In part one of Smaller Pack for Bigger Sales? some of the arguments relating to the value of lower-income consumers in emerging markets were explored. In part two, we will look at the importance of pricing and the role packagers can play in this. Although there are a number of challenges to overcome when it comes to connecting with lower-income consumers in emerging markets, packaging manufacturers are in a good position to deal with the key issue of affordability
Affordability a Key Concern for Packagers, Consumers and Brand Owners
Goods must be packaged in a reasonable pack type and size in order to meet the household budgets of low-income consumers. For example, although it may be commonplace for UK shoppers to buy milk in a four-pint HDPE bottle, such a size would represent a considerable outlay for both a consumer and a small retailer in a developing country.
By retailing in smaller pack sizes, packagers give food/beverage product manufacturers an avenue to significantly reduce unit price, not only increasing the number of consumers who can afford a certain product, but also making products more suitable for trialling or a first-purchase. Alterations in pack size and type can also give brand owners the ability to tailor their offering to the pay patterns of a territory. Besides having generally lower incomes, these consumers tend to exist on a wholly different pay structure, with many workers in emerging markets being paid weekly or even daily. The frequency with which a worker is paid will directly affect his/her consumption habits and the replacement cycles they require from their purchases. A lower replacement cycle necessitates smaller packs, while also potentially reducing the demand for more visually premium packaging types. If a product is unlikely to be kept in the home for a prolonged period, like a premium glass bottle of whiskey might be in the US, consumers may be willing to accept purchasing products in more economic pack types. United Spirits Ltd, a major spirits player in India, has already capitalised on this by launching its top four brands in 180ml brick liquid cartons.
Growing Demand from the Roots up – an Indian Example
Shampoo in India is a strong example of the manner in which packaging has helped a product into a new market, with lucrative results. Dove deviated from its more common 200ml bottle size, using 8ml sachets in order to connect with poorer Indian consumers by increasing affordability. In a culture in which shampoo may not be used daily this product quantity suffices and places the Dove brand within reach of a far greater number of shoppers. This tailored approach to pricing has helped Dove to become the fifth-largest shampoo brand in India, with growth of five percentage points over 2008-2013, yielding a retail market share of 8%.
Shampoo Consumption by Pack Size: India versus Western Europe
Source: Euromonitor International
Looking forward, the big question for packagers and brand owners to answer in relation to lower-income consumers in emerging markets is how they can best offer solutions to the issue of affordability. Products such as milk and soft drinks have the potential to be sold to a larger consumer base, with single serve packaging giving producers the opportunity to grow not only their revenues, but also the consumption habits of these demographics.