India's new packaging rule allowing only standard-sized packs could limit market penetration for FMCG companies competing with unorganized regional players, especially in categories such as biscuit, detergent, soap and tea

Bdebbie Garcia

LOS ANGELES , December 14, 2011 (Industry Intelligence) – Fast moving consumer goods (FMCG) companies operating in India could be adversely affected by India’s new rule allowing only standard-sized packs, reported The Economic Times on Dec. 14.

Under the recently announced rule, market shares of FMCG could be at risk, especially in competition with unorganized regional players that are not as conscientious about following rules.

FMCG companies have increased their market penetration in India by focusing on the right price points.

The new rule will prevent them from adjusting to higher costs by increasing prices incrementally or shrinking product size, at a time when they are also being hit with a slowdown in rural demand, The Economic Times reported.

The categories that are likely to be most affected by the new rule include biscuit, detergent, soap and tea, which are highly-competitive sectors that have a large number of unorganized players.

Among the other products in which the pack size must be standardized are baby food, weaning food, coffee, bread, butter, cereals and pulses, edible oil, beverages, milk, powder, rice, atta, salt, aerated soft drinks, mineral water, cements and paints, reported The Economic Times.

Britannia Industries Ltd. has a strong presence in biscuit and Hindustan Unilever Ltd. (HUL) is big in soap, detergent, tea and coffee. These categories represent move than 80% of the revenues for both FMCG companies.

Smaller companies in these categories include Godrej Consumer Products Ltd., Nestle SA, Dabur India Ltd. and Marico Ltd., although their revenues from these products are not significant, The Economic Times reported.

The primary source of this article is The Economic Times, Mumbai, India, on Dec. 14, 2011.

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