HomeNewsFMCG companies experiment with pricing strategies to counter inflationary pressures

FMCG companies experiment with pricing strategies to counter inflationary pressures

BIRA 91 Taproom

BIRA 91 brings new vibes to Delhi with second taproom at Pacific Mall, Tagore...

Building on t͏he ͏succe͏s͏s of ͏i͏ts ͏fiv͏e͏ existing outl͏et͏s nation͏wide͏, ͏BIRA 91 h͏as͏ pr͏oudly͏͏ opened ͏͏͏its sec͏on͏d͏ Taproom in Delhi.͏͏͏ ͏Sit͏uated in the vibr͏ant͏...

IHCL reports 12% YoY growth in net profit, reaching INR 248 Cr in Q1

Indian Hotels Company Ltd (IHCL), th͏͏͏e ͏o͏perato͏͏͏r of Taj hotels, ha͏s recorde͏d͏ a 12% ͏y͏͏ear-͏͏o͏͏n-year i͏͏ncrea͏s͏͏e͏ ͏in ͏co͏nso͏l͏idated͏ net͏ pr͏͏ofit͏ for Q1͏͏͏ FY͏25, dri͏ven...

Consumer goods companies are vigorously safeguarding their ability to explore price elasticity for their products, while distributors are striving to find order amidst the chaos.

FMCG companies generate a substantial portion of their additional – and occasionally total – sales in rural markets. Their strategy to combat inflation in these markets involves providing reduced quantities for the same price, necessitating modifications to production processes at an added expense and absorbing some of the increased costs of raw materials.

On the opposite side of the spectrum, it’s comparatively simpler to display elevated prices on larger packaging. Nevertheless, this particular market segment experiences slower growth. FMCG companies leverage consumers purchasing larger packs to subsidize the cost for entry-level buyers. Nevertheless, their aim is to encourage these entry-level buyers to upgrade to larger quantities. This is where bridge packs, providing enhanced price-to-weight value, come into play. These types of packages have proliferated since the pandemic and are causing congestion in distribution networks.

Three key factors are propelling this trend.

To begin with, the hyperinflation in commodity prices during the pandemic compelled companies to revise their stock-keeping unit (SKU) strategies.

Secondly, the decline in purchasing power compelled rural consumers to shift to lower-priced brands and smaller unit sizes.

Thirdly, the expansion of retailing formats is giving rise to a demand for a variety of packaging sizes.

Additionally, there exists a marketing necessity to provide various price options for attracting new consumers and subsequently increasing their demand for consumer products. However, safeguarding these price points has its limitations, as its repercussions become evident in terms of volume growth, a metric closely monitored by investors in FMCG companies.

Distributors are in search of a four-tier SKU structure designed to encompass vital facets of FMCG pricing strategy, including market expansion and market share retention. Meanwhile, producers must concentrate on enhancing competitiveness and refining their business models. While the sector has successfully navigated through the challenges posed by cyclical factors driving downsizing, it still grapples with enduring structural transformations. Maintaining healthy penetration levels is a pivotal FMCG metric, but it tends to suffer when the distribution network becomes overwhelmed.

Latest articles

Teriyaki Madness expands to Lynchburg with new franchise agreement

Amer͏ican re͏staurant chain Teriyaki Madness (TMAD) has ink͏ed a franchise agreement to debut its...

Pernod Ricard’s Brancott Estate teams up with Made for Drink to elevate wine pairings with new crisp varieties

Pernod Ricard's Brancott Estate has teamed up with Made for Drink to͏ craft two...

Birds Eye enters UK chips market with ‘Crispy Chips’

Birds Eye is making its debut in the chips mark͏et with ͏the laun͏ch of...

Freja launches innovative bone broth shake line for convenient, on-the-go nutrition

Freja, a ͏r͏eno͏wn͏ed͏ bone broth bra͏͏nd, has un͏vei͏led its la͏test͏ in͏n͏ovati͏on:͏ Bone Broth Shakes.͏...

Related Articles

Adani Wilmar’s Fortune brand makes striking entry into whole wheat market, expanding market presence

Adani Wilmar, a renowned FMCG company, made a significant announcement on Friday regarding its...

Britannia expects commodity price uptick post-elections, eyes double-digit growth despite margin erosion

Commodity prices may see an uptick post-elections, according to Britannia's Executive Vice-Chairman and Managing...

Rural India drives 9% growth in India’s packaged consumer goods sector

India's packaged consumer goods sector saw a remarkable 9% increase in value and an...
× Drop a, Hi?