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Sachets: Some myths & some facts
Introduction of the ‘Chik’ shampoo sachet in the year 1983 has been one of the
most successful stories in the Indian consumer markets. While sachets have been
instrumental in changing the rules of the game, a lot has changed in the last three
decades. So, unlike in the past, sachets today are: a) not just to drive penetration;
b) are not just for single usage; c) are not just simple poly packs. And, a few
interesting facts: a) sachets have made up for space constraints in case of a typical
Kirana store; b) are lower in margins for FMCG marketers but preferred due to
higher volumes; c) are not favored by modern trade channels due to a high focus
on revenue per sqft.
Big sachet story made a humble beginning three decades back…
q India’s sachet revolution made a humble beginning three decades back which
became one of the most successful consumer stories in India.
q It all started when CK Ranganathan, who was working with his brothers’ shampoo
manufacturing business under the brand ‘Velvette’ decided to split up…
q … and launched a shampoo brand, ‘Chik’ (named after his father) in sachet in the
year 1983 with an investment of Rs15,000, largely spent on a packaging machine.
q The idea was actually seeded by his father, Chinni Krishnan who wanted to market
affordable products and started with talcum power in sachets but did not succeed.
… and was soon replicated by FMCG majors
q The product was well received in the market and in the first month of launch itself,
CK Ranganathan made a moderate profit by selling 20,000 sachets.
q The product was successful in driving penetration in the rural and semi-urban areas
and the industry growth picked up post the launch of the product.
q This induced market participants to follow the suit, including the leader, Hindustan
Unilever which launched Clinic Plus shampoo in sachet in the year 1987.
Contribution of sachets to consumerism has been quite high
q The sachet revolution paved the way for ‘Low Unit Pack’ (LUPs) concept across
product categories and today, the scope of LUP extends well beyond sachets.
q In a country where distribution is a challenge with >7.5m retail outlets, superstockists
continue to prefer sachets for distributing products in small towns/villages.
q Marketers find sachets useful for new launches; for example, ITC distributed free
‘Fiama Di Wills’ shampoo sachets which were pasted on the newspapers in Mumbai.
But contrary to popular perception…
q … sachets which started with the objective of driving penetration are today even
preferred even at the top-end in categories due convenience, product trials etc.
q … sachets which were aimed for single usage initially, today have a longer shelf life
and could be used for more than a few times.
q … sachets which were simply poly packs have evolved and modern day sachet even
employ a bit of technology as well.
And a few interesting facts…
q With ever increasing brands, sachets have made up for space constraints as
number of products in a typical ‘kirana’ (200-300sqft) would have gone up by 2x-4x
in last decade as sachets helped in creating space by reducing size in the store.
q Sachets are cheaper for consumers on a unit price basis (may appear counter
intuitive) and the industry makes relatively lower margins in most segments. For
example, shampoo in a sachet is 25-40% cheaper than a bottle on a per ml basis.
q Given high focus on revenue per sqft, sachets form relatively lower proportion in
modern trade; in fact, in personal care segments, are almost inexistent.
q Even today, shampoo sachets form an estimated ~60% of the overall shampoo
volumes sold in India.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sachets: Some myths & some facts
Introduction of the ‘Chik’ shampoo sachet in the year 1983 has been one of the
most successful stories in the Indian consumer markets. While sachets have been
instrumental in changing the rules of the game, a lot has changed in the last three
decades. So, unlike in the past, sachets today are: a) not just to drive penetration;
b) are not just for single usage; c) are not just simple poly packs. And, a few
interesting facts: a) sachets have made up for space constraints in case of a typical
Kirana store; b) are lower in margins for FMCG marketers but preferred due to
higher volumes; c) are not favored by modern trade channels due to a high focus
on revenue per sqft.
Big sachet story made a humble beginning three decades back…
q India’s sachet revolution made a humble beginning three decades back which
became one of the most successful consumer stories in India.
q It all started when CK Ranganathan, who was working with his brothers’ shampoo
manufacturing business under the brand ‘Velvette’ decided to split up…
q … and launched a shampoo brand, ‘Chik’ (named after his father) in sachet in the
year 1983 with an investment of Rs15,000, largely spent on a packaging machine.
q The idea was actually seeded by his father, Chinni Krishnan who wanted to market
affordable products and started with talcum power in sachets but did not succeed.
… and was soon replicated by FMCG majors
q The product was well received in the market and in the first month of launch itself,
CK Ranganathan made a moderate profit by selling 20,000 sachets.
q The product was successful in driving penetration in the rural and semi-urban areas
and the industry growth picked up post the launch of the product.
q This induced market participants to follow the suit, including the leader, Hindustan
Unilever which launched Clinic Plus shampoo in sachet in the year 1987.
Contribution of sachets to consumerism has been quite high
q The sachet revolution paved the way for ‘Low Unit Pack’ (LUPs) concept across
product categories and today, the scope of LUP extends well beyond sachets.
q In a country where distribution is a challenge with >7.5m retail outlets, superstockists
continue to prefer sachets for distributing products in small towns/villages.
q Marketers find sachets useful for new launches; for example, ITC distributed free
‘Fiama Di Wills’ shampoo sachets which were pasted on the newspapers in Mumbai.
But contrary to popular perception…
q … sachets which started with the objective of driving penetration are today even
preferred even at the top-end in categories due convenience, product trials etc.
q … sachets which were aimed for single usage initially, today have a longer shelf life
and could be used for more than a few times.
q … sachets which were simply poly packs have evolved and modern day sachet even
employ a bit of technology as well.
And a few interesting facts…
q With ever increasing brands, sachets have made up for space constraints as
number of products in a typical ‘kirana’ (200-300sqft) would have gone up by 2x-4x
in last decade as sachets helped in creating space by reducing size in the store.
q Sachets are cheaper for consumers on a unit price basis (may appear counter
intuitive) and the industry makes relatively lower margins in most segments. For
example, shampoo in a sachet is 25-40% cheaper than a bottle on a per ml basis.
q Given high focus on revenue per sqft, sachets form relatively lower proportion in
modern trade; in fact, in personal care segments, are almost inexistent.
q Even today, shampoo sachets form an estimated ~60% of the overall shampoo
volumes sold in India.
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