Sachet Economy of the Philippines | THE CATHOLIC ECONOMIST 10/06/2017, 9:04 PM

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Tag Archives: Sachet Economy of the
Philippines

Sachets in the Philippine Context
Posted on July 8, 2015 by The Catholic Economist Standard Reply

(https://thecatholiceconomistphilippines.files.wordpress.com/2015/07/images-1.jpg)

Author: Miguel D. Fernando

Date Published: 22 June 2015 (Ateneo De Manila University, Philippines)

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It would be nearly impossible not to encounter a sachet while in the Philippines. The sachet has
become an integral part of everyday life for Filipinos. According to a survey by Proctor and
Gamble, Filipinos prefer sachets to bottles of their products with a ratio of 2:1 (Ang and Sy-
Changco 12). Practically everything that is consumed on a regular basis can be found in a sachet.

https://thecatholiceconomistphilippines.wordpress.com/tag/sachet-economy-of-the-philippines/ Page 1 of 4

The third benefit would be that this consumption model is actually of lower cost. the loss of money would be significantly less than if the consumer bought the larger unit of product. and reduce the risk of having a surplus of said product. and high underemployment. According to the law of demand.00720 US dollars while the same product in a bottle would be 0. and therefore. A comparison of prices of sachets versus bottles in local stores would likely yield the same result.com/tag/sachet-economy-of-the-philippines/ Page 2 of 4 . The producers would also benefit from this system of packaging their products. Firstly.Sachet Economy of the Philippines | THE CATHOLIC ECONOMIST 10/06/2017. Thirdly. coffee.8% (“Poverty incidence rises”). This means that there would be more people who would have the purchasing power to purchase their products thus providing the producers with a higher income. albeit at smaller quantities. It is cheaper compared to the same product in bottles with larger quantities. they would be able to tap the market of minimum wage workers or the bottom of the economic pyramid. According to the income effect. more economical for the consumer on a price per volume basis. there were a total of 509. and shampoo. high unemployment. As of the first semester of 2014. the higher the demand. Perhaps the number one benefit for the consumer would be the low prices of sachet goods. There are a number of benefits for both the consumer as well as the producer associated with sachet products. Such a high number of stores which could sell their product would allow them to produce and profit more than if they exclusively sold their products in bulk. according to De Veyra (2006) and Capistrano (2005). For example. this lower price would give more purchasing power to the consumer’s income. It would also allow them to compete with substitute goods of lower price and quality which the consumers of the bottom of the pyramid would otherwise consume if sachets were not available. In 2003. the poverty incidence of Filipino individuals was 25. This is of significant importance because of the low income of the majority of Filipinos which stems from the high poverty incidence of Filipino individuals as well as the low minimum wage. These savings would allow consumers to allocate more of their income to other goods or even luxuries. This price advantage is attributed to technological advancements in the packaging techniques of sachets. the bottom of the economic pyramid would have a large number of people due to the low minimum wage. This is also in part due to the nature of the sari-sari stores which often only sell goods piecemeal or tingi.345 sari-sari stores operating in the Philippines. This would allow people at the bottom of the economic pyramid to consume normal goods as opposed to inferior goods at similar prices. https://thecatholiceconomistphilippines.wordpress. Secondly. according to a chart from Proctor & Gamble. Contributing to this would be the fact that the sachet market accounts for a significant volume thereby giving manufacturers the economies of scale necessary to create such a price advantage. In the case that the product does not meet with the consumer’s taste or preference. The second benefit of sachets for the consumer would be a decrease in risk when purchasing a new product. This paper will seek to enumerate the pros and cons of having such rampant consumption of sachet products and figure out if this is a sustainable model of consumption for the Philippines in the long run. there would be more sellers of their product due to the numerous informal stores or sari-sari stores. the high demand for sachet products would mean they would be able to produce and sell more of them. They would be less willing to take a gamble on the full size packages of a new product thus making it harder for producers to introduce new goods into the market. In the Philippine context.00770 US dollars per milliliter (Ang and Sy-Changco 12). the lower the price of a good. in the Philippine context. 9:04 PM Examples of this would be toothpaste. This high demand would stem from the law of demand. the price per milliliter of shampoo for sachets would be 0. The benefits of sachets do not stop with the consumers.

According to a study conducted in 2004 by a multinational fast-moving consumer goods manufacturer. which would have a negative effect on both the consumers and producers. there is approximately 1. In fact. its benefits seem to outweigh them. The nature of sachets would have the consumers purchase more often compared to if they purchased the bigger packages of product. More often than not. consequently making them go out of business. This would also lead to the loss of jobs which would hurt the purchasing power of consumers as a result of lower GDP per capita. additionally. In addition. the high consumption. 9:04 PM Lastly. Sachet packaging is not recyclable like that of the packages of goods in bulk such as big bottles. and production of sachet goods is an appropriate model of consumption for the Philippines. For the producers. One of them would be the effect on local producers of consumer goods.500 kg worth of empty sachets (“Consumer Guide: Sachets”).com/tag/sachet-economy-of-the-philippines/ Page 3 of 4 . However. jars. This would also benefit the consumer in that they would have a wider variety of products to choose from While there may be numerous benefits to both the producers and consumers of having a sachet economy. the low prices of the sachets of larger multinational companies. demand. The biggest effect of continuous consumption of sachet goods would be on the environment.wordpress. In conclusion. it may also lead to the price increase in goods due to the destruction of land or the decrease in manpower resulting in lower supply and thusly higher price (Vidal 2014). blocking canals and sewer systems. in every 15 tons of garbage generated in the Philippines. Perhaps the best way to keep this model of consumption going for the long term is for these companies to invest in new technology which would make the https://thecatholiceconomistphilippines. as mentioned earlier. The distribution is easily facilitated through the sari-sari stores. or boxes. It has a considerable number of benefits for both the consumers and producers. companies such as P&G are trying to push people to buy the bigger packages due to the sachets being very wasteful and non- biodegradable (Pornpitakpan et al 2). there are also downsides for both the consumers and the producers. Notwithstanding a few downsides. The local producers cannot compete with the efficiency in the manufacturing and distribution. This would consequently hurt the consumers in the end because they may lose their jobs or livelihoods. immediate. it is important to note that the sachet economy may not be very feasible in the long term due to its negative environmental impact. This would lead to more waste which would have a huge effect on the environment which would consequently affect both the consumers and producers. leading to a tremendous amount of waste. The packaging is of a one-time use nature. it would be easier for producers to introduce new products or test the responsiveness of a market to a new product through the sachet method. these empty sachets are not disposed of properly and they are often found polluting bodies of water.Sachet Economy of the Philippines | THE CATHOLIC ECONOMIST 10/06/2017. the portions are affordable and the results from the reaction to new products. Producers wouldn’t want to risk the current sales of their SKUs in favor of introducing sachet versions of their products. This would force them to drive up prices and consequently lose income due to the people who stop purchasing their products as they look for cheaper alternatives. or filling up landfills too quickly. Another downside for producers when putting their goods in sachets is the risk of undermining the business of their SKUs or stock keeping units (Pornpitakpan et al 5). the pollution caused by these sachet wrappers could affect the natural resources which they utilize to produce their goods or give their services.

2015. Web.” The Guardian. “’We Expect Catastrophe’. This is really the most feasible way for this model of consumption to work in the long run. 19 June. 6 Mar.Manila.”Mini-sizing Consumption or Whetting the Appetite? Managerial Insights on Sachet Marketing Strategies for Consumer Goods Companies. Digital.” IIMA (2007): 26-1. Ramendra. Chanthika. 20 June. Yahoo!. “Fortune at the Bottom of the Pyramid: An Alternate Perspective. https://thecatholiceconomistphilippines. Rodolfo. Singh.COM. “The Phenomenon of Sachet Marketing: Lessons to Be Learned from the Philippines. 2015.” Advancing Knowledge Development in Marketing 18 (2007): 5-15. 20 June. “Poverty Incidence Rises in Philippines. 19 June 2015 “Consumer Guide: Sachets Pros and Cons. 21 June 2015. 2015 Vidal. Jaiswal. BLOG AT WORDPRESS. 2015. 9:04 PM sachets biodegradable or even recyclable. John. 31 Mar.” ANZMAC (2009) : 7-1. Web.com/tag/sachet-economy-of-the-philippines/ Page 4 of 4 . and Joseph Sy-Changco. Web. This would. 8 Mar. 2015. Web.wordpress. 20 June. ABS-CBN News. and Joseph Sy-Changco. however. 2014. The Guardian. Works Cited: Ang.Sachet Economy of the Philippines | THE CATHOLIC ECONOMIST 10/06/2017. Annand. the Megacity on the Climate Frontline. 2015 Pornpitakpan. Digital. increase the price of sachets in the short-term as a considerable investment would be required in research and new technology.” ABS-CBN News.” Manila Bulletin.