesday. “The introduction of the new SKUs placed an extra burden on existing infrastructure and resources within distribution networks, affecting efficiency," said Dhairyashil Patil, national president of AICPDF.

Speaking to Mint Patil said earlier companies would roll out limited low priced packs of 3-4 with price points spanning 2, 5, 10 or 15. Now they are introducing more price points and variants with more grammages across SKUs. “Problem is companies give us all their SKUs and we have to stock for retailers, who are also facing some storage issues," he said.

Launch of multiple packs means cost for transportation may go up, Patil said. “The rapid launch of new SKUs by companies makes it increasingly challenging to manage inventory effectively. This is particularly challenging given the limited storage space available. Retailers are also showing reluctance to keep added number of SKUs due to rising complexity and potential confusion among consumers."

Earlier this month, federation members had met ministry of public distribution seeking standardizing of packaging and categorizing products into four classes: entry pack, small pack, medium pack, and large pack, to simplify management of inventory, reduce complexity for retailers, and eliminate confusion arising from multiple SKUs at similar price range.

Last year Mint reported that several large fast moving consumer goods makers had stepped up launches of lower-priced packs and introduced “bridge packs" to ensure affordability amid heightened inflation.

Nestle India, for instance, is aggressively pushing its 10 Maggi in new flavors across 15 states in India with the aim of winning more consumers in rural and small town markets. The company already sells the noodle brand at 7 and 14.

Packaged foods company Parle Products said it has stepped up the pace of new launches in the past two years—especially for products priced at 10 and 20. While it acknowledged that distributors may be burdened with more stock, it added that distributors could choose to not carry packs that don’t move quickly. More packs anyway translate to greater business, said Krishna Rao, senior category head, Parle Products. Its popular biscuit Parle-G is available at a starting price point of 2.

However, Rao said the company has launched more of its existing brands at 10 and 20 to build a future portfolio of products as it sees the relevance of 5 price packs diminishing in the coming decade. “The last two decades were predominantly about 5 and lower price points; however, the last decade was about 5 and 10. We think the next few years will see the emergence of 10 and 20 price points. So, we are building our portfolio to develop the market for the future. That’s why marketers are launching the 10 and 20 packs," he said.

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