The government, in its much-awaited notification - Legal Metrology (packaged commodities) Amendment Rules 2012 - has extended the deadline to implement packaging norms for consumer products by four months (to November 01, 2012 from earlier July 01, 2012). Importantly the amended rules have exempted lower unit price packs (INR1 to INR10). Other salient points include compulsion to mention significant details on promotional offer packages and relaxations in weight for categories of bread, biscuits, baby food, beverages, edible oil, toilet soaps and packaged water. We see this as a significant relief to most consumer companies with value based packs exempted (major volume drivers) and increased time for clearance of current inventory. The companies to benefit most from this would be Britannia, Marico, ITC, GCPL and Nestle.
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Value-based packs exempted; Relief to bottom of pyramid
Paying heed to months of lobbying by consumer companies the government has extended the deadline to implement the packaging norms by 4 months. Popular price point packs (below INR10) have been exempted providing relief to customers at lower end of value chain who are dependent on these packs for access to daily usage products. Companies will breathe a sigh of relief as these popular packs are major volume drivers and also help to attract new users (especially rural and urban poor).
Relaxation in weights for some products to aid consumption
The government has provided certain relaxations in weight for categories of bread (allowed in multiples of 50g upto 500g and in multiples of 100g above 500g; earlier allowed only in multiples of 100g packs), biscuits (allowed in packs of 60g and 120g up to 5kg as opposed to packs of 25g, 50g, 75g, 100g, 150g, 200g, 250g, 300g and thereafter in multiples of 100g till 1kg earlier), constituted or reconstituted beverages (upto 50g exempted from any restrictions), edible oil (allowing 250g/ml SKU), toilet soaps (allows 15g and 60g packs earlier allowed packs of 25g, 50g, 75g, 100g, 125g, 150g and thereafter in multiples of 50g), baby food (allows 25g, 50g, 350g and 450g packs earlier only 100g and in multiples of 100g till 1kg) and packaged water (can be sold in pack sizes of 10 litres, 15 litres and a maximum of 25 litres against earlier limit of upto 5 litres). Promotional strategies such as offering extra on a pack will need to carry significant information such as net weight, MRP, manufacturing date, consumer care details and the name and address of the manufacturer on packs.
Price hike on larger packs unavoidable
Consumer companies have been reducing pack sizes while keeping prices constant effectively charging consumer the same for less to protect their profitability. This strategy to retail non-standardized packs continues to be disallowed making price hikes in larger pack sizes imminent. We expect the new changes to provide relief to consumer companies.
Regards,
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