Popular price points of Rs 5 and Rs 10 are disappearing from India’s fast-moving consumer goods (FMCG) shelves. Parle-G, after two decades of selling its smallest biscuit pack at Rs 5, has now priced it at Rs 4.45.
Other everyday items are also shifting- the Rs 1 candy now costs 88 paise, while a Rs 2 shampoo sachet is priced at Rs 1.77.
The changes come as FMCG makers await clarity on how to pass on benefits under the next-generation GST reforms, which come into effect from Monday.
The new GST structure, first announced by finance minister Nirmala Sitharaman earlier this month, reduces tax slabs to two broad rates – 5% and 18% – and moves many food items to the NIL or 0% tax bracket.
Ahead of the reforms taking effect, Prime Minister Narendra Modi said Sunday, “With sunrise on September 22nd, the first day of Navratri, the Next Generation GST reforms will come into effect. In a way, a GST savings festival is going to begin in the country from tomorrow. This GST Savings Festival will increase your savings, and you’ll be able to purchase the things you want more easily. The poor, middle class people, neo middle class, youth, farmers, women, shopkeepers, businessmen, entrepreneurs of our country, everyone will benefit a lot from this savings festival.”
Companies said they are waiting for government clarity on whether increasing product weight at the same price can be treated as a price cut under the new GST regime.
“There will be an initial impact, but we expect consumers to either use UPI (Unified Payments Interface) for exact payments or opt for larger or multiple packs to round off the difference,” said Mayank Shah, vice president at Parle Products, as quoted by ET.
“We are still awaiting clarity and hope to be allowed to pass on the tax cut through grammage increases” he added.
Mondelez adjusts prices across brands
Mondelez India, the country’s biggest confectionery maker, has moved all its products to nonstandard price tags.
Bournvita now sells for Rs 26.69 instead of Rs 30, Oreo cookies at Rs 8.90 instead of Rs 10, and Gems and 5Star at Rs 17.80 instead of Rs 20.
The company said the new maximum retail prices include GST benefits and distributors must pass them on to consumers.
End of ‘Magic’ price points?
For decades, FMCG brands kept Rs 5, Rs 10, and Rs 20 packs as “magic price points” by reducing pack sizes during inflation. But with regulatory ambiguity, companies may move away from these low-cost packs temporarily.
“The inconvenience of something in between magic price points is just too much for the larger industry,” said managing director at Kellanova India and South Asia.
“So, in the short term, there will be some slashing of prices that we will do, or many others will do, because we just can’t turn around the supply chain fast enough. But in the long term, it will be grammage, and we will go to those price points,” added he cited.
Price-point packs still dominate sales
Despite the changes, small affordable packs remain vital for the industry. They contribute 79% of shampoo sales, 64% in biscuits, 58% in chocolates, 44% in salty snacks, and 29% in toothpaste.
“At present, for all our existing stock, we have reduced the prices by 13% to establish a clear calculation that we have passed on all the benefits,” said President at RSPL Group, which makes Ghadi detergent and Venus soap. “Hence, all the price tags will reflect obscure numbers and the challenge is now to see how we can take a different and more simplified approach on newer stocks.”
Source #TOI
