Economy

FMCG companies step up focus on “bridge packs” amidst inflation

Meenakshi Verma Ambwani | | Updated on: Jun 19, 2022
Bridge packs help the consumer to move uptrade to bigger packs

Bridge packs help the consumer to move uptrade to bigger packs

The strategy helps firms to manage consumers’ shift to more affordable packs due to inflationary pressures

FMCG companies are ramping up focus on ‘bridge packs’ that are priced between popular entry-level packs and big packs as they tackle inflationary pressures. Analysts said this strategy is helping FMCG companies incentivise consumers to move up in terms of pricing and value proposition. It also allows companies manage consumers’ shift to more affordable packs due to inflationary pressures.

In response to inflationary pressures, FMCG companies have been focusing on grammage cuts and price hikes besides cost optimisation strategies. However, it is not feasible to hike the prices of low-unit packs (entry-level packs) such as ₹5 and ₹10 due to their popularity. In addition, its not feasible to reduce grammage of such low unit packs (LUPs). So, FMCG companies are using bridge packs to address “margin pressure challenges” to realise better price hikes since grammage cuts in LUPs are not easy, say analysts.

For instance, biscuits major Parle, has launched a bridge pack at ₹15. Similarly, HUL has introduced the Lifebuoy pack at ₹16, a bridge pack between ₹10 and ₹36.

‘Price hikes not feasible’

Mayank Shah, Senior Category Head, Parle Products, said, “The FMCG sector has witnessed unprecedented inflation in the last six months. It’s not feasible to increase prices of the low unit packs or keep reducing the grammage in response to this volatility Hence, it’s important to help the consumer move uptrade to bigger packs.”

“But there is always an inertia among consumers to move to bigger packs. Hence, bridge packs positioned in the middle of low unit packs and the bigger packs helps in reducing this inertia by incentivising them to try a bigger pack. On one hand, companies continue with the LUPs and on the other they focus on helping the consumer move up the value chain through bridge packs, “ he added.

FMCG companies are also increasing focus on bridge packs to combat inflation when consumers are downtrading across price points and categories. “LUPs (Low unit packs) face a coinage issue in terms of pricing (SKUs priced at ₹1/2/5/10), and they contribute 30–40 per cent to revenue in many categories. So FMCG companies are launching products that are not at popular price points, but between ₹5 and ₹20—these are called bridge packs. They provide the right price-value equation to consumers. Having SKUs between LUPs and large packs allows a company to capture some of the downtrading from larger packs,” noted Abneesh Roy, ED-Institutional Equities, Edelweiss Securities, in a report.

‘Strategy needs to be long-term’

However, Tarun Arora, CEO, Zydus Wellness, believes the bridge packs strategy needs to be more long-term as consumers do not change purchase habits overnight. “ We have been experimenting with bridge packs in brands such as Nycil. While bridge pack strategy plays a role, changes in consumer habits and purchase patterns do not happen quickly. Hence it needs to be part of the overall price pack architecture strategy for the long term,” he added. 

Published on June 19, 2022
COMMENTS
  1. Comments will be moderated by The Hindu editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.

You May Also Like

Recommended for you