FMCG Cos to Get 90-Day Extension on New Norms

In what comes as a big relief for FMCG giants like Hindustan Unilever, ITC, Britannia, Parle and others, and also to the consumers, the food ministry is set to give a 90-day extension (against a demand for one year) for the implementation of packaged commodities rules, 2011, which were to come into effect from July 1. The new norms bar the sale of FMCG products in sachets/packs of irregular sizes like 65, 73, 85, 92, 175, 425 (grams/millilitre, whichever is applicable) and makes it mandatory to adhere to the uniform and standardised packaging like of 25, 50, 100 and multiple of 100 units (g/ml).

After the implementation of the packaged commodities rules, 2011, tea or coffee can only be retailed in 25 gm, 50 gm, 100 gm, 500 gm, 1 kg and thereafter in multiples of 1 kg pack sizes as opposed to 425s or 712 gm currently sold.

For categories that include detergents, milk powder and baby food, among others, weight above 50 gm must be in multiples of 100 gm and below it will need to be multiples of 10 gm. Categories like detergents, tea, coffee, soaps are expected to face the brunt of the new rules as they are sold in varied weights.

For the FMCG companies smaller pack sizes generate 35-60% of the revenues across categories due to less content and rounded price points of R1, 5, 10, and 20. For consumers, such sizes mean access to affordable products. A shift to standard packaging will mean higher retail cost of products which may dent sales.

“An extension of up to three months from July 1 is under consideration. However, there is no question of extending it to six months or one year,” said a source in the food ministry.

However, the FMCG players have been opposed to the new norms. Speaking to FE recently, most stakeholders and heads of leading FMCG firms questioned the norms on one account or the other. For example, Ramesh Chauhan, chairman of Parle International, said the move will create chaos in the industry as it was impractical for the water industry to shift to standard sizes as 80% of the market belongs to low-priced economy packs. Chauhan wondered which other country in the world restricted size of packages. On its part, ITC Foods CEO Chitranjan Dhar had said that consumers prefer coinage-friendly price points which will be difficult under the new norms.

According to a top executive of a leading FMCG company making biscuits, the new rule will impact sales and profits. “With the launch of economy packs, we are now reaching out to more consumers. The new rule will impact us for sure.”

Another senior executive of a branded tea said the new norms will lead to price increases and dip in profits for companies who have gone on promoting non-standard packs.

The rule was notified in October 2011 and had to come into effect from April 1, this year. However, after representations from the industry, the food ministry gave an extension till June 30. Other measures for standardised packaging include prohibiting use of a rubber stamp for indicating month and year of manufacture of the product. Besides, packages containing more than 10g or 10 ml will require all the statutory declarations. Under the new measures, the MRP inclusive of all taxes would not mention price in paisa but will be rounded off in rupees.

Financial Express, New Delhi, 30-05-2012