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The five rupee FMCG lure

08-September-2004
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The five rupee FMCG lure

The colas may have jettisoned the paanch strategy but a host of branded products are now realising the importance of being present at the Rs 5 price point.

Although brands such as Pepsodent, Maggi, Clinic Plus and Rin have been communicating, through ads, their availability at this price, the phenomenon isn't limited to any specific category: products such as pens, razors, fruit drinks and adhesive tubes too are on the bandwagon, with the price prominently displayed on their packs.

A HLL spokesman says the ready availability of the five-rupee coin has been an advantage; but that isn't the only plus. The offerings mirror consumers' buying behaviour: many consumers are not so concerned about grammage as much as price, he says. A relatively bigger pack, compared to the Re 1 and Rs 2 ones, also give consumers enough opportunities to try out the brand, says he, while declining to comment about the impact on volumes and margins.

Some of the brands that HLL sells for Rs 5 are Pepsodent, Pond's Talc, Pond's Cold Cream, Rin, Taaza, Fair & Lovely, Clinic Plus and Lux.

Mr K. Radhakrishnan, Vice-President, FoodWorld Supermarkets, sees growth in the user-base of brands that have introduced such packs. "Category penetration is the aim. Coke and Pepsi have hugely succeeded in achieving this over the past year," though much of the gain was lost due to the pesticide issue.

The consumer-base for soft drink increased from 160 million in 2002 to 240 million in 2004, a two-year period during which the Rs 5-price point remained in force.

The Coca-Cola India President and CEO, Mr Sanjiv Gupta, says: "The first half of this year has been good but growth has not been what it was in the same period last year. We continue to make money on Rs 5 pricing but now the quantum of money I make per bottle is squeezed." And this squeeze, brought about by a two per cent cess and higher input costs, has forced cola companies to hike prices by a rupee each on 200 ml and 300 ml pack sizes. And though the colas no longer sell for Rs 5, they have played a big role in sensitising the consumer to the price-point, says marketing professional Ms Sangita Joshi, who reckons the Rs 5 packs to play an important role in spurring impulse purchases as well as giving a brand the first-mover advantage in a competitive market.

Adds Mr R. Subramaniam, Director of discount chain, Subhiksha: "The small packs will increase user base and usage occasion and can explode the market." He makes the point that it's more likely that a customer will guzzle a soft drink three separate times when it costs Rs 5 or Rs 6 a bottle than have a single shot at 600 ml of the cola at Rs 15.

According to industry observers, the price point will also help branded FMCG categories which are battling fakes from the unorganised sector.

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