Earlier this month, the AICPDF members held talks with the Ministry of Public Distribution regarding standardising packaging and categorising products into four classes: entry pack, small pack, medium pack, and large pack, to simplify inventory management and reduce complexity for retail.
“By categorising products into these standardised packaging sizes, it is expected to simplify inventory management, increase efficiency, reduce complexity for retailers, and eliminate consumer confusion arising from multiple SKUs within the same price range under a single brand,” said Patil.
AICPDF represents over four lakh distributors and stockists across India.
Acknowledging the proliferation of SKUs, Krishna Buddha Rao, senior category head at Parle Products Pvt. said that it has become extremely critical to be present across price points amid high competition from the local players and as the industry looks to get back to volume-led growth.
“The Rs 5 pack may not be relevant across all retail points, but one can’t also vacate the space because of growing competition,” he told BQ Prime.
Another reason why companies are extending the number of SKUs is the prevailing strategy to be everywhere a potential consumer may shop. Simply put, a package made for e-commerce is different from that of a brick-and-mortar retailer.
FMCG companies also started setting aside certain SKUs exclusively for business-to-business e-commerce players after the general trade distributors, unhappy about being undercut by the likes of Reliance’s JioMart and Udaan, had threatened to boycott some of their products in the past.
Analysts, too, are cognizant of the SKU shift.
“FMCG companies are aggressively pushing the bridge packs via trade schemes as they chase profitability,” Nitin Gupta, senior research analyst tracking the consumer sector at Emkay Global Financial Services Ltd., said.
In the case of hair oils, the companies, including Marico Ltd., are focusing on a Rs 20 SKU over Rs 10, the brokerage said, citing channel checks.
In instant noodles, Nestle India offers a better margin for the Rs 14 SKU over the Rs 7 SKU. The company may continue to focus on margin-accretive packs—those higher than Rs 10—to counter wheat inflation.
In detergents, Hindustan Unilever Ltd. is now pushing the Rs 20 SKU over the Rs 10 SKU for the Surf Excel brand.
Similarly, in biscuits, the category leaders—Parle Products Pvt. and Britannia Industries Ltd.—have improved the availability of the Rs 10 SKU, as the Rs 5 SKU is margin-dilutive, according to the brokerage.
Hindustan Unilever refused to comment on BQ Prime’s emailed query, citing the “closed period”, following the release of its second quarter financials.