The All India Consumer Products Distributors’ Federation (AICPDF), a representative body for fast-moving consumer goods (FMCG) distributors, has raised concerns regarding the proliferation of low-priced packs of various consumer goods such as biscuits, noodles, chips, soap, and shampoo. These concerns are related to supply chain disruptions and the impact on storage spaces, particularly at small mom-and-pop stores.
In response to heightened competition and declining household budgets due to inflation, large companies in the FMCG sector have been ramping up innovations and introducing more price options for various product categories. These efforts aim to offer consumers more affordable choices. However, the rapid introduction of low-priced stock-keeping units (SKUs) has raised concerns about the efficiency and viability of distribution networks.
Dhairyashil Patil, National President of AICPDF, highlighted the challenges posed by the introduction of numerous low-priced SKUs by FMCG companies. He explained that companies were expanding their offerings with more price points and variants, often with varying grammages across SKUs. This approach, while potentially beneficial for market expansion, places an additional burden on existing infrastructure and resources within distribution networks, affecting their efficiency.
Previously, companies typically rolled out limited low-priced packs with a few price points, such as ₹2, ₹5, ₹10, or ₹15. However, the recent trend is to introduce a more extensive range of price points and variants. This has led to concerns about inventory management, as distributors need to stock these various SKUs for retailers who are also facing challenges related to storage space.
One significant issue arising from the proliferation of SKUs is the potential increase in transportation costs. Distributors may incur higher expenses due to the need to transport a wider range of products. Moreover, managing inventory effectively becomes increasingly challenging, particularly given the limited storage space available. Retailers are also becoming hesitant to stock a growing number of SKUs due to rising complexity and the potential for consumer confusion.
To address these challenges, AICPDF members recently met with the Ministry of Public Distribution to propose standardizing packaging and categorizing products into four classes: entry pack, small pack, medium pack, and large pack. This classification system is intended to simplify inventory management, reduce complexity for retailers, and eliminate confusion arising from multiple SKUs at similar price ranges.
The proliferation of low-priced packs in the FMCG sector reflects the industry’s efforts to cater to diverse consumer needs while remaining competitive. However, it also underscores the importance of effective supply chain management and collaboration between distributors, retailers, and manufacturers to navigate the evolving landscape of consumer preferences and affordability.
