Indian soap industry revenues are predicted to fall when a new government mandated limited pack size structure comes into force in July. Raghavendra Verma and Leah Germain report from New Delhi and from Edmonton, Canada
To keep profit margins intact, many Indian manufacturers have been reducing the size of their packs by a few grams instead of increasing their prices. As a result, soap cakes of 88g are now competing with 100g products from other companies.
A Mumbai based non-governmental organisation, the Consumer Guidance Society of India, has been among the critics, calling it an unethical practice and last November the central government issued a list of fixed standard size packs for soaps and 18 other consumer products. In future soap will only be able to be in cakes of 50g, 75g, 100g and thereafter in multiples of 50g, although an exception will be made in the hospitality industry where smaller cakes will be available in bulk packs.
A senior official at India’s Ministry of Consumer Affairs, Food and Public Distribution told SPC that the odd sizes had been authorised in a liberalisation measure in 2006 to help Indian companies compete with foreign brands that were available in these weights. However local companies were supposed to clearly declare on their products that they were non-standard size packs.
“They not only flaunted this guideline but also confused the consumers by frequently changing both the sizes and prices,” he said. “After too many consumer complaints we had to take action.”
Mumbai based stock market firm Angel Broking has warned that affected companies might have to scrap popular price points of INR5 ($0.10) and INR10 ($0.20) as reducing the weight will no longer be possible.
“These pack sizes have become very popular among rural markets, which for all FMCG companies has become a sizeable sector,” it said. According to the Associated Chambers of Commerce and Industry of India (Assocham) the new regulation could reduce sales of the FMGC sector by 10 to 15%.
Indian soap manufacturers are far from being unusual in using this tactic. American and British manufacturers have also downsized without a noticeable price drop for consumers. Also known as product shrinkage, decreasing product size while maintaining the original price point has become a common practice among manufacturers who are trying to save money during times of economic uncertainty.
Consumer behaviour expert John T Gourville, professor of business administration at Harvard University, told SPC: “When [manufacturers] reduce the packaging by increasing the empty space in the package, it is noticeable. You feel sort of like you’ve been tricked. And I think there is the potential for consumer backlash, switching to a different brand or buying less frequently. For instance, I know that Dial soap has reduced the size of its soap bar. You notice it when you open the package.”
Dial bar soap was reduced from 4.5oz (127.5g) to 4.0oz (113.3g) in 2008. A company spokesperson told SPC: “The Dial brand made the decision in 2008 to downsize some of its bar soap varieties due to the skyrocketing cost of tallow, one of the primary raw material ingredients in the formulation of bar soap. This was in line with almost every other brand.”
In addition, UK manufacturer PZ Cussons has confirmed that it had reduced the size of one of its products, Imperial Leather soap, by 25g.
The US consumer website, The Consumerist, investigates product downsizing and highlights companies who change the product size without altering the price. It has found several examples of product downsizing in the last year.
In 2011, the site posted two pictures of the Procter & Gamble (P&G) hair care product, Aussie Shampoo. The images revealed a 20% difference between the original product, a 33.8 fl oz (1 litre) container, and the latest package design, which contained only 29.2 fl oz (863ml).
A P&G a spokesperson commented: “[The] goal [of the company] is for our brands to deliver superior value at all times. Value is about the combination of product performance and price (pricing at the store shelf is set by the retailer).”
Another consumer posted images of Noxzema facial cleanser from the personal care giant Unilever. A new package design, even though it appeared the same size as the original, cut back on the product amount by 2oz, reducing the product from 14oz (414ml) to 12oz (354ml). However, a spokesperson from Noxzema denied the resizing.
Farah Ahmed, a spokesperson from the US based Personal Care Products Council in Washington, noted there was also a positive aspect to downsizing.
“[Nowadays] companies are more concerned about their carbon footprint,” Ahmed said. “So as part of an overall effort to reduce [their] carbon footprint, many companies are changing either the shape of their package or the actual size of their package or the materials they are using in the packaging.”
